Business Laws related to HR

1. Business Laws related to HR Prepared by, N.Priyadharshini Compiled from: • Elements of Mercantile Law by N.D.Kapoor (2007), • http://labour.nic.in/act/welcome.html • Various postings in www.citehr.com

2. Law • What is law? • Law includes all the rules & principles which regulate our relations with other individuals & with the state. • Object of law? • To establish socio-economic justice and remove the existing imbalance in the socio-economic structure. • Need for the knowledge of law? • Ignorance of law is no excuse.

3. Mercantile/Business/Commercial Law • What is it mean? • It deals with contractual situations and the right & obligations arising out of mercantile transactions between mercantile persons. • Sources of Business Law? • English Mercantile law • Statute Law • Judicial decisions or the system of precedents • Customs & usages

5. The Indian Contract Act, 1872 • Object? • Branch of law which determines the circumstances in which promises made by the parties to a contract shall be legally binding on them. • Contract = Agreement + Enforceablility by law (Legal obligation not a Social obligation) • Agreement = Offer + Acceptance (In genuine consent)

6. Essentials of valid contract • Offer and acceptance - 2 parties – one party making the offer, other party accepting the offer, terms of offer must be definite and the acceptance must also be according to the mode prescribed and must be communicated to the offeror. • Intention to create legal relationship • Lawful consideration - something in return • Capacity of parties - competent, major, sound mind, not disqualified from contracting by any law

7. Essentials of valid contract • Free and genuine consent – same mind on all the material terms of the contract • Lawful object – legal, moral, not opposed to public policy • Agreement not declared is void • Certainty and possibility of performance– not vague or indefinite • Legal formalities – contract should be in writing

8. Workmen’s Compensation Act, 1923 • First step towards social security of workmen • The theory behind this act is that “the cost of product should bear the blood of the workmen” • Object? • To provide for the payment of compensation by certain classes of employers to their workmen for injury by accident. • Note: Workmen who are covered under ESI Act, 1948 are not entitled to compensation under this Act as disablement and dependants’ benefit is available to workmen under the former act.

9. Disablement? • Disablement means loss of capacity to work or to move • It may result in loss or reduction of his/her earning capacity. • Disablement may be • Partial • Total • Further it may be • Permanent • Temporary

10. Employer’s liability for compensation • Personal injury • Occupational Disease Note: Where the monthly wages of workman exceed Rs. 4000, his monthly wages shall be deemed to be Rs.4000 only.

11. Trade Unions Act, 1926 • Trade Union – “An association of workers in a particular craft or industry” and now it symbolize • Workers’ right to organize • Their right to press their demands collectively and to go on strike if their demands are not accepted • Object? • To regulate the conditions governing the registration of trade unions • Obligations imposed upon a registered trade union and • Rights & liabilities of registered trade unions

12. Indian Partnership Act, 1932 • A contract of uberrimaefidei- “utmost good faith” i.e partnership contract must run with mutual trust and confidence • Min: 2 competent persons • Max: on banking business should not exceed 10, any other business not exceeding 20 • Profit must be distributed in “agreed ratio” • Documents which contains the agreement is called “Partnership Deed” and it contains • nature of business, • principal place of business, • name and address of the partners, • management, • accounts • Deed must be duly stamped as required by the Indian Stamp Act, 1889

13. Payment of Wages Act, 1936 • Object? • To avoid with holding wages, delays in paying wages & making unreasonable deductions out of wages. • This Act is applicable to persons whose wages does not exceed Rs. 6500 per month (2005) or such other higher sum which, on the basis of figures of the Consumer Expenditure Survey published by the National Sample Survey Organisation, the Central Government may, after every five years, by notification in the Official Gazette. • Wage period – shall not exceed 1 month • Time of payment of wages • <1000 persons – before the expiry of the 7th day of the following wage period • >1000 persons - before the expiry of the 10th day of the following wage period • Termination of employment – before 2nd working day from the terminated day • Wages to be paid on a working day

14. Deductions from wages • Medium of payment of wages – current coin or currency notes or both, after obtaining written authorization of the employed person, payment can be made either by cheque or by crediting the wages in bank account • Deductions from wages • Fines (shall not exceed 3% of wages payable to him in that wage period) • Absence of duty • Services like house accommodation, amenities etc • Recovery of advances • Recovery of loans • Payments to co-operative societies & insurance schemes • Other deductions such as income tax, PM’s Relief fund etc

15. Maintenance of registers & records • Every employer shall maintain registers & records giving the following particulars of the persons employed by him: • the work performed by them • the wages paid to them • the deductions made from their wages • the receipts given by them

16. The Industrial Employment (Standing Orders) Act, 1946 • Object? • To require employers in industrial establishments to define with sufficient precision the conditions of employment under them & to make the said conditions known to workmen employed by them.

17. Matters to be provided in Standing Orders • Classification of workmen • Manner of intimating to workmen about periods & hours of work, holidays, pay days & wage rates • Shift working • Attendance & late coming • Conditions of procedure in applying for, and the authority which may grant leave & holidays • Requirement to enter premises by certain gates, & liability to search • Closing & reopening of sections in Industrial Establishment, temporary stoppages of work & the rights & liabilities of workmen & employer arising therefrom. • Termination of employment & respective notice • Suspension or dismissal for misconduct & related actions • Redress mechanism against unfair treatment

18. Procedure for Certification of Standing orders

19. The Industrial Disputes Act, 1947 • Object? • To secure industrial peace • By preventing & settling industrial disputes between the employers & workmen • By securing & preserving amity & good relations between the employers & workmen through an internal Works Committee • By promoting good relations through an external machinery of conciliation, Courts of Inquiry, Labor Courts, Industrial Tribunals & National Tribunals • To improve the condition of workmen in industry • By redressal of grievances of workmen through a statutory machinery • By improving job security

20. What is Industrial dispute? • It means any dispute or difference between • employers & employers • employers & workmen • workmen & workmen, which is connected with • The employment or non-employment • The terms of employment • The conditions of labor of any person • It includes both individual & collective disputes

21. Important Terms • Lay off – Failure/Refusal/Inability of an employer to give employment to a workman due to • Shortage of coal, power or raw material. • Accumulation of stocks. • Breakdown of machinery. • Natural calamity. • Lock out – Temporary closing of a place of employment or suspension of work or refusal by employer (Employer’s weapon) • Closure – Closing the business due to actual loss or apprehended loss • Retrenchment – Employees terminated on account of surplus labor • Strike – Cessation of work by workmen • Unfair labor practices

22. Conciliation Machinery • Work committees • Conciliation Officer • Board of Conciliation • Courts of Inquiry Adjudication Machinery • Labor Courts • Industrial Tribunal • National Tribunal

23. Factories Act, 1948 • Factory means any premises where in a manufacturing process • 10 or more persons are engaged if power is used or • 20 or more persons are engaged if power is not used • Object? • To protect children & to provide for some health & safety measures.

24. State Government / Chief Inspector • Site Approval for a factory before it is constructed • Submission of plans of Factories • Registration & Licensing of Factories • Appeal to State/Central Govt within 30 days if permission is refused by Chief Inspector/State Govt respectively • Notice by the occupier • Name & address of the factory, owner & occupier • Address for communication • Nature of manufacturing process • Total rated horsepower • Name of the manager • No. of workers likely to be employed etc

25. Health of workers • Cleanliness • Disposal of wastes & effluents • Ventilation & Temperature • Dust & fume • Artificial humidification • Overcrowding • Lighting • Drinking water • Latrines & Urinals • Spittoons

26. Safety of workers • Fencing of machinery • Work on near machinery in motion • Employment of young persons on dangerous machine • Striking gear & devices for cutting off power • Self acting machines • Casting of new machinery • Prohibition of employment of women & children near cotton opener • Hoists & Lifts • Lifting machine, chains, ropes & lifting tackles • Revolving machinery

27. Safety of workers • Pressure plant • Floors, stairs and means of access • Pits, sumps, openings in floors etc • Excessive weights • Protection of eyes • Precautions against dangerous fumes • Precautions regarding the use of portable electric light • Precautions against explosive or inflammable dust, gas, fire etc. • Power to require specifications of defective parts or tests of stability • Safety of building & machinery • Maintenance of building • Safety officers

28. Welfare of workers • Washing facilities • Facilities for storing & drying clothes • Facilities for sitting • First aid appliances • Canteens • Shelter, rest rooms & lunch rooms • Creches (>30 women workers) • Welfare officers (>500 workers)

29. Working hours • Not more than 48hours per week or 9 hours per day • Intervals of rest – fixed by factory • Women employees – 6AM to 7PM • Ordinary rate of wages = Basic wage + Allowances • Extra wages for overtime – wages at twice the ordinary rate • Annual leave with wages • 1 day for every 20/15 days of work performed in case of adult/child • Application for leave – atleast 15 days before for private, 30 days for public utility service • Maternity leave not exceeding 12 weeks

30. Employees’ State Insurance Act, 1948 • Object? • The Act is a piece of social security legislation conceived as a means of extinction of the evils of the society, namely, want, disease, dirt, ignorance and indigence • Applicability of the Act for employees is Rs. 10000/- per month (Gross Salary). • Benefits? • Sickness benefit • Maternity benefit • Disablement benefit • Dependants’ benefit • Medical benefit • Funeral expenses

31. Employee? • Any person employed for wages in or in connection with the work of a factory or establishment • Directly employed by the principal employer • Employed through an intermediate employer • Contract employees • Apprentice, not being an apprentice engaged under the Apprentices Act, 1961 or under Standing Orders • Wages? • All remuneration paid in cash to an employee except employer contribution to pension & provident funds, travelling allowance, special expenses paid and gratuity payable on discharge

32. Contribution? • Contribution – Sum of money payable to ESI Corporation by the principal employer & employee • Contribution period – Must not exceed 6 consecutive months • Employee Contribution is exemption for employees whose wages are < Rs.50 per day • Default in payment of contribution – to pay simple interest at 12% or more per annum, till the date of its actual payment • All disputes arising out of this are resolved by Employees’ Insurance Court

33. Minimum Wages Act, 1948 • Object? • To secure the welfare of the workers in a competitive market by fixing the minimum rates of wages in certain employments • Scheduled employment – Workers in mines, plantation, transport, mills etc • Appropriate State Government shall fix • minimum rate of wages for time work • minimum rate of wages for piece work • guaranteed time rate • overtime rate

34. Fixation & Revision of wages • Fixation & revision of minimum wages are done by appropriate Government through either of the 2 methods • Appointment of committees & sub-committees as it considers necessary to hold inquiries • Publication of proposals in the Official Gazette • Appropriate Government shall consult with Advisory Boards before fixing/revising minimum wages

35. Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 • Object? • It is a social security measure meant to induce employees to save a portion from their present earnings for a rainy day • Authorized Officer? • Central PF Commissioner • Additional Central PF Commissioner • Deputy PF Commissioner • Regional PF Commissioner • Contribution is made to • Employees’ Provident Fund Scheme • Employees’ Pension Scheme & Fund • Employees’ Deposit Linked Insurance Scheme (EDLI) & Fund

36. Contribution • ESI is covered to employees whose wages are upto Rs.10,000 per month • Basic Salary = Basic Wages + Dearness Allowance including cash value of any food concession + Retaining Allowance

37. Company Act, 1956 • Company - “ an association of many persons who contribute money or money’s worth to a common stock and employ it in some common trade or business(for common purpose) and who share the profit or loss arising there from”

38. Characteristics of the company • Separate legal entity • Limited liability • –limited by shares • –limited by guarantee • Perpetual succession • Common seal • Transferability of shares • Separate property • Capacity to sue

39. Company Vs Partnership

40. Company Vs Partnership

41. Public Co. Vs Private Co.

42. Documents to be filed with Registrar for getting Certificate of Incorporation • Memorandum of Association signed by the subscribers • Fundamental document • Lays down the area of operation • Regulates the external affairs of the co in relation to outsiders • Articles of Association if any(public limited co limited by shares need not have its own AOA • Rules and regulations and bye-laws for the internal management of the affairs of a company. • Agreement between the Co and the individual for the appointment of whole time Director or Manager • List of directors agreed to act as director with their written consent • Declaration relating to companies act and formalities related to registration

43. Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959 • Object? • To provide for the compulsory notification of vacancies to employment exchanges. • Act is applicable to vacancies in posts of a technical and scientific nature carrying a basic pay ≥ Rs.210 per month occurring in establishments or to be circulated to the Employment Exchanges outside the State or Union Territory • Act is not applicable to any employment in • agriculture, horticulture etc • domestic service, • the total duration of which is less than three months, • to do unskilled office work, • connected with the staff of Parliament.

44. Form and manner of notification of vacancies (1) Name and address of the employer ; (2) Telephone number of the employer, if any ; (3) Nature of vacancy :- (a) Type of workers required (Designation) ; (b) Description of duties ; (c) Qualifications required - (i) Essential, (ii) Desirable (d) Age-limits if any ; (e) Whether women are eligible ? (4) Number of vacancies - (a) Regular, (b) Temporary (5) Pay and allowances (6) Place of work (name of town/village and district in which it is situated). (7) Probable date by which the vacancy will be filled (8) Particulars regarding interview/test of applicant - (a) Date , Time & Place of interview/test (b) Designation and address of the person to whom applicants should report (9) Whether there is any obligation or arrangement for giving preference to any category of persons such as Scheduled Castes, Scheduled Tribes, ex-Servicemen and physically handicapped persons in filling up the vacancies, and if so, the number of vacancies to be filled by such categories of persons. (10) Any other relevant information

45. Time limit for notification of vacancies & selection • Atleast 15 days before the applicants will be interviewed or tested. • Employer to furnish the result of selection within 15 days. • Submission of Returns • Quarterly in Form ER-I - Within 30 days by 30th June, 31st March, 30th September & 31st December • BIENNIAL Return Form ER-II – Within 30 days of the due date as notified in the Official Gazette

46. Apprentices Act, 1961 • “An apprentice is bound to obey his master in all his lawful commands, take care of his property and promote his interest, endeavor to learn his trade or business, & perform all the conditions of his contract not contrary to law. He must not leave his master’s service during the term of his apprenticeship” • Object? • To provide for the regulation & control of training of apprentices

47. Types • Technician (Vocational) Apprentice • Undergo training for 2 years inorder to hold a certificate in vocational course after completing secondary stage of school education, recognized by All India Council of Technical Education • Trade Apprentice • Undergo apprenticeship training in any trade or business Qualifications for being an apprentice • 14 years of age or above • satisfies the standard of education & physical fitness as prescribed for apprenticeship training

48. Employer’s responsibilities • Total number of hours/week = 42 to 48 (6AM to 10PM) • Employer shall look after • Offer & Acceptance of employment • Practical & basic training of apprentices & related instructions • Health, Safety & Welfare of apprentices • Leave / Overtime hours • Payment of stipend • Compensating for injury during training • Holding test & granting certificate • Records, settlement of disputes

49. Maternity Benefits Act, 1961 • Object? • To regulate the employment of women in certain establishments for certain periods before & after child birth & to provide for maternity benefit & other certain benefits • Wage? • Remuneration in cash + Cash Allowances including DA & HRA + Incentives + Money value of food grains • Maternity benefit is a payment to a women (should have worked atleast 80 days in the 12 months immediately proceeding the date of her expected delivery ) at a rate of the average daily wage for the period of her actual absence • Maternity benefit is given for a maximum period of 12 weeks, of which not more than 6 weeks shall precede the date of her expected delivery

50. Liabilities of Employer • Pregnant women are prohibited to work in establishments during a period of 6 weeks immediately following the day of her delivery or her miscarriage • Employer is liable to pay maternity benefit to her nominee or that woman even in case of death of that woman/child respectively • 2 nursing breaks per day shall be allowed until the child attains the age of 15 months • 6 weeks leave shall be allowed for miscarriage on production of the prescribed proof