Article (June-2018)


Fixed Term Employment

Girish Patwardhan

Designation : -   Advocate

Organization : -  Indore


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Recently, the Union of India has issued a Notification amending the Industrial Employment (Standing Orders) Central Rules 1946 by which a new category of workman has been introduced named as Fixed Term Employment Workman. The definition of the said category reads as under :
"Fixed Term Employment Workman (FTEW) is a workman who has been engaged on the basis of written contract of employment for a fixed period;
Provided that:
a) His hours of work, wages, allowances and other benefits shall not be less than that of a permanent workman; and
b) He shall be eligible for all statutory benefits available to a permanent workman, proportionately, according to the period of service rendered by him, even if his period of employment does not extend to the qualifying period of employment."
A further explanation has also been inserted, specifically providing that "non-renewal of contract of such FTEW will not be termed as retrenchment."
A perusal of the aforesaid definition makes it abundantly clear that on one hand it has taken care of the employees, but at the same time it also takes care of the interest of the employers/industries. By appointing a person as FTEW the employer is sure that the tenure of such workman will be for the period, he has been hired on contract basis and he will not be required to pay any notice pay, retrenchment compensation or amount like that. The workman is also benefited that he will be getting all the facilities of a permanent workman and chances of any discrimination have been ruled out. He will be entitled to all the benefits that means all conditions of service of a permanent employee.
The second limb of the definition of FTEW speaks about the statutory benefits, available to permanent employee, proportionately according to the period of service rendered by FTEW employee, even though his period of employment does not extend to the qualifying period of employment required in the statute.
This provision has been made for two purposes viz. :
-If an employee is engaged for a period of 6 months as FTEW, he will not fulfill the requirement of entitlement for Earned Leave under Factories Act 1946, but according to this provision, benefit of Earned Leave will be required to be given to him though he does not complete 240 days of service.
-Likewise, there is a requirement under Payment of Gratuity Act, 1972 that employee must complete 5 years of service but, in case of FTEW, though he has not put in qualifying service, yet he will be entitled to gratuity on proportionate basis.
Hon'ble Supreme Court has considered the aspect of FTEE in the light of section 2 (oo) (bb) of I.D. Act. Section 2 (oo) (bb) reads as under:
'termination of service of workman as a result of non-renewal of contract of employment between employer and workmen concerned on its expiry or on such contract being terminated under stipulation contained therein.'
The aforesaid termination has been taken out from the mischief of retrenchment, in other words, the termination on the aforesaid count has been termed as an exception to the retrenchment and, therefore, a termination on completion of contract period will not be retrenchment and therefore the employer will not be required to pay any retrenchment compensation to the employee, if his services have been brought to an end on the basis of completion of employment period. The Notification specifically provides that such non-renewal will not be a retrenchment.
When we are discussing about the pros and cons of FTEW, we have to see the aspect of judgments rendered by different courts.
Hon'ble Supreme Court in case of Birla VXL Ltd., Vs. State of Punjab & Others (AIR 1999 SC 561) has held that :
"The real question is whether the third respondent had a claim of employment beyond 31st December 1984. Having regard to the clear term of his appointment order which he accepted by signing at the foot thereof, the appellant was entitled to bring his employment to an end at the conclusion of the period of temporary employment. The letter stating that the third respondent's services would come to an end on 31st December 1984 does not say that the services were being terminated because of any misconduct.
There was no stigma whatever cast by that letter. The High Court was not, in the circumstances, warranted in concluding that the services have been terminated because of the third respondent's misconduct and upholding his reinstatement with full back wages."
In another judgment, Hon'ble Supreme Court in case of Escorts Ltd. Vs. Presiding Officer (1997 11 SCC 521), observed that:
"Since the services of workman were terminated as per terms of contract of employment, it does not amount retrenchment u/s 2(oo) of the Act and Labour Court was in error in holding that it constituted retrenchment and was protected by section 25F and 25G of the Act."
Yet in another judgment of Hon'ble Supreme Court in the matter of Harmohinder Singh Vs. Kharga Canteen (2001 AIR SC 2681) has held that the argument on the basis of section 25F is equally misconceived. This section deals with the condition precedent to retrenchment of workmen, which would not apply to para 3A because of definition of  retrenchment u/s 2 (oo) (bb) which expressly excludes termination of services of workmen as a result of non-renewal of contract of employment between the employer and workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained thereon. Contract of service for a fixed term are therefore excluded.
Therefore, the aforesaid provision has already been approved by Hon'ble Supreme Court in umpteen cases.
For premature termination of such FTEW i.e., before expiry of contract period, sufficient provisions can be provided in the appointment letter enabling the employer to terminate the services of such FTEW as and when so required.
The amendment does not prescribe any staffing pattern or percentage of such FTEWs in an establishment.
The entire plant can be run with the help of such FTEWs and therefore there should be no restriction on engagement of such workmen.