Article (January-2022)


The booby trap of Fixed Term Employment under the Industrial Relations Code, 2020

Saurabh Prakash

Designation : -   fourth-generation lawyer

Organization : -  specializes in labour and service (employment) laws


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The 4 Labour Codes were supposed to bring a paradigm shift in industrial relations, thereby opening up the country to manufacturing at a global scale. However, they have been a let-down. Not only are they for the most part a mere cut and paste job (whereby 29 central labour laws have been consolidated into 4 Codes), but even that has been poorly executed, with the result that both employers and unions are unhappy.

This article seeks to examine the introduction of the concept of "fixed term employment" under the Industrial Relations Code, 2020 which has been promoted as enablingemployers to hire and fire at will. Of course, any attempt at introducing a hire and fire policy was always going to be difficult to pass through the unions. However, what has been proposed ought even to be unacceptable to employers. In any case, for the reasons explained in this article, it would be useless to them.

To consider the concept of "fixed term employment", I will compare the definition of "retrenchment" as it presently exists under the Industrial Disputes Act and as it has been proposed under the Industrial Relations Code.

The amendments that have been brought to the definition of "retrenchment" are to sub-clause (b) "retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf" by deleting the underlined portion in proposed sub-clause (ii), and by inserting sub-clause (iv) "termination of service of the worker as a result of completion of tenure of fixed term employment".

The proposed amendment to sub-clause (b) makes no real difference for, retirement of a workman can be brought about only on his reaching the age of superannuation as stipulatedin the contract of employment. Hence, the deletion is only of words that were superfluous.

We now come to the topic of this article, which is the introduction of sub-clause (iv) that introduces the concept of "fixed term employment", and which has been defined under the Code as under:

"(o) "fixed term employment" means the engagement of a worker on the basis of a 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 worker doing the same work or work of similar nature;

(b) he shall be eligible for all statutory benefits available to a permanent worker 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 required in the statute; and

(c) he shall be eligible for gratuity if he renders service under the contract for a period of one year;"

Sub-clause (a) mandates that such workers must be given the "hours of work, wages, allowances and other benefits" as do the permanent workers. Then, sub-clause (b) ensures for them "all statutory benefits available to a permanent worker".

The question naturally arises: What might be these "statutory benefits" that require a "qualifying period of employment"? They cannot include gratuity, for that is expressly dealt with sub-clause (c) and PF no longer requiresany qualifying period of employment.

The only other "statutory benefit" that requires a "qualifying period of employment" is the notice period/wages and retrenchment compensation that are prescribed under Section 25F of the Industrial Disputes Act and have been carried forward under Section 70 of the Industrial Relations Code. Since the principles of statutory interpretation require that each clause must be given some meaning, and since this is the only possible meaning that can be placed on sub-clause (b), it is quite possible that such an interpretation could be taken. The contention that the definition of "retrenchment" expressly excludes "fixed term employment" and, hence, Section 25F (new Section 70) would not apply, could be answered by holding that it's consequence would be merely to free the employer from the necessity of observing the last-come-first-go principle under Section 25G (new Section 71), from being obliged to offer employment to such persons under Section 25H (new Section 72) and of obtaining prior permissions under Chapter VB (new Chapter X). Were that view to be taken, the consequence could also be that failure to pay such notice pay/compensation could lead to the termination being held to be void. An employer who decides to err on the side of caution and also pay these benefits would also be faced with the question how the notice period/wages are to be "proportionately" computed "according to the period of service rendered". Would the amount be computed by taking a year as constituting 240 days or 365 days? Consequently, this route is full of difficulties.

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Saurabh Prakash is a fourth-generation lawyer who specializes in labour and service (employment) laws.