India/ Bengaluru

White Paper Industrial Employment (Standing Orders) Act, 1946

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Objective of the Standing Order

The Industrial Employment (Standing Orders) Act, 1946 (IESO) requires the employer to define and publish uniform conditions of employment. This is more than the HR policy, the code of conduct, or the handbook of an organization. It is essentially the terms of employment such as service conditions of employment, entry and exit to the premises, hours of work, rates of wages, shift schedules, leave and attendance, misconduct provisions, and the process of termination or separation.

The conditions of employment are binding on the employer and the employees from the date they become certified and operational.

Meaning of Industrial establishment under IESO Act

An industrial establishment under IESO is an industrial entity defined in clause (ii) of the Payment of Wages Act, 1936, Section 2.

Section 2 (ii) of the Payment of Wages Act, 1936 stipulates that an industrial or “other establishment" means a:

  • Tramway service, or motor transport service engaged in carrying passengers, goods or both by road for hire or reward:
    • An air transport service other than such a service belonging to, or exclusively employed in the Indian military, naval or air forces, or the Civil Aviation Department of the Government of India.
  • A dock, wharf or jetty.
  • A mechanically propelled inland vessel.
  • A mine, quarry or oilfield.
  • A plantation.
  • A workshop or other establishment in which articles are produced, adapted or manufactured, for use, transport or sale.
  • Commercial establishments in which any work relating to the construction, development or maintenance of buildings, roads, bridges or canals, or related to operations connected with navigation, irrigation, development, or the maintenance of buildings, roads, bridges; the transmission and distribution of electricity or any other form of power is being carried out.
  • Any other enterprise or class of enterprise on whom the appropriate government may impose the need for protection of persons employed, and other relevant circumstances, specifically, by notification in the Official Gazette.

Recently, the State of Karnataka (notification no. LD 437 LET 2017 dated 17-10-2019) has made the provisions of the Payment of Wages Act, 1936 applicable to all the employers and employees of the Karnataka Shops and Commercial Establishments Act, 1961. Establishments registered under the Karnataka Shops and Commercial Establishments Act, 1961 will be industrial establishments under the IESO. Therefore, the applicability of the IESO Act will be extended to all the shops and commercial establishments registered under the Karnataka Shops and Commercial Establishments Act, 1961. This excludes the IT/ITES/BPO/KPO sectors that are exempted by the Government of Karnataka vide notification no. LD 194 LET 2016 dated 25/5/2019.

Further, the Government of Karnataka has issued another notification No. LD 268 LET 2016 (P-1) dated 7-12-2019. It has amended Schedule I of the IESO Act, providing that industrial establishments in Karnataka that have received any benefits or concessions from the Government of Karnataka as stated in the notification, shall give priority appointment to Kannadigas who are Indian Citizens, reside in Karnataka for not less than fifteen years and can read, write and speak Kannada. The directive is subject to suitability, qualification, experience and other requirements. For industrial establishments in Karnataka that have not received any benefit of concession from the Government of Karnataka, the preference in appointment to Kannadigas needs to be provided as detailed in the notification.

The State of Haryana has also amended the Payment of Wages Act, 1936 and has specified that the establishments defined in the Punjab Shop and Commercial Establishment Act, 1958 (Notification no. 2/58/2018 – 2LAB dated 25-12-2018) must be industrial or other establishments under the Payment of Wages Act, 1936. The IESO Act will apply to all the establishments registered under the Punjab Shop and Commercial Establishment Act, 1958, in the state of Haryana. There is no exemption for the IT and ITES sector in Haryana unlike Karnataka, so the IESO Act will apply to the IT/ITES/BPO sectors as well. This has been clarified by the department in several communications; in particular, a response to an RTI application filed with the department.

The above amendments, including the IESO Act, will apply to the workman category only; as defined in Section (s) of the Industrial Disputes Act, 1947.

Applicability

Though the Act specifies the applicability as a hundred employees, various states of India specify different head counts for coverage of the provisions of the Act. The ceiling limit of employees for applicability for a few specific states are as follows:

Tamil Nadu (20)
Karnataka (50)
Maharashtra (50)
Madhya Pradesh (20)
Gujarat (50)
Haryana (50)
Kerala (50)
Andhra Pradesh (50)
West Bengal (50)
Andhra Pradesh (100)
Telangana (50)
Delhi (50)
Punjab (100)
Chandigarh (100)
Himachal Pradesh (100)
Uttar Pradesh (100)
Odisha (50)
Rajasthan (50)

Process of Obtaining a Certification

An employer is required to submit to the Certifying Officer (usually the Deputy Labour Commissioner, the Regional Labour Commissioner, or the Joint Labour Commissioner) an appropriate number of copies (as specified by the respective state) of the draft of Standing Orders proposed by them for implementation in the industrial establishment.

The employer will make all such provisions in accordance to the Model Standing Order, a draft standing order will be issued for every matter set out and such a provision would be applicable to the industrial establishment. A draft standing order needs to be submitted with an appropriate list of workmen employed in the industrial establishment. Details of trade union members, if applicable, or lists of representative employees’ otherwise, need to be submitted, as well as draft standing orders for certification and mentioning all the service conditions that are applicable for the organization.

The authority, through their representative officers, after hearing the objections (if any), to the standing orders, decides if any modification to the standing order is necessary and then certifies the standing order. Modification may not be necessary if it is favorable to the employee. The Certifying Authority will sign and seal the submitted draft, as part of Certification and share it with the Employer. The entire process may take few months. However, it is pertinent that there will be hearings on the draft Standing Orders prepared and the authority may ask to delete some of the provisions that are in the opinion of the authority not applicable or are against the workman concerned.

A Certified standing order will not be considered for amendment, except in agreement between the employer and the workmen, a trade union, or employee representatives, until the expiry of six months from the date on which the Standing Orders were certified or the last modifications became operational. The text of the Standing Orders certified will be prominently displayed by the employer, in English and in a language understood by the majority of the workmen. A designated board will be maintained for the purpose. The Standing Orders will be displayed at or near the entrance through which the majority of employees enter the industrial establishment.

It is therefore implicit that all establishments in Karnataka and Haryana are mandated to obtain the certification. Establishments in other states too may get the certification if they don’t want to risk future punitive actions.

Steps Involved to get Certified

  • Meetings to discuss and understand the scope covered in the Standing Order.
  • Study the current HR policies, employee manuals and other such documents to accommodate the requirements in the Standing Order.
  • Prepare the draft Standing Order and send it for review internally to all the stake holders.
  • Conduct review meetings to understand the Standing Order and provide necessary advisory for the changes.
  • Finalization of the Standing Order internally.
  • Translate the documents to vernacular, if required.
  • Conduct meeting to discuss the pros and cons of the rules framed under the Standing Order.
  • Prepare the covering letters and the final copies to be submitted to the Deputy Labour Commissioner (DLC) or JLC, as the case may be, in the Labour department.
  • Represent effectively in the hearings conducted by the Labour Department, with the client representatives.
  • The constitution of the Employees Committee to be presented to the DLC. The process must be completed by obtaining confirmations from the employees.
  • Coordinate inspections, if directed by any authority for checks.
  • Liaise with the Labour departments for approvals and certification.
  • Obtain and provide the final approved copies from the department to the client.
  • Display of the certified Standing Orders.