IT firms have to follow Standing Orders: Are they ready?

Though many IT majors have submitted draft Standing Orders - that determines when employees can be fired, what is misconduct etc., the industry is not fully ready. Why are they lobbying against the Act?

For the past 12-13 years, IT/ITES industry in the state has been exempted from a key labour law which is applicable to other industries. From coming April, this law – The Industrial Employment (Standing Orders) Act, 1946, aka IE Act – is supposed to be applicable for all IT companies in India. While the state Labour Department is waiting for IT/ITES companies to start implementing this, the industry is said to be actively lobbying for exemption.

Pic: Wikimedia commons

The crux of the IE Act is that each company will have to define its employment conditions in ‘Standing Orders’ (SOs), which is a legal document to be adhered to by the company in future. It will define the conditions on which an employee can be fired, what will count as misconduct and what will be the penalty etc.

You can use Standing Orders to challenge:

  • unfair termination
  • sexual harassment
  • unfair treatment
  • no payment for overtime
  • prolonged probations
  • not giving service/experience certificate

The SO is only a consolidated document that is in line with different labour laws, which allows companies to define what is counted as misconduct etc., for the sake of transparency. An employee who is accused of misconduct should be heard by a disciplinary committee before action is taken against him. The law also makes it mandatory to give experience certificates for all terminated employees.

Once a company submits its draft, the department will share it with all its employees. Three employee representatives will be selected to decide on approving the draft. If there are disagreements, the Deputy Labour Commissioner will hold hearings, decide and certify the final SO. Appeals on final SO can go to the Labour Commissioner.

The company is bound by this final SO, and has to display it in all public spaces in its office so that employees are aware of it. If either the company, or an employee, wants a change in SO, they can approach the department; but such amendments can be made once in six months only. All the amendments have to go through the same approval process. Companies that don’t submit SO or modify it randomly, will have to pay fine and can be prosecuted in Metropolitan Magistrate court.

Labour Department days they get 10-15 complaints per day, and sexual harassment complaints alone come to about 700 per year. Termination without notice, not getting salary on time etc. are common complaints; and they come from MNC employees too.

Right to speak against malpractice

Since the SO is a legal document, the Act empowers the employees to speak out against malpractice by the management. For instance, if an employee was terminated unfairly, he can go to the Labour Department or to the Labour Court.

While most IT employees welcome the move, the industry wants the exemption to continue. The Labour Department estimates that there are about 1000 small and big IT companies in Bangalore alone that will be covered under the Act – many of these companies have several offices in the city. Any company with more than 50 employees have to comply with the Act. A deadline of December 31, 2012 was given to the IT companies to draft and submit their own SOs to the Labour Department. But so far only about 200 out the 1000 companies have submitted their drafts. Some biggies like Wipro, Sasken, McAfee Software, Accenture, Infosys BPO, L&T Infotech etc. have submitted drafts, but Labour Department officers say that most drafts are only for namesake.

Additional Labour Commissioner J T Jinkalappa says that the law may not be implemented by April because of the lag. Sources say that many major companies, and IT unions like NASSCOM, are lobbying for exemption from the Act, as they do not want any government control. In fact, many are said to be submitting their draft SOs to the Department of IT/BT, rather than at the Labour Department.

"Model SO has no options like flexible working hours, work-from-home option, two holidays a week etc, that IT companies have. Why do IT employees need SO, when they get good pay, facilities and are treated fairly already?"

‘Our policies are already liberal’

Industry heads say that working conditions in IT companies are already ideal, and the existing policies are good enough. Advocate B C Prabhakar, President of Karnataka Employers Association (KEA), says that the policies followed by companies are much more progressive that the minimum standards set by the IE Act.

"Model SO has no options like flexible working hours, work-from-home option, two holidays a week etc, that IT companies have. Why do IT employees need SO, when they get good pay, facilities and are treated fairly already?" says Prabhakar. He is a labour law expert and independent Director at Wipro, and is on the boards of many other companies. KEA is an employers’ trade union with 700 members, some of which are from IT/ITES industry.

A member of IT/ITES Employees Centre (ITEC), an informal community of IT employees in the city, says that company policies are indeed liberal on paper, but are not implemented. "If the policies are already liberal, what is the problem in making them a legal document?" he asks.

The perception of the fair work conditions also differs. Mohandas Pai, former CFO and board member at Infosys Ltd, says that firing without notice, or making employees work overtime, are not unfair practices. "They are not traditional ‘workmen’ who deserve protection. They can easily get jobs as they have the skills, and if they don’t have the skills they should work hard to acquire them." He claims that, for an employee base of eight lakh, there have been very few complaints from IT/ITES industry.

Pai says that in this industry, there are enough jobs for all. "The attrition rate is around 15% in IT and 35% in BPO. If employees can quit without giving notice, employers should also have the right to fire by giving payment for the notice period," he says.

Employees may not agree with this statement though. A mid-level techie working in the IT company Tech Mahindra says that job insecurity is high, as firing is common. "Switching jobs is easy at the junior levels, but not later. Finding jobs with the right profile and salary is difficult," he says.

"Switching jobs is easy at the junior levels, but not later. Finding jobs with the right profile and salary is difficult"

Labour lawyer A J Srinivasan, who has represented some IT employees in court too, says, "There is a demand-supply gap for skilled employees in the industry, and hence companies pamper them with some perks. But employees come forward with similar issues as in any other industry – being transferred or fired just because the boss does not like them, sexual harassment etc. They don’t prefer prolonged court battles though." He adds that the IE Act will help employees.

‘Far from ideal’

Labour Department officers say that conditions in the industry are far from ideal. A Labour Department officer says that they get 10-15 complaints per day from IT employees, and sexual harassment complaints alone come to about 700 per year. Termination without notice, not getting salary on time etc. are common complaints; and they come from
MNC employees too.

"Most of the complaints are genuine. But most employees don’t file a formal complaint for the fear of not getting a good reference from the company for their next job," says the officer. If there is a prima facie evidence in a complaint, the Department can take suo moto action, but this is not done many times since complainants want to remain anonymous. Action can be taken formally based only on a written complaint, along with witnesses who are usually other employees who may not be ready to come forward.

How to use the law?

You can go to Labour Department officers, who may try to settle the case ( If the company does not comply, the Department will file court cases against it. You can also file cases at the Labour Court directly. Court cases are will be filed using SO along with other labour laws.

"Draft SOs not good enough"

The Labour Department officer says that most companies are submitting SOs just for the sake of it. "Most drafts only address the bare minimum – the mandatory aspects – while they can include much more, like conditions for promotions, transfer packages etc." He says that this will bring in uniformity, impartiality and curb the exploitation of women.

He says that one company’s draft SO even asks for the certification process to be outsourced, instead of being done by the department. According to the Act, the department officers have powers of civil court, in certifying SOs. "Can judiciary be privatised? Can I go to High Court tomorrow and ask the judge to outsource my case to someone else?" he says.

Mohandas Pai says that the law will lead to an ‘inspector raj’ wherein labour inspectors will demand bribes and harass companies. "Labour laws here have only hurt employment and have not been able to protect employees." He believes that laws like the IE Act will deter investment in Karnataka.

Prabhakar says that the reason for opposing the Act is not for the fear of employee empowerment, but simply because the process is inconvenient. Pai says that the government should set up a committee of both its officers and industry representatives to make a model SO for the industry.

KEA has submitted a draft SO to the Department, to serve as a guideline for the industry. NASSCOM (National Association of Software and Service Companies) did not comment on the matter, despite repeated attempts to reach them.

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