Indian Labour Laws and its impact on IT-ITES Industry

Last Updated at: Sep 30, 2020
Indian Labour Laws And Its Impact On IT-ITES Industry
On 21st July, 2020, the Indian Labour Ministry has told the parliamentary standing committee that the attempts by some state governments to bring in sweeping changes in their labour laws will not be entertained. This has come after some of the states extended the working hours of the workers beyond 8 hours during the pandemic period. 


The regime of labour law in India is centred around employment and other related issues to labour and labour standards in India. The application of the law relates to any kind of dispute that arises out of employment between either the employer of the employee or employee and employee. The subject matter of the dispute is irrelevant unless it relates to matters of employment i.e., benefits scheme, working hours, wage revisions, termination, other standards, etc.

However, within this general legal framework of the labour laws, the Information Technology and relates ventures have been exempted by virtue of the Indian IT industries were exempted from the Industrial Employment Standing Orders Act, 1946. However, it was only recently that the government decided to extend the purview of the labour laws to the extent so as to cover within its ambit, enterprises and ventures based on the Information Technology Act. Its regulation by the labour law regime attracts a wide variety of conditions of operation, obligations, duties and other general standards of conduct.

Due to their earlier exemption, it is generally taken to be exempted but such is not the case. However, there do exist certain Acts of Labour Law which do not hold application (Industrial Disputes Act, 1947 and Factories Act, 1946). But the general rule is that of applicability and the caveat of exemption is tiny. Here is a brief of the laws which will apply to the IT Industries and their employees:

  • The Trade Unions Act, 1926: The underlying theory of the Trade Union Act, 1 926 is to facilitate the representation of the workmen or employees via a platform or the coming together of all other employees in a Union. It originates by virtue of Article 19(1)(c) of the Constitution of India, which entitles all citizens to have a fundamental right to form associations. This has applicability on the IT Employees as well and is thus entitled to form unions and operate as an association.
    • The Payment of Gratuity Act, 1936: Payment of Gratuity Act, 1936 provides for the payment to gratuity to all employees, post service. This statute is based on the equitable principle which is in favour of both the employer and the employee. Gratuity entitlement under this Act is also extended to IT employees if they fulfil the pre-conditions of continuous employment and other necessities.
    • The Minimum Wages Act, 1948: This Act applies to all workmen and ensures a basic minimum wage, fixed by the Central or State Government, as per the profile of the job. It essentially extends its scope and application to commercial establishments and the employees present therein. The periods of recession hits the IT industries to an extent that the employers drop current recruits, cuts down salaries and other incentives. The Central legislation as this one ensures that there is a basic minimum support to the employees in the financially difficult times like these.
    •  The Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act, 2013: Solidifying from the apex court’s judgements in the case of Vishakha State of Rajasthan, this legislation was passed to maintain work ethics in all industries pertaining to treatment of women. It provides for the safeguard mechanisms which must be in place in order to ensure a safe working atmosphere for the women employees

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A blanket exemption on IT industries from the labour regime in India allowed them to hire cheap labour, violate work ethics and not maintain standard conditions of labour. However, a worker’s fundamental right cannot be infringed. After the application of labour laws and the removal of blanket exemption, the regime of IT Industries has become more stringent. The only exemption which can be applied to IT industries or other industries for that matter is done on a case-to-case basis.

The industrial or labour laws of the country are also applicable to the IT Industries, but not all the laws. The IT industries have been exempted from many labour laws which are applicable to other industries. The IT industries try their level best to avoid the obligations which are imposed on them by the law, but no one is above the law and the fundamental rights of a worker or an employee cannot be violated in any case by anyone.

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A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.