By Deepti Chaturvedi, Teaching Associate at S.P. Jain Institute of Management and Research (SPJIMR)
In recent years, the Indian IT sector has been analysed from general to specific perspectives, focusing on its innovative capabilities. Studies show India’s low-wage, high-skill, software services have made it an IT superpower. However, the untold story is the legislation protecting employment, especially during layoffs or retrenchments. Employees face significant challenges in court due to gaps in labour laws. Many IT and fintech firms have laid off employees while downsizing, according to recent news. Retrenchment is the permanent termination of a worker’s services, excluding retirement, contract end, or ill health (Industrial Dispute Act 1947, Section 2(oo)). During the 2002 and 2008 recessions, many global software industry employees were retrenched impersonally, often dismissed in one day or via email.
Sector-specific legislations protect workers’ rights under various Acts. The Industrial Disputes Act 1947, is key in protecting workers in the organised sector. Sections 2(s) and 2(j) define a “worker” and an “industry” respectively. Section 2(s) becomes prominent in disputes between employees and employers, defining a “workman” as anyone employed in any industry to do any manual, skilled, technical, operational, clerical, or supervisory work for hire or reward, whether the terms of employment are expressed or implied. Section 2(j) defines “industry” as any business, trade, undertaking, manufacture or calling of employers, including service, employment, handicraft, or industrial occupation or avocation of workmen.
The absence specific legislation defining IT as an industry and IT sector employees as workers create a pronounced gap, especially with the increasing dismissals, retrenchments, and layoffs in the IT sector. Viewing these challenges from the workers’ perspective is crucial to understanding the need for explicit inclusion of IT sector workers in key central labour legislations. The growing culture of layoffs and retrenchments poses a two-fold threat to the IT sector workers in disputes with employers. First, the sudden economic crisis for the retrenched or laid-off employee. Secondly, the absence of legislation protecting employees from unlawful layoffs may prevent them from seeking justice. Silent layoffs citing underperformance are also an area of concern.
Limitations of existing Central Labour Acts and their scope
The Industrial Disputes Act, 1947, aims to investigate and settle industrial disputes, promote industrial peace and economic justice, create harmonious employer-worker relations, and provide mechanisms for dispute resolution, relief in layoffs and retrenchments, and collective bargaining. Media reports and articles suggest numerous layoffs across the IT industry, highlighting the legislation’s limited scope. There is growing emphasis on including the IT sector under labour legislation, regardless of workers’ status, wage levels, and working conditions (Penfold, 2009). Despite high-paying jobs, perks, and excellent office infrastructure, job security remains a concern for IT sector employees.
A study on the BPO/ITES sector in India notes that employment contracts, which specify a notice period for termination, still leave employees vulnerable (Penfold, 2009). Employers familiar with Indian employment law may evade liabilities after wrongful terminations. Legislations protecting minimum wage and preventing retrenchments primarily benefits lower-scale workers (Ahsan and Pages, 2009).
The lack of explicit inclusion of the IT Industry and its workers within the definitions of “industry” and “workman” results in very few litigation matters. Judicial cases, including those in Manupatra’s database, show a limited number of petitions regarding IT sector disputes, despite the sector’s vast presence and frequent retrenchments in India.
Since independence, India’s labour legislation framework has largely remained unchanged. There are 39 key central Acts under the Ministry of Labour & Employment. After the ‘second wave of reforms’ in 1991, driven by liberalisation, privatisation, and globalisation, there have been limited amendments to existing legislation, and very few new laws concerning labour and employment in the IT sector. Out of 39 central enactments and Acts, few have been imposed post-1991, though some amendments have occurred.
Is there a need to amend legislation to explicitly define and include the IT sector within the scope of an “industry” and its “employee” within the scope of the “worker” as defined in the Industrial Disputes Act 1947?
