Maximum 12% Contribution is to be paid to the Provident Fund Authority

An appeal has been preferred before the Provident Fund Appellate Tribunal at New Delhi challenging the order passed by the EPF Authority under Section 7A of the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952.

The labour law advocate appearing on behalf of the Bank/ appellant argued that the EPF authority has arbitrarily assessed the dues on the entire salary and the appellant bank is not entitled to pay more than 12% contribution of the then salary limit of Rs.6,500/- (but the salary limit has been increased from Rs.6,500 to Rs.15,000/- w.e.f. 01.09.2014)*

The Hon’ble Tribunal held that an employee cannot be forced to make payment more than the statutory limit of 12% contribution of Rs.6,500/- but the employer can always deposit more than the statutory limit, if it is done voluntarily, as per the Kerala High Court. Hence, the EPF Appellate Tribunal allowed the appeal of the aggrieved bank and quashed the order passed u/s7A of the EPF & MP Act, 1952 by the EPF authority.

*You can download the Provident Fund Wage Ceiling Increase Notification dated 29th August, 2014 here.
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Does Working from Home Increases Output of the Employee

Working from home and working in the office are very different. But with the advent of technology, organisations often prefer ‘working from home’ employees as it would increase the productivity. Some HRs are strict while adhering to regular attendance by implementing bio-metric system; on the other hand, working from home are also encouraged as the employees can work from the comfort of their homes without the tension of being in the office and also have some more to spend with their families, which in term can increase the productivity of the employees.

Working from home not only increases productivity, but also reduces time of conveyance and travelling expenditure apart from time, which is the most valuable ingredient in today’s world. Employees often lose half of their energy while trying to reach office in time; in that case it is unfair to expect them to provide cent percent dedication towards the work. Considering the transportation system in India, going to office is a huge pain. That is why many organisations mostly IT sectors are encouraging their employees to work from home too and offering the employees flexible working hours.

Though this is highly recommendable and even practiced by many organisations, but this “work from home” policy should not be followed with eyes closed. Many organisations like hospitals, hotels, manufacturing units etc. can allow its employees to work from home. On the other hand, IT companies are in favour of virtual offices as most of their employees are capable of doing their work on a PC/ laptop with a high speed internet connection.

Employees, mostly in the IT sectors are opting for jobs which is providing more working hour flexibility with lesser salary than a high pay packet but with rigid working hours. If employees are allowed to access the office network outside their offices, they can easily work home or even during a vacation (which is not very desirable though).

Companies implementing flexible working hours and working from home facilities to their employees must consider that these facilities should increase the productivity of the organisation. Working from home is not a fashion statement; it should benefit both the employer and employees. A high quality of self discipline is very much essential. There will be nobody to supervise a working from home employee. So before implementing this, one must assess himself whether he is ready for it. Success of this work from home system solely depends on the nature of the organisations. Even the result may vary from one department to another of the same organisation. One can give it a try and then implement it further if it is found to be successful.

A Director is an Employee Under the Employees’ State Insurance Act

A director of a company who is working on a particular amount of remuneration is an employee under the Employees State Insurance Act, 1948 and the remuneration earned by him during his course of employment will be treated as wages under the ESI Act for the purpose of calculation of contributions. The Supreme Court of India in this regard has stated that even if a director is the principle employer of a company, but if he is getting any remuneration on regular basis for performing certain functions in the company, then such director shall be treated as an ‘employee’ and his remuneration shall be treated as ‘wages’ under the Employees’ Insurance Act, 1948.

In the case of Apex Engineering, the ESI Corporation covered the company including their director. The Learned EI Court held that the director being the principal employer would be covered under the Act. Being aggrieved of the said order, the ESI Corporation moved before the Hon’ble High Court. After hearing the learned labour law advocates of both sides, the High Court held that the managing director has been working under the direction of the Board of Directors and hence, the managing director will come under the purview of an ‘employee’ under Section 2(9) of the Employees’ State Insurance Act, 1947 and salary/ remuneration paid to him would be treated as ‘wages’ under Section 2(22) of the said Act.

Finally the High Court set aside the order passed by the Learned Judge, EI Court and held that the managing director of a company will be treated as an employee under the ESI Act.

Your Company Cannot Stop You from Joining It’s Competitor

It is very common for a company to issue appointment letters containing clauses that restrict the employee to join a competitor company or rival company for a particular period of time after cessation of employment with the present company. How far this is legally tenable?

This kind of provisions in the appointment letter is absolutely invalid and does not hold any value in the eye of the law. Either this has been drafted by not so legally trained HR managers or simply by disregarding the laws of the land.

In relation to employment, both the parties, i.e. employer as well as employee both enjoy certain rights but at no point of time such rights can be used against the other party in order to restrain him from doing any particular act. If an employee finds a better opportunity (in a rival/ competitor company) he has every right to join the new company and the present employer cannot force the employee not to do so in any manner whatsoever under the present law.

An employer cannot restrict an employee to join another company solely on the ground that the rival or competitor company would make huge monetary benefit from the said employee who has received the training and experiences from the former employee. If the employee is getting a better opportunity for the growth of his career, no employer can restrain him to join the new company. The freedom of changing employment is very important and the employer has no right to curtail it. Even if there are some negative clauses in the appointment letter or service conditions/ contracts restraining the employee, but such clauses cannot be used against an employee under the law. Such kind of contract is also invalid and unenforceable in terms of the Section 27 of the Contract Act, 1872 which states as follows:

“27. Agreement in restraint of trade, void

Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.

Exception : Saving of agreement not to carry on business of which good will is sold – One who sells the goodwill of a business may agree with the buyer to refrain from carrying on a similar business, within specified local limits, so long as the buyer, or any person deriving title to the goodwill from him, carries on a like business therein, provided that such limits appear to the court reasonable, regard being had to the nature of the business.”

In the case of American Express Bank Ltd, the bank terminated the service of one of its employee on the ground that the employee disclosed confidential data to the rival company. Thereafter, the bank filed a suit for injunction against the employee restraining her from disclosing any information and to solicit with the customers of the bank. The labour law advocate defending the employee argued that the injunction application was filed only to harass the employee as the so called secret data are only the names, address and phone numbers of the customers which cannot be treated as a trade secret.

The Hon’ble Delhi High Court held that the bank was intentionally trying to restrain the employee on the grab of confidentiality issue. It was held that the bank cannot stop the employee from joining any rival company even if the employee is in possession of any confidential data. If the employee receives a lucrative offer from a new employer, the former cannot withhold the employee in any manner whatsoever. After cessation of employment, the former employer cannot dictate an employee in terms of joining a new company, even if it is of similar nature or rival. After leaving the current job, an employee is entitled to exercise the knowledge, training etc. in the new job. Even such conditions in a contract are illegal u/s 27 of the Contract Act. Even if the employee agrees to such conditions while joining the service, it cannot be used against the employee as it is not permissible under the law. In Star India (Private) Ltd case, the Hon’ble Bombay High Court has decided that since the employer has the right to terminate the service on grounds of misconducts, similarly the employee also has the right to leave the service for better opportunity. The Courts were very particular about the fact that an employee cannot be restrained from joining a rival company in any manner whatsoever.

It is a relief for the employees to know that irrespective of the nature of agreement/ contract they have signed with their employers, the employers under the laws of the land cannot restrain their employees from joining any rival/ competitor company after cessation of the present employment.

When You Can Forfeit the Gratuity Payable to an Employee

After conducting a domestic enquiry, the management found the employee guilty of misconducts related to embezzlement of fund for his own benefit. Thereafter, the employee was dismissed from his service and all his financial benefits including gratuity were forfeited. A separate criminal proceeding was also initiated against the employee.

Being aggrieved, the employee challenged the order of dismissal by way of filing a writ petition before the Hon’ble Single Judge, but it was dismissed. Finding no other alternative, the aggrieved employee approached the Writ Court challenging the order of the Single Judge as well as order of dismissal. The Writ Court observed that the employee himself has admitted the charges during the domestic enquiry and the enquiry officer has passed a detailed enquiry report. Even though the employee was acquitted in the criminal cases later, but the domestic enquiry was done independently and has nothing to do with the acquittal of the employee in the criminal case.

According to Section 4(6)(b)(ii) of the Payment of Gratuity Act, 1972, which reads as

4.Payment of gratuity.-

(1) Gratuity shall be payable to an employee on the termination of his employment after he has rendered continuous service for not less than five years,-

                 (a) on his superannuation, or

                 (b) on his retirement or resignation, or

                 (c) on his death or disablement due to accident or disease;

(6) Notwithstanding anything contained in sub-section (1),

(a) the gratuity of an employee, whose services have been terminated for any act, willful omission or negligence causing any damage or loss to, or destruction of, property belonging to the employer, shall be forfeited to the extent of the damage or loss so caused;

(b) the gratuity payable to an employee shall be wholly forfeit

(i) if the services of such employee have been terminated for his riotous or disorderly conduct or any other act of violence on his part, or

(ii) if the services of such employee have been terminated for any act which constitutes an offence involving moral turpitude, provided that such offence is committed by him in the course of his employment.”

the management has the right to forfeit the gratuity of an employee if his service is terminated on the ground of misconduct involving moral turpitude.

In this instant case, the employee was dismissed from service after he was found guilty of embezzlement of fund after conducting a domestic enquiry. His gratuity and other monetary benefit were forfeited. It is the settled position of the law and have been decided by the Supreme Court of India in several cases that the management can forfeit gratuity when it has suffered financially for a wilful and/ or negligent act of the employee resulting in financial loss of the company. Such harsh punishment is required to be implemented on the employee in order to maintain discipline.

The term ‘misconduct’ has vast meaning. First there can be a technical misconduct which cannot be related to indiscipline. Secondly, misconducts which lead to direct financial losses of the company and thirdly, misconduct like riotous behaviour, violence against management etc. which does not directly create financial loss to the company, but surely amounts to grave misconducts.

In spite of vehement argument put forward by the labour law advocate of the employee/ petitioner, Hon’ble High Court Himachal Pradesh held that the employee has himself admitted the charges during the domestic enquiry and no separate order is required to forfeit the gratuity. The Court held that the ordered passed by the Hon’ble Single Judge was a reasoned one and hence dismissed the appeal.

Termination is Valid When Sexual Harassment is Proved

Considering the traditional Indian society, several steps have been taken in order to safeguard the rights and status of women in their offices. One such step is the introduction of the Sexual Harassment of Women at Workplace Act, 2013. Several complaints/ cases might have been registered under this Act; however, this Delhi High Court judgement plays a vital role till date.

A perverted mind, mischief, feudal mentality often leads to sexual harassment of the female employees. Sexual harassment should be dealt strictly by i) exemplary punishment or ii) physiatric treatment or both. Sexual harassment is nothing new. Women across every section of society face it. However, more and more brave women are speaking up. Women, irrespective of their professions like doctors, engineers, managers, teachers etc. face sexual harassment. Since the number of women in workplace is increasing, it is necessary to change the attitude towards them. Still women face the risk of getting sexual harassed by superiors or colleagues in their workplaces. Sexual harassment is an offence and it should be dealt strictly. More and more educated women, who are aware of their rights, are raising voices against sexual harassment at their workplaces. This is indeed a welcome sign.

Earlier female workers were looked down or mocked and stigmatized for raising their voices against sexual harassment. However, times have changed. Women are no longer ready to tolerate the nuisance. Unfortunately, still some management try to put cases of sexual harassment under the carpet.

In the latest Delhi High Court case in sexual harassment, Mr. X challenged the termination of his service by the employer through a Writ Petition before the Hon’ble Delhi High Court. Mr. X was charged with sexual harassment, an Internal Complaint Committee (ICC) conducted its enquiry and found him guilty as per the Sexual Harassment of Women at Workplace Act, 2013 and dismissed him from service. The Hon’ble Delhi High Court observed that Mr. X took the complainant, a young junior female employee to Hyderabad on pretext of some official work and booked separate rooms in the hotel. However, he forced the complainant to sleep with him. Further evidences were found that in the past, Mr. X has travelled with female staffs on official trips on various occasions. The complainant was a young unmarried junior staff to whom Mr. X used sexual tainted languages and verbally abused her which made her ill. Even Mr. X refused to hand over the room key to the complainant and knocked on the door of the complainant several times at night.

Above acts were considered by the Hon’ble High Court Delhi as sexual harassment under the Sexual Harassment of Women at Workplace Act, 2013. This was the first time the complainant raised her voice against Mr. X a senior official and it needed a lot of courage. The Hon’ble Delhi High Court considered that a young woman would not want to ruin her reputation by making such a complaint without any reason. The labour law advocate appearing on behalf of Mr. X argued that the complaint was raised almost after two months of the incident but the Hon’ble High Court Delhi rejected such arguments and stated that the so called delay on behalf of the complainant is not fatal.

Hon’ble High Court Delhi rightly held that the official trip was pre planned and arranged by Mr. X and there was no requirement of taking the complainant/ young female junior staff with him. It further held that the report of the Internal Complaint Committee (ICC) is based on evidence and holds merit. Hence, the Hon’ble Delhi High Court held that Mr. X has been rightly terminated from service for sexual harassment and his writ was rejected. For more information on this particular case, feel free to contact the labour law advocate in Kolkata near you.

Provident Fund Authority Cannot Claim Damages for Unintentional Delay in Paying Contributions

The appellant filed an appeal challenging the order passed under Section 14-B of the Employees’ Provident Fund & Miscellaneous Provisions Act, 1952 before the EPF Appellate Tribunal at New Delhi. In the said appeal, the labour law advocates appearing on behalf of the appellant challenged the EPF authority regarding the claim of damages and interest for the delayed payment of contributions.

The Hon’ble Judge, EPF Appellate Tribunal observed that the appellant was covered under the EPF & MP Act, 1952 retrospectively. Contributions were being deposited on the regular basis. In spite of that, the EPF authority arbitrarily imposed damages and interest for the pre-discovery period. The labour law advocates for the appellant argued that the delay was unintentional and not due to the fault of the appellant, but only because the EPF authority covered them retrospectively. There was hardly any deliberate attempt by the appellant to avoid the coverage under the EPF authority. Even the EPF authority while passing the order did not find any intentional and deliberate delay on the part of the appellant to deposit the contributions.

The Employees’ Provident Fund Appellate Tribunal finally held that there was no intentional delay in depositing the contributions. Delay, if any, was only because the appellant was covered with a retrospective effect and it was not in the hands of the appellant. Under these circumstances, the Hon’ble Judge, EPF Appellate Tribunal held that the appellant is not liable to pay any damage and/ or interest for delay in payment of contributions when the delay is due to covering the appellant in a retrospective manner.