Labour & Employment Law
Full-service employment practice covering compliance, policies, disputes, and workforce restructuring.
Overview
India's labour law framework presents significant compliance challenges for employers across sectors. AMLEGALS provides comprehensive employment advisory spanning central and state labour laws, the new labour codes, workplace policies, and employment disputes. We serve employers from IT companies to manufacturing units, helping them navigate hiring, managing, and separating employees within legal frameworks. Our Under Pivot Labour Code™ methodology addresses the transition to consolidated labour codes.
Understanding Labour & Employment Law
Indian employment law presents one of the most complex compliance challenges for employers. The regulatory framework comprises over 40 central labor legislations, numerous state-specific laws, and varied judicial interpretations that create compliance obligations differing by industry, location, and workforce composition. This complexity demands legal practitioners who understand both the law and practical employer realities.
The four Labour Codes—Code on Wages, Industrial Relations Code, Social Security Code, and Occupational Safety Health and Working Conditions Code—represent India's most ambitious attempt at labor law reform since independence. While enacted between 2019-2020, their implementation awaits notification of central and state rules. This transition period requires employers to maintain current compliance while preparing for the new framework.
Employment relationships in India follow a binary classification system that significantly impacts legal rights and obligations. "Workmen" enjoy statutory protections under the Industrial Disputes Act, including requirements for prior permission or compensation for retrenchment, protection against arbitrary termination, and access to labor courts for disputes. Non-workmen (supervisory, managerial, administrative) are governed primarily by contract law with fewer statutory protections but also fewer compliance obligations for employers.
The distinction between employees and contractors creates additional complexity. The Contract Labour (Regulation and Abolition) Act regulates use of contract labor for certain activities, with evolving judicial interpretation of what constitutes "core" activities where contract labor may be prohibited. Misclassification risks include deemed direct employment relationships with associated historical liabilities.
Prevention of Sexual Harassment (POSH) compliance has become a significant focus area. The Sexual Harassment of Women at Workplace Act, 2013 mandates Internal Complaints Committees, written policies, awareness programs, and annual reporting. Expanding judicial interpretation and increased awareness have elevated POSH from a technical compliance requirement to a critical workplace safety and culture issue.
Global capability centers and technology companies face particular employment challenges. These employers must balance global HR practices with Indian legal requirements, manage intellectual property assignments, address data privacy in HR contexts, and navigate restrictive covenant enforceability limitations unique to Indian law.
Regulatory Landscape
The Industrial Disputes Act, 1947 (ID Act) governs industrial relations, dispute resolution, and workforce restructuring. Chapter V-A requires prior government permission for layoffs, retrenchments, and closures in establishments with 100+ workmen (threshold varying by state). Chapter V-B extends additional protections to larger establishments. Compliance with ID Act requirements is essential before any workforce reduction.
The Shops and Establishments Acts are state-specific legislations governing working hours, overtime, holidays, leave, and employment conditions for shops and commercial establishments. Each state has distinct requirements for registration, working hours, weekly offs, and record-keeping. Multi-state employers must maintain compliance across all operational locations.
The Employees' Provident Fund and Miscellaneous Provisions Act (PF Act) mandates provident fund, pension, and insurance contributions for establishments with 20+ employees. Employee contributions (12% of basic + DA) are matched by employer contributions. Compliance includes registration, timely deposits, and maintenance of records. Penalties for non-compliance include prosecution.
The Employees' State Insurance Act (ESI Act) provides health insurance, maternity benefits, and disability coverage for employees earning below INR 21,000 monthly. Employer and employee contributions fund the scheme. Establishments in notified areas with 10+ employees must register and comply.
The Minimum Wages Act ensures wage floors for scheduled employments, with rates varying by state and industry. The Payment of Wages Act mandates timely wage payment, permitted deductions, and record maintenance. The Payment of Bonus Act requires profit-sharing for eligible employees in establishments meeting specified criteria.
The Maternity Benefit Act provides 26 weeks of paid maternity leave, work-from-home options, creche facilities for establishments with 50+ employees, and protection against discrimination. Recent amendments expanding benefits have increased employer obligations significantly.
Key Practice Areas
Employment Contracts & Policies
Drafting employment agreements, offer letters, confidentiality agreements, non-competes, and comprehensive policy manuals. POSH policy development and committee constitution.
Labour Law Compliance
Central and state labour law compliance audits, factory licensing, establishment registration, and ongoing statutory compliance management.
Workforce Restructuring
Retrenchment advisory, voluntary retirement schemes, closure procedures, and compliance with notification requirements under industrial laws.
Employment Disputes
Representation before labour courts, industrial tribunals, and High Courts. Management of termination challenges, wage claims, and workplace disputes.
Industrial Relations
Union negotiations, collective bargaining, settlement agreements, and industrial dispute management for manufacturing and organized sector employers.
TCL Framework Application
Technical
Understanding employer's operational requirements, workforce composition, and industry practices to design practical compliance frameworks.
Commercial
Balancing compliance costs against operational flexibility, structuring severance arrangements, and managing dispute exposure.
Legal
Ensuring compliance with applicable labour laws while protecting employer interests in policies and dispute resolution.
Regulatory Framework
Industries Served
Our Approach
AMLEGALS provides employment advisory through our Under Pivot Labour Code™ framework, designed to help employers navigate both current law and upcoming code transition. This methodology addresses compliance gaps while building frameworks adaptable to the new regime.
For new employer setups, we begin with workforce planning analysis—projected employee strength, categories, locations, and activities. This assessment determines applicable registrations, compliance obligations, and structural recommendations. We then implement registration processes, policy frameworks, and compliance systems appropriate for the business scale.
Compliance audits follow comprehensive checklists covering all applicable legislations. We review registrations, records, policies, contracts, and actual practices against legal requirements. Findings are prioritized by risk level with remediation roadmaps. Follow-up assessments verify implementation.
Employment contracts and policies require balancing protection with flexibility. We draft employment agreements, offer letters, confidentiality agreements, and policy manuals appropriate for different employee categories. Where permissible, we include protective provisions for intellectual property, post-employment restrictions, and dispute resolution.
Restructuring advisory begins with strategic assessment of business objectives, workforce composition, and legal constraints. We develop compliant approaches whether involving retrenchment, voluntary retirement, closure, or transfer. Documentation, communication strategies, and dispute prevention measures are planned systematically.
Practical Guidance
Employment contract drafting should distinguish between workmen and non-workmen. For non-workmen, comprehensive contracts can include restrictive covenants (with enforceability limitations understood), IP assignments, confidentiality obligations, and arbitration clauses. For workmen, standing orders compliance and ID Act provisions constrain contractual flexibility.
Non-compete enforceability is limited in India—Section 27 of the Contract Act voids agreements restraining trade post-employment. However, practical protection exists through confidentiality agreements (enforceable), garden leave (where relationships permit), and compensation for covenants (providing practical incentive for compliance even if not legally enforceable).
POSH compliance requires more than policy documentation. Effective compliance includes trained ICC members (external member required), awareness programs reaching all employees including new joiners, clear reporting mechanisms, and actual investigation protocols. Annual returns to district officers must be filed even if no complaints were received.
Termination documentation requires careful attention. For non-workmen, ensure contract terms are followed including notice periods and settlement of dues. For workmen, evaluate ID Act applicability—proper procedure depends on whether termination constitutes retrenchment, disciplinary dismissal, or contract completion. Documented performance issues strengthen defense against wrongful termination claims.
Background verification has legal constraints. Employee consent is required for reference checks. Criminal record checks must comply with privacy requirements. Adverse action based on verification results requires fair process. Document verification procedures and maintain records of consent and findings.
Frequently Asked Questions
What is the status of the four labour codes?
The four labour codes (Wages, Social Security, Industrial Relations, and OSH) have been enacted but await notification of central rules and state rules for implementation. Until notified, existing laws continue to apply. Employers should prepare for transition while maintaining current compliance.
Are non-compete clauses enforceable in India?
Post-employment non-competes are generally unenforceable under Section 27 of the Contract Act as restraint of trade. However, reasonable restrictions during employment, garden leave, and protection of confidential information through NDAs are enforceable. Strategic structuring can provide practical protection.
What are POSH compliance requirements?
Employers with 10 or more employees must constitute an Internal Complaints Committee, adopt a POSH policy, conduct awareness programs, and file annual reports with district officers. Non-compliance attracts penalties and can impact employer reputation.
How should companies handle employee terminations?
Termination procedures depend on employee category (workman/non-workman), tenure, and reason. Workmen with one year service require one month notice or pay in lieu and retrenchment compensation. Non-workmen follow contract terms. Documented performance issues, proper notice, and settlement of dues are essential for defending challenges.
What is the difference between contract labour and direct employment?
Contract labour is engaged through a contractor who is the legal employer, while direct employees are on the company's payroll. Contract Labour Act regulates use of contract workers, prohibiting engagement in core/perennial activities in many contexts. Misclassification risks include deemed direct employment and associated liabilities.
What wage and hour requirements apply to employees in India?
Minimum wages vary by state and scheduled employment. Payment of Wages Act requires timely wage payment (monthly for specified employees). Overtime at twice ordinary wages applies for work beyond prescribed hours. The Code on Wages will unify these provisions once effective.
How does PF and ESI apply to employees?
PF applies to establishments with 20+ employees; employees earning up to INR 15,000 are mandatorily covered. ESI applies to establishments in notified areas with 10+ employees; employees earning up to INR 21,000 are covered. Both require employer and employee contributions with strict compliance timelines.
What notice period is required for termination in India?
Notice periods depend on category and contract. Workmen generally require 30-90 days depending on legislation. Managerial employees follow contract terms, typically 30-90 days. Senior employees may have longer periods. Notice can usually be waived with pay in lieu.
How should workplace investigations be conducted?
Investigations should follow fair procedure: written complaint, notice to accused, opportunity to respond, witness interviews, evidence review, and reasoned findings. POSH cases have specific procedural requirements. Document all steps, maintain confidentiality, and ensure consistent application of policies.
What are the key changes expected under the labour codes?
Key changes include expanded minimum wage coverage, universal social security, simplified compliance, fixed-term employment recognition, and updated industrial relations framework. Threshold definitions for factory/establishment and retrenchment rules will change. Employers should conduct gap analysis once rules are notified.
How should employee data privacy be handled?
Employee data constitutes personal data under DPDPA requiring consent or legitimate interest basis. Employers should have clear privacy notices, limit collection to necessary data, ensure security measures, and address cross-border transfers for global employers. HR systems and background verification processes need DPDPA compliance review.
Why AMLEGALS
AMLEGALS employment practice serves employers across industries—technology companies, manufacturers, service providers, and startups. Our experience spans compliance advisory, policy development, restructuring, and dispute resolution. We understand both legal requirements and practical employer realities.
Our Under Pivot Labour Code™ framework provides structured transition planning as the new codes approach implementation. We help employers understand coming changes, prepare compliance systems, and build adaptable HR frameworks.
Our pan-India presence addresses the challenge of multi-state employment compliance. We maintain current knowledge of state-specific Shops and Establishments requirements, local labor law developments, and regional enforcement patterns.
The TCL Framework ensures our employment advice considers technical operational requirements alongside legal compliance. We understand that employment decisions affect business operations, employee relations, and company culture—not just legal risk. Our advisory balances all these dimensions.
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Labour & Employment Law Advisory
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