5 key court rulings that will transform employee-employer relations in 2024

In its judgement in the Bharatiya Kamgar Karmachari Mahasangh vs M/s Jet Airways case, the Supreme Court held that model standing orders would supersede settlements between an employer and employee unless the settlement is more beneficial to the employee. (Illustration by Suneesh Kalarickal)

In the ever-evolving realm of labour and employment law, certain court rulings have stood as pivotal milestones, reshaping the intricate tapestry of relationships between employers and their workforce. These landmark decisions also played a transformative role in delineating the rights and responsibilities of employers and employees.

Moneycontrol delves into major court rulings that have redefined the contours of the employer-employee relationship.

Maternity benefits beyond contracts

The Supreme Court passed a significant ruling in August 2023 in the matter of Dr Kavita Yadav v The Secretary, Ministry of Health and Family Welfare Department & Ors and held that maternity benefits could extend even beyond the contractual period of an employee.

The court held that if a woman had worked in an establishment for 80 days, she would be eligible for full maternity benefits, even if they exceeded the term of the contract.

“It would be important to note that the Supreme Court has observed that the word ‘discharge’ under Section 12(2)(a) of the Maternity Benefit Act, 1961, includes even ‘discharge on conclusion of contract period’ that potentially extends the impact of the judgement to cases where the term of contract had expired and the woman had not even started availing maternity benefits,” said Punyam Bhutani, an associate of SKV Law Offices.

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According to Bhutani, the judgement would cause unanticipated difficulties in its implementation because it is typical, particularly in the private sector, for employees to be hired on short-term contracts – such as six months or a year – for specific projects that eventually expire.

Protecting employees from forced agreements

In its judgement in the Bharatiya Kamgar Karmachari Mahasangh vs M/s Jet Airways case, the Supreme Court held that model standing orders would supersede settlements between an employer and employee unless the settlement is more beneficial to the employee.

The judgement protects employers from abusing their dominance and coercing employees into executing court-recorded settlements by paying them a pittance in comparison to what they are entitled to, said Rohan Taneja, senior associate at Kred Jure.

Take, for example, he said, an employee is due to be paid Rs 20,000. However, the employer offers Rs 10,000 to be payable immediately to the employee. The employee, being under financial pressure, accepts the offer and executes a hasty settlement instead of opting for a long and tedious judicial process to try and recover his dues.

This duly executed settlement can later be ignored/set aside by a tribunal or court and the employee can be awarded his rightful dues.

Safe road towards permanency

In a similar judgement, the court observed that the Bombay Model Standing Order provides that a workman employed for 240 days shall be entitled to be made permanent.

Any agreement that waives this right of employees would not override the standing orders. To be sure, the Industrial Employment (Standing Orders) Act, 1946, applies to industrial establishments with 100 or more workmen.
The state government issues standing orders for establishments not under the control of the Central government.

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“The Supreme Court ruling has fortified the essential function of labour laws. Now, even in situations like change in government priorities or financial struggles, the employees/workers would be assured fair treatment,” said Soayib Qureshi, a partner at PSL Advocates & Solicitors.

According to Qureshi, employees have been denied access to all the benefits they are entitled to because some businesses tried to circumvent the model standing orders for far too long.

“Such entities should take note of this ruling, which signals the end of antiquated and oppressive methods,” he said.

Clarity on worker classification

Another significant judgment was passed by the Supreme Court in the matter of Kirloskar Brothers Limited v Ramcharan & Ors.

Before the judgement, there was ambiguity over worker classification, especially in cases involving contractors. Some courts leaned towards considering workers employed by contractors as "deemed employees'' of the principal employer, based on factors such as control, supervision, and integration into the core business.

This created uncertainty for the principal employers, who could become liable for employee benefits unintentionally.

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“However, the Kirloskar judgement explicitly emphasises the need for either a notification under Section 10 of CLRA prohibiting employment of contract labour or a contract recognising the worker-principal employer relationship,” said Sandeep Bajaj, an advocate in the Supreme Court.

CLRA stands for Contract Labour (Regulation & Abolition) Act, 1970.

In case of absence of notification, the principal employer cannot be required to absorb the contract labour working in the establishment. This sets a clear threshold for establishing employee status, protecting principal employers from unintended liability.

Workers cannot be penalised for employer's failure

In the case of Chintan Bindra v Deputy Commissioner of Income Tax, Kingfisher Airlines pilot Chintan Bindra received notices for discrepancies in income tax deductions for AY 2009-10, 2011-12, and 2012-13. Although his employer deducted tax, it wasn't deposited.

The Delhi High Court asked whether recovery could be enforced against Bindra, given that his employer failed to deposit the deducted tax. Relying on precedent, the court emphasised that Bindra, having received a salary after tax deduction, lacked control over the deposited amount.

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The employer's failure to fulfil its duty didn't warrant penalising Bindra. The court set aside intimations raising the demands and restrained recovery proceedings. The Income Tax Department was directed to refund wrongly adjusted amounts.

“The Court, however, clarified that if the petitioner was able to obtain any amount of money towards tax deducted from his income at source for AYs 2009-10, 2011-12 and 2012- 13 from his employer, the same shall be deposited by him with the revenue forthwith,” said Anindya Mazumdar, partner, Singhania & Co.