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Fixed Term Employment In India – The Present and The Future

For now, employers not engaged in seasoned work may consider revisiting their practices to assess if their fixed-term employment engagement with their personnel commensurate with immediate/temporary business requirements.

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The construct of the employment laws in India revolves around one basic idea – protecting the interests of the workforce against those of the employer. It is, therefore, no surprise when one is heard saying that fixed-term employment is viewed cautiously by the judiciary and the policy-makers.

In this article, the authors examine the present and the future of fixed-term employment in India, highlighting in the process that the route to effectuating such arrangement may not be an easy one.

Understanding fixed term engagement and its reception by Indian courts

Simply put, a fixed-term employment contract is one where the end of the employment relationship is determined in a certain way, whether by way of a fixed duration specified in the contract or due to its connection with a specific assignment/project/event.

In India, several employment benefits are linked to the employment tenure – be it retrenchment compensation (statutory severance compensation) payable to non-managerial employees completing 240 days of continuous service or gratuity (retiral benefit) payable to employees completing 4 years and 240 days of continuous service with an employer. It is for this reason that the judiciary adopts a watchful approach in cases relating to fixed-term employment, the apprehension here being that the employer may have entered into such arrangement to deprive the employee of the benefits associated with the employment tenure.

Courts have held that there is an inbuilt requirement of some justification for hiring employees on fixed-term contracts. In a case involving a claim for retrenchment compensation (K. Rajendran v Director (Personnel), Project and Equipment Corporation of India Limited [1995 III LLJ (Suppl) 240 (Madras)]), the Madras High Court emphasized on the temporary nature of the assignment that may require a person’s services on a fixed-term basis. Likewise, in a case before the Delhi District Court, the judicial forum reasoned that a reasonable justification must underlie the engagement of an employee on a fixed-term basis, such as a time-bound requirement to deploy someone on a particular project or the work of the concerned industry itself being seasonal. The Supreme Court of India, too, has carefully reviewed fixed term engagement for its bonafide nature. In one such case (Haryana State Electronics v Mamni [AIR 2006 SC 2427]), an employee was appointed for 89 days on a regular basis, meaning that after every 89 days, there would be a gap of one or two days after which she would be appointed again on a fixed-term basis. The court held the arrangement to be mala fide, observing that the gaps between two successive appointments were artificial/notional breaks intended to prevent a permanent employment relationship.

From a review of the judicial precedents, one can say that India adopts a similar approach as is followed by several jurisdictions, the underlying notion being that fixed-term employment engagement should not replace permanent employment relationships and that its recourse should be limited to tasks of a temporary nature/duration (see International Labour Organisation’s 2016 report titled ‘Non-standard employment around the world: Understanding challenges, shaping prospects’).

The growing trend towards statutory regulation

The concept of fixed-term employment gained attention in 2018 when the Government of India introduced amendments to the Industrial Employment (Standing Orders) Rules, 1946. The amendments provided that the hours of work, wages, allowances, and other benefits in respect of fixed-term employees (occupying a non-managerial position in an organisation) shall not be less than those available to a permanent non-managerial employee and that the former shall be eligible for all statutory benefits available to the latter subject to the period of service rendered by them. A significant move here is that the government expressly provided that all service benefits would be available to fixed-term employees on a prorated basis even if the qualifying period of employment as set out in the relevant statute is not met.

The above-mentioned provisions have been replicated in several states lately. Karnataka, Punjab, Goa, and Bihar are few states which have recently incorporated the Central amendments.

The future of fixed-term engagement

The future would see a continued trend towards statutory regulation. The Code on Social Security, 2019 as tabled in Parliament reiterates the principles of parity in treatment among fixed term and permanent employees and provision of all service benefits to the former on a proportionate basis. The bill, at present, does not restrict the fixed-term arrangement to specific kinds of work or to a specified duration. However, the Standing Committee on Labour (2019-20) has, while re-examining the bill, suggested that there should be an express provision that sets out “the conditions under which and the areas where the employers can secure fixed-term employments from a designated authority strictly based on an objective situation.” This, if implemented, would be a paradigm shift from evaluation of fixed-term employment engagement on a case-to-case basis to compliance with an objective set of rules.

For now, employers not engaged in seasoned work may consider revisiting their practices to assess if their fixed-term employment engagement with their personnel commensurate with immediate/temporary business requirements. If not, an extensive recourse to such arrangement may become a subject-matter of contention, unless one is ensuring that similar benefits are provided to fixed-term employees at par with permanent resources.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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