Transition from an employee to a worker

Introduction

The Maharashtra Shops and Establishment (Regulation of Employment and Conditions) Act, 2017 (“Current Act”) and the Maharashtra Shops and Establishment (Regulation of Employment and Conditions) Rules, 2018 (“Current Rules”) have replaced the Bombay Shops and Establishment Act, 1948 (“Previous Act”) and the Bombay Shops and Establishment Rules, 1961 (“Old Rules”) respectively. The Current Act has made many significant changes to the Previous Act, such as the upliftment of women by prohibiting discrimination, digitalizing the compliances for the ease of doing business in Maharashtra etc.

However, the Current Act has at the same time taken a major step back by replacing the wide term ‘employee’ with the term ‘worker’ as the cornerstone of this social welfare legislation.

We have done an analysis on the difference in the two definitions – under the Previous Act and Current Act.

Definition

Under Section 2(6) of the Previous Act, an employee was defined as “a person wholly or principally employed, whether directly or through any agency, and whether for wages or other consideration in or in connection with any establishment; and includes an apprentice, but does not include a member of the employer’s family”.

With the introduction of the Current Act, the term worker has replaced the term employee. A worker has been defined under Section 2 (26) of the New Act as “any person (except an apprentice under the Apprentices Act, 1961) employed to do any manual, unskilled, skilled technical, operational or clerical work for hire or reward, whether the terms of employment be express or implied”.

This introduction has led to a lot of confusion as to who falls within the ambit of a ‘worker’. Though the meaning of the terms manual, unskilled, skilled and clerical are very clear, however it is still unclear on which category of people fall under term ‘technical’ and ‘operational’.

Will the term “technical” and “operational” include professionals such as architect, or others such as IT engineers, brokers and advisors?

Exemptions

Section 3 of the Current Act has further elaborated the establishments or persons who are not governed under the Current Act:

1. Establishments of the Central and State Governments;
2. Establishments of the Local Governments;
3. Establishments of Mumbai Port Trust;
4. Establishment of Railway Administration;
5. Offices of the Reserve Bank of India;
6. Offices of the Trade Commissioner and of Consular officers and other Diplomatic representatives of Foreign Government;
7. Offices of Air Service Companies;
8. Establishments used for treatment or care of infirm, destitute or mentally unfit;
9. Establishments pertaining to any kind of educational activities (except those whereby tuition or coaching classes are conducted by individual persons or any institutions other than those) – (a) affiliated to any university established by law, or (b) recognized by the Divisional Boards under the Maharashtra Secondary and Higher Secondary Education Boards Act, 1965, or (c) recognized by the Directorate of Education or the Directorate of Technical Education as a private secondary or technical high school, Industrial Teaching Institute (I.T.I.), Polytechnic, Engineering Colleges or other technical institutions conducting courses recognized by Government
10. High Court Law Libraries and other Court Law Libraries;
11. A worker occupying position of confidential, managerial or supervisory character in an establishment, a list of which shall be displayed on the website of establishments and in absence of the website at a conspicuous place in the establishment and a copy thereof shall be sent to the Facilitator;
12. A worker whose work is inherently intermittent; and
13. A member of the family of an employer.

Displaying a list of employees in managerial and supervisory role

Persons in ‘positions of confidential, managerial or supervisory character’ being excluded from the definition of ‘worker’ under the Current Act, employers are required to list out names of such individuals on their website and in the absence of a website at a conspicuous place in their establishment. Employers would also have to send a list of such persons to the Facilitator. This change appears to intend to align the definition of worker with the definition in the Industrial Disputes Act, 1947.

In Sum

In the Previous Act, an ‘employee’ as the cornerstone of the Act, was a widely defined term and covered all classes of working persons. However, compared to the same, the term ‘workers’ appears to have a narrower scope. Is the object of the Current Act to exclude all non – factory workers from its scope. This is a huge setback as persons working in an organizational setup, or a family run business shall not be covered under any Act and shall not have any laws protecting rights of such employees.

It is observed that though the terms manual, unskilled, skilled and clerical are clear and understandable, but the term ‘technical’ or ‘operational’ still needs clarity. The terms ‘technical’ and ‘operational’ are not defined anywhere and there are no precedents to identify the class of workers / workmen falling in this category. Read with Section 3 (11), that provides that persons in managerial and supervisory position shall not fall within the ambit of this Act, it is hard to decipher the kind of employees who would be technical and operational employees.

The balance of legislation has tilted in favour of business it appears. However, the consequence of excluding managerial and supervisory employees would mean additional compliance of constantly changing and displaying the employees who would fall within that capacity which may be cumbersome for organizations having larger number of employees.

Archana Balasubramanian (Partner) and Rhea Sethi (Associate)