含羞草社区

Workplace harmony is a key to success. Here we compare developments in laws governing workforce management in India and Japan

Navigating transformation of 含羞草社区 labour, employment laws

含羞草社区 employment landscape is undergoing significant transformation, driven by the burgeoning gig economy, evolving workforce dynamics and recent landmark judicial pronouncements. As the country navigates these shifts, organisations are grappling with the complexities of adapting to a transforming legal and regulatory environment.

The traditional employer-employee relationship is giving way to innovative work arrangements, raising critical questions about the rights and protections afforded to workers.

Meanwhile, judicial rulings are redefining the contours of employment law, and proposed legislation such as the Digital Personal Data Protection Act, 2023 (DPDPA) introduces new dimensions to the employment landscape.

This article examines three critical aspects of 含羞草社区 evolving employment scenario:

1. The legal status of gig workers in India, a segment of the workforce that is growing exponentially but has remained shrouded in uncertainty;
2. The implications of a recent landmark judgment by the High Court of Karnataka, which could potentially have far-reaching implications on social security contributions for international workers (IWs), both for employers and for such IWs; and
3. The impact of the proposed DPDPA on employment-related processing of personal data, another remarkable development that may revolutionise the way India approaches data privacy for its employees.

Gig economy

Against the backdrop of proposed labour codes, India Inc should gear up for a transformative shift in the employment regime with the introduction of laws recognising and safeguarding the rights of “gig workers”.

According to the public-policy thinktank Niti Aayog’s 2022 report titled 含羞草社区 Booming Gig and Platform Economy, the gig workforce in India is projected to expand to 23.5 million by 2029-30. But despite the promising growth forecast, it presently faces significant challenges, including the absence of legal protection such as minimum wages for gig work, regulated work hours, the right to unionise, and access to social security benefits.

In response, India is advancing legislation to formalise non-traditional work arrangements and extend social security benefits to gig workers. As labour law falls under the concurrent list of the constitution, both central and state governments hold legislative power in this domain.

At the central level, the Code on Social Security, 2020 (COSS), introduces provisions for gig workers including social security benefits, safe working conditions, and welfare initiatives such as life and disability cover, health and insurance benefits, and old-age protection. The schemes proposed under the COSS are expected to further clarify the role of employers in this regard, including contributions towards funding of these benefits.

At the state level, Rajasthan and Karnataka have introduced legislation for gig worker benefits, namely, the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023; and the Karnataka Gig Workers (Conditions of Service and Welfare) Bill, 2024.

These laws require employers to: register gig workers; provide social security benefits; ensure safe working conditions; contribute to welfare funds; enter into equitable contracts with gig workers; maintain transparency in work allocation, distribution and assessment parameters; and follow prescribed process and safeguards before the termination of gig workers.

The introduction of these laws represents a crucial turning point in India Inc’s formal recognition of alternate workforce models aimed at fostering business and economic growth, maximising employment opportunities, reducing inequality between workforce categories and enhancing global competitiveness.

On one hand, gig workers rejoice from legal recognition and welfare measures; on the other, employers will need to adapt to the new regulatory norms and demonstrate responsible workforce governance.

Provident fund for IWs

含羞草社区 social security law, the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act), provides for mandatory provident fund (PF) contributions by employers and employees in respect of employees earning up to a prescribed wage ceiling. Such PF contributions are required during the service of the employee and can be withdrawn (with interest) by employees on reaching the age of superannuation.

The 25 April judgment of the High Court of Karnataka, in Stone Hill Education Foundation and others v The Union of India marks a significant shift in the social security framework, particularly concerning the obligations of employers towards IWs under the Employees’ Provident Fund Scheme, 1952 (EPF Scheme), and the Employees’ Pension Scheme, 1995 (EPS Scheme), both issued under the EPF Act.

In this judgment, the High Court of Karnataka struck down paragraphs 83 of the EPF Scheme and 43A of the EPS Scheme (impugned provisions) on multiple grounds, firstly holding that the object of the impugned provisions did not align with the fundamental purpose of the EPF Act, which is intended to safeguard the interests of workers in lower salary brackets.

It was also emphasised that the EPF Act was designed to benefit employees earning up to INR15,000 (USD178) per month, and extending these benefits to IWs who ordinarily earn significantly higher salaries was beyond the scope of the legislation.

Furthermore, the judgment reinforced that subordinate legislation, such as the EPF Scheme or EPS Scheme, cannot exceed boundaries set by the parent law.

While addressing the discriminatory nature of the above-mentioned impugned provisions – which differentiated between Indian workers going abroad to countries without a social security agreement and foreign workers from such countries employed in India – the court observed that this classification is unreasonable and does not satisfy the test of “reasonable classification” under the Constitution of India, holding the impugned provisions to be unconstitutional.

As a result of the above-mentioned IW judgment, employers now have the potential to significantly reduce their financial burden by limiting PF contributions for IWs to the wage limit, akin to the practice followed for other (non-IW) employees. IWs are, meanwhile, likely to benefit from a higher take-home pay owing to reduced PF contributions. This change not only offers immediate cost savings for employers, but also introduces clarity and uniformity in the treatment of all employees under the EPF Act.

However, the decision also opens up questions regarding the retrospective impact on PF contributions already made for IWs, and the territorial impact of the IW judgment across India, considering it has only been issued by the high court of one state.

Notably, the PF regulator in India, the Employees Provident Fund Organisation (EPFO), has already filed an appeal against the IW judgment, although so far the ruling remains intact. This is an interesting space being closely watched due to potentially significant financial implications both for India Inc and also the EPFO, which may ultimately have to refund excess contributions collected.

Data privacy overhaul

The DPDPA, enacted on 11 August 2023 but not yet enforced, is set to revolutionise the data protection regime, propelling India to the forefront of global data privacy standards. Once enforced, it will replace the simplistic existing data protection regime under the Information Technology Act, 2000; and the Information Technology (Reasonable Security Practices and Procedures and Sensitive Personal Data or Information) Rules, 2011.

Under the existing regime, employers must obtain the written consent of employees to process their sensitive personal data including passwords, financial information, medical records and biometric information. In contrast, the DPDPA introduces two primary grounds for processing personal data: consent and legitimate use.

Notably, employment-related purposes are identified as a legitimate use, allowing employers, as data fiduciaries, to process employees’ personal data for employment-related purposes. However, if an employer seeks to process employee data beyond what is covered by “legitimate use”, they must obtain written consent from the employee.

In contrast to existing legislation, which does not prohibit employers from retaining employees’ personal data even after termination of employment, the DPDPA requires employers to promptly delete it once its specified and intended purpose is no longer served.

As such, the DPDPA empowers employees by giving them greater control over their personal information, providing a mechanism to address grievances or file complaints related to data processing activities of their employers.

In summary, the DPDPA reinforces the balance between employers’ need to process employee data for legitimate purposes and employees’ rights to privacy and data security.

India Inc is assessing its current practices of processing personal data for employment purposes and is in the process of setting up mechanisms to ensure preparedness for effective compliance with the requirements of the DPDPA, both in letter and spirit.

Back to top

Stringent termination restrictions protect Japan’s job security

Japan’s employment system is uniquely distinguished from other countries by exceptional job security for employees, with a prominent feature of labour law including stringent restrictions on terminating employment.

This article explains restrictions on ending employment contracts categorised under ordinary dismissal, redundancy dismissal, disciplinary dismissal, and non-renewal of fixed-term contracts.

Ordinary dismissal

Ordinary dismissal is when an employer unilaterally terminates employment due to an employee’s breach of obligations under the employment contract. When an employer dismisses an employee without a fixed-term contract, such dismissal must meet two conditions:

1. Proper dismissal procedures must be followed, including providing a 30-day advance notice, or paying the equivalent of at least 30 days’ wages in lieu of notice, and ensuring the dismissal does not occur during a prohibited period; and
2. Dismissal must be based on objectively reasonable grounds, considered appropriate in general societal terms (article 16 of the Labour Contract Law).

The second condition is known as the doctrine of abuse of the right to dismiss. In the Japanese employment system, continuous employment until retirement is often expected, and because dismissal can have severe consequences for employees with limited economic resources, the law imposes restrictions on dismissal.

In practice, determination of whether a dismissal is based on objectively reasonable grounds and is appropriate in general societal terms involves considering factors such as:

1. Whether the employee’s lack of ability or poor work attitude constitutes a breach of contract;
2. Whether the reason for dismissal falls under ordinary dismissal grounds outlined in the company’s rules of employment (Syugyo-Kisoku); and
3. Whether the employee was given an opportunity to improve or not.

In some cases, a performance improvement plan (PIP) may be implemented, and if performance does not improve despite the PIP, dismissal may be considered by the employer. However, it is important to note that implementation of a PIP alone does not automatically validate a dismissal.

The reasonableness of the PIP, employee’s response and results of the PIP must all be considered when determining the dismissal’s validity.

Redundancy dismissal

Dismissals carried out due to the need for workforce reduction are specifically referred to as redundancy dismissals.

While redundancy dismissal is a type of ordinary dismissal, it is unique in that the dismissal is not due to any fault of the employee, and validity of such dismissals therefore requires special consideration.

Court precedents have established that the validity of redundancy dismissals is determined by four factors:

1. The necessity of workforce reduction;
2. Efforts made to avoid dismissal;
3. Reasonable criteria used to select employees for redundancy dismissal; and
4. Appropriate procedures, including explanations provided to employees.

When closing a company’s only site in Japan, redundancy dismissals are generally more likely to be deemed valid. However, simply eliminating the position or duties of the affected employees does not automatically justify redundancy dismissal.

It is generally necessary to consider whether a transfer to another position or duties is possible or not. Even in a job-based employment system, the absence of a role or position does not exempt an employer from the obligation to make efforts to avoid dismissal, and this should be particularly noted.

Disciplinary dismissal

Disciplinary dismissal is a form of disciplinary action serving as a punitive measure for serious violations of corporate rules. Nearly all companies include disciplinary dismissal as a type of sanction in their rules of employment or individual labour contracts if no rules of employment are established.

In addition, it is common for employers to stipulate in rules of employment or individual contracts that part or all of the retirement allowance will not be paid in the case of disciplinary dismissal.

For a disciplinary dismissal to be valid there must be objectively reasonable grounds and the dismissal must be deemed appropriate in general societal terms, given the nature and circumstances of the employee’s conduct (article 15 of the Labour Contract Law). This means that the employee’s conduct must be serious enough to justify the loss of the employment relationship.

Additionally, to justify disciplinary dismissal, several factors must be rigorously assessed, including proportionality of the punishment, the principle of equal treatment among employees, compliance with procedural rules in rules of employment, and ensuring the employee’s right to defend themselves.

Fixed-term contracts

The above-mentioned regulations primarily pertain to employees without fixed-term contracts. However, there are specific provisions regarding the dismissal of employees with fixed-term contracts.

In principle, the contract terminates at the end of the fixed term and, during the contract period dismissal, is only permissible for unavoidable circumstances (article 17(1) of the Labour Contract Law).

Since the obligation to continue employment is even more stringent until expiration of a fixed-term contract, “unavoidable circumstances” are understood to be more serious than the “objectively reasonable grounds, considered to be appropriate in general societal terms” required to dismiss an employee without a fixed-term contract.

While the contract typically ends when the fixed term expires, before the execution of the contract, an employer must also clearly state criteria for contract renewal, enhancing predictability and transparency as part of the mandatory disclosure of working conditions.

Since April 2024, if there are any limits set on the total contract duration, or the number of renewals, these must also be explicitly disclosed before the execution of the contract. Fixed-term contracts are also subject to regulations such as maximum duration limits, the right to convert to a “without fixed-term contract” for employees who have had their contracts repeatedly renewed for more than five years, and the Doctrine of Non-Renewal of Fixed-Term Contracts.

In summary, under Japanese labour law, in certain situations, even if a fixed-term employment contract expires, an employer cannot refuse to renew the contract without objectively reasonable grounds, and without refusal deemed appropriate in general societal terms.

This is known as the Doctrine of Non-Renewal of Fixed-Term Contracts, which protects an employee’s reasonable expectation of continued employment, even if the contract is formally for a fixed term.

“Equivalent to Without Fixed-Term Contracts” (article 19(1) of the Labour Contract Law), the doctrine is based on factors such as:

1. The nature of work is not different from those of an employee without a fixed-term contract;
2. The parties’ subjective intentions to renew a fixed-term contract; and
3. Whether the renewal process is ambiguous or not, terminating the fixed-term employment contract is deemed equivalent to terminating a labour contract without a fixed term.

On the other hand, “Reasonable Expectation to be Renewed” (article 19(2) of the Labour Contract Law) applies when there is no long history of repeated renewals, and the renewal process is not ambiguous, but the employee’s expectation of renewal is reasonable, based on the nature of the work and the subjective intention of the parties.

Key takeaways

Japanese labour law imposes strict restrictions on the termination of employment contracts to protect employees. If a dismissal (or refusal to renew) is found to be invalid, the employer may be required to pay back wages and may often incur additional costs to terminate the contract with the employee, resulting in significant financial costs.

Additionally, since April 2024, employers are required to specify in the employment contract potential duties and locations where the employee might engage in them. Failing to comply with these requirements could disrupt employment management, including the planned relocation of employees, during the contract period.

Given the complex regulations, it is essential for employers to have a thorough understanding of Japanese labour law when employing workers. To ensure flexible and proper employment management, it is advisable to consult with a lawyer not only when terminating an employment contract but also when concluding one.

Back to top