In this article, we aim to illuminate the crucial importance, both for employers and employees, of having written employment agreements in the workplace, under the purview of Indian laws.
It’s imperative to recognize that Indian labour laws are specifically designed to safeguard the interests of a distinct category of employees referred to as ‘workmen.’ According to the Industrial Disputes Act, 1947, a workman is defined as an employee engaged in skilled, unskilled, operational, manual, clerical, or supervisory work. However, individuals engaged in supervisory roles, earning above INR 10,000 per month, or primarily exercising managerial functions, do not fall within the workman category.
Indian labour laws predominantly focus on workmen and govern their fundamental terms of employment, including provisions pertaining to dismissal and disciplinary proceedings. Nevertheless, it is prudent to include these terms, and possibly additional ones, in a written appointment letter or employment agreement issued to workmen.
While ample legal provisions exist to protect the rights of workmen, employers must exercise caution to ensure that the terms outlined in the appointment letter align with legal provisions. For instance, it’s important to note that a simple termination (dismissal without specifying reasons) may not be enforceable against a workman under certain circumstances.
Conversely, all other employees are typically classified as falling into the ‘managerial category’ by default. Since the terms of their employment, including appointment, remuneration, dismissal, and other obligations, are not explicitly delineated under the law, they take on a contractual nature. Therefore, it becomes paramount for employers and employees, whether workmen or managers, to meticulously document the terms of employment in a separate agreement.
Indian law grants considerable latitude to contracting parties to define the terms of their relationship. Given that Indian courts are obligated to interpret contracts during legal proceedings in the absence of comprehensive documentation, it is paramount for both employers and employees to record the terms of employment in writing. Additionally, these terms must harmonize with the prevailing legal framework.
Another compelling reason to advocate for such a written document between employers and employees is to ensure that both parties are unequivocally aware of their rights, responsibilities, and liabilities throughout the course of their working relationship. A written contract offers the advantage of clarity and can be instrumental in averting misunderstandings and conflicts in the employment relationship.
Furthermore, under various Shops and Commercial Establishment laws across different Indian states, employers are statutorily obliged to issue an appointment letter or employment agreement to employees. This document must clearly articulate the terms and conditions governing the employee’s engagement within the company.
Consequently, it is in the best interests of both employers and employees to formalize a comprehensive written document that meticulously outlines the terms and conditions of the employee’s tenure within the company.
Disclaimer: As previously mentioned, this article underscores the significance of entering into employment agreements. The information, suggestions, guidelines, and tips provided herein are of a general nature and should only be acted upon following a thorough evaluation of the specific employment relationship by a qualified legal consultant. Furthermore, we disclaim any responsibility or liability for any losses or damages incurred by individuals or entities acting upon the information provided in this article without seeking the counsel of a professional legal consultant. The information is provided “as is” and “as available.”