Our interview has been published by Lexology at An interview with AZB & Partners discussing labour & employment in India – Lexology

Q&A

What are the most important new developments in India over the past year in employment law?

The past year has witnessed a number of significant developments in the realm of employment law in India, notably including the introduction of new laws for regulating the burgeoning gig economy (as a part of the Indian government’s effort to consolidate the existing labour law framework in India into four labour codes), and the pronouncement of a landmark judgment regarding social security/provident fund (PF) contributions for international workers (IWs).

The gig economy in India has been rapidly expanding, with projections from NITI Aayog’s 2022 report indicating that the workforce could reach approximately 23.5 million by 2029-30. This sector encompasses online platform workers, self-employed individuals, creative tech talent and other freelance workers (collectively ‘gig workers’), who are often characterised by their non-traditional nature of employment, often resulting in a lack of legal protection and social security benefits, which are otherwise mandated for traditional employer-employee relationships.

In response to these challenges, the government has taken various steps to formalise such non-traditional arrangements and implement social security provisions specifically tailored for such gig workers. For instance, the Code on Social Security, 2020 (COSS) proposes to provide social security benefits, safe working conditions and welfare initiatives such as life and disability cover, health and insurance benefits, old age protection, etc, to gig workers. Although not in force yet, the COSS marks a paradigm shift in the manner and scope in which such benefits and contributions have been contemplated under Indian laws thus far. While the COSS is a national law, certain states like Rajasthan and Karnataka have also introduced state-specific legislation for gig worker benefits, namely, the Rajasthan Platform-Based Gig Workers (Registration and Welfare) Act, 2023; and the Karnataka Platform-Based Gig Workers (Social Security and Welfare) Bill 2024, requiring 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; and follow prescribed process and safeguards for termination of gig workers, etc. These provisions aim to address the vulnerabilities faced by gig workers and ensure they receive adequate support and protection, which, until now, has only been extended to conventional employees. This new legal regime represents a crucial turning point in recognising alternate workforce models that foster economic growth while maximising flexible employment opportunities.

Another pivotal recent development in employment law was the recent ruling by the High Court of Karnataka in Stone Hill Education Foundation versus Union of India, where the court struck down certain provisions of the Employees’ Provident Fund Scheme, 1952, and the Employees’ Pension Scheme, 1995, issued under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 (EPF Act), which mandated higher PF contributions for IWs. This judgment is specifically important because it emphasised that the EPF Act was primarily designed to benefit lower-wage earning employees earning up to 15,000 rupees per month, and extending these benefits to IWs who ordinarily earn significantly higher salaries was considered by the court to be beyond the scope and underlying intent of the EPF Act.

The ruling is expected to have significant implications for both employers and employees. While on one hand, it allows the employers to cap their contributions for IWs at levels similar to those applicable to other (non-IW) employees, thereby reducing the financial burden, on the other hand, it increases take-home pay for IWs owning to reduced PF contributions. However, this decision raises important questions about its retrospective impact on prior contributions made for IWs and its applicability on a PAN India basis across different states, as the judgment is pronounced by the High Court of Karnataka. Notably, the EPFO, regulator under the EPF Act, has filed an appeal against this judgment, indicating that further developments may arise from this ruling in due course.

In summary, the past year has seen crucial advancements in employment law concerning the gig economy and PF contributions of IWs. These developments reflect a growing acknowledgement of the need to adapt and mould the existing legal framework to protect vulnerable worker populations while fostering an inclusive labour market.

What upcoming legislation or regulation do you anticipate will have a significant impact on employment law in India?

India is undergoing transformative legal reforms poised to reshape its employment landscape, primarily driven by the implementation of the ‘Labour Codes’ and the recently enacted Digital Personal Data Protection Act, 2023 (DPDPA).

The most notable development expected in the near future is enforcement of the four Labour Codes namely, the Code on Wages, 2019, the Industrial Relations Code, 2020, the Code on Social Security, 2020 and the Occupational Safety, Health, and Working Conditions Code, 2020 (OHS Code) (collectively ‘Labour Codes’), which are expected to subsume and consolidate 29 (out of the total 44) existing central labour laws into a unified framework aimed at enhancing worker protections, improving compliance and boosting ease of doing business. These changes are expected to have far-reaching impact on employment dynamics, benefiting both workers and employers, as the Indian labour and employment law landscape has not witnessed such a massive legal transformation since India’s independence.

The Labour Codes introduced several pivotal reforms, including a standardised definition of wages, consequent enhancement in social security coverage and benefits, and broadened social security benefits for gig and platform workers, unorganised workers, etc. By extending protection such as insurance and gratuity to previously excluded workers, the reforms bridge the gap between formal and informal employment. The Industrial Relations Code facilitates a more flexible labour market by easing rules for hiring and retrenchment, particularly for businesses with up to 300 employees, while also introducing speedy and efficient dispute resolution machinery. The OHS Code mandates higher workplace standards, annual health check-ups and mandatory provision of formal employment contracts, fostering safer and more secure working environments.

The impact of these reforms is expected to be transformative. Employers will need to reassess payroll structures to comply with the new wage definition, while also preparing for the increased costs associated with extended social security coverage. On the other hand, workers stand to benefit from greater job security, improved working conditions and a formalised approach to labour rights, which will particularly uplift the gig economy and other informal sector workers. These changes aim to make India’s workforce more inclusive and competitive, aligning labour practices with international standards and supporting India’s goal of becoming a global manufacturing hub.

Complementing these reforms, the DPDPA, introduced in August 2023 (but not yet enforced), aims to bring a robust framework for data privacy to the workplace. Once in effect, it will replace the existing data protection regime under the IT Act, 2000 and the rules thereunder.

Currently, employers need written consent from employees to process sensitive personal data like passwords, financial info, medical records and biometrics. The DPDPA, however, shifts this approach by also introducing a concept of ‘legitimate use’ of data, and including ’employment purposes’ within the scope of ‘legitimate use’. This means employers (acting as data fiduciaries) can process the personal data of employees without additional consent for employment-related purposes. Unlike the current rules, the DPDPA also requires prompt deletion of such data once its purpose has been fulfilled.

Together, reforms like the much-awaited Labour Codes and the legitimate use provisions under the DPDPA signal a decisive shift toward modernising India’s employment ecosystem. While employers may face initial challenges in adapting to the new compliance requirements, the long-term benefits promise to support a more equitable and protective approach to workforce engagement.

How has the #MeToo movement impacted the investigation or settlement of harassment or discrimination claims in India?

The #MeToo movement has had a notable impact on the raising and redressing of harassment and discrimination claims in India. While the Indian law on sexual harassment of women at workplace, namely, the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act) already mandated certain compliances like establishing Internal Committees (ICs), strengthening workplace policies and conducting regular training sessions, since the #MeToo movement, employers have become more cognisant of such compliances to create safer and inclusive work environment,s particularly for women employees. The movement has empowered women to assert their rights under the law, fostering a culture of accountability and transparency in handling complaints. That said, the movement has not particularly impacted the manner and process of investigation and redressal of such claims since those aspects continue to be driven by the framework provided under the POSH Act.

One significant outcome of the movement has been the increased willingness of survivors to report incidents of harassment, breaking the culture of silence that had long prevailed. Employers, in turn, have recognised the legal and reputational risks of non-compliance and have taken steps to address complaints more proactively. This shift has led to expedited investigations and, in some cases, settlements to resolve disputes more efficiently.

However, the movement has also brought to light various challenges. Survivors often face backlash in the form of defamation suits filed by the accused, creating a chilling effect on those seeking justice. However, courts have increasingly begun to address these challenges by balancing the right to reputation with the need to protect survivors. Recent judicial decisions have underscored that speaking out against harassment is a legitimate exercise of free speech, particularly when done to expose systemic issues or safeguard others from similar experiences.

The widespread use of social media as a platform for #MeToo disclosures has further complicated the legal landscape. While it has provided a space for survivors to share their experiences and mobilise public support, it has also raised concerns about procedural fairness, admissibility of evidence and trial by media. Legal institutions and ICs now face the task of adapting to this evolving dynamic while attempting to ensure fair and unbiased investigations as per the legally defined process.

Despite its successes, the #MeToo movement has also highlighted certain gaps in India’s legal system. For instance, the POSH Act does not extend protections to men or LGBTQ+ individuals, leaving significant sections of society vulnerable. The movement has underscored the need for more inclusive laws. While progress has been made, continued reforms are essential to address the complexities of harassment claims and to ensure justice for all parties involved.