Article on Labour laws compliance for Vendor compliance Management

Labour laws compliance for Vendor compliance Management

It is a fact of life that we all inhabit a vastly regulated world that can frequently seem frightening. How do you know what you have to comply with or if something have changed to move you from your previous compliance to non-compliance? What do you do when you get conflicts between principles, statutes, regulations etc.? What will be your action plans while overcoming with day to day labour laws compliance issues? What are the sources where most of the issues can get solved? How to deal with Government, labour, shop and establishment, ESIC, Provident Fund etc. authorities? What are the legal consequences and penalties when you face with non compliance in your organization?

Ongoing globalization will increase the complexity of principles, regulations, and the cultures in which organizations operate. Increasing litigation, legislation, and regulations will carry important compliance implications. Ever growing competition will increase the pressure on organizations to enhance productivity.  Good corporate governance demands that every organization comply with regulatory needs, and this is not a choice; but the increasing complexities of business in a diverse, global environment have brought the need for a more proactive management of the process.

Compliance has become non-negotiable for everyone today. The word “statutory” means "of or related to statutes," or what we normally describe laws or regulations. Compliance just means to comply with or adhere to. Hence statutory compliance means you are following the laws on a given issue. The term is most often used with organizations who must follow lots of regulations. When they forget or refuse to follow some of those regulations, they are out of statutory compliance. A company that follows all the rules is in statutory compliance.

With increased outsourcing and heightened regulatory concern, all establishments have to carefully manage their relationships with vendors of all shapes and sizes. To achieve that, statutory compliance under various labour laws should be ensured by establishments and the vendors deployed into those establishment. It is not just limited to the statutory deposits, returns and records to be maintained by the employer under various labour laws, but it also to represent them in case of prosecution under various statutes. Hence, it hardly needs to be emphasized that the labour related laws cast an obligation on the employer as well as their vendors for careful, perfect and timely compliances. In the event of violation or delay in complying with the statutory requirements, the consequences in terms of levy of damages, prosecution is inevitable. Further, under most of the employment laws, the top executives or the head of the institution/organization, as the case may be, is held liable and responsible and is required to personally attend such matters before the competent Authority or Court. In order to facilitate day-to-day functioning smoothly, Vendor compliance Management will be an added advantage to overcome with all the lacunas faced by establishment and their vendors.

The Various Labour statutes under which every establishment and their vendor need to comply are as follows:

1. Apprentices Act
2. Contract Labour (Regulation and Abolition) Act, 1970
3. Employees Provident Funds Act, 1952
4. The Employees State Insurance Act (ESI Act)
5. Equal Remuneration Act
6. Factories Act, 1948
7. Labour Laws (Exemption From furnishing returns and maintaining registers by Certain

    Establishments) Act, 1988
8. Payment of Bonus Act, 1965
9. Payment of Gratuity Act, 1972
10. Industrial Disputes Act
11. Industrial Employment (Standing Orders) Act
12. Minimum Wages Act
13. Payment of Wages Act
14. Trade Unions Act, 1926
15. Workmen’s Compensation Act, 1923
16. The (STATE) Shop and Establishment Act.

In Vendor compliance management everybody who are concerned with this has to also keep in mind the main critical implication of non compliance under various labour statutes like, for Principal Employer it would be show cause notice to Directors, Fine, Penalties, closure of business etc., for Vendor/Contractors it would be loss of pay, termination of contract, penal action etc.

The Principal employer as well as vendors should also aware the types of fines which they can face on basis of non compliance, namely under Contract Labour Act ‘s Section 22- punishment for obstructing the inspector or failing to produce registers etc. - 3 months’ imprisonment or fine upto Rs.5000/-, or both.  Under Section 23 of Contract labour act for violation of the provisions of Act or the Rules, imprisonment of 3 months or fine upto Rs.1000/- and on continuing contravention, additional fine upto Rs.100 per day.

Under Payment of Wages Act the punishment will be imprisonment for 6 months or fine upto Rs.10,000/- for avoiding to make payment by making false statement or representation.

Under The Employees’ Provident Funds And Miscellaneous Provisions Act the defaulting person is liable to be arrested without warrant. Defaults by employer in paying contributions or inspection/administrative charges attract imprisonment upto 3 years and fines up to Rs.10,000 (S.14) For any retrospective application, all dues have to be paid by employer with damages up to 100% of arrears. Rate of damages on delayed payment of contribution w.e.f. 26 / 09 / 08, up to 2 months @5% per annum. Above 2 months & up to 4 months @10% per annum. Above 4 months & up to 6 months @ 15% per annum. Above 6 months @ 25% per annum. Simple interest @ 12% pa is charged separately on delayed payment of contribution

There are so many judgments took place in the field of labour law. Few we can cite which are as follows:

1. Payment of Gratuity Act: If an employee has not completed his 5 years, he is eligible for gratuity.

Judgment: If employees completed his 4 years in service and have completed 240 days in the 5th year then he is entitled for 5 years gratuity.

Refer to the case law citation- Mettur Beardsell Ltd., Madras v. Regional Lab. Commissioner (Appellate Authority under Payment of Gratuity Act), Madras etc., 1998 (3) LLN 414.

2. The Employees’ Provident Funds And Miscellaneous Provisions Act: Section 7A, Determination of money due from an employer-Section 7C escaped amount-Petitioner challenged the impugned order by the Respondent No. 1, holding petitioner as principal employer and to pay amount of contributions with interest as per said order.

Refer to the case law citation Best and Crompton Engg. Ltd. Bangalore vs. Assistant Provident Fund Commissioner, E.P.F. Organisation, Bangalore and Anr.

3. Contract Labour (Regulation and Abolition)Act, 1970-  Petitioners have worked for 240 days in a year-and having rendered service for two years-mere working for 240 days would not entitle a contractual or causal worker to claim regularization- petitioners were employee of contractor- Judgment given in this case is dismissed petition and delivered judgment as “Not entitled to regularization”

Refer to the case law citation Prem Shankar Pandey and Another vs. National Thermal Power Corporation Ltd. and others

To sum up we can only say one thing that implementation of Vendor compliance Management is today’s one of the top most need in order to keep the organization’s name intact, secure and popular among top listed organization list.

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