What is a Fixed Term Contract ?
Fixed Term Contract is a Contract of Employment for a fixed
term/tenure between the employer and the employee/workman. This contract is
adapted usually for meeting the ad-hoc requirement of the industry and also for
non-core activities.
Contract Labour (Regulation & Abolition) Act, 1970 regulates
the engagement of labour under Contract in the establishments/industry and also
provides the State/Central Government to prohibit contract labour in particular
field of work/job or industry.
· What are the essential terms of a Fixed Term Contract?
The length of the
contract.
A contract where
the worker has worked for a year or more on the same job or where the contract
has been renewed continuously would be an indication of the job being a
permanent one. However this is subject to the type of work that is being done.
Where a group of workers were employed for the specific job of crushing sugar
during the crushing season and they were terminated at the end of the season
despite having worked for 240 or more days, the contract was deemed to be a
fixed term contract.
Valid FTC
The key to having
a valid fixed term contract would therefore appear to be that the contract must
be genuinely for a temporary job that once completed will not require somebody
else to be appointed for doing it further. The factors that go into the making
of a valid fixed term contract would be :
After the
conclusion of the contract if somebody else were hired to do the same job, it
would lead to the suspicion of the job being permanent and the contract being a
sham one.
Where seasonal or temporary workers were
appointed to do a job, at the completion of the job their termination was
deemed not to be a “retrenchment”.[1]
This re-enforces the view that a fixed term contract is easily accepted for a
short term or temporary job, but where the job is a very long one and needs a
replacement in personnel after the completion, the termination can often be
deemed to be retrenchment.
The procedures for termination as laid down in
the fixed term contract must be adhered to carefully. In situations where the
exact procedure was not laid down, the termination has been held to be void and
amounting to retrenchment.
When adjudicating
on this subject, the Court looks at the nature of the work done and not
necessarily the contract that has been drawn up. Periodical renewal of
contracts over a period of time gives rise to the assumption that the
employment is permanent in nature and not by way of a fixed term contract. The
Courts have also tried to check the wordings and form of contract to see
whether the length of the term of the contract was in any way trying to
camouflage the fact that the contract was actually a sham for what was in fact
a period of permanent employment.
·
How to Terminate a Fixed Term Contract?
Under a fixed term contract of employment, termination of a worker can
take place either through
(i)
The
termination of the service of the workman as a result of the non- renewal of
the contract upon the expiry of the stipulated period of the contract or Termination
of the contract of employment in terms of a stipulation contained in the
contract of employment i.e. through an active step taken under a termination
clause in a contract.
The key to having
a valid fixed term contract would therefore appear to be that the contract must
be genuinely for a temporary job that once completed will not require somebody
else to be appointed for doing it further. The factors that go into the making
of a valid fixed term contract would be :
·
Will the termination of a workman engaged on
fixed term amount retrenchment?
NO. Termination of a workman engaged on fixed term contract, on
expiry of the contract or pursuant to the terms of the contract will not amount
to retrenchment. Section 2(oo)(bb) of the Industrial Disputes Act (ID Act)
excludes such contracts from the purview of “retrenchment”. There are 4
exceptions to Section 2, dealing with retrenchment
·
On the Voluntary retirement of a workman.
·
On retirement after the workman has reached the
age of super-annuation.
·
On the termination of a workman as a result of a
non-renewal of a contract of employment between the employer and the workman on
the expiry of such a contract or termination under a stipulated clause in the
contract and Termination on grounds of continued ill health.
•
The
Supreme Court in the case of Harmohinder Singh v kharagh canteen, Ambala
reported in (2001) 5 SCC 540 has held that an employee’s services could be
terminated on the basis of a stipulation in his contract fixing a particular
tenure or period beyond which the employee would be discharged.
•
The
Supreme Court in the case of Morinda Co-operative Sugar Mills v Ram Krishna
reported in (1995) 5 SCC 653 has held that seasonal workers by their
nature of employment would be covered under section 2(oo) (bb).
•
The
Supreme Court in the case of Kishor Chandra Samal v Divisional Manager,
Orissa State Cashew Development Corporation, reported in JT 2005 (10) SC 46 has held that even if there were repeated
contracts issued for successive terms spread over several years, so long as
each contract was for a fixed period, section 2(OO) (bb) would apply, and
termination of employment would stand excluded from the definition of
“retrenchment”.
Also Read http://www.singhania.in/userfiles/India%20Legal%20Update%20Feb%202012.pdf. India Update on Downsizing, by Singhania & Partners' Journal.
·
What
are the laws applicable for Contract Labour /Employees in the Industry?
In India several labour laws regulate
various conditions of work, wages, service, labour relations and other such
related matter. Some of the relevant
laws in addition to the The Contract Labour (Regulation and Abolition) Act,
1970;
- The Industrial Disputes Act, 1947;
- The Industrial Employment (Standing Orders) Act.
- The Factories Act, 1948;
- The Shops and Establishment Acts of various states;
- The Contract Labour (Regulation and Abolition) Act, 1970;
- The Trade Unions Act, 1926;
- The Employees' Compensation Act, 1923;
- The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952;
- The Employees’ State Insurance Act, 1948;
What should be the Notice pay liability by the employer in case of termination of the FTC, by a stipulation in the said contract or otherwise!
The fixed term contract usually stipulates the notice period or payment in lieu of the notice by either party.
Though the employee/workmen shall be bound by the stipulation agreed to by virtue of this fixed term contract, such a condition should not be a one less favourable than a remedy provided by any law governing the employee workmen. The Contractor/employee engaging the employee/workmen being an establishment under the Shops & Establishment Act, the respective S&E Act would govern the notice pay liability. As far Mahrasthra, Section 66 of the M S&E Act mandates a notice period or wages in lieu of such notice period -
(1) If an employer wants to terminate the services of any employee who has been in his continuous service employment for one year or more, the employer can terminate his services by giving him 30 days' notice in writing or wages in lieu of such notice.
(2) If an employer wants to terminate the services of any employee who has been in his continuous service employment for less than one year but more than three months, the employer can terminate his services by giving him 14 days' notice in writing or wages in lieu of such notice.
The M S&E Act, while defining 'wages' adapts the definitions as in the Payment of Wages Act. Hence the wages for notice pay should encompass all the wages including such allowances, other than the allowances paid to defray special expenses (Please check this PW Act definitions for clarity.
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