March Newsletter

NOTIFICATIONS

Education Support for Wards of Unorganised Workers Strengthened in Alignment with Code on Social Security, 2020

The Ministry of Labour & Employment has announced a reform to strengthen educational support for children of unorganised workers, aligning welfare measures with the Code on Social Security, 2020. The change allows students receiving welfare-based scholarships under the Labour Welfare Scheme (Education Component) to also avail merit-based scholarships offered by central or state governments.

Key highlights of the notification include:

• The reform applies to the Labour Welfare Scheme (Education Component) providing financial assistance for wards of Beedi, Cine and non-coal mine workers (IOMC, LSD, Mica).

• The scheme is need-based and does not include merit criteria.

• The Ministry will amend scheme guidelines to allow beneficiaries to also receive merit-based scholarships from Central or State Governments.

• The change removes the earlier restriction that prevented students from receiving multiple scholarships simultaneously.

• The reform aims to improve access to higher education and reduce dropout rates among children of unorganised workers.

• It is expected to benefit additional students beyond the approximately 1 lakh beneficiaries each year.

• The initiative strengthens the implementation of welfare provisions under the Code on Social Security, 2020.

The reform allows children of unorganised workers to receive both welfare-based and merit-based scholarships, increasing financial support for education, reducing barriers, and improving access to higher studies in line with the Code on Social Security, 2020.

EPFO Welcomes Rationalisation of Income Tax Regime for Provident Funds

The Employees' Provident Fund Organisation has welcomed the rationalisation of the income-tax framework for recognised provident funds introduced in the Union Budget 2026–2027. The reform aligns the tax treatment of recognised provident funds under the Income-tax Act, 2025 with the statutory provisions of the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952 and the Employees’ Provident Funds Scheme, 1952. This move aims to remove inconsistencies related to tax exemption, investment norms, and employer contribution limits, which earlier caused confusion and litigation.

Key highlights of the notification include:

• Alignment of laws: Tax rules for recognised provident funds are now aligned with provisions under the EPF law.

• Exemption condition: Income-tax recognition will be granted only to provident funds that have obtained exemption under Section 17 of the EPF Act.

• Investment norms: Investments will follow EPF framework rules; the earlier 50% cap on investment in government securities has been removed.

• Employer contribution: Employer contributions exceeding ₹7.5 lakh will be treated as taxable perquisites.

• Reduced ambiguity: The reform seeks to remove inconsistencies that earlier led to confusion and avoidable litigation.

The rationalisation brings clarity and consistency between tax provisions and provident fund regulations, reducing compliance complexity for employers and fund managers. By aligning exemption rules, investment norms, and contribution limits, the reform is expected to minimise disputes and create a more streamlined framework for recognised provident funds.

Universal Social Protection Plan

India has significantly expanded its social protection coverage, increasing from 19% in 2015 to 64.3% in 2025, according to the International Labour Organization. The Ministry of Labour & Employment has been implementing multiple social security schemes for both organised and unorganised workers, while strengthening the framework through the Code on Social Security, 2020. Key initiatives include provident fund and pension schemes for organised workers, pension support for unorganised workers, and the creation of a national database through the e-Shram portal to improve access to welfare schemes.

Key highlights of the notification include:

• Social security coverage in India rose from 19% (2015) to 64.3% (2025).

• Organised sector workers receive protection through:

  • Employees’ Provident Funds Scheme, 1952

  • Employees’ Pension Scheme, 1995

  • Employees’ Deposit Linked Insurance Scheme, 1976

• Pradhan Mantri Shram Yogi Maan-dhan provides ₹3,000 monthly pension after age 60 to eligible unorganised workers.

• The Code on Social Security, 2020 formally recognises gig workers and platform workers and provides for dedicated social security measures.

• A Social Security Fund and National Social Security Board are envisaged for welfare of gig and platform workers.

• The e-Shram portal provides a centralised database and Universal Account Number (UAN) for unorganised workers.

• 14 central welfare schemes have been integrated with the e-Shram platform to expand social security access.

The expansion of social protection coverage strengthens welfare support for both organised and unorganised workers, particularly gig and platform workers. Integration of schemes through the e-Shram portal improves access to benefits, enhances policy coordination, and supports the broader goal of universal social security coverage in India.

JUDGEMENTS

New India Assurance Co. Ltd. v. Rekha Chaudhary and Ors.

In New India Assurance Co. Ltd. v. Rekha Chaudhary and Ors., the Hon’ble Supreme Court of India held that an insurer cannot be made liable to pay the penalty imposed on an employer for delayed payment of compensation under Section 4A(3)(b) of the Employees’ Compensation Act, 1923. The Court ruled that the obligation to pay such a penalty arises from the employer’s personal fault in failing to pay compensation within the statutory period of one month and therefore cannot be transferred to the insurance company.

The case arose after a commercial driver died while driving his employer’s vehicle, following which his legal heirs sought compensation before the Commissioner under the Act. Compensation of ₹7.36 lakh with 12% interest was awarded, and due to the employer’s delay in payment, a 35% penalty was imposed. While the vehicle was insured with New India Assurance Company Limited, the insurer accepted liability for the compensation and interest but challenged the penalty. The Delhi High Court had directed the insurer to pay the penalty as well. On appeal, the Supreme Court relied on its earlier ruling in Ved Prakash Garg v. Premi Devi, which held that penalties under Section 4A arise from the employer’s default and cannot be shifted to the insurer.

The ruling clarifies that insurers are responsible only for compensation and interest under the policy, while penalties for delayed payment remain the employer’s personal statutory liability. This distinction reinforces employer accountability and prevents insurance contracts from being used to bypass statutory obligations under the Employees’ Compensation framework.

Sangada Hansaben Malabhai v. State of Gujarat & Ors.

In Sangada Hansaben Malabhai v. State of Gujarat & Ors., the Hon’ble Gujarat High Court held that denying public employment to an unmarried woman on the assumption that she may marry and relocate is arbitrary and unconstitutional. The Court ruled that such reasoning violates the equality guarantees under Article 14 of the Constitution of India and Article 16 of the Constitution of India, and reflects favouritism and discriminatory decision-making in public recruitment.

The petitioner challenged the appointment of another candidate as Administrator-cum-Cook in Dahod district despite having higher academic marks. She had secured 68% in graduation, whereas the selected candidate had 48.94%, yet was placed higher in the merit list. The appointing authority justified rejecting the petitioner on the ground that she was unmarried and might marry and shift to another village. After examining the records, the Court found that several more meritorious candidates were rejected on arbitrary grounds. However, since doubts were raised about the authenticity of the petitioner’s degree certificate, the Court directed the authorities to verify it before granting the appointment.

The Court quashed the appointment of the selected candidate and directed that if the petitioner’s degree certificate is found genuine, she must be appointed; otherwise, the next candidate in the merit list should be considered. The ruling reinforces constitutional protections against gender-based discrimination in public employment and emphasises transparency and fairness in recruitment processes.

Atal Khandelwal v. Institute of Health Management Research

In Atal Khandelwal v. Institute of Health Management Research, the Hon’ble Rajasthan High Court held that a writ petition challenging termination of service is not maintainable when the dispute arises out of a purely private employment relationship. The Court observed that since the termination stemmed from a contractual service relationship without any public law element, the petitioner could not invoke writ jurisdiction under Article 226 of the Constitution of India.

The petitioner, an employee of the Indian Institute of Health Management Research, challenged his termination and sought reinstatement with benefits. He argued that the institute performed public functions in the field of public health management and therefore fell within the scope of Article 12 of the Constitution of India. The respondent contended that the institute was a society registered under the Societies Registration Act, 1860 and not a statutory body. Relying on the Supreme Court’s ruling in Army Welfare Education Society v. Sunil Kumar Sharma, the Court noted that although institutions may perform public functions, disputes relating to employment governed by private contracts do not involve a public law element.

The Court consequently dismissed the writ petition, reiterating that service disputes arising from private contractual relationships must be pursued through appropriate civil remedies rather than constitutional writ jurisdiction.

Smt. Kanta Kumawat v. State of Rajasthan & Ors.

In Smt. Kanta Kumawat v. State of Rajasthan & Ors., the Hon’ble Rajasthan High Court held that details of an employee’s salary and service-related information constitute “personal information” and cannot be disclosed under the Right to Information Act, 2005 in the absence of overriding public interest. The Court upheld the State’s decision to reject an RTI application filed by a wife seeking copies of her husband’s salary slips from his employer department.

The petitioner had sought salary details of her husband, who was employed with a government department, for a specific period. The State denied the request on the ground that the information related to a third party and was personal in nature. While examining the issue, the Court relied on the Supreme Court’s decision in Girish Ramchandra Deshpande v. Central Information Commissioner, which held that service-related details such as performance or financial records are primarily matters between the employer and employee and are protected unless disclosure serves a larger public interest.

The ruling reinforces privacy protections under the RTI framework and clarifies that personal service-related information of an employee cannot be disclosed merely because a family member seeks it, unless a clear public interest justifies such disclosure.

Dr. Jayant v. State of Maharashtra & Ors. 

In Dr. Jayant v. State of Maharashtra & Ors., the Hon’ble Bombay High Court held that fixing the operative date for extending fiscal or service benefits, such as Non-Practising Allowance (NPA), is a matter of executive policy. The Court ruled that classification based on the date of retirement does not automatically violate Article 14 of the Constitution of India and that courts exercising jurisdiction under Article 226 of the Constitution of India cannot rewrite a Government Resolution by altering its operative date unless clear arbitrariness or illegality is shown.

The petitions were filed by retired Zilla Parishad medical officers who had retired shortly before 1 January 2019. Although they received benefits of the 7th Pay Commission for pay fixation and pension revision, they were denied inclusion of 35% Non-Practising Allowance (NPA) in pension computation under a Government Resolution dated 14 October 2024, which extended the benefit prospectively from 1 January 2019. The petitioners argued that since the 7th Pay Commission applied from 1 January 2016, the NPA should also apply from that date. The Court, however, held that acceptance and implementation of pay commission recommendations can occur in stages and that fixing an effective date may legitimately create two classes of retirees.

The Court dismissed the petitions, clarifying that retirees before the notified operative date do not gain a vested right to claim retrospective extension of a later policy benefit. The ruling reinforces judicial restraint in fiscal and policy matters and affirms that courts will not interfere with executive decisions on financial benefits unless they are arbitrary, discriminatory, or illegal.

Brihanmumbai Municipal Corporation & Ors. v. Mumbai Mahanagarpalika Karyalayeen Karmachari Sanghatana & Anr.

In Brihanmumbai Municipal Corporation & Ors. v. Mumbai Mahanagarpalika Karyalayeen Karmachari Sanghatana & Anr., the Hon’ble Bombay High Court held that a discretionary benefit repeatedly granted over decades through formal approvals and circulars can crystallise into a customary concession or service condition. The Court ruled that withdrawal of such a long-standing benefit amounts to a change in service conditions and therefore requires compliance with Section 9-A of the Industrial Disputes Act, 1947.

The case arose when the Brihanmumbai Municipal Corporation challenged an interim order of the Industrial Court which stayed a circular dated 5 September 2025 discontinuing the practice of granting one or two additional wage increments to employees who acquired Diplomas in Local Self Government (LSGD/LGS). The Corporation argued that the increments were discretionary and their withdrawal did not reduce wages already earned. The Court noted that under the Act, changes affecting service conditions listed in the Fourth Schedule require prior notice, and Item 8 of the Fourth Schedule specifically covers withdrawal of customary concessions or privileges.

The Court held that where a benefit has been consistently granted for years through official resolutions and circulars, it may become part of established service conditions. Accordingly, discontinuing such a benefit without following the statutory procedure under Section 9-A may amount to altering service conditions. Upholding the Industrial Court’s interim order, the High Court dismissed the writ petition and allowed the Industrial Court to decide the dispute on merits.

Pawan Kumar & Ors. v. Union of India & Ors.

In Pawan Kumar & Ors. v. Union of India & Ors., the Hon’ble Supreme Court of India held that employees who are similarly situated cannot be treated differently once regularisation has been granted to others in comparable circumstances. Applying the principle of parity, the Court directed regularisation of four long-serving daily-wage workers, holding that denial of the same benefit was arbitrary and discriminatory.

The appellants had been engaged between 1993 and 1998 as sweepers and a cook in the Income Tax Department at Gwalior through Employment Exchange sponsorship and interviews. Despite working for several years, their requests for regularisation were rejected after the department outsourced the work. Both the Central Administrative Tribunal and the Madhya Pradesh High Court denied relief relying on Secretary, State of Karnataka v. Umadevi. The Supreme Court, however, noted that similarly placed workers had already been regularised in Ravi Verma & Ors. v. Union of India and that the appellants’ appointments were not illegal since they were made through Employment Exchange and interviews. The Court also relied on Jaggo v. Union of India, which clarified that Umadevi was not intended to permanently deny relief to long-serving employees appointed through irregular but not illegal processes.

The Court held that denying the appellants the same benefit granted to similarly placed employees violated equality principles and constituted arbitrary treatment. Accordingly, it directed that their services be regularised from 1 July 2006, on the same terms as earlier cases, with consequential benefits to be released within three months.

INTERNATIONAL UPDATES

Maldives ratifies the 1986 Instrument of Amendment to the ILO Constitution

The 1986 Amendment to the International Labour Organisation Constitution has been ratified by 129 Member States so far, including two countries of chief industrial importance, India and Italy. For the amendment to come into force, it must be ratified by two-thirds of ILO Member States and by at least five of the ten countries designated as Members of chief industrial importance. Since only two such members have ratified it so far, ratification by at least three more countries from the remaining group, Brazil, China, France, Germany, Japan, Russia, the United Kingdom, or the United States, is still required for the amendment to take effect.

Until the required ratifications are secured, the 1986 Amendment will remain pending and cannot be implemented. This means the proposed institutional reforms to the ILO’s governance structure will not take effect, limiting changes intended to make representation and decision-making more reflective of current global economic realities. Additional ratifications from major industrial economies are therefore critical to operationalise the amendment and strengthen the functioning of the ILO’s governing framework.

Luxembourg and the ILO sign new Strategic Partnership Framework for 2026-29

The International Labour Organization and the Government of Luxembourg renewed their collaboration by signing a Strategic Partnership Framework for 2026–2029 on 2 February 2026. Under the new agreement, Luxembourg will contribute €6.8 million to support the ILO’s mandate, reflecting an increase from the previous funding arrangement. The contribution will be channelled through the Regular Budget Supplementary Account (RBSA) to provide flexible and predictable financing for initiatives such as social protection programmes and country-level projects, including those in Rwanda and Cabo Verde.

The renewed partnership strengthens multilateral cooperation and ensures continued financial support for the ILO’s programmes promoting social protection and decent work. The increased and flexible funding will help sustain development projects and social protection initiatives globally, while reinforcing efforts to advance social justice and the goals of the United Nations 2030 Agenda for Sustainable Development.

Cambodia strengthens reintegration response for returning migrant workers

The International Labour Organization, in collaboration with Cambodia’s Ministry of Labour and Vocational Training of Cambodia and supported by Japan’s Ministry of Foreign Affairs of Japan, has launched a 24-month initiative to support around 20,000 returning migrant workers affected by tensions along the Cambodia–Thailand border. The project will deliver integrated employment, protection, and skills services, including the establishment of Migrant Worker Resource Centres in Oddar Meanchey Province, Pursat Province, and Preah Vihear Province. It also focuses on job placement support, industry consultations, job fairs, and targeted awareness campaigns in labour-intensive sectors such as garments, construction, and manufacturing, along with reskilling and entrepreneurship training for returnees.

The initiative is expected to strengthen reintegration systems for migrant workers by improving access to employment opportunities, skills recognition, and social protection. By facilitating job matching, upskilling, and support services, the project can help returning workers rebuild sustainable livelihoods, support local labour markets, and promote inclusive economic recovery and stability in affected Cambodian provinces.

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