Recently, the Karnataka Labour Department ruled that the decision to lay off certain trainees does not violate any labour laws, as these trainees are not classified as "employees" under the relevant legal provisions. This development brings into focus the legal treatment of trainees in the Indian workforce and the implications for their employment rights and protections. The official further clarified that the government cannot intervene in the selection process of any private company, reinforcing the company's autonomy in managing its workforce decisions.
I. Key Issue
The key issue in this case revolves around whether trainees, who are typically hired for short-term stints to develop skills, qualify as "employees" under Indian labour laws and are entitled to the same protections as regular employees. The company terminated hundreds of trainees who were hired from both on and off-campus about two-and-a-half years ago but only onboarded in October of the previous year. The company's action was based on the trainees' inability to clear an internal assessment program.
The government's inspection revealed that 300+ trainees failed the test, while over 600 of the same 2022 batch had successfully progressed. The question is whether these trainees are entitled to the same protections as regular employees under labour laws, especially concerning termination.
II. Legal Provisions:
The key provision to determine whether a trainee qualifies as a "worker" lies in the definition of "workman" under Section 2(s) of the Industrial Disputes Act, 1947, and the definition of "worker" under Section 2(zr) of the Industrial Relations Code, 2020. If the trainee's engagement meets the criteria to avoid classification as a worker under these definitions, then, regardless of whether there are specific provisions in the standing orders, the trainee's engagement under an employer's training scheme remains legally valid.
Section 2(s) - “workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person—
(i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957); or
(ii) who is employed in the police service or as an officer or other employee of a prison; or
(iii) who is employed mainly in a managerial or administrative capacity; or
(iv) who, being employed in a supervisory capacity, draws wages exceeding 3 [ten thousand rupees] per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.
Trainees may not necessarily fall under the definition of "workman" depending on the nature of their training and the employment contract. Courts have previously ruled that individuals undergoing training may not be considered workmen as their primary purpose is to acquire skills, not perform work for hire. The definition of a workman includes an apprentice; however, this does not grant a trainee the status of a workman, as affirmed by the Delhi High Court in Kamal Kumar vs J.P.S. Malik, Presiding Officer, 1998 VAD (DELHI) 518. A trainee's engagement must not involve performing manual, unskilled, skilled, technical, operational, clerical, or supervisory tasks. Instead, the trainee should be engaged in learning the trade through a combination of classroom instruction and on-the-job training under supervision.
Furthermore, the trainee should receive a stipend, not wages or other forms of compensation.
The worker definition under section 2(zr) of IR Code 2020 reads that "worker" means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute.
The definition of "worker" under the Industrial Relations Code, 2020 is largely aligned with that of the Industrial Disputes Act, 1947, with a few notable additions. For our purposes, the core interpretation remains consistent with the earlier legislation. However, it is important to note that the term "apprentice" is now explicitly restricted to those falling within the scope of the Apprentices Act, 1961. This likely reflects the prevailing judicial stance on the engagement of trainees. Consequently, a trainee will not be classified as a "worker" under the IR Code unless they meet the specific criteria outlined in its definition. The terms of engagement and supporting facts must substantiate the employer’s position to avoid reclassification.
In the given facts, they were not given appointment letters and were engaged as trainees for three months under an apprenticeship programme, receiving stipends rather than salaries.
III. Trainee vs. Employee
Employee: An individual who provides services in exchange for wages or salary under a formal employment contract.
Trainee: A trainee is an individual hired for the purpose of learning specific skills and receiving practical training and is paid a stipend.
Various court rulings have affirmed that the primary purpose of a trainee is to gain skills, not to contribute to the company's work output, and therefore, they do not qualify as workmen or employees. This legal distinction is critical in determining whether labour protections apply in cases of layoffs or termination.
In The Regional Provident Fund Commissioner, Mangalore v. M/s. Central Aercanut & Coca Marketing and Processing Co-op. Ltd. AIR 2006 SUPREME COURT 97, the Supreme Court clarified that trainees who are paid a stipend and have no right to employment are not considered employees under the EPF Act. The court emphasized that such trainees are classified as apprentices and thus fall outside the definition of employee.
In Haryana Power Generation Company Ltd. vs. Harkesh Chand [2013 2nd LLM 43 SC], the Hon’ble Supreme Court has held that Apprentices have no statutory right to claim appointment on completion of their services.
In a case involving a trainee at G.E.C. Alsthom India Limited, the Industrial Tribunal concluded that the petitioner was appointed as a trainee and not as a workman, affirming that the termination of the trainee's services was justified. This ruling underscores the distinction between trainees and employees under various labour laws- Rama Kant Dwivedi VS Presiding Officer, Industrial Tribunal (I), U. P. , Allahabad - Allahabad (2004).
However, if a trainee is engaged to perform any manual, unskilled, skilled, technical, operational, clerical, or supervisory work in exchange for wages or rewards, they would meet the criteria of the definition and be classified as a worker (Refer to Thungabhadra Sugar Works P. Ltd. Management vs. Presiding Officer, Labour Court and Another, decided by the Karnataka High Court, 1983 (46) F.L.R. 190). The engagement should be made to offer the training under the terms of engagement and not the employment. The opportunity to learn a trade or craft to acquire such knowledge should be the objective of the training program and not the regular duties.
Further, the Apex Court in the landmark case of Trambak Rubber Industries Ltd. vs. NarikWorkers Union & Ors., reported in (2003) 6 SCC 416), held that ‘it is pertinent to note the statement of the Management's witness that in June-July, 1989, the Company did not have any permanent workmen and all the persons employed were trainees. It would be impossible to believe that the entire production activity was being carried on with none other than the so-called trainees. If there were trainees, there should have been trainers too.
Training should not be used as a way to extract work from trainees; instead, it should be designed to prepare them for future work or trade, whether with other employers or within the same establishment. The offer and acceptance of training must be clearly documented. The engagement contract should be explicit, outlining whether the trainees may be absorbed and under what conditions and criteria they would be considered for employment. Trainees should be paid a stipend, not wages, although extending certain benefits, including social security, is allowed with caution to avoid penalties under various laws. The presence of qualified trainers further strengthens the legality of the engagement. Although not mandatory, incorporating the training scheme into the standing orders of the establishment can provide additional legal backing.
IV. The Karnataka Labour Department's Decision
The Labour Department's decision that the company’s layoffs of trainees do not violate labour laws is based on the fact that the trainees were not given appointment letters and were given stipends under an apprenticeship programme. Since trainees do not fall under the definition of "employees" or "workmen" under the Industrial Disputes Act or other relevant laws, the protections offered to regular employees in cases of termination do not apply. This means that the company is not obligated to follow procedures like providing notice, severance pay, or justification for termination in the case of trainees.
The layoffs and the Karnataka Labour Department's ruling underscore the importance of understanding the legal distinctions between trainees and employees in the Indian labour law framework. While the current legal provisions provide employers with flexibility in managing trainees, there may be a need for a nuanced approach that provides some level of protection for trainees without overburdening businesses. Further regulatory clarity on the status of trainees could help address concerns from both employers and trainees.