Investments over welfare? Karnataka’s labour law exemption to IT, ITES firms gets pushback

The exemption has sparked fears of widespread exploitation, as companies seek to maximise profits at the expense of their workers' well-being.

ByMahesh M Goudar

Published Jul 03, 2024 | 11:00 AM Updated Jul 03, 2024 | 11:00 AM

IT employee with a laptop computer (representative image)

In the wake of the Karnataka government’s decision to exempt IT and Information Technology Enabled Service (ITES) companies from the Industrial Standing Orders Act, 1946, the All India IT and ITES Employees’ Union (AIITEU) is urging authorities to address the growing concerns of exploitation and neglect faced by employees in the industry.

With a significant portion of India’s 60 lakh IT employees working in Bengaluru alone, the exemption that has been in place for the last 25 years has sparked fears of widespread exploitation, as companies seek to maximise profits at the expense of their workers’ well-being.

AIITEU is now pushing for improved working conditions, better benefits, and stronger legal protections for the sector’s vulnerable workforce, amid allegations of mass layoffs, forced resignations, and denial of basic rights.

As the IT industry continues to drive India’s economic growth, the union’s demands have thrown a spotlight on the need for greater accountability and regulation in the sector.

Meanwhile, Minister for Information Technology and Biotechnology (IT-BT) Priyank Kharge reiterated that the state would consider their demands in future, adding that the government is making efforts to address the concerns of IT employees.

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Exemption of IT and ITES firms 

As a result of this exemption, the IT and ITES companies have remained out of the ambit of the Standing Orders Act for the last 25 years.

The Industrial Standing Orders Act aims to standardise employment conditions, ensuring uniformity for all employees, regardless of their hire date. It binds both existing and future employees to the same terms, eliminating disparate treatment.

In Karnataka, there are over 22 lakh people employed in around 8,500 IT and ITES firms. The state contributes approximately US $85 billion to the nation’s software exports.

According to sources, “The IT and ITES companies were initially exempted from the aforementioned act with a sole reason to attract more investment to the state. They have been exempted for the last 25 years.”

“If the laws are stringent then there are chances of IT companies not showing interest to invest. Importantly, if they are exempted, they can get away from regulations,” claimed sources.

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AIITEU slams government

The AIITEU not only condemned the move but also demanded to protect the rights of employees in the firms, especially start-ups.

In Bengaluru alone, there are over 8,000 companies IT and ITES companies. The workforce in the IT sector is surging annually, with the state capital also turning out to be a hub for start-ups in the country.

AIITEU working committee member Suman Das Mahapatra told South First, “The IT industry value is pegged anywhere around $254 billion industry. There are over 60 lakh IT employees in India. Among them a whopping 22 lakh techies are working in Bengaluru alone.”

“Initially, to encourage investments, especially in the IT sector in Bengaluru, the government exempted IT and ITES companies from the Industrial Standing Orders Act, 1946,” he said.

“There is lot of exploitation in the IT sector because they are being exempted from the existing laws. There is no legal protection from the government for the techies,” he continued.

“When it comes to the definition of working and service conditions of the employees, there is no clarity at all. Now, the IT companies have been exempted for another five years from this act. Even the central government has diluted all the labour laws,” Mahapatra said.

“Huge volume of young people are employed in the IT and ITES sector. If there are no laws protecting their rights, it is danger for the society. It is important to strike balance by protecting the employees’ rights,” he explained.

“The IT companies, taking advantage of this exemption, fire its employees abruptly, initiate mass layoffs, delay salaries, enforce forceful resignation, deny experience certificates, fail to comply with PF guidelines, and refuse refunds,” said Mahapatra, listing several issues faced by techies.

He continued, “the government has mentioned that IT and ITES companies will get exemptions under certain stipulated conditions, such as the constitution of an internal committee, informing authorities, establishing a grievances redressal committee and and submitting information on service conditions.”

“But in reality, we have noticed that most startup IT companies, don’t comply with all these conditions. There is no mechanism in place to monitor these things as the companies take advantage of this exemption to engage in all kind of illegal activities. How will government tackle these issues?” asked Mahapatra.

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‘No protection for techies’

As the IT companies are exempted from the act, the AIITEU claims that there is no protection for the employees to prevent harassment from the IT companies.

Mahapatra pointed out, “IT companies fully exploit the protection they receive under this act to commit atrocities on their employees. There is absolutely no protection for the employees.”

“Interestingly, the IT companies don’t allow the labour department officials to enter their office. These things are really concerning to the IT employees. There is barely any social security for the techies from its companies,” he said.

Mahapatra continued, “The workforce in IT and ITES companies are often unaware of several labour laws and how to avail service or facilities.”

“IT sector is considered as one of the essential services. When it comes to protest, the employees are not allowed to stage any strike. It is the fundamental right of the employees to present their grievances in front of employer,” he said.

Mahapatra said, “The IT Minister (Priyank Kharge) has claimed that they are exempting IT and ITES companies form the act to encourage investments and to generate employment.”

“If the employment generation is one of their priorities, then why is the government not taking necessary action to protect the rights of employees, who are the main contributors to the country’s GDP.

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‘IT companies to be included in the Act’

In response to the demands of the employees to include them in the Act, Minister Priyank Kharge assured that they will be included in the future and committed to address their grievances as well.

Minister Priyank Kharge told South First, “There is an appeal to consider IT employees under this Act as well. The IT companies were previously considered as sunrise industries.”

“IT is now evolving rapidly and has become a sunrise industry focussed on innovation. The competition is also fierce. The employment generation is huge as well,” the minister said.

“However, we are ensuring that the IT companies do not violate any laws connected to their employees. We will address any complaints coming to our notice, ” added Kharge.

When asked what efforts are being taken up by the government  to ensure that the rights of IT employees are protected, he said,  “The government is concerned about everyone. If we were not responsible, we wouldn’t have brought an exclusive bill for the welfare of gig workers.”

“The government protects the rights of every sector and its employees. We will look into this demand in the coming days,” concluded the IT and BT minister.

(Edited by Shauqueen Mizaj)

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