40 Labour Laws Applicable to Catering Establishments

A. Rajkala

1. INTRODUCTION

The hospitality industry is one the world’s fastest growing industry and revenue earner. It has developed rapidly over the last few decades and employs approximately 10% of the world labour force. The aspect of law, regulating the hotel and catering industry is generally known as hospitality law. It is the body of law relating to the foodservice, travel, and lodging industries.

Any hotelier enters into a legal relationship not only with his customers, but also with his employees, suppliers, trade unions, travel agents and operators, as well as subcontractors in the line of trade. The government and other professional bodies regulate this industry; therefore the hotelier must be aware of the boundaries within which he can operate. In this regard, a sound knowledge of the law as well as fundamental business management skills of the hospitality profession is very essential.

The hospitality laws usually regulate a number of issues pertaining to hospitality. They include issues such as theft or crime committed within hotel premises, ensuring safety of hotel guests, breach of contract for reservation, health and safety of employees, dismissal of employees, price list and stipulations, restaurant permits, safety and working condition of employees, etc. Today we will be seeing on the labour laws pertaining to the hospitality industry.

2. LEARNING OBJECTIVES

Once you complete this module you will be able to

• Identify basic labour laws governing hospitality industry
• Identify and explain the labour regulation
• Understand the laws with respect to safety and security at work place

     For the successful operation of any hospitality industry it is binding on owners and managers to fulfill certain obligations. Some of these are unwritten such as the obligation to satisfy the customers; others are written down in the form of contracts, mutually agreed upon by employers and their employees.

Still others are based on the expectations of the people within the establishment and outside of it, which are developed as codes of practice over the years. Finally there are statutory or legal obligations which need to be fulfilled for safeguarding the health and well-being of people and the establishment. It is this last group which will be dealt in this module focusing attention on laws and regulations which affect hospitality industry and therefore need to be complied with.

In considering the legal implications, the personnel have to be aware of the fact that laws keep changing from time to time based on the changing patterns and needs of the society.

3.  LABOUR LAWS

 Labour Law is the “Body of Laws, Administrative Rulings, & Precedents” which address the Relationship between & among “Employers, Employees & Labour Organizations”, often dealing with issues of Public Law. The “Final Goal” of Labour Laws is to bring both “Employer & Employee” on the same Level, thereby mitigating the differences between the two ever- warring groups.

3.1 Origin of Labour Laws

“Labour Laws” emerged when the Employers tried to Restrict the Powers of Worker’s Organisations & keep Labour Costs Low. The Workers began Demanding better Conditions & the Right to Organise, so as to, improve their Standard of Living. Employer’s costs increased due to workers demand. This led to a chaotic situation which required the Intervention of Government. In order to put an end, the “Government” enacted many Labour Laws in the Country.

The History of Labour Legislation in India can be traced back to the History of British Colonialism. In the beginning it was difficult to get enough Regular Indian workers to run “British Establishments” & hence Laws for chartering workers became necessary.

1.1.1 The “Factories Act” was first introduced in 1883 because of the pressure brought on the British Parliament by the textile moguls of Manchester and Lancashire. Thus we Received the First Stipulation of Eight (08) Hours of work, the abolition of Child Labour, & the Restriction of Women in Night employment, and the introduction of “Overtime Wages” for work beyond Eight Hours. “India” has Various Labour Laws, such as Resolution of Industrial Disputes, Working Conditions, Labour Compensation, Insurance, Child Labour, Equal Remuneration etc.

1.1.2  In Many Countries it’s Employer’s Duty to Provide, Written Particulars (Contract) of Employment to an Employee. This aims to allow the Employee to know concretely what to expect and is expected; in terms of “Wages, Holiday Rights, Notice in the event of Dismissal, Job Description” and so on. An Employee may not for instance agree to a contract which allows an Employer to dismiss them unfairly.

Legislations concerned with the employment of people started in India over 130 years ago with the Apprentice Act of 1850 which obligated on the part of employers to safeguard the welfare of the employees while teaching them respective skills. After independence with the growth of industrialization, came the Fatal Accident Act (1855) to compensate employees families incase of fatal accident occurring at the work place. To deal with conduct of employees at work, the Breach of Contract Act was promulgated in 1859, and Employees and Workmen Dispute Act in 1860 to settle any grievances arising at work. The trade union movement brought about a general awareness among employees of their rights vis-à-vis their employers, and legislations increased to keep pace with the changing requirements of employers and employees. Labour officers were appointed by Royal Commission to liase with employers to ensure that sound recruitment practices were followed by them. These officers were expected to ensure that workers were provided good working conditions, canteen facilities for meals, fair price shops, recreation, medical, housing facilities, etc. it was in 1947 with the enactment of industrial disputes act, that the welfare officers role shifted from that of welfare to handling of disputes relating to the conditions of service, salaries, leave and pension benefits, etc. it was only after 1960 that laws covering all important aspects of personnel management were promulgated.

There are at present more than 110 laws covering employment and working conditions of employees with amendments appearing from time to time to keep up with changes in the living and working environment of people.

The primary obligation of every establishment is that it should be registered, so that it has the legal sanction to operate as the place of public service. Registration of the establishment may be done by the municipal corporations of the region or controlled by Central Government depending on the location and size of the facility.

Let us see some of the primary areas covered by legislation for employees such as working conditions, welfare, health and safety, harmonious working relations and payments. Now let us see them one by one:

4. WORKING CONDITIONS

The Shops and Establishments Act, 1954 covers the conditions of work, which must be provided by all employers in catering establishments. Working condition refers to fixation of working hours, regular and timely payment of wages, paid leave, creation of a healthy working environment through the provision of basic necessities such as toilets, washing facilities, rest rooms, comfort at work, and the establishment of good human relations. The Act requires every employer to:

1.2 Specify the hours of work which each employee is expected to put in on every working day.

1.3 Employer has to Ensure that no one is required to work for more than five hours at a stretch without at least a half an hour break; or nine hours on a single day or forty eight hours in any single week. In case it becomes necessary in conditions of emergencies such as staff shortages, strike, etc for people to work for longer hours, no person should be made to work more than fifty four hours a week.

1.4 Every employee must have a fixed duration lunch break varying from 45 minutes to one hour. The time period fixed must remain operative for a minimum of three months before it can be changed.

1.5  Every employee must have at least 24 continuous hour off in a week with full wages.

1.6 The period during which wages will be paid every month need to be specified and payment expected to be paid promptly every month.

The Act also prohibits children from being employed. Any establishment employing people less than 18 years of age would be considered to be violating the laws.

5. WELFARE

The factories Act 1948 covers the obligation of employers regarding the comfort and welfare facilities of staff. This Act applies to all establishments employing more than 10 workers and using power in its operations. It also applies to all the premises where 200 or more emloyees work, even if no electricity is used. It does not apply to premises operated by self-employed persons or their families. The Factories Act expects all employers to provide minimum safe guards for the safety, health and welfare of people at work.

To fulfill the conditions laid down by the Act, every owner or manager of an establishment must look after those aspects concerned with the welfare of the employees. The provison of welfare by an employer usually includes:

a. Washing facilities for the staff along with toilets and rest rooms.

b. First-aid facilities.

c. Paid annual leave.

d. Uniforms including foot wear that is comfortable for work.

e. Working hours not exceeding 101/2 hours per day including rest periods. Provision should also be made for over time work.

f.   Paid annual leave at the rate of one month’s salary for every year of service for permanent employees.

The employees state insurance Act (1948) also takes care of provision of benefits to employees which are financed from contributions of employees, employers and the state.

The Act was designed to help the employees cover their expenses during periods of sickness, maternity or injury. The benefit is also expected to be paid in the form of a pension to the dependents of worker who may sustain fatal injuries at work.

The Act applies to all establishments employing 20 or more persons, and covers all employees whose monthly wages do not exceed Rs1000 per month. Other benefits under the Act include:

5.1 Canteen facility- the provision of canteen facilities and meals at subsidized rates, especially where more than 250 workers are employed. As far as food service establishments are concerned, the provision of meals (free or subsidized) has become custom and practice even in small establishments with less than 20 workers. This is because the product of catering establishment is food, and the benefit acts as a deterrent to pilferage. Besides it is an established fact that provision of refreshments at regular intervals during working hours, increase the efficiency throughout the day.

5.2 Housing facility- these may take the form of housing or payment of a proportion of the salary disbursed as House Rent Allowance (HRA) for renting of accommodation. Management may also offer loans for buildings and so on.

5.3 Financial and legal services- these involve offering loan and credit facilities to employees who are in need of money for various reasons. Legal advice may also be given when necessary, to maintain the morale of people.

5.4 Purchasing services- some establishments may set up a scheme for the benefit of employees, for purchase of food items in stock at discounted prices. This is beneficial both to institutions and employees, because in catering, it is better to sell out the prepared food items at the end of the day, than to risk storing them for the next day, especially when cold storage facilities are inadequate. This helps employees to carry home ready meals and snacks instead of having to stop and shop on the way home after a full day’s work.

5.5 Recreational activities- the provision of physical and mental diversion at work is becoming increasingly important to people. Even in very small establishments, it has become a practice to provide music through radio or tape. In large establishments, the concept of providing indoor activities like, reading, cards, carom, etc for employees during breaks is gaining significance.

6. HEALTH AND SAFETY

The factories Act also lays down conditions to safeguard the health and safety of people at work. In order to conform to the Act, employers are liable to provide an environment which does not in any way affect adversely, the health of any person, or injure or disable him in any way. To ensure a healthy environment, it is necessary to guarantee:

    a. The cleanliness of the establishment and staff.

b.Proper disposal of waste material.

c.Proper ventilation to prevent dust and fumes from collecting in the work environment, and to control humidity through provision of exhaust fans.

d.Lighting should be such that it should not affect the visibility and eyesight of the people at work.

e.Overcrowding should be avoided by proper planning of areas.

f. Clean drinking water should be provided.

g. Proper washing and toilet facilities are essential.

Procedure suggested for safety of employees at work are:

a.Periodic maintenance of electrical appliances.

b. Proper placement of fire fighting equipments and its regular maintenance.

c. Establish good working habits and safety policy.

d.Adequate supply of safe water.

e.  Immediate and safe disposal of waste.

f.  A high level of building and equipment maintenance.

g. Comfortable working temperatures.

h.Adequate sanitary facilities for staff and customers (1 toilet for 12 persons).

i. Training in use of equipment to eliminate risk of injury.

j.  Eradication of rodents, insects and pests of all kinds.

7. HARMONIOUS WORKING RELATIONS

The Industrial Disputes Act 1947 makes provision for good working relations through the establishment of free communications and negotiations between people at work. In case of disputes it only covers those which are supported by a trade union or a large number of workers. The Act outlines measures for preventing or settling grievances and disputes, prohibiting strike and lockouts, and negotiating terms and conditions on behalf of employees and employers.

At work, the obligations between employers and employees to each other are based on contract (written or verbal) between them. The Indian Contract Act, 1872 deals with the general principals of the law of contract. It ensures realization of reasonable expectations of both parties entering into a legally enforceable agreement at the time of employment.

The Act doesn’t spell out the rights and duties which it will enforce, but it provides the structure within which the parties may chalk out their own rights and duties. These the laws will uphold and enforce. The essence of the contract thus involves full and final agreement on the details of the contract, in the same sense and at the same time by both parties, that is, there must be ‘concensus ad idem’.

In addition the factories Act, 1948 is a piece of social welfare legislation governing working conditions of people in factories which are important factors in harmonious working relations at work. The Act particularly defines ‘factories’ to include establishments which prepare articles of food and service to members of the public. It also classes as ‘workers’ all persons employed in a kitchen for preparing food for sale and canteen workers supplying basic and essential amenities to workers engaged in manufacture of goods for sale.

Trade unions are basically associations of workers formed for regulation of relation between people at work, whether it be among employers, employees or both. These associations are supposed to function so that people can act together to strengthen their bargaining power, and negotiate with employers on progressive or controversial matters.

The Central Government has recently considered a comprehensive law on industrial relations in the form of Industrial Relations Bill, with a view to promote peace and harmony at work through good employer-employee relationship.

8. PAYMENTS

Payments include those made to the employees in lieu of work done. These may be in the form of wages, bonuses, insurance premiums, provident fund and gratuity payments. Sometimes employers are liable to make cash payments in the form of compensations for injury or loss to the employees at work. The Compensation Act, however applies only to those establishments which are not covered by the Employees State Insurance Act, 1948.

The minimum Wages Act, 1948 was an effort to prevent employers from exploiting the employees, in terms of under paying them. The hospitality industry is particularly prone in this respect and the employment of cheap labour is still existent is small establishments which are not often covered by legislations. The criteria set out for wage fixation in the Act are:

(i) Living wages- these are expected to be linked with the cost of living index and the supply and demand situation of labour.

(ii) The ability to pay- The payment of wages is related to the conditions provided by each type of establishment for work and wage and salary agreements between employer and employees, made according to the specific job requirements.

(iii) Fixing wages according to the going rate within the hospitality industry.

What various establishments are paying in a particular area is further related to the productivity of the employees and the bargaining power of the recognized trade unions. The minimum wage rate may be fixed for time and piece of work and also for over time. The fixation must be in relation to the different types of jobs, age and experience of the employee, the location of the establishment on which depends the availability of the staffs and permanence of appointment and so on.

Permanent employees are generally paid a basic salary with the allowances adjusted according to the cost of living index. The minimum wage may be fixed based on the per hour, per day or per month basis based on whether the employee is an adhoc employee or temporary fr a few hours a day or part-time for few hours a week. Where wages are not linked to the cost of living index, benefits in the form of subsidized meals or a facility for purchase of food items at concessional rates for the family may be existent. In some establishments a rate may be fixed which includes the basic rate, concessions and benefits.

Thus wages may be paid partly in cash and partly in kind. From the view point of the employees his wages are as good as the purchasing power that they confer, and the security they give to him and his family. The wage policy of any family must not only help to fulfill the basic needs of the employee but also motivate him to work better and reward him for success and achievement.

A good wage policy is one that pays fair wages, while still maintaining a control over labour costs which is one of the highest costs in the hospitality industry. According to the Payment of Bonus Act, 1956, employers are required to pay a bonus of 81/3 percent of the basic salary of each employee, in establishments where 20 or more persons are employed. This is irrespective of whether or not the establishment has made profit at the end of the accounting year. The payment of Gratuity Act 1973, was legislated to provide security to employees after retirement and to their families in the event of their death.

The Maternity Benefit Act – 1961 “An act to Regulate the Employment of Women in certain Establishment for certain period before and after Child-Birth & to provide for Maternity Benefit & Certain other benefits”. Objective of the Act:- The Maternity Leave & Benefit Act is to Protect the Dignity of Motherhood by providing the Complete & Healthy Care to the Women &   Her Child, when she is not able to perform her duty due to her health condition. In the modern world, as the participation of Women Employees is growing in Every Industry, so the need of the Maternity Leave & other Benefits are becoming increasingly common.

Right of Maternity Benefit:- Every Pregnant working women in any Establishment are Eligible for maternity benefit, provided they have Served in the Establishment for at least 80 days in (12) Twelve months before the expected date of delivery. However, if a woman is earning less than Rs:- 15,000/- she may be offered ESI scheme by her employer& she will receive the maternity benefit under ESI Scheme.

SUMMARY

Hotels are subjected to governmental regulations like any other organisation. However, if they fail to comply with laws and regulations, they may be subjected to significant liabilities, fines and/or penalties, which could adversely affect their financial condition and results of operations. They are also subjected to laws governing relationship with employees, including minimum or living wage requirements, overtime, working conditions and work permit requirements. Legislation thus covers all possible aspects of health, welfare and safety of people at work. All managers of food service establishments however should concentrate on training all staffs to comply with the standards laid down. It is also important that every member of the establishment be aware of the legal, financial and other implications of not achieving the standards laid down by the law.

WEBSITE LINKS

•  http://ncib.in/pdf/ncib_pdf/Labour%20Act.pdf
• http://www.aioe.in/htm/laws.html
•  http://www.pcmcindia.gov.in/pdf/lwo_info/4%20-%20labour_laws_138.pdf
• www.labourlawreporter.com/
•  http://www.singhania.com/Publication/IHL156_india-B.pdf