Safety First – The Importance of Labour Law Audits

The Labour law audits are integral  in today’s industrial world,  for the proper functioning of and safety for employees within an establishment in line with the principles laid down by labour laws in India.

As labour laws stand today, with several amendments being proposed, the powers of the inspector are yet unregulated and ‘Inspector Raj’ continues to dictate what the CEO of a corporation big or small  should do. For example : failure to inform the Employment Exchange can invite prosecution by an inspector whose ego is hurt when he visits the establishment. Imagine being the CEO of a large corporation, who takes multi million dollar decisions, acquires companies, suddenly being dragged to court and made to stand on the same platform along side hardened criminals on account of non-compliance of labour laws. And very often such prosecutions stem from non compliance of laws such as Employment Exchange (Compulsory Notification of Vacancies) Act, 1959 and for failing to maintain a white – wash register at office!

It thus follows, that the concerned investigating officials are very prosecution happy and it is in the best interest of both the employees and the employer , that Indian employment laws are complied with in the fashion as laid down by law. Timely legal audits can ensure such compliance;

Implications of Non-Compliance

Fatal/major accidents that occur due to lacunae in the compliances of an establishment, prosecution is almost certain.

Non-compliance of such laws poses a variety of serious problems for the employer, aside from criminal prosecutions and harassment by Government officials, the militant Trade Union/s known to arm twist the employers into yielding to their demands.  Non-compliance are known to be eventually lead to safety standards not being met and can result in grave accidents on the shop floor. For instance, if workers are allowed to conduct activities like making repairs high up on the roof or using heavy machinery without proper work permits or without wearing safety gear like – helmets, goggles, gloves, shoes etc , it could lead to fatal accidents and a possible show cause by the Factories Inspector followed by criminal prosecution.

Outsourced employees add to the issue of compliance. It is of utmost importance that the Principal Employer ensures that a Service Provider makes payment of wages and other benefits to it’s employees in a timely fashion. Compliance of laws, when it comes to outsourced employees is highly important as many industries around the country echo with incidents of violence, even fatalities, committed by disgruntled outsourced employees.

Owing to the voluminous and difficult to navigate labour legislation India has, which given the recent amendments being made to vital laws , keeping up with the compliances and newer rules pose to be a difficult task for Human Resources and the Industrial Relations Officer of an establishment to keep up with. In this regard, loopholes therefore gradually appear in the compliance structure which leads to the problems discussed above.

How do Legal Audits help?

If legal compliances are properly carried out in a detailed, elaborate and systematic fashion, the company gets an upper hand in the event of harassment and disturbances by Government authorities and this works effectively even to keep interference by non-Government elements at bay.

Legal Audits carried out by lawyers, stand on a different footing from the financial auditing, apart from the traditional connotation associated with the word “audit”. Legal Audits  are involved with the operational aspect of the functioning of an enterprise, be it a factory, an office or a laboratory. Every Factory/establishment has been set up under various laws which regulate factors such as licensing, permits, environmental considerations, health, safety and welfare of workers, hazardous processes etc. These aspects are examined minutely by an Auditor and areas requiring improvement are pointed out. Auditing also serves to spread awareness about the large number of compliances each establishment is required to undertake and it is the duty of the Auditor to suggest techniques and strategies to meet such requirements in his Report at the end of the Audit.

With respect to audits of labour and industrial laws in India, the Audit Report should give in full detail the various laws under which the Audit was carried out, the compliances checked, the observations recorded and finally, suggestions as to improvements needed to be made.


– Ronojoy Basu


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