Mitigating Risks: Safeguards for an Employers to Minimize Liability

by Aggarwals Associates | Jul 20, 2023 | General

“The two most important things to remember in business are: to be aware of the consequential impact on ecology, and a caring relationship between employer and employee.”  – HH. DALAI LAMA

Introduction

An Employer is a person or organization that hires an individual, known as an employee, to perform work or services in exchange for compensation, such as a salary or wages. The employee is typically responsible for performing the work or services agreed upon and following the employer’s policies and procedures. The employer-employee relationship is a legal and contractual one, and the employer is responsible for providing the necessary tools, equipment, and working conditions. An employer will only be able to safeguard himself by setting some rules, and policies and signing agreements with an employee in which he/she drafts the point which is beneficial or helpful for both employer and the employee.

The worker has been defined under Section 2(L) of the Factories Act, 1948 as “WORKER” means a person employed directly or by or through any agency (including a contractor), whether for remuneration or not in any manufacturing process, or in cleaning any part of the machinery or premises used for a manufacturing process, or in any other kind of work incidental to, or connected with the manufacturing process, or the subject of the manufacturing process but does not include any member of the Armed Forces of the Union.

In accordance with the Industrial Dispute Act, 1947 “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 a person of Army, Navy and Air force; employees of police service; employees of administrative and managerial capacity and person of supervisory capacity who draws Rs1600/- per month.

The Role of an Employer in a Company/Organisation:

1. What role does an Employer play in hiring?

Hiring involves the process of reviewing the applications and selecting the right candidate. It involves a range of activities, including job analysis, job posting, candidate screening, interviewing, and offering the job. There are several laws in India that cover the hiring of the employees such as the Industrial Disputes Act, of 1947, and the Contract Labour (Regulation and Abolition) Act, of 1970. The employer is statutorily authorised under these laws to hire the workers/employees on a contractual/permanent basis.

The Contract Labour (Regulation and Abolition) Act, 1970, provides the right to hire the employee on a contract basis u/s 2(b) “a workman shall be deemed to be employed as “contract labour” in or in connection with the work of an establishment when he is hired in or in connection with such work by or through a contractor, with or without the knowledge of the principal employer”. The employers have the rights under the Industrial Dispute Act, of 1947 to hire workmen (including apprentices) for manual skilled or unskilled, sales promotion, operational, clerical or supervisory work or any work for the promotion of sales for hire or reward but do not include the persons of the Air Force, Army or Navy; police service or who is eligible to draw the salary of Rs1600/-.

The main right of the employer is to hire or fire, if the employee fulfils the necessary criteria of recruitment on the basis of qualification, type of job etc. employer can hire that employee. If any such existing employee is an underperforming employer has the right to fire such employee. As per Contract Act and Contract Labour Act, the employer can hire the worker for particular work and after the employee has the duty to leave the job. The employer has certain rights upon the employee such as the employee shall not leave the job during the probation period/committed period and the agreement enforceable by law between employer and employee bind the employee to join on a specific date as per the offer letter. Article 19 (1) (g) of the Constitution of India provides the Right to practice any profession or to carry on any occupation, trade or business to all citizens, for that any person who does business has the right to hire the employee for that business.

2. Is it mandatory to maintain non-disclosure and confidentiality for the employer and employee during the course of service?

The employee during his service is required to maintain secrecy for the employer’s organisation. As not only the employer is dealing with client information and trade secrets but the said information is also accessible to employees especially senior and middle management of an organization. The employee has the duty to use the client’s sensitive information and the company’s trade secrets to fulfill the obligations of their job and to protect this information from leaking to a third party. This duty goes beyond the course of employment and continues even after the employee has left the job. An employer can make his employee bound by the NDA even after his services have been discontinued by the organization for the period mentioned in the agreement signed between employer and employee in this regard. If the employer and employee have signed the NDA, despite that employee violating it by revealing the confidential information, the employee can be sued by the employer and can become liable for paying the damages and compensation and a temporary or permanent injunction can be passed against him. The Right to privacy is a fundamental right under Article 21 of the Constitution of India, which lays down our fundamental rights. This was affirmed by a nine-judge bench of the Supreme Court in Justice K.S. Puttaswamy vs Union of India in its historic judgement of 2017 wherein they declared ‘the right to privacy’ as an integral part of Part III of the Constitution of India. So the Supreme Court itself recognised that privacy is an integral part.

The employer can safeguard himself by signing an NDA with an employee for confidentiality to be maintained, then as per Section 73 of the Indian Contract Act, the employee is liable to pay the compensation for the breach of the contract.  The employer who has the electronic records for his organisation in the computers and laptops, has got all rights to secure his data and nobody can breach the secured data without the permission of an employer otherwise it amounts to be a punishable offence under the Information Technology Act, 2000.

3. What is the role of an Employer in accepting the resignation of an employee?

An employer has the right to receive a resignation notice from an employee before he/she is inclined to leave the company. The employee has to serve a notice period before resigning so that the employer has sufficient time to hire a replacement. The notice period generally ranges from 1 week to 1 month depending upon the company’s HR policy. If the employee resigns without serving a notice period, the employer can send a legal notice to the employee, with the help of the best labour lawyers.

However, one thing that is to be kept in consideration is that if the employment agreement does not prescribe for any notice period to be served by the employee then the employee is not bound to serve the notice. Further certain employment agreements which contain that an employee has to serve a notice period also provide for an option that if the employee does not wish to serve the notice period or is unable to serve the notice period then the salary of an employee in lieu of notice period is to be paid by the employee. If the employee doesn’t pay the compensation in lieu of the salary for not serving the notice period, the employee becomes liable and the employer can recover it by remedy of civil suit for recovery of the amount.

When a party terminates the contract on the basis of termination of convenience without giving any proper reason then the court might direct for performance on the part of their contract. The court can direct the performance of contracts under the Specific Performance Act, of 1963.

However, when the termination clause allows termination by convenience without giving any notice such termination is termed as a ‘determinable’(the term determinable is referred to here as in situation of an employee due to certain circumstances discontinue the employment than on the direction of the court under this section he/she shall perform certain part of the job/period of the job which shall fulfil the employers convenience like the job/project which is left undone and causing the loss to the employer) contract under Section 14 of the Specific Relief Act, 1963.

4. What role an employer has in framing the Employee leave policy?

Employer rights in India entitle an employer with the right to be notified before the employer takes a leave from office. The employer also has the right to reject or approve the leave application of an employee. An employer can reject the leave application if the employee remains absent persistently from the office, fails to perform their duties or take leaves without any substantial reason.

He/she has the right to deduct the employee’s salary for every unpaid leave taken, and even terminate the employment if an employee remains absent from office without prior notification.

The employer has the right to form the contract with an employee before the appointment and in that contract, a clause of leave, holidays and office timings need to be specified clearly in accordance with the Industrial Dispute Act, 1947; Factories Act, 1948 and Shop and Establishment Act of States.

An employer can safeguard himself by initiating legal action with the help of labour advocates, against an employee who violates any of these rights. The employer–employee agreement should entail the leave policy. The leave policy clause in the agreement shall mention how many leaves in the month an employee is entitled to take.

If the employee takes more than such leaves as mentioned in the agreement, then it shall be considered as disobedience to the agreement and the employer can right away fire the employee and the employee cannot raise its objection to such action of the employer against him because its violation to the clause of the agreement. The employer in another case can also file a civil suit in court under Section 73 of the Contract Act for the breach and can claim damages.

5. Can the Employer draft a work policy? 

Employer rights in India also entitle the employer and grant him/her the right to draft and implement a work/ HR policy according to the company’s requirements. An employer can define the code of conduct for employees, working hours, timings, leave policy, salary policy, conditions for termination and resignation, harassment policy and grievance redressal policy in the working policy. The HR policies of the company can be drafted with the assistance of employment Advocates.

All employees have an obligation to adhere to the provisions mentioned in this company manual, and the employer has the right to terminate the employment of an employee who fails to follow the provisions of this policy.  The policies made by the employer should be in compliance with the employment and labour law applicable to a particular kind of organization.

Article 19 (1) (g) guarantees that all citizens shall have the Right to practice any profession, or to carry on occupation, trade or business. The employer has the right to maintain the welfare of its organisation or business if the same is violated or there is any probability that the employee may cause harm or has caused harm to the smooth running of peaceful running of the organisation, then the employer can take action against the employee.

Where the employee threatens the employer or any other person in respect of the reputation or property of any person in the organisation which he is not legally bound to do the employer can register the complaint against the employee under section – 503(Criminal Intimidation) of the IPC,1860.

Where the employee by word, gesture or act intended to insult the modesty of a woman by uttering any word makes any sound or exhibits any object or intrudes upon the privacy of such woman, in an organisation shall be punished under section 509 of the IPC, 1860. If the employee performs any obscene songs or language shall be punishable u/s 294 of the IPC.

Where the employee in a state of intoxication, appears on the office premises and his act is causing annoyance to the staff of that organisation, the employer can register a police complaint for misconduct in public by a drunken person under section 510 of the IPC.

6. What role an Employer plays in the wages and salaries of an employee?

According to the Code on Wages, 2019

The employer has the right to fix the wage period for employees either as daily or weekly or fortnightly or monthly subject to the condition that no wage period in respect of any employee shall be more than a month

An employee shall be disqualified from receiving bonus under this Code, if he is dismissed from service for–– (a) fraud; or (b) riotous or violent behaviour while on the premises of the establishment; or (c) theft, misappropriation or sabotage of any property of the establishment; or (d) conviction for sexual harassment.

The employer can make deductions from the wages of the employee in many cases such as any advance payment made to the employee, fines imposed, absence from duty, house accommodation provided by employer, any loan granted to the employee etc.

According to section 21 of this code, a deduction for damage or loss shall not exceed the amount of the damage or loss caused to the employer by negligence or default of the employee.

Conclusion

The employer and employee are the major two concerns of an association where, the employer plays a role in hiring, making policies, assigning duties, and utmost prior to paying wages. On the other hand, the role of an employee is also major and his work starts from the day he is being hired by the employer. The role to be played by an employee has to be in cooperation with what has been asked or expected by an employer or an organisation.

These days as per the Labour Law not only the employee gets the safeguard it is employer also who can be safeguarded from the harassment of an employee. As it seems easier to sit on the chair of an Employer and plays a vital role but at the same time it is difficult to maintain the relation, equation and balance of all to run the company/organisation.

It is better for the employer to safeguard himself by having strong contracts and agreements with employees prior to and during employment. The new Labour Codes have subsumed the earlier labour laws irrespective of vanishing the labour rights but raising the employer privileges.

By Advocate Ashutosh Saklani, Associate Lawyer at Aggarwals & Associates, Mohali

Counterfeit Concerns: Addressing the Growing Threat of Pharmaceutical Trademark Infringement

by Aggarwals Associates | Jul 11, 2023 | General

Introduction

India’s pharmaceutical industry is thriving and has experienced significant growth in recent decades. The government of India is dedicated to supporting and promoting this sector by enacting and enforcing legislation that aligns with international standards. This commitment has contributed to the continuous success of the Indian pharmaceutical industry. As the market expands and industry participants invest in intellectual property, protecting these rights has become crucial for businesses. Safeguarding your innovative ideas is essential to maintain a competitive edge in today’s dynamic business landscape. While Section 13 of the Trade Marks Act of 1999 technically prohibits the use of chemical names as trademarks, it has become a common practice to name drugs after the organs they treat or the conditions they cure. For instance, “Cal” is often used for calcium in medicines used in deficiency of calcium. This approach allows for easy identification and helps consumers understand the primary purpose or ingredient of the treatment. It is important to note that generic organs, diseases, or ingredients cannot be trademarked, which means they cannot be owned by anyone.

What is Pharmaceutical trademark infringement?

Trademark infringement takes place in multiple ways, like utilizing a logo that closely resembles another or selling counterfeit products. Another common method is employing a brand name that deceives consumers. The critical aspect in determining whether infringement has occurred centers around assessing the probability of confusion among customers. Unauthorized use of a trademark can be deemed as infringement if it causes confusion among consumers, making them believe that the infringing product or service is affiliated with or endorsed by the trademark owner. These acts not only violate intellectual property rights but also jeopardize public health as substandard medicines can find their way into the market.

Pharmaceutical trademark infringement can have significant challenges and consequences for companies involved. Protecting intellectual property rights (IPR) in the pharmaceutical industry is crucial due to the high value and competitiveness of the market.

What challenges are faced because of Pharmaceutical Trademark Infringement?

Pharmaceutical trademark infringement presents significant challenges in India. Firstly, the vastness of the market and the presence of numerous small-scale manufacturers and distributors make it difficult to monitor and control infringement activities effectively. Secondly, the lack of awareness among consumers regarding the risks associated with counterfeit medicines exacerbates the problem. Some major key points to consider are:

1. Global Nature: Pharmaceutical products are often sold internationally, making it challenging to enforce trademark rights across different jurisdictions with varying legal frameworks and regulations.
2. Counterfeit Products: The pharmaceutical industry is particularly vulnerable to counterfeit products, which can harm patients’ health and undermine the reputation of legitimate pharmaceutical companies.
3. Complex Supply Chains: The complexity of the pharmaceutical supply chain makes it difficult to trace the origin of counterfeit products and identify the parties involved in trademark infringement.
4. Generic Substitution: Generic drug manufacturers may try to use trademarks or packaging that resembles the branded products to leverage their reputation and market share, leading to potential trademark infringement.

What consequences are faced due to Pharmaceutical Trademark Infringement?

The consequences of trademark infringement are far-reaching. Legitimate pharmaceutical companies suffer financial losses due to the dilution of their brand value and market share. Moreover, the consumption of counterfeit or substandard medicines can have severe health implications, including treatment failure, adverse reactions, and even loss of life.

1. Financial Loss: Trademark infringement can result in financial losses for the affected pharmaceutical company, as counterfeit products can divert sales from the legitimate product.
2. Reputation Damage: If counterfeit products or products with similar trademarks reach the market, it can harm the reputation and trust of the original pharmaceutical company. This can have long-lasting effects on brand value and customer perception.
3. Legal Consequences: Trademark owners can take legal action against infringing parties, leading to costly litigation, potential damages, and injunctions against the infringing products.

What are the measures to Protect Intellectual Property Rights (IPR)?

To combat pharmaceutical trademark infringement, India has implemented several measures. The country’s legal framework provides protection through the Trade Marks Act, which enables trademark owners to register their marks and take legal action against infringers. Additionally, India is a member of international agreements such as the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS), ensuring a minimum level of protection for pharmaceutical trademarks.

To enhance enforcement, Indian authorities have increased vigilance and coordination between regulatory bodies, law enforcement agencies, and customs officials. The establishment of specialized units, such as the Intellectual Property Rights Cell and the Directorate of Revenue Intelligence, has helped in addressing trademark infringement cases more efficiently. Moreover, awareness campaigns have been launched to educate consumers about the risks of purchasing medicines from unauthorized sources.

1. Trademark Registration: File for trademark registration for pharmaceutical products in relevant jurisdictions to establish legal rights and protection.
2. Vigilant Monitoring: Implement a robust monitoring system to detect potential trademark infringements, including online platforms, marketplaces, and physical markets.
3. Collaboration with Authorities: Collaborate with local and international authorities, such as customs and regulatory agencies, to combat counterfeit pharmaceutical products and ensure effective enforcement.
4. Anti-Counterfeiting Technologies: Implement technologies like holograms, serialization, barcodes, or tamper-evident packaging to make it more difficult for counterfeiters to replicate products.
5. Education and Awareness: Conduct training programs for employees, partners, and customers to raise awareness about the importance of IPR protection and the risks associated with counterfeit pharmaceutical products.
6. Legal Action: Take prompt legal action against infringing parties to enforce trademark rights and seek damages or injunctive relief.

Conclusion:

Pharmaceutical trademark infringement poses significant challenges to the Indian pharmaceutical industry, impacting innovation, legitimate businesses, and consumer safety. By strengthening legal frameworks, enhancing enforcement mechanisms, and raising awareness among stakeholders, India is taking vital steps to combat this issue. However, continued collaboration between government agencies, pharmaceutical companies, and the public is crucial to effectively tackle trademark infringement, ensuring that safe and quality medicines reach those in need. Ultimately, a comprehensive approach is necessary to protect intellectual property rights, foster innovation, and safeguard the health and well-being of the Indian population.

By  Ashutosh Saklani and Kashish Rastogi

Associate Lawyer and Associate Intern at Aggarwals & Associates, Mohali