Karnataka Government Extends Labour Law Exemption for IT/ITeS Sector for Another Five Years

Bengaluru: The Karnataka government has prolonged the exemption granted to the IT and IT-enabled services (ITeS) sector from the Industrial Employment (Standing Orders) Act for an additional five years, extending it until 2029. While this move is expected to benefit the sector, it may result in reduced overall protection for employees compared to the provisions of the Act.

In a circular dated June 10, the state government announced that this exemption applies to industries including IT, ITeS, startups, animation, gaming, computer graphics, telecom, and BPO.

"The Karnataka Employers Association (KEA) appreciates the government's decision, which will significantly contribute to the growth of IT and ITeS industries in Karnataka, particularly in Bengaluru," stated KEA President BC Prabhakar on Tuesday.

These sectors have been exempt from the Industrial Employment (Standing Orders) Act since 2014, with the last exemption granted in 2019.

In December, the Karnataka labour department indicated it was considering ending the exemption for the IT/ITeS sector, citing instances of unfair trade practices such as ID blocking, mass retrenchment, layoffs, extended work hours, and workplace sexual harassment as reasons for the review.

The government conducted discussions with stakeholders, including KEA, before deciding to extend the exemption for another five years.

This exemption is contingent upon several conditions, such as the establishment of an internal committee in line with the Sexual Harassment of Women at Workplace (Prevention, Prohibition, Redressal) Act 2013, the creation of a grievance redressal committee with equal representation from employers and employees, notifying the relevant labour authorities about disciplinary actions against employees (including suspension, discharge, termination, demotion, or dismissal), and the willingness to provide details on employee service conditions upon request by the government.

According to government estimates, approximately 1.8 million professionals are employed across 8,785 IT/BT firms in Karnataka. Following the Covid-19 pandemic, the state labour department saw an increase in complaints from tech professionals about unfair trade practices. This prompted authorities to consider revoking the exemptions, which would have strengthened job security and promoted a safer, more equitable work environment for employees.

However, removing the exemptions would have also reduced the ease of doing business, imposed constraints on policy and process implementation, and increased operational costs for companies.