HR Law Hotline
July 21, 2022
50% of Employees in Indian SEZs Allowed to Work from Home
The Department of Commerce (“DoC”) of the Indian Ministry of Commerce and Industry has notified the Special Economic Zones (Amendment) Rules, 2022 (“SEZ WFH Amendment”). The SEZ WFH Amendment introduces rule 43A allowing IT-ITeSentities operating in SEZ to permit employees (including contractual employees) to WFH or any place outside the SEZ. The SEZ WFH Amendment lays down guiding rules on the aspects of WFH which inter alia includes permission requirement from the SEZ Development Commissioner (“DC”) to allow eligible employees to WFH, cap on the number of employees who can be permitted to WFH and regulation on movement of SEZ unit2 equipment for enabling employees to WFH.
The Special Economic Zones Act, 2005 (“SEZ Act”) was enacted to provide for establishment, development and management of SEZ for promotion of exports and incidental matters. The SEZ Act provides the following guiding principles3 that the Central government is required to keep in mind while notifying SEZ:
The Special Economic Zones Rules, 2006 (“SEZ Rules”) were subsequently notified to regulate the economic activities carried out within SEZ. Prior to the SEZ WFH Amendment, proviso (i) to rule 43, SEZ Rules4 allowed SEZ units to permit following categories of employees to WFH:
The aforesaid proviso to rule 436 also mandated certain conditions to be followed by SEZ units in order to enable eligible employees to WFH, which are as follows.:
However, there remained lack of clarity with respect to some aspects of WFH arrangement in case of SEZ units. These aspects included the limit / proportion of employees that can work remotely, duration for which SEZ units can be permitted to have such arrangements and applicable compliance requirements. In this background, DoC has intervened with SEZ WFH Amendment to lend clarity on at least some of the aspects.
Key Features of the Amendment
The SEZ WFH Amendment omits the erstwhile provision of SEZ Rules governing WFH8 and introduces rule 43A. The new rule 43A basically allows SEZ units to permit certain employees (including contractual employees) to WFH or work from any place outside the SEZ. Consistent with the previous position, employees of SEZ units who are permitted to work from outside SEZ as per SEZ WFH Amendment are:
The key features of rule 43A9, inter alia include:
In a much-needed move, largely owing to the positive WFH experience during the pandemic, the SEZ WFH Amendment allows WFH to IT / ITeS SEZ units by introducing rule 43A. In so doing, the SEZ WFH Amendment drives home the recognition of WFH arrangement which has gained more relevance since the outset of pandemic. The SEZ WFH Amendment is limiting in the sense that it provides for a maximum of 50% employees to be allowed to WFH that too only the specific industries or employees.
The devil lies in the details. While there is a provision for relaxation by DC allowing higher number of employees to WFH, the SEZ WFH Amendment does not provide the reasons that can be considered ‘bonafide’ for such a relaxation. The permission for WFH, which appears to be discretionary, is to be granted for only one year at a time and to be extended only on satisfaction of DC, which again lacks clarity. Moreover, if the SEZ units are able to justify the proposal for such an arrangement, the intervention from DC should happen only in exceptional circumstances. It calls into question the test of managerial prerogative vis-à-vis DC’s role in such scenarios.
The SEZ WFH Amendment is also procedurally complicated and it remains to be seen how it will be actioned by the employers and by the respective DCs. For example, the requirement to furnish the details of employees who will be working from home makes it practically challenging for SEZ units to have a flexible hybrid working pattern as they have resorted to since the outbreak of pandemic.
Needless to say that the final position and necessary guidance was long overdue for WFH arrangements in India considering that there is lack of clarity with respect to non-traditional work arrangements. Despite the limitations and the potential challenges ahead to fully comply with the SEZ WFH Amendment, this is a welcome start and we are confident that it will allow the employers in SEZ to contemplate continuous WFH arrangements.
You can direct your queries or comments to the authors
2 Sec. 2(zc), SEZ Act, defines "Unit" to mean a unit set up by an entrepreneur in a Special Economic Zone and includes an existing Unit, an Offshore Banking Unit and a Unit in an International Financial Services Centre, whether established before or established after the commencement of SEZ Act
3 Sec. 5, SEZ Act
4 Rule 43, SEZ Rules
5 OSPs are also subject to OSP Guidelines issued by the Department of Telecommunication as amended from time to time.
6 Rule 43, SEZ Rules
7 Rule 2(zd), SEZ Rules defines “Specified Officer” in relation to a Special Economic Zone to mean Joint or Deputy or Assistant Commissioner of Customs for the time being posted in the Special Economic Zone
8 Proviso (i), Rule 43, SEZ Rules (prior to SEZ WFH Amendment)
9 Rule 43A, SEZ Rules
10 July 14, 2022
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