If investigators find Wistron management guilty, here's what is at stake for the company

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If investigators find Wistron management guilty, here's what is at stake for the company
Wistron
  • Wistron, one of Apple’s manufacturers for the iPhone in India, is facing trouble with the Indian government over the non-payment and delay in payment of wages.
  • According to lawyers, allegations against the company are in violation of three Indian labour laws — the Payment of Wages Act (PWA) of 1936, the Factories Act (FA) of 1948 and the Contract Labour, Regulation and Abolition Act (CLRA) of 1970.
  • Wistron blames the issue of the payment of salaries to a software ‘glitch’ on its system, which could cushion the blow.
Supplier of Apple iPhones in India, Wistron, claims a software ‘glitch’ is the reason why its contract employees’ salaries were being unfairly deducted and payments were four days late. A dispute that led to a violent reaction from the workers at the Narasapur (Karnataka) factory who threw stones, damaged some vehicles and looted some of the iPhones kept for export, according to the FIR filed by Wistron against 7,000 people.

If investigators find Wistron management guilty, here's what is at stake for the company
Damage to Wistron's factory in Karnataka after employee protests turned violentBCCL

While that argument may help Wistron cushion the blow, lawyers believe that the current allegations against the company are in violation of three Indian labour laws — the Payment of Wages Act (PWA) of 1936, the Factories Act (FA) of 1948 and the Contract Labour, Regulation and Abolition Act (CLRA) of 1970.

The company, which also manufactures IT products for Microsoft and Lenovo, is currently being investigated by Apple, the Karnataka government’s Department of Factories, Boilers, Industrial Safety & Health and the Karnataka Police. “Software glitch can be a reason but that is not of any consequence under the law. That is for Wistron to take care and deal with its software provider,” Neeraj Dubey, a corporate law partner at Singh & Associates told Business Insider.
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Minimum wage and timely payment of wages
The state’s labour department preliminary enquiry has deduced that the hiring agencies were not at fault. It was Wistron’s management, which deducted two to four days’ of salary over the past couple of months due to a software ‘glitch’.

If investigators find Wistron management guilty, here's what is at stake for the company
Overturned and burned vehicles left in the wreckage of the violence at Wistron's factory in KarnatakaBCCL

The workers said that they were angry because they weren’t paid for the additional hours they worked for many months. Things boiled over after the November wages were delayed by four days. “The law mandates salaries to be disbursed by the 7th of every month. Wistron paid contractors on December 10 and those agencies paid workers the next day. The company has said that the delay was because they were trying to fix the technical snag that had led to the deduction of salaries in the previous months,” the labour commissioner told the press.

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Under the Payment of Wages Act (PWA) of 1936, not paying wages on time is a punishable offence within stipulates a fine at least ₹1,500 for every violation, but could extend to up to ₹7,000 for first offenders.

“Although the agency or the contractor is responsible for payment of wages - if they fail to pay the workers, the liability under the Contract Labour Regulation Act is that of the principal employer’s i.e. Wistron in the present scenario,” Avik Biswas, a partner at IndusLaw, told Business Insider.

Dubey adds that there is also scope for an additional fine of ₹10,000 for non-maintenance of proper records pressed against Wistron.

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Laws to specifically protect contract workers
Wistron had hired 9,800 employees through six contractors — Creative Engineers, Quess Corp, Innovsource, Adecco Group, Needs Manpower Support Services and Randstad. While 1,343 were permanent employees, the other 8,490 were hired on a contract basis.

The latter are protected by the Contract Labour - Regulation and Abolition Act (CLRA) of 1970.

Under this law, if the investigators find Wistron’s management guilty of non-payment of wages, they could end up in jail for up to three months, be fined up to ₹1,000, or both.

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Location, location, location
Biswa adds that since this incident took place at a factory, the Factories Act (FA) of 1948 will also apply. This dictates that if any worker — including those working on contract — works on the premises for more than nine hours in a day, they’re entitled to overtime wages. These overtime wages have to be at least double the ordinary rate of wages.

A preliminary report submitted by the Department of Factories Boilers and Industrial Safety dated 13 December, found that Wistron had increased overtime work hours for employees without informing the Labour Department.

It added the difference in pay was not credited along with the salary for the month of November 2020. “The salary of the housekeeping contract workers are not paid till date, and are required to work for 12 hours a day for six days a week, and are being paid the same salary which they were being paid when they were working for 8 hours a day,” said the report.
If the allegations hold true, the penalty for not paying or overtime would leave both the occupier and manager of the factory includes imprisonment of up to two years, a fine not exceeding ₹1 lakh or both.
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“If the contravention is continued after conviction, with a further fine which may extend to ₹1,000 for each day on which the contravention is so continued” explained Biswas.

How much protection does the ‘glitch’ offer?
According to the law, the company is accountable to be prosecuted. “The reason for non-payment of actual dues is immaterial as making the payment is of paramount significance under the laws,” said Dubey.

However, if Wistron can prove that the offence was committed without the knowledge of its employees and Wistron could have done nothing about the software glitch, then Wistron may not be accountable under CLRA.
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“Similarly, under PWA, there may be no penalty if Wistron can satisfy the law only broken due to a bona fide error — like a software glitch — as to the amount payable to the employed person,” explained Biswas.

And, finally, under FA, if the management at Wistron can prove to the satisfaction of the court that they followed due diligence to enforce the law and that the non-payment of wages occurred due to a specific person committing the offence on their own, then the liability of the Company can be significantly limited.

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