Family Law

Definition of Labour Law

Labour law (also called industrial law or employment law) is that branch of law which governs the relationship between employers and workers (employees), and regulates the conditions of work, wages, working hours, health and safety, trade union rights, and the settlement of industrial disputes. It is the body of legal rules that protects the interests of labour, ensures fair treatment at the workplace, and maintains industrial peace.

In the words of Salmond, labour law deals with the "relations between employers and employees and the conditions of employment." Sir Otto Kahn-Freund described it as the law which regulates the "relations between management and labour."

In the Nepali context, labour law consists of the Labour Act, 2074, the Labour Rules, 2075, the Trade Union Act, 2049, the Bonus Act, 2030, the Contribution-Based Social Security Act, 2074, and related ILO conventions ratified by Nepal.

Features of Labour Law

1. Protection of workers — It is protective in nature; it safeguards workers against exploitation through minimum wages, limited working hours, safety and health standards, and welfare facilities.
2. Regulation of employer–employee relations — It defines the rights and duties of both parties regarding appointment, transfer, promotion, leave, discipline, and termination.
3. Tripartite character — It involves three actors: the employer, the workers (through trade unions), and the government as regulator and mediator.
4. Collective bargaining and trade union rights — It recognises the right to organise, bargain collectively, and resort to strikes and lockouts within legal limits.
5. Machinery for dispute settlement — It provides for conciliation, mediation, arbitration, and labour courts for resolving industrial disputes.
6. Social security and welfare — It provides for provident fund, gratuity, social security schemes, maternity benefits, and compensation for accidents.
7. Minimum standards, not maximum — The law fixes a floor of rights; employers may give better benefits but cannot go below the statutory minimum.
8. Dynamic and welfare-oriented — It changes with changing economic and social conditions and aims at social justice and industrial democracy.
9. Public law element — Unlike pure contract law, labour law contains penal provisions and administrative enforcement through labour offices and inspectors.
10. Based on ILO standards — It is largely influenced by International Labour Organization conventions and recommendations.

Is the Labour Act, 2074 a Modern Labour Legislation in Nepal?

Yes. The Labour Act, 2074 is regarded as the most modern and comprehensive labour legislation in the history of Nepal, for the following reasons:

1. Consolidation — It repealed and replaced the Labour Act, 2048, and brought scattered provisions on employment, wages, leave, safety, welfare, and dispute settlement into a single statute.
2. Wider coverage — It applies to enterprises employing ten or more workers, including in the private, cooperative, and non-governmental sectors, with only limited exclusions (e.g., civil service, security agencies, and domestic workers).
3. Written contract requirement — Section 10 makes a written employment contract compulsory, which was not mandatory under the earlier law.
4. Modern employment categories — It recognises part-time, time-bound, work-based, and remote (work-from-home) employment, reflecting the changed nature of work.
5. Balanced termination rules — It introduces a distinction between termination for cause and retrenchment, with notice, compensation, and a right to be re-employed in preference to new workers.
6. Improved working conditions — It prescribes 8 hours a day / 48 hours a week, overtime at 1.5 times the ordinary wage, 13 public holidays plus weekly and festival leave, and 15 days of sick leave and 15 days of annual leave.
7. Special protection — It provides for 52 days of maternity leave, prohibition of discrimination, protection of women and children, and prohibition of forced and child labour.
8. Social security integration — It links labour rights with the Contribution-Based Social Security Act, 2074, covering medical care, accident, dependent, and old-age benefits.
9. Participatory management — It provides for labour committees, collective bargaining, and workers' participation in enterprise management.
10. Effective enforcement — It establishes labour courts, labour inspectors, and penalties for violation, making enforcement stronger than before.

Conclusion: Although the Labour Act, 2074 has some limitations — such as the ten-worker threshold that excludes small enterprises, the exclusion of domestic workers, and weak enforcement in the informal sector — it is undoubtedly the most progressive, rights-based, and modern labour legislation enacted in Nepal to date. It marks a shift from a purely regulatory approach to a welfare and social-security-oriented approach, in line with ILO standards.

Collective bargaining is the process of negotiation between an employer (or an employers' organisation) and a group of workers represented by a trade union, aimed at reaching an agreement that regulates terms and conditions of employment — such as wages, working hours, leave, safety, welfare facilities, and grievance procedures. The term was coined by Sidney and Beatrice Webb. The agreement produced is called a collective agreement, and it binds all workers in the bargaining unit, not merely the union members who negotiated it.

Its essential features are: (i) it is a group rather than individual process; (ii) it is continuous and dynamic, not a one-time event; (iii) it is a two-way give-and-take process; (iv) it requires good faith from both sides; and (v) it results in a binding, enforceable agreement.

Legal Basis in Nepal

• Article 34(1) of the Constitution of Nepal, 2072 guarantees the right to bargain collectively as a fundamental labour right.
• Section 75 of the Labour Act, 2074 provides for collective bargaining between the employer and the trade union.
• Rule 61 of the Labour Rules, 2075 prescribes the procedure for collective bargaining and registration of the collective agreement.
• Nepal has ratified ILO Convention No. 98 (Right to Organise and Collective Bargaining), 1949, and Convention No. 87 (Freedom of Association), 1948.

Collective Bargaining Process in Nepal

1. Recognition of the trade union. Only a trade union that represents at least 51 per cent of the workers of the enterprise is recognised as the authorised bargaining agent. Recognition is verified by the employer through the records of membership; disputes over recognition go to the Labour Office.

2. Preparation and submission of demands. The recognised union prepares a charter of demands covering wages, allowances, working hours, leave, safety, welfare, promotion, transfer and disciplinary procedure. It submits the demands in writing to the employer.

3. Notice and commencement of negotiation. The union gives written notice to the employer expressing its willingness to negotiate. Under Rule 61, the employer must begin negotiations within 21 days of receiving the notice. Both parties nominate their negotiating teams — the union team from among its members and the employer team from its officers.

4. Negotiation and bargaining. The parties meet, exchange views, and bargain on each item of the demand. Negotiations proceed in good faith, with each side presenting facts, figures and justifications. The employer may accept, modify or reject demands, and the union may revise its position. This is the core stage of the process.

5. Conciliation / mediation. If the parties fail to reach agreement within 21 days of the start of negotiation, either party may request the Labour Office to appoint a conciliator or mediator. The conciliator hears both sides and tries to bring them to a settlement. If conciliation fails, the conciliator submits a report to the Labour Office.

6. Arbitration. Where conciliation fails, the dispute may be referred to an arbitrator or arbitration board by agreement of both parties. The award of the arbitrator is final and binding on both parties.

7. Conclusion and registration of the agreement. If negotiation or conciliation succeeds, the terms are reduced to writing, signed by both parties, and registered with the Labour Office as required by Rule 61. The agreement takes effect from the date of registration or the date mentioned in it.

8. Duration and renewal. A collective agreement remains in force for the period stated in it (normally two years). It continues in force until a new agreement is concluded. Either party may give written notice for revision or renewal before expiry.

Matters Covered

Wages and salary scales, dearness and other allowances, provident fund and gratuity, working hours and overtime, weekly and festival holidays, sick and maternity leave, safety and health measures, welfare and canteen facilities, promotion and transfer, disciplinary action and grievance procedure, and the rights and duties of the parties.

Conclusion

Collective bargaining in Nepal is thus a statutory, union-based, good-faith negotiation process culminating in a registered collective agreement that binds the employer and all workers of the enterprise. It is the principal instrument through which industrial peace and fair terms of employment are maintained.

Definition. A trade union is a voluntary association of workers formed to protect and promote their collective interests, such as wages, working conditions, welfare and job security, through united action and collective bargaining. The Labour Act, 2074 recognises the right of workers to form and join trade unions, and Article 34 of the Constitution of Nepal, 2072 guarantees the right to organise and bargain collectively.

How a trade union is established

1. Eligibility. Workers of an enterprise (aged 16 or above) may form a union; persons in managerial or administrative positions with decision-making power are excluded from the workers' union.
2. Required strength. An enterprise-level union needs the support of the minimum percentage of the enterprise's workers prescribed by the Act (25 per cent); a national-level union requires membership from the prescribed number of enterprises and sectors.
3. Formation. An ad-hoc committee is formed, a general assembly adopts the constitution (by-laws), and office-bearers are elected democratically.
4. Application. The union applies to the Registrar (Labour Office) with the constitution, list of members and office-bearers, and other documents.
5. Registration. The Registrar examines the documents and issues a registration certificate. A refusal may be challenged within the prescribed period (35 days) before the Labour Court.
6. Recognition for bargaining. A registered union with the required majority of workers (51 per cent under the bargaining provisions) acts as the authorised collective bargaining agent.

Objectives of trade unions in Nepal

• Protect workers' rights and interests: wages, hours, leave, safety and health.
• Negotiate collective agreements with the employer through collective bargaining.
• Secure job security and prevent unfair dismissal and victimisation.
• Promote welfare: provident fund, gratuity, insurance, medical and social security benefits.
• Settle labour disputes by peaceful means such as conciliation, mediation and, where needed, the Labour Court.
• Take part in workplace decisions through participation in management and welfare/health-and-safety committees.
• Raise workers' awareness and skills through education and training.
• Build solidarity among workers and advance socio-economic justice and industrial peace.

Case. Integrated Mountain Development (P) Ltd. v. Labour Court, Supreme Court of Nepal, decided 2064/12/5 B.S., reported in Nepal Kanoon Patrika (NKP).

Facts in outline. A worker engaged by a private company (Integrated Mountain Development (P) Ltd.) was dismissed or terminated, and approached the labour authorities, and then the Labour Court, claiming reinstatement and the dues and benefits due under the labour law. The company objected to the jurisdiction and findings of the Labour Court, saying that the worker's engagement was outside the protection of the labour law and that the termination was lawful. After the Labour Court decided against the company, the company took the matter to the Supreme Court by writ of certiorari.

Issues

1. Did the Labour Court have jurisdiction over the dispute between the company and the worker?
2. Was the worker a "worker" under the Labour Act, 2048 and had the termination followed the procedure and grounds prescribed by law?
3. Should the Supreme Court interfere with the findings of fact and law of the Labour Court by certiorari?

Ratio decidendi (principles established)

• Labour disputes are to be decided by the specialised forum created by the labour law (the Labour Court); the Supreme Court will not act as an appellate body on facts and will interfere only for error of jurisdiction or a manifest error of law.
• Whether a person is a "worker" is decided by the real nature of the engagement (control, wage, service) and not by the label the employer gives to the contract.
• A worker cannot be removed except on the grounds and by the procedure laid down in the labour law (notice, opportunity to be heard, proper enquiry); a termination that ignores them is unlawful and attracts reinstatement or compensation and payment of statutory dues.
• Labour legislation is welfare legislation, protected by the constitutional right to labour, and is interpreted in favour of the worker.

Conclusion. The Court refused to disturb the Labour Court's decision, upholding the specialised forum's jurisdiction and the worker's statutory protection. The case is cited for the proposition that substance, not form, governs the employment relationship and that termination must follow due process.

(a) Social security

Social security is protection given by the State, through contributions, against the risks of income loss caused by sickness, accident, maternity, old age, disability, death of the earner and unemployment. In Nepal it is governed by Article 34 of the Constitution of Nepal, 2072, the Contribution-Based Social Security Act, 2074 and the Labour Act, 2074. Workers and employers contribute to the Social Security Fund (employer 20 per cent and worker 11 per cent of the basic wage, in total 31 per cent), which is managed by the Social Security Fund. The schemes include medical, health and maternity, accident and disability, dependent family, and old-age benefits. Its purpose is to give workers economic security and social dignity.

(b) Role of the Labour Court

The Labour Court is a specialised judicial body established under the Labour Act, 2074 to decide labour disputes. Disputes first go through negotiation, mediation or conciliation at the Labour Office; if unresolved, they reach the Labour Court. It hears cases of dismissal, unpaid wages and benefits, unfair labour practice, trade union registration appeals and offences under the Act, and its decision is binding and may be appealed to the High Court. Its remedies include reinstatement, back wages and compensation. It thereby enforces labour rights quickly and without the formality of ordinary courts, and keeps industrial relations peaceful.

(c) Powers and functions of the Minimum Wage Fixation Committee

The Minimum Wage Fixation Committee is a tripartite body of representatives of the Government, employers and workers formed under the Labour Act, 2074. It studies cost of living, inflation, nature of work, the economic condition of industries and the needs of workers, and recommends the minimum remuneration (basic wage and dearness allowance) to the Government. The Government, on its recommendation, fixes the minimum wage and publishes it in the Nepal Gazette; once published, no employer may pay less. The minimum wage is to be reviewed at the prescribed interval (at least every two years). It may seek information and consult experts for its work.