Karnataka Extends Labour Norm Exemptions To Startups For 5 Yrs

The state government has exempted new-age tech players, animation, gaming and other knowledge-based companies from the Industrial Employment (Standing Orders) Act

However, the exemptions mandate startups to set up employee grievance redressal panels and internal committees to prevent sexual harassment of women

The exempted companies will also have to furnish reports to local labour authorities about the cases of disciplinary action such as suspension, discharge and termination of its employees

After internally debating the matter, the Karnataka government has reportedly extended the exemption of startups from the provisions of labour regulations for a period of five years. 

As per Economic Times, the state government has exempted new-age tech players, animation, gaming, computer graphics, and other knowledge-based industrial companies from the Industrial Employment (Standing Orders) Act till 2029. 

The report, however, added that the exemptions come with caveats such as mandates to set up an internal committee as per the Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 and a employee grievance redressal committee (GRC).

In addition, the exempted company will also have to furnish reports to local labour authorities about the cases of disciplinary action such as suspension, discharge, termination, demotion, dismissal, among others of its employees.

As per the report, the state government was mulling bringing the technology companies under the purview of labour regulations but opted against it after opposition from concerned stakeholders. The proposal to revisit the norms came after the labour department flagged instances of arbitrary termination, mass layoffs and sexual harassment at work place. 

The latest exemption reportedly looks to allay these concerns by adding caveats that “precisely” define the working and service conditions of employees and mandate startups to comply with relevant procedures before terminating the service of an employee. 

In January 2014, the state authorities issued an order exempting certain tech companies from the standing orders until 2019, with the aim of accelerating their growth and recognising certain industries as sunrise sectors. 

Commenting on the development, the president of Karnataka Employers Association BC reportedly hailed the decision and said that the exemption “would go a long way in developing IT and ITES industries” in the state. 

The development comes as Indian startups continue to reel under the impact of funding winter. As a result, multiple new-age tech companies have resorted to laying off employees in droves to conserve cash and extend their runway. In many instances, thousands of employees have been fired in a single retrenchment exercise while salary payout have been delayed for many others. 

As per Inc42, Indian startups, primarily based out of Bengaluru, have fired more than 37,260 employees since 2022.