Indian employment and labor legal guidelines don’t outline ‘intern’ or ‘trainees’. These references are sometimes used for college students who’re present process coaching as a part of their tutorial course or typically to realize helpful technical expertise and sensible data of their self-discipline of selection, with a view to higher their placement alternatives. These preparations could also be paid or unpaid.

Indian legislation on apprentices

Indian labor legal guidelines envisage the idea of ‘apprenticeship’, an association which is closest to interns and trainees. The Apprentices Act, 1961 (AA) applies to employers in India with not less than 30[1] staff, who’re required to have interaction a sure variety of apprentices[2] of their institutions, based mostly on the energy of their workforce. The employer is required to have interaction apprentices in a band of two.5 – 15% (relying on the Indian state) per monetary yr of the entire energy of the institution together with contractual employees, with a minimal of 5% reserved for more energizing apprentices and talent certificates holder apprentices. The actual variety of apprentices for every group is often decided by the Board of Apprenticeship Training (BOAT).

Additionally, sure apprenticeship positions are statutorily reserved[3] for sure classes of apprentices in each “designated trade”[4] in an institution. Schedule II-A of the Apprenticeship Rules, 1992 states that in each designated commerce, apprenticeship positions have to be reserved by the employer for ‘Scheduled Castes’[5], ‘Scheduled Tribes’[6] and different backward courses[7]. For occasion, within the State of Karnataka (Bengaluru), in a delegated commerce, the ratio of Scheduled Caste apprentices to the entire apprentices is 1:7 and the ratio of ‘Scheduled Tribe’ apprentices to the entire apprentices is 1:15.[8]

The AA, which is run by the regional BOAT, offers for the next compliances[9]:

1. Entering right into a contract of apprenticeship with the apprentices and registering such contract on the federal government portal in a prescribed method.
2. Ensuring appropriate preparations for imparting coaching to the apprentices. Specifically, employers with not less than 500 staff are required to make separate preparations inside the office to impart primary coaching[10] to the apprentices.
3. Apprentices could be engaged for 42-48 hours per week, together with time spent on coaching. There are extra phrases and situations relevant for graduate apprentices.
4. Paying not less than minimal month-to-month stipends (which can be paid in a deferred method as properly) as prescribed by the suitable authorities to the engaged apprentices. No stipend must be paid for any interval the place the apprentice stays on extraordinary go away.
5. Ensuring that the individual positioned accountable for coaching the apprentices possesses the mandatory {qualifications} for such coaching as could also be prescribed by the federal government, if any.
6. Ensuring compliance with the apprenticeship contract and offering the apprentice with leaves and holidays as relevant within the employer’s institution.
7. Ensuring compliance with the Employees’ Compensation Act, 1923 in case of office accidents prompted to an apprentice. 
8. Maintaining information of progress of every apprentice and submitting returns as prescribed by the suitable authorities.
9. Formulating a coverage for recruiting apprentices post-completion of apprenticeship interval. If the apprenticeship contract mandates the employer to make use of the apprentice after the coaching interval, then the employer shall be certain to take action.
10. Designated trades and relevant coaching necessities for the notified designated trades are printed by applicable authorities authorities once in a while.

It is vital to focus on that the place the apprenticeship contract is terminated owing to the employer’s breach of contract, the employer is required to pay the apprentice a compensation of an quantity equal to the apprentice’s final drawn stipend for 3 (3) months. 

Apprentices will not be thought-about as staff and accordingly are solely topic to advantages prescribed particularly beneath the AA and the executed apprenticeship contract. Few Indian labor legal guidelines have particularly carved out exclusions for apprentices from its scope. For instance, the Employees’ Provident Funds and Miscellaneous Provisions Act 1952 (EPF Act) excludes apprentices engaged beneath the AA or beneath the standing orders of the institution from the definition of “employee”.

Not complying with the provisions of the AA by an employer might result in financial penalty in addition to imprisonment if a grievance of such non-compliance is lodged by applicable authorities towards the employer. Upon such contravention, the employer is punishable with a effective of INR 500 per shortfall of apprenticeship month for the primary three (3) months and subsequently INR 1000 per shortfall of apprentices monthly, till the employer complies with the obligatory requirement of partaking the prescribed variety of apprentices. Such penalties are imposed solely after the BOAT sends a discover requiring the employer to clarify the explanations for the contravention of the Act with one month’s time to reply. Only if the BOAT will not be glad with the reason, shall the penalties be imposed.

Besides the AA, few skilled levels, inter alia, Bachelor of Law, Chartered Accountancy, Company Secretary, Bachelor of Medicine and Bachelor of Surgery, require obligatory apprenticeships/traineeships/internships of a prescribed length as a pre-condition to being conferred the respective levels.

Legal concerns for partaking interns and trainees exterior of the AA

As talked about earlier, interns and trainees will not be recognised beneath Indian labor legal guidelines. Hence, such preparations carry various levels of misclassification threat. For instance, relying on the character of preparations, interns or trainees could also be considered ‘employees’ thereby triggering the relevant labor legislation advantages, compliances, and protections.

In order to handle the query of whether or not ‘student-trainees’ are lined beneath the EPF Act, the Employees’ Provident Fund Organization (EPFO) issued two circulars dated October 12, 2015, and July 27, 2022. The round dated October 12, 2015[11] clarified that the next situations need to be met for internships/traineeships to not set off any threat of an employment relationship between the employer and the student-trainees, particularly (i) the student-trainees are imparted industrial coaching/sensible on the job coaching as an integral a part of a recognised course in an establishment acknowledged by the suitable authorities whereby throughout such coaching interval, the student-trainees is uncovered to trendy technical improvement and hands-on-training of engaged on refined tools/devices, (ii) the student-trainees return to their respective establishments for completion of their tutorial levels, and (iii) the student-trainees might or might not be paid a stipend. 

The EPFO adopted this up with a round dated 27 July 2022[12], whereby it listed down pointers to check the standing of a ‘student-trainee’ vis-a-vis an worker that are as follows:

(i) The student-trainee have to be enrolled in an academic institute which is acknowledged by a reliable authority.

(ii) ‘On-the-job-training’ is an integral part of such course and shall not exceed the interval as decided beneath the course.

(iii) The student-trainee is certain to finish the coaching inside the stipulated time together with the extension interval failing which he shall stop to be student-trainee.

(iv) The employer should interact solely these student-trainees who’re pursuing a course related to the trade and so they should not be engaged for any goal apart from as laid out in such course or scheme.

(v) The variety of student-trainees engaged ought to by no means exceed such % of the entire workforce employed within the involved manufacturing unit/department of an institution.

There has been a current main flip-flop-flip by sure regulatory authorities with respect to treating NEEM[13] trainees as ‘employees’. Originally, NEEM trainees have been excluded from employment relationship regardless of incomes month-to-month remuneration/stipend at a prescribed price of minimal wages relevant for the unskilled class. This stance was modified first by together with NEEM trainees inside the ambit of ‘employees’ by an extra clarification dated 24 February 2022[14]. This was once more reversed by the notification dated 23 December 2022[15]  which discontinued the NEEM Scheme with instant impact.

Case legislation evaluation

Several case legal guidelines have created a wealthy physique of opinion on whether or not interns/trainees must be handled as ‘employees’ or not. In the case of Irel (India) Limited Vs P. N. Raghava Panicker[16], the Kerala High Court held that the employer can not deny a so-called “trainee”, advantages beneath the Payment of Gratuity Act, 1965 (Gratuity Act) merely as a result of he’s designated as a “trainee” regardless of performing common worker work. In the case of Chairman-Cum-Managing Director, Orissa Mining Corporation. Ltd. V. Controlling Authority, Payment of Gratuity Act & Ors.[17], it was held that the check of concluding whether or not a “trainee” employed beneath a contract of employment can qualify as an apprentice as per the AA is to verify whether or not he’s present process any apprenticeship coaching in a delegated commerce in pursuance of the contract of apprenticeship. This check was utilized to supply advantages to the involved trainee/worker beneath the Gratuity Act.

In the case of Andhra Prabha (P) Ltd. vs E.S.I. Corporation[18], the Andhra Pradesh High Court lifted the veil to verify whether or not the trainee/worker must be the rightful recipient of advantages beneath the welfare laws of the Employees’ State Insurance Act, 1948 (ESI Act). This case centered on the precise intent of the employer towards any covert guise or nomenclature for the alleged circumvention. Another essential check in figuring out whether or not an engaged useful resource is an worker is to verify whether or not the employer has absolutely the proper to reject the ultimate product and the correct to refuse work. If sure, then this implied that the employer exercised an efficient diploma of supervision and management upon the employees who, due to this fact, fell inside the definition of “person employed” beneath the Andhra Pradesh (Telangana Area) Shops and Establishments Act, 1956.[19]

That trainees don’t quantity to staff was, nonetheless, confirmed within the case of ACIT, Chennai v. M/s. Maveric Systems Limited, Chennai[20] the place it was noticed that the quantity spent on coaching and stipend, can, by no stretch of creativeness, be termed as scholarship. Therefore, such stipend paid to the interns who will not be on the common pay rolls of the assessee didn’t appeal to the provisions of the then relevant Fringe Benefit Tax.

Conclusion

Interns are supposed to be educated as an alternative of being made to do the group’s core, revenue-generating work. Accordingly, it’s advisable to make sure that the association is evident upfront and the internship/traineeship contract is rigorously drafted to scale back the worker’s misclassification publicity.