There is a persistent belief in Bengaluru that software companies sit outside labour law altogether. That is wrong, but the correct answer is more layered than either side usually admits, and the layers matter because they decide which door you knock on.
Layer one: is the employer carrying on an industry
The Industrial Relations Code, 2020 defines industry as any systematic activity carried on by co-operation between an employer and a worker, whether directly or through an agency including a contractor, for the production, supply or distribution of goods or services, with a view to satisfying human wants or wishes. Writing and supporting software for customers is the supply of services on any ordinary reading. An IT company is not excluded because it has no shop floor.
Layer two: are you a worker
This is where most IT employees actually fall out. The Code covers manual, unskilled, skilled, technical, operational, clerical and supervisory work. Engineering, testing, support and analysis are technical or operational work, so a developer, a test engineer or a database administrator is prima facie inside. Excluded are a person employed mainly in a managerial or administrative capacity, and a person in a supervisory capacity drawing wages exceeding eighteen thousand rupees a month or such other amount as the Central Government notifies. Given salary levels in the sector, a genuinely supervisory role is almost always outside; a technical role is not, however much it pays, because the wage cap attaches only to supervisory work. Our note on whether you count as a worker under the Industrial Relations Code works through the sector's job titles.
The special chapter of the Industrial Relations Code that requires prior permission of the appropriate Government before lay-off, retrenchment or closure applies to an industrial establishment with three hundred or more workers, and it defines "industrial establishment" for its own purposes as a factory, a mine or a plantation. A software company's office in Bengaluru is none of those three, so however many thousand people it employs, that chapter does not reach it. Headcount is not the operative fact; the type of establishment is.
Layer three: what does apply
- Conditions precedent to retrenchment in the general chapter apply to a worker with at least one year of continuous service: one month's notice in writing giving the reasons or wages in lieu, compensation of fifteen days' average pay for every completed year and any part in excess of six months, and notice to the appropriate Government in the prescribed manner.
- The order of retrenchment. Within a category, the employer ordinarily retrenches the last person employed in that category unless it records reasons for doing otherwise.
- Preference in re-employment if the employer hires again within a year of the retrenchment.
- Sixty days' notice of closure to the appropriate Government, which does not apply where fewer than fifty workers are employed.
- Unfair labour practices listed in the Second Schedule to the Code are prohibited.
- The wage, safety and social security codes apply on their own terms, which is where unpaid salary, the appointment letter obligation, provident fund and gratuity claims live.
Note what is missing from that list. The lay-off compensation provisions of the Code are expressly confined, for their own purposes, to a factory, a mine or a plantation, and are further excluded where fewer than fifty workers are employed on average. So there is no statutory lay-off compensation for a Bengaluru IT office. Standing orders sit in a chapter that applies at three hundred or more workers in an industrial establishment, so many IT employers are governed by contract and policy rather than by certified standing orders.
The Karnataka Shops and Commercial Establishments Act, 1961 was in none of the four repeal lists. It defines a commercial establishment to include an establishment or administrative service in which the persons employed are mainly engaged in office work, which describes an IT office. Its Section 39 says no employer shall remove or dismiss an employee with six months of continuous service except for reasonable cause and without one month's previous notice or pay in lieu, unless misconduct has been brought on record with proof at an enquiry held for the purpose. The employee has a right of appeal to the prescribed authority. Where the employer will not reinstate, the appellate authority may award compensation capped at one month's pay for every year of service, and a person aggrieved may apply to the District Judge for revision. This route does not require you to win the "worker" argument.
Two limits on it. The Act does not apply to persons occupying positions of management, so the same factual enquiry returns. And once compensation has been awarded under that section, the same claim cannot then be taken to a civil suit, so the forum has to be chosen rather than tried in parallel.
What to do in the week you are told
- Ask in writing for the reason and for the letter. A verbal "your role is redundant" leaves you with nothing to challenge.
- Download your payslips, appointment and revision letters, appraisals and the organisation chart while your access still works.
- Check the appeal period under the Karnataka rules the same week. It is short, and it is measured from the dismissal.
- Do not sign a resignation, and read any release in a settlement before signing it.
Our guide on wrongful termination and employee rights in India sets out the remedies in sequence, and our overview of what the four labour codes changed for employees explains why the section numbers in older material no longer match the statute book.