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There are a number of legal pitfalls and unexpected sources of trouble that appear for U.S. companies employing or contracting with Indian nationals. Common problems that arise for U.S. companies employing or contracting with Indian nationals include certain prohibitions on the termination of employees, the payment of certain benefits without U.S. equivalents and the non-enforceability of non-competition provisions in employment contracts. This paper will highlight and explain the legal pitfalls most frequently encountered by U.S. companies that make use of the Indian workforce.
The Indian workforce is attractive to U.S. employers for numerous reasons. For example, India has a large English-speaking population and one of the world's largest pools of scientific and technical personnel. Twenty-two million people in India have graduated from college and over seven million of those persons have a degree in science and engineering. Due to many factors, including a high rate of domestic unemployment, wages are relatively low for all categories of workers, including managers and skilled labor.
The relationship between an employer and employee in India is primarily governed by any written agreement between the parties and applicable employment law. Employment law in India can be characterized as generally in favor of labor and the rights of employees are broadly protected. Because an employer cannot contract out of the minimum protections provided to employees under Indian law it is important for any employer to be familiar with the laws applicable to its workforce. Not only is there ample legislation governing the rights of workers in general, but there are also a number of laws aimed at specific industries, including plantations, mines, construction, transportation, and sales.
This paper addresses the common legal pitfalls encountered by U.S. companies that employ or contract with Indian nationals. We will first address the law applicable to the full or part-time employment of Indian nationals. Employment is not always the most practical solution for U.S. companies that would like to take advantage of the Indian workforce. An alternative to employment for many U.S. companies is to enter into a relationship with an Indian national as an independent contractor. We address here the law applicable to independent contractors and how best to structure a contracting relationship.
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