Can Foreign Companies be penalised for PoSH non-compliance in India? A Legal Analysis

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (PoSH Act) is a landmark piece of legislation in India aimed at creating safe and secure workplaces for women. A common question that arises is whether foreign companies operating in India can be held liable and penalised for non-compliance with this Act. The answer is an unequivocal yes. This article delves into the legal framework of the PoSH Act, its applicability to foreign entities, the penalties for non-compliance, and the stance of the Indian judiciary on this matter.

The PoSH Act's wide reach

The PoSH Act is designed to have a broad and inclusive reach. Its provisions apply to every workplace in India, regardless of the nature of the industry or the size of the workforce. The term "workplace" is defined expansively to include any place visited by the employee arising out of or during the course of employment, including transportation provided by the employer.

For foreign companies, this means that any of their establishments in India, such as:

• Subsidiaries and Branch Offices: These are distinct legal entities or extensions of the foreign parent in India. They are unequivocally considered Indian establishments for the purpose of the PoSH Act and are fully bound by its provisions.

  
  

• Liaison, Project, or Representative Offices: Even these setups, which may have a limited operational mandate compared to a full-fledged subsidiary, are considered "workplaces" if they employ individuals in India. They must comply with all aspects of the Act, including forming an Internal Committee (IC) if they have 10 or more employees.

  
  

• Joint Ventures: Any joint venture where a foreign company is a partner is an Indian entity subject to Indian laws, including the PoSH Act. The responsibility for compliance is shared among the partners.

  
  

• The Concept of the "Extended Workplace": The Act's definition of "workplace" is not limited to the physical office premises. It includes any place visited by the employee "arising out of or during the course of employment." For MNCs, this has significant implications:

  
  

  • Client Sites and Third-Party Premises: If an employee of a foreign company is deputed to a client's office in India, that location becomes their workplace, and the foreign company remains responsible for their safety.

    
    

  • Company-Sponsored Events: Off-sites, conferences, team dinners, and other events organised by the company, whether in India or abroad, fall under the purview of the extended workplace.

    
    

  • Company-Provided Transportation and Accommodation: Any transport (like office cabs) or accommodation (like guest houses or hotels during business travel) provided by the employer is considered part of the workplace.

    
    

• The Virtual Workplace: With the rise of remote work, Indian courts have clarified that the "workplace" includes virtual and digital spaces. This means a foreign company can be held liable for online harassment (via email, chat, or video calls) if the aggrieved employee is based in India, even if the respondent is in another country. The impact on the employee's work environment in India is the key jurisdictional hook.

  
  

• Employees on Secondment: A foreign national on secondment to the Indian office of an MNC is protected under the PoSH Act. Conversely, the Indian entity of a foreign company has a duty to protect its employees from harassment by seconded foreign nationals.

  
  

The Act mandates that every employer with ten or more employees must constitute an Internal Committee (IC) to receive and redress complaints of sexual harassment. This is a non-negotiable requirement for all companies, including foreign ones.

Penalties for Non-Compliance

The PoSH Act prescribes stringent penalties for non-compliance. These penalties are not merely financial but can also have serious operational consequences for a company. The key penalties include:

• Financial Penalty: An employer who fails to comply with the provisions of the Act, such as constituting an IC, can be subjected to a fine of up to INR 50,000/-.

  
  

• Repeated Non-Compliance: In case of a repeated breach of the Act, the penalty can be doubled.

  
  

• Cancellation of Business License: For repeated non-compliance, the employer may face cancellation of their license or withdrawal, or non-renewal of their registration for carrying on their business or activity.

  
  

These penalties are applicable to all companies operating in India, and foreign companies are not exempt from them. The potential for cancellation of a business license is a particularly strong deterrent and underscores the seriousness with which the Indian legal system views PoSH compliance.

Landmark Judgments and Enforcement

The Indian judiciary has consistently taken a firm stance on the implementation of the PoSH Act. While there is a limited number of high-profile reported cases specifically naming foreign companies, the existing case law provides valuable insights into the judiciary's approach.

In the case of Ms. G vs. ISG Novasoft Technologies Ltd. (2014), the Madras High Court awarded a significant compensation of INR 1.68 crore to an employee for sexual harassment. This case, though not against a foreign entity, set a strong precedent for substantial compensation in sexual harassment cases and demonstrated the judiciary's willingness to impose heavy financial burdens on non-compliant employers.

More recently, in the case of "X" vs. Wiley India Pvt. Ltd. (2023), a subsidiary of the global publishing giant John Wiley and Sons, Inc., the Delhi High Court was approached by an employee alleging sexual harassment by the Managing Director. The case highlights that the Indian courts will not hesitate to intervene and scrutinise the actions of the IC, even in cases involving fully owned subsidiary of a foreign company.

It is also important to note that many cases of sexual harassment in the corporate world, especially those involving multinational corporations, are often settled out of court to avoid reputational damage. The lack of a large volume of reported cases against foreign companies should not be misinterpreted as a lack of enforcement.

Conclusion: A Call for Proactive Compliance

The legal landscape in India is clear: foreign companies operating in the country are fully bound by the PoSH Act and can face severe penalties for non-compliance. The broad definition of "workplace," the stringent penalties, and the proactive stance of the judiciary all point towards the need for robust compliance measures.

For foreign companies, it is not enough to simply have a global anti-harassment policy. They must ensure that their Indian operations are fully compliant with the specific requirements of the PoSH Act, including the constitution of a properly trained Internal Committee and the timely filing of annual reports. Proactive compliance is not just a legal necessity but also a crucial step in fostering a safe and respectful work environment, which is essential for the long-term success of any organisation.