Legal Status of Sales Promotion Employees in India

The Evolving Legal Landscape for Sales Promotion Employees in India: An Analysis of Statutory Provisions and Judicial Precedents

Introduction

The legal status of Sales Promotion Employees (SPEs) in India has been a subject of considerable deliberation and judicial scrutiny. Historically, ambiguity surrounded their classification as 'workmen' under the Industrial Disputes Act, 1947 (ID Act), often leaving them outside the purview of its protective mechanisms. The enactment of the Sales Promotion Employees (Conditions of Service) Act, 1976 (SPE Act) marked a watershed moment, specifically addressing the service conditions and legal standing of this category of employees. This article seeks to provide a comprehensive analysis of the legislative framework governing SPEs, with a particular focus on the interplay between the SPE Act and the ID Act, as interpreted and clarified by the Indian judiciary. It will delve into the definition of SPEs, the scope of their coverage under labor laws, and the critical exceptions that determine their access to remedies under the ID Act.

Legislative Framework

The rights and protections afforded to SPEs are primarily governed by the SPE Act, which, in turn, extends the applicability of the ID Act to them under specific conditions.

The Industrial Disputes Act, 1947 and the Definition of 'Workman'

The ID Act, 1947, is a cornerstone of Indian labour law, providing mechanisms for the investigation and settlement of industrial disputes. Central to its applicability is the definition of a 'workman' under Section 2(s). This section defines a 'workman' as any person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward. However, it excludes individuals employed mainly in a managerial or administrative capacity, or those employed in a supervisory capacity drawing wages exceeding a statutorily prescribed amount.

Prior to the enactment of the SPE Act, courts often held that employees engaged primarily in sales promotion did not fit neatly into the categories of work specified in Section 2(s) of the ID Act. The Supreme Court in May & Baker (India) Ltd. v. Workmen (AIR 1961 SC 678), for instance, held that medical representatives were not 'workmen'. This position was also noted in T.P. Srivastava v. M/S National Tobacco Co. Of India Limited (1992 SCC 1 281), where the Supreme Court observed that persons employed for sales promotion normally would not come within the definition of 'workman' under the ID Act, and that the SPE Act was a subsequent enactment to address this.

The Sales Promotion Employees (Conditions of Service) Act, 1976

The SPE Act was enacted with the explicit objective of regulating the conditions of service of sales promotion employees in certain establishments. The Statement of Objects and Reasons for the Act acknowledged the judicial view that SPEs were not 'workmen' under the ID Act and aimed to provide them with necessary protections (*Rajasthan Medical And Sales Representatives' Union And Others v. Industrial Research Institute (Private), Ltd., And Others*, 2000 SCC ONLINE RAJ 37). This Act was a legislative response to the demands for social justice for this class of employees (*Gautam Banerjee v. State Of Bihar*, Patna High Court, 1999).

Section 2(d) of the SPE Act defines a "sales promotion employee" as:

"any person by whatever name called (including an apprentice) employed or engaged in any establishment for hire or reward to do any work relating to promotion of sales or business, or both..."

However, this definition excludes certain categories of employees. As per the amended SPE Act (Amendment Act 48 of 1986, w.e.f. May 6, 1987), these exclusions are:

  • Persons employed or engaged in a supervisory capacity drawing wages exceeding sixteen hundred rupees per mensem; or
  • Persons employed or engaged mainly in a managerial or administrative capacity.

(*H.R Adyanthaya And Others v. Sandoz (India) Ltd. And Others*, 1994 SCC 1 737; *Ripu Daman Bhanot v. The Presiding Officer, Labour Court, Ludhiana And Others*, Punjab & Haryana High Court, 1996).

Crucially, Section 6(2) of the SPE Act extends the applicability of the ID Act, 1947, to sales promotion employees. It states:

"The provisions of the Industrial Disputes Act, 1947 (14 of 1947), as in force for the time being, shall apply to, or in relation to, sales promotion employees as they apply to, or in relation to, workmen within the meaning of that Act and for the purposes of any proceeding under that Act in relation to an industrial dispute, a sales promotion employee shall be deemed to include a sales promotion employee who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute or whose dismissal, discharge or retrenchment had led to that dispute."

This provision effectively creates a "deemed workman" status for SPEs, bringing them within the ambit of the ID Act, subject to the definitions and exclusions within the SPE Act itself (*Ripu Daman Bhanot v. The Presiding Officer, Labour Court, Ludhiana And Others*, Punjab & Haryana High Court, 1996; *Deepak Kumar v. State Of Bihar*, 2016 SCC ONLINE PAT 1866).

Judicial Interpretation and Key Precedents

The interpretation of the SPE Act and its interplay with the ID Act has been extensively dealt with by the judiciary, with the Supreme Court's decision in *H.R Adyanthaya* being a landmark authority.

The Landmark Ruling in H.R. Adyanthaya v. Sandoz (India) Ltd.

In *H.R Adyanthaya And Others v. Sandoz (India) Ltd. And Others* (1994 SCC 1 737), the Supreme Court meticulously analyzed the definition of 'workman' under the ID Act and the provisions of the SPE Act. The Court clarified that for a sales promotion employee to be considered a 'workman' under the ID Act, they must first fall within the definition of "sales promotion employee" under Section 2(d) of the SPE Act, including not falling into the excluded categories (managerial, administrative, or supervisory drawing wages above the specified limit).

The Court noted that the SPE Act is a special law enacted for SPEs. It traced the history of wage ceilings in the SPE Act, observing that the 1987 amendment removed the general wage ceiling for non-supervisory SPEs to be covered by the Act but retained the wage limit for those in a supervisory capacity and the exclusion for those in mainly managerial or administrative roles. The Court also affirmed that the work of sales promotion, such as that performed by medical representatives, is distinct from and not classifiable as 'skilled' or 'technical' work within the primary meaning of Section 2(s) of the ID Act (*Sachin Narsayya Nagarkar Vs Bata India Ltd.*, Bombay High Court, 2023, and *Deven Jagdishchandra Tolia Vs Bata India Ltd.*, Bombay High Court, 2023, both citing *Adyanthaya*).

Subsequent High Court judgments have consistently followed *Adyanthaya*. For instance, *Rajasthan Medical And Sales Representatives' Union And Others v. Industrial Research Institute (Private), Ltd., And Others* (2000 SCC ONLINE RAJ 37) held that after the SPE Act, medical representatives fall within its purview, subject to exclusions. Similarly, *Lekhakar Jha v. Manager, M/S. Aushadh Prathishthan* (Rajasthan High Court, 2005) emphasized that decisions prior to the SPE Act's full effect (like aspects of *T.P. Srivastava* and initial interpretations of *Adyanthaya* before considering amendments) must be viewed in light of Section 6(2) of the SPE Act.

Defining "Sales Promotion"

The term "sales promotion" itself has been subject to interpretation. The Gujarat High Court in *Commissioner Of Central Excise v. Cadila Healthcare Ltd.* (2012) referred to dictionary definitions, describing sales promotion as activities intended to improve sales, such as advertising, organizing competitions, providing free gifts and samples, demonstrations, discounts, exhibitions, and point-of-sale displays. This indicates a broad understanding of activities related to the promotion of sales or business.

Scope of "Deemed Workman" and Application of ID Act

The "deemed workman" status conferred by Section 6(2) of the SPE Act has been pivotal. In *Rhone-Poulenc (India) Ltd. v. State Of U.P And Others* (2000 SCC 7 675), the Supreme Court dealt with a matter concerning a medical representative considered a "deemed workman" under the U.P. Industrial Disputes Act by virtue of the SPE Act, acknowledging the applicability of the ID Act framework. Recent cases like *Novartis India Ltd. v. Bichimaya Mishra* (Orissa High Court, 2024) and *Novartis India Limited v. Vipin Shrivastava & Others* (Madhya Pradesh High Court, 2018) continue to apply the principles from *Adyanthaya*, emphasizing that the exclusions based on supervisory wages or managerial/administrative capacity are critical in determining if an SPE can invoke the ID Act.

Jurisdictional Issues and Alternative Forums

The question of jurisdiction and the availability of alternative forums has also arisen. In *Spic Pharmaceuticals Division v. Authority Under Section 48(1) Of A.P. Shops And Establishments Act, 1988* (2007 SCC 2 616), the Supreme Court addressed whether the SPE Act ousts the jurisdiction of authorities under State Shops and Establishments Acts. While the Court, in the specific circumstances of that case, directed the State Governments to refer the disputes to the appropriate forum under the ID Act, it explicitly stated it was not deciding the broader issue of whether the jurisdiction of authorities under the Shops Act was excluded. This suggests a possibility of concurrent jurisdictions, though the ID Act forum is often considered more effective for such disputes due to the specific provisions of the SPE Act.

Misconduct and Disciplinary Actions

While the SPE Act itself does not detail procedures for disciplinary action, the application of the ID Act (and often, certified standing orders of the establishment) would govern such matters. General principles of labour law, such as those discussed in *Glaxo Laboratories (India) Ltd. v. Labour Court, Meerut, And Others* (Allahabad High Court, 1981), would apply. This case highlighted that for an act to constitute misconduct under standing orders, it typically must be committed within the premises or vicinity of the establishment, or have a direct and rational nexus with the employment, unless the standing orders specify otherwise. This principle would be relevant for SPEs who often work outside traditional office premises.

Analysis of Specific Issues

Wage Ceilings and Exclusions

The evolution of wage ceilings under the SPE Act is significant. Initially, Section 2(d) included wage limits for all SPEs to be covered. The 1976 definition covered SPEs drawing wages not exceeding Rs. 750 per mensem (excluding commission) or Rs. 9,000 per annum (including commission), and excluded those mainly in managerial or administrative capacity (*H.R Adyanthaya*, 1994 SCC 1 737, referring to the original SPE Act definition). The Amending Act 48 of 1986 (effective May 6, 1987) revised this, removing the general wage ceiling for non-supervisory SPEs but specifying that SPEs in a supervisory capacity drawing wages exceeding Rs. 1,600 per mensem are excluded. The exclusion for those "employed or engaged mainly in a managerial or administrative capacity" remains a constant and crucial factor (*Ripu Daman Bhanot*, Punjab & Haryana High Court, 1996; *Novartis India Limited v. Vipin Shrivastava & Others*, Madhya Pradesh High Court, 2018).

Managerial and Administrative Capacity

The determination of whether an SPE is "mainly in a managerial or administrative capacity" is a question of fact, depending on the predominant nature of their duties and responsibilities. The designation alone is not conclusive; the actual work performed is paramount. This exclusion is a significant gateway for determining the applicability of the SPE Act and, consequently, the ID Act.

Nature of Work: "Promotion of Sales or Business"

The core function of an SPE is "to do any work relating to promotion of sales or business, or both." This is a broad definition encompassing a variety of tasks aimed at increasing market penetration and demand for the employer's products or services. As established in *Adyanthaya* and reiterated in cases like *Sachin Narsayya Nagarkar* (2023), this work, while requiring skill and knowledge (especially for medical representatives), is not considered 'skilled' or 'technical' work in the sense these terms are used in Section 2(s) of the ID Act. The SPE Act carves out a special category for these employees, recognizing the unique nature of their promotional work.

Conclusion

The Sales Promotion Employees (Conditions of Service) Act, 1976, stands as the definitive legislation governing the service conditions and legal status of sales promotion employees in India. By virtue of Section 6(2) of the SPE Act, these employees are "deemed workmen" for the purposes of the Industrial Disputes Act, 1947, thereby granting them access to its protective umbrella and dispute resolution mechanisms. This was a significant legislative step to address the lacuna that previously existed, where SPEs were often outside the scope of the 'workman' definition under the ID Act.

However, the coverage is not absolute. The SPE Act itself carves out critical exceptions: individuals employed mainly in a managerial or administrative capacity, and those in a supervisory capacity drawing wages exceeding the prescribed limit (currently Rs. 1,600 per mensem), are excluded from the definition of "sales promotion employee" and consequently from the deemed 'workman' status. The Supreme Court's judgment in *H.R. Adyanthaya And Others v. Sandoz (India) Ltd. And Others* (1994) provides the authoritative interpretation of these provisions and continues to be the guiding precedent.

The legal position, therefore, is that while SPEs are generally entitled to the protections of the ID Act, this is contingent upon their role not falling within the specified exclusionary categories. Ongoing and future litigation in this domain will likely continue to focus on the factual determination of an employee's primary duties and responsibilities to ascertain whether they fall within the ambit of the SPE Act or its exclusions.