Legal Obligations of Companies Regarding Diversity and Inclusion

Diversity and inclusion (D&I) are not only social imperatives but also have become key elements in corporate governance worldwide, including in India. With a growing recognition that diverse workforces drive innovation, improve decision-making, and lead to better financial performance, companies in India are increasingly being called upon to align their policies with principles of diversity and inclusion.

However, beyond corporate social responsibility, there are also legal obligations that companies must comply with. These obligations, which stem from various Indian laws, regulations, and international standards, require businesses to foster inclusive and diverse workplaces, while also ensuring they comply with specific legal frameworks. This article outlines the key legal obligations of companies in India with regard to diversity and inclusion.

1. Legal Framework Supporting Diversity and Inclusion in India

In India, various laws directly or indirectly address the principles of diversity and inclusion, particularly regarding gender, caste, disability, and more. These include:

a. Constitution of India

The foundation of diversity and inclusion in India lies in the Constitution itself. Key provisions that relate to workplace equality include:

• Article 14 – Right to equality: This article guarantees that every individual shall be treated equally before the law, and prohibits discrimination on grounds such as religion, race, caste, sex, or place of birth.
• Article 15 – Prohibition of discrimination: It forbids discrimination on grounds of religion, race, caste, sex, or place of birth, and mandates that the state can make special provisions for the advancement of socially and educationally backward classes.
• Article 16 – Equality of opportunity in matters of public employment: This article ensures that the state shall not discriminate against any individual on the grounds of religion, race, caste, sex, or place of birth in matters of employment.

b. The Equal Remuneration Act, 1976

This Act mandates that every individual should receive equal pay for equal work. Although not exclusively a diversity and inclusion law, it plays a crucial role in ensuring gender equality in the workplace. Companies must ensure that their pay structures are free from gender-based disparities and reflect equal remuneration for similar roles, responsibilities, and skill sets.

c. The Employment Equity Laws for Differently Disabled Persons

The Rights of Persons with Disabilities Act, 2016 (RPWD Act) mandates that companies must create inclusive work environments for persons with disabilities (PwDs). Under the law, companies with more than 20 employees are required to ensure that a minimum of 5% of their workforce consists of PwDs, provided they are suitable candidates for the positions.

d. The Scheduled Castes and Scheduled Tribs (Prevention of Atrocities) Act, 1989

This Act aims to prevent discrimination and atrocities against scheduled castes (SCs) and scheduled tribs (STs). Companies are expected to create a work environment that is free from discrimination based on caste and take measures to prevent and address any discriminatory behavior against employees from SC/ST backgrounds.

e. The Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013

This law is critical for ensuring a safe and inclusive workplace for women. It mandates that all organizations with more than 10 employees must constitute an Internal Complaints Committee (ICC) to address complaints of sexual harassment. The law also requires companies to adopt policies that prevent sexual harassment, conduct regular training, and ensure that women employees feel safe in their work environments.

2. Government Initiatives and Policies Promoting D&I

While Indian law provides a foundational legal framework, there are also government initiatives that guide companies in adopting diversity and inclusion practices. These include:

a. Corporate Social Responsibility (CSR) and Diversity

Under the Companies Act, 2013, certain companies are required to spend a percentage of their profits on Corporate Social Responsibility (CSR) activities. While diversity and inclusion are not directly mentioned as part of CSR, businesses are increasingly incorporating them into their CSR strategies. For instance, investing in skills development for marginalized groups or supporting women’s empowerment programs can count as CSR initiatives.

b. Diversity and Inclusion Indexes

The Government has also been incentivizing diversity through programs such as the NASSCOM Diversity & Inclusion Index and other voluntary frameworks that encourage companies to assess and disclose their D&I practices. Though not legally binding, participation in such programs can positively impact the company’s reputation and, by extension, employee morale and performance.

3. Specific Legal Requirements for Gender Diversity

Gender diversity is one of the most prominent areas of focus for Indian companies, especially given the underrepresentation of women in leadership positions and in certain sectors. Legal measures have been instituted to promote gender equality and protect women in the workplace:

a. The Maternity Benefit Act, 1961

This Act provides paid maternity leave for women employees and mandates that organizations provide a safe and secure environment for pregnant women. The law ensures that women can continue their employment post-pregnancy and provides for certain rights, such as leave, medical benefits, and nursing breaks.

b. Women’s Reservation in Boards

The Companies (Appointment and Qualification of Directors) Rules, 2014 require companies listed on stock exchanges to have at least one woman director on their board. Although this is specific to listed companies, it represents a broader push for gender diversity in top leadership roles.

c. Equal Opportunities for Women

Under the Factories Act, 1948, women are prohibited from working in certain conditions, particularly in hazardous environments. However, employers are obligated to make reasonable accommodations for women workers in non-hazardous roles, ensuring they have equal opportunities for employment.

4. Disability Inclusion

In addition to legal mandates under the RPWD Act, the National Policy for Persons with Disabilities, 2006, encourages employers to take proactive steps to employ persons with disabilities. Companies are required to:

• Make reasonable accommodations to allow employees with disabilities to perform their duties.
• Create an accessible workplace by ensuring physical infrastructure (like ramps and lifts) is disability-friendly.
• Provide equal opportunities for growth, training, and development for employees with disabilities.

5. Caste-Based Inclusion

India’s legal framework places considerable importance on social justice for the (SC), (ST), and Other Backward Classes (OBC). Companies are expected to:

• Provide equal employment opportunities and ensure no caste-based discrimination in the workplace.
• Implement affirmative action policies to hire individuals from SC/ST backgrounds where appropriate.
• Ensure compliance with quotas in public sector organizations and government-owned corporations, which mandate a certain percentage of jobs for SC/ST candidates.

In the private sector, while caste-based quotas are not mandatory, the law still requires employers to promote diversity and prevent discrimination based on caste.

6. Challenges in Legal Compliance

While Indian laws support diversity and inclusion, compliance can often be a challenge due to:

• Lack of awareness: Many companies still do not have sufficient knowledge or awareness. About the legal requirements related to diversity and inclusion.
• Inadequate enforcement: There is sometimes weak enforcement of laws like the Sexual Harassment Act, especially in smaller organizations.
• Structural biases: The caste system, gender stereotypes, and other social biases can sometimes manifest in organizational culture. Making it difficult to create truly inclusive environments.

7. Best Practices for Compliance

To meet legal obligations and promote an inclusive workplace culture, companies can adopt several best practices:

• Conduct diversity audits to evaluate where the company stands on various diversity indices (gender, caste, disability, etc.).
• Create formal policies on anti-discrimination, sexual harassment, and workplace inclusivity, and ensure these policies are regularly updated and communicated.
• Provide training to all employees on D&I topics, particularly unconscious bias, diversity awareness, and legal compliance.
• Establish diversity-focused recruitment processes to attract underrepresented groups, ensuring that the recruitment process is free from bias.
• Create Employee Resource Groups (ERGs) to support employees from diverse backgrounds. Providing them with a platform for networking, mentorship, and career development.

Conclusion

As India becomes an increasingly important player in the global economy. Diversity and inclusion will continue to be crucial for organizational success. Legally, Indian companies are required to comply with various laws. Aimed at promoting gender equality, preventing caste-based discrimination, ensuring accessibility for disabled employees, and creating safe working environment for women. While the legal landscape is robust. Companies must go beyond mere compliance to foster a culture that celebrates diversity and promotes true inclusion. By doing so, they will not only meet legal requirements but also position themselves. As responsible, progressive, and forward-thinking employers in an ever-changing global market.