Supreme Court Ruling: Labor Act Applicable to Banks and Financial Institutions

The Supreme Court has clarified that the Labor Act extends its reach to encompass banks and financial institutions. The Supreme Court's decision came to light during a case involving Prime Commercial Bank and one of its employees.

In the course of resolving a dispute concerning the reinstatement of employees dismissed for actions contrary to official conduct, the Supreme Court emphasized that the Labor Act's applicability to banks and financial institutions is rooted in the principles of social justice and workers' rights enshrined in the Constitution.

The Supreme Court's recently published statement elaborates: "Before the promulgation of the Constitution of Nepal, Labor Act, 2048, and other labor laws did not appear to have been applied to government agency employees. In the case of the private and non-governmental sectors, it seems the Labor Act was implemented, albeit with some exceptions."

The Supreme Court upheld the order to reinstate the employees dismissed by the bank, affirming that the Labor Act applies equally to banks and financial institutions, thus extending the jurisdiction of the Labor Court.

An employee of Prime Commercial Bank, working in one of its branches, transferred funds from the accounts of other bank customers into an account jointly held by herself and Ramhari Dhakal (name changed). Upon scrutiny by the bank management, it was discovered that 2.6 million rupees had been deposited from the account of the debtor, Indrayani Construction Services. Another individual was found to have added Rs 34 lakh from their account.

The bank sought an explanation from the employee, citing a breach of procedures for depositing funds from other individuals' accounts. In response, she claimed that the money had been transferred with the consent and approval of the account holders. Nevertheless, the bank management terminated her employment in May 2074, asserting that the act was premeditated and not an error.

Dhakal, the terminated employee, took the matter to the labor court, which ruled in his favor, ordering the bank to revoke his dismissal and reinstate him immediately. The Labor Court reasoned that a single misdemeanor could not warrant dismissal and that the labor law permits dismissal only in cases of repeated misconduct.

Prime Commercial Bank appealed the Labor Court's decision to the Supreme Court, contending that labor disputes involving bank employees fall outside the Labor Court's purview. The bench comprising Judges Dr. Anand Mohan Bhattarai and Hari Phuyal clarified that the Labor Act applies to banks and financial institutions.

The Supreme Court emphasized that employees of government and public institutions fall under the jurisdiction of the Administrative Court, while workers in private and non-government sector establishments have the right to appeal to the Labor Court, with the Labor Act governing such matters.

The Supreme Court underscored the state's responsibility to protect, respect, and fulfill workers' rights, ensuring that any worker dismissed under these rights has access to impartial legal proceedings.

The Supreme Court's order stated, "In cases of labor disputes, there is a prevailing belief that bodies such as the Fair Labor Court and the judiciary should safeguard the rights and interests of workers. Examining international court practices, labor laws extend protection to workers and employees across all establishments, including banks and financial institutions."