Is POSH Applicable to Small Companies?

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013, commonly called the POSH Act, is not limited to large companies or multinational organisations. It protects women working in small businesses, startups, shops, professional offices and other workplaces. The size of an organisation mainly determines the authority that will handle a complaint; it does not remove the protection available under the law.

Does the POSH Act Apply to Small Companies?

Yes, the POSH Act is applicable to small companies in India. A business does not become exempt from the law merely because it has a limited number of employees, operates from a small office or has an informal organisational structure.

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The important distinction concerns the constitution of an Internal Committee. A workplace employing ten or more workers must constitute an Internal Committee. Where the establishment has fewer than ten workers, a complaint may be submitted to the Local Committee constituted at the district level.

Therefore, the ten-worker threshold relates primarily to the complaint redressal mechanism within the organisation. It does not determine whether sexual harassment is prohibited or whether a woman working in a small establishment is protected.

A small company must understand two separate legal propositions:

• The prohibition against workplace sexual harassment applies irrespective of the size of the company.
• The requirement to constitute an Internal Committee generally arises when the workplace has ten or more workers.

Thus, even a business employing only three, five or eight persons remains responsible for maintaining a workplace free from sexual harassment.

Understanding the Purpose of the POSH Act

The POSH Act was enacted to provide protection against sexual harassment of women at the workplace and to establish a mechanism for prevention, prohibition and redressal of complaints.

The legislation recognises that sexual harassment violates a woman’s right to equality, dignity and a safe working environment. Its purpose is not limited to punishing misconduct after it occurs. It also places preventive responsibilities on employers.

The Act broadly operates through three connected principles:

• Prevention: Employers must take reasonable steps to prevent sexual harassment.
• Prohibition: Workplace rules must clearly prohibit sexually inappropriate conduct.
• Redressal: An accessible and fair mechanism must be available for making and deciding complaints.

These principles apply to organised as well as small and informal workplaces. A small workforce does not reduce the seriousness of the conduct or the need for legal protection.

Who Is Considered an Employee under the POSH Act?

The expression “employee” under the Act is wider than the conventional understanding of a permanent salaried worker. This is particularly relevant for small companies that frequently engage interns, consultants, trainees and contractual workers.

A person may fall within the definition of an employee when working at a workplace on a regular, temporary, ad hoc or daily-wage basis. Employment may be direct or through an agent, including a contractor.

The definition covers persons working:

• With or without the knowledge of the principal employer;
• For remuneration or on a voluntary basis;
• Under express or implied terms of employment;
• As a co-worker, contract worker or probationer;
• As a trainee or apprentice; or
• Under any other similar arrangement connected with work.

Consequently, a small business cannot count only permanent employees when examining its responsibilities. Persons engaged under different labels may still be workers for the purposes of the Act.

The statutory protection is available to an “aggrieved woman”. This includes a woman of any age who alleges that she has been subjected to sexual harassment at a workplace. In relation to a workplace, she may be employed or may not necessarily have a formal employment relationship with the organisation.

What Is a Workplace for a Small Company?

The meaning of “workplace” under the POSH Act is broad. It is not confined to a registered corporate office or a large commercial building. A small office, shop, clinic, chamber or home-based workplace may fall within its scope.

The definition includes private sector organisations, undertakings, enterprises, institutions, offices, branches and units. It also covers organisations engaged in commercial, professional, vocational, educational, entertainment, industrial, health or financial activities.

For small companies, a workplace may include:

• A startup office or co-working space;
• A shop, showroom or commercial establishment;
• A lawyer’s, accountant’s or consultant’s office;
• A clinic, hospital or diagnostic centre;
• A manufacturing unit or workshop;
• A branch office or project location;
• A client’s premises visited for official work;
• A venue used for a work-related meeting, event or training;
• Employer-provided transportation; and
• A dwelling place or house where work is performed.

A place visited by an employee during or arising out of employment may also be treated as part of the workplace. Therefore, misconduct during official travel, client meetings, office parties or work-related events may come within the Act.

Remote and hybrid working arrangements should also be approached carefully. Sexual harassment through work-related video calls, messages, emails or online communication may have a sufficient connection with employment, even though the persons involved are not physically present in an office.

When Must a Small Company Constitute an Internal Committee?

The requirement to constitute an Internal Committee becomes applicable when an establishment has ten or more workers. The Committee must be constituted through a written order issued by the employer.

Where an organisation has offices or administrative units at different places or at divisional or sub-divisional levels, the statutory requirement must be examined for those units in accordance with the Act.

Composition of the Internal Committee

Merely naming a group of employees as a POSH committee is not sufficient. The Committee must satisfy the statutory requirements concerning its composition.

It must ordinarily include:

• A Presiding Officer: A senior-level woman employee at the workplace must be appointed as the Presiding Officer. Where such an employee is unavailable, the Act permits appointment from another office or administrative unit, subject to the prescribed conditions.
• At least two employee members: These members should preferably be committed to the cause of women, possess experience in social work or have legal knowledge.
• One external member: The external member must be associated with a non-governmental organisation or association committed to the cause of women, or must be a person familiar with issues relating to sexual harassment.

At least half of the total members nominated to the Committee must be women. Members may hold office for a period not exceeding three years from the date of nomination.

The external member is essential to the validity and independence of the Committee. A committee consisting only of company employees does not satisfy the statutory composition.

Counting Workers for the Ten-Worker Threshold

The Act refers to workers rather than limiting the calculation to permanent employees. A practical assessment should therefore consider the actual workforce and the different forms of engagement used by the organisation.

Permanent staff, temporary workers, probationers, trainees, apprentices, contractual personnel and persons engaged through agencies may become relevant. Small companies should not avoid constituting an Internal Committee merely by describing workers as consultants, interns or freelancers when the actual relationship is connected with the workplace.

Where the workforce fluctuates around ten, the safer approach is to examine the working arrangement carefully and constitute a compliant Committee once the threshold is reached. Delaying compliance may leave the organisation without a valid internal mechanism when a complaint arises.

What Happens When a Company Has Fewer than Ten Workers?

A company with fewer than ten workers is generally not required to constitute an Internal Committee. However, this does not leave an aggrieved woman without a complaint mechanism.

The complaint may be made to the Local Committee constituted by the appropriate government at the district level. The Local Committee is intended to receive complaints from establishments where an Internal Committee has not been constituted because the establishment has fewer than ten workers.

The Local Committee also receives complaints where the complaint is against the employer. This is important because an internal body may not be able to independently inquire into allegations against the person controlling the organisation.

Role of the Local Committee

The Local Committee performs a redressal function for women who may not have access to a valid Internal Committee. Its jurisdiction is therefore especially important for workers in small businesses and the unorganised sector.

A complaint may be made to the Local Committee when:

• The workplace has fewer than ten workers;
• An Internal Committee is not required because the statutory threshold is not met; or
• The complaint is against the employer.

The Local Committee is constituted for the district and is supported through designated nodal officers at the block, taluka, tehsil, ward or municipal level. A complaint received by a nodal officer is required to be forwarded to the Local Committee.

A small company should inform its workforce about the applicable Local Committee and the available method for submitting a complaint. Simply stating that no internal committee exists is not an adequate compliance response.

Duties of Small Employers under the POSH Act

The absence of a requirement to establish an Internal Committee does not remove all employer responsibilities. Section 19 places several duties on employers to create a safe and respectful workplace.

Important duties include the following:

• Providing a safe working environment, including protection from persons who come into contact with employees at the workplace;
• Displaying the penal consequences of workplace sexual harassment at a conspicuous place;
• Displaying the order constituting the Internal Committee where such a Committee is mandatory;
• Conducting workshops and awareness programmes for employees;
• Organising orientation programmes for members of the Internal Committee;
• Providing necessary facilities to the Internal Committee or Local Committee for dealing with complaints;
• Assisting in securing the attendance of the respondent and witnesses;
• Making relevant information available during an inquiry;
• Assisting an aggrieved woman where she chooses to initiate criminal proceedings;
• Treating sexual harassment as misconduct under the applicable service rules; and
• Monitoring the timely submission of reports by the Internal Committee.

For an establishment below the ten-worker threshold, some duties connected specifically with an Internal Committee may not arise. However, the broader duties concerning prevention, safety, awareness, assistance and action against misconduct remain relevant.

What Conduct Amounts to Sexual Harassment?

The Act defines sexual harassment through specified forms of unwelcome conduct. The conduct may be direct, implied, verbal, non-verbal, written, visual or physical.

Sexual harassment may include one or more of the following:

• Physical contact and advances;
• A demand or request for sexual favours;
• Making sexually coloured remarks;
• Showing pornography; or
• Any other unwelcome physical, verbal or non-verbal conduct of a sexual nature.

Whether conduct is unwelcome is central to the assessment. Small and informal workplaces sometimes treat inappropriate comments, repeated personal messages or intrusive behaviour as harmless because colleagues work closely together. Informality does not prevent such conduct from amounting to sexual harassment.

Certain surrounding circumstances may also be relevant, including an implied or express promise of preferential treatment, a threat of detrimental treatment, a threat concerning present or future employment status, interference with work, creation of an intimidating or hostile work environment, or humiliating treatment likely to affect health or safety.

How Can a Complaint Be Filed?

A written complaint of sexual harassment may ordinarily be made within three months from the date of the incident. In the case of a series of incidents, the period is calculated from the date of the last incident.

The Internal Committee or Local Committee may extend the period by a further period not exceeding three months where circumstances prevented the complaint from being made within the original period. The reasons for granting the extension must be recorded in writing.

Where the aggrieved woman is unable to make a written complaint, reasonable assistance must be provided. The Rules also permit specified persons to file a complaint in certain circumstances where the aggrieved woman is unable to do so because of physical incapacity, mental incapacity, death or another recognised reason.

Conciliation before an Inquiry

Before initiating an inquiry, the Committee may attempt conciliation at the request of the aggrieved woman. Conciliation cannot be imposed by the employer, respondent or Committee.

A monetary settlement cannot form the basis of conciliation. Where a settlement is reached, it must be recorded and forwarded to the employer or District Officer for action. No further inquiry is conducted unless the terms of the settlement are not complied with.

Inquiry into the Complaint

If conciliation is not requested, does not result in a settlement or the settlement terms are breached, the Committee may conduct an inquiry in accordance with the applicable service rules and the Act.

The inquiry should ordinarily be completed within 90 days. The Committee must follow principles of natural justice and provide both parties with a fair opportunity to present their case.

The inquiry report is to be provided within ten days of completing the inquiry. Where the allegation is proved, the Committee may recommend disciplinary action and compensation in accordance with the law. The employer or District Officer must act on the recommendation within 60 days.

An appeal may generally be filed within 90 days in accordance with the applicable law or service rules.

Confidentiality during POSH Proceedings

Confidentiality is essential in every POSH matter, irrespective of the size of the organisation. Small workplaces present a greater risk of informal discussion because employees often know each other personally.

The contents of the complaint, the identity and addresses of the parties and witnesses, information concerning conciliation and inquiry proceedings, recommendations and action taken must not be published or communicated to the public, press or media.

However, information regarding the justice secured may be shared without disclosing the identity or details capable of identifying the aggrieved woman and witnesses.

Employers should restrict access to complaint records and avoid discussing allegations in general office conversations. Confidentiality protects the dignity of the parties and the integrity of the inquiry.

Consequences of Non-Compliance for Small Companies

An employer may face a monetary penalty of up to ₹50,000 for failure to constitute an Internal Committee where required, failure to act on Committee recommendations or contravention of other provisions of the Act and Rules.

A repeated conviction may result in enhanced consequences, including twice the punishment that might have been imposed for the first offence. It may also affect the registration, licence or approval required for carrying on the business.

A company with fewer than ten workers should not be penalised merely for failing to constitute an Internal Committee when the statutory threshold is not met. However, it may still face consequences for breaches of other applicable obligations.

Non-compliance may also expose a business to reputational harm, employee dissatisfaction, loss of trust, workplace disruption and separate civil, criminal or employment-related proceedings.

Practical POSH Compliance for Small Companies

A proportionate compliance system can be created without imposing an unnecessarily complex administrative structure. Even a very small organisation should maintain basic written procedures and communicate them clearly.

Small companies should consider the following measures:

• Adopt a written policy prohibiting workplace sexual harassment;
• Explain the forms of conduct covered by the policy;
• Include employees, interns, trainees, contractual staff and other workers within its scope;
• Identify the Local Committee where the workforce is below ten;
• Display relevant information and consequences at the workplace;
• Conduct periodic awareness and sensitisation sessions;
• Establish a confidential method for reporting concerns;
• Cooperate with the Local Committee during an inquiry;
• Preserve complaint-related documents securely;
• Prohibit retaliation against a complainant, witness or participant;
• Review workforce strength regularly; and
• Constitute a valid Internal Committee immediately when the threshold is reached.

A policy should not incorrectly direct every complaint to the business owner, particularly when the allegation may be against the owner. The procedure must explain the role of the Local Committee in such circumstances.

Difference between POSH Compliance below and above Ten Workers

The principal difference lies in the forum that receives and inquires into complaints. The underlying protection against sexual harassment remains available in both situations.

Conclusion

The POSH Act is applicable to small companies in India. The law does not provide a general exemption based on low turnover, limited office space, informal management or a small workforce.

A company employing ten or more workers must constitute a properly composed Internal Committee. Where the establishment has fewer than ten workers, complaints may be made to the district-level Local Committee. The Local Committee also deals with complaints against the employer.

Every small employer should focus on prevention, awareness, workplace safety, confidentiality and cooperation with the statutory complaint mechanism. Compliance should not begin only after the workforce reaches ten employees or after a complaint is received. A clear policy and a respectful work culture are essential even in the smallest establishment.