Labor Act not applicable to BFIs: SC

Kathmandu / Feb 14: The Supreme Court (SC) has ruled that the Labor Act does not apply to banks and financial institutions, bringing an end to the ongoing legal confusion surrounding the issue. The ruling followed the Swabalamban Bikas Bank case, in which the bank’s employees had filed a lawsuit, claiming they were entitled to benefits under the Labor Act.

The decision was made by a full bench of the SC, headed by Chief Justice Prakashman Singh Raut, and comprised of justices Til Prasad Shrestha, Binod Sharma, Sharanga Subedi, and Tek Prasad Dhungana. The court determined that labor laws, which are typically applied to various industries in Nepal, do not extend to the banking sector, ending the debate that had been ongoing for several years.

The issue stemmed from a dispute involving employees of Swabalamban Bikas Bank, who claimed they had not received the benefits stipulated under the Labor Act. Initially, the Labor Court ruled in favor of the employees, instructing the bank to comply with labor law provisions. The Labour and Employment Office in Teku also issued a similar directive, pushing the bank to provide the required benefits. However, the bank contested the decision, arguing that it operates under a special law and is not subject to the Labor Act. This led to an appeal to the Supreme Court.

The SC’s ruling comes after a series of contradictory decisions regarding the applicability of labor laws in the banking sector. In a previous ruling on the Prime Bank case in 2018, a division bench of Justices Anand Mohan Bhattarai and Hari Prasad Phuyal ruled that the Labor Act is applicable to the banking industry. However, the current case saw the formation of a full bench to settle the matter definitively.

As a result of this judgment, Swabalamban Bikas Bank and other financial institutions are no longer required to comply with the provisions of the Labor Act in the context of employee benefits and rights.