Understanding Labor Disputes in Nepal: Legal Rights and Procedural Remedies

Nepal’s transformation from an agrarian economy to one with growing manufacturing, service and financial sectors has placed labor relations at the center of legal and industrial discourse. While the right to work and fair treatment is constitutionally guaranteed, friction between employers and employees is inevitable. Understanding the legal architecture; and perhaps more importantly, the procedural pathways and actual court practices; is crucial for both workers seeking justice and employers aiming to maintain compliance and industrial harmony.

 

This article provides a comprehensive examination of labor disputes in Nepal, covering the governing legal framework, root causes of conflict, substantive rights of employees, step-by-step procedural remedies including appeal mechanisms, the appellate rights of employer companies and the practical realities of how Nepalese courts interpret and decide labor cases today.

 

 

Nepal has developed a robust legal framework to regulate the employer-employee relationship, prevent exploitation and provide dispute resolution mechanisms. Nepal has established a four-tier legal structure for labor rights and dispute resolution. The Constitution of Nepal 2072 guarantees the right to employment under Article 34, the right to social security under Article 35 and the right to form trade unions and bargain collectively under Article 36, while also prohibiting child labor and forced labor.

 

2.1. The Constitution of Nepal 2072 (2015):

As the supreme law, the Constitution guarantees labor rights as fundamental rights. Article 34 ensures the right to employment. Article 35 guarantees the right to social security. Article 36 provides the right to form trade unions and to bargain collectively. The Constitution also constitutionally bans child labor and forced labor. These provisions set the philosophical foundation for all subordinate labor legislation and are directly enforceable through writ petitions in the Supreme Court.

 

2.2. The Labor Act, 2074 (2017):

This is the principal statute governing employment relationships in Nepal.. Key areas covered include: working hours (eight hours per day, forty-eight hours per week maximum); wages and overtime at double the normal rate; leave entitlements (annual, sick, maternity, public holidays); gratuity, provident fund and other social security benefits; workplace safety and health requirements; termination procedures and domestic inquiries; and dispute resolution mechanisms.

 

2.3. The Labor Regulations, 2075 (2018):

These regulations provide detailed procedural rules for implementing the Labor Act. They prescribe required forms for employment contracts, registers and notices; procedural mechanisms for forming Workplace Safety Committees; detailed steps for domestic inquiries and compliance inspection protocols.

 

2.4. The Labour Court Regulation, 2080: 

This Regulation, enacted under Section 182 of the Labour Act, 2074, provides the detailed procedural rules for litigation before the Labour Court. It establishes the jurisdiction and functioning of the Labour Court, which has original authority over individual disputes (termination, wages and benefits) and collective disputes. Key procedural aspects covered include: the format and fee for filing complaints; the procedure for issuing summons and notices; the process for filing written responses, presenting evidence and examining witnesses; the framework for mediation and compromise; the hearing scheduling system; the timeline for delivering judgments (generally within sixty days); the process for appealing Labour Court decisions directly to the Supreme Court; and the mechanism for execution of Labour Court orders.

 

2.5. The Trade Union Act, 2049 (1992):

This Act governs the formation, registration, rights and responsibilities of trade unions. It guarantees the right of workers to form or join unions without prior permission; mandatory recognition of unions by employers when they represent at least thirty percent of total workers; collective bargaining procedures; and the right to strike etc. 

 

 

Despite a relatively progressive legal framework, labor disputes remain common. The root causes generally fall into six categories.

 

3.1. Wage and Benefit Disputes:

These include non-payment or underpayment of statutory minimum wage; denial of overtime compensation (legally required at double the normal rate); miscalculation or non-payment of gratuity and provident fund contributions; and failure to provide festival allowance (typically one month's basic salary before Dashain).

 

3.2. Illegal Termination and Retrenchment:

Employers often terminate workers without following due process; specifically, without a valid reason (misconduct, redundancy or poor performance) and without providing the required one-month notice or severance pay. Retrenchment (layoff due to economic reasons) without adequate compensation is a major flashpoint.

 

3.3. Violation of Employment Contracts:

Disputes arise when employers unilaterally change job descriptions, transfer employees to hostile locations without consent or fail to provide a written contract as mandated by the Labor Act.

 

3.4. Refusal to Recognize or Bargain with Unions:

Management may resist forming or recognizing a trade union or may refuse to engage in collective bargaining, leading to strikes (hartals), gheraos (blockades) and work stoppages.

 

3.5. Poor Working Conditions:

Lack of safety equipment (especially in construction and manufacturing), inadequate sanitation, excessive working hours without breaks and workplace harassment often lead to spontaneous protests or legal complaints.

 

 

The Labor Act, 2074 grants a wide array of substantive rights. Awareness of these rights is the first step toward seeking remedies.

 

4.1. Right to a Written Employment Contract:

Employers must provide a written contract within thirty days of appointment, detailing job description, salary, working hours, leave and termination conditions.

 

4.2. Right to Fair Remuneration:

Minimum wage is determined by the Minimum Wage Fixation Committee. As of recent revisions, the basic monthly wage for non-technical workers is approximately NPR 19,550 plus allowances. Overtime work beyond eight hours per day or forty-eight hours per week must be compensated at double the normal hourly rate, capped at four hours of overtime per day. Festival allowance equivalent to one month's basic salary is payable before the Dashain festival.

 

4.3. Right to Leave and Holidays:

Employees are entitled to twelve days of annual leave per year after completing one year of service; six days of sick leave per year with full pay; fourteen weeks (ninety-eight days) of maternity leave with full pay plus nursing breaks of one hour per day for six months; and thirteen public holidays per year as declared by the government.

 

4.4. Right to Social Security:

Employers must contribute twenty percent of the employee's monthly basic salary (split among provident fund, gratuity and accident insurance). Employees contribute eleven percent to the provident fund.

 

4.5. Right to a Safe Working Environment:

Employers must provide safety equipment, first aid and a clean workspace. Establishments with fifty or more workers must form a Workplace Safety and Health Committee.

 

4.6. Right to Unionize and Collective Bargaining:

Workers may freely form or join trade unions. The recognized union has the right to negotiate wage scales, working hours and other conditions on behalf of all workers.

 

4.7. Protection against Unfair Termination:

Termination requires a domestic inquiry or mutual agreement. A worker cannot be fired without one month's notice (or salary in lieu) and applicable severance pay (generally thirty days' wages per year of service). Pregnant employees enjoy special protection from dismissal.

 

Under the Labour Act, 2074, employers may discipline employees for misconduct but must follow a fair procedure. The most important rule is giving the employee a written notice and seven days to respond before imposing any punishment. Failure to do this makes the punishment void, even if the employee was guilty.

 

5.1. Identify the Level of Misconduct

Based on Section 131 of the Labour Act, 2074, workplace misconduct is categorized into four levels with proportional punishments. Level 1 misconduct under Section 131(1) covers minor offences like absence without leave and disobedience, punishable by reprimand. Level 2 misconduct under Section 131(2) includes illegal strikes, false documents and not using safety equipment, punishable by deduction of up to one day's remuneration. Level 3 misconduct under Section 131(3) involves embezzlement, damaging property and disrupting workplace services, punishable by withholding annual increment or promotion for one year. Level 4 misconduct under Section 131(4) covers the most serious offences including assault, bribery, theft, absence over thirty days, disclosure of confidential information and submitting fake certificates, punishable by direct dismissal from service.

 

Level	Legal Provision	Punishment	Examples of Misconduct
Level 1 – Minor	Section 131(1)	Reprimand	Absence without leave Leaving the workplace without permission Frequent late arrival Disobeying lawful orders Similar violations prescribed by the by-laws
Level 2 – Moderate	Section 131(2)	Deduction of up to one day's pay	Refusing to accept notices Participating in an illegal strike Work slowdown (go-slow) Reckless damage to property Submitting false documents Failure to use required safety equipment Similar violations prescribed by the by-laws
Level 3 – Serious	Section 131(3)	Withholding of increment or promotion for one year	Taking employer's property without permission Attempted embezzlement Reckless damage to employer's property Stopping utilities or obstructing movement at the workplace Misuse of worker welfare goods or facilities Similar violations prescribed by the by-laws
Level 4 – Most Serious	Section 131(4)	Direct dismissal (without notice or severance)	Assaulting or injuring the employer or co-workers Bribery Theft Financial misappropriation Intentional damage to property Absence without leave for 30 or more days Disclosure of trade secrets Criminal conviction involving moral turpitude Submission of fake certificates Use of drugs or alcohol at the workplace Third misconduct within three years Any misconduct for which another law permits dismissal

 

 

5.2. Sexual Harassment (Section 132)

The Act also provides for a separate and critical category of misconduct: sexual harassment. Section 132(1) prohibits any person from committing, with the exertion of undue influence, any act considered to be sexual harassment under the law in the workplace or in the course of work. Under Section 132(2), the employer may impose punishment up to dismissal depending on the condition and gravity of the act. If the employer or chief executive commits sexual harassment, the trade union, victim or any member of the victim's family may file a complaint in accordance with the law under Section 132(3).

 

5.3. Suspension Pending Inquiry (Section 134)

Under Section 134(1), if a labour is detained in accordance with law, such labour is automatically suspended during that period and is not entitled to remuneration. However, if the labour is proved innocent (when detained upon a complaint filed by the employer), he or she is entitled to full remuneration for that period. Under Section 134(2), the employer has discretionary power to suspend a labour if dismissal is proposed and there is a possibility that the labour may destroy evidence or obstruct investigation. Such suspension under Section 134(3) shall not exceed three months generally, extendable by a maximum of one month if investigation is not completed. The labour is entitled to half remuneration during the suspension under Section 134(4). If acquitted, the labour is entitled to full remuneration minus amounts received during suspension under Section 134(5). Additionally, under Section 134(6), if suspension under Section 134(1) exceeds ninety days, the employer may terminate service without providing an opportunity for hearing.

 

5.4. Mandatory Disciplinary Procedure (Section 135)

A critical safeguard in this disciplinary process is the mandatory requirement outlined in Section 135: before any punishment can be imposed, the authority imposing punishment must give the accused employee a written notice that clearly states the facts of the commission of the misconduct and the possible punishment if proved. The employee must be given an opportunity to submit clarification within a period of seven days. This procedural step is non-negotiable; failure to provide this notice renders the subsequent punishment procedurally unfair and can lead to it being overturned by the Labour Court.

 

5.5. Period for Taking Decision (Section 137)

Section 137(1) requires that action for misconduct must be commenced within two months from the date of knowledge of the commission of such misconduct. Section 137(2) requires that a decision shall be taken within three months from the date of commencement of the action.

 

 

The Labour Act, 2074 establishes two distinct procedural tracks for resolving disputes: one for individual claims and another for collective demands. This fundamental distinction, established in Chapters 18 and 19 of the Act, is crucial because the process, the authority and the remedies available differ significantly depending on whether the issue affects a single worker or a group of workers.

 

6.1. Individual Dispute Resolution Process (Sections 113-115)

For individual disputes, the Act mandates a step-by-step escalation process under Section 113. It begins with an internal grievance where the affected worker must first submit a written application to their employer regarding any matter related to rights conferred by the Act, Regulation, prevailing laws or collective agreement. The employer is legally obligated under Section 113(2) to receive the application and give its receipt to the labour. Under Section 113(3), the employer must then attempt to resolve the matter through discussion with the labour within fifteen days. This period can be extended through mutual consent between the employer and the labour under Section 113(4).

 

If the employer fails to give a notice for discussion within seven days from the date of application or if no agreement is reached within the fifteen-day discussion period, the worker can escalate the matter to the local Labour Office under Section 114(1). Upon receiving the application, the Labour Office must give notice to both parties specifying the date and time for discussion under Section 114(2). The Labour Office serves primarily as a conciliatory and mediation body; its role under Section 114(3) is to facilitate a settlement between the parties by holding negotiations for up to twenty-one days. This period can be extended through consent between the Office, employer and labour under Section 114(4). If mediation succeeds, the agreement reached under Section 114(5) is binding on the concerned party under Section 114(6).

 

If mediation fails, the Labour Office is empowered under Section 115 to issue a formal, written decision on the claim within fifteen days, based on the available evidence. Any party dissatisfied with this decision has the right to appeal to the Labour Court under Section 165(1) within thirty-five days.

 

6.2. Collective Dispute Resolution Process (Sections 116-129)

The process begins with the formation of a Collective Bargaining Committee under Section 116(1) in enterprises with ten or more labours, formed either through the authorized trade union, mutual agreement of all unions or signatures of over sixty percent of labours. The committee may consist of three to eleven members under Section 116(4) and has powers to submit claims, enter agreements and file cases under Section 116(5). However, under Section 116(3), collective claims cannot be submitted on matters contrary to the Constitution, matters with no evidence, matters affecting personal conduct, matters not related to the enterprise, matters during an existing collective agreement or matters relating to social security.

 

The committee submits collective claims to the employer under Section 116(2). The employer must give notice for negotiation within seven days under Section 117(1) and the committee must be present for negotiations under Section 117(2). If an agreement is reached under Section 117(3), the dispute is settled and the agreement is binding under Section 117(4).

 

If the employer fails to give notice within seven days or no agreement is reached within twenty-one days, the dispute proceeds to the Labour Office for mediation under Section 118(1). The Office must complete mediation proceedings within thirty days under Section 118(3) and if an agreement is reached, it becomes binding under Section 118(5).

 

If mediation fails, compulsory arbitration follows under Section 119(1) in four circumstances: by agreement of parties, in essential services, in special economic zones or during a state of emergency. Under Section 119(2), the Ministry may also order arbitration if a financial crisis is likely. The Ministry forms an arbitration panel under Section 119(3), with expenses borne by the Government under Section 119(4). The arbitrator makes an award within thirty days under Section 119(9).

 

The collective bargaining committee may organize a strike under Section 121(1) if arbitration is not required or fails. Thirty days' advance notice must be given to the employer, local administration and Labour Office under Section 121(2). If the Ministry orders arbitration after strike notice, the strike must be postponed under Section 121(3). Security personnel cannot participate in strikes while on duty under Section 121(4).

 

The management may lock-out under Section 124(1) after obtaining Department approval. Seven days' notice must be given under Section 124(2). In emergencies like riot or unrest, lock-out may be immediate under Section 124(3), with information to authorities within three days. The Department may declare any lock-out illegal under Section 124(5) and no lock-out is permitted in essential services under Section 124(6).

 

Arbitral awards and collective agreements are binding under Section 122(1)-(2), must be registered with the Office under Section 122(3) and remain valid for two years under Section 122(4)-(5).

 

For strike or lock-out periods, under Section 127(1)-(3), labours get no remuneration if strike is unlawful, full remuneration if lock-out is unlawful and half remuneration if conducted in accordance with the Act. The Department determines legality of strikes or lock-outs within thirty-five days under Section 127(4).

 

No case may be filed for financial loss caused by lawful strikes or lock-outs under Section 128(1), though recovery is possible for destruction or physical damage under Section 128(2). The trade union and employer must bargain in good faith under Section 129(1).

 

The Labour Act establishes three primary bodies with distinct roles and jurisdictions, creating a clear hierarchy for labour matters: the Labour Office, the Department of Labour and the Labour Court.

 

7.1. The Labour Office

The Labour Office, established under Section 93, serves as the primary conciliation and mediation body for individual disputes at the workplace level. Its powers and functions are enumerated in Section 94, but its specific adjudicatory jurisdiction under Section 163(2) includes the authority to hear and decide on the following cases:

 

a. Payment of remuneration below the minimum wage or unlawful deduction of remuneration or employment benefits. 

b. Obstruction of a government employee in the performance of official duties, submission of false information or false statements, or exerting or attempting to exert undue influence on a labour authority. 

c. Illegal engagement of apprentices or trainees contrary to the Labour Act. 

d. Failure to deposit gratuity, provident fund contributions, Social Security Fund contributions, payment of medical expenses, or provision of mandatory insurance as required under the Labour Act. 

e. Retrenchment carried out contrary to the Labour Act or in a discriminatory manner. 

f. Termination of employment or prevention of a labour from attending work contrary to the Labour Act, Rules, or Bye-laws. 

g. Individual employment disputes, including non-payment of wages, denial of festival expenses, wrongful deduction of wages, unpaid overtime, disputes relating to leave entitlements, provident fund, and gratuity, through the personal dispute settlement process under Sections 113–115.

 

 

The Labour Office does not have the power to order reinstatement or handle termination cases directly; its authority is largely limited to facilitating settlements or issuing binding orders for the payment of specific amounts. Under Section 165(1), any person dissatisfied with an Office decision may appeal to the Labour Court within thirty-five days.

 

7.2. The Department of Labour

Based on Section 163(1) of the Labour Act, 2017 (Nepal), the Department of Labour and Occupational Safety has jurisdiction over the following nature of disputes:

 

a. Operation of a labour supplier without obtaining a licence under the Labour Act. 

b. Employment of foreign workers without obtaining the required labour permit. 

c. Discrimination against workers in recruitment or during employment in violation of Chapter 2 of the Labour Act. 

d. Failure to provide an appointment letter or failure to execute an employment contract. 

e. Acts or omissions of a Labour Inspector causing loss or damage through recklessness or ulterior motive (departmental action under Chapter 15). 

f. Unfair labour practices by an employer. 

g. Transfer of a worker contrary to the Labour Act resulting in detriment to the worker. 

h. Promotion-related actions carried out contrary to the enterprise's bye-laws. 

i. Failure of a Labour Office to perform duties or functions required under the Labour Act or Rules within the prescribed time. 

j. Disputes between a labour supplier and the principal (main) employer regarding remuneration and employment benefits payable to supplied workers. 

 

These are the specific subject matters that the Department is empowered to inquire into and decide under Section 163(1) of the Labour Act, 2017.

 

7.3. The Labour Court

The Labour Court, established under Section 151, is the highest judicial body for labour matters. It consists of one Chairperson and two Members under Section 151(3), who must be sitting High Court Judges or persons qualified to be High Court Judges under Section 151(4). The tenure is four years under Section 151(5) and the conditions of service are the same as High Court Judges under Section 151(6). The Labour Court has extensive powers under Section 153, including examining witnesses and evidence, taking defendant's statements, ordering parties to appear, inspecting workplaces, issuing interlocutory orders, upholding or altering Office or employer decisions and exercising powers similar to a District Court.

 

The Labour Court has original jurisdiction under Section 165(2) to hear cases directly without requiring prior processing by the Labour Office. This includes:

 

a. All cases concerning wrongful or unlawful termination of employment;

b. Appeals against major disciplinary actions, especially dismissal under Section 131(4);

c. Cases involving serious crimes like forced labour under Section 164(1), which carries imprisonment up to two years or a fine up to NPR 500,000 or both and where the offender takes a person outside Nepal for forced labour, the Court shall also order recovery of expenses incurred in bringing that person into Nepal;

d. Grave occupational safety and health violations under Section 164(2) that result in death or serious injury, where the offender knowingly or recklessly violates safety provisions and if death occurs or any bodily organ becomes disabled or physical or mental state is adversely affected, the offender shall be liable to punishment of imprisonment up to two years and appropriate compensation to the aggrieved person;

e. Cases where a body corporate commits an offence under this Act, the body shall be punished with fine and if imprisonment is also imposable, the chief executive shall be imprisoned accordingly under Section 164(3).

 

7.3.1. In its appellate capacity, the Labour Court hears:

 

a. Appeals against decisions made by the Labour Office or the Department under Section 165(1) within thirty-five days;

b. Appeals against termination decisions or punishment imposed for misconduct by the employer under Section 165(2) within thirty-five days;

c. Appeals against decisions made by the internal appeal hearing body of an enterprise or if no notice is received within sixty days of making such appeal under Section 165(4).

 

The Court also has the power to:

a. Institute contempt proceedings under Section 154(1) and where contempt is established, impose punishment of a fine not exceeding ten thousand rupees or imprisonment for a term not exceeding six months or both under Section 154(2);

b. Require a party to deposit an amount or furnish bank guarantee where there is likelihood of non-payment under Section 155;

c. Order payment of interest at fifteen percent if compensation or cash is not paid within two months of the judgment under Section 156;

d. Permit compromise, deferral or withdrawal of cases under Section 157.

 

The Court's decisions are made by majority of members under Section 152. If two members hold different opinions, the matter is submitted to the third member and if the Chairperson and member hold different opinions, the Chairperson's opinion prevails. Any decision made on appeal by the Labour Court shall be final under Section 161(2) and any party dissatisfied with an order or judgment of the Labour Court may appeal to the Supreme Court within thirty-five days under Section 161(1).

 

 

The Labour Act, 2074 establishes clear timelines for raising grievances and seeking judicial review. To ensure that complaints are raised promptly while allowing sufficient time for aggrieved parties to seek redress, the Act provides specific limitation periods for filing complaints and appeals.

 

8.1. Right to Make Complaint (Section 162)

Under Section 162, where any person, employer, labour or office-bearer acts in violation of this Act or the rules framed under this Act, the party who is aggrieved by such act or the concerned trade union with the written consent of the aggrieved party may make a complaint to the competent authority. This complaint must be made within six months from the date of commission of such act.

 

8.2. Appeal to Labour Court (Section 165)

Section 165(1) provides that any person who is not satisfied with any order or decision made by the Department or Office may make an appeal to the Labour Court within thirty-five days.

 

Section 165(2) provides that any labour who is not satisfied with any decision made by the employer to terminate employment or with punishment imposed with respect to misconduct may make an appeal to the Labour Court within thirty-five days of the date of receipt of a notice of that decision or punishment.

 

Section 165(3) clarifies that nothing bars an internal appeal if the bye-law of any enterprise provides for such.

 

Section 165(4) provides that the aggrieved party may make an appeal to the Labour Court within thirty-five days of the date of receipt of a notice of the decision made by the appeal hearing body or within sixty days from the date of appeal if such party does not receive a notice about the decision on appeal within that period.

 

8.3. Appeal to Supreme Court (Section 161)

Section 161(1) provides that any party who is dissatisfied with the order or judgment made by the Labour Court in a case originally tried and adjudicated by the Labour Court may make an appeal to the Supreme Court within thirty-five days of the date of knowledge of such an order or judgment.

 

Section 161(2) provides that any decision made on appeal by the Labour Court shall be final.

 

8.4. Writ Jurisdiction

The extraordinary writ jurisdiction under Articles 133 and 144 of the Constitution of Nepal serves as a critical constitutional remedy for labour disputes, particularly when statutory remedies under the Labour Act are unavailable. Article 133 empowers the Supreme Court to issue writs including mandamus, certiorari, and prohibition for enforcement of fundamental rights or legal rights where no alternative remedy exists, while Article 144 similarly confers this power upon the High Courts.

 

This writ jurisdiction becomes essential in labour matters because of a landmark 2025 Supreme Court ruling in the case of Swavalamban Laghubitta Bittiya Sanstha Limited vs. Purnachandra Raj Awasthi et al. (080-WF-0034). The dispute arose when Swavalamban Microfinance terminated several employees for unauthorized absence exceeding thirty days, and the Labour Court ordered their reinstatement, which the bank challenged before the Supreme Court. The central legal question was whether the Labour Act applies to banks and financial institutions governed by the special Banks and Financial Institutions Act (BAFIA), 2073. In a 4-1 majority decision by a Full Bench, the Supreme Court ruled that BAFIA is a "special law" that takes precedence over the general Labour Act, and employment matters in BFIs are exclusively governed by internal byelaws approved by Nepal Rastra Bank under Section 108(3) of the Labour Act.

 

As a consequence of this ruling, employees of banks and financial institutions cannot appeal termination or disciplinary decisions to the Labour Office or Labour Court, and their sole legal recourse is to file a writ petition directly in the Supreme Court or High Court under Articles 133 and 144 of the Constitution. This constitutional remedy, however, is widely recognized as more expensive, time-consuming, and procedurally complex than statutory appeals under the Labour Act. Thus, writ jurisdiction functions both as a parallel remedy for excluded workers and as a supervisory mechanism over labour tribunals, ensuring that labour rights can ultimately be enforced through constitutional review, though at a significantly higher cost and complexity for ordinary employees.

 

 

The enforcement of orders and judgments is as important as their issuance. The process for execution is outlined in Sections 166 to 168.

 

Under Section 166(1), once a judgment from the Labour Court becomes final or the limitation for appeal has expired, the concerned party must execute the decision or judgment. Agreements reached in individual or collective claims under Section 166(2) must also be executed in good faith. If a party fails to execute, the other party may apply to the Labour Office under Section 166(3), which then writes to the concerned employer or labour for execution under Section 166(4) and execution must occur within fifteen days of receipt of direction under Section 166(5).

 

If execution still does not occur, the Labour Office may take coercive measures under Section 167(2), including:

 

• Requesting authorities to withhold or auction immovable property

• Requesting to freeze bank accounts

• Requesting suspension or withholding of concessions or facilities

• Suspending the labour permit or license

• Making any other appropriate order

 

The concerned body must comply with the Office's request under Section 167(3).

 

If the decision is not executed within three months from application or within fifteen days of completing the coercive process, a complaint may be filed in the Labour Court under Section 167(4). The Labour Court may then under Section 168(2) impose punishment of a fine up to NPR 100,000 or imprisonment up to one year for non-execution. However, if execution occurs within the period prescribed by the Labour Court, the punishment may be annulled or partially or fully exempted under the proviso to Section 168(2).

 

 

It is crucial to understand a significant jurisdictional exclusion established by both the Act and judicial interpretation. Section 180 of the Act explicitly states that the Act does not apply to certain categories of employees:

 

• Under Section 180(1)(a), the Nepal Army, Nepal Police, Armed Police Force and National Investigation are excluded

• Under Section 180(1)(b), the civil service is governed by the prevailing law relating to civil service

 

Under Section 180(2), services established under special law and the special economic zone are governed by their respective laws. Under Section 180(3), if the prevailing law has no provisions for remuneration, conditions and benefits of service, the provisions of the Labour Act shall apply.

 

More importantly, The Swavalamban Laghubitta Bittiya Sanstha Limited vs. Purnachandra Raj Awasthi et al. (080-WF-0034) is a 2025 Supreme Court ruling which held that the Labour Act, 2074 does not apply to banks and financial institutions governed by BAFIA, 2073. In a 4-1 majority decision, the Court ruled that BAFIA is a "special law" that prevails over the general Labour Act and employment matters in BFIs are governed by internal byelaws approved by Nepal Rastra Bank.

 

 

The Labour Act, 2074 establishes a comprehensive framework for labour rights and dispute resolution in Nepal, providing substantive protections and clear procedural pathways through the Labour Office, Department of Labour, and Labour Court. While the dual-track system for individual and collective disputes offers accessible remedies for most workers, the recent Supreme Court ruling in the Swavalamban case has created a significant jurisdictional exclusion for bank and financial institution employees, barring them from the Labour Court system and relegating them to constitutional writ jurisdiction; a more expensive and time-consuming process. This development highlights the gap between the Act's progressive framework and practical access to justice, emphasizing the need for continued attention to ensure all workers receive meaningful legal protection.

 

 

Date of Publication: 27 July 2026 

Disclaimer: This article published on our website is just for information purpose only. It shall not be taken as the legal advice, advertisement, personal communication, solicitation or inducement. Bhandari Law and Partners or any of the team members of the firm shall not be liable for the consequence arising of the information provided. As the factual situation may be different on your case, thereof if you need further legal advice on the subject matter, please Contact Us.