The COVID-19 crisis has been used as a pretext to flare up the unfinished ‘reforms agenda’. The increasing hours of work, restricting wages to the bare minimum, reducing social security benefits, permitting the engagement of contract labour for any kind of work, easing norms for firing workers, clamping down on trade union rights and whittling down labour inspection, are the major focus. For close to six years now, the Central government has been attempting to increase the hours of work of factory workers. The labour departments of Gujarat, Madhya Pradesh and Himachal Pradesh issued notifications extending the hours of work of factory workers to a maximum of 12 hours a day and 72 hours a week. The notifications have been issued invoking section 5 of the Factories Act and are valid for a period of three months. Around the same time, the labour department of Punjab too issued a similar order under section 65 of the Factories Act as per which factories may be exempted from the stipulation regarding the daily and weekly hours of work under the Act to cope with an exceptional pressure of work. The governments of Odisha, Maharashtra and Goa had also similarly increased the daily hours of work. These measures euphemistically referred to as the ‘labour law reforms’ include amendments to the existing laws, the enactment of new laws, codification of the laws and the issue of advisories, model bills and business reform actions plans.
Labour law comes under the government of India, Ministry of Labour and Employment. Under the constitution of India, labour is a subject in the concurrent list, which means both the central and states governments have joint jurisdiction. However certain matters are reserved for central government.
What are Indian labour laws?
There are over 200 state laws and close to 50 central laws. And yet there is no set definition of ‘labour laws’ in the country. Predominantly, they can be divided into four categories: given in the following chart 1.
Indian labour laws are often characterised as “inflexible”. It has been also referred that there are too many laws, often unnecessarily complicated, and not effectively implemented. Essentially, if India had fewer and easier-to-follow labour laws, firms would be able to expand and contract depending on the market conditions, and the resulting formalisation — at present 90% of India’s workers are part of the informal economy — would help workers as they would get better salaries and social security benefits since 2014, the Central government has been taking a slew of measures aimed at making far-reaching changes to India’s labour laws premised on the grounds that they are antiquated, complicated and an impediment to economic growth.
Labour law changes by states
Several states have amended their labour laws before restarting economic activities after the Covid lockdown.
- States such as Uttar Pradesh, Maharashtra, Rajasthan, Gujarat, Goa, MP, Uttarakhand, Assam, Punjab, Haryana and Himachal Pradesh have increased the working hours from 8 to 12 hours.
- Uttar Pradesh, however, later withdrew the order of 12-hour shift for workers following a notice from the Allahabad High Court. Rajasthan also followed suit.
- While Uttar Pradesh and Madhya Pradesh scrapped key labour laws for the next three years, Gujarat did the same for 1,200 days.
- In MP, factory license will now be required to be renewed only once in 10 years instead of annually. Also, MSMEs (micro, small and medium enterprises) will be able to hire labourers according to their requirement to increase productivity.
- In UP, only three labour laws will be applicable in the state for the next three years apart from provisions related to children and women in the suspended laws. The three include the Building and Other Construction Workers Act, 1996, Workmen Compensation Act, 1923, and the Bonded Labour Act, 1976.
The states had passed ordinances to give effect to various changes, some of which effectively suspend labour laws. Madhya Pradesh sent its ordinance for the president’s approval on May 18. The UP government sent its ordinance soon after the state’s governor Anandiben Patel approved it on May 14. Gujarat too sent its own soon after the state’s governor Acharya Devvrat approved it. Some state governments last week decided to make significant changes in the application of labour laws. The most significant changes were announced by— UP, MP and Gujarat — but several other states, like-Rajasthan, Punjab as well Odisha, too made some changes, although smaller in scope.
Rajasthan labour law reforms
Making use of their concurrent powers, several state governments have taken a path and introduced changes to the labour laws. The government of Rajasthan had been a forerunner in this regard and had increased the thresholds for the application of the Factories Act, 1948 and the Contract Labour (Regulation and Abolition) Act, 1970 in 2014, pushing a large number of workers out of the coverage of those laws.
MP labour law reforms
Amendment in the Industrial Disputes Act 1947
- The minimum number of workmen in the industrial establishment is increased from 100 to 300 workmen.
- In case of lay-off, a workman will be given three months’ notice in writing specifying the reasons for retrenchment and the notice period has expired. Otherwise, the workman has been paid wages for the period of the notice.
- In case of lay-off, a workman must receive compensation corresponding to 15 days’ average pay for every completed year of continuous service or any part thereof in excess of six months; or an amount equivalent to his three months’ average pay, whichever is higher.
Amendments in the Factories Act 1948
- A male adult worker has been allowed to work in a factory for more than 48 hours in a week subject to the following:
- The total number of hours of work in any day will not exceed twelve;
- The spread over, inclusive of intervals for rest, will not exceed thirteen hours in any one day;
- The total number of hours of work in any week, including overtime, shall not exceed sixty;
- No worker will be allowed to work overtime, for more than seven days at a stretch and the total number of hours of overtime work in any quarter shall not exceed one hundred and twenty five;
- Such overtime work shall not be made compulsory or obligatory for any worker.
- The state government may, by order, specify conditions for ensuring safety for women who are required or allowed to work in any factory or manufacturing.
Amendment in the Contract Labour (Regulation & Abolition) Act, 1970
- Provision of deemed registration if the registering officer fails to pass an order either granting or refusing or objecting to grant or amend the registration within a period of 30 days after submission of an application complete in all respects.
- Provision of duly licensed if the registering officer fails to pass an order either granting or refusing or objecting to grant or renew or amend the registration within a period of 30 days after submission of an application complete in all respects.
Amendment in the Building and Other Construction Workers Welfare Cess Act, 1996
- The state government, by notification, may exclude cost on purchase and transportation of plant and machinery to be used in a factory and such other costs from the cost of construction incurred by an employer.
- An employer aggrieved by an order of assessment made under Section 5 or by an order imposing penalty under Section 9, may appeal to the appellate authority against the said order in such manner as prescribed.
- Amendment in the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996
- The registration deemed to be duly granted, if no adverse order is passed within the prescribed time from the date of submission of application.
UP labour law reforms
- Yogi government on March 20 ordered employers to pay full wages during lockdown. This triggered protests by shops, commercial establishments and factory owners.
- UP Labour Commissioner on April 21 wrote to field officers to consult him before lodging a first information report (FIR) against owners of any factory.
- UP government on May 6 decided to bring an ordinance to altogether exempt factories and establishments from most labour laws barring four for a period of three years.
- Among key rights worker would lose include right to form unions, right to raise an industrial dispute, right to have grievance redressal machinery, among others
The government of Uttar Pradesh is in the process of promulgating the Temporary Exemption from Certain Labour Laws Ordinance, 2020 that suspends the operation of all labour laws applicable to factories and manufacturing establishments in the state for a period of three years, with the exception of the Bonded Labour System (Abolition) Act, 1976; Employees’ Compensation Act, 1923, the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 and provisions in the labour laws relating to women and children. The draft ordinance, however, requires employers to pay the minimum wages notified by the state government and also requires compliance with the provisions of the Factories Act relating to safety. It extends the hours of work to 11 hours a day and the spread over of the workday to 12 hours. Uttar Pradesh suspended key labour laws for three years on May 6 through an ordinance.
Following the Uttar Pradesh model, the government of Gujarat is in the process of promulgating an ordinance exempting new units that are set up within a year of its coming into force from the application of all labour laws with the exception of the Minimum Wages Act, the Employees’ Compensation Act and the safety-related provisions of the Factories Act for a period of three years. If the ordinance is promulgated, workers in new units in the manufacturing, as well as service sectors, would be deprived of their rights to fair wages, decent working conditions and social security and their freedom of association and collective bargaining rights as well.
Joining the list of states that are in the process of amending labour laws, the government of Karnataka has proposed to increase the threshold numbers for the application of the Factories Act, the Contract Labour (Regulation and Abolition) Act and Chapter V-B of the Industrial Disputes Act that requires prior government approval for effecting lay off, retrenchment and closure. Increasing the number thresholds under those laws would have the effect of restricting the coverage of those laws which in turn amounts to reducing the protection available to workers under the laws.
These changes signaled the start of an experiment to remove rigidities in the country’s labour markets and stringent rules for hiring and firing, as global companies start shifting their supply chains away from China and reduce their dependencies on factories there. Five other states, including Haryana, Himachal Pradesh, Rajasthan, Assam and Odisha, have increased working hours to 12 hours a day for three months. Rajasthan too extended work hours but rescinded it, reverting to eight hours a day. The labour ministry is examining whether the changes impact conventions of the ILO. The labour ministry has flagged concern over the slew of changes in the labour laws of various states, saying such changes are not “in sync with the labour law codes proposed by the Centre”. In a communication sent to labour ministers of some states last week, the ministry has said states cannot abolish labour laws in the name of reforms because India is a signatory to the International Labour Organisation (ILO) and a few of the changes are against ILO conventions. The ILO has said it was deeply anguished by the moves to free labour laws in the states and issued an appeal to Prime Minister Narendra Modi on May 25.
Trade unions have stridently opposed the ‘labour law reforms’ on the grounds that they undermine the hard-won rights of workers and will lead to greater exploitation of workers. Trade unions have repeatedly charged that the government has been acting unilaterally, without holding tripartite consultations. On account of the stiff resistance of the trade unions, the Central government has been unable to effect the changes at the pace that it would have liked. Although it may appear that such measures will be in place only for a limited period of time, they may be a harbinger of things to come and may well become a permanent feature once the waters are tested. While the government may justify such measures that turn the clock back by over a hundred years claiming that they are necessary to kickstart the economy, attract investment and create employment, the fact is that such measures infringe on the fundamental rights and human rights of workers and cannot be countenanced on any count. Indeed, there is little evidence that such changes to the labour laws result in attracting big investments and boost industrialization or job creation.
Labour rights are human rights and the Indian state cannot abdicate its constitutional obligations and the commitments that it has made by reason of ratifying the International Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights and various Conventions of the ILO as a result of which it is bound to promote decent work in conditions of freedom, equity, security and dignity.