LABOUR LAW REFORMS & RELATED ISSUES IN INDIA

LABOUR LAW REFORMS & RELATED ISSUES IN INDIA

 Introduction to Labour Laws

Indian labour law refer to laws regulating labour in India. Both central and state governments have enacted laws on labour relations and employment issues. 

• History of Labour laws

Labour law arose due to the demands of workers for better conditions, the right to organize, and the simultaneous demands of employers to restrict the powers of workers in many organizations and to keep labour costs low.

The first annual conference (referred to as the International Labour Conference, or ILC) began on 29th October 1919 in Washington DC and adopted the first six International Labour Conventions, which dealt with hours of work in industry, unemployment, maternity protection, night work for women, minimum age and night work for young persons in industry. 

1.2   Purpose of labour legislation

Labour legislation that is adapted to the economic and social challenges of the modern world of work fulfils three crucial roles:

1. It establishes a legal system that facilitates productive individual and collective employment relationships, and therefore a productive economy;
2. It serves as an important vehicle for achieving harmonious industrial relations based on workplace democracy;
3. It provides a clear and constant reminder and guarantee of fundamental principles and rights at work which have received broad social acceptance and establishes the processes through which these principles and rights can be implemented and enforced. 

1.3   Important labour laws in India:

1. a) Apprentices Act, 1961
2. b) Employees State Insurance Act, 1948
3. c) Employees Provident Fund And Misc. Provisions Act, 1952
4. d) Factories Act, 1948
5. e) Industrial Disputes Act, 1947
6. f) Payment of Bonus Act, 1965
7. g) Payment of Gratuity Act, 1972
8. h) Workmen’s Compensation Act, 1923. 

1. Problems / Issues with the current Scenario

2.1   Current Situation

Indian Labour Organisation in the Indian Labour Market Update published in August, 2015 has reported about the current statistics on labour. In 2011-12, 2.2% of the Indian population was unemployed. It shows the huge number of population that is directly or indirectly under the ambit of Indian labour laws. Addition to this, 82.2% of the working population is in the unorganized sector. The main focus of the Indian labour laws since its inception, manufacturing and construction sector employs 24.3%. Many service sectors are excluded from labour laws at the moment. 

2.2   Problem with current scenario

The problems around the Indian labour laws are mainly because of its age. The pre-independence era laws are now being amended but the process is very slow. The need is so because of the technological advances and changed working conditions. There are 44 central laws and more than 150 state laws on the subject. There are multiple laws on the similar topic like 19 laws governing conditions of work and industrial relations and 14 laws on social security and labour welfare.

The main controversy is around the three acts: Industrial Disputes Act (1947), Contract Labour(1970) and Trade Union Act(1926). Chapter V-b and section 9-A of The Industrial Disputes Act says that if a company involves more than 100 people it must take approval from the government for layoff of even single employee and if you quickly need to redeploy the employees to meet certain time bound targets, you can’t do that. Also if the board is going to change the wage and allowances, a 21 days before notice is must. In the amended Trade Union Act, it is mentioned that while forming an union it is necessary to have 25% of members not of the same organization which is absurd. And in the Contract Labour Act the Supreme Court in its ruling has said that even for the work of ‘regular nature’ the employer should term the worker as permanent employee. 

2.3   CII recommendation on flexible labour policy

CII published a report on Ease of Doing Business in India after the country’s dismal ranking in it. It suggested some points for the flexible labour laws. First and foremost thing the confederation has asked is for the amendment of the three acts.  It has asked for the rules that would allow the firms to decide on the hiring and termination eliminating the third party interference. The other demands are setting up of labour arbitration court for fast redressal, code of conduct for setting up of unions and setting up of a mechanism such that less inspections are allowed. 

1. Labour Unrest & Strikes

3.1   Maruti Plant, Manesar, July 2012

On April 2012, the Manesar plant workers’ union demanded a five-fold increase in  salary, a monthly conveyance allowance of  10,000, laundry allowance of  3,000, a corporate gift with every new car launch, and  a  house  for  every  worker  who  wants  one  or  cheaper home loans  for  those who want  to  build  their own house.  In addition to this compensation and normal weekend/holidays, the union demanded the current four paid weeks of vacation be increased to 7 weeks, plus each worker to have 40 days of sick leave and casual leave amounting to 75 days. There were some reports claiming that the wage dispute, as per a union spokesperson, may be caste-related. According to the Maruti Suzuki Workers Union, a supervisor had abused and made deriding comments on a low-caste worker. The shutdown was costing the company 1 billion rupees ($18 million) a day. 

3.2   Honda Motors & Scooters India (HMSI), Gurgoan, June 2005

Trouble began for the management when workers asked for higher wages to be in par with those of the shop floor workers in Hero Honda. The protests followed for about 6 months of simmering labour unrest, where workers also resorted to job slowdown. In July 2005 a violent tussle broke out between the workers and the police and claimed several lives including those who were protesting peacefully.  Over 150 people were seriously injured in clash between the police and agitating workers. The unrest caused an estimated loss of Rs 130 Cr to the company.

 3.3   Mahindra & Mahindra (M&M), April 2013

Workers at Mahindra & Mahindra's Nashik factory went on a tool-down strike in reaction to the suspension of their union’s general secretary, thus paralysing production at the facility.The strike led to an estimated loss or Rs 80Cr to the company.

 3.4   General Motors, Halol, Gujarat, March 2011

Work intensification, wage payments, working hours, unhealthy work environment & pocket union were the major reason for the strike. There were 1,600 workers at the Halol factory, Gujarat, 800 of whom are full-time regular workers, while another 800 have been designated as "temporary workers"-despite the fact that they do the exact same work for the same hours-but are paid just half of what the regular workers earn .The strike was called on March 16 and was called off on May 4. 

1. Reforms by Central Government

Since the inception of labour laws, various reforms have been proposed and implemented by the Government. Most of the reforms were targeted to improve the condition of labourers. However in the recent years, the trend seems to be changing, it can be observed that the reforms are now targeted to liberalise the labour laws and promote ease of doing business in the country.

The reforms were discussed at length in various Indian Labour Conferences (ILC) and also many states have amended / liberalised the labour laws.

 4.1   46th Session of Indian Labour Conference (Held on 20-21 July 2015)

The 46th National Labour conference was held at New Delhi and was presided over by sh. Bandaru Dattatreya and inaugurated by the Hon’ble Prime Minister of India, Shri Narendra Modi. The agenda of the conference were

1. Implementation of the conclusions / recommendations of the 43rd, 44th and 45th ILC, particularly on Contract Labour, Minimum Wages and scheme Workers and Tripartile Mechanism.
2. Social Security for the workers in organized sector, unorganized sector and international migrant workers- All unorganised sector workers are to be covered under ‘Shram Shakti Pehchaan’ for registration of unorganised workers and issuance of portable smart cards by the district administration.
3. Amendment of Bonus Act – The Payment of Bonus Act, 1965 provides for payment of bonus to the employees of ‘factories’ and ‘establishments’ employing 20 or more persons. In the new amendment, employees drawing salary or wage not exceeding Rs. 15,000/- per month in any industry are eligible for payment of Bonus as opposed to Rs 10,000/- before amendment. An amendment was also made to remove the conditions on payment ceiling, eligibility limits, decisions to pay minimum bonus without linking to loss when the performance indicator satisfy grant of bonus.
4. Employment and Employment Generation- Government made way for various projects including “Make in India”, Development of one hundred “Smart Cities”, “Shyama Prasad Mukherji Rurban Mission” to deliver integrated project based infrastructure in the rural areas, “Digital India” programme for ensuing Broadband connectivity at village level, setting up “National Industrial Corridor Authority”, “Apprentice Protsahan Yojana” to cover one lakh trade apprentices for training through MSME units, “Shram Suvidha Portal” covering Office of Chief Labour Commissioner (Central), DGMS, EPFO and ESIC organisations.

 4.2   Amendments in Apprentices Act 1961 through Apprentice (Amendment) Bill 2014

Apprentice: “A person who is learning a trade from a skilled employer, having agreed to work for a fixed period at low wages” The Apprentices (Amendment) Bill, 2014 was introduced in Lok Sabha on August 7, 2014.  It proposes to amend the Apprentices Act, 1961.  The following amendments were passes:

• Minimum age for an apprentice: The Act sets the minimum age for being engaged as an apprentice at 14 years, however for hazardous industries, the minimum age is kept at 18 years.
• Number of apprentices: The no of apprentices have been raised to 300 from 100.
• Practical training to apprentices: The advisor’s approval for setup of workshop for imparting practical training to apprentices has been done away with.
• Hours of work, overtime, leave and holidays:The Bill states that the hours of work and leave will be as per the discretion or policy of the employer.
• Offences and penalties:The Bill specifies the amount/maximum amount of the fine and removes the provision for imprisonment for such offences.
• Power to make Rules:The Bill states that these powers shall include the power to make Rules retrospectively with effect from a date on or after the President grants his assent to the Bill.

 4.3   ESIC 2.0 (Employee’s State Insurance Corporation), 2015

Shri Narendra Modi, Hon’ble Prime Minister launched a series of Health Reform initiatives of ESIC at Vigyan Bhawan, New Delhi on 20.07.2015. These Reforms are part of a series of “2nd Generation Reforms Agenda” named as ‘ESIC-2.0’ which is going to be implemented within stipulated time:

• Online availability of Electronic Health Record of ESI Beneficiaries (Insured Persons and their family members).
• Abhiyan Indradhanush : Ensuring the change of bedsheet according to VIBGYOR pattern during the week i.e. to be changed every day.
• Medical Helpline No. 1800113839 for emergency and seeking guidance from casualty/emergency of ESIC Hospitals.
• Special OPD for Sr. Citizens and differently-abled persons in ESIC hospitals. 

1. Reforms by State Government

5.1   Rajasthan Government (2014)

In order to improve the business environment in India through reshaping the labour market, Rajasthan Government came up with amendment in the following acts:

Industrial Disputes Act

• Prior permission is now only needed when retrenching 300 employees or more, up from 100.
• Three-year time limit set for raising disputes. Currently there is no such time-frame.
• Recognised trade unions need support of 30% of the workforce, up from 15%.
• Three months’ notice and three months’ compensation wages for workers previously, this was one month's notice and 15 days compensation wages.

Factories Act

• Now only applicable to firms with 40 or more employees doing electrified work, up from 20 earlier.
• Now only applicable to firms with 20 or more employees in non-electrified work, up from 10 earlier.

Contract Labour Act

• Only applicable to firms with 50 or more employees, up from 20.

Following the amendment of Apprentice Act by central government, Rajasthan Government also came up with the amendments in the same act.

The move is expected to generate 1.5 million additional jobs in the state.

 5.2  Gujarat Government The Labour Laws (Gujarat Amendment) Bill, 2015

The Labour Laws (Gujarat Amendment) Bills, passed by Gujarat assembly suggests the following reforms:

• Introduction of dispute resolution technique “Compromise”, to help parties resolve their dispute themselves and reduce the burden on courts.
• In case of retrenchment, workers can raise their complaint within 1 year as opposed to 3 years earlier.
• Ease in “Hire and Fire” provisions for certain industries in special investment region and Export oriented industrial units.
• In case of retrenchment in the above said industries, wages equivalent to 60 days to be provide in place of 45 days earlier.
• A nominated govt official could apply for compensation for a worker in case of fatal injury or partial disability at workplace after 90 days of the date of accident.

 5.3  Madhya Pradesh, 2015

MP Assembly passed a single bill to amend 8 labour laws on July, 2015. The major reforms were:

• Industries those employ upto 300 workers can shut down without government approval as opposed to 100 workers earlier.
• The retrenched workers would get a 3 month notice & 3 month salary as opposed to 15 days salary earlier.
• In case of any dispute, the worker can approach conciliation officer within 3 years.
• Overtime hours increased to 125 hours from 75 hours earlier.
• Women are now allowed to work in night shift, Government shall take appropriate measures to ensure their security.

 5.4  Bangalore Water Supply and Sewerage Board  Case

The issue was that whether Bangalore Water Supply and Sewerage Board will fall under the definition of industry or not. In this case, a seven-judge bench presided over by Justice V. R. Krishna Iyer was formed to give a wider definition of the term “industry”. Their ruling was a result of the various disputes arising in establishments that are not manufacturing industries but belong to categories of hospitals, educational and research institutions, Governmental departments, public utility services, professionals and clubs.

(i) A Triple Test was introduced to determine the scope of “industry” is that where there is systematic activity, organized by co-operation between employer and employee (the direct and substantial element is chimerical), for the production and/or distribution of goods and services calculated to satisfy human wants and wishes, prima facie, there is an “industry”

(ii) Absence of profit motive or gainful objective is irrelevant, be the venture in public, joint, private or other sectors.

(iii) The true focus is functional and the decision test is the nature of the activity with special emphasis on the employer and employee relations.2

The consequences of the decision given in this case is that professions, clubs, educational institutions, cooperatives, research institutes, charitable projects and other kindred adventures if they fulfil the above Triple test, cannot be exempted from the scope of section 2(j) of the Industrial Disputes Act, 1947. 

1. Reforms in progress

The draft Labour Code on Industrial Relations 2015 is the government’s attempt to change the present scenario with the suggestions of all the concerned parties. The attempt is to reduce the number of laws which is 44 into four labour codes so as to make them suitable for present conditions and less repetitive. It proposes to amalgamate the three laws dealing with labours and industries. According to it companies with number of employees less than 300 will be allowed to lay them off without informing the interested government department. In addition to this the mandatory notice time before shutting down of unit will be increased to three months. The draft is also with the view of reducing the number of strikes and lock-outs, as industries have always demanded. It is worth the notice that the current government is planning more with its pro-industrial view while balancing it with worker’s view. The government in July this year accepted the demand of Indian Labour Conference and increased the minimum wage to ₹160 from ₹137. Parliament has given its assent in the monsoon session to amend two key labour laws—Apprentices Act, 1961, and the Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. An amendment to the Factories Act, 1948, has also been tabled in Parliament. 

1. Impact of Various Reforms

7.1   Impact on labour

According to the new Factories Act a worker may work overtime for 100 hours in 3 months, which used to be 50 hours. The increase in overtime would result in the workers being compelled to work for two or three shift in a day. The effect of this would be higher unemployment. The amendments would also allow women to work in night shifts; they can currently only do so only from 6 a.m. to 7 p.m. This will bring gender equality in the labour sector.

7.2   Impact on Industry

In the long term, these labour reforms lead to higher investments. More investments mean more production and more jobs hence growth of the industry and more players in the market.

 7.3   Impact on India

There is a positive change in manufacturing sector because of “Make in India” campaign. Tata JLR will move its production facility of Land Rover to Pune, Airbus will manufacture its products in India, Spice Group will manufacture its phones in India etc are a few examples out of many portraying the fact that the impact of reforms on India is huge. 

1. Suggested Reforms

Labor Law should be moved to State List to promote investment and give more freedom to state governments to address the issues according to their requirements. Rajasthan and Madhya Pradesh have started taking some steps in this direction, and if more states follow their lead the reforms can be brought to the micro level in a more systematic manner.

Grouping of various laws should be done on the basis of their function. As of now, the acts are scattered under various headings which can be consolidated under a single heading. For example, EPF and Miscellaneous Provisions Act (1952), ESI Act (1948) and Payment of Gratuity Act (1972) can be consolidated under social security of labour. Also, this would help in decreasing the number of registers that the employer needs to maintain.

Reasonable amount of notice period should be given to the companies before the employees go on a strike/lock-out. Apart from public utility services, there is no other sector where a notice is given to the concerned company before going on a strike.

ESIC’s proposed limit of Rs. 25,000/- should be decreased back to Rs. 15,000/- to lower the burden on employer since this might have an impact on the employment generation of the employer. Also, the facilities that the dispensaries under ESI provide lack important medicines, doctors, paramedical staff etc.