To legalise exploitation

Published : Sep 12, 2003 00:00 IST

Employers seek a reversal of the labour laws to the extreme disadvantage of workers, in order to be competitive in the "globalised world".

INDUSTRIALISTS in India are clamouring for a drastic amendment to labour laws. They want to be unshackled from the bothers of having to seek permission from the government before closing down factories and establishments. Employers would rather have "flexible" laws that would enable them to be nimble-footed in a competitive world where they need to be eternally aware of costs. It would appear that company boardrooms aim to reduce strife in the workplace so that everyone - including the workers - could get on with the task of production, at the cheapest price, in order to compete in this "globalised" world.

To thousands of workers already on the streets because of the liberalisation process initiated in the 1990s, the notion of a debate on whether labour laws ought to be amended may appear to be a cruel joke. Thousands of workers - in the public and private sectors - have lost their jobs. The deregulation of industrial practices has led to greater casualisation and contractualisation, euphemisms for underpaid work with insecure tenures. Under the threat of impending job losses, thousands more have been virtually forced to opt for the Voluntary Retirement Scheme (VRS). Those who remain, hanging on to ill-paid and insecure jobs, find their workload increasing significantly. If the existing labour laws have failed to prevent all this and more from happening, why are workers and their unions fighting to preserve them at all? Conversely, why do employers want to change the laws when things have gone in their favour anyway?

The ire of employers is focussed on two pieces of legislation relating to labour. The first is the Industrial Disputes (ID) Act, 1947. The objective of the Act was to protect workers from the threat of unfair dismissal, that is, dismissal without a fair trial. In order to promote orderly industrial relations, the Act also provided for adjudication by labour tribunals if either party chose to raise an industrial dispute. A later amendment to the Act, effected in 1976, made employers more accountable to the society around them by mandating that employers required governmental clearance before closing down industrial units.

The other piece of legislation is the Contract Labour (Abolition and Regulation) Act, 1970. Interestingly, this Act arose out of the Supreme Court's perception in the 1960s that the onerous conditions of contract labour are akin to slave labour. It was felt that this form of labour should be abolished, or, at the very least, regulated. It is obvious that industrial houses will benefit greatly if these two pillars of labour legislation are dismantled. Companies can hire and fire at will, on contractual terms that are far more onerous for workers.

THE fact that the ID Act was enacted in 1947 is itself of great significance. The gigantic waves of strikes by labour in the closing years of colonial India played a major part in the way the social compact emerged in the early years of Independence. Former Chief Justice of the Delhi High Court Rajinder Sachar, founder-member of the Hind Mazdoor Sabha (HMS) when it was formed in 1948, points out that the precursor to the ID Act was the Bombay Industrial Relations Act of 1946, which was initiated by Gulzarilal Nanda after the wave of industrial strikes in Ahmedabad in 1946. Seen from a historical perspective, the birth of the ID Act was an explicit acknowledgement that labour, the weaker partner in the industrial workplace, needed protection. The ID Act was thus seen as a weapon, albeit small, in the hands of trade unions and workers to prevent capital from riding roughshod over labour. However, this weapon was not sharp when it was wrought. It was tested in the courts and on the streets before it acquired a sharper edge. That weapon has, in recent times, been blunted again by the way the courts have interpreted the law. The vicissitudes of the legislation mirror in some way the tilting of the social balance, which has resulted in a virtual abrogation of the social compact that enabled the birth of such laws. There is a kernel of truth in trade union activists' claim that the dismantling of these and other rights - such as the right to strike - marks an attempt to reverse what has been won after long and hard battles.

The history of the implementation of the ID Act also reveals the changes in the way the courts interpreted the law. For instance, in the initial years after the promulgation of the ID Act, the courts' approach to the very notion of an "industry" and the concept of a "worker" was constrained within narrow parameters. Speaking to Frontline, N.G.R. Prasad, a senior advocate with expertise in labour laws, pointed out that until the Supreme Court ruling in 1978, delivered by Justice V.R. Krishna Iyer, the courts interpreted the purview of the ID Act rather narrowly. Persons working in service establishments such as universities and the Gymkhana Club in Chennai, for instance, were not deemed to be eligible to obtain the protection of the provisions of the ID Act. Krishna Iyer ruled that the mere fact of employment of a worker brought him under the purview of the ID Act. Prasad said: "The judgment reflected the belief that the law was intended to improve the lot of the working people."

Prasad said that though workers had to wait for years for justice at the hands of the labour tribunals, there was hope, particularly until the 1970s, that the courts would protect their interests. Initially, the courts only recognised an "industrial dispute" when workers raised a collective dispute against their managements. In effect, this meant that an individual worker who suffered "wrongful dismissal" could not approach the tribunal using the provisions of the ID Act. Sachar pointed out that the courts initially held that even if a worker suffered wrongful dismissal by a private employer, he could not seek reinstatement because the courts interpreted labour legislation as being bounded by civil law. Sachar said: "Later, progressive Judges took a big step by saying that the worker has a right to be reinstated if he suffered wrongful dismissal, without being curbed within the ambit of civil law." Sachar said that Justice Krishna Iyer "almost laid down the rule" that in case of "wrongful dismissal", the worker's reinstatement was to be "automatic". Employers no longer had the option of merely paying compensation to the affected worker. However, Sachar added that the position that a worker cannot be dismissed unfairly and that he had a right to reinstatement had changed in the last few years "purely by the way the courts have interpreted the law". In recent years, the interpretation appears to have swung back in favour of employers. Sachar referred to recent rulings by the Supreme Court which said that even if a worker was wrongfully dismissed, he could not ask for reinstatement.

Initially, companies argued that a dispute arising out of the dismissal of an individual worker did not amount to an "industrial dispute". Later, the introduction of Section 2 A in 1965 enabled aggrieved individual workers to approach the labour tribunal. Prior to the inclusion of this section, an individual worker or a "minority" group of workers could not approach the tribunal if the trade union did not sponsor their case. Although Sachar believes that this offered protection to workers belonging to smaller groups who could be easily victimised by managements, it has also "weakened" trade unionism. "The concept of a trade union as a collective body representing all sections of workers thus suffered a setback. But, on balance, the amendment was good," he said.

The provisions of the ID Act required that the government "refer" the dispute to the relevant labour tribunal. In effect, this prevented an affected worker or his union from approaching the tribunal directly for redress. Several State governments simply withheld reference to the tribunal, thus blocking the workers' access to courts. The Tamil Nadu government, for instance, had for several years prevented employees of the State Electricity Board from approaching the courts by simply refusing to refer their disputes to the labour tribunal. For instance, when the staff of the Board raised a dispute over payment of bonus, the State government refused to refer the matter to the tribunal. The government claimed that it could not afford to pay bonus. Prasad pointed out a "path-breaking" judgment of the Supreme Court in 1978 that ruled that the government "could not assume the power to adjudicate a dispute between the workers and their managements". This was reconfirmed by another judgment of the Supreme Court in 1985. Prasad said that while the ID Act had "enabled the worker to access the government" for redress of his grievance, the changed interpretation of the law enabled the worker to approach the courts for fair redress of his grievances.

The 1970s was possibly the most tumultuous in terms of industrial unrest since Independence. The rising tide of industrial closures, lockouts and lay-offs resulted in growing unrest among workers. The "law and order problem" that resulted from industrial action forced the government to act, even if only symbolically. The government, by virtue of having provided vital infrastructure for many industrial facilities, had a direct stake as employers closed shop at will. The provisions of the ID Act with respect to closures were rather lenient. Employers could retrench workers by merely paying one month's notice pay and 15 days' compensation. In case of closure or lay-off, they needed to pay only compensation; and, even this payment could be deferred. Prasad observed: "For employers the issue of closures was merely a matter of paying a trifle as compensation to workers." In 1976, even as the Emergency was in force, Chapter V B was introduced in the ID Act. Chapter V B required that employers got permission from the government for the closure of industrial units employing more than 100 workers. Although this was later struck down by the Supreme Court, the government amended the ID Act to strengthen the safeguards against whimsical closures by managements. It is significant that this provision, which the government was unwilling to repeal when it was challenged in the courts, is a prime target of the industrial lobby led by foreign companies. Employers are demanding that the limit set by Chapter V B be raised.

THE freedom to close industrial units at will is one of the two major planks of the industrial lobby. The other is the withdrawal of provisions relating to the control and elimination of the use of contract labour. It is significant that the Contract Labour Act itself arose out of the collective learning process that Indian courts went through since the 1950s. In 1960, ten years before the Act came into being, the Supreme Court issued a landmark judgment in a case involving the employment of contract labour in the Standard Vacuum Oil company. The Supreme Court ruled that the company could not employ contract workers. It went further by ruling that the contract workers would be justified in raising an industrial dispute demanding the abolition of contract labour, using the provisions of the ID Act. In effect, the court's interpretation of the ID Act led to the enactment of the law to abolish contract labour. In 1970, Parliament passed the law, recognising that direct employment, instead of using the device of labour contractors, would lead to better terms of employment for workers. In particular, the law recognised that workers would be employed on a regular basis and paid fair wages. The law also recognised that workers engaged in work of a "perennial nature" could not be employed on contract.

While the law gave the government the power to control and regulate the use of contract workers in certain areas of economic activity, it also gave the government the power to prohibit the use of such labour in other areas. In 1976, the government issued a notification marking out the activities to be placed under these two broad heads. Section 10 of the Act lists the areas where contract labour is prohibited. The law requires that in the remaining areas, employers of contract labour should register themselves. Licences were also issued so that the government could ensure that those using contract labour followed safety and other work norms.

In 1997, a Supreme Court Bench headed by Justice K. Ramaswamy delivered a landmark judgment. It ruled that contract workers, who were working at the time the scheme to abolish contract labour was being implemented, had the right to be absorbed in the workforce on a permanent basis. Prasad pointed out that this logic rested on the premise that there was no point in abolishing contract labour if it would only lead to the loss of livelihood to thousands of workers who had worked on that basis for years. The court, Prasad said, "ensured that the remedy would not end up being worse than the disease". However, in 2001, in a case relating to Steel Authority of India Ltd. (SAIL), a Constitution Bench of the Supreme Court ruled that contract workers were not entitled to "automatic absorption". Prasad said that the judgment struck down the 1976 notification and termed it as "being bad in law". The judgment also ruled out any provision of direct absorption of contract workers who were employed at the time of abolition of contract labour. Prasad views this as a "retrograde step because workers on contract would be better off before abolition rather than after, because they would only lose the jobs they had at the time of abolition". Prasad said: "The judgment favours the propertied classes and is a big blow to the working class. It has encouraged many employers to employ contract labour. This judgment has given rise to a peculiar situation. Unions and workers would rather not fight for the abolition of contract labour because it only results in job losses."

Earlier this year the government constituted a Group of Ministers (GoM) to finalise amendments to the ID Act and the Contract Labour Act. Although the government had initially said that it intended placing these for passage by Parliament, it appears that it fears stiff opposition to the move. Earlier, the GoM, taking its cue from the Second National Commission on Labour, demarcated activities that it deemed were "non-core" in nature. These activities, in which contract labour is regarded as acceptable, include maintenance, service and repair of machines and plants, construction and maintenance of bridges, roads and other infrastructure, hospitals, educational institutions, sweeping, garbage cleaning, gardening and so on. Tapan Sen, secretary, Centre of Indian Trade Unions (CITU), observed that even by a conservative estimate, this would result in at least 80 per cent of the workforce in most industrial organisations being employed on short-term contracts.

The experience with labour legislation has been mixed. This can, at least in part, be attributed to the way changing social ethos influenced the interpretation of the legislation by the courts. While labour laws have not prevented the tide of liberal policies from flooding the workplace, they remain the only hope for India's working class. With all their imperfections, they remain the only hope that the courts will interpret the law in the spirit the nation had expected at the dawn of Independence. On the other side of the divide, employers are also aware that existing labour statutes have acted as a double-edged sword. They are aware that the weight of popular pressure can swing the pendulum of the law against their long-term interests. Their vociferous demand for the annulment of these laws reflects, in part, their concern about the uncertain terrain they are on in the face of growing unrest among the working class. Meanwhile, workers and their unions are engaged in a bitter struggle to save a set of laws, which they may have reason to believe, betrayed them. It is in this context that the adage that the rule of law is the only hope for the poor, the weak and the oppressed, is relevant to labour's fight to reclaim lost ground.

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