Unsettling reform

The Centre’s decision to introduce fixed-term employment in all sectors sparks a controversy as trade unions fear this will affect the nature of future employment contracts and legitimise hire and fire.

In a shoe-making unit in Ambur, Tamil Nadu. Fixed-term employment was introduced in this sector in 2017.

ON March 16, the Ministry of Labour and Employment issued a notification amending the Industrial Employment (Standing Orders) Act and Rules, 1946, and introducing the concept of “fixed-term employment” in all sectors. In 2016, the National Democratic Alliance (NDA) government introduced fixed-term employment in the textile sector. In December 2017, the Union Cabinet approved the application of fixed-term employment in the leather and footwear sectors.

The newly amended rules are called the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018. The power to amend the rules is in Section 15 of the parent Act. The 1946 Act requires employers to define the conditions of employment in their industrial establishments. Item one of the Schedule to the Act classifies a worker as permanent, temporary, apprentice, casual, probationer and badli (replacement or substitute workers). The Central government can add any other matter in the Schedule and under the rules given in Section 15. Fixed-term employment, as defined by the government, was employment of a worker or a workman on a contract basis for a fixed period. Under this concept, the services of the worker will be automatically terminated as a result of non-renewal of the contract. A government release explained that “separation of service of a workman as a result of non-renewal of the contract of employment between the employer and workman concerned shall not be construed as termination of employment”.

The Ministry issued the final notification notwithstanding protests by all unions as the notification for fixed-term employment for all sectors was made public on January 8, and, as per government reasoning, it has considered all objections and suggestions. Clearly, the notification had not been arrived at through consensus. Under fixed-term employment, the worker would be engaged on the basis of a written contract of employment for a fixed period and the benefits and emoluments would be on a par with those of a permanent employee only for the period of service specified in the contract with no notice of termination necessary in the case of temporary and badli workers and for fixed-term contract workers. The amendment specifies that no worker shall be entitled to any notice or pay if the services are terminated owing to non-renewal of contract or employment. The notification stipulates that the services of a temporary worker, who has completed three months of continuous service, can be terminated with two weeks’ notice if such termination was not in accordance with the terms of the contract. Even if the contract has a stipulated term of employment, the temporary worker’s employment can be terminated before the stipulated term with the employer providing a written explanation. The same rules are to apply to a badli worker. The only positive part of the notification is that it prohibits an employer of an industrial establishment from converting a permanent worker into a fixed-term employee.

Finance Minister Arun Jaitley announced the concept of fixed-term employment in the Union Budget without as much as a preliminary discussion or consultation with the trade unions. The Centre of Indian Trade Unions (CITU) and other trade unions criticised the move to introduce fixed-term employment in all sectors. On April 2, Central trade unions observed a nation-wide protest. In Kerala, the effect of the one-day strike was palpable.

A recent World Bank report claimed that 30 per cent of India’s population in the 15-29 age bracket was not in education, employment or training. The Finance Minister listed a number of measures ostensibly to boost employment, one of which was the proposal to extend fixed-term employment to all sectors. The other measures are yet to see the light of day.

Predictably, industry welcomed the move. In a statement on March 21, Rashesh Shah, president of the Federation of Indian Chamber of Commerce and Industry (FICCI), said it would trigger employment generation. “Since the provisions under the existing labour laws did not provide for such flexibility, industry had inhibitions in engaging extra labour to discharge timely commitments such as export orders. The amendment will certainly remove this hurdle and employment generation will receive an impetus in the coming months,” he said.

Slump in apparel production

But the apparel sector did not share the optimism of the FICCI chief. On March 18, the Apparel Export Promotion Council (APEC), the official body of apparel exporters in India sponsored by the Ministry of Textiles, expressed concern over the continuous decline in apparel exports. In a statement, it noted that apparel exports had shown a decline of 10.25 per cent for February 2018 against the corresponding period in 2017.

APEC chairman H.K.L. Magu said in a statement that apparel production was already on decline, with the industry registering a fall of 10.4 per cent in production for April-January 2017-18. There was uncertainty, he said, ever since the U.S. challenged India’s export subsidy programme at the World Trade Organisation. “We are seriously worried about the future of the industry. Exports have been on a continuous decline since October 2017,” he said.

Why the government gave the go-ahead to fixed-term employment in the apparel sector was only too evident. The claim that fixed-term employment would improve the working conditions was also not well founded as the right to terminate the contract was unilateral, requiring no arbitration or consent or even the involvement of a third party, like, for instance, the government. It was basically a bilateral agreement between the employee and the employer and heavily loaded against the employee.

In fact, the objective was stated clearly in the notification of October 2016 when fixed-term employment was introduced in the apparel sector. In a subsection titled “Objective of inclusion of the term fixed-term employment”, it was stated that the notification was intended to “provide flexibility to the employers to meet the challenges of globalisation, new practices and methods of doing business. The demand is from those sectors where there is fluctuation in demand and variation in demand of the labour accordingly.”

The NDA government headed by A.B. Vajpayee mooted the concept of fixed-term employment in 2003. The United Progressive Alliance (UPA) government resurrected it in 2008 but rescinded the concept following opposition from trade unions. In October 2016, the Narendra Modi government revived the concept by introducing it first in the apparel sector on the grounds that since the apparel industry was a seasonal industry, workers could be hired on a seasonal basis. According to a government release on October 7, 2016, the decision to introduce fixed-term employment in the apparel manufacturing sector would “facilitate employment of workers in apparel manufacturing on a fixed-term basis in the backdrop of the seasonal nature of the sector and would also ensure the same working conditions, wages and other benefits for fixed-term employee in the sector as a regular employee. It is thus a win-win situation for both employers and employees in the apparel manufacturing sector.” It would “provide flexibility to the textile sector in employing workers and hence strengthen and empower the Indian textile and apparel sector”. This was one of the measures in the package approved for the textile sector on June 22, 2016, the government release said. In addition, it was claimed that the “measures assume significance due also to its [sic] potential for social transformation through women empowerment since 70 per cent of the workforce in the garment industry are women and the majority of the new jobs are likely to go to women.” The Ministry published the prepublication notification twice, once on April 29, 2015 and then on August 4, 2016, for employment in the apparel sector.

Worker exploitation

Tapan Sen, general secretary of the CITU, told Frontline that fixed-term employment was worse than contract employment. He said that despite objections by all trade unions, the NDA government amended the Industrial Standing Orders in 2003. The UPA government rescinded this in 2007. “The idea is to keep the worker continuously under pressure,” he said. By amending the Apprenticeship Act, introducing the Industrial Relations Code, amending the Contract Labour Act and creating new categories such as outsourced workers, and now introducing fixed-term employment in all sectors, the government opened the floodgates for greater worker exploitation, he said. Under the Contract Labour Act, the employer was obliged to comply with all labour laws, but under fixed-term employment the employee could continue only as long as the employer wanted him to. He called this a new system of “bonded labour”. The assurance that a fixed-term employee would be entitled to the same benefits enjoyed by a permanent worker was not workable as no worker would dare to assert his or her rights with the knowledge that he or she could be fired any time or at the end of three months. “It is like closing the option itself to dispute,” Tapan Sen said.

‘Nonsensical idea’

The Bharatiya Mazdoor Sangh (BMS), the trade union affiliate of the Rashtriya Swayamsewak Sangh, criticised the move stating that the “ease of doing business” would result in “ease of closing business”. A statement issued by BMS president Saji Narayanan warned the government that the move would affect unskilled and semi-skilled workers. Studies undertaken on fixed-term employment in Europe had shown that the rate of unemployment had increased. He said an amendment should have been made to the Contract Labour Act by giving contract workers the benefit of permanent employees.

BMS general secretary Virjesh Upadhyay told Frontline that fixed-term employment had no link with employment generation and that industry would be the loser. He said: “Industries have been practising fixed-term employment for long. A worker becomes skilled and experienced after a certain period. If a worker is told to go after a brief period, industry will be the loser. The knowledge gained on the shop floor is important. Industry will lose out on quality also.

“The only concern is the monetary one. The indirect losses will be greater; what an experienced worker delivers and what a fresh worker delivers cannot be the same. Continuation of employment benefits both the worker and the employer. Loyalty is also important. If the worker feels he or she is for a short duration, what loyalty is that worker going to develop? The economy as a whole will suffer. It is a totally nonsensical idea.” He was also upset that the government called off the Indian Labour Conference (ILC) scheduled to be held in the third week of February.

“There was a two-line communication on this. The ILC is known as the labour parliament. It is shocking that it did not take place. Our concerns have not been addressed. Consultations don’t have any meaning any more. We said in our national executive meeting in February that if the government did not address our concerns, we would boycott the ILC. However, the ILC itself was unilaterally postponed. Certain issues were connected to the Budget and others were pending. Labour laws are not getting the due they deserve,” Upadhyay said.

He said contract work flourished with impunity in all government departments and public sector units and jobs of a permanent nature. The principle of equal pay for equal work was not implemented despite several Supreme Court orders. “What meaning does the Contract Labour [Abolition and Regulation] Act have any more when the executive [government] itself is employing contract labour? Labour laws have now become just a subject of academic discussion. For us trade unions, these labour laws have no meaning. We are unable to practically enforce them. Ninety-nine per cent of today’s problem is non-enforcement of labour laws. So when people start talking about labour laws being reformed, it sounds funny. The recommendations of both the First and Second Labour Commissions have not been implemented to date. No government has taken the initiative to amend or reform laws as suggested by the commissions,” he said.

Interestingly, in Gujarat, the government amended the Standing Orders allowing units to employ workers for “fixed terms”. It is a matter of time before other States follow suit. Apart from the economic consequences of such limited durations of employment, social unrest arising out of job losses is something the government should take into consideration. At a time when the economic outlook, as stated by the Economic Survey, and the employment outlook, as portrayed by international labour bodies, look bleak, fixed-term employment is not in the interest of the economy, and definitely not in the interest of workers.