Dismantling protection

Amid a lacklustre economy, the NDA government is peddling labour law reforms as key ingredients in ensuring industrial growth.

Published : Sep 27, 2017 12:30 IST

A procession in protest against the government’s proposed labour reforms, in Mysuru on September 2, 2015.

A procession in protest against the government’s proposed labour reforms, in Mysuru on September 2, 2015.

SOON after coming to power in 2014, the National Democratic Alliance (NDA) government promised to overhaul the labour laws and initiate wide-ranging reforms. In its view, the absence of labour reforms was the biggest roadblock to development and industrial growth. Three years down the line, employment generation is stagnant and there is not much to show by way of skill development, but the government’s plan to overhaul labour laws, a brainchild of the previous United Progressive Alliance (UPA) government that did not materialise, seems to be gaining greater traction.

The government’s reform plans initially did not succeed owing to the resistance from all central trade unions, including the Bharatiya Mazdoor Sangh (BMS), the Bharatiya Janata Party’s (BJP) trade union affiliate. But it has not given up because of its confidence that it has the numbers in the Lok Sabha.

This government remains committed to single-window clearances, which are central to the concept of “Make in India”. At the core of its plans are labour law reforms through legislative intervention. The commitment to rationalise and simplify labour laws was reiterated in the 2017 Budget, in which Finance Minister Arun Jaitley proposed legislative reforms to “simplify, rationalise and amalgamate” the 38 existing labour laws into four codes on wages, industrial relations, social security and occupational safety, health and working conditions.

On August 10, the Code on Wages Bill 2017 was introduced in the Lok Sabha. It subsumes four laws—the Minimum Wages Act, 1948, the Payment of Wages Act, 1936, the Payment of Bonus Act, 1965, and the Equal Remuneration Act, 1976. With the enactment of the Bill, all these individual laws would stand repealed. The Centre of Indian Trade Unions (CITU) has pointed out that the Bill dilutes the enforcement machinery and does not declare a national uniform minimum wage for the country—Section 9(1) of the Bill stipulates that “different national minimum wage may be fixed for different States or different geographical areas”—and leaves the formulation of minimum wages to the discretion of the government despite consensus agreements at Indian Labour Conferences (44th and 46th) about wage fixation formulae.

Further, the definition of “employer” in the Bill makes it difficult to identify the “principal employer” as it simplifies the definition of an employer as one who employs one or more employees in his establishment. In the original 1948 Minimum Wages Act, the employer was clearly defined as a person who “employs, whether directly or through another person, or whether on behalf of himself or any other person, one or more employees”.

The changed definition, according to the CITU president K. Hemalatha, ignores the reality of contract labour and would end up absolving the principal employer of the responsibility and obligation to contract workers. The Bill has also done away with the concept of “schedule employment” (dealing with trades and employment) which specified a list of industries where the concept of a minimum wage applied. It was well known that the wages in industries in the list of “schedule employment” were far higher than those outside the list. In the Section dealing with deductions, the Bill introduces the concept of “any other tax”, which can be levied by the Central or State governments, apart from income tax.

The codes also stipulate that the “audited accounts of companies shall not normally be questioned”, thereby removing the right of workers or their unions to question the accuracy of the balance sheet of a company or even demand clarifications in order to ascertain “surplus” while bargaining for bonus above the minimum level as mentioned in the Bonus Act.

It also specifies that the fixation of bonus, eligibility for payment of bonus or the application of the code in respect of bonus in a public sector establishment shall be deemed to be an industrial dispute within the meaning of the ID Act, 1947; the Bill is silent on whether issues such as payment of wages, minimum wages or gender discrimination may be possible subjects of industrial dispute.

Under the proposed codes, inspectors are to be replaced by facilitators who would conduct inspections only in accordance with the schemes notified by the appropriate government in accordance with the Web-based inspection schedule under the scheme. The CITU has argued that the experience of Web-based portal inspection under the Shramev Jayate scheme had exposed the limited reach of the scheme: the data captured was hardly 30 per cent of the total number of establishments in the Central sector.

The facilitator has the power to search or seize documents from defaulting employers but cannot initiate action against them. Instead, the facilitator will have to apply to the authority concerned for any realisation of the claim under dispute. The penalties for violating the code range from a fine of Rs.10,000 to Rs. 1 lakh, which trade unions say is the mildest conceivable penalty for defaulting employers.

Industrial Relations Code Bill On September 14, leading Central trade unions such as the CITU, the All India Trade Union Congress, the Indian National Trade Union Congress and the Hind Mazdoor Sabha raised strong objections with the Labour Ministry to some of the features in the draft Industrial Relations Code Bill, 2017, a copy of which had not been circulated to them.

The Code Bill is not in public circulation, but the Ministry circulated five issues as agenda items in its discussion with the unions, who objected to all of them. To begin with, they turned down the subcategorisation of workers as supervisors and workers.

The rationale for their opposition was that by making a section of senior and skilled workers “supervisors” or “managers”, and by moving them to the “non-unionised” category, the managements would deprive them of their trade union rights.

“All employees receiving wages/salary in lieu of work done should be treated as workers/employees with attendant rights to be organised in trade unions and related other rights,” the unions said.

The Bill also disallows the entry of outsiders as office-bearers of any registered trade union in the organised sector and restricts the number of outsiders to two in the unorganised sector. The unions said that restricting outsider organisers in the trade unions of the unorganised sector would impede the effort to organise workers in trade unions, apart from exposing and subjecting them to more exploitation.

The recognition of trade unions would be contingent on the basis of a verified membership of 50 per cent of the workers in the muster roll, according to the draft Bill. This was rejected by the unions, who said it would embolden employers to act unilaterally. More so, they argued, when most governments could get elected with less than 50 per cent of the votes polled, such conditions on recognition of trade unions were unrealistic.

They said that the recognition of a trade union by the employer must be made mandatory in all establishments; that when there was more than one union in any establishment, recognition should be accorded by secret ballot and the trade union getting more than 65 per cent of the votes should be treated as the sole negotiating agent. In the event of any trade union not getting more than 50 per cent of the votes, all trade unions with more than 10 per cent should be recognised and accommodated in the negotiating council on the basis of proportional representation. This, the Central unions said, was prevalent in most public sector units in the country.

Threshold levels The codes also propose raising the threshold level of employment to 300 for establishments, below which employers would not be required to seek permission from the government concerned for retrenchment, layoff and closure. The Rajasthan and Madhya Pradesh governments have already amended their labour laws to raise the threshold level of employment. The central trade unions have said that the government should lower the present threshold from 100 to 50 in the context of greater automation at workplaces requiring less labour. Ironically, the Bill has proposed an enhancement of the retrenchment compensation from 15 to 45 days. The unions have welcomed this but have also pointed out that this was meaningless in the context of employers being given a free hand to hire and fire in organisations employing up to 300 employees.

Central trade unions rejected many features of the previously circulated Industrial Relations Code Bill, 2015. These include the need for a trade union to have 10 per cent of the workers of an establishment or industry or 100 workers, whichever was less, in order to apply for registration; at present, seven or more members can apply for registration.

The Bill also gave sweeping powers to the Registrar to grant, reject or cancel union registration. It also gives powers to employers to unilaterally change the service conditions of the employee even as a conciliation procedure is under way. Other features include increasing the notice period for a strike in public utility services, imposing hefty penalties and fines and even imprisoning workers for participating in an “illegal” strike. The Bill also restricts the right of a worker to take recourse to adjudication or a tribunal as it specifies that the consent of the employer is necessary.

NITI Aayog report Before Arvind Panagariya quit as NITI Aayog Vice-Chairperson, one of the things he did was to sign on a report on “Ease of Doing Business: An Enterprise Survey of Indian States”, jointly commissioned and authored by the NITI Aayog and IDFC, a Mumbai-based think tank. Some 3,326 manufacturing enterprises in 19 States that were set up in and after 2014 were surveyed, along with 25 industry associations. The focus of the survey-cum-report was to identify the constraints preventing enterprises from taking off. Earlier, the World Bank had, in a report on ease of doing business, ranked India at 185 in a list of 187 countries. The NITI Aayog report said the actual experience of enterprises showed that the situation was much better than what the World Bank survey claimed. While it identified a slew of impediments—ranging from provision of electricity to no-objection certificates pertaining to construction—it was seen that most States ruled by the BJP had used single-window clearances for setting up enterprises.

Significantly, the survey confirmed what trade unions had been saying all along: that the preponderance of employment was in very small enterprises; 131 million workers were employed in “Own Account Enterprises” managed by owners who did not employ a single regular worker; and small firms employing less than 50 workers accounted for 84 per cent of the total workforce, compared with 24.8 per cent in China. Only 7 per cent of the enterprises employed more than 200 workers.

At least four States—Andhra Pradesh, Telangana, Maharashtra and Gujarat—did not report any obstacles in starting a business in terms of getting land and construction-related permits for environment approval and for tax compliance. More than 400 enterprises reported a turnover of Rs.10-50 crore and a very small number reported a turnover under Rs.1 lakh. Yet, the survey’s basic premise was that labour regulation stood in the way of labour-intensive manufacturing.

In fact, the BMS came out strongly against the NITI Aayog-IDFC report, stating that their understanding was flawed. Citing the example of the Rajasthan government, whose radical reforms in 2014 had had no positive outcome on either employment or industrial growth, the BMS appealed to the government to not look at the economy in a piecemeal manner.

“We have no dispute with the codification but there are problems with some features. Industry has already tweaked the labour laws and due to the unemployment situation, workers are accepting these conditions. We have opposed the disinvestment of the public sector and the privatisation of Air India. Today, two-thirds of employees in Central and State government are contract employees. Governments are supposed to protect the law, not infringe it,” Virjesh Upadhyay, BMS general secretary, told Frontline .

Notwithstanding the BMS’ inconsistent opposition to the government, a trade union leader said that the BMS often entered into negotiations with the government on the eve of a joint action by the other central trade unions. “They can’t be trusted,” said the leader.Trade unions led by the Left and Centrist parties are planning a sit-in protest ( mahapadav ) in December. The BMS is planning a march to Parliament in November.

The replacement of Bandaru Dattatreya with Santosh Kumar Gangwar as Labour Minister was surprising as the former had gone out on a limb backing demonetisation, a decision that broke the backs of workers and resulted in huge job losses. The passage of the Code on Wages Bill may well signal the beginning of the end of all protective labour laws.

Sign in to Unlock member-only benefits!
  • Bookmark stories to read later.
  • Comment on stories to start conversations.
  • Subscribe to our newsletters.
  • Get notified about discounts and offers to our products.
Sign in


Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide to our community guidelines for posting your comment