Labour Issues

Warning signals

Print edition : July 11, 2014

Employees at work at Kei Industries, a leading electrical equipment manufacturer, in the Bhiwadi industrial estate in Rajasthan. Photo: B. MATHUR/REUTERS

A garment factory in Tirupur, Tamil Nadu.The Union Labour Ministry has proposed some 54 amendments in 61 Sections of the Factories Act. Photo: M. BALAJI

Trade unions feel that the Rajasthan government’s proposed amendments to labour laws, which industry representatives have hailed, have serious implications for workers.

IF there is one area of governance in which the Bharatiya Janata Party-led National Democratic Alliance government has been moving with alacrity, it is labour law reforms. The President’s speech, articulating the blueprint for the government, was largely silent on labour, industrial as well as agricultural, while a good portion of it appeared to have a pro-industry tilt with a hidden emphasis on less government regulation. The BJP’s election manifesto had promised to review labour laws. The party stated that it would invite all stakeholders to review laws that were outdated, complicated and even contradictory. Interestingly, this was the stated position of the previous Congress-led United Progressive Alliance (UPA) government too, but it could not make any major changes in the laws as all trade unions, including the Indian National Trade Union Congress (INTUC), which is affiliated to the Congress, were opposed to the proposal. The BJP is taking this policy forward. The first move in this direction was made not at the Centre but in Rajasthan, where it runs the government.

The Vasundara Raje government cleared a Cabinet proposal to amend three key laws—the Industrial Disputes Act, 1947; the Contract Labour (Regulation & Abolition) Act, 1970; and the Factories Act, 1948—on the plea that it would generate employment, encourage investment, and lead to economic growth. Predictably, industry and wide sections of the mainstream media welcomed the move and exhorted the Central government to follow suit. Some sections even argued that liberalisation of labour legislation was a sine qua non for employment generation. The amendments have to be passed by the State Assembly. They become law after getting presidential assent. Article 254 of the Constitution allows the States to enact laws on subjects listed in the Concurrent List, contingent on presidential assent.

The Rajasthan government’s proposals include applying the Contract Labour Act to firms employing more than 50 persons rather than 20, which means that units employing fewer than 50 workers are not bound by the contract labour legislation. Similarly, it proposes to exempt units employing up to 20 workers and using power from the protective coverage of the Factories Act. At present, the law applies to units using electricity and employing up to 10 workers. Factories that do not use power and which employ up to 40 workers are exempted from these provisions. This effectively means that no labour law will apply to units that are not registered under the protective legislation of the Factories Act. More worryingly, under the proposed amendments, employers can retrench up to 300 workers without the government’s permission—the present ceiling for retrenchment without permission is 100. Even the formation of a union has been made difficult. The existing law permits 15 per cent of the workforce in a production unit to form a union. This has been raised to 30 per cent.

The Cabinet decision was taken on June 5 on the basis of a proposal prepared by the Department of Labour. The Cabinet gave the green signal on the grounds that the amendments would encourage employment, reduce “inspector raj” as far as small units were concerned and reduce industrial disputes. The proposed amendments have not gone down well with the trade unions, including the State unit of the BJP-affiliated Bharatiya Mazdoor Sangh (BMS). On June 10, during the debate in the Lok Sabha on the motion of thanks to the President’s address, the Congress’ Leader of the House Mallikarjun Kharge, who was Labour Minister in the UPA government, referred to the reforms by the Rajasthan government. But Arjun Meghwal, BJP MP, denied that any reforms had been introduced and claimed that they were only proposals.

“It is a serious issue. All unions in the State have opposed it. The Congress, which is in the opposition, is not doing anything about this. The Left parties and the trade unions are going to take to the streets on the issue,” Vasudev, secretary, Communist Party of India (Marxist), told Frontline from Jaipur. Ravindra Shukla, president of the State unit of the Centre of Indian Trade Unions (CITU), said that all the State’s trade unions were on the same page on the issue. “What was the hurry? The Assembly meets next month. The Chief Minister could have waited till then. The idea is to get presidential assent before June 30 and then, after six months, bring an ordinance to get the changed labour laws working,” he said. The most dangerous provision, he said, was the right given to employers to retrench workers without notifying the government. “This means that any unit employing 299 workers can be closed without a hitch. If this is not hire and fire, then what is?” he asked, adding that this was easier said than done. In 1982, Prime Minister Indira Gandhi proposed similar amendments, but following opposition by trade unions she withdrew them. Similarly, the proposed changes to the Contract Labour Act were fraught with implications for the worker as essentially they removed all liabilities from the principal employer, he said. “At present, the principal employer gives the contract to a contractor who employs workers. But in the event of any labour law violation, including non-payment of wages, it is the principal employer who is held responsible. But with the new changes, no one can be held accountable. The worker is completely vulnerable,” said Shukla.

Industry representatives, such as the Indian Staffing Federation (ISF), have welcomed the Vasundara Raje government’s move as a test case for the Centre and other States. The ISF, which provides temporary staff, aims at a “suitable, legal and regulatory environment that is positive and conducive to industry that will facilitate job creation”. It believes that India needs flexible labour laws in the formal sector and that flexi-jobs are associated with higher labour market transition as well as higher employability.

A leading staffing company went to the extent of saying that there was no need for the Factories Act. In a statement issued on June 10, Sanjay Bhatia, president of the All India Organisation of Employers (AIOE), welcomed the proposed amendments as “bold and positive measures” that would promote employment generation. Justifying the changes in the Industrial Disputes Act, he said the introduction of the system of strike notice and strike ballot, which is in vogue in developed economies, would curb the number of unwanted and unjustified strikes. He said amendments in labour laws were critical to meet the target of creating 100 million jobs and increasing the share of manufacturing in the gross domestic product (GDP) from the existing 16 per cent to 25 per cent.

Industry associations in Rajasthan were also quick to welcome the decision. The chairman of the Rajasthan Committee of the PHD Chamber of Commerce and Industry (PHDCCI) said “other reform-oriented States would soon follow suit as its [amendments] consequences would lead to enhanced productivity of all stakeholders in the labour market”. He said the State government had “signalled its sincerity and seriousness to implement measures, contained in its agenda for labour reforms”. The PHDCCI described the Rajasthan government’s proposals as a move in the right direction. Its president, Sharad Jaipuria, said the move was “worthy of appreciation and deserves to be vastly welcomed”. He pointed out that industry had been seeking labour reforms for enhanced productivity, work stability and a healthy work culture for decades.

Labour Ministry's proposal

The day after the State Cabinet gave its nod for the proposed reforms, the Union Labour Ministry issued a circular inviting comments and suggestions from all concerned to effect amendments in the Factories Act, which include relaxing the norms for women to work in certain industrial segments, and increasing the number of working hours and overtime. The trade unions have dismissed the method of inviting comments as ridiculous as they feel these issues need tripartite dialogues and not a laissez faire kind of approach.

The Ministry has proposed some 54 amendments in 61 Sections of the Factories Act. The amendments appear worker-friendly, making it difficult for unions to reject them outright. They include enhancing the role of State governments in establishing safety norms for health standards in factories; providing for harsher penalties for health hazards, which encompasses a new provision that enables the Central government to frame rules relating to some important aspects of occupational safety and health; and mandating the use of safe machinery and the provision of safe drinking water, shelters, rest rooms, sanitation, lighting and staircases. One amendment claims to introduce gender parity by seeking to allow the employment of women in areas requiring examination of machinery and on night shifts.

Other provisions include doubling the limit of overtime from 50 hours a quarter to 100 hours in some cases and from 75 hours to 125 hours in areas involving work in the public interest and reducing to 90 days from the existing 240 days the period for which an employee must work to become eligible for benefits such as leave with pay.

One union representative rejected the idea of sending comments on the proposed amendments. “This is not the way. Unions cannot be treated this way. There is an established process of dialogue and we expect the government to follow those norms,” he said. Allowing women on night shifts is not new. “The unions have maintained that having women on night duty is not a problem as long as adequate safeguards, including home drop facilities, are provided. Besides, women are already working in night shifts in the BPO industry. The managements are not ready to take responsibility,” said A.K. Padmanabhan, CITU president. As for overtime, he said there was hardly any work, and so increasing the limit of overtime hours would not help.

He said the Narendra Modi government with its minimum government and more governance formula had given an impression that labour laws were a hindrance to job creation. The Rajasthan government, he said, had promised to create 1.5 million jobs, and easing labour norms appeared to be a precondition for that. “We say implement the labour laws, the government wants to reform the labour laws. If it is bonded labour that they are talking about, we have no issues. We are against that. But it must be made clear that if any labour law needs to be changed, it has to be done with the consent of the unions. No sensible person will agree with the Rajasthan government’s proposal that diluting some crucial provisions in the three labour laws concerned will create more jobs,” he said.

Amendments were proposed to the Trade Union Act as well. At present for a union to be registered, a minimum of seven people are required to give their consent to move an application for registration. The Act prescribes that either 10 per cent of the workforce or 100 workers, whichever is fewer, who are engaged or employed in the establishment and who are members of the trade union, can register a union. In the name of reducing the burden of dealing with multiple unions, proposals were being mooted to make the formation of unions difficult. It was pointed out that in all agitations in recent times involving automobile majors, the problem was not the multiplicity of unions but the reluctance of the managements to recognise the worker-elected unions as opposed to the management-selected ones.

Going by the Centre’s silence on Rajasthan’s proposals, it can be assumed that there is support, if not overwhelming approval, for its measures. If the observations of Modi on the state of the economy are any indication, it will be no surprise if labour laws are diluted to make retrenchment easy and hire and fire a convenient method of employment, all in the name of tightening the belt and improving employability.

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