Labour Reforms

23rd September – Labour Reforms

Labour laws dilution

Recently, the government withdrew three Bills related to labour laws and replaced them with new ones. These Bills make significant changes to regulation of labour and the employer-employee relationship in several ways.

Background –

  • India has a complex regime of labour laws, and several committees have recommended simplifying and rationalising them.
  • Last year, the government introduced four labour codes as Bills to replace 29 existing laws. These Codes dealt with regulation of wages, occupational safety and health, social security, and industrial relations.
  • The Code on Wages was passed by Parliament last year. Over the last few months, the Standing Committee on Labour presented its reports on the other three Bills. It is these three Bills that the government has replaced and introduced in the Lok Sabha.

What changes are proposed?

There are several aspects of these Bills that differ significantly from the earlier Bills. Let us call the new Bills as the 2020 Bills to distinguish them from the 2019 Bills that were examined by the Standing Committee and subsequently withdrawn.

  • First, the 2020 Bills raise several thresholds.
    • The Factories Act of 1948 defines any manufacturing unit as a factory if it employs 10 workers (and uses electricity) or 20 workers (without using electric power). These thresholds are being raised to 20 and 40 workers, respectively.
    • The Industrial Disputes Act of 1947 requires any establishment employing over 100 workers to seek government permission before any retrenchment; the threshold has been raised to 300, with the government empowered to raise it further through notification. These changes have been debated for over two decades but were not proposed in the 2019 Bill.
    • The Industrial Employment (Standing Orders) Act of 1946 requires employers to formally define conditions of employment under them if they have at least 100 workers. The 2020 Bill has increased this threshold to 300 workers.
  • Second, they provide the government with the power to exempt establishments from any or all of their provisions.
    • The Code on Industrial Relations governs working conditions, trade unions, retrenchment and layoffs, dispute resolution, and establishes industrial tribunals. The government may, in public interest, exempt any new industrial establishment from the provisions of this Code.
    • The Code on Occupational Safety, Health and Working Conditions specifies leave and maximum work hours, requires health and safety norms including adequate lighting and ventilation and welfare measures. It subsumes 13 Acts including the Factories Act. The 2020 Bill allows the State government to exempt any new factory from its provisions in the interest of increased economic activity and employment generation.
    • Given that every new factory would lead to incremental employment, this gives wide discretion to the State government to exempt new factories from basic safety and welfare norms. Note that the Factories Act permitted such exemption for a limited period of three months only during a “public emergency”.
  • Third, there are some changes related to contract labour.
    • The 2019 Bill was applicable to establishments which employed at least 20 contract workers and to contractors supplying at least 20 workers; these thresholds have been raised to 50 workers.
    • The 2020 Code prohibits the employment of contract workers in any core activity, and specifically permits employment in a specified list of non-core activities including canteen, security and sanitation services.
  • Fourth, the 2019 Bill on Occupational Safety allowed the government to prohibit employment of women in undertaking operations that could be dangerous to their health and safety. The 2020 Bill removes this power to prohibit employment and instead allows the government to require employers to provide adequate safeguards.

Major issues with the Bills –

  • All the three Bills (both the 2019 and 2020 versions) also show a major shift in approach from the earlier laws. Many essential features of the law are no longer specified in the Codes but have been delegated to be prescribed by the government through Rules.
  • Examples of delegated items include setting the thresholds for application of various social security schemes, specifying safety standards and working conditions, and the power to increase the threshold for establishments that have to seek permission before retrenchment. An important question is whether such features should be hard-coded in the Acts.
  • Another important issue for consideration is whether there should be relaxations for small enterprises to reduce their compliance burden. One may argue that some matters such as safety standards should apply to everyone while others that provide job security could be based on the size of the firm.
  • The Occupational Safety Bill (which prescribes safety standards and maximum work hours) exempts small establishments from its purview while the Industrial Relations Bill applies to all.

Conclusion –

The Bills also have several key changes from the 2019 Bills that were examined by the Standing Committee. Therefore, it is important that there is wider scrutiny and public discussion on these Bills. They should be referred to the Standing Committee. After all, a complete revamp of labour laws should be done only after due deliberation.

SourceThe Hindu

QUESTION – The government has attempted to reform a maze of labour laws in India to improve ease of doing business in India. Examine the provisions of the Bill and discuss the issues with them.

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