7 PM | Bearing the brunt of slack laws: On labour laws in India | 18th December 2019

Context:Labour laws in India.

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  • A huge fire engulfed a residential-cum-production unit in a congested part of Delhi on December 8, killing over 40 people.

Labour Laws:

  • Labour law also known as employment law is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, working people and their organizations.
  • As such, it mediates many aspects of the relationship between trade unions, employers and employees.
  • In other words, Labour law defines the rights and obligations as workers, union members and employers in the workplace.
  • Generally, labour law covers: 
  • Industrial relations – certification of unions, labour-management relations, collective bargaining and unfair labour practices; 
  • Workplace health and safety;
  • Employment standards, including general holidays, annual leave, working hours, unfair dismissals, minimum wage, layoff procedures and severance pay.
  • There are two broad categories of labour law.
  • collective labour law relates to the tripartite relationship between employee, employer and union.
  • individual labour law concerns employees’ rights at work and through the contract for work.

History of Labour laws:

  • Labour law arose due to the demands of workers for better conditions, the right to organize, and the simultaneous demands of employers to restrict the powers of workers in many organizations and to keep labour costs low.
  • International Labour Organisation (ILO) was one of the first organisations to deal with labour issues. The ILO was established as an agency of the League of Nations following the Treaty of Versailles, which ended World War I. Post-war reconstruction and the protection of labour unions occupied the attention of many nations during and immediately after World War I.
  • The history of labour legislation in India is interwoven with the history of British colonialism. Indian textile goods offered stiff competition to British textiles in the export market and hence in order to make India labour costlier the Factories Act was first introduced in 1883.
  • The earliest Indian statute to regulate the relationship between employer and his workmen was the Trade Dispute Act, 1929

Purpose of labour legislation:

Labour legislation that is adapted to the economic and social challenges of the modern world of work fulfils three crucial roles: 

  • it establishes a legal system that facilitates productive individual and collective employment relationships, and therefore a productive economy; 
  • by providing a framework within which employers, workers and their representatives can interact with regard to work-related issues, it serves as an important vehicle for achieving harmonious industrial relations based on workplace democracy; 
  • it provides a clear and constant reminder and guarantee of fundamental principles and rights at work which have received broad social acceptance and establishes the processes through which these principles and rights can be implemented and enforced.

Constitutional provisions with regard to labour laws:

  • The relevance of the dignity of human labour and the need for protecting and safeguarding the interest of labour as human beings has been enshrined in
  • Chapter-III (Articles 16, 19, 23 & 24) and
  • Chapter IV (Articles 39, 41, 42, 43, 43A & 54) of the Constitution of India
  • Labour is a concurrent subject in the Constitution of India implying that both the Union and the state governments are competent to legislate on labour matters and administer the same. The bulk of important legislative acts have been enacted by the Parliament.

Labour Market: Fact Sheet

  • The Economic Survey of 2018-19, says “almost 93%” of the total workforce is ‘informal’. But the Niti Aayog’s Strategy for New India at 75, said: “by some estimates, India’s informal sector employs approximately 85% of all workers”.
  • There is yet another government report, ‘Report of the Committee on Unorganised Sector Statistics’ of the National Statistical Commission (NSC), 2012, which says the share of the informal workforce is “more than 90%” of the total.
  • Stressing the importance of labour law reforms, it said that according to the latest comparable figures available with the International Labour Organisation, the man-days lost in India were a staggering 23.34 lakh as compared with 1.7 lakh in the UK and 7.4 lakh in the US, with Russia at a low of only 10,000.

Regulation of Labour Market: 

  • Currently, there are 44 labour laws under the purview of Central Government and more than 100 under State Governments, which deal with a host of labour issues. 
  • Unfortunately, these labour laws protect only 7-8 percent of the organised sector workers employed at the cost of 93 per cent unorganised sector workers. 
  • Following are some of the Central legislations passed under different articles of the Constitution:
  • Minimum Wages Act, 1948.
  • Industries (Regulation and Development) Act of 1951.
  • Industrial Disputes Act, 1947.
  • Factories Act of 1948.
  • Contract labour Act 1970.
  • Trade Unions Act 1926.

Issues with Labour Law:

  • Labour laws involving safety at workplace, wages, social security and industrial relations.
  • Distorted the labour market.
  • Due to the complex and massive numbers of labour laws, industries prefer to hire contractual labourers not covered under these laws and without any social security or termination protection.
  • Another major problem of labour market in India is that there are a growing number of unskilled labourers in the country.
  • Current labour reforms are less focus on apprenticeship.
  • Labour market in India is suffering from surplus labour force.
  • lack of adequate information regarding jobs
  • child labour practices
  • lack of proper manpower planning etc.
  • Weak labour unions.

Initiatives of Central Government:

  • Legislative Initiatives
  • Under Payment of Bonus Amendment Act, eligibility limit for payment of bonus enhanced from Rs 10000/- to Rs. 21000/- per month and the Calculation Ceiling from Rs. 3500/- to Rs. 7000/- or the minimum wages.
  • Payment of Wages (Amendment) Act, 2017 enabling payment of Wages to employees by Cash or Cheque or crediting it to their bank account.
  • Child Labour (Prohibition and Regulation) Amendment Act, 2016 provides for complete ban on employment of children below 14 years in any occupation or process.
  • Maternity Benefit Amendment Act, 2017, increases the paid maternity leave from 12 weeks to 26 weeks.
  • The Employee Compensation (Amendment) Act, seeks to rationalize penalties and strengthen the rights of the workers under the Act.
  • The Payment Of Gratuity (Amendment) Act, 2018,provides flexibility to the Central Government firstly to increase the ceiling limit of gratuity to such amount as may be notified from time to time and secondly to enhance the calculation of continuous service for the purpose of gratuity in case of female employees who are on maternity leave to such period as may be notified from time to time. 
  • Governance Reforms
  • Ministry has notified “Ease of Compliance to maintain Registers under various Labour Laws Rules, 2017” on 21st February 2017 which has in effect replaced the 56 Registers/Forms under 9 Central Labour Laws and Rules made there under in to 5 common Registers/Forms. This will save efforts, costs and lessen the compliance burden by various establishments.
  • A Model Shops and Establishments (RE&CS) Bill, 2016 has been circulated to all States/UTs for adoption with appropriate modification. The said Bill inter alia provides for freedom to operate an Establishment for 365 days in a year without any restriction on opening/closing time and enables employment of women during night shifts if adequate safety provisions exist.
  • UnderIndustrial Employment (Standing Orders) Act, 1946, the category i.e. Fixed Term Employment, with all Statutory Benefits, has been extended to all Sectors to impart flexibility to an establishment to employ people to meet the fluctuating demands, vide the Industrial Employment (Standing Orders) Central (Amendment) Rules, 2018.
  • Ministry has also notified Rationalization of Forms and Reports under Certain Labour Laws Rules, 2017 for reduction of number of Forms / Returns under 3 Central Acts / Rules from 36 to 12 by reviewing redundant and overlapping fields.
  • Unified Annual Return – “Unified Annual Return returns have been made mandatory in respect of the these Central Labour Acts [the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Maternity Benefit Act, 1961, the Payment of Bonus Act, 1965, the Industrial Disputes Act, 1947] on the Shram Suvidha Portal“.

Way Forward:

  • Simplification and consolidation of labour laws apart, the government must focus on the key issue of job creation.
  • The Periodic Labour Force Survey that was finally made public clearly pointed to the dire situation in job creation in recent years.
  • While the proportion of workers in regular employment has increased, unemployment has reached a 45-year high. In such a situation, the government should be better off building a broader consensus on any major rule changes to existing worker rights rather than rushing through them for the sake of simplification.
  • Labor to be shifted to ‘State List’: Labor being in the concurrent list of the constitution, both central and state government legislate on it. But the State Governments have limited space to enact labor laws to address their own requirements – promoting investment and employment generation. It is in best interest of all to shift labor in State list.
  • Improving Enforcement of Labor Laws:
  • Strengthening of enforcement machinery: Increased manpower, improved infrastructure is essential for effective implementation of labor laws.  
  • All India Service for labor administration must be formed that will provide professional experts in the field of labor administration.
  • Dispute resolution: Regular Lok Adalats could enable faster disposal of cases
  • The consolidated code bills should be thoroughly discussed in Parliament and also with labour unions before being enacted.


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