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This article has been written by Aman Sagar pursuing the Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho. This article has been edited by first evaluator Gloria Gomes (Associate, Lawsikho) and Dipshi Swara (Senior Associate, Lawsikho).

Introduction

Labour Laws are the way a nation’s government provides social as well as economic justice to the workers working in various establishments within their jurisdiction. It is these legislations that are meant to protect the rights of the workers, ensure their wellbeing, safety and put certain obligations for employers to comply with the laid-down standards. They play an important role in integrating the interests of workers, employers and trade unions. This article throws light on the newly formed Labour codes & subsequently how they have been received by the people. Discussion with respect to some areas of concern and the point of view of different stakeholders have also been elaborated.

The archives of Indian labour laws date back to the era of British rule in India. Needless to say, offering due consideration to the British economy was one of the main objectives of shaping labour laws in India. The first legislation in this area of law was meant to govern the Indian workers which was the Factories Act that came in the year 1883. Through this law, we received the first clause of no. of work hours to be limited to eight hours, the abolition of child labour & putting across limitations on women for late night employment in view of their safety, the commencement of provisions of overtime wages for work/tasks completed over and above the hours specified. Before its arrival, the Indian labour market had seen the ill-effects of an unregulated market as workers were exposed to all kinds of exploitation and were perceived no more than cogs in the Industrialisation wheel.

Present scenario

Coming back to the present era, the labour laws however developed with a common good for all have become very archaic and redundant and not quite abreast with the latest socio-economic standards especially when we are at a phase where the older generation has been replaced and new blood in the form of Generation Z is already present at the workplace. There have been a few of the legislations that were amended such as The Workmen’s Compensation Act, 1923, The Maternity benefit Act 1961 and many others in the recent past. But by and large, there was a requirement to make the laws compatible with the current needs of the labour market.

Keeping these things in mind, the current government has brought in labour reforms through streamlining of almost 44 labour laws into a set of 4 codes as mentioned below: – 

  1. The Code on Wages, 2019 includes all employees in organized as well as unorganized sectors with an intent to regulate as well as properly define wages and payment of bonuses for all categories of employment and aims at maintaining equal wages paving the way for benchmarked minimum wages for different regions for workers performing work of similar nature in every industry, trade, business, or production unit. The code will also help smoothen the ease of doing business.
  2. The Code on Occupational Safety, Health and Working Conditions, 2020 was brought in with an aim to regulate the health and safety conditions of workers in varied institutions which have 10 or more workers including mines and dockyards.
  1. The Code on Social Security, 2020 unites 9 laws related to Social Security Benefits and Maternity benefits to workers in organized as well as bringing the unorganized sector workers into its fold as well.
  1. The Code on Industrial Relations, 2020 pursues an amalgamated Industrial Disputes Act, 1947, Trade Unions Act 1926, Industrial Employment (Standing Orders) Act, 1946. This Code aims to improve the business setting in India by reducing the labour compliance & disputes-related issues of industries.

Although none of the above codes have yet been implemented, there is a general feeling among the masses that the codes which were passed in both Lok Sabha as well as Rajya Sabha lack proper due diligence and are without necessary consultations of different stakeholders. Also, it is felt that the codes are biased towards employers as compared to the workers and Trade Unions. Normally all matters in an Industrial setting are decided based on tripartite consultations. The Labour codes were passed by both the Houses in a haste in September 2020 while opposition parties were busy protesting for the two Farm laws and not present in the house.

In a developing country such as India, the majority of workers would be categorized as unskilled, unempowered and also, immobile. In the first two decades of economic liberalization which took place in 1991, the availability of skilled and unskilled labour enabled India’s fast-paced economic growth. Now, with growth flattening out and unemployment on the rise, the upsurge in the supply of young labour is a cause of massive distress to the political economy of reforms.

Labour codes : areas of concern

When we talk about the aforementioned 4 codes, it is the Code on Industrial Relations 2020 that has particularly come under the scanner since it has certain draft rules that somewhat change the relationship between employers and workers. The said code re-evaluates the Industrial Employment Standing Orders Act 1946 that concerns establishments that employ more than 100 workers. The main objective of this code is to create a sense of uniformity in the working conditions of the different industrial establishments and employers can’t violate the workers’ rights and do something untoward which is against the interest of their workers. Also, it is made with the intent to enhance productivity levels and provide a healthy working environment for workers.

This new code however significantly reduces the protection that is offered to the workers and makes them vulnerable to arbitrary retrenchment, lay-offs. Now the employers are mandated to take permission from the appropriate government in an establishment that has more than 300 workers which were earlier 100. This is a cause of distress among the Trade Unions and workers who feel that they are imprudent and this move has given a high hand to employers to promote a regime of hire and fire. On top of this, employers have the flexibility to issue standing orders on matters which may not have been prescribed in the schedule. 

In addition to this, no worker can go on strike without complying with one or more of the following provisions-

  • giving notice to its employer within a period of 60 days before the strike;
  • within 14 days of giving of such notice;
  • before the expiry of date of strike as specified in the notice;
  • during the pendency of conciliation and/or arbitration proceedings;
  • after 7 days of the conclusion of conciliation proceedings and/or after 60 days of the conclusion of arbitration proceedings;
  • during any period of settlement or award is in operation as prescribed under settlement & awards of Industrial Disputes Act 1947.

Earlier the above-mentioned provisions were only applicable to public utility corporations however now the provisions are applied to all establishments. 

The Code of Wages 2019 specifies that employers have to bring about a change in their wage/salary structure with higher Basic & Dearness Allowance, thereby increasing the corresponding social security benefits. This step, however, will, unfortunately, reduce the take-home salaries of the workers. The state government’s minimum wage rate which is usually set based on the skill set of the worker will be aligned to the National Floor wages bringing a sense of parity, shortened time imposed on employers to settle what they owe to their ex-workers who have attrited from the organization, penalties imposed and prosecution for Non-compliance of prescribed rules as specified by the appropriate government etc.

The codes have redefined the terms employee, employer and worker as well as wages have broadened the definition to meet the requirements of present circumstances and have more individuals into the fold. The workers however feel that the definitions as specified in the codes are confusing and implausible. The contract worker becomes the worker of both the principal employer and the contractor. Hence who is the “employer” is ill-defined. It will not be possible for such workers to pinpoint the responsibility of the “employer” on any one person. Even the definition of “employer” is internally self-contradictory. The employer may be the person who employs or the person who has ultimate control of the affairs — which may not be the same legitimate person.

Trade union & worker’s view 

Trade unions have noisily opposed these reforms on the grounds that they undermine the hard-won rights of workers and will lead to greater exploitation of workers and the government is deciding on this unilaterally by confining wages to the bare minimum, plummeting social security benefits, authorizing the engagement of contract labour for any kind of work, easing norms for firing workers, bracing down on trade union rights and sculpting down labour inspection.

Government’s view

It has been hyped that the reforms are necessary to bring better flexibility to employers, smoothen ease of doing business, emphasize the usage of technology and concurrently, these will lead to greater foreign investment. It has also been claimed that changes to the labour law inspection regime are necessary to free employers from ‘the tyranny of the inspection raj’.  On account of the stiff resistance of the trade unions, the Central government feels that they have been unable to effect the changes at the pace that they would have liked.

Conclusion

Seeing what the government, as well as the Trade Union/s of workers, feel about these codes, there is a whole lot that can be done to transition smoothly to the new labour codes with the help of phased as well as a planned dialogue between the parties. Efforts must go in areas of assessing the overall financial impact of changing the wage structures, advantages that will be enjoyed by the workers especially when the social security benefit percentages will be increased thereby promoting a sense of savings driven approach and not just living-in-the-moment with a bigger take-home salary, defining the employees as well as employers across different cadres to make things more streamlined by and large for all & creating a stronger compliance net which will disallow employers to take due advantage of their workers and give a chance for the workers to be heard. 


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