Changes in labour laws and growth in the economy. GS: 3 "EMPOWER IAS"

In news:

• In the backdrop of relaxation/suspension of  the labour laws by MP and UP, the interests of labourers and workers need to be taken care of while balancing with the resumption of economic activity.

 

More on the news:

• The revival of business and economic activity after weeks of forced closure is indeed the need of the hour.
• However, the action of some states to grant sweeping exemptions from legal provisions aimed at protecting labourers and employees in factories, industries and other establishments scores low on the moral index.
• Madhya Pradesh, in order to give a boost to business and industry has allowed units to be operated without many of the requirements of the Factories Act.
• It has called for extension of Working hours to 12 hours, instead of eight, and weekly duty up to 72 hours. 
•  It seems that M.P has used Section 5 of the Act, which permits exemption from its provisions for three months.
• However, this exemption can be given only during a public emergency, defined in a limited way as a threat to security due to war or external aggression. 
• Uttar Pradesh has approved an ordinance which seeks to suspend all labour laws for three years.
• It has exempted a few ones relating to the abolition of child and bonded labour, women employees, construction workers and payment of wages, besides compensation to workmen for accidents while on duty.

 

Analysis:

Problems of Labour Market in India

 

Indian labour market is characterised by a sharp dichotomy.

• • Organised sector is stringently regulated while the unorganized sector is virtually free from any outside control and regulation with little or no job security.
  • Wages are ‘too high’ in the organised sector and ‘too low’, even below the subsistence level in the unorganised sector. This dualistic set up sug­gests how far the Indian labour market is seg­mented.

 

Poor Social Security:

• • Social security to organised labour force in India is provided through a variety of legisla­tive measures.
  • Work­ers of small unorganised sector as well as in­formal sectors remain outside the purview of these arrangements.

 

Multiplicity of Archaic Labour Laws

• • Labour Laws govern trade unions, industrial re­lations, and job security
  • Labour is a concurrent subject and more than 40 Central laws more than 100 state laws govern the subject.

Trade Union Issues:

• • Trade Union Act, 1926 provide that any seven employees could form a union.
  • During the freedom struggle, Indian trade union contributed handsomely. It is now better organized.
  • Frequent Strikes: Industrial Disputes Act, 1947 aims at promoting good relations between employers and workmen, protecting workers against re­trenchment and settling disputes through con­ciliation, arbitration or adjudication. However, industrial relations climate were far from sat­isfactory when trade unions resorted to mili­tancy in the 1960s and early 1970s. Between 1972 and 1981, the average number of work days lost per year per employee in the manu­facturing sector stood at 4.070. This figure went up to 5.736 between 1982 and 1992—a very high figure compared to other countries in the contemporary period.

Multiplicity of trade unions hamper dispute resolution.

• • In­ter-union rivalry and political rivalries are con­sidered to be the major impediments to have a sound industrial relation system in India.
  • Indian labour laws are highly protective of labour, and labour markets are relatively inflexible. As usual, these laws are applicable in the organised sector only.
• Rigid Laws:
  • India’s labour laws for the workers in the organised sector give workers permanent employment, of course, after a probation pe­riod ranging from 6 months to 2 years.
  • Job security in India is so rigid that workers of large private sector employing over 100 work­ers cannot be fired without government’s per­mission.

 

Unskilled labour

• • Lack of enough skilled workers is a common concern raised by the employers in defence of their inability to hire more.
  • They resort to contract employment
  • They adopt hire and fire policy.

 

Gender gap

• • Low female labour force participation
  • 71% of men above 15 years are a part of the workforce as compared to just 22 percent women (Labour Force Survey)

 

Low labour Productivity:

• • Promotions are based on seniority and thus workers get fixed annual wage increments unrelated to work perform­ance.
  • The labour market poli­cies followed in India in the past have led to serious problems due to low labour produc­tivity even in the context of an economy where the firms were shielded from both interna­tional competition (by the very high import tariffs) and domestic competition (by the li­censing policies).

 

List of major Labor law Acts in India

• 1. Worker’s Compensation Act, 1923
• 2. The Trade Unions Act, 1926
• 3. Payment of Wages Act, 1936 
• 4. Industrial Employment (Standing Orders) Act, 1946
• 5. Indian Industrial Disputes Act, 1947

 

 

State of Labour laws in India:

• As per various estimates there are over 200 state laws and close to 50 central laws. 
  • And then also there is no set definition of Labour laws in the country. 
• On a broader level, they can be divided into four categories. 
  • The main objectives of the Factories Act, for instance, are to ensure safety measures on factory premises, and promote health and welfare of workers. 
  • The Shops and Commercial Establishments Act, on the other hand, aims to regulate hours of work, payment, overtime, weekly day off with pay, other holidays with pay, annual leave, employment of children and young persons, and employment of women.
  • The Minimum Wages Act covers more workers than any other labour legislation. 
• The most contentious labour law, however, is the Industrial Disputes Act, 1947 as it relates to terms of service such as layoff, retrenchment, and closure of industrial enterprises and strikes and lockouts.

 

Labour Code on Industrial relations, 2019

Need

• • It aims to create greater labour market flexibility and discipline in labour – to improve upon ease of doing business and also to encourage entrepreneurs to engage in labour-intensive sectors.
  • It would replace three laws i.e. Trade Unions Act, 1926; Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

 

Key Features

•  
• It seeks to allow companies to hire workers on fixed-term contract of any duration.
• The code has retained the threshold on the worker count at 100 for prior government approval before retrenchment, but it has a provision for changing ‘such number of employees’ through notification. This provision has been criticized sharply by the labour groups and trade unions as any notification may change it later.
• It also provides setting up of a two-member tribunal (in place of one member) wherein important cases will be adjudicated jointly and the rest by a single member, resulting speedier disposal of cases.
• It has vested powers with the government officers for adjudication of disputes involving penalty as fines.
• Introduces a feature of ‘recognition of negotiating union’ under which a trade union will be recognized as sole ‘negotiating union’ if it has the support of 75% or more of the workers on the rolls of an establishment.
• As several trade unions are active in companies, it will be tough for any one group to manage 75% support, hence taking away their negotiating rights. In such a case, a negotiating council will be constituted for negotiation.
• Underlines that fixed-term employees will get all statutory benefits on a par with the regular employees who are doing work of the same or similar nature.
• Under the code, termination of service of a worker on completion of tenure in a fixed-term employment will not be considered as retrenchment.
• Proposes setting up of a “re-skilling fund” for training of retrenched employees. The retrenched employee would be paid 15 days’ wages from the fund within 45 days of retrenchment. 
• While this means workers can be hired seasonally for six months or a year it also means that all workers will be treated at par with regular workers for benefits.

 

Concerns

•  
• The Industrial Relations Code of 2019 has evoked strong reactions, as the right to form unions and accord them powers of representation has been severely curtailed.
• It provided that a minimum of 10% of workers or 100 workers employed in an establishment or industry would be needed - from seven at present - to register a trade union.

 

Criticism of Indian Labour laws

• Indian labour laws are often characterised as inflexible. 
  • It has been argued that firms (those employing more than 100 workers) dither from hiring new workers because firing them requires government approvals. 
  • Even the organised sector is increasingly employing workers without formal contracts. 
  • It has constrained the growth of firms on the one hand and provided a raw deal to workers on the other.
• Further, there are too many laws, often unnecessarily complicated, and not effectively implemented. 
  • This has laid the foundation for corruption and rent-seeking.
• Essentially, if India had fewer and easier-to-follow labour laws, firms would be able to expand and contract depending on the market conditions
•  In this case the resulting formalisation, at present 90% of India’s workers are part of the informal economy, would help workers as they would get better salaries and social security benefits.

 

Reaction of Labour Unions

• Ten central trade unions said they were considering lodging a complaint with the International Labour Organisation (ILO) against the anti-worker changes in the labour laws in some States.
• In a joint statement, they said the recent blanket exemption given to establishments from the employer’s obligations under several labour laws for three years by the Madhya Pradesh and Uttar Pradesh governments was a retrograde and anti-worker move. 
• This move was the second phase of anti-worker policies after six State governments increased the working hours from 8 to 12 hours.
• Central trade unions consider these moves as an inhuman crime and brutality on the working people, besides being a gross violation of the Right to Freedom of Association [ILO Convention 87], Rights to Collective Bargaining [ILO Convention 98] and also the internationally accepted norm of eight hour working days.
• The ILO Convention 144 in regard to tripartism has also been undermined by the government.
• The statement was signed by representatives of the Indian National Trade Union Congress, the All-India Trade Union Congress, the Hind Mazdoor Sabha, the Centre of Indian Trade Unions, the All-India United Trade Union Centre, the Trade Union Coordination Committee, the Self Employed Women’s Association, the All-India Central Council of Trade Unions, the Labour Progressive Federation and the United Trade Union Congress.

 

The Factories Act, 1948:

About 

• The Factories Act, 1948 consolidating and amending the law relating to labour in factories, was passed by the Constituent Assembly on August 28, 1948. 

• The Act came into force on April 1, 1949.

 

Objective

• To regulate the working conditions in factories.
• To regulate health, safety, welfare, and annual leave. 
• To enact special provision in respect of young persons, women and children who work in the factories.

 

Salient Features

Working Hours

• According to the provision of working hours of adults, no adult worker shall be allowed to work in a factory for more than 48 hours in a week. 
• There should be a weekly holiday.

Health

• The Act lays down that every factory shall be kept clean and all necessary precautions shall be taken in this regard.
•  The factories should have a proper drainage system, adequate lighting, ventilation, temperature etc.
• Adequate arrangements for drinking water should be made. 
• Sufficient lavatory facilities should be provided at convenient places.

Safety

• The Act provides that the machinery should be fenced, no young person shall work at any dangerous machine, in confined spaces, there should be provision for manholes of adequate size so that in case of emergency the workers can escape.

Welfare

• The Act provides that in every factory adequate and suitable facilities for washing should be provided and maintained for the use of workers.
• Facilities for storing and drying clothing, facilities for sitting, first-aid appliances, shelters, rest rooms and lunch rooms, crèches, should be there.

Penalties

• The provisions of The Factories Act, 1948, or any rules made under the Act, or any order given in writing under the Act is violated, it is treated as an offence with provision for the following penalties.
• Imprisonment for a term which may extend to one year
• Fine which may extend to one lakh rupees or
• Both fine and imprisonment.
• If a worker misuses an appliance related to welfare, safety and health of workers, or in relation to discharge of his duties, he can be imposed a penalty of Rs. 500/-.

Applicability

• The Act is applicable to any factory whereon 
• Ten or more workers are working, or were working on any day of the preceding twelve months, 
• and in any part of which a manufacturing process is being carried on with the aid of power,or  where twenty or more workers are working, or were working on any day of the preceding twelve months.

 

Time to rationalise the labour laws:

• India’s complex web of labour laws, with around 47 central laws and 200 State laws, need rationalisation.
• However, now more than ever before, reforms need to maintain a delicate balance between the need for firms to adapt to ever-changing market conditions and workers’ employment security.
• Depriving workers of fundamental rights such as freedom of association and the right to collective bargaining, and a set of primary working conditions such as adequate living wages, limits on hours of work and safe and healthy workplaces, will create a fertile ground for the exploitation of the working class.
• Presently, over 90% of India’s workforce is in informal jobs.
• These informal jobs have no regulations for decent conditions of work, no provision for social security and no protection against any contingencies and arbitrary actions of employers.