Center For Workers Education

for building a democratic labour movement in India

Ad-hocism in the Decisions to Modify Labour Laws

K Chandru; EPW; Vol – XLIX No. 30, July 26, 2014 |

Beginning with Rajasthan, labour legislations are being modifi ed and it seems to have the blessings of the new dispensation at the centre. The Government of India too has announced its decision to amend important legislations and has called for public comments. But ad hoc changes as planned do little for the working class, while ensuring that employers do not attract the ire of the law. There seems to be little understanding of the historic background of labour legislations in India, and even less about what needs to be done to make them more effective.

K Chandru ( is a former judge of the High Court of Madras.

The Vasundhara Raje-led government in Rajasthan has taken the lead in bringing about drastic changes to central labour laws. It has introduced far-reaching amendments to crucial labour legislations, which no state government has ever chosen to do. The history of Indian labour legislations shows that most of them were made due to strong demands by the working class from the Bengal, Bombay, and Madras presidencies. For a state that has very few industries to come up with such proposals shows that the newly elected Bharatiya Janata Party (BJP) government wants to use Rajasthan as a potential laboratory for tinkering with labour laws before extending them on a national scale.

The state has made amendments to three central government labour legislations – the Industrial Disputes Act (IDA), 1947, Contract Labour (Regulation and Abolition) Act (CLRA), 1970, and the Factories Act, 1948 – in an attempt to liberate the corporate sector from the stringent requirements of the law.

IDA Changes

According to the changes proposed to the IDA, the government’s prior permission will not be required for effecting retrenchments in establishments engaging up to 300 workers. When the Act was amended in 1976, it had stipulated that firms employing 300 or more workers had to obtain permission from the competent authority for retrenchments, lay-offs, and closures. By an amendment in 1982, it was expanded, and establishments engaging not less than 100 workers were brought within its purview. These provisions were challenged by employers as being arbitrary and unconstitutional, and they were repelled by the Supreme Court of India in the Meenakshi Mills case (1992), Madura Coats case (1994), and Orissa Textiles case (1994). The Rajasthan amendments represent an attempt to take history backwards.

The amendments made by the state government have also increased the percentage of workers needed for registration as a representative union from 15% to 30%. Today many states do not have a law obliging employers to compulsorily recognise any trade union for the purpose of collective bargaining.

The amendments to the CLRA raise the applicability of the Act to establishments having more than 50 workers from the current 20. Raising the strength for the application of the Act to larger establishments has no significant effect in the present scenario. The engagement of contract workmen is larger in ratio than permanent workmen in not only the private sector, but also public sector undertakings. Without following the provisions of the Act, the Supreme Court in the Steel Authority of India’s case (2001) rejected the claims of workers and virtually legalised outsourcing of labour. It ruled that the

CLRA Act do not provide automatic absorption of contract labour on issuing a notification prohibiting employment of contract labour and the principal employer cannot be required to absorb those contract labour.

Hence no trade union seeks a government notification on abolishing contract labour as it will eliminate the workforce in question by providing it no employment.

The Factories Act is applicable to premises with more than 10 workers with power and 20 without power, and the amendments raise these numbers to 20 and 40, respectively. The increase in maximum overtime work to 100 hours will make the eight-hour-day norm a mirage. It is a retrograde step in a law that is to take care of the safety, health, and welfare of workers. For the last six decades, employers have evaded the Act by having less than nine or 19 workers as the case may be. In Tamil Nadu, power-loom owners have divided looms in the same shed among their family members and registered each loom separately, thereby avoiding the provisions of the legislation. The proposed amendments only legalise the ingenious methods used by factory owners, still leaving out a large section of workers.

Night Shifts and Women Workers

The removal of the ban on night shifts for women workers also raises considerable concerns, even among women workers. The Factories Act prohibition on employing women for work at night was struck down by the Madras High Court in R Vasantha’s case (2001). The state did not effectively challenge the judgment. The net result is that female workers are employed in three shifts in Tamil Nadu, and have in a sense become camp coolies, contrary to the International Labour Organisation (ILO) norms.

By the amendments proposed to the Apprentices Act, 1961,the state government will be sharing the cost of apprenticeship. If a company having less than 250 workers hires apprentices, the state will absorb half the cost, and if it has above this number, the state government will absorb a fourth of the cost. Under the Act, in no case have employers absorbed trained apprentices as regular workmen. After the successful completion of training, apprentices are left high and dry.

Since labour legislations come under the concurrent list under Schedule VII of the Constitution of India, it is open to both the central and state governments to enact labour laws and also to make the necessary amendments to the law made by the central government provided they gain the assent of the President of India. As soon as the Rajasthan government proposed the amendments, senior BJP leader and former minister Arun Shourie claimed

should Narendra Modi become the Prime Minister, he could bring about genuine federalism by allowing more progressive states to change their laws. As the Gujarat Chief Minister, Modi himself complained in the past that the central government was sitting on many of the changes proposed by his state.

He further claimed that “such changes to laws can be brought about in a variety of issues and this will ‘unfreeze’ policy environment.”

Central Follow-up

The Rajasthan proposals have evoked strong reactions among all the trade unions, including the Bharatiya Mazdoor Sangh (BMS), an affiliate of the BJP. Having sounded the bugle from Rajasthan, the Modi government followed it up with its own proposals to amend labour laws. Its first attempt will be to revamp the Factories Act. Minister of State for Mines, Steel, and Labour Vishnu Deo told the Lok Sabha in a written reply that the proposed major amendments will include relaxing restrictions on night duty for women in factories, subject to certain conditions, and increasing the limit of overtime to 100 hours (now 50 hours) in a quarter. He further told Parliament that the process of amending the Factories Act had been initiated in 2011 with the government setting up an expert panel headed by Planning Commission member Narendra Jadhav. In recent times, it has become routine for spokespersons of the BJP government to attribute any unpopular move to decisions taken by the United Progressive Alliance (UPA) government. The Modi government, on 5 June and 17 June, introduced the proposed amendments to the Factories Act, 1948 and the Minimum Wages Act, 1948. (The Ministry of Labour has posted the proposals on the website and has sought comments.)

National Labour Commission

India undoubtedly has the lengthiest labour legislations in the world. There are as many as 50 central laws, besides each state having umpteen local labour legislations. From time to time, there have been demands from many quarters to consolidate and simplify labour legislations. There have been demands from trade unions and employers to make the necessary changes to the laws, and they were raised before the first National Labour Commission (NLC) presided over by Justice P B Gajendragadkar. In its 1969 report, the NLC suggested cosmetic changes, such as that the name of the IDA should be changed to Industrial Relations Act so that it would not sound a discordant note and encourage smooth industrial relations. The report also recommended the consolidation of the Trade Unions Act (1923), the Industrial Employment (Standing Orders) Act (1946), and the Industrial Disputes Act (1947).

Prime Minister Indira Gandhi took advantage of the Emergency to woo working-class parties, and brought amendments to the IDA. A new chapter, V-B, was brought in making the approval of the government mandatory before declaring lay-offs, retrenchments, and closure of industrial establishments. If at all employers have any grievance today, it is against these provisions of the IDA. Foreign investors, Indian business houses, and chambers of commerce mounted a strong campaign since their legal challenges had failed.

After the first NLCreport, no worthwhile steps were taken to consolidate and simplify laws. A decade later, the Janata Party government introduced the Industrial Relations Bill (IRBill) (1978) in Parliament, but it was later dropped. In 1982, the Congress government introduced another IRBill. Since there was no clarity on the attendant legislations to be brought in for the categories excluded from the IDA, that move also failed.

After a few years, another NLCwas constituted under former Union Labour Minister Ravindra Verma. That commission in its 2,700-page report(1989) stressed bilateral agreements, collective bargaining, identifying the parties to a bargain, and reviewing the provisions in the Trade Union Act on the recognition/registration of trade unions. It was recommended that the existing labour laws be grouped into laws pertaining to industrial relations, wages, social security, safety, welfare, working conditions, and so on. The NLC was of the view that the coverage as well as the definition of the term “worker” should be the same, and that social security benefits must be available to all employees, including administrative, managerial, supervisory, and other excluded categories. It recommended a separate law for small establishments. It also held that contract labour should not be engaged for core production/service activities. Contract labour was to be remunerated at the same rate as regular workers in the same organisation doing work of a comparable nature. The NLC observed that the unionisation was low, and that it was time to reverse this and encourage collective negotiations.

Far from implementing the second NLC report, the central government dragged its feet, only making some changes to the Trade Union Act (2002) and the IDA (1984 and 2010). It was around this time that the central government’s policy turned towards privatisation, liberalisation, and globalisation of the economy. Many public sector units were privatised and foreign companies were encouraged to shift their units to India. State governments created special economic zones (SEZs) to attract investments and entrepreneurs were promised exemption from labour laws.

Judiciary’s Support

The government’s policy of privatisation received strong support from the higher judiciary. Challenges made to the disinvestment of public sector units were rejected and judicial reviews were prohibited in the Balco Employees Union case (2002) and the Devans Modern Breweries case (2004). The Supreme Court also observed in the Uttar Pradesh State Brassware Corporation case (2006),

Socialism might have been a catchword from our history. It may be present in the preamble of our Constitution. However, due to the liberalisation policy adopted by the Central Government from the early nineties, this view that the Indian society is essentially wedded to socialism is definitely withering away.

The Court also ruled,

Globalisation has brought a radical change in the economic and social landscape of the country. Its impact on the Constitution and constitutionalism is significant. …Often the economic changes in the country relating to regulation of markets brought about by competition law leading to substantial erosion of administrative law by private law are matters which eventually would fall for our decision. The Court will have to take a realistic view in interpretation of the Constitution having regard to the changing economic scenario.

Today, vast sections of unorganised labour are not covered by any labour legislation. Even where legislation operates, large numbers of casual workers are unable to get legal protection. While trade unions seek a comprehensive labour legislation, employers seek more and more deregulations or exemptions from the law. SEZs that have allowed industries to be set up with special incentives to improve the export of goods are hardly regulated by labour laws. This has resulted in demoralisation of the workforce. These developments have also sometimes led to individual violence against officers/managers (for example, at Maruti Suzuki’s plant on the outskirts of Gurgaon). The enforcement machinery has become utterly corrupt and enforcement officers look the other way when serious breaches of labour legislations take place. The multi-tier appeals system allows litigation to start from labour courts/industrial tribunals, proceed to high courts (single bench and division bench), and end up in the Supreme Court. Normally, a contested industrial dispute takes a minimum of 20 years to reach the finality of a conclusion. A survey of the disputes that come up for adjudication before labour courts shows that 90% of them had to do with the dismissal of individual workers. Gone are the days when adjudicating forums dealt with collective disputes related to workers, wages, bonuses, and work norms. No trade union worth its name now wants to go for adjudication and would rather settle matters around the negotiating table. The trade unions operating in large units hardly go to court for adjudication. The existing labour laws have largely failed to deliver and they require revamping – but not in the sense understood by the Modi government.

Before tinkering with the existing labour laws, one must know their history. The colonial government never wanted to extend labour legislations that existed in the UK in the early years of the 20th century. After the first world war, colonial India was dubiously made a member of the ILO. After lot of hue and cry, a Royal Commission of Labour, which came to India, observed in its report (1929),

Everything that we have seen in India has forced upon the conviction that the need of organisation among Indian workmen is great. …Nothing but a strong trade union movement will give the Indian workman adequate protection. …It is in the power to combine that labour has the only effective safeguard against exploitation, and the only lasting security against inhumane conditions.

Its opinion was that the unionisation of workers alone would improve their economic conditions. Therefore, the first phase of labour legislations introduced (1923-45) were merely regulatory. In the second phase, after the second world war, a nationalist government began making laws that affected the relationship between capital and labour (1946-51). After the Constitution of India was enacted and the state was obliged to make laws in terms of the directive principles of state policy, a number of welfare legislations were enacted in the third phase (1952-86). The legislations made during the second phase show that most of them were as a result of unionisation in a particular sector. They covered an identifiable group. The government made sector-wise and segment-oriented laws relating to plantation labour, mine workers, beedi and cigar workers, motor transport workers, and so on. Each of them had their own peculiarity and the service conditions for each industry were unique.

Motives of Amendments

Against this background, any attempt made to consolidate and simplify labour laws is welcome. However, attempts to universalise the law should not result in workers in unique segments losing their hard-earned rights. The present attempts by the Rajasthan government and the central government do not indicate that they were motivated by the desire to bring any comprehensive laws to the sector. On the other hand, they are only an attempt to deregulate the sector. Without conducting any worthwhile studies on the issue, ad-hocism seems to be ruling the roost.

Stories are published in the media on the need for revamping so-called outdated labour legislations that were brought in without conducting any scientific studies. The Times of India in 1928 had said in an editorial:

So far we have seen repeated in India almost the whole of the blunders that attended the beginnings of the industrial era elsewhere, in the failure to realise the needs of the workers as human beings. The process of transferring millions from agriculture to industry calls for a large statesmanship, if irretrievable blunders are to be avoided.

It did not have any qualms about saying in 2010,

Successive governments haven’t had the stomach for labour reform, the key to generating organised sector jobs. Thanks to restrictive labour laws, relics of colonial times, such employment has remained near-stagnant in port-reforms India…There’s also little scope for flexibility in contracts reflecting the diversity of jobs on offer across different sectors…Besides overhauling antiquated labour laws, we must create opportunities by dismantling hurdles to private investment in infrastructure and retail…State paternalism is no surrogate for these tasks.

The economic reforms and the dilution of labour legislations have brought unprecedented misery to the working masses in our country. Ever rising prices have eroded the real value of their wages, which have put their health in jeopardy. Fast shrinking public health services and the lack of medical insurance for the poor have added to their problems. There are no jobs that provide a sustainable income for workers. Whatever is on offer is contractual or casual in nature with long hours, terrible work conditions, and no security. To top it all, the fundamental right to organise and agitate for better wages, better working conditions, and a better life is being crushed systematically. The working class certainly did not bargain for this parivartan (change) from the new government.


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