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Labour law
Legislative history
The history of labour legislation in India is naturally interwoven
with the history of British colonialism. Considerations of British
political economy were naturally paramount in shaping some of
these early laws. In the beginning it was difficult to get enough
regular Indian workers to run British establishments and hence
laws for indenturing workers became necessary. This was obviously
labour legislation in order to protect the interests of British
employers.
Then came the Factories Act. It is well known that 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 because of the pressure
brought on the British parliament by the textile magnates of
Manchester and Lancashire. Thus we received the first stipulation
of eight hours of work, the abolition of child labour, and the
restriction of women in night employment, and the introduction of
overtime wages for work beyond eight hours. While the impact of
this measure was clearly welfarist the real motivation was
undoubtedly protectionist!
To date, India has ratified 39 International Labour Organisation (ILO)
conventions of which 37 are in force. Of the ILO’s eight
fundamental conventions, India has ratified four - Forced Labour
1930, Abolition of Forced Labour 1957, Equal Remuneration 1951,
and Discrimination (employment and occupation) 1958.
The organised and the unorganised
An important distinction that is popularly made nowadays
in all discussions relating to labour legislation is between
workers in the organised/formal sector and those in the
informal/informal sector. Many who make this distinction do so
with ulterior motives, yet we must reckon with it - especially
because out of the total workforce in the country, 92 percent work
in the informal sector while only eight percent work in the formal
sector.
At the outset it must therefore be remembered that those who were
unorganised yesterday are organised today and those who are
unorganised today aspire to become the organised tomorrow.
Moreover, many rights, benefits, and practices, which are
popularly recognised today as legitimate rights of the workers,
are those that have accrued as a result of the struggles carried
out by the earlier generation of workers. The attempt, prevalent
in some circles to pit one section of workers against the others,
must therefore be carefully understood and deserves to be rejected
outright.
Trade unionism and the Trade Union Act 1926
There are almost ten major central union organisations of workers
based on different political ideologies. Almost every union is
affiliated to one of these. These central organisations have state
branches, committees, and councils from where its organisation
works down to the local level.
The first central trade union organisation in India was the All
India Trade Union Congress (AITUC) in 1920 - almost three decades
before India won independence. At about the same time workers at
the Buckingham and Carnatic Mills, Madras went on strike led by B
P Wadia. The management brought a civil suit against the workers
in the Madras High Court and not only obtained an injunction order
against the strike but also succeeded in obtaining damages against
the leader for ‘inducing a breach of contract’. This was followed
by widespread protests that finally yielded in the Trade Union Act
1926 giving immunity to the trade unions against certain forms of
civil and criminal action. Apart from this aspect the Trade Union
Act also facilitated registration, internal democracy, a role for
outsiders and permission for raising a political fund subject to
separate accounting requirements.
The Trade Union Act facilitates unionisation both in the organised
and the unorganised sectors. It is through this law that the
freedom of association that is a fundamental right under the
Constitution of India is realised.
The right to register a trade union however does not mean that the
employer must recognise the union – there is in fact no law which
provides for recognition of trade unions and consequently no legal
compulsion for employers, even in the organised sector, to enter
into collective bargaining.
Yet in reality because of the strength of particular trade unions
there is fairly widespread collective bargaining, especially in
the organised sector.
Wage determination in the un organised sector
Wage determination in India has been achieved by various
instruments. For the unorganised sector the most useful instrument
is the Minimum Wages Act 1948. This law governs the methods to fix
minimum wages in scheduled industries (which may vary from state
to state) by using either a committee method or a notification
method. A tripartite Advisory Committee with an independent
Chairman advises the Government on the minimum wage. In practice
unfortunately, the minimum wage is so low that in many industries
there is erosion of real wage despite revision of the minimum wage
occasionally. A feeble indexation system has now been introduced
in a few states only.
Collective bargaining in the organised sector
An important factor that is not much recognised, but which still
prevails in many organised sector units is fixing and revising
wages through collective bargaining. The course of collective
bargaining was influenced in 1948 by the recommendations of the
Fair Wage Committee that reported that three levels of wages exist
- minimum, fair, and living.
These three wage levels were defined and it was pointed out that
all industries must pay the minimum wage and that the capacity to
pay would apply only to the fair wage, which could be linked to
productivity. In addition to this the fifteenth Indian Labour
Conference, a tripartite body, met in 1954 and defined precisely
what the needs-based minimum wage was and how it could be
quantified using a balanced diet chart. This gave a great boost to
collective bargaining; many organised sector trade unions were
able to achieve reasonably satisfactory indexation and a system of
paying an annual bonus. It is now the law, that a thirteenth month
of wage must be paid as a deferred wage to all those covered by
the Payment of Bonus Act. The minimum bonus payable is 8.33
percent and the maximum is 20 percent of the annual wage.
Strikes and lockouts
Workers have the right to strike, even without notice
unless it involves a public utility service; employers have the
right to lockout, subject to the same conditions as a strike. The
parties may sort out their differences either bilaterally, or
through a conciliation officer who can facilitate but not compel a
settlement which is legally binding on the parties, even when a
strike or a lockout is in progress. But if these methods do not
resolve a dispute, the government may refer the dispute to
compulsory adjudication and ban the strike or lockout.
Conciliation, arbitration, and adjudication
When parties engaging in collective bargaining are unable
to arrive at a settlement, either party or the government may
commence conciliation proceedings before a government appointed
conciliation officer whose intervention may produce a settlement,
which is then registered in the labour department and becomes
binding on all parties. If conciliation fails it is open to the
parties to invoke arbitration or for the appropriate government to
refer the dispute to adjudication before a labour court or a
tribunal whose decision may then be notified as an award of a
binding nature on the parties. Disputes may be settled by
collective bargaining, conciliation, or compulsory adjudication.
Colonial dispute settlement machinery
The Industrial Disputes Act 1947 (IDA) provides for the
settlement machinery above. The framework of this legislation,
which is the principle legislation dealing with core labour
issues, is of colonial origin. This law originated firstly in the
Trade Disputes Act 1929, introduced by the British, when there was
a spate of strikes and huge loss of person days and secondly
through Rule 81A of the Defence of India Rules 1942, when the
British joined the war efforts and wanted to maintain wartime
supplies to the allied forces. Interestingly the interim
government on the eve of formal independence retained this
framework by enacting the IDA, which still remains on the statute
book.
Developments after independence
Even though the IDA was primarily meant for industry in the
organised sector, its present application has now extended well
into the unorganised sector, through judge-made law. Its
pro-worker protection clauses and safeguards against arbitrary job
losses have evolved over a period of time both through the process
of sustained legislative amendments and through the process of
judicial activism spread over more than five decades.
The original colonial legislation underwent substantial
modification in the post-colonial era because independent India
called for a clear partnership between labour and capital. The
content of this partnership was unanimously approved in a
tripartite conference in December 1947 in which it was agreed that
labour would be given a fair wage and fair working conditions and
in return capital would receive the fullest co-operation of labour
for uninterrupted production and higher productivity as part of
the strategy for national economic development and that all
concerned would observe a truce period of three years free from
strikes and lockouts.
Regulation of job losses
Space does not allow a detailed discussion of this
transformation in labour policy and consequent amendments to
labour law, but provisions that deal with job losses must be
noted. Under the present law any industrial establishment
employing more than 100 workers must make an application to the
Government seeking permission before resorting to lay-off,
retrenchment, or closure; employers resorting to any of the said
forms of creating job losses, is acting illegally and workers are
entitled to receive wages for the period of illegality. The
Reserve Bank of India commissioned a study into the causes of
sickness in Indian industry and they reported cryptically,
‘Sickness in India is a profitable business’. This chapter in the
IDA, which has been identified as offering high rigidity in the
area of labour redundancy, has been targeted for change under
globalisation and liberalisation.
Protection of service conditions
A feature of the IDA is the stipulation that existing
service conditions cannot be unilaterally altered without giving a
notice of 21 days to the workers and the union. Similarly if an
industrial dispute is pending before an authority under the IDA,
then the previous service conditions in respect of that dispute
cannot be altered to the disadvantage of the workers without prior
permission of the authority concerned. This has been identified as
a form of rigidity that hampers competition in the era of the
World Trade Organisation.
Removal from service
A permanent worker can be removed from service only for
proven misconduct or for habitual absence - due to ill health,
alcoholism and the like, or on attaining retirement age. In other
words the doctrine of ‘hire and fire’ is not approved within the
existing legal framework. In cases of misconduct the worker is
entitled to the protection of Standing Orders to be framed by a
certifying officer of the labour department after hearing
management and labour, through the trade union. Employers must
follow principles of ‘natural justice’, which again is an area
that is governed by judge-made law. An order of dismissal can be
challenged in the labour court and if it is found to be flawed,
the court has the power to order reinstatement with continuity of
service, back wages, and consequential benefits. This again is
identified as an area where greater flexibility is considered
desirable for being competitive.
Return to colonial days!
Almost all pro-worker developments that accrued since independence
are now identified as areas of rigidity and in the name of
flexibility there is pressure on the government of India to repeal
or amend all such laws. Interestingly, if such a proposal is fully
implemented, labour law, especially for the organised sector, will
go back to the colonial framework where state intervention was
meant primarily to discipline labour, not to give it protection.
Globalisation
The most distinctly visible change from globalisation is the
increased tendency for offloading or subcontracting. Generally
this is done through the use of cheaper forms of contract labour,
where there is no unionisation, no welfare benefits, and quite
often not even statutorily fixed minimum wages. Occasionally the
tendency to bring contract labour to the mother plant itself is
seen. This is very often preceded by downsizing, and since there
is statutory regulation of job losses, the system of voluntary
retirement with the ‘golden handshake’ is widely prevalent, both
in public and private sectors.
Regulation of contract labour
The Contract Labour (Prohibition and Regulation) Act 1970
provides a mechanism for registration of contractors (if more than
twenty workers are engaged) and for the appointment of a
Tripartite Advisory Board that investigates particular forms of
contract labour, which if found to be engaged in areas requiring
perennial work connected with the production process, then the
Board could recommend its abolition. A tricky legal question has
arisen as to whether the contract workers should be automatically
absorbed or not after the contract labour system is abolished.
Recently a Constitutional Bench of the Supreme Court held that
there need not be such automatic absorption - in effect this
‘abolishes’ the contract labourer and has given rise to a serious
anomaly.
Phase between organised and unorganised
We are already witnessing a reduction in the organised
labour force and an increase in the ranks of the unorganised. The
above law is a kind of inter-phase in the process of regulating
the transition from regular employment to irregular employment. If
contract labour is seen as introducing a form of flexibility, a
strict enforcement of this Act could have had a salutary effect on
the transition process. Instead the enforceability of the Act is
now diluted and consequently even the minimum protection envisaged
under this law to contract labourers is in jeopardy. Dominant
thinking in relation to globalisation is having its effect on the
judicial process also, ignoring Directive Principles of State
Policy contained in the Constitution of India.
Employment injury, health, and maternity benefit
The Workman’s Compensation Act 1923 is one of the earliest
pieces of labour legislation. It covers all cases of ‘accident
arising out of and in the course of employment’ and the rate of
compensation to be paid in a lump sum, is determined by a schedule
proportionate to the extent of injury and the loss of earning
capacity. The younger the worker and the higher the wage, the
greater is the compensation subject to a limit. The injured
person, or in case of death the dependent, can claim the
compensation. This law applies to the unorganised sectors and to
those in the organised sectors who are not covered by the
Employees State Insurance Scheme, which is conceptually considered
to be superior to the Workman’s Compensation Act.
The Employees State Insurance Act provides a scheme under which
the employer and the employee must contribute a certain percentage
of the monthly wage to the Insurance Corporation that runs
dispensaries and hospitals in working class localities. It
facilitates both outpatient and in-patient care and freely
dispenses medicines and covers hospitalisation needs and costs.
Leave certificates for health reasons are forwarded to the
employer who is obliged to honour them. Employment injury,
including occupational disease is compensated according to a
schedule of rates proportionate to the extent of injury and loss
of earning capacity. Payment, unlike in the Workmen’s Compensation
Act, is monthly. Despite the existence of tripartite bodies to
supervise the running of the scheme, the entire project has fallen
into disrepute due to corruption and inefficiency. Workers in need
of genuine medical attention rarely approach this facility though
they use it quite liberally to obtain medical leave. There are
interesting cases where workers have gone to court seeking
exemption from the scheme in order to avail of better facilities
available through collective bargaining.
The Maternity Benefit Act is applicable to notified
establishments. Its coverage can therefore extend to the
unorganised sector also, though in practice it is rare. A woman
employee is entitled to 90 days of paid leave on delivery or on
miscarriage. Similar benefits, including hospitalisation
facilities are available under the law described in the paragraph
above.
Retirement benefit
There are two types of retirement benefit generally
available to workers. One is under the Payment of Gratuity Act and
the other is under the Provident Fund Act. In the first case a
worker who has put in not less than five years of work is entitled
to a lump sum payment equal to 15 days’ wages for every completed
year of service. Every month the employer is expected to
contribute the required money into a separate fund to enable this
payment on retirement or termination of employment. In the latter
scheme both the employee and the employer make an equal
contribution into a national fund. The current rate of
contribution is 12 percent of the wage including a small
percentage towards family pension. This contribution also attracts
an interest, currently 9.5 percent per annum, and the accumulated
amount is paid on retirement to the employee along with the
interest that has accrued. Unfortunately the employee is allowed
to draw many types of loan from the fund such as for house
construction, marriage of children, and education etc. As a result
very little is available at the time of retirement. This is also a
benefit, which is steadily being extended to sections of the
unorganised sector, especially where the employer is clearly
identifiable.
Women labour and the law
Women constitute a significant part of the workforce in India but
they lag behind men in terms of work participation and quality of
employment. According to Government sources, out of 407 million
total workforce, 90 million are women workers, largely employed
(about 87 percent) in the agricultural sector as labourers and
cultivators. In urban areas, the employment of women in the
organised sector in March 2000 constituted 17.6 percent of the
total organised sector.
Apart from the Maternity Benefit Act, almost all the major central
labour laws are applicable to women workers. The Equal
Remuneration Act was passed in 1976, providing for the payment of
equal remuneration to men and women workers for same or similar
nature of work. Under this law, no discrimination is permissible
in recruitment and service conditions except where employment of
women is prohibited or restricted by the law. The situation
regarding enforcement of the provisions of this law is regularly
monitored by the Central Ministry of Labour and the Central
Advisory Committee. In respect of an occupational hazard
concerning the safety of women at workplaces, in 1997 the Supreme
Court of India announced that sexual harassment of working women
amounts to violation of rights of gender equality. As a logical
consequence it also amounts to violation of the right to practice
any profession, occupation, and trade. The judgment also laid down
the definition of sexual harassment, the preventive steps, the
complaint mechanism, and the need for creating awareness of the
rights of women workers. Implementation of these guidelines has
already begun by employers by amending the rules under the
Industrial Employment Standing Orders Act 1946.
Implementation of labour laws
The Ministry of Labour has the responsibility to protect and
safeguard the interests of workers in general and those
constituting the deprived and the marginal classes of society in
particular with regard to the creation of a healthy work
environment for higher production and productivity. The Ministry
seeks to achieve this objective through enacting and implementing
labour laws regulating the terms and conditions of service and
employment of workers. In 1966, the Ministry appointed the First
National Labour Commission (NLC) to review the changes in the
conditions of labour since independence and also to review and
assess the working of the existing legal provisions. The NLC
submitted its report in 1969. The important recommendations of NLC
have been implemented through amendments of various labour laws.
In the areas of wage policy, minimum wages, employment service,
vocational training, and worker’s education, the recommendations
made by the NLC have been largely taken into account in modifying
policies, processes, and programmes of the government. In order to
ensure consistency between labour laws and changes in economic
policy, and to provide greater welfare for the working class, the
Second NLC was constituted in 1999.
All labour laws provide for an inspectorate to supervise
implementation and also have penalties ranging from imprisonment
to fines. Cases of non-implementation need to be specifically
identified and complaints filed before magistrates after obtaining
permission to file the complaint from one authority or the other.
Very few cases are filed, very rarely is any violator found
guilty, and almost never will an employer be sent to prison.
Consequently these powers are used by corrupt officials only for
collecting money from employers.
This does not however mean that no labour laws are implemented. On
the contrary experience has proved that the implementation of such
laws is directly proportional to the extent of unionisation. This
generalisation is particularly true of the informal sector.
The unorganised sector
Many of the laws mentioned above apply to the unorganised sector
also. In some cases a separate notification may be necessary to
extend the application of a particular law to a new sector. It is
useful to notice that some pieces of legislation are more general
in character and apply across the board to all sectors. The Trade
Union Act 1926, The Minimum Wages Act 1948, The Contract Labour
(Regulation and Abolition) Act 1970, The Workman’s Compensation
Act 1923, and The Payment of Wages Act 1936 are examples of this
type. In certain cases, even the IDA 1947 would be included.
In addition to the above there are special sectoral laws
applicable to particular sectors of the unorganised. Under this
category are laws like the Building and Construction Workers Act
1996, the Bonded Labour System (Abolition) Act 1976, The
Interstate Migrant Workers Act 1979, The Dock Workers Act 1986,
The Plantation Labour Act 1951, The Transport Workers Act, The
Beedi and Cigar Workers Act 1966, The Child Labour (Prohibition
and Regulation) Act 1986, and The Mine Act 1952.
Broadly speaking these sectoral laws either abolish or prohibit an
abominable practice like bonded labour or they seek to regulate
exploitative conditions by regulating working hours and conditions
of service.
A recent trend has been to seek the creation of a welfare fund
through the collection of a levy from which medical benefits or
pension provisions are made. Workers and management may contribute
and attempt to set up tripartite boards for implementation of
welfare benefits. In some states like Kerala a large number of
such boards have already been set up to take care of welfare in
different sectors of employment.
Another contemporary effort is to provide an umbrella statute to
take care of employment conditions and social welfare benefits for
all unorganised sections. Common central legislation for all
agricultural workers is also on the anvil. Many powers are vested
in quasi-judicial authorities, labour courts, and magistrates’
courts. The power of review is in the High Courts and finally in
the Supreme Court.
The general experience, with the occasional exception, is
unbearable delay. Even where statutes prescribe reasonable time
limits, they are not adhered to. Frustration with labour-related
justice is heightened by these unlimited delays. A case of
dismissal takes almost ten years for the labour court to decide
and if the parties decide to seek judicial review in the higher
courts there can be unlimited delay.
For the unorganised sector a renewed attempt to focus on the core
labour standard identified by the ILO in its Declaration on
Fundamental Rights at Work would still be worthwhile, especially
if we take steps to ensure the implementation of the first of
those core labour standards namely the freedom of association and
the right to collective bargaining. It is only through the
organisation of potential beneficiaries that we can hope for some
benefits at least to percolate down into the hands of the needy.
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