Changing Context

Reforming Labour Laws

Surendra Pratap

The process of Labour Reforms has acclerated dramatically. The new proposed code on industrial relations (clubbing together ID Act, Trade Unions Act and Standing Orders Act) apply to only industrial units with 40 or more workers. There is another proposed law on the Small Factories (Regulation of Employment and Condition of Services) Bill, 2014, which will be applicable to factories employing 10-40 workers and which clearly says that *14 laws including Industrial Disputes Act, Factories Act etc will not be applicable to these units. The small factories bill has only some minimum kind of provisions on industrial relations, OHS, wages, social security etc. It is still not clear, which law will apply to industrial units with 1-9 workers. Agriculture operation is clearly put outside the ambit of both these laws. It is not mentioned and hence unclear whether it also applies to other traditional occupations like fisheries, horticulture and plantations. It is also not clear, which law will apply to industrial units other than factories (i.e., services) with up to 40 workers. Moreover, in various sections of new code of industrial relations, the Government has power to exempt conditionally or unconditionally, any industrial establishment or class of industrial establishments from all or any of the provisions.

It is worth mentioning that the most serious problem in current industrial relations scenario is that of huge proportion of unreported workers, i.e., large proportion of workers are engaged without putting them on any rolls of the company and they do not possess any proof of employment. In absence of any of such identity they are unable to make any complaint when laws are violated and their dues are not paid by the companies; and moreover they also face harassment by police when they do night shifts or overtime work in the night. The new code does not address this problem in any way. Employers use this strategy to reduce labour costs and maximize their profits and hence this problem can be resolved only with strict provisions and enforcement of heavy punishment for employers who violate it. It is to be kept in mind that Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act is already amended and now establishments with 10-39 workers (earlier 10-19) are exempted from filing returns for 19 labour laws (earlier 9). This will drastically increase the intensity of engagement of unreported workers and exploitation of workers in general in industrial units with less than 40 workers.

It is also important to note that Contract Labour Act is not made the part of new code on industrial relations, and the code simply ignores the aspects related to contract labour; although the issues of informal/contract/casual labour and the major aspects of the contract labour act are integral part of industrial relations, and currently this is one of the important issue of conflict in almost all industries. The employers want to scrap this act; Rajasthan government has already amended the contract labour act making it applicable only in units with 50 or more workers rather than earlier 20 or more workers; many other states are also moving in the same direction, but this new code is silent on this. Moreover, another major development in current industrial relations dynamics is that of engaging extremely higher proportion of apprentices and using them as source of cheapest and most vulnerable workforce. In these situations there is no logic why they are not considered as workers for all practical purposes. Therefore the issue of apprentice is also integral part of industrial relations, but the new code simply ignores these issues and neither contract workers nor apprentices find any mention in the new codes. The most serious part of labour law reforms is the amendment in Child Labour Act that allows children to be engaged in household enterprises in the name of learmng skills. This is naturally going to increase the intensity of child labour considering the fact that in new production systems household industries are integrated with global value chains and engage significant proportion of workers and contribute significant proportion of value addition in industries.

One of the major issues that emerged with new system of production is that now everything is linked with the global value chains, majority of local industries producing for transnational brands and almost completely dependent on production orders of these brands. In these situations they face serious problems of fluctuating production orders and so need fluctuating production capacities accompanied with continuous pressure from brands to reduce costs. This is one of the important factor behind the problems of brutalization of labour exploitation-extremely excessive overtime, extreme intensification of labour process, not paying even minimum wages, no premium payment for overtime, engaging large numbers of unreported workers and frequent hire and fire to avoid paying social security, bonus and gratuity. This is why one of the demands emerged for a new law or a new section in industrial relations law on outsourcing and responsibility of insuring labour standards across the value chains, with clear provisions for: a) compelling Brands or other 1st and 2nd tier customer companies to make yearly contracts with supplier companies, rather than order based contracts, and that the cost of total orders in a year must include (along with cost of other factors and profit margins of suppliers) total cost of wages, social security contributions, cost of occupational health and safety, layoff wages and severance payment to workers if the orders are discontinued after a year (in case the supplier company is working for multiple brands and other customer companies then the above total cost may be distributed among them accordingly), b) the above cost breakup of the work orders showing the component of wages must be declared by the supplier companies on their website so that accountability can be insured, and in case of violauons the brands and suppliers can be made responsible and punished; c) the law must clearly state that the brands and other customer companies, whether national or foreign, are equally responsible for ensuring compliance of labour standards across their value chain and share its costs, and in case of any violations reported in their value chains the brands may be made equally responsible and punished. But the new code of industrial relations cleverly skips this aspect completely.

Standing Orders : In the new code the Standing Orders will apply to only industrial units with 100 or more workers. In many states it is applicable on industrial units with 50 or more workers, but in the new proposed central code limit of 50 workers is not incorporated. A standing order provides for clear cut policies and provisions and all various aspects of working conditions. It is not understandable why it is not made applicable for all industrial units. It is only a case of denying a basic right to workers without any proper logic.

Right to Association and Collective Bargaining : The Trade Unions Act is already amended that increased the requirement of membership to 10 percent or 100 members for registration of trade unions. The earlier requirement was only for 7 members. Now the requirement of 7 members applies only in the units where 10 percent of workforce is less than 7. Non-worker members of trade unions or outsiders played a crucial role in formation and strengthening of the trade union movement, but the new proposed Code on Industrial Relations does not allow any outside member in trade unions in organized sector. In unorganized sector trade unions also only two outside members are allowed. This will certainly weaken the trade unions. In new code there is a provision for Registrar making an order on the application for registration of trade union within 60 days, if no communication is received from registrar within this time limit the union may be deemed registered. But anyone familiar with current state of industrial relations dynamics knows well that sixty days is a very long period and there are all possibilities the application gets leaked to the employers and large scale victimization of workers fails the unionization process.

The new code also does not bring out any provision for recognition of trade unions. Although in many states there is clear provisions and procedures for recognition of trade union, but these provisions were not incorporated in the new central code. This is one of the biggest problems that the trade unions face, because in the lack of any law of recognition, the employers generally deny recognition to the unions truly representing workers, rather they create and recognize yellow unions.

There are provisions in the new code for a Works Committee and a Grievance Redressal Committee. This is a mockery of collective bargaining. These committees will have equal number of representatives from workers and management. In these situations is it unimaginable that workers may dare to raise their voice in these committees.

Rights to Strikes : Definition of strike is changed and a group of workers (50% or more) taking casual leave together is also considered (illegal) strike. The provisions for going on a strike is made so complex that it is almost next to impossible to have an effective strike if all legal procedures are followed. The provisions earlier applied for public utilities are now applied to all industrial units—2 weeks' notice and soon after conciliation proceedings triggered and in pendency of these proceedings strike not allowed. If the strike is called without following legal procedures there are heavy punishment for the workers as well as those who support or help the strike. It is interesting to note that punishment for workers for illegal strike and those for employers for illegal lockout is same (50000 to 1 lakh and/or imprisonment). It is also prohibited for workers to stage, encourage or instigate such forms of coercive actions as willful, "go-slow", squatting on the work premises after working hours or "gherao" of any of the members of the managerial or other staff during conciliation proceedings and that no worker shall stage demonstrations at the residence of the employers or the managerial staff members during conciliation proceedings and adjudication proceedings before the Tribunal and National Tribunal. It is interesting to note that in small factories bill, there is no mention of strike or right to strike. This is completely unclear whether right to strike exists for them or not. The term Collective dispute is used in small factories bill, and it provides that not less than fifty one percent of the workers, directly or through a trade union of workers, may raise a dispute about general demands before the Conciliation Officer appointed under the Industrial Disputes Act, 1947 and that if the dispute is not settled within 90 days of filing the dispute before the Conciliation Officer, the workers or the trade union may submit a statement of claim before the Labour Court. It is also interesting to note that the recent Gujarat Labour Laws (Gujarat Amendment) Bill 2015 prohibits the strikes in public utilities for two years (existing 6 months), and moreover it brings out a new provision to settle various offences out of court. It is also worth mentioning that in small factories bill there is a crazy clause : "If ten or more workers, acting in concerted manner remain absent from duty without due notice and reasonable cause, the employer shall be entitled to mark them absent and deduct eight days wages of each worker."

Job Security : Under the new code on industrial relations the job security applies to only the industrial units with 300 and more workers, in which case the employers are required to take permission from the government before retrenchment and layoff of the workers. In Industrial Disputes Act this provision applied for all industrial units with 100 or more workers. Therefore now Easy hire and fire is allowed in all industrial units with 300 and more workers, and actually there are very few units with 300 or more workers. Industrial units with less than 50 workers need not take any permission from the government for closure; however, those with more than 50 workers need to give 60 days notice for closure. The compensation to workers facing retrenchment or closure is increased from 15 days per completed year of continuous service to 45 days. Notice period is one month in case of units with less than 300 workers and 3 months in case of units with 300 and more workers. It can be easily understood that in a situation of easy hire and fire in case of units with less than 300 workers, the employers will leave no space for such claims. By giving breaks, not putting them on rolls and periodically discontinuing their services, the employers can easily avoid paying compensation. This is how they also escape from paying gratuity to workers. The new code also removes the protection from change in service, and in case of lay off if workers do not accept any alternative employment in the same establishment they lose the compensation as well. It is also interesting to note that small factories bill provides only for 15 days of compensation for each completed year of service and not 45 days, so it is not dear, whether the 45 days will apply to small factories as well or not. Rajasthan government has already amended the industrial disputes act in the same line, and Maharashtra government is also doing the same.

There were two major demands of labour movement on the issue of wages:
a)   The wage law must contain clear criteria for determination of minimum wages, annual increments and mode of payment and this must be same and apply to all wage workers and home based workers, without any exception. This must be made mandatory to provide a proper wage slip to all workers showing all payments made in a month including the overtime wages (except casual workers engaged for not more than 8 hours in a week and 5 days in a month). The current criteria on minimum wage determinations includes: i) 3 consumption units for one earner, ii) Minimum food requirements of 2700 calories per average Indian adult, iii) Clothing requirements of 72 yards per annum per family, iv) Rent corresponding to the minimum area provided for under Government's Industrial Housing Scheme, v) Fuel, lighting and other miscellaneous items of expenditure to constitute 20% of the total Minimum Wages, vi) Children education, medical requirement, minimum recreation including festivals/ ceremonies and provision for old age, marriage etc. should further constitute 25% of the total minimum wage, vii) Local conditions and other factors influencing the wage rate. It was a demand of labour movement to revise this criteria to consider 4 consumption units in place of three, to consider the actual rent of a two room flat or equal to at least 30 percent of wages, the cost of children education, medical etc may also be revised to make it 30 percent of wages, and to include one more component: viii) travel and communication.

b)   The law of wages must clearly declare that the minimum wages apply to only on workers without any work experience. After an experience of six months their wages must cross the minimum wages and they must get an increment and further years of experience must be reflected in their wage increments. The procedure of determination of wages must be transparent and wages so fixed must be declared with their detailed break up to enable the workers to see whether allocations to all factors are properly considered.

c)   The Minimum Wages Act as it exists currently, does not clearly define the categories of unskilled, semi-skilled, skilled and highly skilled workers and therefore it depends on whims of employers to put a worker in any of these categories. The new wage law must clearly define these categories, for example: a) Unskilled: Non ITI fresh workers without any experience; Semiskilled: Non ITI Workers with one year experience in any factory in same industry or related industry; Skilled: Workers with Fresh ITI degree and no experience or Non ITI workers with two years experience; Highly skilled: Workers with ITI degree and one year experience or non ITI workers with three years experience. Minimum wages of any of these categories must be 30% more than the preceding skill category.

d)   Even if only the government accepted criteria of determining the minimum wages is followed transparently, the minimum wages in any part of India and in any sector may not be less than Rs 15000 per month.

e)   There must be only one system of revision of minimum wages. In all states dearness allowance must be added in their wages in every six months, and the revision of wages must be done every three years, rather than every five years.

The new code on wages (Clubbing Minimum Wages Act, Payment of Wages Act, Payment of Bonus Act and Equal Remuneration Act) does not address any of these issues; rather, it further downgrades the wage law.

No more national floor wage, now only state wages : Under the Minimum Wages Act 1948, both central and state government can fix minimum wage rates in various sectors, with 45 sectors in the central sphere and 1,679 areas under states' jurisdiction, but under the new Labour Code on Wages only state governments have power to fix minimum wages. In a situation when all the states are competing with each other for attracting investments, thus law will lead a race to the bottom among states, and the sufferings of the labour will be increased many fold.

It is also worth mentioning that recently the government has initiated a new amendment in Employees Provident Fund Act, and according to one of its provisions the PF contribution of employers will be considered as part of wages. There is an apprehension that after this law comes into effect, the employers may also count their PF and ESI contribution in wages and by this the take home wages of workers may be reduced. It also appears a future game of the state and employers, in that, by clubbing the ESI and PF contribution of employers with minimum wage amount they may claim that the wages paid to the workers are far higher.

Equal Remuneration Act practically scrapped : In the current phase one of the important struggles of the workers is that of contract/casual/honorary workers strongly raising the demand for regularisation of their services and most importantly demanding the equal wages for equal work, and Equal Remuneration Act, 1976 provided strong ground for this. But the new code on wages has almost completely removed this aspect from the law and talks only about discrimination in wages on ground of sex. Moreover, the equal remuneration act not only prohibited discrimination in matter of wages, but also in recruitment of workers on the basis of their gender. The act also provided for constitution of an advisory committee with equal representation of women members to advise governments on increasing work opportunities for women along with appointing labour officers for hearing complaints on this issue.

The Inspectors became facilitators : Under new code the role of inspectors is not insuring enforcement of laws but "supply information and advice to employers and workers concerning the most effective means of complying with the provisions of this code" and "to assist the work of industrial establishments and factories and to provide guidance to establishments". This is self explanatory, how the whole purpose of minimum wage law and payment of wages law is going to be defeated by the new code.

Bonus payment may be rare and meager : Under the new code on wages expands the exemptions under section 16 of Payment of Bonus Act for all newly set-up establishments. Therefore, keeping in mind that the establishments with less than 50 workers do not need any permission of government for closure of enterprises, they may avoid paying bonus whole life just by keeping on closing and reopening their enterprises in every few years and that actually they keep on doing to continuously getting the benefit of various tax exemptions. Moreover, now it will be difficult for workers to know how much bonus the employers need to pay them legally. Section 23(2) of the Payment of Bonus Act, 1965 provided that the trade unions can legally access audited accounts and balance-sheets of employers, to calculate the bonus that they must be paid. But the new code on wages scraps this provision and now trade unions have no right to access the above documents of employers. It was one of the major demands of All India Organization of Employers and they got it.

Social security
The current aggression of capital globally was accompanied with a strategy to project a good image of corporate by monopolizing the information machinery, and at all levels and everywhere the propaganda was managed in such a way that systematically good sounding, pro-people and democratic terminologies and slogans were used for practicing anti-people policies and strategics. The rule of the game being, "appear to be doing, rather than practically doing something for people" and "talking good, but doing bad". Terminologies of "liberalization", "globalization" and "global village" are the best examples of this strategy. At the ground level also the same strategies are used systematically and the best example of this is on the social security issue in India. In the name of extending the social security for unorganized sector workers the Unorganized Social Security Act 2008 was enacted but it has practically no meaning in terms of social security, rather, it was targeted to justify and institutionalize the duality of labour and informalization of labour. Now with a very large scale propaganda some insurance schemes are launched that are actually targeting to facilitate a process by which the corporate can grab every penny left in the pocket of millions of innocent poor people in the country, and at the same time, silently scrapping all the rights of people for access of free or affordable health and for compensation claims in case of any losses in their livelihoods due to natural/manmade disasters or subsidies of various kinds etc. Everyone knows that health insurance benefits may be rarely claimed by the working class, because they are hand to mouth and even if bed ridden they prefer to be at home in families’ care rather than admit in the hospital, and the health insurance benefits are available only when one is admitted in a hospital. In such situations the whole money they will be depositing (or even if government is depositing it is public money) is silently looted by the corporate. For one worker, the money may be few rupees but if one considers the whole population of the country, the whole amount may be hundreds of billions. The same game also appears in case of other insurance schemes. It is also to be kept in mind that FDI is now allowed in Insurance, and one can understand why foreign investors are so interested in insurance. In a country with 1.25 billion population, even if one rupee can be grabbed from each, it forms 1.25 billion. The great sanitation campaign—the toilet propaganda has also similar dynamics and similar objectives.

But most important game on social security is on Pension Law, Provident Fund Law and Employees State Insurance. The new pension scheme is already being implemented in Railways and other government sectors, and also to the so-called unorganized sectors. Even after strong opposition from trade unions the new pension scheme was implemented and now the government has started giving option to organized sector as well to choose between Employees Provident Fund and New Pension Scheme. Naturally the employers will prefer the new pension scheme. The pension scheme under EPF Act offered a guaranteed pension amount, including a family pension, and disability pension. But in the new scheme all these benefits are lost, and there is even no guarantee of the principal amount, the benefits will depend on rise and fall in share markets, because the pension amount will be held by banks and insurance companies (ICICI Prudential Fund, IDFC Pension Fund, Kotak Mahindra Pension Fund, Reliance Capital Pension Fund, SBI Pension Fund, UTI Retirement Solution and Annuity Service Provider etc) and it will be invested in financial markets of various kind. The trade unions are protesting against investing pension fund in financial markets and demanding at least Rs 3000 per month guaranteed pension, but the government is not listening and offering only Rs 1000 per month.

The Employees State Insurance (ESI) remained a life line for industrial workers (who were able to access it) covering various aspects of social security. But now it seems that this lifeline will also be lost for majority of workers. On the one hand, there are attempts to privatize the ESI hospitals, in line with privatization of whole health sector. On the other hand, there are also attempts to put majority of workers out of the coverage of ESI. The small factories bill that may apply to all factories engaging less than 40 workers (i.e. units with 10-39 workers) does not include the ESI act. In place of applicability of ESI, it provides for a contributory) health or medical insurance, in which employer and worker shall contribute ten percent of the wages, and that the insurance scheme will include a component for insurance towards injury or death arising out of and in course of employment at a rate not less than that prescribed under the Employees Compensation Act 1923. In this way the ESI is being replaced by a private insurance in the so called small factories, and the contribution share of workers is increased many folds. In the similar way, the provident fund scheme for these small factories is also changed. According to the small factories bill, the employers shall ensure that all workers are covered by a Provident Fund scheme, approved by the Insurance Regulatory and Development Authority and that employers and workers shall contribute ten percent of the wages, basic and DA to this fund. The contribution share of workers taken together for health insurance and provident fund is so high that the workers themselves may not choose to register in these schemes, particularly in a situation when they are frequently hired and fired and as end result the employers may not have to bother about all this. And to whatever extent these schemes are able to run, they will provide a huge space for profit generation for insurance companies holding this money. The workers in the so-called small scale factories (and actually in factories up to 300 workers as well) may also be never able to claim gratuity because in a situation of frequent hire and fire, they will never be able to provide a proof of working in a particular factory for 60 months or so.

Moreover, the government is also amending the EPF Act. The one of the provisions of the amended act says that PF contribution of employers will form part of wages. This will have implications for wages as it has been discussed earlier. But this may also have another implication in terms of increased deductions for PF and ESI from the salary of workers and therefore the take home wages of workers will decrease.

Most importandy, the government is now making the PF taxable. This was unimaginable in any country. Social security benefits were never taxed. This shows to what level the government is moving to tax the people and benefit the corporate.

This is also important to note that in recent years there is a cut in social sector spending of the government by about 1.7 lakh crore rupees (Rs 66222 crore cut in grants on social sector schemes and Rs 1.03 lakh crore cut by not implementing the food security program aimed at 67% of population).

Most serious impact may be felt in drastically increasing the health and safety problems because on the one hand, the small factories (less than 40 workers) are put out of The Factories Act, on the other hand, excessive overtime is getting legal justification and list of hazardous industries and substances are deleted in the new proposed amendments. One may think about the impact of all this keeping in mind the self certifications granted to various industries under various labour laws and labour inspectors becoming facilitators, in a situation when the country is becoming a dumping ground of hazardous industries. ooo

*14 Labour Laws will not be applicable to small factories including: The Factories Act, 1947, The Industrial Disputes Act, 1947, The Industrial Employment (Standing Orders) Act 1946, The Minimum Wages Act, 1948, The Payment of Wages Act, 1936, The Payment of Bonus Act, 1965, The Employees State Insurance Act, 1948, The Employees Provident Funds and Miscellaneous Provisions Act, 1952, The Maternity Benefit Act 1961, The Employees Compensation Act, 1923, The Inter-state Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979, (State) Shops and Establishments Act, The Equal Remuneration Act, 1976 and The Child Labour (Prohibition and Regulation) Act, 1986.

Vol. 47, No. 50, June 21 - 27, 2015