The only limit to our realization of tomorrow will be our doubts of today.

Franklin D. Roosevelt

Labour Law 1

Before we commence understanding what’s being proposed, it is important to familiarize ourselves with the current labour laws of India. The “labour laws” in the country can be broadly divided into the following four categories.


Conditions of Work: This segment includes the ‘Factory Act, 1948’, ‘Contract Labour Act, 1970’ and finally, ‘Shops and Commercial Establishments Act’.


Wages and Remuneration: An essential segment that includes the ‘Minimum Wages Act, 1948’ along with the ‘Payment of Wages Act, 1936’.


Social Security: Ensuring a safety monetary net, this segment comprises of the ‘Employees Provident Fund Act, 1952’, ‘Workmen’s Compensation Act, 1923, and also ‘Employees State Insurance Act, 1948’.


Employment Security and Industrial Relations: This category includes the ‘Industrial Disputes Act, 1947’ and ‘Industrial Establishments Act, 1946’.

Each of the above laws are meant to safeguard the interests of the workers, thereby ensuring a fair deal. The objectives range from ensuring safety measures on factory premises, promoting health and welfare of workers to regulating hours of work, payment and employment of women. Terms are clearly laid out for layoff, closure of industrial enterprises, strikes and lockouts.

Let’s start with Gujarat. Here, the new industrial establishments are exempted from all labour laws except the ‘Minimum Wages Act’, ‘Industrial Safety Rules’ and ‘Employees’ Compensation Act’.


In Uttar Pradesh, the industry has been exempted from labour laws, except the ‘Building and other Construction Workers’ Act of 1996’, ‘Workmen Compensation Act of 1923’ and ‘Bonder Labour (Abolition) System Act of 1976’. Besides this, a section of ‘Payment of Wages Act’ will be applicable.


Madhya Pradesh will be replicating the American model of ‘hire and fire’. Establishment with up to 100 workers can hire according to needs. No registration is required for contractors with 50 labourers. No factory inspection needed for 3 months. No inspection for firms required with less than 50 workers. Shift hours will be raised to 12 hours from 8 hours in a factory (overtime of up to 72 hours permitted). Also, shops and establishments can operate from 6 am till midnight.

In Rajasthan, Himachal Pradesh and Punjab, the Factories Act will be amended to increase the work time from 12 hours a day and 72 hours a week in place of the 8 hours a day and 48 hours a week. Rajasthan has amended the Industries Disputes Act to increase the threshold for lay-offs and retrenchment to 300 from 100 earlier. The threshold membership of the trade union has been increased from 15 per cent to 30 per cent.


Maharashtra has allowed shops/establishments/factories to submit a consolidated annual returns in lieu of multiple returns under the various labour laws.


Tamil Nadu has permitted the employment of women in night shifts subject to safeguard measures. In Kerala, it has been decided to facilitate new industrial licence within a week after the applications are filed. However, this would be subject to the investor agreeing to complete formalities within a year.

States’ labour law changes under central govt scanner

Under the Constitution, labour falls under the concurrent list, which means the Union government and states have joint jurisdiction. Therefore, changes by state need to be ratified by at the federal level.


The Union labour minister has advised the states not to change labour laws in ways that could violate India’s commitments to international covenants, and plans to hold a meeting of all state labour ministers (as per sources). The ministry is examining a set of radical changes made by Uttar Pradesh, Madhya Pradesh and Gujarat to their labour laws, including moves to freeze them altogether. 


To add to this, ten central trade unions wrote to the Geneva-based International Labour Organisation (ILO), stating that changes in labour laws by these states violate workers’ rights and ILO convention No 144, to which India is a signatory. The labour ministry is examining whether the changes proposed by state govts is going to impact conventions of the ILO.

Could the government have done something else?

Moreover, beyond labour regulations, firms face a lot of other hurdles like the shortage of skilled labour and the weak enforcement of contracts etc.


Trade unions have stridently opposed the ‘labour law reforms’ on the grounds that they undermine the hard-won rights of workers and will lead to greater exploitation of workers. Trade unions have repeatedly charged that the government has been acting unilaterally, without holding tripartite consultations. On account of the stiff resistance of the trade unions, the Central government has been unable to effect the changes at the pace that it would have liked.


Indeed, there is little evidence that such changes to the labour laws result in attracting big investments and boost industrialisation or job creation. Labour rights are derived from human rights. No nation can fulfil its constitutional obligations by softening or removing these laws. Covenant on Civil and Political Rights, the International Covenant on Economic, Social and Cultural Rights and various Conventions of the ILO as a result of which it is bound to promote decent work in conditions of freedom, equity, security and dignity.

What’s next?

As we understand, the state laws ‘cannot’ get more stringent than the centre laws, especially when it comes to labour rights and minimum wages. And also keeping in mind the negative global impact that such a step would have had, the centre has rejected all the suggestions in this matter.


Will a stringent labour law system help us in the long run? Or does the centre need to take a long look at redefining some of the laws? Especially as the newer geographies line up to acquire bigger share of the manufacturing market.


This is where we are, at the moment.

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