Modi’s Latest Four Labour Codes – Boon or Bane

 

Modi’s 4 Labour Codes which were passed by the both houses – Lok Sabha and Rajya Sabha -  are not new laws in toto  – but they had consolidated, concised and codified all existing laws of more than 100+ thereby simplifying them for easy and hassle free compliance. These bold reforms are complete game-changing labour reforms in the country which was long overdue.

These labour laws reforms will usher new era for development, investment – local and global, balanced justice to both Employers and Employees, Ease of Doing Business, Simplified Reporting Systems with replacement of Inspector Raj to Inspector – Facilitator Scenario.

 

The four labour reform laws – called Four Labour Codes – are as below:

1. The Code on Wages - 2019

2. The Code on Occupational Safety, Health and Working Conditions - 2020

3. The Code on Social Security and Safety - 2020

4. The code on Industrial Relations - 2020

( While the wage Code was passed in 2019, other 3 codes were passed during September 2020.)

A brief Note on Simplification of existing labour laws:

·       The Social Security code replaced 44 labour  laws on social security, including the Employees’ Provident Fund Act, 1952, and the Maternity Benefit Act, 1961.

 

·       Industrial Relations Code subsumes the Industrial Disputes Act, 1974, the Trade Unions Act, 1926; and Industrial Employment (Standing Orders) Act, 1946. Replaced 3 laws.

 

·       The Occupational Safety, Health and Working Conditions Code replaced 13 labour laws.

 

·       The Wages code consolidates the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 – Passed in  August 8, 2019. - Replaced 4 laws

Hence these four codes had amalgamated many existing labour laws on wages, health and working condition, social security and safety, Industrial relations.

The labour codes were adopted on the recommendations of the Second National Commission on Labour (2002), which suggested consolidating 100 State laws and 40 Central laws across industries, occupations and regions. Further 174 of 233 suggestions of standing panel were incorporated in these labour codes.

Single registration under labour laws instead of eight and Four labour law returns instead of 17 are all going to help the industries to concentrate more on production rather than on unproductive paper work.

As per the 'Doing Business' 2020 report, India had jumped 14 places to the 63rd position in the ease of doing business rankings already even before these 4 labour codes made Acts. India had improved its rank by 79 positions in five years (2014-19). The higher ranking would boost investment and job creation in the country.

The government aims to catapult India to among the top 10 countries in the World Bank's ease of doing business rankings with the comprehensive labour reforms. Codes give more power to states to be flexible on labour laws

Government Statistics say over 21 million job loss occurred during April to August 2020 alone due to Covid-19 apart from 30 % of over 65 million enterprises having shut their doors.

Hence on the face of it, successful framing of 4 labour codes along with the most difficult job of making them as Acts for implementation is by itself a herculean task for which Labour Union Minister Santosh Gangwar and his Team Members need to be complimented. 

Now let us delve on some finer points that the new codes had dealt with:

1.    Employer now includes principal employers and contractors. This entitles contract workers to proceed against both – the principal employer and contractor to enforce their rights. The term ‘employee’ also includes persons employed at the supervisory and managerial level. Therefore service conditions of senior level employees will be regulated by the provisions under the Wage Code.

2.  Uniform definition of the term ‘wages’: The term ‘wages’ is defined to include all remuneration that can be expressed in monetary terms and lists down specific exclusions.  As a corollary, there is no difference in definition of employee or worker and their remuneration becomes same – wages and salary become the same. The code also recognizes the right of contractual workers. 

3.  Earlier employers can engage persons to do work in their establishment either as workers or employees.  Workers are paid wages and employees paid salary. Now this distinction between them removed and both are at par pertaining to their emoluments- but those under fixed contract period will be terminated at the expiry period – it will not be termed as retrenchment.

4.    Under the Wage Code, the Central Government is empowered to fix the national minimum wages which will act as a floor for minimum wages to be fixed by the concerned state government.

5.    The concept of ‘recognition of negotiating union’ has been introduced 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. Negotiating Council will be formed in absence of 75% support. 

6.   Increased threshold of units employing 100 to 300, Flexibility has been provided to reduce or increase the threshold by the appropriate government, for the purpose of seeking permission before closure, retrenchment and lay off. Presently, it is compulsory for firms employing upto 100 workers.

 

7.    It proposes that workers in factories will have to give a notice at least 14 days in advance to employers if they want to go on strike. Presently, only workers in public utility services such as water, gas, electricity etc.  required to give notices to hold strikes. Now, notice period is applicable to all the industrial establishments.

8.    Every industrial establishment employing 20 or more workers will have one or more Grievance Redressal Committees for resolution of disputes arising out of employees’ grievances.

 

9.    The code also proposes setting up of a reskilling fund to help skill retrenched workers.  Also, aggregators employing gig workers will have to contribute 1-2 per cent of their annual turnover for social security, with the total contribution not exceeding 5 per cent of the amount payable by the aggregator to gig and platform workers.

 

10.                       For the first time, provisions of social security will also be extended to agricultural workers and transgender. 

 

11.                       The code provides employers the flexibility to employ workers on a fixed-term basis, on the basis of requirement and without restriction in any sector. More importantly, it also provides for statutory benefits like social security and wages to fixed-term employees at par with their permanent counterparts.

12. The fixed-term employment will mean that the respective Companies would not need to engage with any third-party contractors. Instead, under the new regime, they will be able to hire contract workers directly for a fixed tenure. 

For instance, if a welding professional has been hired, and the company is able to procure a machine to perform the same function at a later date, this professional can be laid off. In the past, firing staff would lead to a dispute since there was no concept of a fixed-term employment.

13. Social Security Code - Establishments working in hazardous sectors 

      would mandatorily be linked with ESIC, even if there is only one worker

      working in it. Option to link workers working in Plantations is being 

      given to Plantation owners. Option for becoming member of ESISC is 

      also being given to establishments with less than 10 workers.

14. Occupational Safety and Health Code - Free health checkup once a year for workers of more than a certain age.  Legal right for getting appointment letter to workers.

 

While there were not much opposition in respect of wages, Social Security, Occupational Security Codes, only the Industrial Relations Code was mostly being targeted as Anti-Labour, Anti-Strike, Pro-Employer etc.

The Unions raised their voice complaining that Cessation of the entire dispute-settlement mechanism will mean labour courts, tribunals, works committee and conciliation officers to be rendered null and void.

Right to Strike was diluted as all Industrial Establishments Workers strike can be legal only if they give 14 days just like Essential Services. In short, all industries are brought under essential services for going on strike.  Further, the definition of “strike” brings “mass casual leave” within its ambit. Hence requirement of a notice period of 14 days has been incorporated for strikes and lockouts in any establishment. Here both employer and employee are required to give 14 days notice  for lockout or strike respectively.

The main grouse of Labour Unions was in respect of the Government’s move to increase the threshold for standing orders from the existing 100 to 300. They felt that the government is very keen to give tremendous amounts of flexibility to the employers in terms of hiring and firing. Unions fear that the increase in the threshold for standing orders will water down the labour rights for workers in small establishments having less than 300 workers.

 

“Dismissal for alleged misconduct and retrenchment for economic reasons will be completely possible for all the industrial establishments employing less than 300 workers. This is complete demolition of employment security. Safety Valves to protect workers from unfair dismissal and reduction in pay apart from vulnerable exploitation were completely removed by these codes. Above all, elongating the legally permissible time frame before the workers can go on a legal strike, will make a legal strike well-nigh impossible” - were their major objections.

Hence, the Main objections of the Unions are 1. Strike without Notice being declared Illegal is eroding their Rights. 2. Increasing the threshold for standing orders from 100 to 300 employees will give free hand to the employer – Hire and Fire of employees.

Right to Strike is not removed, but, 14 days notice period as prevalent in existing essential services like water, electricity, gas, etc. are extended to all Industrial Establishments.  If the Unions wanted Lighting Strikes not to be treated as illegal Strikes on the ground that Strikes at any time are their Rights, then Such Rights were against Justice and Fair Play. When the employer also could not declare lock out without notice, it is but natural to expect Unions representing employees should also give notice for strike to be legal.

States like Andhra Pradesh, Assam, Haryana, Jharkhand, Madhya Pradesh, Rajasthan, Uttarakhand and UP had already enhanced the threshold from 100 to 300 by amendments.

Many State Governments – both ruled by BJP and Other Opposition Parties like Congress, Jagan Party etc. – had even before these labour codes being discussed – passed State Labour Laws to increase the threshold to 300 and working hours etc. While amending, the State Governments had indicated that they had amended the labour laws because the existing labour laws were too restrictive or inflexible  and  employers had to go through a plethora of restrictions before firing an employee. This had resulted in holding back on hiring, and this had impeded the growth of organizations.

Further, the Modi Government is now working on a national floor wage to do away with different minimum wage rates across states in the country.

Federalism is fully respected in these 4 labour laws. But, strangely, this liberal attitudes of Central Government attracted criticism that states had been given a free hand to exempt laws in violation of labour rights. However, the Union Labour Minister  said the labour issue is in the Concurrent list of the Constitution and therefore states have been given the flexibility to make changes as they wish.

Finally, it will be pertinent to comment on the Hindu Editorial under the heading “Code Debate” on the 26^th September 2020.

The Hindu’s Editorial reveals its dilemma and confusion.

Its Main Criticism is that:

1. Passed in Haste or Without Sufficient Deliberation.

2. These Labour Codes being an updated version of the respective code, 2019 duly scrutinized by the Standing Committee, these labour codes are to be again sent to the committee its assessment or approval.

3. Expansive powers of exemption given to state governments with excessive delegation of rule making powers are not warranted.

The changes were clearly spelt out from a long time – since 2002 and there were many debates and discussions with various stake holders.  Further 174 of 233 suggestions of standing panel were incorporated in these labour codes. Hence sending the four codes again to the standing committee for its assessment is only delay the process of implementing labour codes.

It is most funny to hear the Hindu saying: Why give the Centre unfettered powers to amend the labour codes ?  Normally, they used to complain that Centre is not respective Federalism, but, here, they play a different tune.

As Labour is in the concurrent list, it is but natural to give the States to allow playing their roles.  However, the Hindus Editorial had almost praised many advantageous provisions in the other 3 codes.

In short, these four labour codes will promote fixed term employment, reduce influence of trade unions and expand the social security net for informal sector workers.

Centre had given full autonomy to make amendments in the 4 Labour Codes to suit their requirements subject to the overall provisions in the codes.

Herculean Tasks well done by our Labour Ministry.

Jai Ho! 4 Labour Codes!