The New Labour Codes: Labour’s Loss


The labour Codes enacted by Parliament have little to do with labour welfare; they are apparently meant to improve ‘ease of doing business’ and to make it easy for employers to hire and fire workers.

PARLIAMENT passed on September 23 three labour code Bills when the opposition was boycotting the monsoon session on the issue of the farm Bills. The three Bills, the Industrial Relations (IR) Code, the Occupational Safety, Health and Working Conditions (OSH) Code, and the Social Security Code, along with the Code on Wages, 2019, amalgamate 44 labour laws. All the Codes deal with wages, industrial relations, social security, safety, and welfare conditions.

An NDA project

Not only are several features of the Codes problematic; the process by which they were pushed through was hardly transparent. For one, all central trade unions were opposed to the amalgamation of the hard-won labour laws and had submitted their objections on several occasions. It was not a coincidence that the idea of amalgamation was first mooted in 2002 by the National Commission on Labour under the National Democratic Alliance (NDA) government. It could not be carried forward. The two terms of the United Progressive Alliance (UPA) government also could not do much as all unions were opposed to the move. Therefore, what the NDA could not accomplish in 2002, it achieved in 2020 under the leadership of the Bharatiya Janata Party (BJP).

Central trade unions such as the Indian National Trade Union Congress (INTUC), the Centre of Indian Trade Unions (CITU), the All India Trade Union Congress (AITUC), the Hind Mazdoor Sabha (HMS), the All India Coordination Committee of Trade Unions (AICCTU) and the United Trade Union Congress (UTUC) have consistently opposed the new Codes. The BJP leadership came in for a rude shock when the Bharatiya Mazdoor Sangh (BMS), its trade union affiliate, openly criticised the government over the IR Code Bill.

Industry welcomed the Codes with open arms. Chandrajit Banerji, director general of the Confederation of Indian Industry, was quoted as saying that the reforms would make India a preferred investment destination and facilitate expansion of establishments to create employment opportunities. Industry representatives believe that flexibility in hire and fire would lead to ease of compliance by industry and generate more employment.

The commitment of the government to labour could be gauged by the fact that the annual meeting of the Indian Labour Conference (ILC), the highest tripartite body, was not convened even once in the last five years. The claim that the provisions in the Codes are for the welfare of unorganised sector workers, including gig economy workers, is a half-truth as a huge swathe of the workforce, which includes migrant workers, home-based workers and self-employed category workers, has been left out. These workers have been either partially or inadequately covered or not covered at all in the Codes. The coverage under the Social Security Code iss limited and not extended to all categories of workers. Construction sites employing more than 10 workers will be covered under the Code while personal construction work is totally exempted from coverage. Factories employing more than 20 persons are obliged to implement Provident Fund clauses, which exclude the bulk of the medium and small-scale sector from this obligation. The Code, therefore, makes categorisations based on the number of workers engaged and employed and does not have a universal coverage of the benefits it purports to give.

All the four Codes have less to do with labour welfare and more to do with facilitating ease of doing business. Under the OSH Code, for example, which amalgamates 13 pieces of legislation such as the Factories Act, 1948, the Mines Act, and the Working Journalists and Other Newspaper Employees Act, 1955, the labour inspector cannot make surprise inspections. Any health survey in establishments will be conducted after giving notice in writing to the employer. It applies to factories employing 20 workers (with power) and 40 workers (without power). The Code gives a fillip to the engagement of contract labour by granting an all-India licence for five years to a contractor hiring such labour.

The amalgamation of 44 labour laws dealing with wages, social security, occupational health and industrial relations into the four Codes makes it difficult for workers to unionise but easy for employers to comply and hire and fire at will. The introduction of a new nomenclature like “inspector cum facilitator” gives an impression that the codes are labour friendly. The hierarchy of such inspector cum facilitators is such that it would make surprise inspections difficult. Amalgamation has been an excuse to push through anti-worker provisions.

Employment of women

Under the pretext of providing employment opportunities for women, the OSH Code says women will be entitled to all kinds of work, including mining, before 6 a.m. and beyond 7 p.m., with their consent. Where potentially dangerous and hazardous work is involved, the appropriate government is expected to direct the employers to provide safeguards. The Code does not lay down the safeguards that employers have to put in place before allowing women to work at all hours. Neither does it lay down harsh penalties for violations. The implementation of the notion of “working with their consent” principle is ironic in a situation where more than choice and consent, economic pressures and compulsions are the driving force. Women are already working in large numbers in agriculture as farm labour and in non-agriculture services such as construction at low wages and have little by way of bargaining power or occupational health protection. For the majority of them, working is not a choice but a matter of survival. By opening up all sectors to women without putting in place safeguards relating to the working environment and guarantees of decent wages, the Code aims at encouraging the employment of women in modern-day sweat shops.

The Code legalises contract work by providing for the issuance of work permit licences to contractors. It even allows for the employment of contract labour in core activities where “normally the work was being done through a contractor” or where “full-time workers were not required” or where there is a sudden increase in the volume of work needing more labour. But the worst part is that in case of an emergency, the government can exempt, by notification, any establishment a class of establishments or any class of contractors from any or all provisions of the Code. While the Code prohibits the employment of persons under 18 years of age in mines, it permits the hiring of persons above 16 to work as apprentice. The penalties for the offences under the Code range from fines to imprisonment up to three months and even here no court will be allowed to proceed with the trials of the offence except with the previous sanction of the appropriate government.

The OSH Code stipulates the setting up of safety committees in establishments employing more than 250 workers. This will exclude 90 per cent of the units from the ambit of such committees. Where the Code is applicable, the penalty clauses are not stringent in the least as there is a specific condition that the employer can be criminally prosecuted only for repeated offences. It is estimated that 40,000 deaths take place at work sites in India every year.

Pernicious features

The IR Code repeals the Trade Union Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the Industrial Disputes Act, 1947. The objective of the Bill as stated in the Statement of Objects and Reasons is to “achieve industrial peace and harmony as the ultimate pursuit in resolving industrial disputes and to advance the progress of industry by bringing about the existence of harmony and cordial relationship between the employers and workers.” It proposes to do this by defining a worker as one who earns up to Rs.18,000 a month, allowing for fixed-term employment (FTE) whereby a worker gts all the benefits of a permanent employee, including gratuity, but no retrenchment compensation. Under this, the employer is “provided with the flexibility to employ workers on the basis of requirement” and without restriction on any sector.

One of its pernicious features is the introduction of fixed-term contracts. It is hailed as a huge benefit for workers as it claims to treat FTE employees (the duration decided by the employer) on a par with permanent workers. FTE workers can be fired without notice and will not be able to participate in strikes along with other workers.

The IR Code goes several steps further and tinkers with the definition of “worker”. A person is not a “worker” if she is employed in a supervisory capacity and earns over Rs.18,000 a month because of the ceiling. The worst feature of the IR Code, however, is that it has amended the Standing Orders in chapter IV of the Industrial Disputes Actwhereby, earlier, establishments employing100 or more workers had to take the government’s permission before termination, layoff or retrenchment. The threshold of hundred has been increased to 300, which means that only units employing 300 or more persons must take permission before laying off workers or retrenching them. Where an application has been made for closure and the government concerned does not respond either way, it will be assumed that permission has been granted. Union Labour and Employment Minister Santosh Gangwar told Parliament that several State governments had already amended the Industrial Disputes Act (as labour was on the Concurrent List) to increase the threshold. Indeed, many governments, including Congress-led ones, had made such changes.

The IR Code has made union formation difficult and placed restrictions on the right of workers to go on strike. It has placed several conditions. For instance, a strike is defined as “concerted casual leave” where 50 per cent or more workers are required to give notice. A registered union will be one where either a hundred workers or 10 per cent of the total workers are its members. At all times a registered trade union will be required to have this proportion of workers as members. Similarly, only a union that has the support of 51 per cent or more of the workforce on the muster roll of an establishment can be regarded as the sole negotiating agent. This is a climb-down from the earlier criterion of 75 per cent in the draft version of the code which allowed monopoly of a single union. Unions have objected to the conditions in the new clause, saying that it will still result in the monopoly of a single union at the negotiating table. This, the unions have pointed out, is not in conformity with even the ILO conventions on collective bargaining. Where no single trade union enjoys such support, the employer will constitute a negotiating council.

Single industrial dispute tribunal

The IR Code abolishes district labour courts and provides for a single industrial dispute tribunal in each State, thus making the grievance and dispute redress mechanism cumbersome for workers. It also places a limit of three years for the resolution of disputes, which unions feel is an unrealistic proposition that is unfair to workers. Industrial establishments employing fewer than 50 workers or those engaged in “seasonal employment” or intermittent work will not be required to pay compensation for retrenchment. The decision of the government concerned shall be final should a dispute arise about whether the work was seasonal or not. Laid-off workers will not get any compensation if they decline to accept alternative employment offered by the employer either in the same establishment or in an establishment that is located within a radius of eight kilometres. Before the closure of an establishment, the owner is required to give 60 days’ notice to the government. But exemptions are allowed under certain circumstances, such as an accident or death of the employer or natural calamities. Besides, this notice period does not apply to establishments employing fewer than 50 workers.

The IR Code is not even binding on establishments, old and new. If the government is satisfied that an establishment can fulfil any provision of the Code, it can by notification, exempt it from that provision. In the case of new establishments, if the government is convinced that it is in the public interest, the establishment can be exempted from any or all of the provisions of the Code.

The Code on Social Security amalgamates nine Central laws with the sole objective of facilitating the implementation and use of technology to enable ease of compliance for employers. There is nothing new suggested other than powers arrogated to the Central government to defer or reduce Provident Fund contributions by employers or employees for a period of three months in the eventuality of a pandemic, an epidemic or a natural disaster. The other achievement of this amalgamation is a proposal to create separate accounts under the social security fund for unorganised sector workers and gig and platform workers and a separate account for the amount collected as fines for violating the Codes.

The Codes that will come into effect from December have little to do with workers’ welfare or with guaranteeing wage and income security. The FTE is the biggest evidence of the government’s commitment to workers’ welfare. Just like the farm Bills, the Codes were pushed through Parliament with minimum debate. Other than the treasury bench’s praise for the Prime Minister, there was little substantive discussion on the Codes. The aim of labour reforms has been to improve India’s ranking in the World Bank’s Ease of Doing Business ratings and boost investor confidence. Therefore, they have had little to do with reforms in the real interest of labour.

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