Labour reforms in the pipeline?

Source: The Financial Express

While labour has been a key competitive advantage, we need to simplify laws to maintain the edge.

Simplification of extant labour laws has emerged as key to the success of the government’s Make-in-India initiative—many sectors in India, particularly manufacturing sectors, still remain labour-intensive. The last few decades have witnessed proliferation of views from economists, jurists and institutions arguing in favour of revamping the legal framework governing labour and employment. Successive committees have undertaken a review of extant legislations and made recommendations, and geared towards consolidation and reorganisation of labour laws at federal and state levels.

Matters pertaining to labour law and social security find mention in the Concurrent List in the Seventh Schedule to the Constitution of India, empowering Parliament and state legislatures to legislate on labour-related matters. As per latest counts, there are in excess of 44 centrally-legislated labour laws, and over 100 state-specific laws. Due to complications caused by the multiplicity of statutes, rules and regulations, it has become increasingly challenging for an entrepreneur to confidently comply with each statute or rule that may be applicable to an enterprise. Further, effective and efficient administration and enforcement of laws has emerged as a key challenge for the government.

The Second National Labour Commission report submitted to the government in 2002 suggested that the extant labour laws be organised under five distinct ‘codes’—industrial relations, wages, social security, safety and welfare/working conditions. To initiate the process of consolidation, the ministry of labour and employment, through its notification dated April 27, 2015, released a draft labour code on industrial relations, inviting comments from the public. The code is intended to consolidate the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. While it is a welcome move, there are several grey areas that need to be addressed. For instance, the proposed process for registration of trade unions requires less than 10% of the total workers or a hundred workers to apply, which makes the criteria for registration of trade unions difficult. Any offence under the code can be compounded before or pending the trial of the offence. While such compounding provisions would contribute to reduction of adjudication of cases for tribunals and courts, it is important to analyse whether making any and every offence compoundable under the code will result in compromising justice for workmen.

In addition multiplicity of statutes, there are concerns around the protection of the workforce and effective implementation of statutes. Recently, the labour ministry introduced the Factories (Amendment) Bill, 2014, in the Lok Sabha. It was referred to the Standing Committee on Labour for examination, which submitted its report to Parliament on December 22, 2014. The report appreciates initiatives to amend the Factories Act, 1948, considering that the last amendment to the statute took place in 1987. However, the amendments relating to increase in threshold of number of workers for the definition of the term “factory”, removal of the definition and list of “hazardous process” (which is proposed to be replaced with “hazardous substances”) and removal of restrictions on night shifts for women are key ones on which the ministry has been cautioned by the Standing Committee. The committee has also recommended some measures for consideration by the ministry, aimed towards efficient and transparent implementation of the Factories Act. Pursuant thereto, the ministry published a revised draft of the amendment Bill for public comments.

Another major challenge is the existence of repetitive and confusing compliance under various statutes. For instance, compliance requirements for maintaining multiple records under the shops and establishments acts, payment of wages rules, minimum wages rules, payment of bonus rules, and maternity benefit rules are essentially the same, albeit in slightly different formats. Maintaining and updating such multiple records serves as a logistical difficulty, particularly for start-ups, and does not serve any purpose in furtherance of the intent of welfare legislation either. Instead of being repetitive, labour laws require radical modification to be relevant and useful for the employer as well as employees. One suggestion would be to consolidate the various forms into a single adaptive online form.

Madhya Pradesh, Gujarat, Maharashtra and Rajasthan have taken positive steps towards reforming labour laws. For instance, Madhya Pradesh has expedited the process for registration and grant of licences under several legislations by introducing a maximum time period of 30 days within which, if an application is not rejected, it will be deemed to be registered. Similar steps are required to be taken by other states as well. For decades, labour has been a key competitive advantage for India. The need of the hour is to preserve and enhance such competitive advantage by promoting ease of doing business in the country through simplification and consolidation of labour laws at both federal and state levels.