Labour Laws: A Paradigm Shift
Published: Dec 21, 2020
By Prashanth S Shivadass & Pooja Rao
FOR a little over a year, we have heard about consolidation of various laws by the Central Government - one such consolidation is with regard to the labour laws. Champions of these laws have stated that it is high time such (some archaic while others outdated) need to revamped / re-looked in order to give more rights to labourers. Critics, however, had stated that the process of consolidation of these laws have overlooked some key aspects and features.
Four (4) major bills, therefore, were introduced by the Central Government in the Parliament, broadly covering wages, occupational safety and health, industrial relations and social security. The bills are the Code of Wages, 2019; the Occupational Safety, Health and Working Conditions Code, 2019; the Industrial Relations Code, 2019; and the Code of Social Security, 2019, consolidating nearly 29 existing laws.
As a background, the 2 nd National Commission on Labour ('Commission') recommended consolidation of central labour laws. Labour laws were added in a 'piecemeal manner which has resulted in these laws being ad-hoc, complicated, mutually inconsistent with varying definitions, and containing outdated clauses' 1. The Commission emphasized the need to simplify and consolidate labour laws for the sake of transparency, and uniformity in definitions and approach. Since various labour laws apply to different categories of employees and across various thresholds, their consolidation would also allow for greater coverage of labour.
Following these recommendations of the Committee, the four Codes that were introduced relate to Code on Wages, Occupational Health and Safety, Industrial Relations and Social Security. Since the Code of Wages, 2019, has already been discussed a lot, this article focuses on the Occupational Safety, Health and Working Conditions Code, 2020 ('Health and Safety Bill'); Code of Social Security, 2019 ('Social Security Bill'), and; Code on Industrial Relations, 2020 ('Industrial Relations Bill') along with Industrial Relation (Central) Rules, 2020 ('Rules').
Occupational Safety, Health and Working Conditions Code, 2020
As the name suggests, the Health and Safety Bill covers the occupational safety, health and working conditions of a workmen. The Health and Safety Bill essentially consolidated 13 legislations which includes, among others, Factories Act, 1948, Contract Labour (Regulation and Abolition) Act, 1970, Plantations Labour Act, 1951, Mines Act, 1952 etc. The schematic of the Health and Safety Bill shows that the conditions of workmen at different workplaces / establishments / factories etc. ('establishments') are being consolidated and regulated to update the functioning of such establishments.
Essentially, the coverage of establishments revolves around 'thresholds' i.e., factory that employs more than (i) 20 workers (if the process is carried out using power) or (ii) 40 workers (if the process is carried out without using power); establishments where any hazardous activity is carried out regardless of the number of workers and insofar as contract workers is concerned, any establishment or contractor employing more than 50 workers (on any day in the last year).
The Code provides for prohibitions from employing contract labour in certain cases including: contract labour in core activities (appropriate Government to decide what is a core activity, however, the Code defines a list of 11 non-core activities where the prohibition will not apply including (a) sanitation workers; (b) security services and (iii) any activity of intermittent nature even if that constitutes a core activity of an establishment). However, there are certain exceptions for the aforesaid prohibitions i.e., (i) the normal functioning of the establishment is such that the activity is ordinarily done through a contractor, (ii) the activities are such that they do not require full time workers for the major portion of the day, or (iii) there is a sudden increase in the volume work in the core activity which needs to be completed in the specified time. The Code also applies to contract labour engaged through a contractor in the offices of the Central and State Governments (where the respective Government is the principal employer).
The daily working hours have now been fixed to a maximum of 8 hours per day. Further, women will be entitled to be employed in all establishments for all types of work. In case women are required to work, the biggest step by this code is of allowing the women workers to be involved and take part in all types of work under the bill and in case there is a requirement for that woman worker to work in a hazardous activity, the employer has to provide safety guards and other necessary safety equipment to them.
A lot of emphasis has also been laid out towards Inter-state migrant workers and unorganized workers. First off, the definition of inter-state migrant worker under the 2019 Bill, means a person who (i) has been recruited by an employer or contractor for working in another state, and (ii) draws wages within the maximum amount notified by the central government. The 2020 Bill now includes any person who moves on his own to another state and obtains employment in that state. The 2020 Bill also has a higher threshold (in terms of earnings) for such workers at INR 18,000/- per month.
Various other benefits for migrant workers including option to avail benefits of the public distribution system either in the native state or the state of employment; benefits available under the building and other construction cess fund in the state of employment and; insurance and provident fund benefits available to all other employee within the same establishment.
The Bill also requires that a database be maintained by the Central and State Government in a portal. This database will record all details of an inter-state migrant worker. The database also gives an option to the migrant worker to register himself on a self-declaration basis and her / his Aadhar.
Lastly, a Social Security fund has been mooted for the welfare of the unorganized workers. Amounts that have been collected under the Bill in the form of penalties (including compounding of offences) will be credited to this Fund.
Insofar as obligations are concerned, the following are some of the obligations of employers:
a) Providing a safe workplace, issuing appointment letters and complying with the provisions of the Code;
b) Employers of factories, mines, docks, plantation and construction must provide a risk-free workplace and instruct all employees on safety protocol;
c) For inter-state migrant workers, employers / contractors must (i) notify specified authorities of both States in case of fatal accidents and serious bodily harm, (ii) ensure suitable work conditions, and (iii) extend medical check-up and other benefits like provident fund and ESI entitlements which other workers in the establishments may be entitled to;
d) The owners and agents of mines will be jointly responsible for providing a safe work environment.
The following welfare facilities need to be provided by employers (subject to this being notified by the Central Government):
a) Bathing spaces, canteens and first aid boxes;
b) For factories, mines, plantation, construction and motor transport undertakings - ambulance rooms, welfare officers and temporary housing along with appointment of medical officers to examine, certify and supervise the health of workers;
c) Specifically for plantations - employers must provide welfare facilities such as housing accommodation, creches, educational and health and recreational facilities. Additionally, arrangements must be made for the safety of workers in connection with use, handling, storage and transport of insecticides, pesticides and chemicals and toxic substances;
d) For factories that are involved in hazardous processes - the state government will prescribe the maximum limits of exposure to chemical and toxic substances in the manufacturing process;
e) For factories involved in hazardous processes - emergency standards may be set, the recommendations for which may be provided by the National Advisory Board.
The licenses and other registration requirements are as under:
a) All establishments with ten or more workers must register with the appropriate government;
b) Factories may need additional licences;
c) For beedi workers and contract labour, contractors must either obtain a five year license or work specific license;
d) For audio visual workers - a signed agreement between the employer or contractor and worker must be registered with the government.
The Code also provides for an Inspector-cum-facilitator, who may inquire into accidents and conduct inspections. Specifically, the Inspector-cum-facilitator may limit the number of employees working or prohibit work in an establishment, if it appears that the workers are in danger for factories, mines, docks and construction work.
Social Security Bill, 2020:
The third major reform under the labour law stream is the introduction of the Social Security Bill. The Social Security Bill is a consolidation of nearly 9 labour legislations which includes Employees' Provident Fund and Miscellaneous Provisions Act, 1952; Employees' State Insurance Act, 1948; Employees' Compensation Act, 1923; Maternity Benefit Act, 1961 and Payment of Gratuity Act, 1972.
The Commission (referred to above) has recommended that (i) social security must apply to all establishments, (ii) existing wage ceilings for coverage should be removed, (iii) there should be functional integration of the administration of existing schemes. Critics however have claimed, the Bill has not followed all the above recommendations to the hilt.
The Bill is now applicable to any establishment (depending on size) as notified by the Central Government. There are also various schemes setup for unorganized workers, gig workers and platform workers. Gig workers and platform workers have been defined to mean workers outside the traditional employer-employee relationship and those who access organizations or individuals through an online platform and provide services and solve specific problems respectively.
The schemes will be monitored by the Central and the State governments through their respective boards. Such boards will consist of five representatives of aggregators, five representatives of gig workers and platform workers, Director General of ESIC and five representatives of state governments. Funds for these schemes shall be contributed by the central and the state governments and 'aggregators'. A list of aggregators is specified under schedule VII of the Bill, totally to nine categories including ride sharing services, food and grocery delivery services, content and media services and e-market places. Contributions from these aggregators be notified by the government anywhere between 1 - 2% of their annual turnover. These contributions, however, cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.
The Bill has now expanded the definitions of various terms for instance, 'employees' now include workers employed through contractors; 'inter-state migrant workers' include self-employed workers from another state; 'platform workers' to include additional categories of services or activities as notified by the government and 'audio-visual productions' include films, web-based series, talks shows, reality shows and sport shows. The Bill also exempts construction works from the definition of 'building or construction work' if the total cost of the construction work exceeds INR 50 Lakhs and if they employ more than a certain number of workers.
The Bill places various issues for consideration. For instance, provisions relating to gig workers and platform workers are rather unclear. Application of schemes, that are otherwise applicable only to an employer-employee relationship, are now applicable to gig and platform workers. Therefore, it is unclear as to how the same scheme may apply to such workers.
Additionally, in order to avail any and all social security benefits, an employee or worker must provide her / his Aadhar number, mandatorily. This violates the Supreme Court's decision in Justice KS Puttaswamy v. Union of India 2.
Code on Industrial Relations, 2020 and Industrial Relation (Central) Rules, 2020
The Industries Relations Bill is the last major reform. This subsumes three (3) major legislations including Trade Unions Act, 1926, Industrial Employment (Standing Orders) Act, 1946, and Industrial Disputes Act, 1947.
As the name suggests and given the nature of the enactments that this subsumes, this Bill essentially governs the relationship between employers and employees within an industry. Therefore, classification of industries or industrial establishments under this Bill, rests solely with the Central Government (in so far as new industrial establishments are concerned). However, the Bill summarily applies to all existing industries that employ more than 300 workers. Further, standing orders on matters listed in the Schedule of the Bill, which relate to (i) classification of workers, (ii) manner of informing workers about work hours, holidays, paydays and wage rates, (iii) termination of employment and (iv) grievance redressal mechanisms for workers - all apply to such industrial establishment who employ more than 300 workers.
One of the biggest challenges was with regard to closure, lay-offs and retrenchments. The Bill addresses this issue by ensuring that prior permission is sought from the government before closure, lay-offs and retrenchment.
Insofar as trade unions are concerned, the Bill states that if there are more than one (1) trade unions registered within the same establishment, the trade union having more than 51% of the workers would be recognized as the sole negotiating trade union. However, if there is no such negotiating trade union, a negotiating council will be formed consisting of representatives of unions that have at least 20% of the workers as members.
All disputes which include discharge, dismissal, retrenchment or any other termination of services of an individual worker will be termed as an industrial dispute. The worker may apply to the Industrial Tribunal for adjudication of the dispute. The worker may also apply to the Tribunal 45 days after the application for conciliation of the dispute was made.
On October 29, 2020 the Ministry of Labour and Employment issued the draft rules called the Industrial Relation (Central) Rules, 2020, for the purpose of seeking public objections and suggestions. The rules are proposed to have been notified under Section 99 of the Bill.
The Rules will repeal the Industrial Tribunal (Procedure) Rules, 1949, the Industrial Tribunal (Central Procedure) Rules, 1954, the Industrial Disputes (Central) Rules, 1957 and the Industrial Employment (Standing Orders) Central Rules, 1946. The applicability of these rules is only restricted to matters where the central government is considered the "appropriate government". Whereas, for institutions like State PSUs, State owned/ controlled autonomous bodies and private establishments, where the state government is the "appropriate government", they may draft their own state specific rules according to their requirement or adopt the Rules as it is.
The draft rules broadly consist of the following:
1. Manner of choosing members for the Grievance Redressal Committee (GRC):
2. Procedure for filling an application with the GRC for disputes or grievances.
3. Procedure to inform the concerned certifying authority electronically in the event of adopting the model standing orders as provided by the central government.
4. Serving a notice of change by an employer who intends to change the in the conditions of service applicable to any worker.
5. Voluntary referring disputes to arbitration: this provision can be invoked in the event of the worker and the employer agreeing to the matter be referred to arbitration.
6. Manner of application for conducting strikes and lock-outs and serving notice, providing an opportunity for re-employment for the retrenched workers.
While several issues still persist and the implementation of these codes is going to be a challenge, this is still a major step towards reform and consolidation of laws. The erstwhile regime resulted in a lot of chaos and misinterpretation of laws, including definitional irregularities. With consolidation, this is a step closer to reducing litigation and increasing productivity, safety, and security.
(The authors are Founder and Associate respectively with Shivadass & Shivadass (Law Chambers and the views expressed are strictly personal.)
1See, Report of the National Commission on Labour, Ministry of Labour and Employment, 2002, http://www.prsindia.org/uploads/media/1237548159/NLCII-report.pdf;
See also, https://www.prsindia.org/billtrack/overview-labour-law-reforms
2See, (2017) 10 SCC 1 - 2017-TIOL-311-SC-MISC-CB
