September 28, 2016

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Why Labour Laws Should Be Reformed

- Amit Wadhwa, Senior Manager Legal [ Max Life Insurance Company Limited ]

Amit Wadhwa

The government is coming up with a vision to consolidate and simplify Acts dealing with labour laws wherein around 44 different Acts will be integrated into 5 Acts only. This will certainly boost business as will removal of redundant provisions that are not in sync with the current business environment...

As we are on the path of development and emerging a stronger economy, there is an urgent need to reform laws around the workforce and its management. The management of workforce is one of the most crucial aspects for smoother functioning, especially in labour-intensive industries like manufacturing, mining, ports etc. Timely delivery is highly dependent on seamless labour management apart from access to raw material and energy resources. In the current era of dynamic growth and global competition, profits are interlinked with timelines, wherein any conflict between management and its workforce may seriously affect the same. The need of the hour is that labour laws should be clear, unequivocal, matching with the current pace and having a vision of the future.

Current Scenario

As on date, voluminous litigation in different courts revolves around whether an employee falls under the definition of workmen as that is instrumental for application of various statutes. Further, there are many redundant provisions and pace with the present business environment is missing.

The government is coming up with a vision to consolidate and simplify the Acts dealing with labour laws wherein around 44 different Acts are intended to be integrated into 5 Acts only. We believe that this will be a catalyst in boosting business by removal of redundant provisions wherein some provisions are prevalent since years and are not in sync with the current environment, also bring clarity for implementation of the provisions. On one hand, it will exhort people to take advantage of technology and make certain departments completely paper free. "Believe it or not, the government of NCT of Delhi has announced the minimum wages for employees of the scheduled employments and also for the employees of the shops and establishments, wherein it has enumerated the workers like ‘kahar’, palanquin bearer (Paalki Uthane Wala) and kneader, who knead flour (Aata Gundhne Wala). As on date, there are many professions which need to be incorporated like Painters, Carpenters, Tailors, Computer/Data Entry Operators, Receptionists, Car Drivers and Couriers (Delivery men), etc.. Therefore, certain categories of workers have become obsolete and redundant and they must be deleted, instead some more categories may be created".1 Further, there are multiple returns and forms to be filled with duplicity under different statutes which needs to be reformed and streamlined for the ease of business and welfare of employees as well.

Further, there is a vast difference between the definition of a "Workman" as defined in Industrial Disputes Act and an "Employee" as defined under the different Shops & Establishment Acts in different States. So, in case of retail business having presence at multiple locations, the aspect of termination; enquiry needs to be seen from different perspectives leaving both employer and employee in a state of uncertainty.

Further, there are different definitions of "Wages" provided in different Acts which creates complexities. For example, the definition of "Wages" changes from Industrial Disputes Act to Minimum Wages Act and then to The Contractual Labour (Abolition & Regulation) Act. So, the consolidation of many Acts into few will be the reformatory movement in labour welfare as well as business operations.

Bills on the Way

While there are different bills under different stages with the Labour Ministry or Parliament, below are some of the draft bills:

1. Employees Provident Fund and Miscellaneous Provisions 1952

The key features are:

a) Introduction of "Contributing Wages" instead of "Basic Wages" which will bring uniformity as currently the ambiguity lies around the special allowances. The definition is crucial for calculation of provident fund and will bring clarity on the same.

b) There is a specific provision of not granting exemption from provisions of Provident Fund Act to International Worker under section 2 (FF).

c) There is proposed change in age of superannuation which would be in sync with different schemes under different statutes.

d) Proposed introduction of Appellate authorities at Regional levels under section 7 (CC).

e) Introduction of the term "Appropriate Government" for appointment of Inspectors instead of Central government.

f) Increased penalties and provision of compounding under section 14 of the proposed Act.

g) Option proposed for employees to choose between National Pension Scheme and Employee Provident Fund. Further, there is a proposed provision that the current corpus in PF can be transferred to the National Pension Scheme if the employee wishes for the same.

2. Draft Code on Industrial Relations Bill, 2015

This will replace The Trade Unions Act, The Industrial Disputes Act and The Industrial Employment (Standing Order) Act. The key features are:

a) Organization having up to 300 workers can lay off without government approval as against the earlier limit of up to 100 workers. However, the governance and check on the same is proposed by a "Works Committee" comprising members of management and representatives from workers.

b) Increased penalty with minimum of five lakh and may extend up to ten lakh (section 103 of bill).

c) Stringent conditions for strikes and lock outs.

d) Registration of a Trade Union can be done if applied by 10 per cent of the workers as against the earlier provision of any seven members of a Union could apply for registration of a Trade Union. This will discourage forming of Trade Unions and will increase representation base as 10 percent of workers against only 7 in earlier provision.

3. The Model Shops & Establishment Code

This is intended to be a Model Shops and Establishment Act formulated by the Union Government basis which, states will be required to modify their State Acts. This will be a solution to organizations having presence in multiple states and may have a centralised leave policy wherein today different number of leaves is provided by different states. The key features are:

a) Covers establishments employing ten or more workers except manufacturing units.

b) Freedom to operate 365 days in a year.

c) Freedom for opening/closing time of establishment.

d) Women to be permitted during night shift.

e) No discrimination against women in the matter of recruitment, training, transfer or promotions.

f) Common online Registration through a simplified procedure.

g) Power of Government to make rules regarding adequate measures to be taken by the employer for the safety and health of workers.

h) Clean and safe drinking water.

i) Twelve days casual cum sick leave.

j) One day earned leave for every twenty days of work performed (can be accumulated up to 45 days).

k) Five paid holidays for festivals in addition to three national holidays.

l) Exemption of highly skilled workers for daily and weekly maximum working hours (for example workers employed in I.T., Bio-technology and R&D division).

By all the new reformatory amendments proposed, not only will there be welfare of labour but also ease of business for industry that will trigger a new era of growth.


Disclaimer – The article is for information only and exact legal position needs may be checked with relevant statutes and bills. Author does not take any responsibility for any change in legal position/interpretation.

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