Labour Law Reforms: After a Tearing Hurry, Ad-hocism, Lethargy and Complexities Dominate Regulations Making Processes – Part II

Analyzing the stuttering, impeded the implementation of the much-vaunted Labour Codes over the last two years, PROF. K.R. SHYAM SUNDAR explains the five major flaws in the Union Government's follow-up to the enactment of the Codes by the union government. In this second of a two-part series, he goes over the latter two of these flaws: the slow pace of formulating regulations, indicating lethargy from state governments), and chaotic regulations, indicating a lack of coordination between the union and state governments.

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EVEN though the Code on Wages was passed in August 2019 and the other three Labour Codes about a year later, we are yet to see the four Codes being implemented.

After the complete and unpardonable breach of democratic norms in passing the Labour Codes with undue haste, the legal processes following the enactment of the Codes have been observed to suffer from five major deficits, which are an absence of social dialogue, inordinate delay in implementation, implementation in a piecemeal fashion (ad-hocism), the slow pace of formulating regulations (lethargy), and chaotic regulations (lack of coordination).

Also read: Why workers fear the new labour codes will usher modern slavery

In the previous part, I demonstrated how both the codification of labour Codes and the draft rules promulgated thereunder suffer from the first three deficits. In this part, the latter two deficits are discussed, as it is shown with the use of data that state governments have not been quick to frame the rules under the four Codes (lethargy), and even those who did, have not done a good job, as abundantly reflected in the lack of coordination between the Union and state governments.

Lethargy of State Governments and Union Territories in Rule-making Processes

The following table provides details relating to the framing of rules under the four Codes by the state governments and the Union Territories (UTs) (Data for the same has been collected from the data and technology platform Simpliance).

Table 1: Details relating to Framing of Rules under the Four Labour Codes in States and the Union Territories (as on June 8, 2021)

Note: 'X' denotes that rules don't exist in those particular states and UTs. Data valid as of June 8, 2021.

It is seen that most of the states and UTs have so far not notified the draft rules under any of the four Labour Codes. Significantly, some of these, like Tamil Nadu, Kerala, West Bengal, Puducherry and Assam recently faced Assembly polls. While Bihar, Karnataka, Gujarat, and Odisha have made the rules for one or more of the Codes, only Madhya Pradesh, Uttar Pradesh, Punjab and Uttarakhand have notified the draft rules under all four Labour Codes. 

It is easy to understand that in the current political context, where labour and employment related issues have lost the significance that they used to earlier possess in the Indian political space, the question of implementing the Labour Codes gets relegated in terms of political and governance priorities.

Also read: New Code on Work Conditions: Should a Workweek have Four Days or Six?

At this rate, we do not know how long workers and employers will have to wait for the rule-making process to be completed by all the states and UTs. But even more worrying are the regional variations in these rules, which I briefly explore briefly below.

Uncoordinated State Regulations

It will be well-nigh impossible to analyse all sets of rules under any one Code, if not all the four Codes, in a short article of this kind. I concentrate on two aspects of the Industrial Relations Code, 2020 (IRC): recognition by the employer and the state government, and general and political funds of trade unions in the five states which have framed the Draft Rules under IRC. The data for this analysis has been sourced from Simpliance as well.

Trade union recognition is the fulcrum of the larger rule-making processes in industrial relations, which is why I have chosen this aspect for scrutiny of the rules framed by state governments.

Table 2: Details Concerning Trade Union Recognition⁽¹⁾ and Other Aspects of Trade Unions (as of June 8, 2021)

Notes: 

(1) – None of the state regulations mentioned in the Table provide for recognition of trade unions by the state governments.

(2) – The language of the provisions in the rules is ambiguous as it involves multiple agencies. In case of disputes concerning membership, "the employer" shall appoint an independent observer if the trade union demands so. Further, the employer shall inform to the Regional Additional/Deputy Registrar of the area in respect of voting, and the latter "may direct that voting shall be conducted in the presence of Inspector cum Facilitator." [Rule 20(1)].

(3) – This is deductible from the following clause: "The verification of workers on the muster roll of the industrial establishment, under sub-sections (3) and (4) of Section 14 shall be made in presence of authority as notified by State Government of (sic) the concerned area." [Rule 16(1)].

(4) – However, Rule 16(1) is ambiguous as it requires the employers to negotiate on matters "pertaining to service conditions and charter of demands of Workers (sic) signed by atleast (sic) 20% of the total workforce if there is no registered trade union or by the executive committee of a registered trade union." Does the former numeric criterion mean recognition of any workers' body subject to the specified criterion? Or is it a criterion for a sole negotiating agent where is single trade union?

(5) – This is deduced from the language in Rule 16(4) mentioning "verification" and the specific absence of other methods of verification.

Also read: Discordant Chord of the Social Security Code: Raising concerns on the Draft Labour Code on Social Security and Welfare

The discord between the central regulations and the state regulations is manifest in Table 2. While Punjab has not framed regulations providing for the recognition and the facilities to be provided for recognised unions, others have either not provided the regulations completely, or been vague about them, or made different regulations for both.

While different provisions across the states have their own issues, the absence of or ambiguous provisions for recognition and related aspects of trade unions is a particular cause of concern, as is the seemingly casual manner in which some states have framed their regulations. For instance, while Gujarat leaves the facilities to be provided by the industrial establishment to a negotiating union or a negotiating council for their mutual determination, Uttar Pradesh leaves them to be specified by a "general or a special order".

On the other hand, the rules relating to "general and political funds" of trade unions framed by these governments vary in terms of clarity, specificity and the number of clauses. Some like Punjab have inserted them in appended Forms but not mentioned them in the text; others like Uttar Pradesh and Bihar have left them vague.

This begs the question: What is the need for rules if the regulations could be left to the bye-laws of the trade unions concerned? They should provide a broad framework, and specify concretely and clearly the substantive and functional aspects of them. Otherwise, there could be considerable and unhealthy variations in practice in the bye-laws of trade unions.

In sum, three concerns arise here. One, as expected, there exist variations in the Rules framed by the regional governments. Two, even after the decentralized rules-making process, matters, general or specific, are left to the executive orders. Three, the rules-making process, instead of generating the regulations, leave some aspects to the mutual determination or the bye-laws of the trade unions.

The essential principle of labour regulations is to empower the workers and their collectives.  Lawmakers fail in their duty if they leave the regulations to the parties or workers' organizations.  Then, the entire edifice of regulations collapses like a pack of cards.

I have desisted from a more detailed analysis of the rules framed by these states and comparing them with the central regulations. Imagine the chaotic picture we are most likely to secure if all the states and the UTs formulate their regulations!

These confirm the assumption that there exists little or no coordination between the union and state governments. One may argue that regional diversities account for the divergence in the regulations. Indeed, they could differ in terms of procedures, but not pertaining to substantive provisions.

Imagine a firm having many branches across the country, and dealing with different recognition methods and criteria in each state. In other words, the regulations promote unhealthy variations at the 'sub-national' levels which would pose considerable problems to the stakeholders. In fact, to avoid inter-state variations in regulations and reduce the transaction costs, the Occupational Safety and Health and Working Conditions Code provided for a "national license" to be issued by the Central government for national operators [see Section 47(3)]. Such options must exist for recognition of trade unions and regulations concerning trade unions operating across several states and UTs.

Several of these problems have arisen primarily because the lawmakers have completely and unpardonably failed to define these aspects clearly and comprehensively in the IRC itself, which would have rendered these complex exercises irrelevant and reduced the transaction costs for the state governments, stakeholders, and academics.

For example, why did the IRC not define the criterion for a sole bargaining agent, the method of recognition, the facilities to be provided to the negotiating union/council or the regulations concerning the general and political funds in the IRC itself, and left it to rule-making? This is a huge failure on the part of law-making by the Parliament and the ruling party alliance at the centre. As a result, we have to engage in these ponderous exercises for understanding and resolving this web of regulations, which have huge transaction and institutional costs.

Similarly, it is logical that the regulations should also clearly define the powers and liabilities of the recognised unions, and also those concerning other trade unions as is done by the existing regional labour laws. But these aspects are absent in the Labour Codes, due to which there cannot be rules on them. This is a huge legal void. After all, how can 'rules' of industrial relations in a company or a firm or an industry be determined through collective bargaining when the powers and the liabilities of the negotiating agencies are not specified by law? The Parliament was evidently blind to such pressing legal questions. In fact, there are big enough inconsistencies with regard to the minimum requirement of members to register a trade union (For instance, verify the compatibility of section 6(1), (2) and (4) in the IRC, and compare this with section 4(1) and two provisos to it in the Trade Unions Act, 1926).

Also read: New Labour Codes: No Protection Against 'Hire and Fire' Regime

What Is The Way Forward? 

There are two complementary courses open to the union government.

One, it should immediately call halt to the entire disparate and uncoordinated process of rule-making by the state governments under the four Labour Codes, as they suffer from many a slip.

Two, as was done (albeit by the Supreme Court) in the case of the controversial farm laws, it could suspend the Codes for a year or so, and use that time to resolve all these issues by suitably amending them. Even the Parliamentary Standing Committee on Labour had opined, as did many commentators, that the four Codes have left out many substantive and procedural aspects in the Codes to the rule-making processes. The Central Rules themselves, as I have argued in this and other outlets, suffer from several shortcomings.

The Central government must take a pragmatic call and should revisit them, consult experts and reframe the Codes, and re-introduce them at an appropriate Parliamentary session as well-drafted and consulted Codes.  At any rate, the existing laws, at least with respect to the migrant, construction and the unorganised sector workers, have not been implemented well or not implemented at all. So this is an opportunity to cure the legal sin. Otherwise, we would witness a scenario where one inefficient and inequitable legal regime is substituted for another, merely due to conception and drafting failure!

In the meanwhile, the union government should engage with the state governments and stakeholders (that is, trade unions, industry representatives and labour academics) to get their detailed recommendations and take a call, as the executive branch of the State, on the final shape of the Codes.

One fails to understand the ruling party alliance's utter desperation in getting the Codes passed by hook or by crook in the Parliament. However, it is its constitutional and moral duty to now cure the deficits, and make the Codes a complete and consonant scheme before implementing them. 

The country has waited ad infinitum for new, sound labour laws, so it could afford to wait for a few more months. At any rate, employers' bodies have called for suspension of labour laws, given the pandemic-induced lockdowns and the economic slowdown context, and have also demanded changes in the Codes.

Also read: Social Security Code: Another Historic Opportunity Missed!

The defective and incomplete Codes cannot enable good governance of the labour market and the industrial relations system. The government must consult a galaxy of legal experts and, if necessary, the International Labour Organization to improve the Codes.

One thing is certain: the chaotic and inefficient current way of things cannot continue! Will the government listen?

(Dr K. R. Shyam Sundar is Professor, HRM Area, XLRI, Xavier School of Management, Jamshedpur. The views expressed are personal.)