Labourers at Rajpath in New Delhi

Labour law reforms: The new labour minister has his work cut out

[dropcap]T[/dropcap]HE news that Modi .02 was mulling a tsunami of labour law reforms by codifying 44 laws into four codes did not get the traction that was expected. One reason could be that this was old wine in a new bottle. The other could be that there were more fundamental challenges before this government insofar as resuscitating the economy was concerned; a labour reform was just not that burning an issue.

Interestingly, at the beginning of the Narasimha Rao era, the challenge before the nation about to take off on a new economic flight path was to shed the age hold stranglehold that a controlled economy had which acted as a growth inhibitor. One of the by-products of this old order was a labour law regime which was perceived as unfairly loaded in favour of the workers.


Trade unions today are a pale shadow of their strident forms, outfits which in an era gone by could bring the economy of a city like Bombay to a grinding halt and contribute to future design malls in abandoned textile mills! Interest disputes, i.e. disputes of collective bargaining such as bonus, fair wage revision, allowances, hardly hold that space they once held. Most of the labour cases are termination disputes.


The courts, it was perceived, were too soft on labour and this discouraged economic growth as capital feared it would get tangled in labour conflicts. The series of minority governments in Delhi also made the task of legislative reform daunting and a political hot potato.

The wisdom of the day was to rely on courts to do the hatchet job. So Labour Reform ranked along with Gay Rights. Legislative reform would be messy, so try the judicial route. While Rainbow had a roller coaster until Kaushal, Red was luckier. Or rather, tackling red I should say. The 2000s witnessed the horrible decade for labour law. A plethora of judgements (majority from two particular judges) followed, which demolished the edifice of workers’ rights. After years of legal battle, workers were sent home by the Supreme Court, with compensations of 25000 or 50,000. This had the expected downstream impact. Soon Industrial Adjudicators imitated the Top and sparingly awarded reinstatement and back wages, which were the heart of labour litigation. Where the Industrial Adjudicators did put the labour back in service, the high courts did the needful. Soon the Trade Unions wisened up. Most would themselves settle their disputes through conciliation or mediation for paltry sums.


Judge-made laws


The bane of “contract workmen”, a problem unique to the governmental and public sector was also deftly handled by the powers that be. Again, the controversial legislative route was avoided and the court was only too willing to step in and came to the Steel Authority decision (2001). This overruled the previous view of the court in Air India’scase and made it extremely cumbersome for such workers to get “absorbed” by the principal employers who chose to resort to the camouflage of contractors. In many cases, contractors changed six to eight times, but the same workers remained. Yet courts have been generally reluctant to call it this new form of labour exploitation. The February 2019 decision of the Supreme Court in Bharat Heavy Electricals Ltd. (BHEL) vs Mahendra Prasad Jakhmolaand the cases of 63 others again inexplicably focuses of the actual pay test to determine control over the contract employee. So a wise employer will ensure that payments are routed through a sham contractor.

The troika is only complete if we review the third major segment of labour adjudication. This was the demand against public employers for “regularisation”. Here again, the judicial intervention in the form of the Uma Devidecision (2006) put paid to the efforts for some time by frowning on the route of regularisation as this was against the constitutional scheme of public employment under Art 16. Creative decisions, that have subsequently come, have tried to distinguish this decision and held that it was not rendered in the context of the Industrial Law. However, the right to regularisation is still not out of ICU.



So this was the post-liberalisation first wave of labour law reform mostly through the judicial route. It must, however, be conceded that most of the labour law jurisprudence and the concepts that we know today – reinstatement, back wages, absorption of labour engaged through sham contractors and regularisation –  are all judge-made. So a judicial burial should not have been surprising to any keen watcher of this space.


Where have all the unions gone?


What then was left? Trade unions today are a pale shadow of their strident forms, outfits which in an era gone by could bring the economy of a city like Bombay to a grinding halt and contribute to future design malls in abandone textile mills! Interest disputes, i.e. disputes of collective bargaining such as bonus, fair wage revision, allowances, hardly hold that space they once held. Most of the labour cases are termination disputes.

Well a clue can be got from the reforms, BJP ruled Gujarat, Rajasthan and Haryana legislated just before Modi .01 floated the idea of codification. These seek to primarily exclude labour laws from special zones and make it easier for exit by raising the threshold stipulated by law for requiring governmental approval for exit or restructure. The other significant reform has been to make it difficult for workers to unionise.



In 2001, when Steel Authority was fought in Court, contract labour was principally a public employment issue. The last decade has witnessed an increasing adoption of the contract labour route by the private sector. While a significant segment of the workforce is being outsourced to “contractors”, the permanent workers are being inhibited from unionising. I am representing a number of trade unions in Haryana whose members have been en masse terminated only because they have tried to unionise.


Modi .02 – a storm in a teacup


In this backdrop let us examine what this Modi Codification has for us. The drafts which have been circulated seek to encapsulate in four broad codes the existing plethora of laws.  One code each shall deal with Employment, Social Security, Industrial Safety & Security and Industrial Relations. The draft which was accessible on the Labour Ministry website indicates that other than marshalling the existing 44 odd labour laws into the above four categories, this ambitious labour reform is pretty much a storm in a teacup.

Corruption and unfair implementation of labour regulations by the labour inspectors and officials no doubt has been a serious problem red-flagged by the Industry for decades. This codification, at first blush, seems to address this and herald a paradigm shift in labour administration. The central theme or thread of the Codes is self-regulation and voluntary compliance which, as we know of this country, is wishful thinking.



The Labour Inspectors are reborn as “Facilitators”. While admitting that there is much to be desired about our labour law enforcers, we cannot lose sight of the fact that in most states, the labour departments, as most government departments are understaffed and overloaded with responsibilities. ( I have consciously avoided using the term “overworked”).

Even if the 44 laws are fused into four, there would still be 44 aspects to have oversight over – from building and construction workers to employees compensation to bonded labour to minimum wages. Also, we must never discount the genius of Indian society to always find the way out. When cash payment was prohibited under the Minimum Wages Law and bank transfers were made the norm, many employers religiously complied and also religiously ensured that the worker withdrew a portion of the transferred wages and returned the same in cash to the employer.

While this government has often traced systemic ills to the Gangotri of Panditji, insofar as labour reform is concerned, one does not need to go that far. The reckless governance by legislation that was followed by the UPA2 is enough of historical precedence to put the government on a note of caution. The dying years of the Manmohan Singh regime saw an overdrive of lawmaking from street vendors to unorganised labour to education and food. Each exercise betrayed a complete lack of imagination and foresight.

Resultantly, today for instance, beneficiaries under the Right to Education Act, having had the opportunity to study in affluent schools till class 8, are told by the Central Government to find a place back in government schools as the RTE Act leaves such students high and dry after the 8th Standard. It is no surprise that other UPA era laws such as the one on unorganised workers is yet to see the light of day in terms of practical implementation.


Need for creative thinking


With massive joblessness which now the government has officially admitted, and falling economic growth parameters, simple codification, unfortunately, will give no succour either to the labour or to capital. Let us also not forget for a moment that even now, the vast unorganised sector remains completely beyond the tentacles of formal regulation.

The task for the new labour minister is really cut out. Mere legislative intervention is woefully inadequate a response. The need of the hour is an out of the box thinking that will (a) encourage more employment. (b) encourage strict compliance (c) create a stable climate where industrial relations encourage mutual trust and cooperation.

While doctors are not workers, the recent crisis in West Bengal gives us a vital insight into human behaviour. Most often all that the people want is a patient hearing and feeling that they shall be dealt with fairly and with empathy. All reforms must have this as the mantra and driving force.


The Leaflet