Madhya Pradesh declared Thursday, in the midst of the battle against Covid-19, a slew of amendments in labour laws to allow workers more freedom to work. Which include improving contract labour standards, requiring checks by third parties, encouraging workers to work up to 72 hours a week if they are willing and paid overtime, and implementing compounding clauses to eliminate workplace disputes.
Chief Minister Shivraj Singh Chouhan said by establishing a positive investment climate, the reforms will attract new industries; build employment for youth and the unemployed. He said that MP was the first state to initiate this change by amending laws within its framework.
Registration and licensing for, amongst others, businesses, shops and bidi manufacturers will now be issued in just one day against the current 30-day requirement. The state has already informed amendments to the Public Services Delivery Assurance Act that will impose a fine on the registration and licensing authority responsible for these services. The claimant receives the fine as compensation.
Factory license will be required from now on to be renewed once in ten years instead of annual renewal. Under the Contract Labour Act, the state will now give a license rather than a calendar year for the entire duration of the contract.
Contractors with less than 20 employees are not expected to register for registration. The state has suggested increasing the number of employees to 50 to offer more flexibility to the contractors. Enrolment will also be given online. It sends the Centre a request to make punishable offences compoundable under the Contract Labour Act.
With the exception of the clause dealing with workers ‘ safety, the MP government has for the next three months given relaxation in all provisions of the Factory Act. Chouhan said the state has done what it could within its domain, but it wants to extend similar relaxations for the next 1,000 days for which it has submitted a proposal to the Centre.
The state has relaxed all other laws, with the exception of Section 25 of the Industrial Disputes Act, to allow business owners to hire employees as they please. Industries with less than 100 employees were exempted from the provisions of the MP Industrial Employment Act (Permanent Order).
MSMEs will now be able to employ labourers to maximize productivity according to their requirements. The Industrial Employment Act which applied to establishments with more than 50 employees will now apply if the number of employees is 100 or more.
Units operating on power currently require registration under the Factory Act, if they hire 10 employees. The state has given the Centre a plan to raise the number of employees to 50 The state has argued that it would exempt these units from the Factory Act provisions, and they will be able to raise production to their maximum potential. Industries which are not operating on electricity must also be registered if they hire 20 employees. The state has requested that the cap be withdrawn from the Centre.
The state has already released a notice requiring shops and restaurants to stay open between 6 a.m. and 12 p.m. on the grounds that it would generate more employment on the one side and on the other it will avoid crowding.
Citing the conditions produced by the COVID 19 pandemic, the state has allowed industries to increase the shifts of employees from eight hours to 12. Employees will be able to work up to 72 hours a week if they are willing to do so, and they will be paid more for putting in more effort.
Specific labour laws allow industry to hold 61 registers and to file 13 returns. Now they will have to hold just one register and file one return, and consider self-certification as appropriate.
Significance of these amendments
The implementation of economic change needs a recession and Covid is an excellent opportunity to make our economy competitive internationally in the long term. UP and MP have made their states more attractive to investors and have sent other states a strong signal to follow.
The archaic labour laws of India are a key reason why it is not a successful exporting nation. Sensitive countries, including those in Scandinavia, provide employers with the right to recruit and lay-off workers based on market dynamism. We support employees who lose jobs through a well-designed unemployment compensation and retraining safety net.
India’s labour laws do the opposite — they protect jobs, not employees, and don’t provide flexibility for employers in a downturn to lay off staff. Indian businesses thus stop recruiting permanent staff and 90% of Indian jobs ended up in the informal sector without a safety net.
It is one of the reasons why the manufacturing sector in India has not become a mass-employment driver, as it has in the Far East. During the Covid crisis the plight of daily wage migrant workers has shocked the nation’s conscience. Though reforming its nonsensical labour laws, India needs to set up a social welfare fund (with employers and government contributions) to support temporary unemployment and retraining. By doing so, India will become a successful export centre, creating numerous formal jobs, as well as protecting the interests of the unemployed and the informal.
The reforms being mooted by the governments of Madhya Pradesh and Uttar Pradesh are large in nature and will have serious implications for the welfare of workers. They seem to be targeted less at wooing investors and more at harnessing the opening of the Covid-19 crisis in policy ‘agendas.’ The anxiety is due to three factors.
Three, such changes are timing. The two governments failed to curb the spread of the coronavirus pandemic even as they are nascent to push migrant workers back home in their states. Whether certain states are in a true post-lockdown situation is uncertain.
Two, the way such laws were applied were undemocratic. Any reform with these consequences in a democratic polity — such as exempting new industrial units from registering child workers in MP — needs public consultation, especially with immediate stakeholders or their representatives. While this has been an unfortunate phenomenon since 1991, the changes have not come through any such process.
Third, the success of these measures in achieving their policy goals is questionable. If the basic workplace safety guarantee is withdrawn, as is the case with both MPs, prospective employees may be more reluctant to enter or resume work. The assumption that labour-dilution laws, which have been implemented half-heartedly anyways, will woo investors once the lockdown ends is also open to question empirically.
Legality of the amendments
Now inspection would only be possible on the basis of complaints, with the approval of the Labour Commissioner. Additionally, the provisions of the Madhya Pradesh Industrial Relations Act were relaxed. Trade unions and plant managers should now be able to settle conflicts in factories according to their convenience. For settle conflicts, they won’t have to go to the Labour Court. Exemptions from provisions of the Madhya Pradesh Industrial Jobs (Permanent Order) Act were given in industries with less than 100 labourers
Until now, the Industrial Jobs Law was applied to institutions of over 100 workers. The state government has submitted for consideration a number of recommendations to the Centre. One of them linked to the Factory Act, according to which power units had to be licensed for 10 employees in the past applicable to businesses of more than 50 (but less than 100) employees.
Similarly, units operating without power in the past had to be registered on hiring 20 labourers under the Factory Act. Now a plan to eliminate the cap on the number of staff has been submitted to the centre. Under the Contract Labour Act, so far, contractors have had to register to hire 20 labourers. They will now only be required to register after having employed 50 staff or more.
Legally these changes are within limits but can be twisted and turned to exploit the labours as they leave them more exposed to such instances.
According to the Minimum Wages (Central) Rules, 1950 from Ministry of Labour and Employment
24. Number of hours of work which shall constitute a normal working day
(1) The number of hours which shall constitute a normal working day, shall be –
(a) In the case of an adult – 9 hours;
(b) In the case of a child – 4 &1/2 hours.
If a 7 day working week is considered it will amount to 63 hours for the labourers hence and additional 9 hours exceeds the limits of this act. But, these amendments ensure that the Labourers consent is the primary factor and upon their willingness only can work for an overtime.
“For closure under chapter VB of I. D. Act, to decide the strength of workers, employees working as supervisors or managers would be excluded while counting 100 numbers of workmen”.
National Kamgar Union vs. Kran Rader Pvt. Ltd. & Ors. 2018 LLR 159 (S.C.)
“Once the departmental enquiry was held legal and proper, interference in punishment by the labour court by setting aside the same is not justified.”
Management of Bharat Heavy Electricals Ltd. vs. M. Mani & Anr. 2018 LLR 2 (S.C.)
“Labour Court has to frame preliminary issue on fairness and validity of the inquiry.”
Kurukshetra University vs. Prithvi Singh. 2018 LLR 371 (S.C.)
“The labour court award granting reinstatement with 50% back-wages will not hold good when the labour court first failed to decide the validity and legality of the enquiry, second, labour court called the parties to lead evidence on all issues including the charge of misconduct, third the labour court examined the findings of the enquiry officer without coming to conclusion that the enquiry was vitiated”.
M.L. Singla vs. Punjab National Bank. 2018 III CLR 668 (S.C.)
“Payment on piece rate basis made to the workmen is ‘wages’ covered under the definition of Section 2(22) of the Act”.
Employees’ State Insurance Corporation vs. Hindustan Milkfood Manugacturers Ltd. and Others. 2018 LLR 119 (S.C.)
“Contract employee has no legal right either to get his/her contractual period renewed/extended or to get regularized his services.”
Yogesh Mahajan vs. Prof. R.C. Deka, Director, All India Insutitute of Medical Sciences. 2018 LLR 366 (S.C.)
In the case of Uttar Pradesh, where all labour laws (except three on construction workers, bonded labour, and wage pay) are suspended for three years, this is an ‘attempt’ to woo investors. In Madhya Pradesh the suspension at face value is less severe.
But consumers are never drawn to simpler labour laws. Surveys by the World Bank have shown that labour law is just the fifth biggest issue facing employers. MP and UP are also states with lower resources and human capital which are traditionally poorly governed.
There are 35 central labour laws, plus over 100 state labour laws, most of which were poorly enforced by state governments, partially because India’s total number of labour inspectors does not exceed 6000. They are either not applicable or ignored in the unorganised sector. Madhya Pradesh and Uttar Pradesh’s acts are not being thought about, and risk being challenged in court.
Suddenly, FDIs do not flood into Uttar Pradesh and Madhya Pradesh merely because of relaxation of labour rule. If domestic investment went up slowly pre-Covid, then with the demand collapse after Covid, don’t expect sudden growth.
Authors:G Shashank Rao from Symbiosis Law School, Hyderabad.
Editor: Akshat Mehta from Institute of Law, Nirma University.