Proposed Changes to Labour Laws: A Boon Or Bane?

In-House Counsel

Proposed Changes to Labour Laws: A Boon Or Bane?

Pathik Arora | May 2016

The government in 2015 has proposed major overhaul to the present labour laws in India. The primary focus, of the change is to create a balance between labour welfare on one hand and making doing business in India easier on the other. This article attempts to provide a helicopter view of the amendments proposed while analyzing the impact of amendments from a labour welfare stand point.

Essentially, the proposal is to reduce the current gamut of labour laws into four codesdealing with industrial relations, wages, social security, industrial safety and welfare.

The notable changes to the present regime are outlined below.

THE LABOR CODE ON INDUSTRIAL RELATIONS, 2015

The proposed code merges the Industrial Disputes Act of 1947, the Trade Unions Act of 1926 and the Industrial Employment (Standing Orders)Act of 1946. The significant changes include:

Creating a labour union will require 30% of the workers to sign for its creation as opposed to the earlier 10%. This is a welcome development for industry, however, only time will tell whether this will become a weapon in the hands of management to suppress and ignore labour concerns.
Employers with up to 300 workers would not require government permission for retrenchment, lay-off and closure, at present employers having less than 100 workers do not require government permission. This, however, may make large number of industrial units out of the ambit of this code making it easier for them to retrench or lay off the workers.
Severance pay obligation would be raised from15 days of the laid-off employee’ save rage salary to 45 days for every year of service
Employers with less than 50 workers would no longer be required to provide a minimum of one month’s notice and severance at the time of retrenchment (lay offs).

THE LABOR CODE ON WAGES, 2015

This merges the Payment of Wages Act, 1936; the Minimum Wages Act, 1948; the Payment of Bonus Act,1965; and the Equal Remuneration Act,1976. The significant changes include:

The proposed code, while removing the scheduled list of employment, gives state governments the power to fix the minimum wage for any employment. States can revise from time to time, taking into the consideration the guidelines of the Minimum Wages Advisory Board.
Prohibition of discrimination against trans gender persons in the payment of wages.
Payment of Wages Act replaces power given to labour commissioners with new “authorities”.

INDUSTRIAL SAFETY AND WELFARE

2015 AMENDMENTS TO THE CHILD LABOUR (PROHIBITION AND REGULATION) AMENDMENT BILL, 2012

The proposed bill prohibits employment of children (below 14 years of age) in any occupation, except where a child, helps his family after school hours or in fields or home based work, attends technical institution during vacation for learning. The provision creates a loophole, as it is difficult to keep a check on children working in their homes, and finding out whether they are helping their parents or working to supplement the family income.
The proposed bill provides that appropriate government may regulate working conditions and safety standards for children in the audio-visual entertainment industry. However, there is no specific provision regulating adolescents in the audio-visual entertainment industry.
Prohibits employment of adolescents (person between the age of 14 to 18 years) in hazardous occupations (i.e., mines, inflammable substances or explosives). The meaning of hazardous occupations and processes should be widened to include all those occupations/processes that may jeopardise health, safety and morals of adolescents, in line with the International Labour Organisation Convention 138.

CONTRACT LABOUR ACT

The proposed amendments here will exempt companies employing less than 50 workers from the ambit of this Act (from the earlier limit of 20). This may have a severe impact on the conditions of work of labour. Therefore, it is critical that prior to the amendment becoming enforceable, the government introduces special legislation regulating contractors, companies etc. engaging less than 50 labourers.

THE FACTORIES (AMENDMENT) BILL, 2014

The Bill specifies that the state government may raise the minimum number of workers employed in the definition to 20 (if power is used) and 40 (if power is not used).
At present the Factories Act prohibits women from working: (i) on certain machines in motion, (ii) near cotton openers, and (iii) between 7:00 PM and 6:00 AM. The Bill seeks to remove the first two restrictions. It proposes to empower the State Government to allow women to work during night hours in a factory or group of factories if: (i) there are adequate safeguards for safety, health and comfort of women (including night crèches, ladies’ toilets and transportation from the factory to their residence), and (ii) it has held due consultations with and obtained the consent of the women workers, the employer and the representative organisations of the employers and workers. This change would definitely encourage more women to be recruited by industry and increase the women workforce.
The Bill introduces provisions for: (i) supply of protective equipment and clothing to workers exposed to hazards, and (ii) rules regarding hazardous processes. It modifies the provisions regarding: (i) precautions against dangerous fumes and gases, (ii) explosive or inflammable dust or gas, and (iii) dangerous operations.
The Bill states that a factory with more than 75 workers should provide separate and suitable shelters or restrooms for male and female workers. The Factories Act, 1948 at present provides for suitable shelters and restrooms to be mandatorily provided in factories with more than 150 workers, with no prescription for separate shelters and restrooms for male and female workers. This is a much required changed, as it is necessary for the health and safety of women work force. However, a hygienic and safe rest room should be every worker’s right and thus every factory (irrespective of the number of workers employed) should provide for separate shelters and restrooms for male and female workers.
The Bill increases the maximum number of overtime hours from 75 hours per quarter to 150 hours per quarter allowed to a worker and relaxes the provisions regarding entitlement of workers to paid leave. While thisis an encouraging change both for industry and labour force, however, the impact on the health of labour will have to be monitored if they are engaged for these extended overtime hours. Further, this may also result in downsizing of workforce.

It is expected that a separate code on small factories will lay down the procedure for closure or lay-offs in the case of small factories, with up to 50 workers. Some earlier bills presented by the government have already clarified that the government will keep small factories out of the purview of major laws.

SOCIAL SECURITY

PAYMENT OF BONUS (AMENDMENT) BILL, 2015

The Bill was passed in Jan.1, 2016, and is retroactively effective fromApril1, 2015

The Act mandates payment of bonus to employees’ whose salary or wage is up to ` 10,000 per month. The Bill seeks to increase this eligibility limit to ` 21,000 per month.
The Act provides that the bonus payable to an employee will be in proportion to his or her salary or wage. However, if an employee’s salary is more than ` 3,500 per month, for the purposes of calculation of bonus, the salary will be assumed to be ` 3,500 per month. The Bill seeks to raise this calculation ceiling to ` 7,000 per month or the minimum wage notified for the employment under the Minimum Wages Act, 1948 (whichever is higher).

EMPLOYEES’ STATE INSURANCE ACT, 1948

There is proposal to provide employees the option of choosing between the benefits provided by the Employee Insurance Act and a health insurance schemes provided by private insurance companies recognized by the Insurance Regulatory and Development Authority. This will promote better insurance schemes to evolve for the labour force.

CONCLUSION

For ease of doing business in India and providing the much needed thrust to the manufacturing sector, changes to the present complex labour law regime are vital. The proposed changes though endevour to achieve the balance between workman welfare and simplifying doing business, however, the true test will be in its strict enforcement and effectively plugging in of lacunas appearing from time to time. Finally, since labour concerns are not limited to factory and construction workers, the problems of the agricultural workers, domestic workers and plantation workers must be addressed by the Government urgently through separately dedicated legislations

About Author

Pathik Arora

Pathik is a lawyer and company secretary with over 14 years of experience. He is presently working with InterGlobe Hotels Pvt. Ltd., where he Heads – Legal, Secretarial Estate Management & Compliance. InterGlobe Hotels is a joint venture between InterGlobe Enterprises and Accor Asia Pacific, to develop 'ibis' branded hotels in India, Nepal, Sri Lanka and Bangladesh, with currently 10 operational and 9 under construction hotels in India. He also heads the Legal portfolio for the joint venture set up amongst InterGlobe, Accor and Pacifica Partners (Singapore) for development of luxury hotels under Accor brand viz., Pullman and Novotel.