Right code for labour

| Updated on September 22, 2020 Published on September 22, 2020

The three labour code Bills before Parliament will ease inspector raj, but they need fine-tuning

The three labour code Bills — Industrial Relations Code Bill 2020, Code on Social Security Bill, 2020, and Occupational Safety, Health and Working Conditions Code Bill, 2020 — passed in Parliament on Tuesday, can have a transformative impact on labour relations in India. Along with the ‘wages code’, which became a law in August 2019, these can significantly ease the conduct of business by amalgamating a plethora of Central and State laws on labour. The exercise follows the recommendations of the Second National Commission on Labour (2002), which suggested consolidating 100 State laws and 40 Central laws across industries, occupations and regions. For instance, the social security code replaces nine laws on social security, including the Employees’ Provident Fund Act, 1952, and the Maternity Benefit Act, 1961; the IR code Bill subsumes the Industrial Disputes Act, 1974, the Trade Unions Act, 1926; and Industrial Employment (Standing Orders) Act, 1946; and the health and working conditions code, 13 labour laws. For both employers and employees seeking enforcement of their respective rights and obligations, this marks a major step forward — a final break from inspector raj.

However, it is important that the consolidated laws are free of ambiguities and anomalies, which can defeat the purpose of simplification and, in fact, lead to disputes and litigation. Examining the codes, the Parliamentary Standing Committee on Labour has “exhorted” the Government “review all such equivocal and cryptic provisions and endeavour to have a course correction so as to determine a transparent and inclusive legislation”. It is a bit surprising for the Ministry of Labour to inform the House panel that the open-ended provisions are “a conscious decision...as it provides for dynamism and flexibility to those provisions which are amenable to change as per needs of the time”. This cannot be a source of comfort to investors who seek predictable rules rather than those where discretionary power comes into play. For example, Sections 96 and 127 of the IR code and Occupational Safety Code, respectively, allow governments considerable powers to exempt industries from the codes altogether, without creating any alternative system.

It is also not clear why rural labour, iron ore mine workers, beedi workers and domestic workers have been overlooked. The inclusion of the Employment Exchanges Act in the social security code is inexplicable. The broad theme of expanding the labour protection umbrella to well beyond the ‘labour aristocracy’ of the organised sector is unexceptionable. Indeed, the social security code makes an effort to reach out to the ‘gig’ and ‘platform’ economy. The Periodic Labour Force Survey (2017-18) observes that 71 per cent of regular wage/salaried workers in the non-agriculture sector did not have a written contract, and 50 per cent were without social security cover. The new laws, by simplifying compliance, should create an incentive for workforce formalisation.

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Published on September 22, 2020
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