The Law At Work

At the heart of the Modi government’s effort to rewrite all lab­our laws is a pet scheme—‘Make in India’, aimed at reviving industrial production after decades of stagnation. Ind­ian manufacturing faces many obstacles, but the government has chosen to target worker-related legislations first: loosening hire-and-fire restrictions and tightening rules for forming trade unions have become the cornerstone of ‘Make in India’.

These labour law amendments will rep­lace older labour-related legislation with four new “labour codes”, being pitched as an effort towards simpler, neater regulation. Nothing wrong with that, ostensibly; but the government also seems to believe that what’s obstructing ‘Make in India’ is the provisions for minimum wages and overtime. This is exacerbated by state-level reforms,  some of which are harsher than the Centre’s. A certain ideological leaning on questions of labour, however, has been associated with the BJP government, and the unions have rained fire upon it. They say the gamut of changes, whether in Rajasthan, Haryana, Karnataka, Mahar­as­h­­tra or Gujarat, are completely at odds with what’s going on in factories. Many experts feel New Delhi has hastened through the proposals, misled by industry into believing it’s labour laws that obstruct India’s manufacturing potential.

The government, of course, hastens to correct this impression. Union labour minister Bandaru Dattatreya has tried to calm the unions and workers, who rem­ain agitated. “Workers’ rights will be protected in the new labour codes. Some of the changes are to laws as old as the 1920s,” the minister told Outlook in an interview (see page 56). “The trade UNI­ons, employees and companies, all will be part of the dialogue on labour law reform,” he says, acknowledging that earlier discussions were “not tripartite enough”. While this inclusion would help the Centre stave off accusations of being pro-industry, it also signals the government’s commitment to labour law ref­orms. Despite opposition, the BJP-led gov­­­e­rnment is going ahead with the new labour codes; one on social security and another on worker safety are in early stages of discussion. “For the two other codes, we have started work. As tripartite discussion is cumbersome, it will take time,” the labour minister says.

The proposed changes in the two existing drafts are being seen not as simplification but as drastic. For instance, the industrial relations code says a factory with less than 300 employees can lay off workers without government permission. The current norm is 100 employees. While this seems like simplification, aimed at lessening paperwork for employers, in reality, 84 per cent of Indian establishments already have fewer than 50 employees. “Forget 300, hardly any companies are being set up with even 100 employees these days,” says Vrijesh Upadhyaya, general secretary of the Bharatiya Mazdoor Sangh (BMS), India’s largest union, affiliated to the RSS. “Thus, with the new rule, all but a handful of manufacturers would have hire-and-fire as the norm.”

The new code on wages, second of four proposed legislations, says at least 30 per cent employees of an establishment—as against the current 10 per  cent—must consent to forming a union. This, too, app­ears out of sync with reality. On the one hand, workers are having to strike work for the right to form unions (see box, on page 54); on the other, companies are trying to encourage contract workers—more job-insecure, typically paid less and with no collective strength. “In Haryana, Guja­rat and Rajasthan, strikes are being noted, mainly because companies prefer the contracted to the salaried employee,” says Jayan Jose Thomas, assistant professor, economics, at IIT Delhi. “Some say, colonial-era laws need reforms, but their argument that labour law is the main obstruction to ‘Make in India’, because it makes it difficult to hire and fire, is wrong.”

The government’s own statistics show how. Even in the 1980s, when manufacturing peaked, organised manufacturing, where labour laws apply, was slack in job creation. It added only 1.2 million jobs from 1982 to 2005. Thereafter, up to 2012, 4 million jobs were created. “Most additions were of contract workers, the trend since the 2000s,” according to Thomas’s research. Labour bureau stats studied by Thomas show contracted labour rising from under 20 per cent to over 30 per cent. “What’s more, labour disputes like strikes are reducing, while lockouts by management are rising. But nobody mentions this power of management to close a unit under our existing labour laws,” he says.

Since 1998, lockouts have caused a minimum of 45 per cent of lost mandays annually. In 2004, management-called lockouts caused 90 per cent of lost mandays. And industry concern over hire-and-fire laws being impossible seem misplaced, for half of all new jobs since 1999 in the organised sector are outside the purview of labour laws. Independently, manufacturing creates 70 per cent jobs outside the purview of lab­our laws by virtue of being contractual.

“I believe the trend of more contractual than regular jobs is irreversible, but we can improve terms and conditions—say, better salaries—for contract workers. Also, minimum wages should be such that nob­ody depends on overtime. With overtime, we find people working beyond their cap­acity, which shouldn’t happen if wages are adequate,” says Dr Sanjay Upadhyaya, a fellow at the V.V. Giri Nat­ional Institute for Labour who took part in the government’s deliberations on new codes on wages and industrial relations.

“That said, labour laws definitely need a clean-up,” he says. He refers to Rule 25 of the central Contract Labour Act, which says contract workers doing the same task as regular employees must work on the same terms. “Companies often escape this, arguing that it’s merely a rule and not in the main Act. I feel such an important proviso should be included in the Act,” he says. He also believes penalties need to be effe­ctive, not just stringent-sounding. Breaking Rule 25, for instance, can get an employer’s lic­ence to hire contract workers cancelled. “But does that help workers? It doesn’t.”

States have their own version of each rule. In Tripura, Kerala and West Bengal, instead of the minimum limit of 20, the government allows 10 workers to be hired for contractual assignments. “Elsewhere, companies would hire 18 instead of 20 and get contractual workers in. Some regulations don’t make sense any longer,” Upadhyaya says. Rajasthan already is a virtual hire-and-fire zone. The central proposals were released to the public in July 2014, but Rajasthan had finalised them in June. Its contract labour law only applies in factories with a minimum of 50 workers. In fact, out of 7,622 factories in Rajasthan, 7,252 employ less than 300 workers. Eager to attract investments, Haryana too has relaxed closure norms. Ease of business rules are so relaxed for closure, many units immediately chose closure, leaving workers high and dry.

“The problem is, good labour reforms are defeated because the Centre has clubbed them with the bad. What relief could have been gained from simplification is lost too,” says Shyam Sunder K.R., who teaches industrial relations at Xavier Labour Relations Institute, Jamshedpur.

Labour law reforms have got identified with a habitual tendency of governm­ents to take sides with the rich. The pitch is muddied because the BJP believes in, and propagates, the idea that India is a land of business opportunities. So industry often sees efforts to help workers as feeding do­-nothings. This view predates the pre­sent dispensation, and alas, has been exploited by every successive government.

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