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Ruddar Datt

THE National Commission on Labour has made certain important and path-breaking recommendations in the context of the review of labour laws. A few important points from the report are given below:

The Commission recommends a specific provision in the Trade Union Act to enable workers in the unorganised sector to form trade unions and register them. It has recommended a waiver of the condition of employer-employee relationship and also of the 10 per cent membership in the establishment. This is a path-breaking recommendation that can pave the way for bringing into the fold of the labour movement 92 per cent of the workers in the unorganised sector.

The Commission has recommended using the check-off system to determine the negotiating agent in an establishment. Moreover, by fixing 66 per cent membership for entitlement as negotiating agent, the panel has not favoured the principle of simple majority but has opted for two-thirds majority. If the condition is not satisfied, a composite negotiating agent from among representatives of unions with support of more than 25 per cent has been recommended.

The Commission has recommended a three-tier system of Lok Adalats, Labour Courts and the Labour Relation Commission. While the Lok Adalats and Labour Courts deal with individual grievances and complaints, the Labour Relations Commission has been empowered to deal with both individual problems and those of collective bargaining a settlement cannot be reached through bilateral negotiations.

The Commission has recommended that Labour Courts should have final authority in issues pertaining to labour and jurisdiction of civil courts in this area be banned. By imposing on the unions the condition of 10 per cent membership to represent labour in various fora, the Commission has eliminated the role of very small unions parading as genuine representatives of labour. The idea of establishing an All-India Labour Judicial Service is welcome.

The Commission has guaranteed 8.33 per cent bonus for all employees when it states that every employer should pay each worker one month's bonus before an appropriate festival. Any demand in excess of this up to a maximum of 20 per cent of the wages will be subject to negotiation.

The Commission has recommended that the present system of two wage ceilings for reckoning entitlement and for calculation of bonus should be suitably enhanced to Rs 7,500 and Rs 3,500 for entitlement and calculation respectively. It has presented the minimum and maximum limits for bonus and permitted freedom to negotiate.

The Commission's categorical view that no exemption from labour laws should be allowed to export promotion zones or special economic zones is further evidence of its sincerity in implementing the laws.

However, certain recommendations are vague and require further debate and deliberation. It would be desirable to take up certain issues and clarify them:

The Commission has recommended that the Government may lay down a list of such highly paid jobs in the high-wage islands, such as those of air-pilots, who may be declared as non-workers, or alternatively fix a cut-off limit of remuneration, which is substantially high (such as Rs 25,000 per month), beyond which employees will not be treated as ordinary workers.

Fixing a cut-off of Rs 25,000 can open a Pandora's box because a very large number of supervisory and managerial personnel are drawing less than Rs 25,000 per month All these categories will put pressure on the Government to be included in the category of workers to get the benefit of labour laws.

The Commission has explicitly stated in its report: "A settlement entered into with a negotiating agent must be binding on all workers". The intention is to bring an industrial dispute to a close, once the major representatives of workers agree on the negotiating table.

But the Commission does not make the agreement binding on management. It has been observed on several occasions that managements also violate agreements. It would, therefore, be appropriate if the recommendation had been reworded as under: "A settlement entered into with a recognised negotiating agent must be binding on all workers and on management as well."

The Commission has recommended that the check-off system should be limited to establishments employing 300 or more workers. This seems be inconsistent with the basic philosophy of the Commission to develop harmonious industrial relations. A break-up of the proportion of workers employed in establishments employing less than 300 workers reveals that in the factory sector, of a total employment of 6.36 million workers in 1997-98, about 3.79 million (59.6 per cent) were in such establishments.

The Commission has, however, recommended a different mode for the negotiating agent in establishments of less than 300 persons. The Commission states: "Though the check-off system will be preferred in the case of establishments employing less than 300 persons too, the mode of identifying the negotiating agent in these establishments may be determined by the LRCs.

The Commission is of the view that workers' participation in management should be made applicable to all establishments employing 300 or more workers. This is welcome. But the question is: Why should establishments employing less than 300 workers be left out? If the functioning of an establishment and its productivity has to be enhanced, workers' participation can in all cases be used as an effective instrument for the purpose.

Moreover, even with 100 to 300 workers, many establishments function as joint-stock companies. If that is so, workers' participation at various levels should be promoted.

The approach of the Commission to treat strikes and lockouts at par is basically unjustified. The Commission, however, recommends "that an illegal strike or illegal lockout should attract similar penalties. A worker who goes on an illegal strike should lose three days wages for every day of the strike, and the management must pay the worker wages equivalent to three days wages per day for the duration of an illegal lockout. The union which leads an illegal strike must be debarred from applying for registration for two or three years."

The basic question is: What is the proportion of illegal strikes and illegal lockouts in the total man-days lost in each category? There is every likelihood that the impact of illegal lockouts is much higher than that of illegal strikes. That being so, to recommend double punishment for labour, against single punishment for the employer, does not seem justified. The perfunctory manner in which the Commission has treated the phenomenon of lockouts is seen in the following statement:

"A review of industrial relations reveals that as against 402.1 million man-days lost during the decade (1981-90 — the pre-reform period), the number of man-days lost declined to 210 million during 1991 to 2000 (post-reforms). But more man-days have been lost in lockouts than in strikes."

But for this bland statement, a deeper analysis of individual behaviour and social intensity of lockouts has not been made. Neither has an effort been made to identify the causes of this growing phenomenon. As against about 92 million man-days lost in strikes during 1991 and 2000, lockouts accounted for 138.5 million man-days lost. In relative terms, lockouts accounted for over 60 per cent, and strikes only 40 per cent, of the total man-days lost in the 1990s.

The situation was alarming in 1999, when lockouts accounted for 76.2 man-days lost per worker as against only 9.7 man-days in strikes — nearly eight times. In the face of these ground realities, the Commission should have outlined a more effective policy to curb the phenomenon of lockouts.

The Commission has noted that prior permission is not necessary in respect of lay-offs and retrenchment of any employment size. Workers, however, are entitled to two months notice, or notice-pay in lieu of notice, in case of retrenchment. The Commission recommends that the rate of retrenchment compensation should be higher in a running organisation than in a sick one.

Prescribing differential rates of compensation is good, and the revised rates have been recommended for establishments employing 300 or more persons. In establishments employing less than 100 persons, half the rates of compensation in the other category have been prescribed. However, the Commission has not prescribed any rates for establishments in the employment range 100-300. This shortcoming needs to be rectified.

The Commission states: Chapter VA of the law may be amended to provide for sixty days notice for both retrenchment or closure, or pay in lieu thereof, The provision for permission to close down an establishment employing 300 or more workers should be made a part of chapter VA, and chapter VB should be repealed.

In case of closure of such establishment employing 300 or more workers, the employer will make an application for permission to the appropriate Government 90 days before the intended closure and also serve a copy of the same on the recognised negotiating agent. If permission is not granted by the appropriate Government within 60 days of the receipt application, the permission will be deemed to have been granted.

The Labour Commission has facilitated the process of closure for establishments employing 300 or more persons. It has really permitted establishment employing less than 300 workers accounting for 60 per cent of the total labour employed in the manufacturing sector outside the purview of law. The real issue is: whether closure is used as a device for retrenchment. This, and the issue of what is genuine and bona fide closure have not been addressed.

Inconsistencies

The Report of the National Commission on Labour is, in parts, internally inconsistent. On providing protection to workers employed in small units employing less than 20 persons, it says: "No employer shall dispense with the services of an employee employed for not less than six months, except for a reasonable cause". But this clause is removed in case of retrenchment of employees working in establishments employing up to 300 workers.

In other words, the cost of retrenchment and closure is to provide sixty days notice or pay in lieu thereof. This would leave near 60 per cent of labour force employed in industry at the mercy of a `hire and fire' policy with the changing structure of market demand. The question of proving `reasonable cause' does not arise. In this sense, the NCL report suffers from logical inconsistency.

On the plea that such a policy of labour flexibility will lead to enlargement of employment size, the S. P. Gupta Special Group on Targeting Ten Million Employment Opportunities per Year (2002), states: "One should remember that the contribution of total employment by the organised private sector is hardly 3.5 per cent and, therefore, the potential of generating sizable employment in this sector, even by changing the law, will be insignificant over the Tenth Plan period."

The Special Group is, therefore, of the following view: "... given the fact that the organised sector (especially the public sector) is already carrying excess labour, the immediate effect will be more firing than hiring. Therefore, purely on the ground of employment generation, the favourable effect of any change in this legislation is marginal, at least in the short term. Gradual withdrawal of the Act could be considered, observing the net impact on employment at every phase. Along with it the social security coverage may be increased and care should be taken of the retrenched labour."

Mr C. K. Saji Narayanan, Member, Second National Commission on Labour, has argued against the recommendation of the Commission to permit the policy of `hire and fire' in all establishments employing less than 300 workers comprising nearly 60 per cent of the workforce in industry.

According to him: "The Reserve Bank of India is conducting yearly surveys on sickness of industry, and has come out with the finding that about 65 per cent of the cause is contributed by management failure. Contribution by labour or strike is only 3 per cent. The less competitive are getting sick."

Despite this, the Commission has chosen the path of labour reform and has provided for:

— Total removal of prior permission for layoff and retrenchment,

— Raising the limit from 100 workers to 300 workers for closure,

— Chapter VB is to be repealed progressively; and

— post facto permission after one month of layoff in establishments with more than 300 workers.

Mr Narayanan has vehemently protested against these recommendations: "Removal of the restrictions on retrenchment is to accept the principle of `hire and fire' as demanded by the employers' organisations. By permitting retrenchment, the employers can reduce the strength of workers below the minimum level and overcome other legal restrictions also".

Mr Narayanan has, therefore, pleaded that: "When the Commission is attempting to codify and simplify the various provision of labour laws of the country with a common norm of applicability to establishments of more than 20 workers, Ch VB should also be made applicable to all establishments to which general labour laws apply... Labour laws should have uniform applicability."

To conclude, the National Commission on Labour has failed to protect the interests of labour. It has agreed to a philosophy of "hire and fire" for nearly 60 per cent of workers in the organised sector without ensuring any system of social security.

While unorganised sector labour was earlier described as `unprotected' labour, and organised sector labour as `protected labour', this distinction will soon vanish and both `organised' and `unorganised' sectors will become `unprotected' if the Commission's recommendations are accepted by the Government. This explains the unanimous rejection of the NCL report by all the trade unions in the country.

(The author, a former president of the Indian Economic Association, is Visiting Professor, Institute for Human Development, New Delhi.)

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