Who needs national codes and laws?

Since April 2015, the National Democratic Alliance (NDA) has been pushing the process of codifying the so-called numerous Central labour laws into four Codes on wages (WC), industrial relations (IRC), occupational safety and health and working conditions (OSHWC), and social security (SSC).

The WC was enacted in August 2019. Meanwhile, the Parliamentary Standing Committee (PSC) has submitted its reports on the IRC and the OSHWC, and that on the SSC is pending. As the Finance Minister recently observed, the Centre is committed to enacting the remaining Codes. The Covid-19 outbreak has, however, coincided with wholesale labour law deregulation by States through the ordinance route, even as the codification of labour laws at the Centre remains incomplete.

Meanwhile, the PSC Chairperson has sought clarifications from the States for making changes in labour laws when the Parliamentary codification processes are on. But the Labour Ministry has quietly asked States to introduce changes in the Central laws. Then, who needs national labour codes?

Covid context and deregulation

The Covid impact on workers coincides with a systematic erosion of their legal rights. Job losses, reduced or no income, loss of shelter for many migrant workers and rise in child labour are some of the documented adverse labour market outcomes. Unemployment has reduced mainly because of availability of work under MGNREGA. However, informality has intensified.

Covid-19 has exposed huge gaps in laws as well as their implementation. Non-implementation of laws concerning inter-state migrant workers, construction workers, and the unorganised workers in general has come to the fore. The disbursement of the unutilised huge cess fund collected under the Building and Other Construction Workers’ (BOCW) Welfare Cess Act, 1996, has not been satisfactory; States such as Bihar, Chhattisgarh, Jharkhand, Puducherry have, till recently, not disbursed assistance to workers despite the Centre’s directive.

IndustriALL, a global union, has recorded 30 industrial accidents since May 2020 in India, killing 75 and injuring more than 100. The accidents include a gas leakage reminiscent of the Bhopal gas tragedy in LG Polymer in Vishakapatnam, Andhra Pradesh; a boiler explosion in Yashashvi Raasayan Private Limited in Gujarat; and accidents in chemical plants, coal mines, steel factories and boiler blasts in power stations.

The PSC and the law-makers will surely need to review the Codes in the light of the above and improve labour administration. While there are no encouraging signals, the Centre has, in fact, recently issued directives to State governments to carry out some changes in the Central labour laws, such as introduction of fixed-term employment (FTE) and increasing the thresholds for application of some labour laws. The Centre is exercising its powers in the context of labour being on the Concurrent List of the Constitution.

States’ overreach

More than a dozen state governments have through Ordinances extended maximum hours of work from eight per day to 10 or more (12 in several) by amending the Factories Act, 1948 (FA). A few, like Karnataka and Uttar Pradesh (UP), withdrew the ordinances in response to litigation while Rajasthan withdrew such orders on its own. However, UP’s withdrawal is of little consequence as it has also issued a comprehensive ordinance which provides for 11 hours of work in a day. Further, it has suspended 34 labour laws like the Trade Unions Act, 1926, the Industrial Disputes Act, 1947 (IDA), the Industrial Employment (Standing Orders) Act, 1946 (IESOA), etc; and retained the provisions in the FA and the Building and Other Construction Workers Act, 1996 that relate only to safety; protected payment of minimum wages (while omitting complementary clauses like hours of work, overtime payment, claims process, etc) in the Minimum Wages Act; and ensured payment of compensation as provided for in the Employee Compensation Act, 1923, among others.

The two-page UP ordinance raises numerous legal and implementational issues since it omits inspection. In fact, the Centre has sought information on the list of laws that the UP government seeks to suspend. Madhya Pradesh (MP) has removed many substantive segments of the FA concerning working hours, inspection, welfare, health for next 1,000 days, and in the case of the IDA, it has retained only those provisions relating to retrenchment and closure and left out others for new factories in the next 1,000 days.

The wide-ranging changes made by these two States amount to virtually complete deprivation of labour rights such as forming trade unions, collective bargaining, raising industrial disputes, strikes, access to compulsory adjudication, etc. It is not for the States to suspend labour laws and substantive rights using the Concurrent status of labour.

The Central government has reportedly written to State governments to introduce reforms like FTE and changes in the thresholds of selected labour laws to afford labour flexibility to business.

In recent weeks, following the pre-Covid-19 pattern, States such as Tripura, Goa and Bihar increased the threshold for application of Contract Labour (Regulation & Abolition) Act, 1970 (CLRAA) from 20 workers to 50 workers and Himachal Pradesh (HP) from 20 workers to 30 workers. Bihar and Gujarat have increased the threshold of Chapter V-B of the IDA from 100 workers to 300 workers and HP from 100 workers to 200 workers. HP has increased the retrenchment and closure compensation from 15 days to 60 days. The conditions for striking under S.22 in the IDA are so tough they render legal strikes well-nigh impossible; they have been applicable to “non-public utility services” as well. Bihar, Assam and HP have increased the worker thresholds of the FA from 10 to 20 (those using power) and 20 to 40 (not using power).

It may be recalled that several States starting from Rajasthan carried out similar changes immediately after the assumption of power by the NDA government at the Centre in 2014. The changes will prevail for a short period ranging from six months to nearly three years. Karnataka has introduced FTE by amending IESOA.

Increase in thresholds implies that more workers and establishments/contractors are removed from the purview of the laws concerned. Gradually, many States have amended the Chapter V-B threshold from 100 to 300 (or 200) as has been demanded by employers. This, along with extension of thresholds for the CLRAA and FTE, provides substantial labour market flexibility to employers and extends opportunities to reduce regular workers’ appointment.

Dilution of rights

Extension of the maximum work hours could affect the safety and welfare of workers and exclude women workers due to their multiple commitments. It could also mean a wage rate less than minimum wages, as the latter is fixed for a standard eight hours of work (see the Rules framed under WC). UP’s changes will mean virtually complete the disentitlement of workers’ rights, including trade union and collective bargaining rights, access to labour judiciary for justice, etc. Simply put, the changes in laws mean informalising hitherto formal (law covered) enterprises. Many of these changes are in fact contemplated by the proposed Codes.

The States have introduced these changes through ordinances and not through legislatures. They have not consulted trade unions. They strike at the foundations of pluralistic and democratic institutions and processes. Further, thanks to competitive changes in labour laws, we are moving away from “national law-making” to “regional law-making” centres, from Legislatures to the Governor’s office.

As a result, we are moving away from national labour market governance, providing a host of labour market securities, to regional models of labour market flexibilities. Further, the States are muzzling inter-state migrant workers’ rights by legislating job reservations to the local (read regional) workers. The plight of migrant workers has suddenly intensified primordial identity politics.

We are moving away from national to increasingly fragmented local labour markets and governance systems. But the dangers inherent in the regional systems are the high potential of a reckless race to the bottom for labour standards, thanks to competitive federalism, and a misconceived notion that labour flexibility is the panacea for all the ills of regional economies.

The writer is Professor, HRM Area, XLRI, Xavier School of Management, Jamshedpur