http://unpan1.un.org/intradoc/groups/public/documents/apcity/unpan029043.pdf
Labour and Employment Laws of India
By Lalit Bhasin
The law relating to labour and employment in India is primarily known under the broad category of "Industrial Law". Industrial law in this country is of recent vintage and has developed in respect to the vastly increased awakening of the workers of their rights, particularly after the advent of Independence. Industrial relations embrace a
complex of relationships between the workers, employers and government, basically
concerned with the determination of the terms of employment and conditions of
labour of the workers. Escalating expectations of the workers, the hopes extended by
Welfare State, uncertainties caused by tremendous structural developments in industry,
the decline of authority, the waning attraction of the work ethics and political activism
in the industrial field, all seem to have played some role.
Historical Background
The history of labour legislation in India is naturally interwoven with the history of
British colonialism. The industrial/labour legislations enacted by the British were
primarily intended to protect the interests of the British employers. Considerations of
British political economy were naturally paramount in shaping some of these early
laws. The earliest Indian statute to regulate the relationship between employer and his
workmen was the Trade Dispute Act, 1929 (Act 7 of 1929). Provisions were made in
this Act for restraining the rights of strike and lock out but no machinery was
provided to take care of disputes.
The original colonial legislation underwent substantial modifications in the
post-colonial era because independent India called for a clear partnership between
labour and capital. The content of this partnership was unanimously approved in a
tripartite conference in December 1947 in which it was agreed that labour would be
given a fair wage and fair working conditions and in return capital would receive the
fullest co-operation of labour for uninterrupted production and higher productivity as
part of the strategy for national economic development and that all concerned would
observe a truce period of three years free from strikes and lockouts. Ultimately the
Industrial Disputes Act (the Act) brought into force on 01.04.1947 repealing the Trade
Disputes Act 1929 has since remained on statute book.
Object of the Act
The Industrial Disputes Act, 1947, is, therefore, the matrix, the charter, as it were, to
the industrial law. The Act and other analogous State statutes provide the machinery
for regulating the rights of the employers and employees for investigation and
settlement of industrial disputes in peaceful and harmonious atmosphere by providing scope for collective bargaining by negotiations and mediation and, failing that, by
voluntary arbitration or compulsory adjudication by the authorities created under
these statutes with the active participation of the trade unions. With the aid of this
machinery, industrial law covers a comprehensive canvas of state intervention of
social control through law to protect directly the claims of workers to wages, bonus,
retiral benefits such as gratuity, provident fund and pension, claims, social security
measures such as workmen’s compensation, insurance, maternity benefits, safety
welfare and protection of minimum of economic well-being. Job security has been
particularly protected by providing industrial adjudication of unfair discharges and
dismissals and ensuring reinstatement of illegally discharged or dismissed workmen.
Protection has gone still further by laying down conditions of service in specified
industries and establishments and limiting the hours of work. By and large, all these
subjects are "connected with employment or non-employment or terms of
employment or with the conditions of labour" of industrial employees. In other words,
these matters are the subject matter of industrial disputes, which can be investigated
and settled with the aid of the machinery provided under the Act or analogous State
statutes.
Mechanism of Disputes Settlement
The principal techniques of dispute settlement provided in the I.D. Act are collective
bargaining, mediation and conciliation, investigation, arbitration, adjudication and
other purposes.
Collective bargaining
Collective bargaining is a technique by which disputes of employment are resolved
amicably, peacefully and voluntarily by settlement between labour unions and
managements. The method of collective bargaining in resolving the Industrial dispute,
while maintaining industrial peace has been recognized as the bed rock of the Act.
Under the provision of the Act, the settlement arrived at by process of collective
bargaining with the employer has been given a statutory recognition under Section 18
of the Act. Under the Act two types of settlement have been recognised:
1. Settlement arrived in the course of conciliation proceeding before the authority.
Such settlements not only bind the member of the signatory union but also
non-members as well as all the present and future employees of the
management.
2. Settlement not arrived in the course of conciliation proceedings but signed
independently by the parties to the settlement binds only such members who
are signatory or party to the settlement.
Section 19 of the Act prescribes the period of operation inter alia of such a settlement
and envisage the continuation of the validity of such a settlement unless the same is not replaced by another set of settlement, while Section 29 prescribes the penalty for
the breach of such a settlement.
Mediation and Conciliation -
Under the Act, an effective conciliation machinery has been provided which can take
cognizance of the existing as well as apprehended dispute, either on its own or on
being approached by either of the parties to the dispute. The Act further makes
conciliation compulsory in majority of disputes.
Investigation
Section 6 of the Act empowers the government to constitute a court of inquiry, for
inquiring into any matter pertaining to an Industrial Dispute. The procedure of the
court of inquiry has also been prescribed by Section 11. While the report of the court
is not binding on the parties, many time it paves the way for an agreement.
Arbitration
Voluntary arbitration is a part of the infrastructure of resolving the Industrial Dispute
in the Industrial adjudication. Section 10 of the Act provides for the provision for
resolving the Industrial Dispute by way of arbitration, which leads to a final and
binding award. However, in India arbitration is not a preferred way of resolving
Industrial Disputes.
Adjudication
Adjudication means a mandatory settlement of Industrial Disputes by labour courts,
Industrial Tribunals or National Tribunals under the Act or by any other
corresponding authorities under the analogous state statutes. By and large, the
ultimate remedy of unsettled dispute is by way of reference by the appropriate
government to the adjudicatory machinery for adjudication. The adjudicatory
authority resolves the Industrial Dispute referred to it by passing an award, which is
binding on the parties to such reference. There is no provision for appeal against such
awards and the same can only be challenged by way of writ under Articles 226 and
227 of the Constitution of India before the concerned High Court or before the
Supreme Court by way of appeal under special leave under Article 136 of the
Constitution of India.
However before the provisions of the Act, 1947 may become applicable certain
pre-requisite conditions must exist.
1. The dispute must relate to an ‘Industry’; 2. Section 2(j) of the Industrial Dispute Act gives a comprehensive definition of
‘industry’. The definition of industry in this clause is both exhaustive and inclusive
and is quite comprehensive in its scope. It is in two parts, the first part says that ‘it
means any business, trade, undertaking, manufacture or calling of employees and then
goes on to say that it, includes any calling, services employment, handicraft or
industrial occupation or avocation or workmen. Thus one part of the definition defines
it from the standpoint of the employer; the other from the standpoint of the
employees.
This definition has undergone variegated judicial interpretation. In case of Bangalore
Water Supply and Sewage Board Vs. A. Rajagappa [(1978) 1 LLJ 349] a 7 judges
bench of the Supreme Court has given the widest possible meaning of the term
‘industry’ which virtually covers almost all organized activities under the ambit of the
term ‘industry’. After the decision of the Supreme Court in Bangalore Water Supply
and Sewage Board case the question to be asked is not what is an industry, but what is
not an industry. Further, even after the Bangalore Water Supply and Sewage Board
decision there is much left to be desired with the interpretation of industry and the
need for legislative reforms has been accentuated by all concerned. A very sensible
and pragmatic definition of the term ‘industry’ has been attempted in the Industrial
Relations Bill of 1978. With the dissolution of the Parliament in 1979 the Bill lapsed.
The definition has been amended by the Parliament in the Industrial Disputes
(Amendment) Act, 1982 with new definition of industry in Section 2(j). However the
amendment has yet to be brought into force. There is an urgent need for a
comprehensive and practical definition of the ‘industry’.
3. Under this Act an Industrial Dispute can be raised only by ‘workman’ employed in
an ‘industry’. Section 2(s) of the Act defines ‘workman’, which means any person
employed including an apprentice, in any industry to do any skilled, unskilled, manual,
clerical, supervisory or technical work for hire or reward, whether the terms of
employment be expressed or implied. The definition of workman under the Act also
includes any person who has been dismissed, discharged or retrenched in connection
with or as a consequence of any dispute. However, it excludes inter alia any person
who has been employed mostly in managerial or administrative capacity or in
supervisory capacity drawing wages exceeding 1600/- per month or exercises either
by the nature of the duty attached to the office or by reason of the powers vested in
him, functions mainly of a managerial nature. However, in this regard it is not the
nomenclature or designation of the employee but the actual nature of duties performed
by him/her that will determine the status of such employees. Furthermore, before an
Industrial Dispute can be referred for adjudication, it is necessary that their exists a
relationship of employer and employee between the workman and the management.
One of the short-comings of the present definition of the workman, as the experience
has shown is its over emphasis on the criteria of nature of duties performed by an
employee irrespective of the status, position and wage of such an employee in the hierarchy of the management in determining whether such employee will come under
the category of workman. For example, in India even the Pilots and Engineers of
aircraft have been covered under the definition of workman although in terms of their
salary and wages and authority they exercise, by no stretch of imagination, they can
be equated with labour and working force of the industry. In some cases, even doctors
have been recognized as workman as they perform technical or skilled job. This area
of the definition of workman requires an urgent legislative modification. Stressing the
need for recasting the definition of workman, the Second National Labour
Commission recommended as follows :
"Relatively better off section of employees categorized as workmen like
Airlines Pilots, etc, do not merely carry out instructions from superior
authority but are also required and empowered to take various kinds of on the
spot decisions in various situations and particularly in exigencies. Their
functions therefore, cannot merely be categorized as those of ordinary
workmen. We, therefore, recommend that Government may lay down a list of
such highly paid jobs who are presently deemed as workmen category as being
outside the purview of the laws relating to workmen and included in the
proposed law for the protection of non workmen. Another alternative is that
the Government fix a cut off limit of remuneration, which is substantially high
enough, in the present context, such as Rs. 25,000/-p.m. beyond which
employees will not be treated as ordinary ‘workman’."
4. The dispute must be an ‘Industrial Dispute’. Section 2(k) of the Act defines
‘Industrial Dispute’ and only disputes covered under the definition can be referred for
conciliation or adjudication under the Act. The definition of ‘Industrial Dispute’ in
section 2(k), can be divided into two parts viz :
1. Dispute or difference
i. between employer and employers
ii. Between Employer and workman
iii. Between Workman and workman
2. Subject matter of dispute.
i. Connected with the employment or non-employment
ii. The terms of employment
iii. With the condition of labour.
Space does not allow a detailed discussion of all the provisions of the Act, but
provisions that deal with job losses must be noted. Under the present law any
Industrial Establishment employing more than 100 workers must make an application
to the Government seeking permission before resorting to lay-off, retrenchment, or
closure of undertaking. Employers resorting to any of the said forms of creating job losses without seeking prior permission as aforesaid act illegally and workers are
entitled to receive wages for the period of illegality. However, an Industrial
Establishment employing less than 100 workers can retrench its surplus employees in
accordance with the provisions provided under Section 25F, 25G & 25H of the Act
without seeking the permission of the appropriate government. Under Section 25 F of
the Act the retrenchment compensation to be offered to a retrenched workman has to
be 15 days salary for every completed year of service and an amount equivalent to
one month salary. However, it has been felt that the present retrenchment
compensation provided under the Act is wholly inadequate and there is an urgent need
for enhancing the compensation to a realistic standard.
However, the service of an employee can be terminated by an order of discharge
simplicitor without complying with the provisions contained in Section 25 F of the
Act if such an employee has been appointed for a fixed period under the contract of
fixed term appointment and his/her services is terminated either on the ground of
expiry of the fixed period or in stipulation of the provision contained therein.
The Reserve Bank of India commissioned a study into the causes of sickness in Indian
industry and they reported cryptically, ‘Sickness in India is a profitable business’.
This chapter (V-B) in the Act, which has been identified as offering high rigidity in
the area of labour redundancy, has been targeted for change under globalisation and
liberalisation.
A feature of the Act is the stipulation that existing service conditions cannot be
unilaterally altered without giving a notice of 21 days to the workers and the trade
union. Similarly if an industrial dispute is pending before an authority under the Act,
then the previous service conditions in respect of that dispute cannot be altered to the
disadvantage of the workers without prior permission of the authority concerned. This
has been identified as a form of rigidity that hampers competition in the era of the
World Trade Organisation.
A permanent worker can be removed from service only for proven misconduct or for
habitual absence or due to ill health or on attaining retirement age. In other words the
doctrine of ‘hire and fire’ is not approved within the existing legal framework. In
cases of misconduct the worker is entitled to the protection of Standing Orders to be
framed by a certifying officer of the labour department after hearing management and
labour, through the trade union. Employers must follow principles of ‘natural justice’,
which again is an area that is governed by judge-made law. An order of dismissal can
be challenged in the labour court and if it is found to be flawed, the court has the
power to order reinstatement with continuity of service, back wages, and
consequential benefits. This again is identified as an area where greater flexibility is
considered desirable for being competitive.
Strikes and lockoutsWorkers have the right to strike, even without notice unless it involves a public utility
service; employers have the right to declare lockout, subject to the same conditions as
a strike. The parties may sort out their differences either bilaterally, or through a
conciliation officer who can facilitate but not compel a settlement, which is legally
binding on the parties, even when a strike or a lockout is in progress. But if these
methods do not resolve a dispute, the government may refer the dispute to compulsory
adjudication and ban the strike or lockout. However in recent times the Higher Courts
have deprecated the tendency to go on strike quite frequently. Furthermore, the
Supreme Court of India has also held that government employees have no
fundamental right to go on strike.
The Regulation of Contract Labour
The most distinct visible change in the time of globalisation and privatization is the
increased tendency for outsourcing, offloading or subcontracting. The rationale is that
the establishment could focus on more productivity in the core or predominant
activity so as to remain competitive while outsourcing the incidental or ancilliary
activities.
The Contract Labour (Prohibition and Regulation) Act 1970 provides a mechanism
for regulating engaging of contractor and contract labour. The Act provides for
registration of contractors (if more than twenty workers are engaged) and for the
appointment of a Tripartite Advisory Board that investigates particular forms of
contract labour, which if found to be engaged in areas requiring perennial work
connected with the production process, then the Board could recommend its abolition
under Section 10 of the Act. A tricky legal question has arisen as to whether the
contract workers should be automatically absorbed or not, after the contract labour
system is abolished. Recently a Constitutional Bench of the Supreme Court has held
that there need not be such automatic absorption.
Employment Injury, Health, And Maternity Benefit
The Workmen’s Compensation Act 1923 is one of the earliest pieces of labour
legislation. It covers all cases of ‘accident arising out of and in the course of
employment’ and the rate of compensation to be paid in a lump sum, is determined by
a schedule proportionate to the extent of injury and the loss of earning capacity. The
younger the worker and the higher the wage, the greater is the compensation subject
to a limit. The injured person, or in case of death the dependent, can claim the
compensation. This law applies to the unorganised sectors and to those in the
organised sectors who are not covered by the Employees State Insurance Scheme,
which is conceptually considered to be superior to the Workmen’s Compensation Act.
The Employees’ State Insurance Act, 1948 provides a scheme under which the
employer and the employee must contribute a certain percentage of the monthly wage
to the Insurance Corporation that runs dispensaries and hospitals in working class localities. It facilitates both outpatient and in-patient care and freely dispenses
medicines and covers hospitalization needs and costs. Leave certificates for health
reasons are forwarded to the employer who is obliged to honour them. Employment
injury, including occupational disease is compensated according to a schedule of rates
proportionate to the extent of injury and loss of earning capacity. Payment, unlike in
the Workmen’s Compensation Act, is monthly. Despite the existence of tripartite
bodies to supervise the running of the scheme, the entire project has fallen into
disrepute due to corruption and inefficiency. Workers in need of genuine medical
attention rarely approach this facility though they use it quite liberally to obtain
medical leave. There are interesting cases where workers have gone to court seeking
exemption from the scheme in order to avail of better facilities available through
collective bargaining.
The Maternity Benefit Act is applicable to notified establishments. Its coverage can
therefore extend to the unorganised sector also, though in practice it is rare. A woman
employee is entitled to 90 days of paid leave on delivery or on miscarriage. Similar
benefits, including hospitalisation facilities are available under the law described in
the paragraph above.
Retirement Benefit
There are two types of retirement benefits generally available to workers. One is
under the Payment of Gratuity Act,1972 and the other is under the Employees
Provident Fund Act. In the first case a worker who has put in not less than five years
of work is entitled to a lump sum payment equal to 15 days’ wages for every
completed year of service. Every month the employer is expected to contribute the
required money into a separate fund to enable this payment on retirement or
termination of employment. In the latter scheme both the employee and the employer
make an equal contribution into a national fund. The current rate of contribution is 12
percent of the wage including a small percentage towards family pension. This
contribution also attracts an interest, currently 9.5 percent per annum, and the
accumulated amount is paid on retirement to the employee along with the interest that
has accrued. The employee is allowed to draw many types of loan from the fund such
as for house construction, marriage of children, and education etc. This is also a
benefit, which is steadily being extended to sections of the unorganised sector,
especially where the employer is clearly identifiable.
Indian labour laws divide industry into two broad categories:
1. Factory
Factories are regulated by the provisions of the Factories Act, 1948 (the saidAct). All
industrial establishments employing 10 or more persons and carrying manufacturing
activities with the aid of power come within the definition of Factory. The said Act
makes provisions for the health, safety, welfare, working hours and leave of workers in factories. The said Act is enforced by the State Government through their ‘Factory’
inspectorates. The said Act empowers the State Governments to frame rules, so that
the local conditions prevailing in the State are appropriately reflected in the
enforcement. The said Act puts special emphasis on welfare, health and safety of
workers. The said Act is instrumental in strengthening the provisions relating to safety
and health at work, providing for statutory health surveys, requiring appointment of
safety officers, establishment of canteen, crèches, and welfare committees etc. in large
factories.
The said Act also provides specific safe guards against use and handling of hazardous
substance by occupiers of factories and laying down of emergency standards and
measures.
2. Shops and Commercial Establishments
‘Shops and Commercial Establishments’ are regulated by Shops and Commercial
Establishments Act which are state statutes and respective states have their respective
Shops and Commercial Acts which generally provide for opening and closing hour,
leave, weekly off, time and mode of payment of wages, issuance of appointment letter
etc.
Statutory Regulation of Condition of Service in Certain Establishments
There is statutory provision for regulating and codifying conditions of service for an
industrial establishment employing more than 100 workmen under the provisions of
Industrial Employment (Standing Orders) Act, 1946 (this Act). Under the provisions
of this Act every employer of an Industrial Establishment employing 100 or more
workmen is required to define with sufficient precision the condition of employment
and required to get it certified by the certifying authorities provided under Section 3
of this Act. Such certified conditions of service will prevail over the terms of contract
of employment. In a significant judgment recently the Delhi High Court has held that
a hospital even though employing more than 100 workmen is not covered under the
provisions of this Act, as a hospital is not an Industrial Establishment as defined under
this Act.
Distinctive Feature of Indian Labour and Employment Laws
A distinguishing feature of Indian Labour and Employment Laws are that in India
there are three main categories of employees: government employees, employees in
government controlled corporate bodies known as Public Sector Undertakings (PSUs)
and private sector employees.
The rules and regulations governing the employment of government employees stem
from the Constitution of India. Accordingly, government employees enjoy protection
of tenure, statutory service contentions and automatic annually salary increases. Public sector employees are governed by their own service regulations, which either
have statutory force, in the case of statutory corporations, or are based on statutory
orders.
In the private sector, employees can be classified into two broad categories namely
management staff and workman. Managerial, administrative or supervisory
employees drawing a salary of Rs.1600/- or more per month are considered
management staff and there is no statutory provisions relating to their employment
and accordingly in case of managerial and supervisory staff/employee the conditions
of employment are governed by respective contracts of employment and their services
can be discharged in terms of their contract of employment. Workmen category are
covered under the provisions of the Industrial Disputes Act as already detailed above.
Voluntary Retirement Scheme and Golden Handshake
In the competitive time of globalization and liberalization the system of Voluntary
retirement with golden handshake is widely prevalent both in public and private
sectors in order to reduce the surplus manpower which for most of public sector
undertakings is a major cause of losses.
The Unorganised Sector
Many of the labour and employment laws apply to the unorganised sector also. The
unorganized sector can be defined as that part of the work force that have not been
able to organize itself in pursuit of a common objective because of certain constraints
such as casual nature of employment, ignorance or illiteracy, superior strength of the
employer singly or in combination etc. viz. construction workers, labour employed in
cottage industry, handloom/powerloom workers, sweepers and scavengers, beedi and
cigar workers etc. Under this category are laws like the Building and Construction
Workers Act 1996, the Bonded Labour System (Abolition) Act 1976, The Interstate
Migrant Workers Act 1979, The Dock Workers Act 1986, The Plantation Labour Act
1951, The Transport Workers Act, The Beedi and Cigar Workers Act 1966, The Child
Labour (Prohibition and Regulation) Act 1986, and The Mine Act 1952.
Women Labour and the Law
Women constitute a significant part of the workforce in India but they lag behind men
in terms of work participation and quality of employment. According to Government
sources, out of 407 million total workforce, 90 million are women workers, largely
employed (about 87 percent) in the agricultural sector as labourers and cultivators. In
urban areas, the employment of women in the organised sector in March 2000
constituted 17.6 percent of the total organised sector.
In addition to the Maternity Benefit Act, almost all the major central labour laws are
applicable to women workers. The Equal Remuneration Act was passed in 1976, providing for the payment of equal remuneration to men and women workers for
same or similar nature of work. Under this law, no discrimination is permissible in
recruitment and service conditions except where employment of women is prohibited
or restricted by the law. The situation regarding enforcement of the provisions of this
law is regularly monitored by the Central Ministry of Labour and the Central
Advisory Committee. In respect of occupational hazards concerning the safety of
women at workplaces, in 1997 the Supreme Court of India in the case of Vishakha Vs.
State of Rajasthan [(1997) 6 SCC 241] held that sexual harassment of working
women amounts to violation of rights of gender equality. As a logical consequence it
also amounts to violation of the right to practice any profession, occupation, and trade.
The judgment also laid down the definition of sexual harassment, the preventive steps,
the complaint mechanism, and the need for creating awareness of the rights of women
workers. Implementation of these guidelines has already begun by employers by
amending the rules under the Industrial Employment (Standing Orders) Act, 1946.
Focus on Elimination of Child Labour
Elimination of child labour continued to be one of the major focus areas of the Labour
Ministry. It took an initiative for framing an omnibus legislation prescribing 14 years
as the minimum age for employment and work in all occupations except agricultural
activity in family and small holdings producing for own consumption. The proposed
legislation would also fix a minimum age of not less than 18 years to any type of
employment and work which by its nature or circumstances is likely to jeopardize the
health, safety or morals of young persons. As of date, employment of children has
been prohibited in 13 occupation and 51 processes in the country bringing the total to
64. It is proposed to raise their number to 73 by notifying additional nine hazardous
occupations and processes.
In 2006, the Central Government has amended the Child Labour (Prohibition and
Regulation) Act, 1986 prohibiting employment of children below 14 years of age
even in non-hazardous industry like restaurants, motels and also as domestic servants.
To further augment resources for elimination of child labour, the Ministry of Labour
signed a Memorandum of Understanding with the ILO extending International
Programme on Elimination of Child Labour (IPEC) in India for another two years.
India under the ILO’s IPEC programme has taken up 154 action programmes on child
labour covering more than ninety thousand children with direct funding by the
ILO/Area Office to the NGOs.
The Reforms and Labour Law
Reforms in Labour laws is being much talked in recent years. It is being advocated
that all talk of liberalization is futile without squarely facing up to the imperative of
labour reforms. These are an integral part of the economic reforms process itself.
Other efforts at raising the standard of performance on the economic front to world class are apt to stall if those managing enterprises find themselves hamstrung by
outdated trade union laws and dilatory methods of adjudication of industrial disputes.
For instance, the unwieldy number of adjudicating authorities — conciliation officers,
conciliation boards, courts of inquiry, labour courts, industrial tribunals and the
national industrial tribunal — under the Industrial Disputes Act and the complex
procedures are out of sync with the essential pre-requisites for the success and even
the survival of companies in a globally integrated economy.
Productivity, customer service, cost-effectiveness, keeping to delivery schedules,
technological up gradation and modernization have emerged as the criteria for judging
the quality of management of companies, and labour reforms hold the key to
increased competitiveness and investment flows in all these respects. The need for
introducing labour market flexibility and simplifying labour laws has no doubt been
emphasized by the President and Prime Minister of the country downwards from time
to time.
The case for labour reforms could not have been argued better than in this extract
from the Economic Survey of 2005-06: "... Indian Labour Laws are highly protective
of labour, and labour markets are relatively inflexible. These laws apply only to the
organised sector. Consequently, these laws have restricted labour mobility, have led to
capital-intensive methods in the organised sector and adversely affected the sector's
long-run demand for labour".
Source: http://www.mondaq.com/ 08/24/2007
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