IMS UNISON

UNIVERSITY

SUBMITTED TO: - MR. Arun S

FACULTY OF LAW
IUU.

SUBMITTED BY:-
Rashmi Garg
IUU15BBL003
BBALLB- SEM 6
 TITLE

Critical analysis of labour law reform

and social security legislation

AREA

LABOUR LAW-II
 ABSTRACT
Presently, there is a constant intense debate on labour law reforms in India. It is argued that the
restrictive labour laws create rigidity in the labour market or else the Indian economy would have
witnessed an elevated escalation. It has been alleged since time immemorial that the Indian labour
laws are numerous, complex and even ambiguous that they promote litigation rather than the
resolution of problems related to industrial relations. Although the Government claims the
amendments of the labour laws for the development of our nation, several trade unions have protested
against these amendments alleging that the amendments of labour and industrial laws were done
without consulting them and these amendment favour the capital more than the labour force. The
latest Government policy, for the success of Make in India is the ―ease of doing business should be
given priority‖. The Government unveiled a slew of measures aimed to change labour laws for the
better and to make inspections more transparent and devoid of unnecessary harassment. But it is
argued that such amendments will do more harm than good. Therefore, the need of the hour is to
critically evaluate the current labour policy of the Government and figure out whether it is for the
betterment of the labour community or just a myth.
Introduction
The current Government has cleared proposals to amend three colonial era labour laws. The proposed
amendments suggests in total 54 changes in the Factories Act 1948, the Apprenticeship Act 1961 and
Labour Laws (Exemption from furnishing returns and maintaining of registers by certain
establishments 1988).1 Moreover the Government has recently introduced the Labour Code on
Industrial Relations Bill, 2015, a Bill to consolidate and amend the law relating to registration of
Trade Unions, conditions of employment, investigation and settlement of disputes, and the matters
related therewith or incidental thereto. This means the government aims to combine the Trade Unions
Act, 1923, The Industrial Standing Orders Act, and the Industrial Disputes Act, 1947. Although with
so many aspirations of growth, the trade unions don‘t like the talk of reforms and the Government is
likely to face resistance in its attempt to change decade-old laws. The members of the trade union
allege that even the move to allow women to work night shifts in some industries is bad and aimed at
providing businesses cheap labour. Women who join the industrial workforce tend to be from the
marginalized sections of society, and forcing them to work night shifts will make them more
vulnerable to exploitation. Therefore today, there is an intense debate on labour market reforms in
India. It is argued that but for restrictive labour laws that create inflexibility in the labour market, the
Indian economy would have experienced a higher growth of employment and on the other hand, this
view is intensely disputed by trade unions and many other economists.
Meaning of Labour Reform:
Policymakers face several kinds of choice and, hence, trade-offs. They can emphasise on enforcing higher
wages only but at the cost of low employment. Higher growth at the cost of low wages is another option to the
policymakers. Again, job security of existing workers may be the concern for policymakers at the cost of
encouraging employers to adopt labour-displacing techniques of employment.

Labour Policies before the Reform Era

Before we move to the labour policy in the pre- reform era of 1990s, we must make one important observation
of the Indian labour market. Indian labour market is characterised by a sharp dichotomy. Here one finds a small
enclave of organised labour. This organised sector is fairly stringently regulated. On the other hand, a large
number of establishments operate in the organised sector where labourers cannot organise themselves to pursue
their common interests due to various constraints. Most importantly, this sector is virtually free from any outside
control and regulation with little or no job security.

Social security to organised labour force in India is provided through a variety of legislative measures. These are
payment of compensation to workers in cases of industrial accidents and occupational diseases leading to
disablement or death, provident fund, pension including family pension, health insurance, payment of gratuity,
maternity benefit, employees’ deposit-linked insurance scheme, etc.

Labour Policies and the Reform Era

Since protective labour policies and inflexible labour laws are not in the long term interests, flexible labour
market policies gained legitimacy in the climate of economic liberalism so as to promote efficiency and
productivity of labour and protect them against any hazards. The Indian neo-liberal economic reforms
introduced in mid-July 1991 paid rather little attention to employment generation. That is why one finds poor
employment growth during the reform period—an adverse consequence of the reform process.

The Government of India has in recognised the following rights of workers as alienable to every worker under
any system of labour laws and labour policy.

These are:
(i) Right to work of one’s choice

(ii) Right against discrimination

(iii) Prohibition of child labour

(iv)Just and humane conditions of work

(v) Right to social security

(vi) Production of wages including right to guaranteed wages

(vii) Right to redress grievances

(viii) Right to organise and form trade unions

(ix) Right to collective bargaining

(x) Right to participation in management.

Criticism

(i) Labour Market Reforms are Imperative:

India’s experience of growth during the liberalised regime is rather stunning, but its overall impacts on
employment in the organised sector, per worker productivity are not altogether rosy. As employment, during the
period considered, grew slowly compared to the GDP growth rate the period has been described very aptly as
‘jobless growth’ or ‘job loss growth’. Employment decelerated in all sectors in the post-liberalisation period.

It is also observed that employment discrimination against women workers has increased substantially in the
reform period though empowerment of women is considered an important avowed objective in India.

Workers are exploited not only in the unorganised sector but also in the organised sector in spite of the
legislation providing social security to these workers. Unfortunately, most of these legislations are dated and not
adequate ‘fit’ in the current globalised-liberalised economy. In fact, labour market in India is now showing a
great deal of inefficiency and a high cost structure economy.

(ii) Different Aspects of Labour Market Regulations

Against the backdrop of current liberalised Indian economy, we can say that as changing labour laws is a
sensitive issue it requires consensus among all the parties involved. The three issues involved in the labour
market regulations are: (i) the wage setting process, (ii) the labour market conditions, and (iii) the hiring and
firing process.

The issue of labour reforms has been a source of debate since the reforms era begun in 1991 when the State
withdrew itself from intervening the labour market. Historically, the government had a ‘social pact’ with labour
reflected in the labour laws of the country. Employers argue that the rigid labour laws are fetters to their
development in the current competitive environment. Flexibility in the labour market is of urgent necessity.

The objective of the Contract Labour (Regulation and Abolition) Act is to abolish contractual employment in
activities and processes in core production/service activities. However, contract workers must enjoy prevalent
social security provisions and other benefits.
(iii) Unorganised Sector and Umbrella Organisation:
These are all about formal or regular employment. But an umbrella legislation is indeed of great importance so
that the unorganised sector—where the majority of workers are engaged—is protected. It is necessary to take
steps to improve quality of employment in the unorganised sector.

Any significant improvement in their incomes and the quality of employment is feasible if the ‘institutional
environment in the labour market makes it feasible for the formal sector to reach out to the workers of the
unorganised sectors on a decentralised basis. This is also possible if provident fund, ESI and a variety of welfare
funds are extended to the unorganised sectors. All these would give the workers a better deal in terms of wages,
and security of all kinds.

Conclusion

Thus, in the current scenario, greater flexibility in labour laws must be ensured so that firms can adjust to
changes in demand when necessary. The Government admits that the labour laws—such as Chapter V-B of the
ID Act, and Contract Labour (Regulation and Abolition) Act—lack flexibility. Further, those laws focus on job
protection and thus inhibit employment. These aspects received attention in the Mid-term Appraisal of the Tenth
Plan.

However, the 11th Plan Document says that the V-B provisions of the ID Act, 1947 ‘has not proved to be a
major obstacle in downsizing by several manufacturing enterprises during the past few years with the aid of
generous packages for voluntary retirement.’ The labour market is required to be made more flexible in the days
to come so that labour force shifts gradually from the unorganised sector to the organised ones.

In the ultimate analysis, labour laws, significant as they are, are not the true drivers of growth. Changes in
labour laws are only one of the issues that merit attention. Flow-ever, the Second National Labour Commission
Report goes on stating that these labour laws ‘have to be visualised and effected in a broader perspective of
infrastructural facilities, social security, and Government policies.’

The Commission adds that it is necessary to provide for both protective and promotional measures, the latter
being highly relevant for the workers in the unorganised sector.