“This move of the Uttar Pradesh government turns the clock back by more than 100 years. It will lead to slave-like conditions for workers and it’s unacceptable, in violation of all human and fundamental rights. This move should be legally challenged” - Labour Law advocate Ramapriya Gopalakrishnan
“The reported labour law reforms by the UP government of exempting industries from all labour laws save three, all of them otherwise poorly implemented by any government is beyond the scope of imagination and will make even the most vocal labour flexibility advocates to shame and even industries would not have imagined getting these ‘holidays from labour laws’,” XLRI Jamshedpur professor and labour economist K.R. Shyam Sundar
The action which elicited these responses was a May 6th news, where the Uttar Pradesh Cabinet decided to suspend 35 of the 38 labour laws in the state for three years through an ordinance. These include Central laws such as the Minimum Wages Act, the Payment of Wages Act and the Payment of Bonus Act. Gujarat, Rajasthan, Punjab, Himachal Pradesh and Haryana have also issued notifications under provisions of the Factories Act after the UP government’s ordinance, to increase the working day from 8 hours to 12 and the working week from 48 to 72 hours.
How is it supposed to help?
● The unemployment rate in India is at 27.1% in the week ended May 3, according to CMIE. Hence, to put industries in a position to hire people or even continuing with the existing pool of employees, this is a step to ease labour costs allowing companies room to function with market-determined costs, unhindered by compliance.
● It might also be a signalling mechanism to firms which are thinking seriously about shifting their production units from China. With its 45 national and over 200 state labour laws, investors have always been wary of setting up manufacturing units in India. ● According to the World Bank, less than a fifth of the workers in India are in salaried jobs. Draconian labour laws are often blamed for creation of India’s unorganised sector. Removing these laws might encourage corporates to bring more people into the formal job fold.
● The existing laws only serve two parties: unionised labour with 90% of the workforce never having any of the stipulated protection in the first place, and labour inspectors who are responsible for creating the dreaded Inspector Raj in India.
So why are labour unions and opposition parties so concerned?
● Opening the way for exploitation: With the Minimum Wages Act, 1948 suspended, employers can choose to pay workers less than the earlier mandated minimum wage, literally as little as they want. The suspension of other laws opens the door for entities to use this window to get rid of permanent employees without having to comply with usual formalities like notice pay, retrenchment compensation and gratuity, thus shifting more people to the informal sector. And workers, having no recourse to an appeal, may resort to unrest, pushing employers, who now do not have a platform to raise an industrial dispute, into further quandary.
● Worsening the life of Majdoors: State intervention to remove labour standards goes against the popular adage of “good capital chases high labor standards.” While forcing workers to put in shifts that are one and a half times the limit may theoretically lead to increased productivity, several studies have found that a reduction in the prevalent long hours of work (and better remuneration) actually increased productivity. Suspension of laws related to trade unions, settling industrial disputes, occupational safety, health and working conditions of workers and contract labour will also make the lives of labourers tougher.
● Multiplier effect of fire at will: The definition of “industry” under the Industrial Disputes Act has been expanded by the Supreme Court to include informal establishments such as temples, shops, taxi stands, chemists and kirana shops. Therefore, sudden suspension of the labour laws would impact the lives of these people and their dependents as well.
● Is this the stimulus that MSMEs were expecting? Instead of granting bailouts, subsidies, loan extensions or incentives to MSMEs to tide over the pandemic, the state governments have instead given the employer an easy option of getting rid of the employees altogether. And with their backs against the wall, companies may actually choose this option in a bid to survive.
Barking up the wrong tree
Instead of providing protection to the most marginalised and vulnerable, as exposed by the COVID-19 crisis, these moves will further exacerbate the crisis for those who are worst affected by it. Instead of working to remove archaic laws and reforming the existing labour laws to promote growth, the UP government has instead chosen to completely abandon the hard-earned protection that trade unions had fought for since independence. At a time when countries are providing wage subsidies to companies to prevent lay-offs, a few Indian state governments are making it easier for businesses to fire people. Is this not short-changing the few enterprises which may have actually tried to promote workers welfare? Should we indeed be following in the footsteps of China, which is notorious for violating human rights, disregarding labour law protection and active trade unions, just to provide cheap labour?
We can only hope that the Centre, whose consent is required to change labour laws, would not be desperate enough to agree to these wholesale exemptions to protections that the laws now afford to workers. Instead, the Centre should expedite reforms of the existing labour laws to change the adversarial nature of employer - labour union relationships into a mutually beneficial one.
About the Author: The post is written by our EZPP Partner Abhirup Roy with relevant edits from our editorial team. Abhirup is a graduate from IIM Ahmedabad and works with Zolo Stays.