Draft Labour Code

In April 2015, the Ministry of Labour and Employment had issued a draft Labour Code on Industrial Relations Bill, 2015 aimed at consolidation of the existing central labour laws. The proposed draft code seeks to replace the three laws viz. Trade Unions Act, 1926, Industrial Employment Act, 1946, and the Industrial Disputes Act, 1947. This law was recommended by second National Commission on Labour (NCL). Further, the government is also working towards rationalizing the provision of 44 Labour laws by converting them into four labour codes including codes on wages, industrial relations, social security and welfare, and safety and working conditions of workers. The labour ministry has set up a tripartite committee with representatives from employer and trade unions and state government officials to look into all concerns to review the draft code. The ministry is planning to introduce the bill in the upcoming winter session of Parliament.

Key provisions of the draft bill

Key Provisions of the Draft Bill are as follows:

• The draft bill increases the employee limit above which, the government approval is needed for layoff/retrenchment/closure. A company with less than 300 workers can take decisions on any layoff, retrenchment and closure without the government permission. The present limit is 100 employees. The objective is to meet the fluctuation in demand arising from ebbs and flows of business cycles.
• The draft code provides that 10 per cent of workers shall apply (be applicant) for registering a trade union. In cases where 10 per cent of workers is less than 7, at least seven workers are required (to apply) for the purpose and where the 10 per cent of workers exceed 100, hundred workers shall be sufficient for registering the trade union.
• For employers employing less than 50 employees, the requirement to provide a minimum of 1 months’ notice and retrenchment compensation (severance) is to be removed. The draft code raises the retrenchment/closure compensation payable to workers from 15 days wages to 45 days wages for every completed year of service.
• Right to Strike: currently, the Industrial Disputes Act allows workers in public utility services (PUS) to resort to strike only after they give at least 2 weeks advance notice. Conciliation proceedings are immediately triggered upon issue of such notice and workers are required to abstain from going on strike during the pendency of the proceedings and seven days thereafter. Because of these restrictive conditions, it is impossible for workers in PUS to go on a legal strike. The misuse of the power to classify industries as PUS has resulted in curbing the right to strike of workers in a large number of industries that are not really essential. Now the draft code proposes to place uniformly all industrial workers as PUS workers. This means workers in all industries will be governed by the strict conditions which have so far applied only to PUS workers.
• The definition of ‘strike’ has been widened under the code to include casual leave by 50 per cent or more workers in the industry.
• The draft code has empowered the government to exempt any establishment or class of establishments from any or all the provisions of the code if it is satisfied that adequate provisions exist for the investigation and settlement of industrial disputes in respect of workers employed there.
• Penalties: The penalties for participating in or instigating or aiding an illegal strike are very steep, ranging from ₹ 20,000 to ₹50,000 with possible imprisonment.
• Freedom of association: The draft code mandates that all the office-bearers of a registered trade union be persons actually engaged or employed in the establishment/industry with which the trade union is concerned. It also prohibits a person holding office in more than 10 unions.
• The registration of a trade union may be cancelled if it fails to hold bi-annual elections and fails to submit annual returns.
• Workers who are not members of any trade union have to pay subscription to a workers’ welfare fund established by the government or the employer. Itencourages workers to join trade unions.
• Only a single trade union with 51% or more votes to be the sole negotiating agent with management.

Criticism of the draft bill

Though the draft bill aims to create greater labour market flexibility and discipline in labour, it is criticised on various fronts.

1. Trade unions argue that the draft code has been prepared keeping in mind only employer demands for greater labour market flexibility and labour discipline and it ignored the longstanding demands of trade unions.
2. The limit of more than 300 employees to get permission from government for layoff will reduce the accountability of employers and exposing a much larger number of workers to arbitrary closures and en masse termination. According to the unions, 85% of the companies will be thrown out of the ambit of the Act and thus enable employers to hire and fire employees.
3. The freehand for government to decide to exempt any establishment/industry from the act could result in workers being deprived of various basic rights including the right to organise and the right of access to justice. While a similar provision was inserted into the ID Act in 1982, it was never brought into force.
4. The increased penalty will reduce the capacity of the workers to go on strike.
5. The mandate of registration in a trade union to become office-bearer is against the standards contained in the ILO Convention of Freedom of Association and Protection of the Right to Organize (C.87) as it interferes with and limits the ability of workers to choose the persons they think best to be their leaders.
6. The restriction of not to hold office in more than 10 unions is contrary to the principles of freedom of association.
7. The code is not mentioned about collective bargaining and it is against the principles contained in ILO Convention No 98 requiring the promotion of collective bargaining.

Joint Bargaining Council

In October 2015, the labour ministry has agreed to revise the draft industrial relations code bill to allow constitution of a joint bargaining council to negotiate with the management in the event of a conflict. This will widen the workers participation in an organisation by including minority trade unions to be part of negotiations. The original draft allowed only a single trade union with 51% or more votes to be the sole negotiating agent with management. The revised draft will allow all unions having 15% or 18% of votes to have their representatives on the negotiating board when there is an absence of a two-thirds majority with any trade union at the time of voting. This will serve the twin objectives of giving wider representation to workers and ensuring that no single union walks away with all the powers.

The passage of this bill ease the doing business in the country by subsuming the 44 labour laws into four broad codes, dealing with industrial relations, wages, social security , industrial safety and labour welfare .

Conclusion

There is a need to update the labour laws, because these laws don’t reflect the requirements of the day. The Industrial Disputes Act, the Trade Unions Act, Factory Act and all other such acts were enacted in those times when liberalization, globalization or privatization was not even fully understood, let alone practiced. However, it is very challenging to make a delicate balance between the interest of the businessmen and those of the weaker section of the society. Further, reforms should bring inclusiveness and lead to economic growth along with job creation.