Labour Laws: The Unlikely Villian
In discussions, about India's progressions often focus turns to labour laws
which are commonly seen as a source of conflict. These laws are often portrayed
in a light as barriers that discourage investments and hinder entrepreneurial
activities upon closer inspection it becomes clear that the root cause of the
problem does not necessarily lie within the labour laws framework but rather, in
how they are implemented interpreted, how they intersect with the socio
landscape of Indian workers.
The Constitutional Framework: Trade Unions and Fundamental Rights
In India's constitutional framework, the formation of associations or unions as
outlined in Article 19(1)(c) granting individuals the freedom to create groups
without hindrance, by authorities or governmental bodies. However the Indian
judiciary has consistently upheld a stance that does not consider trade unions
as a right, under Article 19(c). The courts have adopted an approach by
restricting the scope of this provision concerning the establishment and
acknowledgment of trade unions. There is now a lack, of safeguarding of
employees' rights which weakens their capacity to unite and negotiate for
working conditions and pay scales
A case in this regard is All India Bank Employees Association, v National
Industrial Tribunal 1962 where the Supreme Court held that although the
right to form unions had been granted to the employees under Article 19(1)(C)
the right to strike is not a constitutional right. The court further opined that
there could be reasonable restriction on the activities of trade unions so as to
effect public order or morality. The judgment circumscribed the scope of the
right to unionize, reinforcing the notion that trade unions do not have
constitutional guarantees in the same way as other forms of association.
Another important case is T.K. Rangarajan v. Government of Tamil Nadu
2003 wherein the Supreme Court held that the right to strike for government
employees was not covered under Article 19 (1) (c). This judgment further
weakened the scope of trade union rights by reinforcing that even the right to
strike, being an essential tool of unions, was not constitutionally protected.
While article 19 guarantees the right to form associations, trade unions have
thus been treated differently, with the courts often taking a more conservative
approach. This is quite in contrast to the liberal interpretation assumed by the
judiciary under Article 21, which guarantees the right to life and personal
liberty. Article 21 has been expounded over the years in an expansive manner to
include the right to live with dignity, right to livelihood, and other
socio-economic rights. On the contrary, the liberal approach remains unbending
when it comes to trade unions as identified through Article 19. The opportunity
was missed before us to provide robust protection to workers' rights in
countries where exploitation of labour and poor working conditions are rampant.
Article 21: Right to Live with Dignity and Workers' Rights
Where Article 19 is given a narrow interpretation concerning trade unions,
Article 21 has been read relatively more broadly to cover workers' interests. In
this regard, the right to life under Article 21 has been interpreted to include
the right to live with dignity-an umbrella concept covering quite a number of
socio-economic rights, including the right to livelihood and safe working
conditions.
In Olga Tellis v. Bombay Municipal Corporation 1985, the Supreme Court
held that the right to livelihood is an integral part of the right to life under
Article 21. Though it's a case concerning slum dwellers, the issue of eviction
goes to question a more profound matter regarding workers' rights, since it
restores the tenet that the state has a duty to protect citizens from being
deprived of their livelihoods.
Similarly, the Supreme Court in Bandhua Mukti Morcha v. Union of India
1984 recognized the right of bonded labourers to be freed from exploitation and
further held that the right to life with dignity under Article 21 includes the
right to basic working conditions. The cases represent a more general,
progressive construction of Article 21 under the rubric of workers' rights; yet
at the same time, notwithstanding this broad commitment to protecting dignity
and livelihood, it has been far more circumspect in its approach to Article 19
and trade unions.
The Need for Simplification of Labour Laws, Not Overthrowing Workers' Rights
Consequently, the major portion of Indian labor laws, coming from colonial
existence, are complex and disjointed. Over 40 central laws and numerous state
laws regulate different aspects of employment-related matters such as wages,
working conditions, social security, and industrial disputes. The multiplicity
of laws begets 'licence raj' for employers, particularly SMEs, who became
frequently overwhelmed by their sheer numbers in compliance demands.
The Industrial Disputes Act of 1947, for instance, places huge shackles on the
right of employers to terminate employment or close down the operation. This has
made the whole process a major hindrance to business decisions in response to
market demands. Factories Act of 1948 and Minimum Wages Act of 1948 are also
considered rigid and even outdated, causing bottlenecks to industries,
particularly manufacturing industries.
The need of the hour is not to dismantle these laws but simplify and consolidate
them. For example, the four labor codes on wages, social security, industrial
relations, and occupational safety that the government plans to introduce
represent a step in the right direction-they simplify compliance, reduce the
regulatory burden on businesses, and carry on without stripping workers of basic
protections. However, these changes need to be brought forward in a way that
does not infringe on core labor rights; examples include the right to a decent
wage, safe working conditions, and provision for social security.
Lessening the License Raj: Easing Compliance While Protecting Rights
The argument that India's labour laws are too straitjacketed and responsible for
the 'license raj' is not unfounded either. Bureaucratic hurdles that flow from a
multiplicity of regulations dis-incentivize entrepreneurship, at least in the
informal sector where most businesses operate below the formal radar.
Simplification of the compliance process can go a long way in encouraging
formalization and reducing vulnerability in the informal sector to exploitation.
However, making regulatory laws simpler should not be at the expense of
safeguarding workers. Indeed, making labour laws simpler would make the
regulatory burden lighter on businesses. Yet, what is important is maintaining
core worker protections. In reform, less redundancy should be established by
eliminating unnecessary procedures and making processes transparent and more
accessible to the employer and employees. Thus, for instance, online portals
shall make returning easier, a scheme of self-certification may reduce
compliance, and a one-stop shop for inspection would make it easier without
compromising the fundamental rights of the workers.
Organised vs. Unorganised Sector: The Reality Check
A large proportion of the work-force of India is engaged in the unorganised
sector where labour laws have hardly anything to say. The 2019 Periodic Labour
Force Survey estimates that about 92% of India's workforce is engaged in the
informal sector. It raises a significant question: How are such rigid labour
laws impacting growth when directly applicable to a small fraction of the work
force?
Some Experiences
The intricacies of the formal labour laws have little impact on the broader
gamut of Indian workers who function outside this system. It is hence necessary
to reassess the story that labour laws are the major hindrances to economic
growth. The problem is more about how the many unorganized workers' requirements
are met and their rights fulfilled rather than getting rid of the protections
afforded to the workers in the formal sector. Some of these states have
experimented with the softening of labour laws, which Rajasthan has initiated.
This state has been one of the first to amend crucial acts, including the
Industrial Disputes Act, the Factories Act, and the Contract Labour Act.
These amendments made hiring and firing easier, increased the threshold for
compulsory recognition of unions, and reduced the regulatory burdens on
industries. Proponents of such changes argued that states would have a more
attractive business environment through a more flexible labour market, thus
becoming the driving factor for stimulating economic activity and job creation.
But the outcomes in Rajasthan state and the others, like Madhya Pradesh and
Uttar Pradesh, have not delivered much towards the anticipated positive
outcomes. Even while the labour laws are relaxed, no positive rise has been seen
in investment or job generation in those states. An article by the Azim Premji
University also found that the amended labour law did not reflect upon actual
employment creation and the inflow of investments.
This finding overturns the popular narrative that labour market deregulation is
a cure-all for economic stagnation, and shows that although labour laws may well
be part of what makes it easy to do business in a particular country, they are
far from determining investment decisions. It is actually the quality of the
infrastructure, the ability to access markets, stable politics, and the general
business environment that weighs significantly more on the eyes of investors.
International experiences from many countries can complement the argument. For
instance, Brazil and Argentina have had similar problems. In the early 2000s,
Brazil undid some of its labour protections in a bid to attract foreign
investment. However, the resultant investment never came, and fears about the
exploitation of workers remained high. In fact, Brazil's experience highlighted
that although enterprises may want flexible labour laws, they also covet
stability, predictable regulations, and a well-trained workforce—all elements
that were not adequately addressed through mere deregulation.
Well, countries like Germany and the Nordic nations have succeeded in building
robust economies even with labour protections in place. These countries combine
a commitment to worker rights with effective vocational training programs and
focus on innovation, creating an environment that attracts investment while
maintaining high standards of living for workers. Research has indicated that
countries with high worker protection and strong safety nets have mostly
achieved higher productivity and economic resilience, countering the argument in
response that it is just the deregulation of labour markets that can bring about
growth.
In addition, it has not been borne out by the Indian experience at least to that
extent: fears that loosening labour laws would lead to extreme exploitation of
workers or degradation of working conditions have not materialized in the Indian
case. For instance, in Rajasthan, while apprehension that adverse impacts would
affect the rights of the workers, in reality, most of the workers are still
protected by the existing frameworks. For example, safety laws and equal wages
remain strictly on the agenda suggesting that the enactment of lax laws does not
necessarily mean a loss of benefits.
The experiences of Indian states and, in fact, other nations underscore the need
for a more holistic approach to labour reforms-one that acknowledges the
necessity for robust protection of workers' interests even as it grapples with
the broader factors shaping investment and employment. It is clear that
simplistically focusing on deregulation would not do justice to the complex
economic landscape. A holistic approach articulating flexibility with enough
protection can create a conducive atmosphere for sustainable growth.
The appeal of the more relaxed labour regulations as an attractive tool for
stimulating investment is thus strong; however, evidence overwhelmingly
indicates that such reforms are not enough to drive the potential for large
economic shifts on their own. To propel a resilient and prosperous economy, it
will thus be necessary to have a robust mix of both strong worker protection,
infrastructural development, and carefully positioned investments in improving
skills.
The Need for Balanced Reforms
From being laws associated only with defamation, the labour law story should be
more balanced. Instead of viewing the laws as barriers to economic growth, they
should instead be regarded as a factor that leads towards a more wholesome work
environment. Worker's rights should not be compromised through severe
revocations; instead they must provide a legal framework that gratifies the
benefits of economic growth and welfare of the workers. A good framework should,
for instance, foster fair wages, safe working conditions, and job security-all
significant factors for a motivated and productive workforce.
Labour law simplification would be one of the most important requirements.
Compliance with labour laws often becomes quite onerous and partitioned for
employers and employees alike on account of the complexity and natures of the
current legal structure. By making labour laws easier to manage, this would
lower administrative burdens imposed on businesses so that the formal sector is
better positioned to function clearly. In this respect, simplification of rules
can motivate more employers to adopt lawful standards such that better worker
protections are perceived through them.
Further, more effective mechanisms for stronger enforcement to ensure that there
is greater compliance and observance of existing laws are needed. Effective
enforcement does not only deter violations but also lends credibility to the
workers. It shows the workers that these mechanisms do work and are in place to
protect them. It lends trust to the otherwise vulnerable workers. This includes
putting timely investigations of complaints and consistent penalties into
actions for non-compliance. When workers realize that their rights are indeed
being protected, it engenders accountability that may boost workplace morale.
An important step also includes inclusionary policies specifically targeting the
informal sector. Since a large majority of Indian workers are employed
informally, it would also be important to include them in protections and
rights. Some steps may include formalization, social security provisions, and
equal wages. This could eventually lead to millions of informal sector workers
coming under protection of law.
Lastly, there is a culture of dialogue established between the employers and the
employees such that high prospects can be fulfilled by all. Negotiations or
solving problems will become easier through open communication channels, where
both parties could collabourate in coming up with solutions to problems at the
workplace. Working conditions, wages, and other needs of the employees will be
discussed frequently, thus leading to solutions that benefit both parties.
Increased productivity leads to a rise in the feeling of security among workers.
When appreciated and listened to, employees tend to work more loyally and
devotedly towards the workplace or job, thereby ensuring a stable and thriving
job environment.
This will change the narrative about labour laws into that of cooperation and
mutual benefit, which will yield a fairer and more productive structure of the
economy. The facilitation of simplification, robust enforcement, inclusiveness,
and dialogue will help guarantee workers' rights but also ensure sustainable
economic growth that will benefit society at large.
Conclusion: A Call for Thoughtful Reforms
In conclusion, whereas the overall feeling is labour laws are villains in the
story of India's economic growth, the duty of this author is to draw back and
look critically at the issue in question. The failure to recognize that the
right of organizing in trade unions lies under Article 19, and the very
straightforward fact that stripping away labour protections will get growth
going, is misbegotten.
Rather than considering the labour laws as an impediment, we should suggest the
reforms that simplify the legal scenario but ensure the protection of rights of
the workmen. It requires an approach full of nuance: realizing that such a
gigantic workforce in this country cannot belong to just one mould, as one needs
to focus both on economic growth and the welfare of the workers. India needs to
learn a better lesson from its past experience sooner or later.
As the global economy continues to change fast, so much more pertinent is it for
these needs to be accomplished by forming deep, thoughtful, inclusive, and
protective labour laws. Let us march ahead with a vision which valued growth as
well as dignity and made sure every worker's right was represented to thrive in
a just and fair society.
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