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Labour Laws: An Overview

Labour law provides for a legislative framework which governs the relationship between - the employees, the employees and the employer, the rights, liabilities and obligations of the workers and their employer, and the disputes arising between them, health and welfare benefits, working conditions, safeguarding the interests of the workers and to make provisions for the wages, bonuses, Provident funds, leaves, working hours, compensations, provisions for lay-offs and retrenchments and the like, formulations and functioning of trade unions, this list is however not exhaustive but an indication of the many areas which are covered under the term labour laws.

Since the industrial revolution the development of labour laws have been an integral part of the socio-economic development of a country, and the protection of the rights of the labourers has led to the enactment of the labour laws across the world during the 19th and 20th century.

Emergence of the Labour Law:

The origin of labour laws can be traced back far in time, but the actual codification and development of labour law is a result of the industrial revolution during the 18-19th century, this period showed a great turn of events, like the increasing capitalization of market. One of the major shifts was seen in the deteriorating standard of living of the workers, their long working hours and low wages, exploitation of the labourers due to industrialization, and problems of child labour. Labour law can be said to be a product of struggles between the different interests and demands of the people in a society.

England was one of the first countries to industrialize, and hence it also became the first one to face the problems related to exploitation of work and labour force due to unregulated and uncontrolled capitalization and laissez faire, a major step in the protection of labour was seen in 1802 when the first legislation was passed by the UK parliament, i.e., the Health and Morals of Apprentices Act[i]  the act limited working hours and abolished night shifts, the early efforts were however aimed at child labour.

A series of acts were passed on from then addressing the plights of the workers, their safety, compensations, working hours and health. And a similar trend was followed all over the world, in France a similar legislation was adopted in 1841 which was as a result of the French Revolution, the Workers Compensation was introduced for the first time in Germany in 1884. While more-industrialized states like United States of America began enacting legislations by late 19th century after the World war- I and the Great Depression, like the National Industrial Recovery Act[ii] which was however repealed by the US Supreme Court in 1935 and replaced by the National Labor Relations Act 1935[iii]. In Japan a rudimentary regulation[iv] was introduced in 1890 later on in 1911 a full blown Factory Act was adopted and enforced in 1916[v].

In India, before independence the labour rights, trade unions and slavery were regulated by the colonial laws such as Indian Slavery Act, 1843[vi]; Societies Registration Act[vii] and Indian Trade Unions Act 1926 which was repealed and replaced by the Industrial Dispute Act, 1947[viii], after India became independent, rights for labourers were incorporated in the Indian Constitution i.e. equal work equal pay, decent living wages, abolition of bonded labour, abolition of child labour, right to work, just and human working conditions and maternity benefits. Labour was made a subject of concurrent list and hence even the states could make laws for protection of workers.

Comprehensive labour legislations were not introduced until the 20th century, advanced consolidation and codification of labour laws was seen in the Mexican Constitution and the Weimar constitutions. Later fully dedicated Labour Ministries became widespread for effective administration of labour policies and development of the law. Since pre-modern period, labour laws have continuously evolved from time to time and regionally keeping in mind the interests of all the stakeholders. The labour laws in the modern era are a result of continuous evolution over a period of time.

Evolution of labour law

The evolution of Labour law as stated earlier have been due to the social setup and different interests, one of the major developments which had taken place globally was the establishment of the International Labour Organization (ILO). The ILO was established in 1919 as a part of the Treaty of Versailles. The ILO aims to provide labour standards, develop policies and programmes promoting decent work.

At present there are 187 member states. The Constitution of ILO consists of 40 articles divided into IV chapters and two annexures.

The constitution was drafted by the Labour Commission represented by nine countries, as result a tripartite organization was born which brought together the representatives from the government, employers and the workers in executive bodies. In a period of two years 9 International Labour Conventions and 10 Recommendations were adopted. It initially provided for certain standards which were related to hours of work, unemployment, night shifts, minimum age and maternity protection.

A committee of experts was set up in 1926 to look after and supervise the application of these standards, the committee is still in force today, it presents before the conference annual reports on the implementation of the ILO conventions.

The ILO became a specialized agency of the UN by 1946, further in 1960 an International Institute of Labour Studies was established in Geneva and in 1965 in Turin an International Training Centre. The most recent development in the working of ILO was seen from 2013-2019 where a Global Commission on the Future Work was formed to make an in-depth analysis of the future works and endeavors that can provide for social justice in the 21st century. 2019 marked the 100 years of the establishment of ILO.

Labour laws in India:

As mentioned above after India got independent the existing labour legislations underwent a change, a partnership between the capital and labour was called for and it was decided that the labourers should get fair wages and working conditions and the capitalist shall receive uninterrupted cooperation from the labourers in terms of high productivity and efficiency. Provisions for strikes and lockouts were also agreed upon and thus came the first post-independence legislation i.e. Industrial Dispute Act, 1947 which provided for modified conditions according to the need of the society, this act has been further replaced by the Industrial Relations Code 2020[ix].

By way of social and economic development - Labour rights were first incorporated in the Indian Constitution by way of Fundamental rights and Directive Principles of State Policy, labour as a subject is placed in the concurrent list which implies that both the Centre and States can make laws related to it, as result of which there are numerous legislations which were made to regulate and administer matters related to occupational health and safety, employment, minimum wages, mode of payment of wages, compensation to workmen as a result of injury or death, bonded labour, women and child labour, maternity benefits, provisions for Employment insurance, gratuity, bonus, Provident Fund etc.

Legislation on labour have also been influenced by a number of recommendations of various Committees and Commissions like the First National Commission on Labour (1969), National Commission on Rural Labour (1991), Second National Commission on Labour (2002), not only this, but labour legislation is also a product of judicial pronouncements and International conventions. The most recent development in the Labour Legislation in India is the consolidation of all the various labour laws into 4 major codes.

Prior to the codification of the Labour laws they could be categorized into four categories, Firstly, certain laws which were enacted by the Central Government and they have the sole responsibility of enforcing it, these laws are:
  1. The Employees State Insurance Act, 1948
  2. The Employees Provident Fund and Miscellaneous Provisions Act, 1952
  3. The Dock Workers (Safety, Health and Welfare) Act, 1986
  4. The Mines Act, 1952
  5. The Beedi Workers Welfare Fund Act, 1976
  6. The Cine Workers Welfare Fund Act, 1981,
Secondly, there are certain acts which were enacted by the Union but enforced by both the Centre and the State governments like the:
  1. The Child Labour (Prohibition and Regulation) Act, 1986
  2. The Contract Labour (Regulation and Abolition) Act, 1970
  3. The Equal Remuneration Act, 1976
  4. The Industrial Disputes Act, 1947
  5. The Industrial Employment (Standing Orders) Act, 1946
  6. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  7. The Maternity Benefit Act, 1961
  8. The Minimum Wages Act, 1948
  9. The Payment of Bonus Act, 1965
  10. The Payment of Gratuity Act, 1972
  11. The Payment of Wages Act, 1936
Thirdly, there are laws which were enacted by the Centre but are enforced by the State governments:
  1. The Employers Liability Act, 1938
  2. The Factories Act, 1948
  3. The Motor Transport Workers Act, 1961
  4. The Trade Unions Act, 1926
  5. The Workmen's Compensation Act, 1923
  6. The Bonded Labour System (Abolition) Act, 1976
  7. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966

And, lastly those laws which were enacted and enforced by the State governments which apply to the respective states. The above mentioned list of legislations is however not exhaustive, there were around 44 central laws and a plethora of state made laws and rules for proper implementation. (The list is not exhaustive but only an indication.)

The Employees State Insurance Act, 1948
This act was enacted with the objective of providing benefits to employees in case of sickness, maternity and injury, the employees will receive medical and or maternity relief, cash benefits pension and compensation to the dependents in case of death of workers. The benefits of this act extended to employees working in a factory or any other establishment. The ESI scheme is a self-financing health insurance scheme, contributions are made from the fixed wages of the employer and the employee i.e., 3.25% and 0.75% respectively.

The Employees Provident Fund and Miscellaneous Provisions Act, 1952
This act provides for the institution of Provident Funds, Pension Fund and deposit-linked insurance fund for employees in factories and other establishments.[x] Contribution paid by the employer is 12% of basic wages + daily allowances + retaining allowances and an equal contribution is paid by employee also.[xi] Under the EPF scheme a certain amount of contribution is paid, the employee gets a lump-sum amount with the interest on the total amount paid by both upon retirement.

The Industrial Disputes Act, 1947
An act enacted to provide provisions for investigation and settlement of industrial disputes and provide certain safeguards to the workers, it also provides for Conciliation Officers, Labour Courts and Tribunals, their duties, powers and authorities. Contains prohibitory provisions on strikes and lockouts and also lays down the provisions for lay-off, retrenchment and closure. It provides provisions of Penalty. As per section 2(k) - an industrial dispute is defined as any dispute or difference between employees and employers, or between employers and workmen, or between 75 workmen and which is connected with the employment or non‐employment or the terms of employment or with the conditions of labour, of any person.

The Minimum Wages Act, 1948
The concept of minimum wages was first recognized by the ILO. Under this act both the Centre and State governments are the appropriate authority to fix/revise the minimum wages on a per day basis for employments covered under this act which is to be paid to skilled/unskilled workers. This minimum wage is revised within a period of every 5 years. The Centre fixes National Floor Level Minimum Wage lower than the wages of respective states.

The Payment of Bonus Act, 1965
The act provides for payment of bonus to persons employed in certain establishments on basis of profit, production or productivity. A minimum bonus of 8.33% of wages is to be paid and the eligibility for receiving bonus is receiving a minimum salary of Rs. 3,500 pm. This act provides provisions for the disqualification for bonus, maximum and minimum bonus payable and calculation of bonus.

The Payment of Gratuity Act, 1972
It provides for payment of gratuity as a reward for long services and statutory retirement benefit to the employees engaged in factories, mines, oilfields, plantations, ports, railways, shops or other establishments every employee irrespective of his wages is entitled to receive gratuity if he has rendered services for a period of 5 years and more on the termination of his services.

The Factories Act, 1948
This act covers all manufacturing processes and establishments falling within the definition of Factory [xii]. It provides for provisions which ensure adequate safety measures, to promote health and welfare of the workers employed in factories; and to prevent haphazard growth of factories by prior approval of plans before establishing a new factory. Sections 11-20 provide for provisions related to Cleanliness, Disposal of wastes and effluents, proper ventilation and adequate temperature, artificial humidification, over-crowding and proper lighting, supply of drinking water, sufficient latrines and urinals.

Similarly chapter V provides for welfare measures like washing and sitting facilities, first-aid appliances, canteens, restrooms, shelters, lunch-rooms. Chapter VI lays down the provisions for working hours which should not be more than 48 hours in any week (section 51). It lists out provisions for employment of young persons (children & adolescents), women and night shifts and annual wages and leaves.

The Trade Unions Act, 1926
With an aim to achieve the power of collective bargaining of the labourers through legal organizations, this act provides for the registration of trade unions and certain rights, liabilities and privileges of a registered trade union. Section 4 provides for the mode of registration of the trade union i.e. any 7 or more than 7 members of a trade union may apply for the registration for the trade union by way of an application, provided that atleast 7 members should be employed in an establishment or at least 10% or 100 members whichever is less are employed in an establishment are a part of that union. It also provides for the cancellation of registration of the union.

The Workmen's Compensation Act, 1923
This act aims to provide for some relief to the workmen or their dependents in case of accidents arising out of or during the course of employment resulting in either death or disablement of workmen. This act was renamed and after 2010 it is known as the Employee's Compensation Act, 1923. It imposes a liability on the employer for compensation under section 3 when any personal injury is caused to the workmen by an accident while on duty.

Section 4 provides for the amount of compensation in case of death from an injury  an amount equal to 50% of the monthly wages of the deceased worker multiplied by relevant factor or 80,000 Rs. whichever is more; Distribution of compensation shall be made by depositing it with the Commissioner appointed under section 20 of the act.

There are numerous laws made by the State and the Union which govern the labour regulations in various ways, which makes the compliance of law legislations too complex, to remove the complexity reforms in labour laws is the need of the hour.

Contemporary Developments in India
As a part of the long awaited legislative reform of the labour laws, the Centre has finally proposed the amalgamation and codification of 44 labour laws into 4 codes in order to simplify the labour legislation in India and provide a comprehensive legal protection to the workers and flexibility to employers to conduct business.

According to the report submitted made by the 2nd commission on Labour Law, it was mentioned that majority of the acts were outdated and have lived more than their life, hence an immediate reform in the labour laws were required. The consolidation of these laws was done with an aim to nationalize the labour laws and to improve the ease of doing business and safeguard the interests of the working class. Also, to ensure the effective implementation of the labour laws the Union Labour Ministry plans to launch an online portal Santusht.

The four codes are:
  1. Code on Wages, 2019 [xiii]:
    passed by both the houses of the Parliament and received Presidential assent on 8th August 2019, the Code on Wages subsumes and repeals the following 4 acts:
    1. The Payment Of Wages Act,
    2. The Minimum Wages Act,
    3. The Payment Of Bonus Act,
    4. The Equal Remuneration Act,

      Key highlights of the code:
      This code applies to the employees in the organized As well as unorganized sectors, and shall extend to all employees irrespective of their wage ceiling and type of employment. This code comprises of 9 chapters, it distinguishes between an employee and worker, prohibits discrimination against employees on the ground of gender (section 3), the Central Government is tasked with fixing of a floor wage and the provisions related to fixing minimum wages are the same as under the Minimum Wages Act. It introduces the payment of wages in form of current coin, currency, cheques or through online or electronic mode in the bank account. The provisions for the payment of bonus are same as under the Payment of Bonus act, at 8.33% or Rs. 100 whichever is higher.
  2. Code on Industrial Relations, 2020 [xiv]:
    this code received the assent of the President on 28th September 202, it combines the features of 3 major laws, it amends and repeals the following acts:
    1. The Trade Unions Act, 1923
    2. The Industrial Employment (Standing Orders) Act, 1946
    3. The Industrial Dispute Act, 1947

      Key highlights of the code:
      It aims to minimize the conflicts between the workers and the employers and to provide provisions for investigation and settlement of Industrial Disputes. This code has revised the definition of industry (section 2(p)), provides for an adequate representation of woman workers, a new feature of negotiation union or negotiating council is introduced under section 14, appeal for cancellation the Trade union, setting up of Industrial Tribunal, and a 14-day notice period for strikes and lock-outs as provided under Chapter VIII of the code.
  3. Code on Occupational Safety, Health and Working Conditions, 2020[xv]:
     received Presidents assent on 28th September 2020 this legislation amalgamates relevant provisions of 13 central acts relating to occupation, health and working conditions of the workers to name a few:
    1. The Factories Act, 1948
    2. The Mines Act, 1952
    3. The Motor Transport Workers Act, 1961
    4. The Dock Workers (Safety, Health and Welfare) Act, 1986; and
    5. The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.

      Key highlights of the Code
      Adapting technological developments, provides the concept of one registration for establishments having more than 10 employees, issuing of appointment letter is mandatory by the employer, providing free health check-ups for the detection of diseases at an early stage for effective and proper treatment.

      Provisions are made for the inter-state migrant workers and his registration by way of self-declaration. Constitution of a National and State Occupational Safety and Health Advisory Board (section 16 and 17). Employment of women in all types of establishments and also work in night shifts subject to their consent.
  4. Code on Social Security, 2020[xvi]:
    passed by the Parliament and received the assent of President on 28th September 2020, this code consolidates and repeals the following acts:
    1. The Employee's Compensation Act, 1923
    2. The Employees State Insurance Act, 1948;
    3. The Employees Provident Funds and Miscellaneous Provisions Act, 1952;
    4. The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;
    5. The Maternity Benefit Act, 1961;
    6. The Payment of Gratuity Act, 1972
    7. The Cine-Workers Welfare Fund Act, 1981;
    8. The Building and Other Construction Workers Welfare Cess Act, 1996;
    9. The Unorganised Workers Social Security Act, 2008.

      Key highlights of the code:
      The code provides for an establishment to be covered under chapter III and IV relating to EPF and Employers State Insurance Corporation (ESIC) on a voluntary basis even if the number of employees in any establishment is less than the threshold. Provides for registration of any establishment and cancellation of the registration by any establishment subject to the rules notified by the Central Government (section 3). It empowers the Centre to frame schemes for unorganized, gig, platform workers and their family members for providing benefits under the ESIC, lays down provisions for maternity benefits, provides for establishment and maintenance of separate accounts under the social security fund for the welfare of unorganized, gig and platform workers.
In the dynamic context the labour laws need to be reviewed timely to bring them at par with the changing needs of the economy and society whether it is increasing productivity, generating employment and opportunities, encouraging the living standards and cost of living, and increase international cooperation.

After the codification of laws into 4 codes now it is time for proper and effective implementation of these codes to achieve what is desired. Largely these reforms look more like a consolidation of all the existing laws rather than a reform in true sense. Merging the laws into 4 codes in unlikely to solve the existing lacunae and ensure compliance. However, these codes shall remove the multiplicity of authorities and terms and will make the enforcement easier and less complex without compromising on the basic concepts of welfare.

These codes however cannot be said to be flawless for instance, in the Code of Wages the definition of wages could further be simplified, the concept of dearness allowances and retaining allowances could be explored, and the concept of payment of bonus to be paid only based upon the salary or based upon individual performance could have been further evolved. Similarly, the Code of Industrial Relations unilaterally empowers the employer to close an establishment and retrench workers without any compensation, it provides for fixed-term employment contracts which will allow the employers to arbitrarily fire and hire the workers.

And have also placed significant restrictions on the workers right to strike. The code on Social Security does not offer a universal security to the workers, it curtails the power of the bureaucracy to determine the amount of PF and ESI dues owned by establishments, it also allows the government to exempts certain industries for a specified period in the name of interest of promoting economic activities.

Hence, the questions which still need to be answered while making reforms in the laws relating to labour are What are the challenges faced by the labour class?, What changes are required? What impact will the reforms have on the working class and their employers? The codification of the laws is one step in the direction of reform there are miles to go before we achieve an effective and flawless law.

  1. The Health and Morals of Apprentices Act 1802 (42 Geo III c.73
  2. 48 Stat. 195 (Pub. Law 73-67)
  3. 49 Stat. 449 (Pub. Law 74-198)
  4. Ken Takahashi and Yoshimasa, Ishii Historical developments of administrative measures for occupational diseases in Japan (ILO, 10 July 2013),
  6. Act No. V. of 1843
  7. Act No. 21 of 1860
  8. Act No. 14 of 1947
  9. Act No. 35 of 2020
  10. Act No. 19 of 1952
  11. Act No. 19 of 1952 S. 29
  12. Act No. 63 of 1948 S. 2(m)
  13. Act No. 29 of 2019
  14. Act No. 35 of 2020
  15. Act No. 37 of 2020
  16. Act No. 36 of 2020

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