The journey of labour regulation
KAVYA BHARADKAR and BABU MATHEW
PRESIDENTIAL assent was recently granted to three acts – the Code on Social Security, Industrial Relations Code and the Occupational Safety, Health and Working Conditions Code. Together with the Code on Wages passed in 2019, their passage marks the near-conclusion of an exercise first recommended by the contentious Second National Commission on Labour, 2002 – the amalgamation of Indian labour law into four operational codes.
The new codes subsume into themselves 29 central labour legislations. They were steamrolled through Parliament amid a raging pandemic, at a time of great strain in parliamentary processes with little debate – the Rajya Sabha passed all three within two hours. They are yet to be notified (brought into force formally), and the final rules for their implementation are awaited. While the bulk of protections brought under the codes cover the formal sector, these sweeping changes will have far reaching consequences for all Indian working people’s lives, including those in the informal sector.
The working class was the backbone of the Indian independence struggle. A combination of factors, including the development of strong class solidarity in response to colonial subjugation, social democratism, and strong constitutional commitment towards a welfare state contributed to the development of the Indian labour regulation regime. These reforms will unsettle a century of labour jurisprudence accumulated through trial and error, tussle between labour and capital, state and judicial intervention.
Over 90% of India’s working population toils in informal employment. The International Labour Organization understands informal labour relations as relationships which are ‘not subject to national labour legislation, income taxation, social protection or entitlement to certain employment benefits (advance notice of dismissal, severance pay, paid annual or sick leave, etc.).’ The National Commission on Enterprises in the Unorganized Sector perceives unorganized employment similarly, noting that unorganized workers may be found in both – the unorganized sector (unincorporated and small enterprises that are usually owned by individuals or households, provide goods or services, and employ fewer than 10 people) and unorganized jobs in the formal sector. Informal jobs have been consistently growing due to a steady conversion of formal sector jobs into informal jobs.1
More than 95% of working women are engaged in informal work. There is a similar over-representation of socially and economically marginalized groups – Dalits, Adivasis, Muslims, and OBCs.2 A critical question is: what do the new codes have to offer them?
The Wage Code subsumes the law on Minimum Wages (1948), Payment of Wages (1936), Payment of Bonus (1965) and Equal Remuneration (1976). It is commended as the first law to universalize minimum wage protection for all workers. The Minimum Wages Act determined and protected statutory wages only for professions notified by central/state governments as ‘Scheduled Employments’. The code abandons this – Section 5 prohibits all employers from paying employees below minimum wages. The Equal Remuneration Act sought to ensure parity at work between men and women, but the new Wage Code prohibits such discrimination based on ‘gender’ – a broader term; through which equal pay for equal work and non-discrimination for recruitment, promotion, transfers can be ensured for transgender people too.
The Wage Code however cannot help large portions of the workforce. Nearly a million ASHA (Accredited Social Health Activists)3 and 2.6 million Anganwadi workers4 are not entitled to minimum wages, as the government denotes them as voluntary workers. Gig workers, who perform a variety of urban services usually through mobile-based platforms too can’t benefit from this code, since they are not recognized as ‘workers’. The companies they work for/through denote them as ‘microentrepreneurs’ or ‘independent contractors’, denying them all labour protections and thus minimizing legal liability.
Half the workforce (52%), earning on an average, Rs 8,000 per month,5 is self-employed and therefore out of the purview of this code. This includes unpaid family helpers who subsidize work carried out by their relatives without any pay (13.6%). Their labour remains unmonetized.6 They require a different variety of reforms to improve and supplement their livelihoods. The NREGS has been one such measure. After the pandemic, demands for increasing the total days of work under MNREGA and initiating an urban equivalent to it have been raised. Unfortunately, they have not gained much political traction.
The ‘need-based minimum wage’ guaranteed by law is based on nutrition, clothing, housing and other norms first adopted in the 15th Indian Labour Conference.7 This was affirmed by a constitutional bench of the Supreme Court in the Unichoyi judgment,8 and augmented by it through the Raptakos judgment.9 Except for a modification in the housing component, these are reproduced in the draft rules prepared for the code. The Committee on Fair Wages though refers to the minimum wage as a guarantee of not just bare physical sustenance, but preserving the efficiency of the worker by ensuring education, medical requirements and amenities. This wage level is linked to life with human dignity, above mere animal existence.10
Long ago, the Supreme Court breathed life into the Minimum Wages Act in the Asiad Case by referring to work performed for wages below the minimum wage as forced labour.11 Justice P.N. Bhagwati warned: ‘Where a person is suffering from hunger or starvation, …has no resources at all to fight disease or to feed his wife and children or hide their nakedness, utter grinding poverty has broken his back… would have no choice but to accept any work that comes his way, even if the remuneration offered to him is less than the minimum wage.’
The Wage Code codifies a new, lower wage level – the Floor Wage. No legislative or policy document explains what level of sustenance the Floor Wage will provide, even though it is a critical policy issue. Neither the code, nor the draft rules lay out the norms for its fixation – it is left to each successive central government to determine these.
The lack of a clear objective normative criterion is already creating confusion. Quite outside their competence, the Labour Minister announced a floor wage of Rs 179 last year, while the Finance Minister pegged it at Rs 202.12 Both contradicted the Labour Department’s Expert Committee on Determining the Methodology for Fixing the National Minimum Wage (2019) that identified household expenditure and nutritional and other norms and recommended Rs 375/day as the Floor Wage.13 An unreasonably low floor wage is likely to drag market wages down and push crores of informal workers further into poverty.14
Measures such as Employees State Insurance, Gratuity and Maternity Benefit are accessible to establishments with over 10 workers, and Employees Provident Fund to establishments with over 20. Informal establishments and workers get a much lower standard of social security through central or state government schemes. In its Preamble, the Social Security Code states its goal is to make social security available to all workers – in the formal and informal sector. Universalization of social security has long been contemplated and was also urged by the Parliamentary Standing Committee on Labour.15
Superficial modifications have therefore been introduced – by granting the central government the power to extend these measures to establishments they don’t currently cover (Section 1(6)), to make schemes for unorganized, gig and platform workers under EPFO (Section 15(d)), and extend underutilized ESIC hospitals to people outside ESI coverage (Section 44). Unorganized workers and their families can be brought under the ESI mechanism (Section 45). These enabling provisions only create legal space for progressive extension of better social security measures to the working class – it is neither guaranteed, nor can it be demanded legally. Presently it is merely a potentiality.
Despite being a 21st century legislation the Social Security Code retains the differential standard of maternity benefit for women in formal and informal employment. Establishments with over 10 employees are obliged to provide working mothers many benefits: 26 weeks fully paid maternal leave; protection from firing for asking for maternal leave; Rs 3,500; nursing breaks and a creche. Only 1.37% commercial establishments employ over 10 workers.16 Over 95% of women must rely on a much lower tier of maternal benefits.
Illustratively, the Pradhan Mantri Matru Vandana Scheme provides a conditional cash transfer (Rs 5,000) via three instalments for the first child. The Janani Suraksha Yojana provides additional conditional cash transfer of Rs 1,400 to eligible mothers. The National Food Security Act, 2013, guarantees all pregnant and lactating mothers the right to Rs 6,000 as maternity benefit (without limitations on the number of existing children).
Given the severe humanitarian crises suffered by migrant workers, portability of social security becomes essential to their welfare in host and destination states. The Social Security Code gives a broad definition of ‘inter-state migrant workers’. It now covers workers engaged by a contractor, or directly by the employer, or workers migrating on their own who subsequently find work in another state.
The Standing Committee recommended enabling portability of social security benefits between states; disallowing disparity in protection between states; identifying interstate migrants as a separate category of beneficiaries; and a social security fund with contributions from sending and receiving states, employers and workers themselves. These have not been adopted into the Social Security Code, though the Safety, Health and Working Conditions Code (see below) provides portability of the public distribution system and benefits under the Building and Construction Workers’ Welfare Boards.
In a first for India, the Labour Codes acknowledge people working in the digital platform economy – so called gig and platform workers. This sector currently employs three million, is expected to grow at 17% annually and will eventually provide 56% of all new employment.17 Platform or aggregator companies call themselves a mere medium or marketplace that connects people seeking services to those providing them. Across the world, this obfuscation has come under question. Legislative and judicial actions in various countries have concluded that the nomenclature of partnership belies an employer-employee relationship between the platform and the gig worker.
However, the labour codes shed no light on the nature of relationship between aggregator and workers. No minimum standards are set for the measure of social security to be extended to them, or to unorganized workers generally. Nor do the new codes make any mention of their rights to minimum wages, collective bargaining, due process in employment related decisions, health and safety.18 At some future time any social protection for this class may be funded through contributions from the government, aggregators, and perhaps the workers themselves.
The Industrial Relations Code grants trade unions a statutory right to be recognized as a union by the employer and a seat at the negotiation table (Section 14). This right was mooted soon after independence, but was only codified in 2020. Unfortunately, this code does not explicitly say how such ‘recognition’ is to come about. The ‘secret ballot’, which is the least corruptible method of deciding this vexatious but procedurally important question, finds no mention in the IR Code.
On the other hand, the IR Code severely restricts the right to strike. All workers intending to strike must provide notice of their intention to go on strike. Until recently this applied only to public utilities’ workers. A strike notice triggers the commencement of conciliation proceedings. If conciliation fails, either party may seek adjudication, or jointly seek arbitration. It is illegal to carry out a strike without notice, or during the pendency of conciliation, arbitration or adjudication.
Strikes can legally occur only if the employer wants to facilitate a legal strike by not seeking adjudication after conciliation has failed.19 Section 9 grants the Registrar of Trade Unions the power to cancel the registration of trade unions for violating any provision under the code, therefore implying that carrying out a strike can even end up in deregistration of trade unions. This brazen and targeted attack on industrial action in the form of strikes has a chilling effect on collective bargaining and collectivization.
The IR Code legitimizes fixed term employment, bringing into Indian law the concept of flexible labour. Fixed term workers are entitled to the same wages, benefits and conditions of work as their regular counterparts – except for security of tenure, which by design they must lose as their contract comes to an end.
In principle the protection of social security and equal pay are appreciable – especially since crores of Indian workers are already casually employed and denied job security. But fixed term employment is short-sighted from the point of view of career progression and upward social mobility – it will keep workers from gaining job security, promotions and stepping up on the socio-economic ladder. None of the codes (especially the Code on Social Security) articulate the legal protections available to fixed term employees during phases of unemployment – which are an inevitability given the lack of job security.
The Occupational Safety, Health and Working Conditions Code (OSH) is symptomatic of the denial of labour protections to unorganized workers. The code applies to ‘establishments’ (Section 2(v)), covering places employing over 10 workers. A very small minority of Indian establishments cross this threshold.
The Code of 2020 affirmatively defines eight hours as the duration of the normal working day – extending a protection for factory and mine workers to all ‘establishments’ in India. However, it is unclear on the spread-over (that is, the total time over which the work day with breaks may extend), weekly maximum hours of work, and limits on overtime work. It empowers the central and state governments to notify these. This flexibility appears dangerous as we remember the haste with which states sought to deregulate and extend working hours during the pandemic in the hope of attracting manufacturing investment.20
The OSH Code repeals and subsumes the Inter-State Migrant Workers Act. The ISMW Act required registration of establishments and contractors engaging more than five migrant workers. The code increases this threshold to 10 migrant workers (Section 59) – excluding more than 98% of commercial establishments in India, and the inter-state migrants working in them, from the protections it seeks to codify for migrant workers. These include the portability of PDS and benefits under the Building and Construction Workers’ Welfare Boards. The code also guarantees migrant workers welfare benefits at par with local workers, including access to provident fund, employee state insurance and health check-ups. A majority are excluded from this protection due to the high threshold for its application.
Overall, the codes mark some appreciable legal developments in Indian labour law – broader protection of minimum wages, scope for universalization of social security, recognition of trade unions to enable them to participate in collective bargaining, and codification of an 8-hour working day. But these are accompanied by a few anti-labour reforms, which threaten to break the backbone of the working class – especially the undefined Floor Wage, receding protections for migrant workers, differential social security standards for 7% and 93% of the workforce, indomitable barriers on the right to strike, legitimization of fixed-term employment without accounting for career progression or unemployment insurance.
The implications of the codes will come into better view once the rules for implementation are notified, given the heavy use of delegation of legislative responsibility to the government.
The codes have been oversold as a modernizing effort that creates a fairer playing field for all. In truth they are a mixed bag, often giving with one hand only to take away with another. The majority of Indian workers – working in the unorganized and informal sector – are still going to find themselves outside of all the seeming benefits of this mammoth legal reform. The power equation between employer and employee in the formal sector, meanwhile, has been firmly tilted in favour of the employer. Whether old laws or the new codes, implementation has always been a problem and disobedience, discrimination, and exploitation a habit. Despite seven decades of legislation, working people in India are still plagued by bonded labour, child labour, wage theft, and intensely precarious work.
The future of justice for workers depends on the ability to enforce legal standards in their places of work, create a reliable and sufficient social security system; and enable social dialogue and collectivization of workers. In speaking of an Atmanirbhar Bharat it is essential to seek atmanirbharta for the working class family too – through legislative measures to ensure a dignified and secure livelihood and acceptable conditions of work.
The recent pandemic has triggered mass unemployment, impoverishment, and withdrawal of children from schooling and greater vulnerability – which the hastily legislated codes may not have the capacity to address. Post-pandemic, the working class requires stronger legal protection – not more neglect or precarity. The recent parliamentary session reflects a lack of empathy or accountability towards the working class, who have not been mobilized around their shared concerns as a political constituency, but along narrower concerns based on identity.
It is time to think definitively about the protection of the human and labour rights of the remaining 93% of the workforce – in terms of a Fifth Labour Code, one rooted in the idea of a rights-based and participatory approach. Such legislation must be based on the Indian constitutional vision of equality equity and inclusion of all. More specifically it must guarantee the core labour standards as spelt out in the ‘Declaration on fundamental rights and duties at work’ of the ILO, which binds all members of the ILO including India. Only this will afford for all working people, floor-level of protections of decent conditions and make them a national priority.
* We thank Mohan Mani, visiting fellow at CLS for his review and intellectual contributions.
1. India Labour Market Update, ILO Country Office for India, July 2017. Accessible online at https://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—sro-new_delhi/documents/publication/wcms_568701.pdf
2. Barbara Harris-White and Aseem Prakash, ‘Social Discrimination in India: A Case for Economic Citizenship’, Oxfam India working papers series, September 2010, OIWPS – VIII. Accessible online at https://www.oxfamindia.org/sites/default/files/VIII.%20Social%20Discrimination%20in%20India-%20A%20Case%20for%20Economic%20Citizenship.pdf
3. Lok Sabha – Unstarred Question no. 3418 to be answered on 13 March 2020. Ministry of Health and Family Welfare, Government of India. Accessible online at http://220.127.116.11/loksabhaquestions/annex/173/AU3418.pdf
4. Press Release, Ministry of Women and Child Development: Anganwadi Sevikas. Posted on 12 July 2019 4:39 pm by PIB Delhi. Accessible online at ihttps://pib.gov.in/PressReleasePage.aspx?PRID=1578557
5. Santosh Mehrotra, ‘Informal Employment Trends in the Indian Economy: Persistent Informality, but Growing Positive Development’. Employment Police Department Working Paper no. 254 (2019). Accessible online at https://www.ilo.org/wcmsp5/groups/public/—ed_emp/—ifp_skills/documents/publication/wcms_734503.pdf
6. Periodic Labour Force Survey, 2017-2018 (Annual Report). Ministry of Statistics and Program Implementation, National Statistics Office. Available online at http://www.mospi.gov.in/sites/default/files/publication_reports/Annual%20Report,%20PLFS%202017-18_31052019.pdf
7. Report of the Fifteenth Indian Labour Conference, July 1957.
8. U. Unichoyi and Ors. vs State of Kerala. AIR 1962 SC 12.
9. Workmen Represented by Secretary vs Management Of Reptakos Brett. and Ors. 1992 AIR 504.
10. Report of the Committee on Fair Wage, 1948.
11. People’s Union for Democratic Rights and Others vs Union of India & Others, AIR 1982 SC 1473.
12. Neither the labour minister nor the finance minister have the legal authority to make announcements of this nature – the Code on Wages lays down the due procedure for fixation of the floor wage, which wasn’t followed before these announcements. Section 9 of the Code on Wages provides the procedure for its fixation.
13. Report of the Expert Committee on Determining the Methodology for Fixing the National Minimum Wage. Ministry of Labour and Employment, Government of India, 2019. Accessible online at https://labour. gov.in/sites/default/files/Commitee_on_Determination_of_Methodology.pdf
14. As Mohan Mani notes, the poverty line measurement last done by the Rangarajan Committee of the Government of India pegged monthly poverty line expenditure at Rs 7035 per family in urban India, at 2011-12 prices. The poverty line at today’s prices, after adjusting for inflation from the year 2011 to 2019, is Rs 11467 per month (CPI for January 2011=188; for January 2019= 307) or Rs 382 per day. 26 days of work, at Rs 375 per day would deliver a household income of Rs 9750, which falls below the poverty line.
15. Standing Committee on Labour (2019-20, Seventeenth Lok Sabha), The Code on Social Security. Ninth Report, Para 2.11. Accessible online at https://www.prsindia.org/sites/default/files/bill_files/SCR-Code%20on%20Social%20Security%2C%202019.pdf
16. All India Report of Sixth Economic Census (2013). Ministry of Statistics and Program Implementation, Central Statistics Office. Available online at https://msme.gov.in/sites/default/files/All%20India%20Report%20of%20Sixth%20Economic%20Census.pdf
17. Statement issued by an Alliance of Labour Unions and Civil Society Organizations, 22 September 2020. Accessible online at https://focusweb.org/indian-labour-law-must-recognise-platform-workers-rights/#:~:text= Today%2C%20there%20are%20already%20 three,percent%20of%20 all%20new%20 employment.
18. Kaveri Medappa, Rajorshi Roy, Mohammad Sajjad Hussain, ‘Confronting Precarious Work: Beyond Social Security for Platform Workers’, The India Forum, 2020, accessible online at https://www.theindiaforum.in/article/confronting-precarious-work
19. This interpretation is based on Section 53(1) of the IR Code read with Sections 53(6) and 62(1)(d,e, & f).
20. PRS Legislative Research, State Legislative Brief: Assam, Goa, Gujarat, Haryana, Himachal, Karnataka, MP, Odisha, Punjab, Rajasthan, Uttarakhand, UP: Ordinances and Notifications Providing Relaxation of Labour Laws. Accessible online at https://prsindia.org/bills/states/state-brief-relaxation-of-labour-laws