Looking back on the reform process— there have been more shifts in policy than laws. In most cases, the legislative changes have been opposed vehemently. Indian legislators have been reluctant to replace obsolete laws, even if dysfunctional – so we continue to deal with various absurdities and inconsistencies.
For example, the Indian Telegraph Act, 1885 governs mobile telephone services as well as telecast of cricket matches.
Indian labour laws have not been impacted by reforms, as sequentially these are second generation reforms. Labour reforms constitute yet another battleground between the Left parties and the government, trade unions and labour matters being closely identified with the Left cause.
As in the case of most social security benefits, labour laws operate effectively in the organised labour sector, to 7 per cent of the total workforce — mainly in PSU monopolies. Yet India’s recent economic growth has been mainly in the unorganised sector where new jobs are mushrooming without any protection, while after an initial spurt, growth in the organised sector has slowed.
Indian labour laws are highly protective and restrictive of labour mobility, and identified as the main reason for deceleration of growth in the organised sector. This inflexibility has fomented a sense of complacency, detracting from the stark reality that profitability of an enterprise ultimately benefits all stakeholders.
One recalls the infamous Uttam Nakate case – a worker who was found to be sleeping in the factory premises during office hours and was dismissed by his employer on conducting disciplinary proceedings in which he was found guilty.
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Nakate went to the labour court, which forced his employer to reinstate and pay him 50 per cent of the last wages. The case dragged on another twenty years, till the Supreme Court finally awarded the employer the right to fire Nakate.
The Supreme Court decision is based on existing laws, but the interpretation reinforces the imperative need for clarity, so that justice need not emanate from the highest court, that too after twenty years.
Legal reforms are not just about removing anomalies, as in the Factories’ Act, which require factories to be whitewashed and sand in red buckets to be provided for fire safety. It has to do with standardisation, consolidation and removal of inconsistencies.
Does the beedi manufacturing industry really require three special Central laws? Should BPOs and call-centres be subject to laws which disallow women from working night shifts when women work around the clock in healthcare and hospitality sectors? The proposed amendment to the Factories’ Act seeks to remove this restriction, subject to the management making adequate safeguards for occupational safety and dignity in the work place and providing transportation.
The amendment is a corollary to India’s ratification of an ILO Protocol to optimise utilisation of skills and generate opportunities for women.
Left Parties have always espoused gender equality; it’s not clear whether opposition to the amendment is part of an overall ideological posturing.
The problem with protective legislation arises when it assumes inflexibility, on the basis that the Labour is always right. Nakate’s claim to siesta is no different from workmen in West Bengal claiming salary as a birthright and working only on overtime.
Take Chapter V B of the Industrial Dispute Act, which requires establishments having more than 100 workers to obtain state government permission to retrench employees, close down or even relocate. The result— employers are reluctant to add to the organised work force, and growth gets stunted. Incidentally, the Second National Commission has recommended total removal of prior approvals, except for closure.
The other bug bear is the Contract Labour Act (CLRA) which empowers the state government to determine whether temporary workers provided by a contractor should be absorbed in an establishments’ workforce.
The shift in Supreme Court’s view in the last decade reflects a recognition of realities. In interpreting the CLRA in the Air India case, (1996), the Apex Court had held that the Principal Employer is statutorily bound to absorb contract labourers even in menial work.
The Sail decision (2001) overruled the Air India ruling, holding that even if a contract labour system is abolished, the contract workers have no right to be automatically absorbed as permanent employees under the provisions of CLRA, as such no right is envisaged in the Act.
Both laws belong to the protectionist era, and have to be changed. Undoubtedly, the stakeholders are not on the same platform, while political parties are inclined to keep their vote banks happy. As starters, solution to most issues would lie in a formal benefit scheme for the unorganised sector.
The author is a Partner in Rajinder Narain & Co. and can be reached at kumkumsen@rnclegal.com