India’s Consolidated Labour Laws: Another Government 'Reform’ Left Mid-Stream?

It had termed the codes as 'the biggest labour reforms in Independent India’ that would benefit 50 crore workers.

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A few years ago, the Union government got 29 (later press releases claim 44) labour laws consolidated into four Labour Codes.

Parliament passed the Code on Wages in July 2019 and the other three in September 2020:

• Occupational Safety, Health and Working Conditions Code

• Industrial Relations Code

• Code on Social Security

The government termed the codes as "the biggest labour reforms in Independent India," and claimed that these would benefit 50 crore workers. Prime Minister Modi called the codes "long due and much-awaited labour reforms” which "will ensure the well-being of our industrious workers and give a boost to economic growth."

More than three years have passed since then. The government seems to be in no hurry to implement the codes. Why? Does the government intend to abandon these reforms mid-stream?

The Wages Code Expanded Workers’ Benefit Coverage

The Factories Act of 1948, the mother of labour laws in India, covered only about two lakh operational factories in 2020 employing 1.31 crore workers (the bulk of our organised sector).

The new Wages Code expanded the definition of 'worker’ to mean any person (excluding an apprentice) employed in any establishment to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward. The expanded definition of 'employee’ included those employed in administrative and supervisory jobs.

Amongst many benefits, the government claimed that the Wages Code would guarantee minimum wages to all workers/employees. The construct of minimum wages under the code is, however, quite complex.

The Wages Code requires the government to fix a maddening variety of minimum rates of wages (running into thousands) for 'time work’, 'piece work’, by the hour, day, or month, for unskilled, skilled, semi-skilled, and highly-skilled workers, for different 'geographical areas’ and so on. Minimum wages have to be taken into account, along with 'variation in the cost of living index’ and 'cash value of the concessions’.

This task is simply undoable. No wonder the government has not been able to do so in the last three years. In June 2021, the government appointed an Expert Committee to "provide technical inputs and recommendations” for 'minimum wages’ and 'national floor minimum wages', and gave it three years to provide its report, much after the its term would be over in 2024.

The Occupational Code Added No Value

The Occupational Code consolidated thirteen laws relating to workplaces and working conditions within its fold, and renamed different workplaces as 'establishments’.

The code used a single definition for establishments and did away with the different conditions and processes for registration of workplaces, which was, however, mandatory for all of them. It is essentially a patchwork.

The Code fails to recognise that most office and service establishments have very minor concerns relating to safety, health, and working conditions. It made no distinction between hazardous and non-hazardous establishments and subjected all to the same mandatory registration.

While this single form and process for registration were claimed as ease of doing business, retention of all earlier requirements and mandatory registration has made it more onerous.

The Social Security Code Envisaged Real New Benefits

The Social Security Code brought together all the unorganised sector workers, eliminating the minimum threshold requirement of establishments under social security laws, including all workers of the modern economy – 'platform worker’, 'home-based worker’, and 'gig worker’ – within the benefits framework of workers and employees.

The code materially expanded coverage and benefits for unorganised workers and those of the new economy. It extended, amongst others, the benefits of the Employee's Provident Fund (EPF) and the Employees' Pension Scheme (EPS) to workers of non-covered establishments and allowed aggregators, gig workers, and platform workers to voluntarily join. It also made employees on fixed-term contracts eligible for gratuity.

Additionally, the Code established an electronic registration of establishments to potentially create India’s complete database of establishments and workers, including all unorganised workers.

Unfortunately, the code assigned all responsibility to develop programmes and schemes to deliver these benefits to the government itself, which did nothing to develop the same.

The Industrial Relations Code Has Elements of Reforms

The Industrial Relations (IR) Code brought some reforms for factories, though of the old industry type which had been asking for freedom to 'hire and fire’ workers and close factories.

The IR Code freed enterprises employing less than 300 workers from many restrictive conditions – mandatory certification of standing orders, taking prior permission before layoff, retrenchment, and closure. It also prohibited strikes and lockouts in all industrial establishments without 14 days’ notice. It also eliminated the misuse of casual leave by bringing the same within the scope of 'strike’.

The code included the concept of fixed-term employment as a regular mode of employment within the law.

Additionally, it eliminated the multiplicity of negotiating trade unions by mandating that only a trade union with the support of 51 per cent or more workers would be allowed to participate in labour negotiations.

The Government Developed Cold Feet

The codes, duly gazetted in 2020, needed the rules to be framed before the government fixed an appointed date to bring them into effect. They use the instrumentality of 'appropriate government’.

The central government is appropriate for all government establishments and public sector undertakings, including Railways and contractors. The state government is appropriate for the rest of the establishments (almost 99 per cent). The codes, therefore, expected both central and state governments/union territories (UT) to frame the rules.

The government at the centre drafted the rules quite promptly and released them for public comment between August 2020 to November 2020. Most states and UTs (24 by the latest count) have also framed all the requisite rules. Only four states have not framed any, and the others have framed some but not all the rules.

But the codes do not require all states/UTs to frame the rules for the government to bring them into effect. Quite surprisingly, the central government has neither finalised its own draft rules in the last three years nor brought any of the codes into effect.

The Codes Have Been Abandoned Mid-Stream

It seems the central government lost interest in the codes after the fiasco over the farm laws. The government began offering the excuse of some states not framing the rules for not notifying the central rules and implementing the consolidated labour codes.

There appears to be no likelihood of it being done in the remaining tenure of the government, as only three months remain.

Therefore, the whole exercise of consolidating 29 labour laws in four codes seems to have been abandoned mid-stream. In the process, workers of the unorganised sector and the modern economy have remained deprived of much-needed protection, support, and welfare.

(The author is a former Economic Affairs Secretary and Finance Secretary of India. This is an opinion piece and the views expressed above are the author’s own. The Quint neither endorses nor is responsible for the same.)