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The New Labour Codes Of India: A Major Change In India

The legislations are made with 3 objects:
  1. To regulate,
  2. To Punish,
  3. To ensure welfare.
Depending upon the object various legislations are framed from time to time by the legislature. In a country like India, we follow the quasi-federal system and the powers have been divided among the Center and States. Some subjects fall under the exclusive power of Parliament i.e. the central legislature and over some subjects state assemblies i.e. state legislatures have exclusive power to make laws, however, this power of state legislatures is not permanent as we don't have the rigid federalism in India.

But there are certain subjects which fall into the jurisdiction of both the center and state legislatures. On such a matter, both are empowered to make laws but in case of conflict among the laws of the central legislature and state legislature, the law of the center will prevail in general.

Now coming back on the objects of the legislation and relevance of it being discussed here, depending upon the object and power to make laws, many times the states and the center end up making various legislations on a similar subject. As we have discussed till now that various subjects fall under the power of both the legislatures and hence the laws do not remain the same throughout the country and this leads to confusing every state as various laws when a central act is already provided.

When we talk about some of such subjects, labor-related matters fall into both center and state legislatures' power to make laws. Currently in India, we have around 44 labor legislations in totality, that are enacted by the central government but these are not uniformly applicable throughout India as India is a vastly diversified country, and various factors available in a state may not be available in other state and the issues of one state might differ from issues of the other states. On this note, the central legislature made the general legislations governing the common points but the states were given powers to amend and make other laws as and when they deem necessary.

While ensuring that all the matters of concern are covered, the legislatures forgot to keep in mind that so many legislations after having the central legislations will lead to extreme confusion for the seekers as well as for the performers of the functions given in those legislations. The key purposes of such legislations as given below can fail due to such confusion caused due to the number of legislations.
  • It establishes a legal system that facilitates productive individual and collective employment, relationships, and therefore a productive economy;
  • By providing a framework within which employers, workers, and their representatives can interact concerning work-related issues, it serves as an important vehicle for achieving harmonious industrial relations based on workplace democracy;
  • It provides a clear and constant reminder and the guarantee of fundamental principles and rights at work that have received broad social acceptance and establishes the processes through which these principles and rights can be implemented and enforced.[1]
Before moving on toward the important legislations and key points, we must know about the history and evolution of Labor movements and Labor legislation.

History Of Labour Movements:

The labor movements were started all over the world with the first industrial revolution in England around the 1750s. If we start discussing world history, then the only history will cover the whole paper, so we are going to straight away talk about Labor Movements in India.

Some Important events encouraging the labor movements in India were as given below:
  • In 1860, the first-ever labor movement can be said to be the Indigo Movement which was started by Dinbandhu Mitra who was a social reformer in Bengal to protest against the hardships of the indigo cultivators and plantation workers.
  • In 1875, Sorabji Shaparji with others started the agitation for women and children labor in Indian Industries.
  • In 1877, a strike over wage rates by workers of the Empress Mill at Nagpur was the first strike done by the workers.
  • In 1884, a Labor Conference by laborer N.M. Lokhande in Bombay (Currently known as Mumbai).

If we talk about the evolution of labor law in India then the labor laws are generally known as Industrial Laws and the history goes back to the British Colonial era which was mainly enacted to protect the interest of the British employers and first-ever legislation related to the labor matters was the Factories Act which was first introduced in 1883 because of the pressure brought on the British parliament by the textile magnates of Manchester and Lancashire. This was the first legislation that provided for eight-hour work, the abolition of child labor, restriction on women for night employment, etc.

The earliest Indian statute to regulate the relationship between employer and his workmen was the Trade Dispute Act, 1929 (Act 7 of 1929). Provisions were made in this Act for restraining the rights of the strike and lockout but no machinery was provided to take care of disputes.

The post-colonial era was of the views that no capital i.e. business can survive without the partnership of labor and hence all the pre-existing laws were amended and new laws were made accordingly. Ultimately, the Trade Dispute Act, 1929 was repealed and the Industrial Dispute Act, 1947.

Key Legislation Enacted By Central Government:

All 44+ Labor legislations enacted by the central government are useful in one way or another but discussing all here is not possible hence we are going to discuss the most commonly used legislation.
  1. Minimum wages Act, 1948:
    This Act talks about the minimum wages that should be provided to a worker. The wages defer from state to state, categories, and designations, etc. The wages are fixed and revised by the state governments.
  2. Payment of wages act, 1936:
    This Act talks about the time of payment of wages/salary to the worker/employee by the employer. It says that the Salary should be paid by the employer by the 7th of every month. This Act also governs the deductions from the salary.
  3. Equal Remuneration Act, 1976:
    This Act ensures equality at the workplace and makes sure that no employer is discriminating on any grounds of sex, religion, race, caste, etc., for example, the female or male employees working at the same position and holding the same qualifications. Equal salary is to be provided to them.
  4. Employees Provident Fund And Misc. Provisions Act, 1952:
    This act governs the money that is to be provided from Provident Fund and Pension during retirement. It also governs the deductions for PF i.e. 12% from the Basic salary + Dearness Allowances from the side of the Employee, and the Employer is supposed to contribute 12 + 1%, the compulsory limit for the deduction and it says that deductions should not be more than Rs. 15,000 (it can be exceeded if the employer and employee agree).
  5. Employee State Insurance Act, 1948:
    This Act mainly focuses on medical insurance for both Individual + the family of the Employee and Accidental Insurance to the individual employees. It regulates the limit of cover provided by the insurance i.e. maximum Rs. 21,000. The Act also governs the deductions that can be done for this Insurance that is being provided. The total part of wages which can be reduced from an employee is restricted to .75% of his wages whereas the employer is obliged to contribute 3.25% of the total wages as provided to the employee so that eventually the total part becomes 4% for the insurance.
  6. Bonus Act, 1965:
    This Act makes a mandate of providing statutory bonus having a lower limit of 8.33% which can be increased by the employers based on their profitability, policies, and strategies.
  7. Gratuity Act, 1972:
    This Act makes an effort on ensuring respect for the employees who have worked for dedicated time for an employer and has retired or has been removed by the employer due to some reason. It makes sure that if an employee works for 5 years or more then the employer is bound to provide the gratuity to such employees irrespective of the wages given during the employment.
  8. Professional Tax Act:
    This Act is governed from Article 276 of the Constitution of India. The maximum deductions under this Act can be till Rs. 2,500 per annum. This Act is not applicable in all the states of India but function in 15: 16 states.
  9. Maternity Benefit Act, 1961:
    This Act has been made to provide the social equality to the women and also under the constitutional right to provide laws for the protection and promotion of children and women under Article 15(3). This Act makes sure that the employer provides 26 weeks of paid leave for female employees for maternity Purposes.
  10. Shop and Establishment Act, 1954:
    This Act differs from state to state and this Act simply provides the mandate to all the employers to provide weekly leave and right to the employees with or without wages except the employer's family. This Act governs the leaves and holidays as given by the employer.
  11. Industrial Dispute Act, 1947:
    This Act governs the relations of employees and employers. This Act also governs the rules for hiring, firing, compensation at the time of termination, and all the disputes arising out of the employment contract.
  12. Factories Act, 1948:
    This Act has been implemented with the intent to provide adequate safety measures and to promote the health and welfare of the workers employed in factories. It provides the Facilities and Conveniences to be provided to the workers, welfare schemes by the employers, facilities to be provided in case of large factories, safety measures to be ensured in the factories, working hours for the factory workers, overtime wages to the workers, etc.
  13. Trade Union Act, 1926:
    The right to form peaceful ad legal association as provided in the Constitution of India under Article 19(1) (c) is acknowledged in the context of labor workers. The labor workers are free to form trade unions and this Act provides some advantages and obligations to be complied with. It provides for Registration, Obligations, Status after registration, rights as a registered trade union, the procedure of changing names, etc, and Dissolution procedure of trade unions.
  14. Industrial Employment (Standing Orders) Act, 1946:
    The intent behind enacting this Act was to prevent the exploitation of the workers employed by manipulating the terms and conditions as at the time of employment, the terms and conditions were not prescribed in the employment agreement. This Act gives the provisions for the formation of standing orders and to set the accountability of the employers in case of any violation of any set model of standing orders.

New Labor Codes: A Step Towards Unification:

The recent step of the central government has brought 4 codes for the various labor law legislations as there is a vast list of legislations as some of them have been discussed above.

The second National commission for labor in 2002 recommended the labor laws to be unified and to be divided into 5 subheads:
  • Industrial relations
  • Wages
  • Social security
  • Safety
  • Welfare and working conditions
The four codes that have been introduced in the houses of Parliament, contain various legislations having the similar objectives together for reducing the number of legislations and to bring some clarity in the existing legislation as there are various legislations which are formulated by the state governments as well. So moving on to the codes for discussion one by one, the four codes are named as:
  • The Code on Wages, 2019
  • The Occupational Safety, Health and Working Conditions Code, 2020
  • The Code on Social Security, 2020
  • The Industrial Relations Code, 2020
To begin with the analysis of the Labor codes, we will first understand the status of the Code, then the Acts comprising in that code then a brief sections scheme of the Code and analysis if there is any specific thing missing in the code which was there in Act or needed a reform.

The Code On Wages, 2019:

This is the first code that has been passed by the Parliament and has also attained the consent of the President. This Act is enacted right now but not enforced as the enforcing rules have not been notified in the official gazette yet for enforcement purposes. The draft rules are out for public comments.[2]

The code of wages, 2019 talks about the unification of all the labor laws having the same objective of regulating wage systems in industrial establishments. The code of wages mainly involves:
  • The payment of wages Act,
  • Minimum wages Act,
  • Payment of Bonus Act,
  • Equal remuneration Act,
The code of wages 2019 mainly talks about payment of wages to the employees and workmen employed under any employer falling under the definition as given in the code then it talks about floor wages, this code is not only applicable to the employees drawing a salary from a particular employer but also applicable on the and is selected as well as on the organized sector labor with word floor which in this code ensures that a minimum as a prescribed in the floor which is provided to the worker or employee as prescribed depending upon their industry.

Key points of the code of wages 2019
  • This code for the first time gives a uniformed definition on wages as applicable to minimum wage payment of wages and payment of bonus as well.
  • This code also provides for or the definition of worker and employee separately and the term employee has a wider meaning that includes managerial and administrative work as well where is the definition of worker is inclusive of working as journalist and sales promotion employees
  • The definition for the equal wages Act was Vague which has been properly defined in this code.
  • The code also talks about equal remuneration in case of the same work for work of a similar nature done by employees and concerning the recruitment of employees for the same work or work of similar nature.
  • The concept of the floor which it was introduced in the minimum wage act was on the discretion of state government as the state government had the power of changing the minimum prescribed wage in a particular industry and this wage changed from industry to industry and state to state. Now as per the new provisions under this act the central government will fix a floor wage and the employer cannot in any circumstances fix the minimum wage rate which is lower than this floor rate as a fixed by the central government. Also, these floor wages are to be reviewed after a few years not exceeding five years by the appropriate government.
  • The code also talks about the wage rate in case of overtime that is if an employee works for more than the prescribed working hours in his employment contract then the employer is bound to pay him for every hour or part of an hour or so work done access and the overtime rate which this act prescribed should not be less than twice the normal rate of wages.
  • This code also introduces which period which can be daily weekly fortnightly on monthly basis it also stimulates the time limit for payment by the employer under each of such wage periods. This Scheme was absent in the payment of wages act.
  • The code has also introduced various disqualifications for employees in case of disqualification from bonus including dismissal from service due to conviction for sexual harassment at the workplace.
  • The code further provides for provision for inspector-cum-facilitator who will advise the employer and employee regarding the compliances of this code and the other function will be to conduct inspections for ensuring that the code is being followed.
  • There have been various changes in penalties and punishments provided in contravention of the provisions of the code. The code has introduced a staged punishment system as there was no difference between the first offender and the frequent offender. The penalty in the case of the first offender is very lenient in comparison with the provisions of the payment of wages act, minimum wage act, etc. Where the first offender was punished with imprisonment and fine here the offender having contravened the provisions for the second time within five years from the first attempt will liable for imprisonment.
  • The code has increased the amount of penalty which is to be levied upon in case of any contravention in a good ratio if compared with previous legislation.

Code On Social Security

The code on social security has been frame with the intent to replace 9 Central labor legislation including:
  • The employee compensation act,
  • The Employee State Insurance Act,
  • The employees' provident fund and miscellaneous provisions act, the maternity benefit Act,
  • The unorganized workers' social security act, etc.
The code on social security is presented with the intent to bring all the social security-related legislation under a code. This code focuses on the benefits that are to be provided to the workers and employees. Along with this the proposed code also intends to utilize technology and to bring transparency and accountability e and facilitating is of compliance with the provision that will ultimately lead to benefit to the workers. The code has been passed from Loksabha on 23rd September 2020.

Key points of the code on Social Security, 2020:
  • Under this code, the welfare schemes will apply to the workers of both organized and unorganized sectors this also means that the PF related schemes, the pension-related schemes, the deposit insurance schemes, etc. will be valuable to the workers of the unorganized sector as well.
  • The definition of wages has been expanded in this code and is now divided into three parts that are:
    • Inclusions of basic pay dearness allowances and retaining allowance.
  • Specified exclusions provided funds pension and gratuity house rent and conveyance allowance etc. These are excluded as long as these do not constitute a part of the total of more than 50% of the remuneration being paid.
  • Apart from the inclusions and exclusions the third category which has been identified as wages are benefits in kind. The 15% of total wages which has been provided as a benefit in kind will be counted as wage for ensuring does social security benefit will be at least 50% of overall compensation.
  • This code also provides for various authorities for administrating the social security schemes on a ground level such as:
    • A central body of trustees headed by central provident fund commissioner.
  • National and state social security board headed by central and state ministers for labor and employment to administer schemes for unorganized workers.
  • The state-level building workers' welfare board it's headed by a chairman as nominated by State Government for the administration of the schemes for building workers.
  • There has been a change in the contributions that are required for these social security schemes. Like in the PF scheme the employer and employee will each make the matching contributions of 10% of wages or such other rate as notified by the government. Whereas all the other contributions towards payment of gratuity, maternity benefit, cess for building workers, and employee compensation will be borne by the employer only. the schemes for Greg walkers platform workers and unorganized sector workers may be financed through a combination of contribution from the employer and employee and the appropriate government which may be Central or the state as the case Maybe.
  • As already discussed scored as enhanced the Ambit of workers by including various workers such as gig workers platform workers and unorganized workers etc. which were not covered in any legislation in past.
  • It can be concluded that the code not only aims towards simplification of the complex labor laws in India but also intents to modernize the law and to make it in the interest of both employer and employee.

Industrial Relations Code 2020

The code on Industrial relations aims on unification of various legislations having the same objective of governing Industrial relations.

The court will be replacing three major acts such as:
  • Trade union Act,
  • Industrial relations (standing orders) Act, and
  • Industrial dispute Act.

The code on Industrial relations mainly talks about reforms in the labour laws relating to Industrial relations including the trade unions and their procedures and powers relating to registration, dissolution, suspension etc. and, the dispute resolution and addressing system in industries along with the code of conduct for both employers and employees.

Key features of the code on Industrial Relations, 2020
  • The definition of worker in the score person in supervisory capacity getting wasted up to 18000 rupees or as may be prescribed. Further, in order to provide permanent employment to the employees all the benefits including gratuity except for notice period after the conclusion of expanded and retrenchment compensation is to be provided by employer. The employer has been provided with the flexibility of employing the employees for the term as may be required without restriction on any sector.
  • The definition of industry has also been re-defined through this code and now industry is any systematic activity carried on with the cooperation of employer and employee for the production supply and distribution of the goods and services with a view to satisfy human needs and wants except those which are really spiritual or religious in nature with certain exceptions as laid in the code.
  • This code identifies the concept of trade union as similar to identification provided in trade unions act. Further this code also provides for negotiation unions in case of an industrial establishment having multiple trade unions. The trade unions having 51% of of the the votes from the workers of that industrial establishment will be the sole negotiator union for that industrial establishment.

This court further restrict the unfair labour practices as listed in the schedule of the code these fair labour practices include:
  • Restricting workers from forming trade unions
  • The employer's sponsored Trade union of workers
  • Using force threat or version on the workers to make them join a particular Trade union
  • Damage to employers property
  • Preventing any worker from attending work
The court not only provides for unfair labour practices but it also provides for fine ranging from 10000 to 2 lakh rupees on people indulged into such unfair labour practices.

In context of standing orders the code holds the same applicability and criteria as it was mentioned in Industrial relations (standing orders) act. The provisions relating to model standing order is given in schedule 1 of the code as well.

The code also provides for provisions relating to notice to change in any of the provisions of standing orders to all the employees.

The code mandates formulation of grievance redressal committee consisting of 10 members when the total number of employees is 20 or more. It further talks about proportional representation of women in the committee in similar proportion of women working in that industrial establishment against total workers employed.

The act also talks about establishment of industrial tribunal consisting of one judicial member and one administrative member replacing the current tribunal having only one judicial member who presides the tribunal. The trade union also has Bheem given the right to approach the industrial tribunal in case of cancellation or denial of registration by the registrar of trade union. The industrial tribunal will replace multiple adjudicating bodies like the Court of enquiry Board of conciliation And Labour courts.

It further provides for the time of commencement of conciliation proceeding and ensures that the conciliation proceedings shall be deemed to have commenced on the date when first meeting with the conciliation officer is done after receiving the notice of strike or lockout.

A mandate to provide notice of 14 days before organizing any strike or lockout.

It can be concluded by saying that the code on Industrial relations not only aims to unify the laws governing Industrial relations but also aims at safeguarding the interest of both employer and employee.

The Occupational Safety Health And Working Conditions Code

The code on occupational safety health and working conditions aims to provide for a unified law governing day occupational state help and working conditions for laborers and workers. This act aims to replace 13 currently existing legislations with this code namely:
  • The Factories Act, 1948;
  • The Plantations Labour Act, 1951;
  • The Mines Act, 1952;
  • The Working Journalists and other Newspaper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955;
  • The Working Journalists (Fixation of Rates of Wages) Act, 1958;
  • The Motor Transport Workers Act, 1961;
  • The Beedi and Cigar Workers (Conditions of Employment) Act, 1966;
  • The Contract Labour (Regulation and Abolition) Act, 1970;
  • The Sales Promotion Employees (Condition of Service) Act, 1976;
  • The Inter-State Migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979;
  • The Cine Workers and Cinema Theatre Workers Act, 1981;
  • The Dock Workers (Safety, Health and Welfare) Act, 1986;
  • The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996.
The code aims at providing a unified legislation aiming for workers safety health welfare and working conditions.

Key Features Of The Code On Occupational Safety, Health And Working Conditions, 2020
The code provides for single registration of all the industrial establishments covered in the code to be registered within a period of 60 days from the date of commencement of this code. This is step will design a central database and it will develop the ease of doing business as it will restrict multiple registrations under multiple acts.

The Oxford that provides for free annual health check ups for the age as prescribed by the appropriate government and tests as per the requirements of the industry in which the employee is working. This is step has been taken in order to to ensure that employees are healthy and by this way the employer will be benefited by knowing the level of productivity of the employees.

As per this code the appointment letter has been made compulsory to all the employees engage in their establishments by the employer. This will prevent the exploitation of employees.
School also provides for a body named occupational safety and health advisory board that will set up various committees concerning various subject matters having representation from trade unions employee associations and state governments.

This code also specifies the working hours of women also the night shift which shall start after 7 p.m. and before 6 a.m. and the timings are required to be approved by the central or a state government.

This code provides for various rights and duties to the employees including the duty of taking care of their health complying with the safety and health measures reporting unsafe situations to the inspector etc. The code also provides right to gain information regarding the safety and health standards of industrial establishment.

The code also imposes duty on the employer that the employee is required to keep safety measures in hazardous conditions and an annual health check up is required apart from that the relevant authorities are required to be informed when an accident leads to death or bodily injury of an employee.

The employer is duty bound to provide hygienic work environment along with proper ventilation sufficient space clean drinking water changing rooms/ locker rooms etc.

The code also provides for specifying working hours for different classes of the establishment and employees as per the rules prescribed by the central or state government. It also the provisions regarding paying the toys of the rate of daily wages in case of overtime by an employee one day weekly leave is also given in the four except for the motor transport workers. It also identifies various paid and medical leaves for various sets of employees.

The code also covers various offence and penalty for contravening the provisions of this code. In an offence resulting the death of any worker, the punishment can be provided as two years of imprisonment or find up to 5,00,000 rupees or both. It is on the discretion of the court (facilitator cum inspector all any other person as may be appointed by central or state government) to provide the 50% of the fine amount to the the hairs of of the deceased worker. Another contravention not specifically provided in the code, amount of 2,00,000 to 3,00,000 rupees used as fine amount for such contraventions.

It can be concluded that the code on occupational help and working condition not only AIMS at providing a unified law for occupational safety health and working conditions but also intense to be beneficial for both employee and the employers.

Labour Codes In India: A Revolutionary Change?

Coming back to the topic of discussion weather the labour codes as introduce in India are revolutionary change or not?

By discussing the confusion that was there in India before introduction of these codes and the complexity of labour laws as in force we can see the difficulty faced by the normal employees who don't really understand the legal language and tries to protect his own interest. Even after having a number of labour laws protecting from the exploitation there were many instances when the employee could not oppose owing to the complexity of labour legislations as well as the arguments of employer having found loopholes aur overlap in the acts.

The labour legislations are as old as 1926 and needed reforms as per the modern requirements. Even now the step of passing Labour Codes cannot be said to be revolutionary because the unification demand has been raised by various commissions in past as well however it is a welcoming move from the side of the legislature that they have finally thought of reducing the complexity of labour laws.

The codes not only unified the legislations having similar objectives but also work on various requirements of reform in the old laws.

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