NATIONAL COMMISSION FOR ENTERPRISES IN THE UNORGANISED SECTOR Jawahar Vyapar Bhavan, 1, Tolstoy Marg, New Delhi 110001

Labour Reforms in India

Background Note to the first meeting of the Task Force on Labour Reforms, 26 March 2007

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Contents

S. No. Items Page No.

1. Note 3 - 9

2. Appendix I- V 10- 83

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The National Common Minimum Programme (NCMP) of the UPA government

gives a central place to reform of Labour Laws consistent with the rights of workers. TOR

(viii) of NCEUS enjoins it `to review Indian Labour Laws, consistent with labour rights,

and with the requirements of expanding growth of industry and services, particularly in

the informal sector, and improving productivity and competitiveness’. The Commission

has also been directed by the Prime Ministers’ Office to prepare a base paper on issues

pertaining to greater employment generation by undertaking a review of the Indian

Labour laws consistent with labour rights in order to improve productivity, ensure greater

competitiveness and generate greater employment in various sectors, like textiles, IT,

and SEZs.

In order to prepare an Agenda for Labour Reforms, the Commission is examining

the issues involved in the light of available empirical evidence, nationally and

internationally, so as to arrive at conclusions that are not influenced by dogmatic

opinions held by many participants in the debate on the subject. Some of the important

issues, which have been raised in the area of labour reforms, are discussed below:

1. Multiple and Parallel Labour Legislation: There is the burden of multiple and

parallel legislation that has created confusion and complexity and has resulted in

vast paraphernalia of regulation. Currently, there are around 50 Central Labour

Laws and more than 100 State Labour Laws. Moreover, many Acts go into

unnecessary details. There appears to be a need to reduce the number of laws

through simplification, rationalization and codification.

2. Issues relating to appropriate government and jurisdiction: Labour is a

concurrent subject in the Constitution of India implying that both the Union and

the state governments are competent to legislate on labour matters and

administer the same. The bulk of important legislative acts have been enacted by

the Parliament. These statutes have sought to determine the respective

jurisdiction of the Central and state governments through the device of introducing

the concept of appropriate government in most statutes for various purposes.

This matter of jurisdiction has led to much confusion. What is the most

appropriate way of demarcating jurisdiction of the central and state governments

in matters of labour laws, therefore, needs to be examined.

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3. Multiplicity of authorities: Due to debates over the jurisdiction, not only most

statutes have central authorities but state authorities too. Not only various levels

of administrative or implementing authorities but also adjudicating authorities that

have been instituted under different laws differ. This proliferation of authorities

needs to be checked. The feasibility and the desirability of having a single Labour

Authority dealing with all aspects of labour at the state as well as central level

need a thorough examination. (In this regard the desirability and feasibility of

Industrial Relations Commissions as recommended by the first and the second

National Commissions of Labour may need to be examined).

4. Lack of uniformity in definitions: There is a lack of uniformity in respect of

key definitions in many of the labour laws. Many common items like workmen,

wages, employee, and industry are defined differently in different Acts pertaining

to the same sector. The Payment of Wages Act comes up against the different

definitions of wage in different labour legislation. Thus, while defining wages in

any statute, the cognate definition in another statute does not appear to have

been kept in mind. In this context, it needs to be examined as to what is the best

way of finding common definitions so that these are not subject to different

interpretations.

5. Minimum wages: There are a bewildering variety of minimum rates of wages

that have been fixed by various state governments under the Minimum Wages

Act, 1948. Moreover, while setting wage limits for the applicability of a statute, the

wage limits in other statutes do not appear to have been kept in mind. Most wage

limits are also out of tune with the industrial realities today. Following questions

need answers in this context:

What is the rationale for fixing minimum wage?

What is the rationale for industry or occupation specific minimum wages? Can the

number of minimum wages set be reduced to manageable levels?

How realistic would the concept of a basic minimum wage or a national minimum

wage be which would serve as a floor level?

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What is the methodology followed while fixing minimum wage? This needs to be

examined and recommendations made for improving upon it.

6. Inspector Raj: Streamlining of the present inspections regime is an important

issue. Satisfactory answers to the following questions will have to be found for this

issue to be resolved.

• What may be better and less vexatious alternative to the present system of

inspection? Can the inspection system be replaced by a system of self-

certification? Can self-certification be introduced for all labour laws or

whether it may be desirable to have it in case of selected labour laws only?

What are the correctives which may have to be prescribed to cope with the

problem of moral hazard which would be present under such a system?

What may be the level of authority that should certify? What may be the

frequency of inspection once this system is put in place? Whether simple

certification would suffice or certification on oath/affidavit? The experience

of some of the States which have introduced self-certification schemes or

put restrictions on inspection by the labour inspectors would have to be

critically examined in this context.

• Can a system of labour audit on the lines of conventional audit be

considered to cope with the shortcomings of the inspection system? Who

would qualify to be labour auditors? What would be the merits and

demerits of such a system? What changes would be required in the legal

framework for having a system of labour auditors?

• The feasibility of replacing the system of maintaining and submitting to

different authorities multiple registers and records by one register for each

broad area such as muster roll, accidents, wages etc. needs to be

explored. Any other feasible alternative may also be looked into.

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7. Industrial Disputes Act, 1947: Under the Industrial Disputes Act, 1947

downsizing cannot be resorted to without Government permission. The Act is

applicable to establishments employing 100 workers or more. IDA has been one

of the most controversial aspects of the on-going debate on labour law reforms

leading to sharp, polarized views among employers and labour unions. Following

aspects need clarifications for a satisfactory solution to the problem.

What is the rationale for obtaining Government permission for downsizing, the

need for which may be arising due to sharpening economic competition? Has the

prevailing legal framework really worked or has it created problems?

What suggestions can be made for reducing the difference between the positions

of the trade unions and employers? Is there any scope for reaching a common

ground between the two positions?

What has been the position of earlier Labour Commissions/ other relevant

committees in this respect? What has been the international experience in this

regard?

To what extent provision of adequate compensation and/or unemployment

allowance to retrenched employees will act as a reasonable solution? This

requires fresh thinking and an examination of feasible ideas.

The feasibility and desirability of having a system of unemployment insurance

need to be examined in this context.

8. Contract Labour (Regulation and Abolition) Act, 1970: Given the competitive

pressures, businesses are constantly striving to increase efficiency by cutting costs.

Employment of contract labour is one of the ways in which such cost cutting is being

attempted. The following questions appear relevant in this context:

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Are there ways in which the employment of contract labour can be encouraged

without making the employees feel that they are losing out in terms of important

benefits?

How can flexibility in employment be promoted best? By putting aside a few

categories of occupations in a list which is exempted from the provisions of the

Contract Labour Act or by putting a ceiling on the percentage of labour force

which could be employed as contract workers by an enterprise?

What are the merits and demerits of the two systems? Are there any alternatives

to contract labour that may provide employment flexibility without affecting labour

rights?

9. Sectoral Demands: Demands have been voiced that if economy-wide labour

reforms cannot be implemented immediately, attempts may be made for providing

flexibility in labour laws at least in certain areas, eg Textile industry, SEZs. In

case of Textile industry, it needs to be examined as to what is the best way of

meeting the requirements of such units, which are catering to the export markets.

As far as SEZs are concerned, if their promotion is to be viewed as part of a

growth strategy to increase employment, then the question arises as to what is

the best way of promoting growth – whether through giving exemption to selected

production units from applicability of labour laws or through other promotional

measures. The relative importance of the two sets of factors needs to be

examined. Other promotional measures for increasing growth and employment

generation need to be identified and recommended for adoption.

10. Labour standard and size of establishment: Whether labour standards can

be divided as core labour standards which are applicable to all enterprises and

other labour standards which may be linked to the capacity to pay of an

enterprise? Core labour standards may include standards relating to treatment of

hazardous material, prohibition of child labour etc.

11. Better enforcement of workers’ rights: How can enforcement of labour laws

be improved? How to limit the extent of judicial scrutiny so as to check the

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number of cases that end up as court cases? How can the process of in-

house/domestic disposal of dispute or grievances within an establishment be

made more fair, just and transparent? How can the process of collective

bargaining be improved and made more effective in solving disputes? How can

mediation and arbitration provisions of the labour laws be strengthened?

12. Labour laws and the Unorganised sector: At present majority of labour

laws are applicable to the organised sector and only a few to the unorganized

sector. Is there a need for review of the existing system? If yes, is there a need to

link labour laws in the unorganized sector to the enforcement of a set of core

labour standards?

Many of the issues discussed above do not admit of clear-cut answers. The need

is to examine them with an open mind, taking in view the available empirical evidence,

the ground realities, and the relative importance of the issues being examined.

For instance, there is a demand for flexibility for hire and fire by large enterprises

by relaxing Chapter VB of the Industrial Disputes Act wherein government permission is

mandatory for layoffs and retrenchment. However, the applicability of Ch.VB of the IDA

is perhaps limited to one percent of the workforce in the economy (i.e. units employing

more than 100 workers). Moreover, the Act itself allows for deemed permission under

certain circumstances if no reply is forthcoming within sixty days. Indeed, as noted by

many studies, there is hardly any problem for such units to take recourse to layoff and

retrenchment whenever they feel necessary. Permission to downsize has been fairly

easily accorded to existing enterprises in the past few years. In fact, this points to the

need for an income security for workers while they are out of work. Therefore loss of job

needs to be considered in relation to the existence of an income security net.

Another major demand of the employers has been relaxation of Contract Labour

(Abolition and Regulation) Act to allow for employment of as much contract labour as

they want. Again, the fact is that outsourcing has been growing rapidly. Many states are

witnessing increasing share of contract labour in organised manufacturing. Moreover,

such type of work is associated with low protection including job and social security. The

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argument that such labour reforms will increase employment requires credible

evidence. In fact, overall development of infrastructure and access to such critical inputs

as power, water, and credit have had a far more impact on the spread of industries,

especially the small enterprises and hence on employment.

Doing away or relaxing the ‘inspector raj’ especially multiple inspections is

another major demand of the employers. Relaxing multiple inspections would perhaps

add to the smooth functioning of small and medium enterprises and encouraging new

ones. There is scope for simplification of labour and other laws as well as easy

enforcement reducing the scope for rent-seeking and harassment. However, many

state governments have either greatly diluted the rigour of inspections or completely

done away with it, under one pretext or another. Again, there is no evidence that such

relaxations have led to increased employment, let alone decent work.

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Appendix I

MAIN CONCLUSIONS AND RECOMMENDATIONS OF THE COMMITTEE SET UP UNDER THE CHAIRMANSHIP OF SHRI ANWRAL HOODA, MEMBER, PLANNING COMMISSION TO STUDY ON `STRENGTHENING THE REQUIREMENT OF INSPECTION OF INDUSTRIAL UNITS UNDER DIFFERENT ACTS’, PLANNING COMMISSION, IN DECEMBER, 2005. Overall Assessment 1. The real reason for all inspections being viewed with terror by many employers is the fact that many of them are not in compliance. This is confirmed by the experience in schemes of self-certification, which have elicited very lukewarm response in States like UP, Punjab and Gujarat. Few employers are willing to certify that they are meeting with the legal requirements in respect of labour conditions and health and safety requirements under all legislations and Regulations. The Committee feels that the main reason for widespread non-compliance with labour laws is the situation of over-supply of labour, which gives employers the opportunity to recruit staff without complying with even the basic labour laws, such as the Minimum Wages Act. Special Dispensation for Small Enterprises 2 The Second National Commission on Labour had expressed considerable sympathy for the plight of the unorganised sector and was of the view that the units in this sector should be covered by a set of self-contained, simple legal provisions, which are easily understood by managements and are easy to implement. The study group set up by the Commission recommended that only establishments with 50 or more persons (not merely workers) must be governed by the general law and the smaller establishments should have a self-contained set of provisions applicable to them. The Commission, however, felt, that the limit of 19 workers should be accepted as the socially defensible mean. 3. Since the Second National Commission on Labour has made a reasoned recommendation in this regard, the Committee feels that it is not necessary to rethink on the matter. Against the background of the amendments proposed in the law for reducing the number of returns to be filed and registers to be maintained, and the new SME Bill, introduced in the Parliament, Ministry of Labour had taken the view that a separate Act for enterprises employing up to 19 persons may not be necessary. The Committee feels that, as the proposed SME Bill covers only 7 legislations for the purpose of simplified procedures for inspections whereas a large number of laws and regulations apply to even smaller enterprises, implementation of the recommendation of the Second Labour Commission would alleviate the burden on inspections on the enterprises with less than 19 workers.

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Third Party Inspection a. As a general rule, the units that have obtained ISO 14001 certification should be

exempted from routine inspections under environmental laws as for the duration for which the certification is valid.

b. For the 17 industries with high pollution potential as identified by the Ministry of

Environment and Forests the exemption would be granted only after the unit has been found in compliance in two successive inspections undertaken jointly by the Central Pollution Control Board (CPCB), State Pollution Control Board (SPCB) and the Regional Office of the MOEF. The Committee feels that the certification under ISO 14001 together with the additional requirement of verification by Government agencies of adherence to environmental laws during two successive inspections constitute adequate safeguards and would justify the recommended exemption from routine inspections.

c. ISO 14001 certification has legitimacy in India, as it is a standard developed by an

international organisation and the certifying agencies are accredited by the Quality Council of India. There should, therefore, be no problem for ISO 14001 certified organisations to be granted relaxation from regulatory inspections for environment laws as stated above.

d. For the same benefit to be given in respect of occupational health and safety and

labour laws, it would be necessary to develop national standards and put in place accreditation procedures by way of formulation of new guidelines in consultation with Quality Council of India for certifying agencies. BIS has already developed national standards corresponding to OHSAS 18001. The Committee recommends that the BIS also develop national standards corresponding to SA 8000, and in respect of both these standards the Quality Council of India must eventually have an accreditation system.

e. While there would be exemption from routine inspections no immunity from

inspection by Government agencies would be conferred. In other words, on credible complaints being received the Head of the Department concerned should be able to authorise special inspections.

f. For enterprises not desirous of going in for full-fledged international standard

certification a second-tier certification system should be put in place whereby the same QCI accredited certifying agencies that certify compliance with ISO 14001 and the new national standards corresponding to OHSAS 18001 and SA 8000 could be given the authority to certify compliance only of the laws and regulations related to the environment, labour and occupational health and safety as well as basic labour laws. They would, however, have to be paid their fee for the inspection. Once the certificate of compliance has been received the enterprise concerned would transmit it to the authorities concerned and would be exempt from regulatory inspections.

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g. The Committee has ascertained by means of informal consultations with representatives of certifying agencies concerned that (i) they would cope with the additional workload by appointing additional auditors and (ii) their charges would be affordable by Small and Medium enterprises.

h. The above certification would cover not only the environment and occupational and

health and safety laws but also all labour laws in respect of which enterprises are subject to inspection.

i For the success of third party inspections, as recommended above, it is

necessary to develop the infrastructure for third party inspection system and strengthen the existing accreditation system like QCI by way of capacity building, laying down of standards and developing inspection manuals.

j Another system of third party inspection in respect of non health and safety labour

laws could also be considered in parallel. Chartered Accountants could be entrusted with the responsibility for third party inspection as compliance with the relevant labour laws basically involves only payments and for this it would be adequate to check the books of account. For companies which are required by statute to get their accounts audited ever year, it can be easily verified at the time of annual audit whether the enterprise is making the payments in accordance with these laws. Thus the auditors can also give a certificate that the enterprise is complying with the provisions of these laws. Enterprises that do not have the responsibility for statutory audit could also get the necessary certification from firms of chartered accountants.

k Once the annual certificate has been obtained and furnished to the authorities,

there should be exemption from inspection by government inspectors, except on complaint and after authorisation by the Head of the Department concerned or by another officer designated for the purpose.

l Since the firms of chartered accountants are already under the disciplines of their

professional body established under the Charted Accountants Act that provide for penal action in case of errant behaviour, it would not be necessary to set up a separate accreditation system for the purpose.

5 The Committee believes that the establishment of the system of third party

inspection as an alternative to inspection by Government agencies would result in the following benefits:

a The enterprises that are complying with the various laws will have the

alternative of taking recourse to third party inspection and avoiding regular inspection by Government inspectors.

b Government agencies can be assured of better compliance through third party

inspections. Among other things lack of adequate strength of inspecting staff is a big impediment in the way of effective enforcement of labour, environment and occupational health and safety laws in the country.

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c Buyers in the developed countries are increasingly insisting on suppliers in India (and other developing countries) complying with the international norms on environment, occupational health and safety as well as labour laws. Setting up of the systems for third party inspections, as outlined above, would induce enterprises in India to gradually move up to full compliance with the international norms.

d Considerable broadening of the scope of activities of the certifying agencies

accredited to the Quality Council of India would create a large number of quality jobs.

Improvements in the current systems of inspections 6. The Committee believes that the enactment of the current Bill for the amendment of the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988, would be relief to the enterprises, which would be required to maintain only two registers instead of the present 53 and which would have to submit only one return instead of the present 11. Since inspections also involve scrutiny of registers and returns the simplification would result in reducing the rigour of inspections. The changed proposed in the law would bring additional benefits to enterprises by making it possible to maintain electronic registers and to submit returns in electronic form. 7. After reviewing the reforms introduced by several States to limit the scope for harassment by inspecting agencies the Committee would recommend that the following practices be considered for adoption by the authorities in Central and State Governments:

a Inspections under applicable Acts, Rules and Orders by different authorities must be conducted jointly, once a year, by the offices of the Labour Commissioner, Chief Inspector of Factories and the State Pollution Control Board

b Jurisdiction should be allocated among inspecting officers, so that each of them has clearly defined responsibilities for enforcement

c An annual schedule of inspections for specific areas in the State should be prepared in advance, so that the industrial and other units are aware of the date of inspections.

d Inspections outside the normal yearly schedule of inspections should be permitted only on a written, signed and verifiable complaint, after obtaining the authorisation of the Head of the Department concerned. A copy of the written complaint should be given to the management at the time of inspection.

e Prosecution should be initiated or penalties imposed only with the sanction of the Head of the Department after giving to the enterprise a reasonable opportunity to redress the default.

f Each State should compile and publish a compendium of all laws for the compliance of which the enterprises are liable to be inspected.

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g Schemes for self-certification should be introduced whereby the enterprises that furnish such certificates would be liable for inspection only once in five years. Based on the assessment of the existing schemes, the following features are proposed to for incorporation in the scheme:

i) Industry organisations would need to have a greater advocacy role towards

self-certification, by way of greater interactions among Government, industry associations and industries.

ii) A detailed form for self certification should be developed which provides for

specific aspects of compliance under various legislations and regulations, instead of expecting the enterprises to submit a blanket certificate under all provisions. This would allow the enterprises to file compliance in respect of regulations which are being fully met and to that extent the need of inspections would no longer exist.

iii) Instead of the occupier, an authorised signatory could be allowed to certify compliance with the various legislations and regulations on behalf of the Organisation. This person would need to duly authorised by the Units in accordance with applicable Rules and regulations, viz., in case of companies incorporated under the Company Act, authorisation by the Board of Directors of Company.

h Greater emphasis should be given on quality of inspections. For this purpose

there would need for training and capacity building of inspecting officials and greater use of IT in Department dealing with inspections. There is also a need of joint workshops of industry and inspecting officials for a better understanding of the practices and documentation requirement during inspections.

Other Recommendations 8. The inspection systems under consumer protection laws should undergo broadly similar reforms. The main elements of proposed reform are: inspections should be limited to once a year, except on complaint in which case authorisation of the Head of the Department concerned must be obtained; prosecution should not be initiated without sanction of the Head of the Department; and there should be arrangement for third party inspection by accredited inspecting organisations.

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Appendix II

Letter from Ministry of Labour and Employment dated 14th Feb. 2006, to NCEUS

(a) Present status of amendment in the Industrial Disputes Act, 1947

The Industrial Disputes Act, 1947 provides the machinery and procedure

for investigation and settlement of industrial disputes. The Act also seeks to regulate illegal strikes, lockouts and provides protection to the workmen in case of lay-off, retrenchment and closure of establishments.

2. In the context of the ongoing economic reforms and particularly in the wake of liberalisation of industrial and trade Policies, there has been a demand for amending the Industrial Relations Law so as to re-orient it towards securing greater industrial harmony, enhancing production and productivity, creating an environment to stimulate growth, attracting both domestic and foreign investments while at the same time ensuring the dignity of the labour and a decent workplace. To achieve these objectives, a major shift in the approach to industrial relations is required so that the traditional, confrontationist and adversarial role between capital and labour is replaced by a complementary, collaborative and a much more congenial relationship between the two social partners. 3. The proposals for amendment in the Industrial Disputes Act, 1947 have been under consideration of the Government since long. A Group of Ministers under the Chairmanship of Deputy Chairman, Planning Commission, considered the proposals in detail in its meetings held on 11.04.2000, 12.05.2000 and 22.05.2000. In the meantime, Hon’ble Finance Minister made announcements in his Budget speech in February, 2001 regarding certain changes in the Industrial Disputes Act and stated that a Bill in this regard will be introduced in Parliament soon. The amendment proposals were again discussed by the newly constituted GOM in its meetings held on 11.10.2001, 06.11.2001 and 03.12.2001. The amendments to Industrial Disputes Act apart from giving effect to the announcements made by Hon’ble Finance Minister in his Budget Speech in February, 2001, were expected to promote bipartism, strengthen internal grievances redressal machinery and make conciliation and adjudication more effective. The amendment proposals were approved by the Cabinet in its meeting on 22.02.2002 with the direction that the draft Bill may be finalised by the Ministry of Law, Justice & Company Affairs in order to accurately reflect the approved proposals. In the mean time, the report of the National Commission on Labour was also been received.

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4. It was further resolved that the process of building a consensus to facilitate the introduction and passage of the Bill in the Parliament will be simultaneously initiated.. In the meantime, the 2nd National Commission on Labour submitted its report. The recommendations of the Commission were discussed in the 38th Session of Indian Labour Conference held on 28-29 September, 2002 and in a Tripartite meeting held on 18-19 February, 2003 at V.V.Giri National Labour Institute, NOIDA. The then Union Labour Minister has been undertaking wide consultations with all concerned to build-up a consensus. Subsequently. General elections 2004 were announced and the consultationprocess could not be completed. 5. The common minimum programme stipulates that the UPA rejects the idea of automatic hire and fire. It recognizes that some changes in Labour laws may be required, but such changes must fully protect the interests of workers and families and must take place after full consultation with the trade unions. The UPA will pursue a dialogue with industry and trade unions on this issue before coming with specific proposals. However, Labour Laws other than the Industrial Disputes Act that create an Inspector Raj will be reexamined and procedures harmonized and streamlined. 6. Notwithstanding above, and the difficulties in arriving at a consensus so far due to divergent views of social partners, on the contentious issue, it is proposed to carry out amendments to the Industrial Disputes Act particularly to Chapter V B and to some other Sections in order to provide some flexibility in the overall interest of the industry as well as workers.

(i) At present, industrial establishments employing not less than 100 workmen have to seek prior permission of the appropriate government under Chapter V B of the I.D. Act, 1947 to affect lay off, retrenchment and closure. The workmen ceiling would be enhanced from 100 to 300 workmen.

(ii) Under Section 25 F for retrenchment compensation of 15 days average pay for every completed year of service or any part thereof in excess of 6 months is admissible to workmen. Retrenchment compensation could be enhanced from 15 days to 45 days average pay for every completed year of service.

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(iii) The others amendments which could be considered are: direct reference of disputes connected with termination/ dismissal/ retrenchment/discharge of workman to Industrial Tribunals; notice of change of service conditions (Section 9-A); validity of Notification declaring any industry as public utility services from six months to three years; power to exempt (Section 36-B); Power to enforce Decree by Industrial Tribunals; relaxation of qualification and terms conditions of service of Presiding Officers of CGIT and provision of participation of workers in the management etc. 8. Amendment proposals regarding “Special provisions relating to Lay-off, Retrenchment and Closure under Chapter V B” of the Industrial Disputes Act, 1947 were discussed in the 40th Session of the Indian Labour Conference held on 9-10 December, 2005. But no consensus was arrived at to enhance the workmen ceiling from 100 to 300 workmen by amending Section 25 K of the Industrial Disputes Act, 1947.

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(b) Present status of Amendments in the Contract Labour (Regulation and Abolition) Act, 1970

At present contract labour in India is regulated by the Contract Labour (Regulation & Abolition) Act, 1970. This Act was enacted with the objective of regulating the employment of contract labour in certain establishments and to provide for its abolition in certain circumstances.

2. The Act applies to every establishment in which 20 or more workmen are/were employed on any day of the preceding 12 months as contract labour. It also extends to every contractor who employs or who has employed on any day of the preceding 12 months, 20 or more workmen. The other salient features of the Act include provision for setting up Central/State Advisory Boards under Section 3 and 4, the registration of establishments of principal employers under Section 7 and licensing of contractors under Section 12. There are also provisions for appeal under Section 15 and for welfare and health under Sections 16 to 19. The penal provisions are contained under Section 22 to 27. The power to exempt in an emergency is contained in Section 31 while Section 35 empowers the appropriate Government to make rules to carry out the purposes of the Act.

3. The most contentious provision in the Act is contained under Section 10, which provides for prohibition of contract labour under specific circumstances. Accordingly, the Central Government after following the due process has issued 68 notifications prohibiting the engagement of contract labour in various establishments. From time to time, workers and their representatives have agitated for extending prohibition to other categories in other establishments as well, whereas there has been increasing resistance from the employers on the matter. The situation became critical in view of the Supreme Court s judgment of December, 1996, in the case of Air India Statutory Corporation Vs United Labour Union and others (AIR 1997 Supreme Court 645) where the Apex Court ruled, inter alia, that Central Government would be the Appropriate Government in all undertakings in which it has a deep and pervasive interest and in cases where contract labour has been prohibited, contract labour would automatically become the employees of the principal employers.

4. The impact of the above judgment led to a series of representations from Administrative Ministries and Central Public Sector Undertakings highlighting the difficulties faced by them and requesting Govt. to amend the Act in order to enable them, in view of financial and administrative difficulties, to continue with the practice of engagement of contract labour. On the other hand, workers

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representatives agitated for their absorption in the organizations of the principal employers as a result of this ruling of the Apex Court. Though, a five-Judge Constitution Bench of the Supreme Court in the matter of SAIL Vs National Union of Waterfront Workers have quashed the Air India Judgment prospectively diluting its impact, the situation has not undergone much change. The workers have continued to demand for abolition of contract labour in the hope that it may force the employers to absorb them on a regular basis, as they are entitled to get preference if the employer intends to take regular workmen in the prohibited job.

5. The detailed views of the Employers’ Organizations and that of the Trade Unions are as below: -

• Since 1970 when the Contract Labour (Regulation and Abolition) Act was enacted the economy has undergone a sea change, from an era of protectionism to liberalisation, from restricted domestic competition to international competitiveness.

• The system of contract labour offers tremendous opportunities for

employment and allows the employers flexibility to choose what is best for them. This helps improve productivity and service competitiveness.

• The Act should be made applicable only to the main and core

activities of the establishment in so far as abolition of contract labour system is concerned

• Supportive or allied activities of an establishment like maintenance, house keeping should be out- sourced and the Act should only provide for regulating the working conditions and wages.

• The Principal Employer should, however, have to ensure payment of

wages to contract labour as laid down under the law in force as also other basic amenities and social security benefits.

• Work requiring specialised skills is unavailable within the

establishment.

• If the contract labour system, which is cost effective, is not allowed to continue, industries may go in for technological restructuring with less number of workers leading to reduction in employment.

Views of The Trade Unions

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• The Trade Unions are totally opposed to the idea of contracting of services and in jobs which are perennial in nature for the following reasons: -

• Reduction of regular employment. • The contract labour generally belongs to weaker sections

of the society and will be deprived of the benefits that accrue to regular employees.

• Efficiency will decrease, as establishment will be deprived of experienced staff.

• Coordination of activities of large number of contractors/sub-contractors will prove to be more time consuming and costly than in house activity.

• What is required is not privatisation but in house improvements and restructuring.

• Out sourcing will only lead to a type of employment founded on discrimination and exploitation of contract labour in regard to wages paid, working conditions, etc.

• Their further demand is that the Act should be amended to provide for automatic absorption of contract labour in the event of prohibition of employment of contract labour in an activity in an establishment.

6. As a follow up of the recommendations made by the Conference of Chief Secretaries held in November 1996 and that of the 5th Central Pay Commission on outsourcing of jobs/services, to review the existing Contract Labour (Regulation & Abolition) Act, 1970, a Core Group of Secretaries headed by Secretary (Personnel) was constituted to come up with recommendations for consideration of the Government. The main thrust of the initiative was on making public services more responsive to the needs of the people without infringing on workers’ rights.

7. The Core Group held meetings with representatives of Employers’ Organizations, Administrative Ministries and also with the Chairman, Central Advisory Contract Labour Board. After taking into consideration all aspects, the Core Group recommended among other things that the existing Contract Labour (Regulation & Abolition) Act, 1970 can be suitably amended so as to facilitate outsourcing of peripheral/supportative services or a separate legislation for contracting out service by Government Departments, PSUs and Central Undertakings can be worked out. 8. The recommendations of the Core Group was considered by a Group of Officers set up in the Ministry of Labour on the directions received from the Cabinet Secretariat on the subject. The Group after taking into consideration the

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views of the administrative Ministries and other sources felt that a new law on contract labour would respond to the needs of the time and provide for a flexible and dynamic system of regulating manpower deployment. 9. Two alternatives were placed before the Committee of Secretaries in its meeting held on 2.11.98. The first was to amend the Act suitably to provide for prohibition of employment of contract labour only in the case of main and core activities and to facilitate outsourcing of peripheral/supportive activities. The second alternative was to enact a new legislation to do away with the provision relating to prohibition of employment of contract labour, that is, to allow outsourcing of activities without any restrictions. The Committee of Secretaries decided that a new legislation for contract labour should be enacted to facilitate outsourcing of activities to specialized firms having the professional experience and expertise in the relevant area but at the same time it must provide for a safety net for labour engaged in such outsourced activities. Accordingly, a Bill was drafted in consultation with the Ministry of Law Justice and Company Affairs (Legislative Department) which was approved by the Committee of Secretaries in its meetings held on 16.12.99 and 21.1.2000. The draft Bill along with a Note for Cabinet was taken to the Cabinet Secretariat in February 2000 and in March 2000, a Group of Ministers was constituted to examine the proposal. 10. While the matter was under consideration of the GOM, the 2nd National Commission on Labour submitted its report and they have recommended that contract labour should not be engaged for core production and service activities. In today’s competitive environment, the Commission has also recommended that for sporadic seasonal demands, the employer may engage temporary labour for core production and service activities. The Commission has further recommended that perennial non-core services like canteen, watch and ward, cleaning etc. may be off loaded to other employing agencies where such activities are \ being performed by employees on the pay roll of the enterprise, but the same should not be transferred to other agencies without consulting the bargaining agents. It has also recommended that the contract labour should be remunerated at the rate of a regular worker engaged in the same organization doing work of a comparable nature or at the lowest salary of a worker in a comparable grade. Further the principal employer will ensure that social security and other benefits are extended to contract labour.

11. The Government of Andhra Pradesh have amended the Contract Labour (Regulation & Abolition) Act, 1970 with the consent of the Ministry of Labour. The thrust of the amendment is the distinction drawn between core and non-core activities of an establishment. While it empowers the appropriate Government to prohibit employment of contract labour in the core activities of an establishment, it excludes certain services such as watch and ward, sanitation and other cleaning works etc. from the core activities of an establishment and allows engagement of contract labour in these non-core activities. Further the amendment seeks to empower the State Government to grant exemption from any provision of the Act to certain categories of

22

establishment or classes of contractors not only in emergency but also under certain circumstances subject to certain conditions and restrictions.

12. The Special Subject Group constituted by the then Prime Minister’s Council on Trade and Industry recommended as below: -

“Regulate contract labour in various industries to non-core activities of a company and not abolish it. This should be made explicit in the Contract Labour (Regulation & Abolition) Act, 1970 by amending the relevant portions of the Act. This clause should clearly define that contract labour could not be utilized in the concerned company’s continuing manufacturing process and should be relegated only to company’s non-core needs”.

13. In the Inter-State Council meeting held on 27th-28th August 2003 also a broad consensus had emerged that amendments to the Contract Labour Act should be made to enable use of contract appointments and outsourcing so that the Government is able to take steps to put in place cost effective and efficient staff size and management policies and evolving reasonable social standards to safeguard the interests of contract labour under various categories. This would help in consolidating the ongoing economic liberalisation process.

14. The GOM on Labour Reforms held series of meetings in the years 2000, 2001 and 2003. After in-depth deliberations on the issues involved it was agreed that the following features be incorporated by way of amendments to the existing Contract Labour Act and where necessary by changing the rules: -

(i) Application of the Act to the nature of establishment (ii) Responsibility of principal employers. (iii) Exemption to certain activities from the application of the Section 10

of the existing Act. (iv) Licensing/Registration of contractors/establishments. (v) Level of wages payable to contract labour and level of compensation

to be offered to contract labour upon termination of contract labour. A draft of a Bill to amend the existing Contract Labour (R&A) Act, 1970 was

prepared in consultation with the Ministry of Law, Justice and Company Affairs (Legislative Department) in the light of the deliberations held in its various meetings. 15. The emerging trends of market economy in the context of increasing domestic and international competition and globalization induces employers to take recourse to contract labour in order to optimize the workforce and reduce administrative costs for achieving higher productivity. The existing law is too restrictive in nature. The present economic scenario, therefore, calls for a flexible and balanced approach to prevent exploitation of contract labour on the one hand and on the other to provide for higher growth and productivity and delivery of quality and efficient services to the public. The ideal solution in the

23

present regime would be to allow outsourcing without any restrictions. However, in view of the demands of the trade union and that of the employers, the feasible solution would be to allow employment of contract labour in activities like cleaning, sweeping, gardening, security services etc. Accordingly, the GOM identified ten such activities which are mainly of ancillary, supportive/peripheral in nature and which may be kept outside the purview of prohibition of employment contract labour under Section 10 of the Act. 16. The draft Bill namely the Contract Labour (Regulation & Abolition) Amendment Bill, 2004 is at Appendix-A. The salient features of the proposed amendments are as given below: -

I. Amendment of the definition of ‘appropriate Government’ to include establishments of Central Government and the definition of ‘workman’ to cover workers drawing less than six thousand five hundred rupees instead of five hundred rupees.

II. Deletion of provisions relating to registration of establishments.

III. Insertion of a sub-section in the provision relating to prohibition of

employment of contract labour indicating the ten identified jobs/activities like sweeping and cleaning, loading and unloading, security services etc. in respect of which employment of contract labour shall not be prohibited.

IV. Substitution of Chapter-IV to provide for registration of contractors

instead of grant of licenses.

V. Insertion of a new section to provide for twice the ordinary rate of wages for overtime work. Incorporation of wages payable to the contract labour by amending the rules.

VI. Insertion of a new section to provide for payment of compensation

equivalent to fifteen days wages for every completed year of service to contract labour upon termination of a contract.

VII. Enhancement of penalties to act as a deterrent and appointment of

a designated authority for the purpose of inspection, and inquiry into complaints alleging violation the provisions of the Act.

VIII. Grant of exemption to establishment or contractors from the

applicability of the Act in ‘public interest’ instead of ‘emergency’ 17. The draft bill could not be finalized by the Group of Ministers constituted by the NDA Government. After the UPA Government was formed, a decision was taken not to pursue with these proposals. Any proposal to amend Section 10 of

24

the Contract Labour (Regulation and Abolition) Act, 1970 has to be reviewed now in the light of National Common Minimum Programme (NCMP), that is, in consultation with social partners.

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25

Draft Bill The Contract Labour (Regulation & Abolition) Amendment Bill 2004

A

BILL

Further to amend the Contract Labour (Regulation & Abolition) Act, 1970. Be it enacted by Parliament in the Fifty-fifth year of the Republic of India as follows: -

1. (1) This Act may called the Contract Labour (Regulation & Abolition) amendment Act, 2004. (2) It shall come into force on such date as the Central Government may by notification in the Official Gazette, appoint and different dates may appointed for different provisions of this Act.

Short title and commencement.

37of 1970. 22 of 1992

2. In section 2 of the Contract Labour (Regulation & Abolition) Act, 1970 (hereinafter referred to as the principal Act), in sub-section (I),

(A) in clause(a), in sub-clause(i), for the words “in relation to”, the words “in relation to an establishment of the Central Government or” shall be substituted;

(B) in clause (b), the words “with or without the knowledge of the principal employer” shall be omitted;

(C) in clause (i) in sub-section (B), for the words “five hundred rupees”, the words “six thousand and five hundred rupees” shall be substituted.

(D) after clause (g), the following clause shall be inserted, namely:-

Amendment of section 2.

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“(ga) “Special Economic Zone” means a port or area notified as such under section 5 of the Foreign Trade (Development and Regulation) Act, 1992.”.

Omission of sections 6 to 9

4. Sections 6 to 9 of the principal Act shall be omitted.

Amendment of section 10.

5. (1) In section 10 of the principal Act;-

(a) in sub-section (1), for the words “Notwithstanding anything contained in this Act”, the words “Subject to the provisions of sub-section(3)” shall be substituted;

(b) after sub-section (2), the following sub-section shall be inserted, namely:-

“(3) Notwithstanding anything contained in sub-section (1) no notification shall be issued by the appropriate Government, with respect to the following operations or processes, namely:-

(a) sweeping, cleaning, dusting and gardening,

(b) collection and disposal of garbage and waste;

(c) security, watch and ward; (d) maintenance and repair of

plant, machinery and equipments;

(e) house keeping, laundry, canteen and courier;

(f) loading and unloading; (g) information technology; (h) support services in respect of

an establishment relating to hospital, educational and training institution, guest house, club and transport;

(i) export oriented Units

27

established in Special Economic Zones and Units exporting more than seventy five percent or more of their production; and

(j) construction and ;maintenance of buildings, roads and bridges.

6. For Chapter IV of the principal Act, the following Chapter shall be substituted, namely: -

“CHAPTER IV” Registration of Contractors Employing Contract Labour” 11. The appropriate Government may, by an order notified in the Official Gazette-

(a) appoint such persons, being Gazetted Officers of that Government and not below the rank of an Assistant Labour Commissioner, as it thinks fit, as the registering officers for the purposes of this Chapter; and

(b) define the limits, within which a registering officer shall exercise the powers conferred on him by or under this Act.

12. (1) Every contractor to whom the Act applies, shall, before undertaking or executing any work through contract labour, make an application for registration to the registering officer in such form and manner as may be prescribed. (2) If the application for registration

Substitution of a new Chapter for Chapter IV. Appointment of registering officer. Registration of contractor.

28

made under sub-section (1), is complete in all respect, the registering officer shall, within a period of thirty days, from the date of receipt of such application, enter the name of the contractor in a register to be maintained for this purpose in such form and manner as may be prescribed and issue to the contractor a certificate of registration for such period and on payment of such fees as may be prescribed.

13. If the registering officer is satisfied, either on a reference made to him in this behalf or otherwise, that- (a) the registration certificate

issued under sub-section (2) of section 12 has been obtained by misrepresentation or suppression of any material fact; or

(b) the contractor has, without reasonable cause failed to comply with the conditions subject to which the registration certificate has been issued or has contravened any of the provisions of this Act or the rules made thereunder, then without prejudice to any other penalty to which the contractor may be liable under this Act, the registering officer may, after affording an opportunity of being heard, by an order, amend, revoke or suspend the registration certificate.

Revocation, suspension or amendment of registration certificate.

Appeal. 14. (1) Any contractor aggrieved by an order issued under section 13 may, within thirty days from the date on which such order is communicated to him, prefer an appeal, to an appellate officer who shall be a person appointed

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in this behalf by the appropriate Government, in such manner as may be prescribed:

Provided that the appellate officer may entertain an appeal after the expiry of the said period of thirty days, if he is satisfied that the appellant was prevented by sufficient cause from filing the appeal in time. (2) On receipt of an appeal under sub-section (1), the appellate officer shall, after giving the appellant an opportunity of being heard, dispose of the appeal as expeditiously as possible”.

Appointment of appellate officer

15. The appropriate Government may, by an order notified in the Official Gazette: -

(a) appoint such person, being Gazetted Officer of that Government and not below the rank of Regional Labour Commissioner, as the appellate officer for the purposes of this Act; and

(b) define the limits, within which an appellate officer shall exercise the powers conferred on him by or under this Act.”.

Insertion of new sections 21A and 21B. Wages for overtime work.

7. After section 21 of the principal Act, the following sections shall be inserted, namely: - “ 21A. Where any contract labour is required to work on any day in excess of the number of hours constituting a normal working day, he shall be

30

entitled to wages at the rate of twice his ordinary rate of wages. Explantion: For the purposes of this section, “ordinary rates of wages” mean the basic wages plus such allowances as the worker is for the time being entitled to but does not include any bonus.”

Retrenchment compensation.

21B. (1) The contractor shall, at the time of retrenchment of the contract labour pay such compensation, which shall be equivalent to fifteen days wages calculated or based on the last drawn wages as retrenchment compensation for every year of service or any part thereof rendered in excess of six months to the contract labour. (2). Where under sub-section (1) any money, on account of non-payment of retrenchment compensation, is due to a contract labour, it shall be recovered from the contractor in the same manner as may be prescribed.”

8. In section 22 of the principal Act, -

(a) for the word “inspector”

where ever it occurs, the word “Inquiry Officer” shall be substituted;

(b) for the words “imprisonment for a term which may extend to three months, or with fine which may extend to five hundred rupees, or with both” at both the places, the words “fine which may extend to rupees one thousand” shall be substituted.

Amendment of section 22.

9. For section 23 of the principal Act, the following section shall be

Substitution of new section for

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substituted, namely: - “23. Whoever contravenes any provision of this Act or of any rules made thereunder, or contravenes any condition of a registration certificate granted under this Act, shall be punishable with fine which may extend to rupees ten thousand, and in the case of a continuing contravention, with an additional fine which may extend to rupees one thousand for every day during which contravention continues after conviction for the first such contravention or with imprisonment for a term which may extend to six months.”.

section 23 Contravention of provisions regarding employment of contract labour.

10. In section 24 of the principal Act, for the words “imprisonment for a term which may extend to three months, or with fine which may extend to one thousand rupees, or with both”, the words “fine which may extend to ten thousand rupees” shall be substituted.

Amendment of section 24.

11. For section 28 of the principal Act, the following section shall be substituted, namely: -

Substitution of a new section for section 28.

Appointment of Inquiry Officer

“28. The appropriate Government may, by notification in the Official Gazette appoint such person, being Gazetted Officer of that Government and not below the rank of an Assistant Labour Commissioner, as it thinks fit, as the Inquiry Officer who after satisfying himself shall register and inquire into the complaints relating to contraventions of the provisions of this Act and the rules made thereunder”

Amendment of section 31.

12. In section 31 of the principal Act, for the words “in the case of an emergency”, the words “in public

32

interest” shall be substituted. Amendment of section 35.

13. In section 35 of the principal Act, in sub-section (2), - (i) for clause (c) the following clause shall be substituted, namely:- “(c) the form and manner in which contractors may be registered under section 12, the levy of fee and the form of certificate of registration;” (ii) clauses (d) to (g) shall be omitted; (iii) for clause (h), the following clause shall be substituted, namely:- “(h) the form and manner in which appeals may be filed under section 14 and the procedure to be followed by the appellate officer in disposing of the appeals;”, (iv) after clause (1), the following clause shall be inserted, namely:- “(1a) the period within which and the manner in which the retrenchment compensation, due to contract labour, shall be recovered from a contractor under sub-section (2) of section 21B.

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c) NOTE ON “MAKING LABOUR MARKETS FLEXIBLE: SUGGESTIONS FOR CONSIDERATION”

• The enclosed Note has been drawn up by the Union Labour & Employment

Secretary, in consultation with his officers, at the National Labour Institute on the 16th September, 2005. This is the outcome of innumerable earlier discussions on the subject of Labour Reforms, and also keeping in mind what was discussed with the employers’ and employees’ representatives at formal sittings on 29th and 31st March, 2005 respectively.

• Our focus is not only on existing jobs but, as importantly, on job creation.

• Looking for a job has now become a full-time job.

• Recruitment has become the key to survival.

• A Standing Committee of Chief Ministers has recently met in New Delhi to discuss ways and means of tackling the spreading Naxalism.

• More than a half of India (54% to be precise) is under the age of 25; more than a third, under 15.

• Within the next decade, half of India’s unemployed will be its educated youth.

• If one half of India’s population is under 25, and if the current available jobs are held by those over 25, India simply needs to double its employment.

• The BPO/IT industry generate a mere 0.2% of employment. • Employment growth and opportunity will, therefore, come only as the Indian

economy expands.

• This means that India ought to remove the difficulties that have held back the manufacturing and service industries.

• Why are labour reforms so difficult in India? Because, labour reforms mean

different things to different people.

• Industry wants hire and fire, though they may not couch it in so many words.

• Trade Unions want the status quo to be adhered to. Where is the question

of any reform, they ask, in a country where payment of minimum wages cannot be ensured, and where child/bonded labour cannot be eliminated?

• Industry points out that trade unions represent only 7% of the workforce;

trade unions counter that industry represents only itself.

• Basically, both are protecting their respective turfs.

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• Sadly, nobody is talking to the youth of the country, the unemployed graduates, the school drop-outs, whose future is at stake.

• Of course, everybody should get a permanent job, but where are these

jobs?

• The Government is downsizing.

• And industry, in its quest for a slice of the globalizing pie, is obsessed with cutting costs. The garment industry, for instance, wanting to make out on the quota free regime, wants only seasonal workers.

• The Ministry of Textiles is hoping to create millions of seasonal jobs, if

allowed to do so.

• The Ministry of Small Scale Industries wants Inspector Raj to be replaced by self-certification. More on that later.

• The question, therefore, is, what can our wish list be on Labour Reforms,

given the NCMP, and given the fact that except for two Central Acts, viz. the ESIC and EPF, all other labour laws are implemented largely by the States.

• Our enclosed Note, therefore, deals with specific suggestions to link

existing labour laws with the changing ground realities, with a view to increasing job opportunities and economic growth.

• We present these proposals with utmost respect for our stakeholders, in the

hope that these will encourage debate and carry conviction in the larger interest of our country, esp. our youth.

• For we do feel, as Indians, that in the world now around us, it may be sheer

folly to try and live in splendid isolation.

(a) Amendments proposed in the Contract Labour (Regulation and Abolition) Act, 1970 :

Despite the existence of the Contract Labour (Regulation and Abolition) Act, 1970, the emerging reality in the world of work is increasing use of Contract Labour. It is important that this reality is recognized and appropriate formalization of this ground reality be made in the existing legal framework. These may be as follows,

• Certain activities may be excluded from the application of the provisions of Section 10 of Chapter 3 of the Contract Labour (Regulation and Abolition) Act, 1970.

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Section 10, presently, reads as follows:

Prohibition of employment of contract labour-

(1) Notwithstanding anything contained in Act, the appropriate Government may, after consultation with the Central Board or, as the case may be, a State Board, prohibit by notification in the Official Gazette, employment of contract labour in any process, operation or other work in any establishment.

(2) Before issuing any notification under sub section (1) in relation to

an establishment, the appropriate government shall have regard to the conditions of work and benefits provided for the contract labour in that establishment and other relevant factors, such as-

(a) whether the process, operation or other work is incidental to, or

necessary for the industry , trade, business, manufacture or occupation that is carried on the establishment;

(b) whether it is perennial nature, that is to say, it is so of sufficient

duration having regard to the nature of industry, trade business, manufacture or occupation carried on in that establishment;

(c) whether it is done ordinarily through regular workmen in that

establishment or in an establishment similar thereto; (d) whether it is sufficient to employ considerable number of whole time

workmen. Explanation: if a question arises whether any process or operation or other work is of perennial nature, the decision of the appropriate government thereon shall be final.

• These exclusions may generally be provided in case of identified activities and may be placed in a separate schedule that can be amended from time to time. A possible list of activities that may be included in this schedule is given below:-

(i) sweeping, cleaning, dusting and gardening; (ii) collection and disposal of garbage and waste; (iii) security, watch and ward; (iv) maintenance and repair of plant, machinery and

equipments; (v) housekeeping, laundry, canteen and courier; (vi) loading and unloading; (vii) information technology;

36

(viii) support services in respect of an establishment relating to ports/dockyards, airports, railway stations, inter state bus terminals, hospitals, educational and training institutions, guesthouse, club and transport;

(ix) export oriented units established in Special Economic Zones and units exporting more than 75% or more of their production; and

(x) construction and maintenance buildings, roads and bridges. Note: Special Economic Zone means a port or an area notified as such under section 5 of the Foreign Trade (Development and Regulations) Act, 1992.

• Further, the government may consider amending section 31 of the chapter-3 by replacing the word “emergency” by “public interest”.

Section 31 reads as follows:

The appropriate government may, in the case of an emergency, direct, by notification in the official Gazette, that subject to such conditions and restrictions, if any, and for such period or periods, as may be specified in the notification, all or any of the provisions of this Act or the rules made there under shall not apply to any establishment or class of establishments or any class of contractors.

This will enable the government to meet with any emerging situation on a case to case basis.

(b) Amendments proposed in the Industrial Disputes Act,1947:

It is proposed that the present number filter of 100 under Chapter VB of the Industrial Disputes Act, 1947, may be raised to 300. Chapter V-B of Industrial Disputes Act, 1947 applies to an industrial establishment(not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than one hundred workmen were employed on an average per working day for the preceding twelve months. If a question rises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate government thereon shall be final. Under Chapter VB, Industrial establishments viz. factories, plantations and mines employing not less than 100 workmen, have to seek prior permission from the appropriate government to affect layoff, retrenchment or closure.

The number filter of 300 was the limit prescribed originally when chapter V

B was added in the ID Act in 1976. It was reduced to 100 through an amendment in 1982.

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This proposed increase is also in consonance with the recommendations of

Second National Labour Commission, 2002. • The workers may be, as a quid pro quo, given a retrenchment

compensation of 45 days of average pay for every completed year of service or part thereof in excess of six months in place of the existing 15 days of average wage per year of service rendered. This compensation will be in addition to any other benefit which the workman is entitled to under any other labour law.

• The retrenchment compensation shall not be less than 90 days of average

wages.

• The above changes will entail amendment in the Section 25 F, 25 K(1), 25 O(8), and 25 N(9) of the ID Act, 1947.

• Under Section 36 B of the Industrial Disputes Act, 1947, the appropriate government is presently empowered to exempt only Departmental Undertakings of the Government from all or any of the provisions of this Act subject to the availability of the machinery for investigation and settlement of disputes in the establishments or class of establishments.

It is proposed that this enabling power to grant such exemption by

appropriate governments may be extended in respect of all undertakings. (c) Streamlining Inspection Regime:

In a recently held workshop of State Labour Commissioner and Secretaries, Employer and Trade Union representatives at the Mahatma Gandhi Labour Institute, Ahmedabad on 2nd and 3rd September, 2005 where Shri Anwarul Hoda, Member, Planning Commission was also present, a consensus emerged on some of the important steps for rationalizing and streamlining inspection systems and improving its efficiency. Several of these steps have already been initiated in some state like Gujarat, Rajasthan, Andhra Pradesh and Punjab, not however with much encouraging response. The consensus inter alia included:

1. The system of multiple inspections under different laws may be replaced by a system of self-certification that may be treated as prima-facie compliance. Self-certification should not be mandatory but should be made optional. However, random sample inspection on the basis of self-certification may be made. Routine inspections may be discouraged except where safety and health of the workers, and issues pertaining to payment of minimum wages, child and bonded labour are involved. The current bottlenecks in following this system where introduced need to be removed. These include:- 1) certification on Oath/Affidavit or simple certification? 2) level of authority that should

38

certify, whether CEO himself or a subordinate authority?, and 3) whether all or selected labour laws to be covered under self certification?

2. Labour Audit on the lines of conventional audit may be considered. Issues that emerge in this respect include:

Identification of appropriate personnel/agencies Capacity building Costs Incorporation in the legal framework

• The present requirement of maintaining multiple registers and records may be replaced by one register for each broad area such as muster roll, accidents, wages etc.

• Similarly, the process of filing many returns may be reduced drastically by switching over to a system of filing one single comprehensive return electronically.

• The above improvements may be made within a definite and reasonable timeframe.

(d) Use of Information and Communication Technologies:

Extensive use of information and communication technologies (ICTs) in filing, processing and analysis of reports and returns is not only desirable but indeed imperative. This will reduce delays, cut paper work and make the system transparent. A campaign may be launched in popularizing and orienting the utility and advantage of ICT, towards realizing this objective.

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d) NOTE ON RAJIV GANDHI SHRAMIK KALYAN YOJNA

Rajiv Gandhi Shramik Kalyan Yojna (Unemployment Allowance

Scheme) was approved by the Corporation in its 131st meeting held on 27.02.2005 and the same was published in the Gazette of India on 26.3.2005. The Scheme has been made effective from 01.04.2005. Again, in the 132nd meeting of the Corporation held on 19.4.2005, the Scheme was discussed at length and it was observed that one of the conditions i.e. the eligibility of involuntarily unemployed IP for Sickness Benefit in the benefit periods corresponding to the last 4 contribution periods immediately preceding the date of unemployment, may be removed. A corrigendum was published in the Gazette of India on 26.05.2005 removing the said condition. 2. WHO IS ELIGIBLE

The Insured Persons who have been rendered unemployed involuntarily

due to closure of the Factory/ Establishment, retrenchment or permanent invalidity arising out of non-employment injury and have contributed under the ESI Scheme for a minimum period of five years prior to loss of employment, are entitled to Unemployment Allowance. 3. DURATION

The maximum duration for which an IP is eligible to draw unemployment

allowance is 6 months during the life time though in different spells of not less than one month. The Unemployment Allowance shall cease to be payable from the date the IP gets re-employed elsewhere. 4. RATE

The rate of unemployment allowance is the standard benefit rate on the

basis of average daily wage during the last 4 completed contribution periods immediately preceding the date of unemployment. 5. MEDICAL CARE

An Insured Person alongwith the members of his family are entitled to medical care also for a period of 6 months from the date of unemployment.

6. PAYMENTS MADE

So far 339 applications have been received from the unemployed IPs out of which 152 applicants were found eligible. A sum of Rs.11, 54,139/- has since been paid to the IPs as Unemployment Allowance upto December, 2005.

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7. PUBLICITY

An Advertisement in this regard has been issued on 10.9.2005 in the Daily Editions of the Times of India (11 cities), The Hindu (13 cities) and the Indian Express including New Indian Express (21 cities). In addition 50,000 Posters (25,000 in Hindi and 25,000 in English) highlighting the benefits of the Scheme have also been distributed throughout the country by the Regional Offices / Sub-Regional Offices/ Divisional Offices and ESI Hospitals. 130 seminars have been arranged throughout the Country by the Regional Directors/ Joint Directions I/c of SROs/ Divisional Offices wherein 2046 participants attended. These seminars were also covered in various regional newspapers

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e) List of Activities suggested by the Ministry of Labour and

Employment to be excluded from Section 10 of Contract labour (Regulation and Abolition Act, 1970 intimated by the Ministry of Labour and Employment vide letter dated 14.02.2006, to the Commission

1. The following ten (10) activities:-

(1) sweeping, cleaning, dusting and gardening; (2) collection and disposal of garbage and waste; (3) security, watch and ward ; (4) maintenance and repair of plant, machinery and equipments; (5) house keeping, laundry, canteen and courier; (6) loading and unloading (7) information technology; (8) support services in respect of an establishment relating to hospital,

educational and training institution, guest house, club and transport;

(9) export oriented units established in Special Economic Zones and Units exporting more than seventy five percent or more of their production; and

(10) Construction and maintenance of buildings, roads and bridges. 2. Views of Trade Unions

The Trade Unions are totally opposed to the idea of contracting of

services and in jobs which are perennial in nature for the following

reasons: -

Reduction of regular employment.

The contract labour generally belongs to weaker sections of the society

and will be deprived of the benefits that accrue to regular employees.

Efficiency will decrease, as establishment will be deprived of

experienced staff.

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Coordination of activities of large number of contractors/sub-

contractors will prove to be more time consuming and costly than in

house activity.

What is required is not privatisation but in house improvements and

restructuring.

Out sourcing will only lead to a type of employment founded on

discrimination and exploitation of contract labour in regard to wages

paid, working conditions, etc.

Their further demand is that the Act should be amended to provide for

automatic absorption of contract labour in the event of prohibition of

employment of contract labour in an activity in an establishment.

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Appendix III

INDUSTRIAL DISPUTES ACT, 1947

Existing provisions of Chapter VB (Provisions relating to lay-off, retrenchment and closure in certain establishments) 25K. Application of Chapter VB.- (1) The provisions of this Chapter shall apply to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than 1[one hundred] workmen were employed on an average per working day for the preceding twelve months. (2) If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate Government thereon shall be final. 25L. Definitions.- For the purposes of this Chapter,-- (a) "industrial establishment" means—

(i) a factory as defined in clause (m) of section 2 of the Factories Act,

1948 (63 of 1948); (ii) a mine as defined in clause (i) of sub- section (1) of section 2 of the Mines Act, 1952.(35 of 1952); or (iii) a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951.(69 of 1951);

(b) notwithstanding anything contained in sub-clause (ii) of clause (a) of section 2,--

(i) in relation to any company in which not less than fifty-one per cent. of the paid-up share capital is held by the Central Government, or

(ii) in relation to any corporation [not being a corporation referred to in sub-clause (i) of clause (a) of section 2] established by or under any law made by Parliament, the Central Government shall be appropriate Government.

25M. Prohibition of lay-off:- (1) No workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment to which this Chapter applies shall be laid-off by his employer except 2[with the prior permission of the appropriate Government or such

1 Substituted for “three hundred by the Industrial Disputes (amendment) Act, 1982 w.e.f. 31.8.1984 2 Amendment Act, 1984 w.e.f. 18.8.1984

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authority as may be specified by that Government by notification in the Official Gazette (hereinafter in this section referred to as the specified authority), obtained on an application made in this behalf, unless such lay-off is due to shortage of power or to natural calamity, and in the case of a mine, such lay-off is due also to fire, flood, excess of inflammable gas or explosion]. (2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner. (3) Where the workman (other than badli workmen or casual workmen) of an industrial establishment, being a mine, have been laid- off under sub-section (1) for reasons of fire, flood or excess of inflammable gas or explosion, the employer, in relation to such establishment, shall, within a period of thirty days from the date of commencement of such lay-off, apply, in the prescribed manner, to the appropriate Government or the specified authority for permission to continue the lay-off. (4) Where an application for permission under sub-section (1) or sub-section (3) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such lay-off, may, having regard to the genuineness and adequacy of the reasons for such lay-off, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen. (5) Where an application for permission under sub-section (1) or sub-section (3) has been made and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days. (6) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (7), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order. (7) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (4) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication: Provided that where a reference has been made to a Tribunal under this sub-

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section, it shall pass an award within a period of thirty days from the date of such reference. (8) Where no application for permission under sub-section (1) is made, or where no application for permission under sub-section (3) is made within the period specified therein, or where the permission for any lay-off has been refused, such lay-off shall be deemed to be illegal from the date on which the workmen had been laid-off and the workmen shall be entitled to all the benefits under any law for the time being in force as if they had not been laid-off. (9) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1), or, as the case may be, sub-section (3) shall not apply in relation to such establishment for such period as may be specified in the order.] (10)] The provisions of section 25C (other than the second proviso thereto) shall apply to cases of lay-off referred to in this section. Explanation.--For the purposes of this section, a workman shall not be deemed to be laid-off by an employer if such employer offers any alternative employment (which in the opinion of the employer does not call for any special skill or previous experience and can be done by the workman) in the same establishment from which he has been laid-off or in any other establishment belonging to the same employer, situate in the same town or village, or situate within such distance from the establishment to which he belongs that the transfer will not involve undue hardship to the workman having regard to the facts and circumstances of his case, provided that the wages which would normally have been paid to the workman are offered for the alternative appointment also. 25N. Conditions precedent to retrenchment of workmen:-(1) No workman employed in any industrial establishment to which this Chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until,- (a) the workman has been given three months notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice; and (b) the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf. (2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served

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simultaneously on the workmen concerned in the prescribed manner. (3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen. (4) Where an application for permission has been made under sub- section (1) and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days. (5) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (6), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order. (6) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (3) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication: Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference. (7) Where no application for permission under sub-section (1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him. (8) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such establishment for such period as may be specified in the order. (9) Where permission for retrenchment has been granted under sub-

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section (3) or where permission for retrenchment is deemed to be granted under sub-section (4), every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, at the time of retrenchment, compensation which shall be equivalent to fifteen days@ average pay for every completed year of continuous service or any part thereof in excess of six months. 25-O. Procedure for closing down an undertaking.- (1) An employer who intends to close down an undertaking of an industrial establishment to which this Chapter applies shall, in the prescribed manner, apply, for prior permission at least ninety days before the date on which the intended closure is to become effective, to the appropriate Government, stating clearly the reasons for the intended closure of the undertaking and a copy of such application shall also be served simultaneously on the representatives of the workmen in the prescribed manner: Provided that nothing in this sub-section shall apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work. (2) Where an application for permission has been made under sub- section (1), the appropriate Government, after making such enquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen and the persons interested in such closure may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the general public and all other relevant factors, by order and for reasons to be recorded in writing, grant or refused to grant such permission and a copy of such order shall be communicated to the employer and the workman. (3) Where an application has been made under sub-section (1) and the appropriate Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days. (4) An order of the appropriate Government granting or refusing to grant permission shall, subject to the provisions of sub-section (5), be final and binding on all the parties and shall remain in force for one year from the date of such order. (5) The appropriate Government may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (2) or refer the matter to a Tribunal for adjudication: Provided that where a reference has been made to a Tribunal under this

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sub-section, it shall pass an award within a period of thirty days from the date of such reference. (6) Where no application for permission under sub-section (1) is made within the period specified therein, or where the permission for closure has been refused, the closure of the undertaking shall be deemed to be illegal from the date of closure and the workmen shall be entitled to all the benefits under any law for the time being in force as if the undertaking had not been closed down. (7) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such undertaking for such period as may be specified in the order. (8) Where an undertaking is permitted to be closed down under sub-section (2) or where permission for closure is deemed to be granted under sub-section (3), every workman who is employed in that undertaking immediately before the date of application for permission under this section, shall be entitled to receive compensation which shall be equivalent to fifteen days@ average pay for every completed year of continuous service or any part thereof in excess of six months. 25P. Special provision as to restarting of undertakings closed down before commencement of the Industrial Disputes (Amendment) Act, 1976:- If the appropriate Government is of opinion in respect of any undertaking of an industrial establishment to which this Chapter applies and which closed down before the commencement of the Industrial Disputes (Amendment) Act, 1976 (32 of 1976),-- (a) that such undertaking was closed down otherwise than on account of unavoidable circumstances beyond the control of the employer; (b) that there are possibilities of restarting the undertaking; (c) that it is necessary for the rehabilitation of the workmen employed in such undertaking before its closure or for the maintenance of supplies and services essential to the life of the community to restart the undertaking or both; and (d) that the restarting of the undertaking will not result in hardship to the employer in relation to the undertaking, it may, after giving an opportunity to such employer and workmen, direct, by order published in the Official Gazette, that the undertaking shall be restarted within such time (not being less than one month from the date of the order) as may be specified in the order. 25Q. Penalty for lay-off and retrenchment without previous permission.-Any employer who contravenes the provisions of section 25M

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or of section 25N shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to one thousand rupees, or with both. 25R. Penalty for closure.- (1) Any employer who closes down an undertaking without complying with the provisions of sub-section (1) of section 25-O shall be punishable with imprisonment for a term which may extend to six months, or with fine which may extend to five thousand rupees, or with both. (2) Any employer, who contravenes [an order refusing to grant permission to close down an undertaking under sub-section (2) of section 25-O or a direction given under section 25P], shall be punishable with imprisonment for a term which may extend to one year, or with fine which may extend to five thousand rupees, or with both, and where the contravention is a continuing one, with a further fine which may extend to two thousand rupees for every day during which the contravention continues after the conviction. 25S. Certain provisions of Chapter VA to apply to an industrial establishment to which this Chapter applies.- The provisions of sections 25B, 25D, 25FF, 25G, 25H, and 25J in Chapter VA shall, so far as may be, apply also in relation to an industrial establishment to which the provisions of this Chapter apply.

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Appendix IV

Labour Inspection systems adopted in four states i.e. Uttar Pradesh, Andhra Pradesh, West Bengal and Maharashtra (Papers presented at the Conference on Labour Reforms organised by ISID during November 21-22, 2006). Uttar Pradesh Reform of Inspection system –

• On 6.5.1994, the State Govt. made a provision of 5% inspection of industrial units and establishments on a random basis. Inspections of hazardous factories were exempted under this Order and their inspections are not restricted.

• The inspection system was reviewed on 26.10.1998; restrictions on inspection were removed, but industries were protected from unnecessary interference by introducing a system of prior permission of inspections from the concerned district magistrate / divisional commissioner.

• On 29.8.2003 the State Govt. suspended the inspection of all industrial establishments and, therefore, inspections of other establishments were not being carried out.

• On 14.12.2004 the State Govt. prescribed a revised system of inspections, wherein statutory inspections, which are provided under the laws along with their periodicity, are required to be carried out as well as inspections to enquire into the complaints received from the workers, the trade unions or public representatives but no routine inspections would be carried out.

• On 10.3.2006 the State Govt. introduced a scheme of self certification for the enforcement of labour laws in factories, shops and commercial establishments. There will be only 20% inspection every year and only one unit will be required to be inspected after every five years with the core emphasis being on `compliance’ and not on `prosecution’. Further, since it will be operated by a joint team with representatives from workers and management, it is expected to reduce incidences of corruption and harassment.

Andhra Pradesh

• The Govt. of Andhra Pradesh introduced the system of self-certification under the Factories Act, Maternity Benefit Act, A.P. Shops and Establishment Act, Contract Labour (R&A) Act, Payment of Wages Act, Minimum Wages Act, the Employment Exchange (Compulsory notification of vacancies) Act w.e.f. 21.4.2001

• Relaxation of inspections (w.e.f. 4.3.2003) – It provides for annual inspection of factories confined only to hazardous factories and factories employing more than 150 workers. Tiny, Small Scale non-hazardous factories to be inspected in case of occurrence of accident

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or on receipt of complaint. In all other cases, factories shall be inspected not more than once in a period of two years. There shall be no surprise inspections. Only joint inspections by the concerned departments i.e. factories, labour, pollution control board, boilers, ESI, and EPFO.

West Bengal

• The Govt. permits self –certification to IT companies in the act and regulations under various Acts i.e. Maternity Benefit Act, West Bengal Shops and Establishment Act, Contract Labour (R&A) Act, Payment of Wages Act, Minimum Wages Act, Workmen compensation Act, ESI Act, PF, Payment of Gratuity Act, Water and Air pollution Act

Maharashtra

• The Govt. has introduced the `Self-certification–cum-consolidation annual return scheme’ for factories and establishments in the State on 2.1.2006. Under this scheme the employers can suo moto certify that they are implementing the labour laws faithfully and the applicants should file an affidavit on a non-judicial stamp paper of Rs. 100 declaring that they agree to comply with all the provisions of labour laws covered under the scheme and accept the penalty prescribed for violation of labour Laws. The establishment should apply to the self-certification committee along with the security deposit (ranging from 5000 to 20,000) and the committee allot a number for the applicants and scheme will be valid for five years and the scheme would cover thirteen labour laws. 20% of the covered establishment (randomly selected) would be inspected in a year and inspection visits to enquire into complaints would have to be authorised by higher level officers in respect of matters falling in their jurisdiction.

*********

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Appendix V

Issues in labour law reforms

1. Multiple and Parallel Labour Legislation:

2. Issues relating to appropriate government and jurisdiction:

3. Multiplicity of authorities:

4. Lack of uniformity in definitions:

5. Minimum wages:

6. Inspector Raj:

7. Industrial Disputes Act, 1947:

8. Contract Labour (Regulation and Abolition) Act, 1970:

a. Sectoral Demands:

b. Textiles industry:

c. Special Economic Zones

d. Labour standard and size of establishment:

e. Better enforcement of workers’ rights:

f. Labour laws and the Unorganised sector:

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Views of Stakeholders

(1) Multiple and Parallel Labour Legislation: There is the burden of multiple and parallel legislation that has created confusion and complexity and has resulted in a vast paraphernalia of regulation. Currently there are around 50 Central Labour Laws and more than 100 State Labour Laws. Moreover, many Acts go into unnecessary details. There appears to be a need to reduce the number of laws through simplification, rationalization and codification. FICCI-AIOE

• Multiplicity of labour laws has created confusion and complexity. The number of labour laws should, therefore, be reduced through repeal, mergers and consolidation. Laws should be simple, user friendly and implementable.

• Labour laws should facilitate effective implementation. There should be incentives for enterprises to seek not only compliance but also, compete for setting standards of excellence, both in product and labour markets.

• There should be only four sets of labour laws as following:

o Laws governing terms and conditions of employment, which may consolidate (a) Industrial Employment (Standing Orders) Act, (b) Industrial Disputes Act, ( c) Trade Unions Act.

o Laws governing wages, which may consolidate: (a) Minimum Wages Act, (b) Payment of Wages Act, and (c) Bonus Act.

o Laws governing welfare which may consolidate: (a) Factories Act, (b) Maternity Benefits Act, (c) Workmen’s Compensation Act, and (d) Contract Labour (Regulation) Act.

o Laws governing social security, which may consolidate: (a) EPF Act, (b) ESIC Act, and (c) Payment of Gratuity Act. • A separate set of simple labour laws should apply to enterprises employing less than 50 employees to promote small and micro-

enterprises.

Centre of Indian Trade Unions

• There has been a consensus, on number of occasions in various tripartite fora, to jointly look into the issues and work out a solution to ensure simplification and eliminate mutual inconsistencies in various aspects in the different labour laws viz., wage ceilings, coverage and entitlement etc. We wish to emphasise that efforts should be made to integrate the various labour laws into one single ‘Labour Code’ consistent with labour rights. We are of the view that the draft of such an integrated ‘Labour Code” presented by the Indian Labour Law Association years back could form the basis of further discussion in this regard.

• We like to point out that despite general consensus on the aspect of simplification and uniform codification of labour laws, the

government has taken no substantive initiative in that direction. They only talk about above inconsistencies in labour laws but seek changes in areas, which are no way linked with them. The government proposals for changes in Industrial Disputes Act and Contract Labour (R&A) Act are examples of such inconsistencies in the preaching and practice by the government.

• In the agenda note circulated for the Fortieth Session of the Indian Labour Conference (New Delhi, 9-10 December, 2005) the

Ministry of Labour had stated that it had decided not to go in for category-wise amalgamation of the existing labour laws as

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suggested by Second National Commission on Labour (SNCL). But, the trade unions including ours had emphasised that efforts should be made to integrate the various labour laws into one single ‘Labour Code’. We are of the view that the draft of such an integrated ‘Labour Code”, presented by the Indian Labour Law Association years back, could form the basis of further discussion in this regard.

CII We agree with the stated suggestions in this point and feel that there is a definite need to reduce the number of laws through

simplification, rationalization and codification. There should be only 4-5 legislations covering the following:

• Dealing with Resolution of Disputes • Minimum Wages • Social Security • Conditions of Work and • Code of Employment

BMS • In case a State law conflicts with provisions made under a central law, there is constitutional provision to resolve such a situation.

• We welcome considering issues like 1. Simplification, rationalisation and codification of Labour Laws, but without any part of it

becoming anti labour.2. Resolving the issue on defining "appropriate Government”. • A single authority cannot handle all the issues concerning Labour. So it can only be advisory. Attempting to make definitions

uniform should not dilute the purpose of different definitions according to the context of different legislations. Multiple registers and records can be replaced by comprehensive register that will include all the required details.

HMS As opined by NCEUS, HMS agrees on the need to reduce the number of labour laws through simplification and rationalization. Dr. Kamala Sankaran

1.1 There is an urgent need to consolidate the labour laws into broad, functional groups, such as employment relations, conditions of work, social security, wages and others. There is nothing new in this suggestion - this has been suggested several times in the past.3 The same applies to uniformity in definitions of certain key terms like ‘employer’, ‘employee’, ‘establishment’, and ‘wages’.4 In my opinion,

3 See Report of the Study Group on the Review of Laws of the Second National Commission on Labour (SNCL)(2002)for further details. The Indian Labour Code prepared by the National Labour Law Association is another example. 4 For instance, some of the labour laws do not have an employment limit for applicability. Thus at the present time, certain laws like the Minimum Wages Act 1948, Equal Remuneration Act 1976 apply to all scheduled employments/establishment. The Industrial Disputes Act 1947 applies to certain large sectors of the unorganised sector, which come within the purview of its definition of ‘industry’. In the case of retrenchment, lay-off or closure of industrial establishments, Chapters VA and VB of the Act lay down an employment limit. The Trade Unions Act applies to all enterprises in trade or industry. Even very small enterprises can have unionised workers who are members of an industry (not enterprise) level union.

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two sets of laws, one for larger establishments employing 10 or more in the aggregate (including contract labour) and smaller establishments covering broadly the unorganised sector, would be needed in the Indian context 1.2 In India’s federal Constitution, labour matters are included in the concurrent list. The merit in allowing both centre and the state to deal with labour matters is essential in a federal constitution. Further, in the event of a conflict between a central law and even a subsequently enacted state law (both relating to an entry in the concurrent list), it will be the central law that will prevail to the extent of inconsistency (article 254). Presidential assent to the state law will of course, allow it to operate in the state despite there being a central law to the contrary. This state law could take the form of an entirely new legislation or be an amendment to the central law with reference to the state. 1.3 Even where a central law has ‘occupied the field of legislation’, flexibility and deference to federal concerns have been achieved in a number of ways. Many of the labour laws are centrally enacted but are implemented by State governments e.g. the Minimum Wages Act 1948, where the power to fix minimum wages is granted exclusively to the state government. Similar is the case under the Trade Unions Act, 1926 where the Registrar of Trade Unions is at the State level, though the law is a central one. The other characteristic of Indian labour laws is that many of the laws have given the power to enforce the law to the ‘appropriate government’ as in the case of the Industrial Disputes Act 1947 and the Contract Labour Act – the two most currently discussed labour legislations.

Some of the laws that lay down an employment limit have varied applicability. The Motor Transport Workers Act 1961 and the Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act 1979 have a lower limit of 5; 10 in the case of the Factories Act 1948; 10 in the case of Building and Other Construction Workers’ (Regulation of Employment and Conditions of Service) Act 1996, Contract Labour (Regulation and Abolition) Act 1970 and 100 in the case of the Industrial Employment (Standing Orders) Act 1946. There is also varied coverage of social security laws such as the ESI Act 1948, the Employees’ Provident Fund Act 1952, Maternity benefit act 1961 and the Workmen’s Compensation Act 1923. Functional criteria such as the kind of work performed by a worker, or his/her remuneration are also factors affecting applicability of the law. Some labour laws provide for an ‘infancy clause’; other have explicit exemption clauses. There is thus varying coverage of enterprises in the unorganised/informal sector with respect to labour laws. The Study Group on Labour Laws set up by the National Commission on Labour had recommended an employment level of 50 persons (not merely workers, thus including managerial and supervisory staff within the limit) for coverage of existing labour laws. They proposed that a (new) umbrella legislation would apply to those enterprise below that limit. This limit was subsequently brought down to 19 workers by the Report of the National Commission on Labour in 2002, while the proposed new legislation was approved. 5 The Court has held that an industry carried on under the authority of the Central Government cannot be equated with an industry carried on by the Central Government itself. The test is whether a corporation/instrumentality is carrying on an industry under the authority of the Central This is a question of fact which can be determined by examining whether there is any conferment to carry on the industry by the Central/State Government. Such an authority may be conferred either by statute or by virtue of relationship of principal and agent or delegation of power and this fact has to be ascertained on the facts and circumstances of each case. Thus in relation to a company merely supplying sleepers to the railways and where the Directors of the Company are private individuals, the appropriate Government is the State Government. Yet construction of labour contractors through a contractor, where the work is being carried on under the authority of the Railways, the Central Government would be the appropriate Government. Steel Authority of India Ltd. v. National Union Water Front Workers 2001 2 LLJ 1087 (SC).

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1.4 The term ‘appropriate government’ has resulted in a great deal of litigation. These disputes typically relate to public sector undertakings (in the case of private sector firms the law is more settled) about whether a central or state government can refer a dispute for adjudication, if the dispute should relate to a central public sector undertaking located in a particular state. While the law on the matter is now settled by a definitive Supreme Court decision in the Steel Authority of India case5, it may be better to exhaustively list the public sector undertakings (wherever located) in two lists, viz. those where the ‘appropriate government’ is the central government or the state government. 1.5 There are multiple dispute resolution bodies under the different laws. Consolidation of laws would also streamline the creation of a unified labour judiciary, empowered to deal with all manner of disputes – employment relations, recognition, wages, social security - and cutting across both large scale and unorganised sectors. While the two sets of laws mentioned in paragraph 1.1 would remain with respect to rights and benefits, the dispute resolution process could be uniform. My suggestion made earlier with regard to lok adalats would of course be in addition to these structures. With respect to the unorganised sector bills, we have already seen that panchayati raj bodies have a role to play in dispute resolution. 1.6 Currently, disputes relating to non-payment of wages or for workmen’s compensation are dealt with at the state level by authorities notified by the various state governments under the different laws. If all quasi-judicial powers were handed over to a unified labour judiciary, with broad jurisdiction, some degree of uniformity in labour adjudication would develop. Variation would however remain, if a State chooses to amend the central law and receives presidential assent (as pointed out in 1.2 above) to do so, given the reality of Indian federalism. The labour judiciary should also have the powers to deal with all offences created under the labour laws. (At present there are different sets of authorities/courts dealing with civil and criminal remedies under the labour laws). At present, each State government notifies the number and location of authorities under different labour laws in the manner it considers expedient. If SME are located in clusters, it would be easier for a common adjudicatory body to be notified for each cluster. 1.6 Labour administration however will vary across states given our federal structure. This diversity is inevitable and should continue.

Dr. Praveen Jha • Streamlining and simplification of labour laws should be addressed on a priority basis. There has been a consensus amongst academics and activists along the entire ideological spectrum on the need for doing so for some time now. Existing laws should be broadly grouped into four or five categories, such as industrial relations, wages, social security, safety, welfare and working conditions etc. (or some other appropriate typology). As has been frequently suggested, various labour laws should be integrated into one single ‘Labour Code’, and the draft of such a ‘Labour Code’ presented by the Indian Labour Law Association in 1994, already provides a strong foundation.

• While undertaking simplification and rationalisation, the problem, that most of the laws are quite old and often anachronistic, will obviously need to be addressed. A vision of a process of economic transformation that generates decent and productive employment should be the broad framework, within which rationalisation of labour laws needs to be located. Further, appropriate enforcement mechanisms have to be put in place so that the transaction costs for firms and rents for enforcement agencies are minimised, while workers are ensured the designed benefits.

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• Most of the laws should be ‘Central Laws’ and must cover all types of workers (both from organised and unorganised sectors), so that it can be implemented universally within the country.

(2) Issues relating to appropriate government and jurisdiction: Labour is a concurrent subject in the Constitution of India implying that both the Union and the state governments are competent to legislate on labour matters and administer the same. The bulk of important legislative acts have been enacted by the Parliament. These statutes have sought to determine the respective jurisdiction of the Central and state governments through the device of introducing the concept of appropriate government in most statutes for various purposes. This matter of jurisdiction has led to much confusion. What is the most appropriate way of demarcating jurisdiction of the central and state governments in matters of labour laws, therefore, needs to be examined. What will happen in case a State law conflicts with provisions made under a central law also needs clarification?

6. FICCI-AIOE

Centre of Indian Trade Unions

• The Supreme Court directive making Central Govt the Appropriate Govt for Central PSUs may be taken into consideration in

dealing with the issue. The issue of conflicts between the provisions of a State law and a Central law/rules, if there be any, may be addressed on a case to case basis through consultation with the affected parties and while doing so, the protection of labour rights should be guiding and binding parameter. This is the only practical way within the existing federal structure and cases of such conflict arise only occasionally.

• The Payment of Wages (Amendment) Act, 2005 has attempted to redefine the ‘appropriate government’ as under: “Appropriate government” means, in relation to railways, air transport services, mines and oilfields, the Central Government and in relation to all other cases, the State Government”. In our view, this also is of a broad generalisation and may not serve the purpose.

CII Since labour is a concurrent subject, there is a need to bring in more clarity on jurisdiction. This assumes great importance and significance in cases of organizations operating in more than one state and facing lot of hardship in complying with different local laws.

HMS If there is a conflict between the Central and State Law/provision, then the Central Act should apply. It is of utmost importance that there is a basic employer-employee relationship act that is applicable through out India – uniformity of basic labour law obligations will prevent race to the bottom in terms of labour standards (by basic labour obligations one intends to mean – minimum wages, right to organize, right to collective bargaining, social security obligations and health and safety standards).

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(3) Multiplicity of authorities: Due to debates over the jurisdiction, not only most statutes have central authorities but state authorities too. Not only various levels of administrative or implementing authorities but also adjudicating authorities that have been instituted under different laws differ. This proliferation of authorities needs to be checked. The feasibility and the desirability of having a single Labour Authority dealing with all aspects of labour at the state as well as central level need a thorough examination.

FICCI-AIOE • The multiple authorities under each of the Acts should be restricted such that there is a system of a single Labour Authority/single

inspection to check compliance by employers’ with regard to their obligations under various labour laws.

Centre of Indian Trade Unions

• The issue of minimising multiplicity of authority (complete elimination may not be possible in the Federal structure) can be addressed in the process of the Simplification exercise as suggested vide item no 1 and also through joint consultation in the event of occasional conflicts as suggested vide item 2 above.

CII It is desired that there should be only one Labour Authority, which is competent enough to deal with these units in the unorganised sector. This kind of empowerment is to act for all the statute will definitely make things simpler and will avoid multiplicity of actions.

HMS HMS is in favour of setting up independent tripartite Industrial Relations Commission at State and Central levels (with appropriate branches in each district of the country) as part of dispute resolution machinery – which should be adequately funded and properly staffed to play the role of single window for all labour related matters – adjudication and arbitration – as the case may be.

Dr. Praveen Jha • Given the country’s federal structure, it is not possible to eliminate the multiplicity of authorities completely, but it must be rationalized and robust mechanisms for efficient coordination between multiple authorities should be accorded the importance that it deserves.

• The existing mechanisms for dispute resolution are extremely tardy and time-consuming. One innovative way to deal with the problem has been to set up Alternative Dispute Redressal mechanisms, which can speedily dispose the pending cases. Fast track courts, including Lok Adalats, have been in existence for close to a couple of decades; based on a through review of such experiences, appropriate legislations may be put in place.

(4) Lack of uniformity in definitions: There is a lack of uniformity in respect of key definitions in many of the labour laws. Many common items like workmen, wages, employee, factory and industry are defined differently in different Acts pertaining to the same sector. The Payment of Wages Act comes up against the different definitions of wage in different labour legislation. Thus, while defining wages in any statute, the cognate definition in another statute does not appear to have been kept in mind. In this context, it needs to be examined as to what is the best way of finding common definitions so that these are not subject to different interpretations. FICCI-AIOE • A uniform definition of terms like `industry’ and `workmen’ is necessary in all the statutes. For better interpretation and

understanding, industry should be termed as `enterprise’ and the workmen should be termed as `employee’.

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Centre of Indian Trade Unions

• The issue may be addressed in the process of Simplification exercise (item no 1.) In this case also, the protection of labour rights

and not restricting the same should be the guiding and binding parameter.

CII There is a need to come out with a common set of definitions, having same meaning in the different Labour Acts. Also as per point no. 1 stated above when the total no. of Acts will be only 4-5, it would be very easy to come out with a common set of definitions.

HMS If labour laws are simplified and rationalized, the issue of definitions would also be resolved and uniformity would be possible. Even under the present set of labour laws, uniform definitions (of workers, industry, wages, etc) are possible provided there is a consensus on basic labour law obligations. NCEUS should compile all such multiple definitions and suggest one that is most inclusive and relevant. It may also be useful to consider what definitions ILO uses in its conventions.

Dr. Praveen Jha In the existing laws, basic definitions (e.g. workers, employees, industry, child labour, establishment, appropriate government etc.) are full of ambiguities, which must be removed at the earliest.

(5) Minimum wages: There is a bewildering variety of minimum rates of wages that have been fixed by various state governments under the Minimum Wages Act, 1948. Moreover, while setting wage limits for the applicability of a statute, the wage limits in other statutes do not appear to have been kept in mind. Most wage limits are also out of tune with the industrial realities today. Following questions need answers in this context: What is the rationale for fixing minimum wage? What is the rationale for industry or occupation specific minimum wages? Can the number of minimum wages set be reduced to manageable levels? Whether earlier Labour Commissions have addressed these problems? How realistic would the concept of a basic minimum wage or a national minimum wage be which would serve as a floor level? What is the methodology followed while fixing minimum wage? This needs to be examined and recommendations made for improving upon it.

Centre of Indian Trade Unions

• The rationale for fixing minimum wage should be based on the unanimous recommendation of the 15th Indian Labour

Conference formulated supposedly to ensure a fulfillment of bare needs of human survival. Besides, the directive of the Supreme Court in the Raptakkos Brett case should be taken into account. The Minimum Wages, once fixed on the above basis, should thereafter be inflation indexed to provide for automatic revision consequent upon changes in price level. This rationale should be followed uniformly by all states as well as the center and then only the phenomenon of bewildering variety can be addressed effectively and minimized to the best possible extent.

• It is not proper to subordinate the minimum wage fixing to wage-ceilings in various other statutes. Rather, the wage

ceilings provided in various other statutes should be set to keep in tune with the Minimum Wages. The CITU and in fact

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all the trade unions in the country have been of the considered opinion that the present wage ceilings in various labour legislations have become obsolete in the context of the present day income levels of the workers for whom they are intended to apply. Hence, the upward revision of the existing wage-ceilings in all the labour laws should be decided on the basis of rise in the price index from the date of its last revision and thereafter the said ceiling should be inflation-indexed. And in particular, the wage ceiling for the Payment of Wages Act should be completely removed.

• The argument of ‘manageability’ in respect of minimum wages is altogether irrational and unwarranted. Every civilized society

must provide for certain benchmarking (or a floor level) for a humane living and minimum wage is one of the same. This must be governed by statute and strictly implemented.

FISME The Minimum Wages Act is a Central Act. However, the State Governments are authorised to make their own schedule of industries and implement minimum rate of wages for those scheduled industries. There are approximately 65-70 industries in the schedule made by the Govt. of U.P. under section 27 of the minimum wages act. The rate of minimum wages differ in scheduled employment. The social and living conditions being the same a uniformity of wages in all the scheduled employment is desirable and the State Government should take steps in this regard.

It is observed that in the past, the State Government has several times exceeded its jurisdiction while enforcing Minimum Wages for scheduled employment. Following are some of the examples : - In several scheduled employment, the clerical categories have been divided into clerical grade-I and clerical grade-II.

While ordinary clerks, accountants and head clerks etc. have been placed in clerical grade-I. However, the State Government has laid down a condition that if the concerned clerk has a certain qualification and has worked for more than 5 years in clerical grade-II, he will automatically be entitled to be placed in clerical grade-I category. This is a clear case of traversing outside the jurisdiction as the State Government under the purported exercise of enforcing Minimum Wages has framed a condition of service promoting the employee from clerical grade II to clerical grade I.- The intent of the Minimum Wages Act is to enforce a minimum rate of wages which is the total of all the components, i.e. basic wage, variable dearness allowance, etc. If an employer is paying wages which are not less than the total of all the components, then the requirements of Minimum Wages Act are satisfied. However, the State Government is continuously enforcing a condition that even if the employee is being paid wages which are higher than the minimum rate of wages, they should still be entitled to get further increase in variable dearness allowance, annual increment etc. Our submission is that the State Government cannot enforce this clause of notification under Minimum Wages Act. The Hon’ble Supreme Court has also held in the case of Municipal Corporation, Hatta versus Bhagat Singh and others that Minimum Wages Act is not applicable upon those who are getting wages which are more than those fixed by the State Government as minimum wage. This ruling is reported in 1998 SSC (L&S) 581. Only minimum wages of unskilled workers should be fixed under the Act. Minimum wages should be fixed on the basis of the following formula :

i. Current Consumer Price Index of the preceding 6 months. ii. Consumer Price Index of the 6 months at the time of last fixation. iii. Per Capita Income (at fixed prices) at Present

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Note: i. The minimum wages worked out above should be subject to the minimum wages workers are getting at present. (This can happen only if the monthly special allowance rate notified in the past exceeded the actual inflation and growth in real incomes) ii. The wages for other categories i.e. semiskilled, skilled etc. can be computed by increasing the unskilled rate in the same proportion as existing earlier. iii. Monthly special allowance can be kept same for all categories. It should be worked out in a manner that 100% increase in consumer price index in future should result into 100% increase in the total wage. The rate of allowance so worked out for ten point increase in consumer index on basis of 1005 neutralisation could be rounded off to the lower 10 paise.

CII The rational for fixing minimum wage is to avoid any kind of exploitation against the workers.

BMS Various minimum wages committees are working properly in this country with little complaints. Many a time issues before them are settled and reformed at the appropriate time. Commission's apprehension that "most wage limits are also out of tune with the industrial realities today" can reasonably suspected to be having an anti labour tone intending to reduce present wage levels in the organised sector. Other aspects regarding wages like National Minimum Wages etc are to be considered by the Commission, with the caution that already those who are enjoying higher minimum wages should not be disturbed. Supreme Court on many occasion has examined and declared that labour standards especially the liability to pay minimum wages cannot be linked to the capacity of an enterprise to pay. As early as in 1958 in Crown Aluminium Works case (AIR 1958 SC 30) Justice Shri Gajendragadkar of the Supreme Court declared that no industry has a right to exist unless it is able to pay its workmen at least a bare minimum wage. This view was consistently followed by the SC since then. Financial capacity of the employer to pay is relevant only in a claim for fair wages and not minimum wages.

HMS At present there is no fixed rationale (except the poverty line) being followed for fixing and revising minimum wages either by the

Central Govt or by State Govts. Revisions are infrequent and sometimes based on committee members perceptions regarding inflation and cost of living. It may also be noted that poverty line definition in the country continues to be based on only food/calorie requirements. It is time that this criteria was expanded to include other needs of the workers. HMS suggests that NCEUS looks into the recommendations that the Supreme Court made in the case of Workmen v/s the Management of Reptakos Bret & Co. Ltd. Central Minimum Wage Advisory Board had set up a Committee after the above mentioned judgement to consider the criteria suggested by the Supreme Court – namely – the size of the family, basic needs and requirements (such as education, medical and social obligations, apart from the food, housing and clothing).

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National Minimum Wage should be set taking into account poverty line (which should include more than calorie requirements), basic needs of the workers, should include rest days wages and be linked to the consumer price index.

Dr. Kamala Sankaran

The debate of whether there needs to be a national minimum wages has been a long one in India. There is a declared (non-statutory) floor level, national minimum wages but the wage rate is much lower than various state level minimum wage rates. I am strongly in favour of a need based national minimum wages, which the central government has the duty to publicise, just as it does, for example, the pulse polio programmes. The SNCL Study Group recommended that the minimum wgae rate be revised every two years. A need based wage takes into account the calorific requirements of the worker and his/her family, other needs of clothing, housing and medical and social security. These need to be done on a realistic basis, based on actual family size, scientific data on food and other requirements and in a gender-neutral manner. There is also a need to stipulate that the piece-rated wage would be equivalent to what a worker working diligently would earn for working 8 hours in a day, as done under the NREG Act of 2005.

Dr. Praveen Jha • Although the Minimum Wage Act, the Equal Remuneration Act, the Contract Labour Act, and even the IDA, are applicable to substantial sections of unorganised labour, the sheer practical difficulties and high costs associated with implementation and enforcement of such legal provisions ensures that most workers do not benefit from them. Again, this reinforces the need for rationalisation of the existing laws.

• The rationale for fixing minimum wage should be based on unanimous recommendations of 15th Indian Labour Conference. Minimum wage payable to anyone, in whatever occupation, should be such that it satisfies the basic needs of the worker and her/his family. There should be a national minimum wage that the central government may notify, and it must be revised periodically. The recommendation of the Second National Labour Commission (2002) that the minimum wage rate be revised every two years, may be implemented.

(6) Inspector Raj: As was pointed out by the Prime Minister during his address at the recent Indian labour Conference, in most industries in China, a factory establishment is visited by a handful of inspectors, often not more than 5. In India, it has been estimated, a large-scale factory is visited by over 30 inspectors under various laws and rules and regulations. Hence, streamlining of the present inspections regime is an important issue. Satisfactory answers to the following questions will have to be found for this issue to be resolved. • Can the inspection system be replaced by a system of self-certification? Can self-certification be introduced for all labour laws or

whether it may be desirable to have it in case of selected labour laws only? What are the correctives which may have to be prescribed to cope with the problem of moral hazard which would be present under such a system? What may be the level of authority that should certify? What may be the frequency of inspection once this system is put in place? Whether simple certification would suffice or certification on oath/affidavit? The experience of some of the States which have introduced self-certification schemes would have to be critically examined in this context.

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• Can a system of labour audit on the lines of conventional audit be considered to cope with the shortcomings of the inspection system? Who would qualify to be labour auditors? Has this subject been discussed in the existing literature? What would be the merits and demerits of such a system? What changes would be required in the legal framework for having a system of labour auditors?

• The feasibility of replacing the system of maintaining multiple registers and records by one register for each broad area such as muster roll, accidents, wages etc. needs to be explored.

FICCI-AIOE

• The formats/returns under various labour laws need to be simplified, rationalized and consolidated into one common format/return. • The scope of – Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act 1988,

should be widened to cover establishments employing up to 50 employees. • FICCI had conducted a Survey on Inspector Raj and administrative reforms required for Indian Manufacturing. Respondents to the

Survey suggested the following measures to mitigate the severity of the problem: 1. Change required in attitude and mindset: from that of a prosecution mindset to a much more guidance oriented mindset 2. Inspections should be clubbed: formulation of a single/ few Act(s) covering all aspects related to labour, machinery,

environment etc. 3. All inspections to be carried out once in a year. 4. Maintenance of a common register depicting all details should be taken as sufficient proof of compliance 5. Prior permission from superior officers before checking a unit 6. Surprise inspections should be authorized by designated authorities and should be undertaken to investigate written

complaints, press clippings etc 7. Prosecution/ closure notice to be approved by a panel of independent experts 8. All records should be maintained electronically 9. Self certification should be allowed 10. Processing of all cases to be accounted for 11. Inspection once in 2 years 12. Renewal of license to be once in 5 years rather than once in 3 years

• Suggestions by respondents to FICCI survey pertaining to Labour Laws are given below: (1) Accept the Recommendations of the 2nd National Labour Commission. Specifically,

o Existing set of labour laws to be grouped into 4 or 5 groups of laws pertaining to industrial relations, wages, social security, safety, and welfare and working conditions

o There need be no statutory obligation for the employer to give prior notice, in regard to item 11 of the 4th schedule for the purpose of increase in workforce

o Definition of ‘Retrenchment’ to be precise, to cover only termination of employment arising out of reduction of surplus workers in an establishment

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o Prior permission not necessary in respect of lay off and retrenchment in an establishment of any employment size. Workers’, however, entitled to 2 month’s notice or notice pay.

(2) Definition of wages and workmen should be uniform in all labour legislations (3) License renewal requirement to be fulfilled once in 3 years (4) Inspections once in 2 years (5) Affidavit to be sworn that labour laws are being complied with (6) Single muster roll containing requirements of Factories Act, Minimum Wages Act, ESI Act should be implemented (7) Common audit questionnaire covering all labour legislations to be submitted to a single agency (8) Amendment to Section10 – Contract labour for non-manufacturing work be allowed, for canteen work, loading and unloading, transport, security etc (9) If a licensed contractor is hired, requirement of separate registration for employer should be waived (10) Amendment to Section 64 iv – Total number of hours of overtime of workers should be increased from 50 to 150 for a continuous process industry (for example, paper industry). The rate of overtime should be same as ordinary rate of wages instead of twice of the ordinary rate (11) Time limit given for registration and amendment to licenses, after 30 days of the submission clause of “deemed approval” should come into force (12) Self Declaration Procedures (13) Self Certification

CII • A common inspection should be carried under all labour and pollution laws, reducing the regular visits by the inspectorate. Inspections should be carried out once a year as per an advanced schedule and with prior intimation. Furthermore, it should suffice to have a common audit questionnaire, covering all Labour Legislation, filled by an employer and submitted to one agency.

• Surprise inspections must be authorized by designated authority and should be undertaken to investigate only the written complaints, press clippings, consent issue and renewal, and cases where legal proceedings need to be carried out.

• Prior approval of authority must be required for inspections against specific complaints. It will necessitate justifiable reasoning by the Inspectorate, reducing unnecessary harassment in the process. Furthermore, in case of written complaints, a copy of the complaint must be furnished to the management.

• A single Muster roll containing the requirements of Factories Act, Minimum Wages Act and ESI Act should be implemented. Such a measure would also obviate the need to maintain the following registers:

i. Register of Adult workers ii. Register of Child workers

iii. Muster Roll for exempted workers iv. Register of Compensatory holidays

• A single Accident-register should be specified for Factories Act and ESI Act.

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• Presently, a different Inspection Book is required for each of the various agencies relating to ESI/ PF/ Factories/ Other Labour Laws. Suggested to have a single Inspection book for all kinds of inspections.

• The Inspecting Officers should not insist on maintenance of manual registers, in cases where the requisite information has been computerized. With computers, any requisite information can be supplied immediately in the form of a neat and clear print out, without any misprint or over-writing or cutting.

• Fine register, Advance register, Leave register, Damage or loss register etc. can be consolidated into the Register of Wages. It will help save time, money, and energy for all the stakeholders.

• It is strongly recommended to reduce the number of Return Forms. Titles of different Forms and the information sought therein should also be rationalized to avoid duplication/confusion. Furthermore, the various Forms should be consolidated into a single booklet.

• As a longer-term measure, the formats for annual returns by industry need to be consolidated into one single format, the same as Core Return filed under the Labour Laws (exemption from furnishing returns and maintaining registers by certain establishments) Act, 1988. This provision may further be extended to medium and large-scale establishments. One Common Return is definitely more useful for all purposes.

• There should be self-certification in factory and labour laws for all industries except major hazardous industries such as petroleum refineries, cement, tanning, foundries, ceramics etc.

Centre of Indian Trade Unions

• Prime Minister’s anxiety about so called Inspector Raj in our Labour regime is altogether misplaced and unfounded.

Equally illusory is the story of 30 inspectors in India vis-a-vis 5 inspectors in China. In India, in reality the system of inspection has been practically dismantled and non-implementation of labour laws is being consciously promoted as a policy drive from the seat of governance. Most of the state governments have practically banned labour inspections through internal orders and vacancies of inspectors are not being filled even at the central level. Ninety per cent of the ongoing labour related disputes and agitations in our country pertains to just non-implementation of basic labour laws relating to payment of minimum wages, working hours, social security and trade union rights. Majority of the employers in our country are habitual offenders not only of the labour laws but also all the tax laws. Allowing them self-certification is tantamount to assigning the thieves to guard against the theft.

• Whatever simplification, labour audit, rationalising register-maintenance etc as being proposed may be thought about and exercised, but those cannot in any way replace the need for a well organized and well-manned system of regular inspection under various labour laws to be applied universally in all industries, occupations etc wherever the employer-employee relationship exists and hence should no way be compromised. And in the informal sector, where in majority of the cases the employment relationship is clouded and camouflaged (excluding the self-employment area), appropriate machinery should be put in place to save the workers from the anarchy of the employers and administration.

CII • Streamlining of the present system of inspection regime is highly desirable multiplicity of returns should be brought down. A

system of self- certification should be encouraged along with e-filling of returns.

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• The disputes should be solved directly between the workers and the management of the establishment. Alternatively the present

tripartite reconciliation process could be followed. In case there is less number of labour laws and the compliance of these laws are ensured the number of disputes will definitely come down.

HMS If inspector raj is to be reduced then it is necessary that besides self certification, the implementation rights for the labour standards/laws should be given to the unions and the workers and not just be the responsibility of the labour inspectors alone. That is, under the labour law, the workers and the trade unions should have the right of private action, rather than depending on the Labour Department to refer the case to the Labour Courts/Industrial Tribunals. The system of labour audits can also be tried out - to be conducted by certified labour auditors who should be under similar legal obligations as chartered accountants.

BMS Complete elimination of labour inspectors is not desirable as it will bring in jungle law in the industrial area. Inspector raj can be rationalised, but in no case it should not be totally eliminated nor totally replaced by self certification. No body would say all our employers are honest. Many of them are Shyloks longing for the money and flesh of the poor workers. Similarly is the case of labour audit done by Private auditors. So BMS totally rejects the idea of Self certification that will replace inspections, even in selected labour laws.

Dr. Kamala Sankaran

Reduction in the number of laws and corresponding authorities should result in the reduction of number of inspections. Already the proposed amendment of 2005 (bill pending in Parliament) of the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Central Establishments) Act 1988 proposes to reduce the umber of return submitted to the government. This can extend to all establishments.6 3.2 Self certification would be viewed with suspicion by the workers given the flagrant violation of labour laws by the employers. Instead, independent auditors could be appointed for this purpose. Currently under voluntary Codes of Conduct entered into by MNCs to satisfy labour standard compliance for their consumers at home, various auditors – sometimes the Big Four audit firms - certify compliance. The compliance is not with labour laws of the outsourced country of production but a common labour standard evolved by the manufacturer. There is a vast literature on codes of conduct, and voluntary non-official, third party monitoring. Certain standards such as SA 8000 deal with these matters.

6 The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Central Establishments) Act 1988 provides exemption to employers in small and very small establishments from furnishing returns and maintaining registers under certain labour laws. ‘Small establishments’ has been defined as establishments in which not less than ten and not more than nineteen persons are employed or were employed on any day in the preceding twelve months. ‘Very small establishment’ is defined as an establishment in which not more than nine persons are employed or were employed on any day in the preceding twelve months. The exemption is granted with respect to nine laws covering mainly laws relating to wages and weekly holidays. There is no exemption for the laws of social security at present.

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3.3 Codes of conduct can be noted in sectors where there is a link with international trade particularly in the Footwear, Textile and Clothing sectors. There is an aspect of territoriality to most labour laws within a country. When the production processes are diversified across countries, one means of ensuring certain minimum conditions of work has been through voluntary codes of conduct. These are often customer driven and/or adopted or subscribed to by the brand owner. Many of these codes adopt the ILO’s Fundamental Principles as their basic set of standards that they wish to ensure. These have had positive effects in the units engaged in manufacturing for the brand owners.7 However unions have expressed concerns that codes of conduct may result in the “privatisation” of labour administration. Further there is some evidence to suggest that MNC’s have been somewhat selective in their choice of issues to include in their codes.

3.4 There is a scope for introducing such voluntary codes in sectors where there is sub contracting to ancillary units, in order to ensure compliance with labour standards. Employers, subcontractors and trade unions agreeing upon the need to recognise certain minimum labour rights in the subcontracting chain and also arriving at mutually agreeable means of monitoring these codes could be considered. The incentive for voluntary monitoring would improve the credibility of the social partners to be seen to be committed to a policy of adhering to norms of decent work. While state based inspection systems are sanction based, such voluntary systems would be an incentive for the social partners, particularly the employers to improve their brand image. Voluntary codes would of course in no way supplant, but merely supplement existing inspection procedures.

Dr. Praveen Jha • In recent times, there has been much talk about ‘self-certification’. Sure enough, where feasible, such ideas may be experimented

with, but as part of system of well-organized system of regular inspection, and should not become an excuse for non-compliance of labour laws. Independent auditors, for instance, could be roped in, to monitor self-certification process.

(7) Industrial Disputes Act, 1947: Under the Industrial Disputes Act, 1947 downsizing cannot be resorted to without Government permission. The Act is applicable to establishments employing 100 workers or more. IDA has been one of the most controversial aspects of the on-going debate on labour law reforms leading to sharp, polarized views among employers and labour unions. Following aspects need clarifications for a satisfactory solution to the problem. What is the rationale for obtaining Government permission for downsizing the need for which may be arising due to sharpening economic competition? Has the prevailing legal framework really worked or has it created problems? What suggestions can be made for reducing the difference between the positions of the trade unions and employers? Is there any scope for reaching a common ground between the two positions? What has been the position of earlier Labour Commissions/ other relevant committees in this respect? What has been the international experience in this regard? To what extent will providing adequate compensation / or unemployment allowance to retrenched employees act as a reasonable solution? This requires fresh thinking and an examination of feasible ideas.

7 See the case study on Mabrouc dealing with forced and child labour in Rogovsky and Sims, Corporate Success through People, ILO, 22 (2002).

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The feasibility and desirability of having a system of unemployment insurance needs to be examined in this context. Under such a scheme a certain percentage of wages, which the worker was earning when he was employed, could be paid to him only during the first three years of his unemployment. The percentage of wages paid as unemployment insurance could diminish over the three year period.

FICCI-AIOE

• TITLE AND OBJECTIVE OF THE LEGISLATION: The existing title – Industrial Disputes Act, presupposes existence of disputes and limits the scope of the legislation to resolving disputes only. To amplify its scope and promote employer – employee relationship, the legislation should, be renamed as Employment Relations Act.'

• DEFINITION OF INDUSTRY: The definition of ''industry" under Section 2(j) had been amended in 1982, but could not be

enforced due to absence of a parallel machinery to investigate and settle the disputes in the excluded category of the establishments. Parliament in its own wisdom thought it prudent to save certain institutions like hospitals, education and research institutions from the vagaries of industrial unrest like strikes and lockouts, and kept them out of preview of Section 2(j). The amended definition of `industry’ should, therefore, be enforced forthwith.

• DEFINITION OF 'WORKMAN': Section 2(s) defining workman needs to be amended. Excessive protection given to the

employees in the higher salary brackets in the organized sector, like Airlines, Bank, Insurance, etc., has not helped to make these employees accountable to the establishment and the Society at large. On the contrary, it has tended to erode the overall discipline. It is, therefore, suggested that employees receiving a salary beyond Rs. 10,000/-, should be taken away from the ambit of the definition of ‘workman’. Supervisors, irrespective of the salary limits, should be taken out from purview of the definition of the workman.

• NOTICE OF CHANGE: Section 9-A requires an employer to give 21 day's notice to the Union before stipulating any change in

the service conditions. This includes, inter-alia, reducing or increasing the staff strength as necessitated by the business needs. This has operated as a serious bottleneck, in industries, which operate on exigencies such as executing extra orders or rescheduling the work to meet emergency demands. Therefore, to respond to the market conditions and make full utilization of resources available, Section 9A needs to be dropped.

• GRIEVANCE HANDLING MACHINERY: Section 9-C introduced by the Amendment Act of 1982 created a grievance

redressal mechanism at the enterprise level. It is yet to be enforced. In order to minimize the number of disputes, grievances need to be redressed at the initial stage. Section 9-C should, therefore, be enforced with suitable procedural amendments.

• DISPUTES RESOLUTION MECHANISM:

(a) Belated Disputes: The Industrial Disputes Act, 1947 does not put any time bar for filing belated claims or disputes for

adjudication, as a result, non genuine / fictitious cases are filed. With a view to reducing the burden on the Court and

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discourage non-genuine claims to be filed, a limit of one year should be fixed.

(b) Appellate Tribunals: The Labour Appellate Tribunals were abolished in 1954. This has overburdened, the work of higher judiciary, i.e. the High Court and Supreme Court, consuming a considerable time and cost. It is, therefore, necessary to revive Labour Appellate Tribunals which will be a part of the National / State Labour Commission.

(c) Publication of Awards: According to Section 17 of the existing Industrial Disputes Act, only a published award becomes enforceable on the expiry of 30 days from date of its publication. The requirement of publishing Award is a mere formality, consuming time and resources. The same can be communicated to the parties like a Judgment of the Civil Court, which should become enforceable on the expiry of 30 days after the Judgment, to give adequate time to parties to file Appeal, if it is necessary.

(d) Payment of Wages During Pending Proceedings in Supreme Court / High Courts: Payment of full wages to the workmen

pending proceedings in the Supreme Court, under Section-17(B) of the Industrial Disputes Act, 1947 is an iniquitous provision as much as the back wages paid to the employee is not recoverable, even if the award of the Labour Court / Industrial Tribunal is quashed by the High Court or the Supreme Court. It is recommended that Section-17 be deleted and the superior Courts be allowed to decide each case on its merits and Award appropriate relief to the Party.

(e) Strikes And Lock-Outs

India is perhaps the only country, where the requirement of strike notice, barring public utility service, is totally lacking. This does not give adequate time to the parties to take pre-emptive steps and avert the situation through negotiations. A reasonable period of notice of strike is, therefore, essential. Section 23 of the ID Act to be amended to provide that a three weeks notice of strike should be compulsory. Further, to democratize the functioning of trade unions, the Strike Ballot should be supported by at least 75% of the workers working in the enterprise.

Go-slow and work to rule are the most pernicious forms, even worse than strike. The economic loss caused by go-slow is far graver than strike. It has not yet been prohibited in our legislation. It should be recognized as a strike. To make illegal strikes more deterrent, it is proposed to provide for 8 day’s deduction of wages for each day of illegal strikes.

(f) Lay-Off, Retrenchment And Closure:

Chapter V-B of the Industrial Disputes Act, 1947, which provides for obtaining a prior permission of the Government for effecting rationalizing measures like lay-off, retrenchment or closure, hampers industry’s initiative to be competitive and face global challenges. In past, removal of Chapter V-B has been recommended by a number of Committees, including Inter Ministerial Working Group on Industrial Restructuring (1992) and Industrial Sickness and Corporate Restructuring (1993), which observed that Chapter V-B has proved detrimental to workers’ interest, hence, should be deleted.

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The Prime Minister’s Council on Trade and Industry under the convenorship of Mr Kumar Mangalam Birla in the year, 2000 had observed that certain global benchmark are necessary for running the business in the arena of globalisation. It, therefore, recommended allowing for right sizing by paying compensation. It further recommended seeking prior permission for closure only in the case where the establishment employs more than 1000 employees. The present Government should consider implementing the proposed recommendation to help industry to effect structural adjustment and be competitive. As lay-off is beyond the control of the employer and industry, and at times it is sudden, no permission to be required for effecting lay-off at least for initial 45 days. Provided, such a lay-off meets other legal requirements.

(g) Recovery Of Money Due-Section 33-(C) 2: To discourage the filing of fictitious claims, a one year time limit should be fixed for filing of claims before the Authority for recovery of dues by a workman under Section 33-C (2) and no belated claims should be entertained by the Court

(h) Voluntary Arbitration Must Be Promoted To Discourage Litigation: Section 10A, providing for Voluntary Arbitration, has failed in its objective. Arbitration should be promoted as an alternative dispute resolution machinery to discourage litigation. A panel of expert arbitrators to be drawn up for the purpose.

CII

• The State Governments, in exercise of the powers under Section 9-B of the Act, may grant exemption from the following provisions of Section 9-A:

I. Item number 10: Rationalisation, standardization or improvement of plant or techniques which is likely to lead to retrenchment of workmen; and

II. Item number 11: Increase or decrease in the number of persons employed. • The State Governments should add continuous process industry, hazardous industry and export-oriented industry to the 1st

schedule. This would not harm the interests of the workmen. It would only require them to give 14 days notice before going on strike so that the Conciliation Officer may induce the parties to come to a fair and amicable settlement of the dispute.

• There is need for simplification of rules for closure of unit and retrenchment, if the unit is not economically viable. Chapter V-B could be applicable only in respect of establishments employing more than 1000 permanent workmen. Permission under Chapter V-B should be given by the Labour Department as a matter of routine only, after a prima facie scrutiny. There should be deemed approval after time limit of one month.

• Currently there is no provision of limitation period for raising a dispute by a workman. Therefore, any workman is free to raise his industrial dispute anytime after arising of cause of action. There has to be a limitation period prescribed, say three years,

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under IDA, 1947 for the purpose of raising of the dispute. • Provision should be there on the issue of jurisdiction for entertaining an industrial dispute by the appropriate government.

Sometimes, an industrial dispute is being raised before the conciliation officer of State A, while the worker is engaged in an establishment situated in State B.

• The legal practitioners be completely banned to represent the parties to the industrial dispute, even if they are members of such Associations /Trade Union, specifically for proceedings before Conciliation Officer. Under Section 36 (3) no party to a dispute is entitled to be represented by a legal practitioner in any conciliation proceedings or in any proceedings before a Court. However, u/s 36 (1) such parties to the disputes can be represented only by any member or office bearer of a registered trade union/employer association, as the case may be. But, the legal practitioners/advocates, who are also members or office bearer of such associations/unions, are representing the parties before the conciliation officer/Court. The representation of such legal practitioners tend to make the disposal or settlement of labour dispute more cumbersome and time consuming, specifically in case of proceedings before the Conciliation Officer.

FISME The Labour Department has fixed a period of six months for filing of appeal with the Conciliation Board. The period should be reduced

to 30 days only. Although this was agreed to by the Labour Department, but necessary instructions were not issued. Chapter V-B should be repealed. There should not be any bar on closure, layoff and retrenchment.

HMS • HMS suggestions made under previous sections. BMS Chapter VB in ID Act, 1947: Government's repeated efforts to amend labour laws especially Industrial Disputes Act appears to be

totally against the interest of workers of the country. In the name of "greater employment generation" it discusses how best the existing employments can be taken away. Reducing workers in an establishment under the pressure of employer’s organisations, is not a simple thing. It involves the lives of several workers and their families; their aspirations and dreams about their future. Downsizing had been a curse to the organised sector and workforce is being marginalised to unorganised sector. How dare the Commission on Unorganised sector is also asking for easy methods of downsizing? Downsizing here means downsizing of the workforce. Making people jobless is a National concern, hence Governmental control is necessary. Hence downsizing is a social malady, for whatever reason whether it be arising due to sharpening economic competition or for other reasons. Because of the Governmental control, unscrupulous closures, retrenchment and lay off could be prevented. Hence the Commission may spend its valuable time for encouraging those who are running the industry and not for those who shut it down. Trade Unions cannot be expected to come down even an inch on these anti social activities of unscrupulous closing down industries. BMS has strongly opposed the recommendation of the 2nd NCL on Ch. VB of ID Act by filing a dissenting note. Unemployment allowance or insurance can never be a substitute for proper employment. Industry should not be allowed to lay-off without any sufficient reason and control. It is the demand of unsuccessful employers who are unfit to be the masters of industry. BMS proposes that the scope of Chapter VB should be enlarged further. Intention of Ch. VB is to discourage through prior permission procedure retrenchment, lay-off and closure, which are detrimental even to the society. Provision for Government scrutiny will discourage unscrupulous and malafide closure, retrenchment and lay off. Still at present this is only in a limited way. Hence we would

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recommend for – 1. Removing the limit of applicability of even 100 workers- In the changed situations due to downsizing, even the limit of 100 is

on the higher side. 2. Applying Ch. VB to all establishments in which employer-employee relations exist apart from the present position of

application only to factories, plantations and mines. 3. Workers be protected well in the event of unavoidable retrenchment or closure, by adequate compensation and provision

for re-employment.

Dr. Kamala Sankaran

4.1 This is the main legislation dealing with employment relations of the organised sector. Presently, every time there is a proposed change on working conditions, a notice of change has to be given to all concerned including the government under section 9A. This is a long drawn out procedure. As suggested by the Report of the Study Group on Labour laws of the SNCL, this can be done away with, in order that the needs of flexibility are met. Disputes dealing with any changes can be dealt with by the usual dispute settlement machinery. A Grievance Settlement Machinery as provided for in the Act needs to be put in place to deal with such issues.

4.2 The need for prior permission or post-facto approval for retrenchment should be done away with. This is also the view of the Report of the Study Group on Labour laws of the SNCL. At the same time the provisions relating to providing notice and retrenchment compensation should be extended to all establishments covered by law. In order to balance the address the concerns of the trade unions that redundancy benefits are needed particularly where loss of jobs and skills are a real threat, there is a need to balance any move to reduce the government’s role in permitting or not permitting retrenchment with an increased role in providing for unemployment insurance. The ESIC has recently in 2005 introduced an unemployment allowance for the first time. This is the Rajiv Gandhi Shramik Kalyan Yojna (Unemployment Allowance Scheme) launched on 1st April, 2005, granting an unemployment allowance of a maximum of six months duration during his/her entire service for a person who has been a member for at least five years. Based on this experience, the liability to pay the retrenchment compensation can be converted into an insurance-based, social security benefit. This would be in keeping with the shifts world wide from employer liability to insurance based social security. The scheme can be suitably broadened and modified to increase coverage. 4.3 There is need for the law to deal with recognition of trade unions. Any talk of increasing bilateralism and collective bargaining in employment relations requires this. There is also a need that industrial disputes be allowed to be raised before labour courts/ designated authorities by either workers or employers, even without the reference from the government, as is the case at present. The central role played by the government in labour adjudication has been a factor to hamper development of healthy labour-management relations. 4.4 The question of whether there is a moral and also a legal right to strike has been an important question in recent years, following the Supreme Court judgement to that effect while commenting on a strike by government employees of Tamil Nadu a few years ago. . At the present time, there is an implied right to go on strike in non-public utility services under the IDA. However, in the case of public utility services, strike notice is to be given and upon notice being given such strikes are prohibited unless conciliation fails. In effect, a legal strike is virtually impossible in a Public utility service. In the case of essential services, strikes are banned strikes are liable to

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criminal action. The list of what constitutes public utility and essential services is a long one. SEZs are likely to be included in this list. Rationalisation of what constitutes essential or public utility is required. What is also needed is creation of adequate mechanism to resolve grievances and disputes. A gag order in the form of a ban on strikes does not seem to be the answer. The alternative seems to be creation of a Grievance Settlement Authority in such services/utilities or arbitration from a panel of arbitrators or mediators. The present reliance on conciliation by a government conciliation officer does not seem to have worked. It needs to be clarified, that the IDA has no application to government servants who are covered under various conduct rules; conduct rules have always prohibited strikes by government workers.

Dr. Praveen Jha

• As discussed earlier, there is very small part of the country’s labour market, namely the organised sector, which is relatively inflexible. Attempts to increase flexibility in this segment, wherever desirable, must be accompanied by social security measures. For instance, expanding unemployment insurance and/ or other support measures including training and skill upgradation for alternative employment options, under the social security laws would seem a necessary step if a change in the IDA provisions with respect to retrenchment and lay-off are being contemplated.

(8) Contract Labour (Regulation and Abolition) Act, 1970: Given the competitive pressures, businesses are constantly striving to increase efficiency by cutting costs. Employment of contract labour is one of the ways in which such cost cutting is being attempted. Following questions appear relevant in this context:

What are the ways in which the employment of contract labour can be encouraged without making the employees feel that they are losing out in terms of important benefits? How can flexibility in employment be promoted best---by putting aside a few categories of occupations in a list which is exempted from the provisions of the Contract Labour Act or by putting a ceiling on the percentage of labour force which could be employed as contract workers by an enterprise. What are the merits and demerits of the two systems?

FICCI-AIOE

• To respond to the changing needs of the globalised economy, the contract labour legislation should be made flexible and employment friendly. The Contract Labour (Regulation and Abolition) Act, 1970 should therefore be amended on the pattern of Andhra Pradesh Contract Labour Legislation.

• The existing social security schemes should be further simplified to cover and extend full benefits to the Contract workers. In this

context, the following amendments are suggested:

1. Employee State Insurance (ESI) benefits should be made available to all employees including contract employees from the day of making contribution instead of waiting for the corresponding benefit period. Services of the ESI dispensaries should be qualitatively

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strengthened.

2. A comprehensive social security network needs to be developed, integrating EPF, EPS & ESI Schemes and a common number be allotted for each employee to make contributions and avail benefits under this integrated scheme.

3. EPF Scheme should be amended to introduce Passbook system for contract/temporary/transitory workers and contribution, so

paid, should be in the form of Stamps which may be encashed after certain lock-in period.

CII • Licensing and Registration should be done at the district level in a time bound manner. Furthermore, it is suggested that once the contractor is licensed, there should be no need for separate registration for the principle employer.

• If no action is taken within 30 days of applying for registration and license, the State rules should be amended to provide for deemed approval.

• The procedure of applying for amendments in the registration certificate is non-productive exercise, and hence should be discontinued. A compulsory intimation to the appropriate authority for change in contractor’s name with valid licence should suffice in lieu.

• Requirement of permission for contract labour in non-core activities is an avoidable exercise. Under Section 10 of the Act, the State Government is fully empowered to exempt Industries from the applicability of this Act and allow use of contract labour for non-core activities like cleaning, security, gardening, loading/unloading etc. Fixed term employment of contracts should eventually be allowed in core activities, as has been done in China.

• There should be specific provision pertaining to non-applicability of Industrial Disputes Act, 1947 in case of dispute concerned with labour appointed under the provisions of this Act.

FISME With the liberalisation of economy, competitiveness can be achieved only through productivity of resources. Productivity of work

force is thus the need for the hour. It has to be admitted that productivity has been comparatively very low in our country leading to high cost of low wages. This is not to argue against creating permanent jobs but to highlight that the work load which are of uncertain quantum or transient or not the main line activity of an organisation should be allowed to be filled by the contract labour. Looked at differently, the contractor is an entrepreneur with insufficient resources for creating his physical facilities. He should not be prevented from taking up that he does jobs on the sole strength of his labour force. At times such contractors have graduated to full scale entrepreneurs and have set up their own enterprises.It is the low productivity, indiscriminate employment of work force and wrong policies that have forced PSU to offer golden hand shakes, etc. out of compulsion to become economically competitive. Thus in the present context of globalisation the employers may not be barred from opting for the services of contract labour. This will help them to remain lean and cost competitive specially in the SSI and Medium Sector.

Under Section 10 of the CONTRACT LABOUR (REGULATION & ABOLITION) ACT. 1970, the State Government is empowered to prohibit employment of contract labour in any industry or class of industries. The Government of U.P. in exercise of this power has

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prohibited employment of contract labour in engineering Industries as well as Textile Industries on the lobs stated in the relevant notification. It is submitted that practical approach be adopted by the State Government in prohibiting employment specially in relation to smaller units. It is reliably learnt that in the Advisory Committee constituted for the purpose of studying employment of contract labour in engineering industry, the industry was not represented. A review of the notification for Engineering, Textile as well as for Sugar Industry is called for an is absolutely imperative in consultation with the actual representation of the concerned industries. The experience says that the work done through the contractor is more efficient and better performed as well as quality wise. The only thing is to be ensured that benefits of wages, ESI, PF, etc. are available to contract workers or not. Contact labour should also be permitted to exporting units because their nature of business is essentially order based and orders have to be executed within the stipulated time. There is, therefore, need for total flexibility in employing workers.

HMS HMS suggestions made under previous sections. BMS Commission seems to be confused on the concept of cutting of costs of an Industry. Cutting of costs does not mean only cutting of labour

costs. Over emphasis on labour costs remains in areas where age old methods, obsolete technology, absence of periodical technical or technological improvements occur. Cutting of costs should never mean cutting the human element in it. Employment of contract worker is another name of exploitation of workers in inhuman working conditions. Some of the exploitative advantages of the employers through contractualisation includes: Non payment of proper wage or low wages, no necessity to pay allowances, fringe and other benefits, no contribution to social security measures like EPF & ESI, easy dispensability by termination of contract, unspecified work load and working hours, absence of trade unions, squeezing worker to the maximum under force, coercion and fear of insecurity, minimum litigation etc. At every termination of contractor, there is an artificial break and the contract labour also gets terminated. In such a compelling situation, hapless contract worker has to compromise with poor working conditions without protest. Management should not make undue gain by contractualisation of regular jobs. So it is anti national to think that contract labour should be encouraged. Guarantee of minimum days of employment is also no solution or alternate.

Dr. Kamala Sankaran

In order to deal with the increasing use of contract labour and outsourcing the Contract Labour Act creates the framework for regulating the legal relationship between the user enterprise, the contractor and contract labour. The Act lays down minimum conditions under which contract labour may be employed. The NCL has recommended that barring ‘core’ activities, contract labour may be used in all other aspects of the establishment.8 In such non-core activities, the ‘abolition’ part of the law would not apply. The ‘regulation’ part of the law would in any event overlap with other laws laying down minimum standards of work. A listing in the schedule of what constitutes such non-core activities can be listed, in addition to a stipulation that disputes could be raised about whether any activity not mention in the scheduled list would be a core or non core activity. These matters would need to be adjudicated upon and cannot be left to be resolved administratively by the Contract Labour Advisory Boards as at present. It is a moot point whether the increase in the use of contract labour has increased employment in any sector. However there is no doubt that there are financial and other gains (supervisory duties and risks get transferred on the contractor) to be had for the employer by replacing

8 The Act at present allows the use of contract labour to be abolished by the appropriate government in perennial activities.

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permanent workers by contract workers. While one may not be able to establish an employer- employee relationship (in all cases) between the principal employer and the contract labour, in India, it is rare that the contractor is considered an employer; rather he is treated as a mere labour supplier. Yet theoretically the contractor is the employer. Yet one does not come across a contractor who deploys his contract labour at various sites for use by other principal employers, and who pays provident fund or ESI contribution as an employer. Many contractors are fly by night operators which is why trade unions and workers wish to be absorbed by the principal employer. It would shift the focus of the current debate and give the needed security to the workers if the law were strictly enforced and the contractors made to discharge their duties as employers.

(9) Sectoral Demands: Demands have been voiced that if economy-wide labour reforms cannot be implemented immediately, attempts may be made for providing flexibility in labour laws at least in certain areas, eg Textile industry, SEZs. (a) Textiles industry: Recent press reports indicate that the textiles industry has demanded that the industry be allowed to engage contract labour with some guarantee of minimum days of employment together with an increase in the number of working hours. The industry may also be allowed to lay off workers by giving adequate compensation. In this context, following issues need clarification. Whether existing laws allow for seasonable employment? If not, what is the best way of meeting the requirements of such units which are catering to the export markets. What is the position in the agro processing industry which also is a seasonal industry? The cause of seasonality in demand for labour could be either due to seasonal demand for the output or seasonal nature of raw materials availability. Whether such a distinction in the cause of seasonality be relevant while framing relevant legislation? (b) Special Economic Zones: Special dispensation for Export Processing Zones (EPZs) was accepted at a time when foreign exchange was scarce. However whether the same logic can be extrapolated to the Special Economic Zones (SEZs) in the present context needs to be examined. If the promotion of SEZs is to be viewed as part of a growth strategy to increase employment, then the question arises as to what is the best way of promoting growth – whether through giving exemption to selected production units from applicability of labour laws or through other promotional measures. The relative importance of the two sets of factors needs to be examined. Other promotional measures for increasing growth and employment generation need to be identified and recommended for adoption. In any case 92 % of the labour force is in the unorganized sector where most of the labour laws are not applicable. The NCEUS’ approach of `Growth Poles’, for accelerating growth through interventions in social and physical infrastructure, needs to be examined.

FICCI-AIOE SEZ's are the springboards to boost exports, therefore, an effort to free them from the shackles of the existing Labour Laws, is

necessary. In this context, the following modifications are proposed to be applicable to the Special Economic Zones. • Section 66 of the Factories Act, 1948, which does not allow women to work between 7 p.m. and 6 a.m., is coming in the way of

increasing productivity in certain export oriented units like IT and IT enabled services, garments, handicrafts, electronics etc. which are employing women employees. This restriction should not be applicable as far as the SEZ's are concerned.

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• The SEZ's have demand led schedule of production. When the orders are not in hand, they cannot carry on the load of surplus

workers. They should therefore, be allowed to engage contract labour freely. Alternatively, Government may also consider to give SEZ's the status of seasonal industry to allow them to lay-off workers during lean seasons, on payment of some retaining allowance.

• Certain operational restrictions like advance notice of change of shift, or other minor changes in the service conditions as mandated

by Section 9-A of the Industrial Disputes Act, 1947 or Section 66 of the Factories Act, should not apply to the SEZ's. • Only the following basic labour legislations should apply to the SEZ's in order to ensure exploitation free working environment.

1. Minimum Wages Act, 1948 2. Payment of Wages Act, 1936 3. Employee's State Insurance Act, 1948 4. Employees Provident Fund Act, 1952 5. Payment of Bonus Act, 1965 6. Payment of Gratuity Act, 1972

• Only a single combined return should be required to be submitted for the compliance of these legislations and the

Rules framed therein. • No inspector, without a written permission of a senior officer, not below the rank of Additional/Deputy Labour

Commissioner, should be allowed to visit the SEZ's for any inspection. An advance notice of at least 7 days to be given before such inspection.

HMS The demands of the textile industry are not much different from other industries. Textile (as also any other industry) needs to respect the

workers right to organize and right of collective bargaining. The issues of work place flexibility (in working hours and labour deployment) can be negotiated at company level rather than giving blanket permissions or changing any labour laws.

BMS Trade Unions in the country have already declared that EPZ cannot be exempted from applicability of labour laws. 2nd National Labour Commission was right in rejecting the demand for exempting export processing zones and special economic zones from the purview of labour laws. The labour laws being prescribing minimum conditions, they must govern all the Industrial activities relating to workers equally. Experience of China is worth mentioning. In special economic zones of China foreign investors want flexible licence procedures and not flexible labour laws. So in successful Chinese industrial sectors flexibility has a positive meaning. But in India the word “flexibility” has an entirely different and negative meaning. Flexibility should not mean separating workers from the industry. So there is no question of bringing flexibility in textile industry, SEZs. etc.

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Dr. Kamala Sankaran

6.1 The concerns of the manufacturing sector which is seen as a sector affected by labour laws deal mainly with the IDA concerns of notice of change, retrenchment and lay-off. At present the provisions of lay-off do not apply to all workers. Just as in the case of retrenchment, the need for prior permission or post facto approval for lay-off should be done away with. In the case of short term employment for fixed periods, the law as amended in 1982 is clear that liability to pay retrenchment compensation will not arise. In the light of the point raised earlier in paragraph 4.2 for insurance based unemployment allowance, the vulnerability of such short term employees can be addressed by the social security system.

6.2 Textile Industry and Women: The long run experience of the developed countries suggest that increased participation of women on equal terms in the work force have been associated with growth in productivity and a greater labour force participation of women. The question of whether prohibiting night work for women is discriminatory also needs to be assessed. The Indian Constitution permits that the State may make special provisions for women and children. On the basis of this provision, affirmative action taken in favour of women is not in violation of the provision of the Constitution that the State shall not discriminate against any citizen on the ground only of religion, race, caste sex, place of birth or any of them. As a result if the ban on night work by women is seen as a case affirmative action towards women or as protective legislation to benefit women, such legislation cannot not be held to be discriminatory solely on the basis of sex, since positive discrimination on the grounds of sex is permitted to protect women. The SNCL has recommended that the ban on night work by women can be lifted if the number of women workers in a shift in an establishment is not less than five, and if the management is able to provide satisfactory arrangements for their transport, safety and rest after or before shift hours.9

6.3 Granting exemption to SEZs appears controversial. The SEZ Act of 2005 does not deal with such exemptions from labour law. At present, labour inspection and enforcement of labour laws in such zones have become law priority for the government. As pointed out be several studies, low labour standards are not positively related to growth. Hence the myth in the minds of employers and the government needs to be challenged about the ‘detrimental effects of labour laws’. In addition any talk of complying with decent work norms or the ILO’s mandatory Fundamental principles and Rights at Work would be incompatible with any exemption given to labour laws.

Dr. Praveen Jha • Sometimes, one hears the argument that specific areas, such as Special Economic Zones, should be out of the coverage of labour laws; such arguments are simply ludicrous and absurd. Such a demand was rightly rejected by the Second Labour Commission on Labour.

9 See Report of the National Commission on Labour (2002) at http://www.labour.nic.in at para 6.121 (d). Unlike in countries in Europe who have denounced Convention Nos. 41 and 89 on the basis that women do not require protection except in cases of pregnancy and maternity, trade unions in India argue that there is a need to continue to prohibit night work of women. Since factories employing women are in the export sector, it is argued that the demand for permitting night work is driven by the need to have a third shift rather than an assessment of women workers real position in the workplace.

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(10) Labour standard and size of establishment: Whether labour standards can be divided as core labour standards which are applicable to all enterprises and other labour standards which may be linked to the capacity to pay of an enterprise. Core labour standards may include standards relating to treatment of hazardous material, prohibition of child labour etc.

FICCI-AIOE • A separate set of simple labour laws should apply to enterprises employing less than 50 employees to promote small and micro-

enterprises.

CII We feel there is a need to have core labour standards, which are uniform for all sets of Industry, irrespective of its nature.

HMS The rationale for SEZs/EPZs is not clear under the current era of economic liberalization. Given that under the new economic policies, export promotion is one of the main thrusts and the whole of the industry/business services, etc are supposed to export and earn foreign exchange, it does not make sense to have separate special economic zones or EOUs.

(11). Dispute resolution machinery and better enforcement of workers’ rights: How can enforcement of labour laws be improved? How to limit the extent of judicial scrutiny so as to check the number of cases that end up as court cases? How can the process of in-house/domestic disposal of dispute or grievances within an establishment be made more fair, just and transparent? How can the process of collective bargaining be improved and made more effective in solving disputes? How can mediation and arbitration provisions of the labour laws be strengthened?

6. FICCI-AIOE To reduce multiplicity of trade unions, only trade unions having membership of at least 25% of the total work force in an enterprise should be registered. Section 4 of the Trade Unions Act, 1926 to be amended accordingly.

• Absence of a Recognised Bargaining Agent, weakens the process of collective bargaining, opening scope for litigations. The

Trade Unions Act should, therefore, provide provision for recognition of the Bargaining Agent. • A union with 51% membership should be recognized as the Sole Bargaining Agent. In case, no single union has 51%, the top 2-3

unions with more than 25% membership may come together to form Joint Bargaining Council. A union with less than 25%

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membership should not have a right to challenge a collective agreement nor raise a collective dispute. A new provision in the Trade Unions Act should therefore be inserted suitably.

• The number of outsiders in the Trade Union Executive should be restricted to a maximum of two persons and out of the two top

positions of 'President' and 'General Secretary', at least one post should be held by the internal employee. Section 22 of the Trade Unions Act should be amended accordingly.

• Registration of a Trade Union should be compulsory and the registration is liable for automatic cancellation if the Union fails to

hold elections every year, and also does not submit return in time to the Registrar of Trade Unions. • Adequate arrangement should be done including amending section 16 of the Trade Union Act, 1926 to insulate trade unionism

from politics. • Adequate provisions should be made by the State to professionalize trade union movement and impart them education and

training about not only the rights of workers and unions but also the factors affecting business success and economic and social development of the nation.

• Verification of membership of the Trade Unions should be done through the ‘check off’ system and all critical decisions affecting the operation of the industry should be taken by a ‘secret ballot’.

BMS In the name of “better enforcement of worker’s rights” it is better not to limit the present extent of judicial scrutiny. The existing

adjudicatory and other authorities have to continue, they should not be reduced, but can be rationalised. We do agree that in-house or domestic resolution of dispute or grievances within an establishment should be made fairer, just and transparent. Collective bargaining should be improved, and mediation and arbitration should be strengthened.

Dr. Praveen Jha • The enforcement infrastructure and processes are extremely weak in India, which need to be addressed, at different levels, and on an urgent basis.

• Transparency, simplicity, effective implementability etc. are obviously the key operational issues in any system of labour legislation, and must be addressed. However, prior to the issues related to monitoring, one has to necessarily, be clear about the basic vision that forms the foundation of such legislations; the core of such a vision must be right-based, where workers have rights as workers and as citizens.

(12) Miscellaneous issues:

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6. FICCI-AIOE Provident Fund Act

• Since a number of changes in the EPF Scheme are under implementation, our major recommendation is to cover effectively the

unorganized and migrant workers. The EPF Trusts should be given a wider choice of investment to increase the yield and the yield should be automatically linked with the interest to be credited to the subscribers account.

Employees’ State Insurance Act

• ESI beneficiaries should be allowed to go in for treatment from approved hospitals/doctors and not just the ESI hospitals alone. The ESI authorities may negotiate and fix rates for the purpose. Buying medicines from private sources may not be allowed.

• ESI benefits should be allowed during post-VRS period subject to contributions as applicable. • There is a need to either privatize ESI dispensaries/hospitals or run them as autonomous institutions. • A one-time amnesty be granted to bring on board all covered establishments/workers under both the social security Schemes

viz. ESI and EPF & MP Act.

7. CII The Factories Act, 1948 • The State Government should use its powers under Section 65(2) of the Factories Act and grant exemption to all EOUs from all

provisions of Section 51, 52, 54 and 56 of the Act. Thus, the working hours should be increased from 48 to 60 per week (Section 51), from 9 to 11 per day (Section 54) and spread over from 10.5 to 13.0 hours per day (Section 56).

• The State Governments should facilitate two-shift operation with women workers and may require the management to make adequate arrangements for their transport and security.

• The relevant Rules should provide that the building plans are accompanied by a certificate issued by a qualified person, who is in the panel approved for this purpose by the Chief Inspector of Factories. There should be deemed approval from the Chief Inspector of Factories or the concerned local authority, within 15 days of submission of such plans.

• There should be exemption from the provisions of crèche under the Factories Act, since this is generally a redundant exercise and provides scope for undue harassment by the inspectors.

• Electronic requests for leave, etc. should be allowed. • Given the large number of issues relating to labour reforms. We feel that the prioritization be based on less contentious issues

so that those could be taken up without arousing much controversy.

BMS Commission while going into the details of the issues related to organised sector, as usual of all the recent Commissions related to labour, the trend of the questionnaire in general is in favour of management and not for improving the interest of Labour. eg. Downsizing, Ch.VB, self certification, contractualisation etc. On many anti labour issues the Commission expresses pre-conceived and established views. From the questionnaire the activity of the Commission appears to be a sponsored programme of the management

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organisations with the agenda set by them. This is in violation of the express commitment in National Common Minimum Programme of the present Government that “it will see that the changes in labour laws will fully protect the interests of workers and families and will take place after full consultation with TUs.” In the new era of globalisation, workers are looking upon every change proposed in labour laws with caution. So only those recommendations that can create confidence among workers are required. Till then BMS will say ‘no’ to reforms. Many of the topics were discussed in depth by the 2nd National Commission on Labour. Those discussions where BMS has not submitted dissenting note should be made use of for the base paper and the views of Trade Unions should be called for. Other wise again discussing those issues afresh will be wasting of time. The time, voluminous work and efforts done by 2nd NCL which are not against the interest of Labour should be made use of to the maximum by this Commission. In no case the working hours should be increased more than 8 hours a day. Regarding seasonal employment the existing provisions in ID Act are more than sufficient even in units catering to export markets, agro-processing industry etc. No change or new provisions are required. At the international market the question of compulsorily linking social clause with standards relating to treatment of hazardous material, prohibition of child labour etc. is to be opposed since such a situation stands on a different footing. Definitely there is a need to link labour laws in the unorganized sector to the enforcement of a set of core labour standards. So priority should be for assuring at least minimum legal protection, minimum wages, minimum service conditions and social security for the workers in UO sector. For the purpose already several Commissions have submitted their reports and several drafts of unorganised sector bills have been discussed in tripartite fora at various levels. The proper prioritization would be based on less contentious issues so that these could be taken up for implementation without arousing much controversy. Now the only good thing that can be done is to pass and implement at the earliest point of time the Bill that has been unanimously approved by the tripartite body.

Dr. Kamala Sankaran

7.1. Link between unemployment insurance and flexibility: Expanding unemployment insurance under the socials security laws seems to be a necessary step to change the IDA provisions with respect to retrenchment and lay-off. As discussed above in paragraph 4.2 the concerns of the workers vis-à-vis redundancy and subsequent loss of livelihood needs to be seriously addressed. This needs to be studied and implemented soon on a priority basis.

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7.2 Enforcement: Unless there is better enforcement of labour laws relating to the unorganised sector, say, like the minimum wages act or the workmen’s compensation act, the capacity of the government to implement the proposed unorganised sector legislation is very doubtful. Setting a national minimum wage and demonstrating its capacity to implement its laws seems a critical test for the administration to fulfil. 7.3 Privatisation: Disinvestment of certain public sector units has meant that these corporations cease to be ‘State’ for purposes of Article 12 of the Constitution, and instrumentalities of the State. As a result, employees in these units lose their rights to take action against these units and treat them as violation of their fundamental rights. In the case of the managerial and administrative cadre, this loss of a remedy is crucial because under the labour laws applicable to private firms they find that the Industrial Disputes Act does not provide the managerial or administrative cadre a avenue for dispute settlement! At the other end of the spectrum, contract labour hired by public sector corporations too will be unable to use the writ jurisdiction to seek remedies. Rationalising the coverage of the labour laws becomes all the more important in this context. In many other ways privatisation has not yielded a level playing field for these erstwhile state entities. To cite one example, public sector undertakings, whatever is their equity dilution, are subject to the Right to Information Act unlike their equivalent private sector enterprises. Being subject to reservations, being compelled to advertise and select person through the Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959, continue to be apply only to the public sector.

Dr. Praveen Jha • Legal provisions to ensure greater attention to the investments in human capital of workers have been hitherto a seriously neglected area. Lessons from the East Asian countries may be instructive, as initial steps, in this regard.

• Formal education always does not match with the industrial requirements. Laws may be put in place which encourages industries to assist in skill development of the workers. There is a need to revamp the existing technical and vocational training courses in cooperation with the concerned Industry Associations.

• Absence of social security provisions has been among the biggest problem towards efficient functioning of India’s labour market. Recent proposal of NCEUS, aimed at social security for unorganised workers may be seen as an important first step in this regard.