Criticism of the proposed Code on Social Security has resulted in dropping plans to corporatize the Public Provident Fund

Major Labour Legislation is on the anvil and was open to public comment till October 25, 2019. Public criticism has forced the government to change its policy.

No these are not gagged union members. We still have time to comment on the proposed Code on Social Security! Binay Tiwary a union official from the Steel Industry offers a face mask to a rickshaw driver in pollution ridden New Delhi

Published October 15, 2019. Edited December 2, 2019
Have unions in India, lost their historic opportunity to represent India’s workers? Given India’s socialistic roots, unions in India have over the last 72 years since Independence been given a series of legislative statutes that have attempted to strengthen the hands of workers and supervise corporate Managements. Depite these laws and a willing partnership with virtually all the political parties. Unions in India may have squandered their opportunities to recruit members among the 93 percent of Indian workers who are not unionized. Only 3 percent of India’s workers are unionized at this point.

Global trends, new technologies in India and abroad  indicate that the union movement is seriously under threat.  New aggregation tools like Uber software for drivers, or the OYO reservation system for independent hotels, new management practices such as the increased use of contract labour and the privatization of government services have together taken large chunks of people out of the union ranks. The meteoric rise of new technology driven non union companies like Amazon have also dramatically reduced the role of organized labour in today's economy.

Given these developments this article attempts perhaps a historic survey of labour law can give us some clues as to the best way forward for workers.

One way we can re-boot the relevance of the union movement is to replace this plethora of laws with a small number of updated laws that simplifies and supercedes the current maze of laws and regulations. Public criticism of the (Draft) Code on Social Security 2019 has resulted in the labour ministry dropping its proposal to corporatise the Employees’ Provident Fund Organisation (EPFO) and instead dust off its earlier proposal to set up a body headed by the Prime Minister to oversee the social security of nearly 500 million workers. The move comes after it was pulled up by the Prime Minister’s Office.

The original draft code on Social Security should still be available at the link below:

This proposed law as above covers the various instruments through which a worker can save up for retirement. This includes: Provident Fund, ESIC, Gratuity, Maternity Benefits, Unemployment Compensation, Building and Other Construction Worker Cess, also Unorganized Worker benefits etc.

Since this would be a major step impacting approximately half a million workers, it would be a good idea to read review the provisions of the Draft Code on Social Security 2019 at the above link. Meanwhile, if you would like to know how we got to this point, there is a brief overview of the legal system as it evolved, below:

Labour law defines the rights and obligations of workers, union members and employers in the marketplace. Labour law covers the tripartite relationship between workers, management and the union. It also covers the individual’s contract with the company and employee rights and responsibilities. We can further divide Labour Law thus: 

Industrial Relations: Certification of unions, labour management, collective bargaining & unfair labour practices and, 

Workplace health and safety: Employment procedures, incl public holidays, leave, work hours, unfair dismissals, minimum wage, lay offs and severance pay.

Labour unions arose during a time when most workers had to deal with obvious exploitation, unsafe working conditions and very little scope for redress of employee issues because previously protections for workers were not built into legislation nor was there adequate judicial oversight or case law.

The Factories Act, 1893: In India, labour law began to be enacted in an effort to address the needs of colonial employers. The 1893 Act, was initially a response to lobbying from the textile magnates of Machester and Lancashire and designed to make Indian goods more expensive. In the process, several welfare oriented provisions were passed such as abolition of child labour, the eight hour work day, and the introduction of overtime time for work over eight hours.

The Trade Union Act, 1926: The Act provides for registration of Trade Unions so that unions can lawfully bargain collectively. The Act extends to all of India and applies to all kinds of unions of workers and associations of employers which seek to regularize labour management relations. A Trade Union can be temporary or permanent, formed for regulating relations between workmen and employers but also between workmen and workmen or between employers and other employers. The Act like many included here has been updated on occasion.

No strikes or Lock outs: The earliest Indian law to directly impact the Indian employer and his employees was the Trade Dispute Act of 1927, which restrained the right to strike or lock out.  No dispute resolution mechanisms were included at this point.

Independent Indian support for labour: Even before Independence, the Industrial Dispute Act 01.04.1047 came into being with some protections for workers and assurances for employers alike. in December 1947 a tripartite conference was called that laid out a three year plan for uninterrupted production for employers and fair wages/ working conditions for labour.

Dignity of Labour: Since Labour legislation was listed as a concurrent subject (for both state legislatures and parliament to rule on,) the Indian Constitituion in Chapters 3 and 4 recognized the dignity of labour and strengthened provisions for workers in line with Fundamental Rights of the individual and Directive principles of State policy. The Universal Declaration of Human Rights in 1948 by the UN also strengthens Human Rights for Indian workers.

Labour laws have also been impacted by International and Indian Labour Conferences and the recommendations of various Indian Committees and Commissions. (1969, 1991 and 2002). Also legal judgments relating to bonded/child/contract labour etc. State legislation and judgments on a variety of issues also shaped the discussion.

Judicial Redress: In addition to the regular judicial court system there is also a system of Labour Courts that allow both employers and employees to file complaints as a first line of redress. Each State has its own labour laws (Maharashra alone has almost 60!)

Types of Labour Laws in India:

Laws pertaining to:
-          Industrial Relations such as the Industrial Disputes Act of 1947
-          Wages, such as the Minimum Wages Act of 1948
-          Working conditions (for different types of workers such as Miners, Journalists, etc.
-          Equality and Empowerment of Women such as the Maternity Benefit Act, (laws are also emerging to protect the handicapped, transgendered people etc.)
-          Deprived and disadvantaged sections of society such as the Bonded Labour Act of 1976.
-          Social security, such as the Unorganized Workers Social Security Act of 2008.
The Payment of Wages Act, 1936 regulates wages, wage periods, mode of payments and permitted wage deductions.
The Minimum Wages Act, 1936 considers factors like region, nature of work and minimum wages payable to skilled and unskilled labourers.

The Industrial Disputes Act 1947 (IDA)*: Regulated the rights of employees and the settlement of disputes harmoniously with provisions regulating strikes, layoffs, unfair labour practices, even lockouts and the closure of an establishment.

According to the Act, unfair business practices are unlawful. These includes threats of dismissal for joining a union, threatening to lock out to prevent formation of a union and granting wage increases at critical points to undermine the formation of a union. Also disallowed is the formation of employer sponsored unions.

The Factories Act of 1948 regulates working conditions in manufacturing units such as cleanliness, bathroom facilities, availability of canteen (for establishments with over 250 employees), The Act was amended to allow night shifts for women provided safety and protection are maintained. Factories that engage in hazardous activities are listed under a separate schedule and have additional requirements.

The Shops and Establishment Act regulated wages, other service terms, days off, working hours, overtime etc. for those employed in retail establishments (including charitable trusts and educational institutions). It was initially passed in Bombay in 1948 (later updated in 2017). Each State then developed their own versions of the Act.

The Employee State Insurance Act of 1948 is an Act that applies to employees of firms with over ten employees (If no power is used in manufacturing, the qualifying limit for such firms is 20 employees). Casual and Permanent employees earning up to Rs. 21,000 per month are now eligible. The ESIC Act is sometimes not followed by uninformed or callous employers. Activists must therefore familiarize themselves with its provisions and take action where necessary.

A June 14, 2019 report in the Economic Times says, “the government has reduced the contribution under the Employees’ State Insurance (ESI) Act to 4% from 6.5%.....This includes a reduction of 1.5% in employers’ contribution to 3.25% from 4.75% and 1% reduction in employees’ contribution to 0.75% from 1.75%.

The Employees Provident Fund Act of 1952 applies to all firms that employ 20 people or more. The Fund is available for those who earn up to Rs. 15,000/month. Three schemes available:

1. Employees Provident Fund Scheme                                1952
2. Employees’ Pension Scheme                                           1995
3. Employees Deposit Linked Insurance                              1976

The Maternity Benefits Act of 1961: The Act applies to any business that has ten employees or more. It does not apply to establishments covered by the Employee State Insurance Act, 1948. State governments can extend it further to other categories of workers if deemed necessary. Every pregnant woman is eligible for six months wages after (and including day of) delivery at the average daily wage. She is eligible if she has worked for at least 160 days in the 12 months pior to her delivery. The benefit applies also in cases of miscarriage or death during delivery,The maximum maternity benefit payable is twelve weeks (six before and six after delivery). She may not be laid off or have working conditions changed to her disadvantage while she is pregnant.

The Apprentices Act of 1961 modifies the Workmens Compensation Act of 1923 and provides for training of young workers and extends to engineering diploma and degree holders. This particular Act has potential for relieving some of the nation’s unemployment issues if re-packaged for employers.

The Payment of Bonus Act, 1965 obligated employers to pay bonuses and provide the principle and formulae for calculation of Bonus, minimum and maximum bonus payable and enforcement of liabiity for calculation of the bonus.

Contract Labour (Regulation & Abolition) Act 1970 was passed to control the way contractors could hire workers for a “principal employer.” This is an area that needs closer examination as many firms these days have stopped hiring their own labourers and instead rely in contractors who provide the workers they need.

Important provisions of the Contract Labour Act: The Principal Employer (who hires a licensed contractor must file an application for registration. The Registering Officer must then register the company and issue a certificate of Registration. If the company does not obtain this registration, workmen employed by the contractors would be employed by the Principal Employer or Company. The following facilities should be provided to the contract labourers if the contractors do not provide them. Rest rooms, Canteens, Urinals, Deinking Water and First Aid facilities.

Building and other Construction Workers (Regulation of Employment & Conditions of Service) Act, 1996: This legislation purported to benefit construction workers and particularly regulated issues of safety, health and welfare.

In conclusion, we need to remember that the union movement has lost much of its steam abroad as well as India.  We need to review the legislation available and simplify as we modernize.

* The Industrial Disputes Act excludes persons employed in army/Navy/Air Force/Police and those employed in mainly managerial or administrative, supervisory capacity and drawing wages of more than INR 24,000.

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