Authors: Manav Pamnani is a third-year student at the NALSAR University of Law, Hyderabad; Teesha Arora is a fourth-year student at the Symbiosis Law School, Pune.
This article explores the critical balance between flexibility and protection in India’s labour regulations, focusing on the impact of the 2020 labour codes, which consolidated twenty-nine central laws into four comprehensive codes aimed at modernizing the labour market. However, challenges such as inconsistent definitions, selective application and an over-reliance on flexibility for employers have diluted the intended protection for workers. The
paper discusses key concerns, such as lay-off provisions favouring larger establishments and inadequate social security for unorganized workers. Additionally, it advocates aligning India’s labour policies with International Labour Standards (ILS), which offer robust frameworks for worker rights and social justice. Through real-life examples and comparisons with ILO conventions, this article emphasizes the necessity of reforms to safeguard workers’ rights while maintaining employer flexibility, ultimately promoting a balanced and globally aligned labour ecosystem.
“Workers’ rights should be a central focus of development.” – Joseph Stiglitz
INTRODUCTION
In a diverse country like India, labour, particularly contract labour, has become an integral part of the workforce mainly due to the burgeoning economy and a booming manufacturing and infrastructure sector. In definitional terms, contract labour refers to a set of workers appointed by intermediaries such as contractors, rather than directly by the principal employer. This arrangement provides employers with the required flexibility which enables them to tailor the strength of the workforce to suit their requirements as per the fluctuating demand. However, although the employment opportunities that accrue to the labour force are enhanced, the effectiveness of such an arrangement from the perspective of the workers is questionable. The reason for this scepticism is due to the largely persisting ground realities such as the lack of job security, precarious working conditions, and inadequate social protection. The perilous predicament that this system places workers in necessitates the crucial need for reforms in order to balance flexibility with the protection of contract labour. This essay, while propagating the argument of balancing flexibility with labour protection, analyses the challenges posed by the new labour codes, alongside advocating an alignment towards the International Labour Standards (ILS).
ASSESSING THE BALANCE OF FLEXIBILITY AND PROTECTION IN INDIA’S NEW LABOUR CODES
The year 2020 marked a significant development in India’s labour regulation regime with the consolidation of twenty-nine central labour laws into four comprehensive codes, namely the Code on Wages, the Code on Social Security, the Industrial Relations Code and the Occupational Safety, Heath, and Working Conditions Code. These enactments have witnessed an amalgamation of reactions and mixed responses from legal practitioners, legal scholars, and the public. One category of people praises the modernising effect of these codes and the corresponding flexibility they provide for, while the opposing faction criticises them for potentially compromising workers’ security and rights by endowing employers and contractors with unbridled powers subject to misuse. For example, Chapter X of the Industrial Relations Code addresses matters concerning the lay off and retrenchment of labourers. The applicability of this chapter is confined to establishments having a minimum of three hundred workers (increased from the previous threshold of hundred). This means that only those organisations that exceed this threshold need government permission before laying-off workers. The other smaller establishments have been given a huge discretion to exercise this option as per their convenience and specific labour requirements. The rationale behind the introduction of such a provision is to enhance flexibility, promote business operations and leverage investment opportunities. On the contrary, provisions enshrined under the other three codes mainly focus on upholding the rights of workers and ensuring their continued protection from the threats of exploitation and abuse. For instance, Chapter V of the Occupational Safety, Health, and Working Conditions Code mandates the provision of basic amenities like potable drinking water, basic cleanliness and hygiene, and adequate lighting, among others, by employers to workers. Additionally, the Code on Social Security extends the protection and coverage of social security benefits like provident funds (Chapter III), insurance schemes (Chapter IV), and gratuity benefits (Chapter V), etc to workers, which ensures their ability not only to meet their present needs but to fulfil their future requirements through effective financial planning and fund management. Furthermore, the Code on Wages mandates timely payment, as required (Section 43) and ensures that contract labour is not discriminated against by extending the applicability of its provisions to the class of contract labour also (Fourth object as stated under the Statement of Objects and Reasons). Moreover, these enactments also establish grievance redressal mechanisms to facilitate workers to get their issues resolved effectively and expeditiously. However, despite these safeguards and the apparent inclination towards the protection of labour rather than flexibility, with a ratio of three codes in favour of the workers as opposed to one code partially endowing excessive power on employers, the intended effect has been undermined.
CHALLENGES IN ACHIEVING BALANCE: PROBLEMS WITH THE NEW LABOUR CODES
The challenges associated with the new labour enactments are manifold. Firstly, on the recommendation of the National Commission on Labour, the government intended to consolidate forty labour laws, but only twenty-nine of them were subsumed into the four codes. The rationale behind such consolidation was to reconcile the differences that existed between scattered labour law legislations to bring consistency and uniformity. However, this objective has not been materialised because these codes have retained several inconsistent provisions that existed in the earlier legislations. For example, the Occupational Safety Code still provides additional leave entitlements to sales promotion employees without having any rational basis for the same. The definitions, too, have not been completely standardised. The epitome of this is the definition of “contractor,” which, while mentioned in three codes, has been omitted from the Industrial Relations Code. This raises questions regarding the exact legislative intent because this omission can be potentially interpreted to imply an alternative conception or complete non-relevance to the Code. Substantively, the fundamental problem with these codes is their selective application to specific categories of workers or establishments. For example, as previously mentioned, lay-off provisions have been made applicable only to large establishments with a workforce of over three hundred members. This creates scepticism because such over-flexibility is bound to be misused by employers who have been granted excessive discretion. Similarly, the Code on Social Security mandates the provision of worker benefits to establishments with over ten employees. It does not consider the plight of small-scale organisations or unorganised sector workers, which is not acceptable, especially in the context of the increased protection labour requires.
Additionally, the type of social security benefits has not been enhanced compared to previous legislations, which has led to stagnancy and legislative denial of the much-required expansion. Moreover, a pre-requisite to claiming these benefits is the possession of an Aadhar card. This violates the Justice K.S. Puttaswamy (Retd) v. Union of India judgement, which discussed the right to privacy under Article 21 of the Constitution. It also has adverse practical implications because not every worker possesses an Aadhar (according to the official 2022 statistical data, around 9.51 crore Indians have not even applied due to various reasons), which is problematic because this leads to the denial of benefits on technical grounds.
The Code on Wages provides for a binding floor price, which is redundant because, in practice, states set their minimum wage rate above this binding requirement. This creates a dual wage rate, which leads to issues such as inconsistent implementation, the potential for exploitation due to the considerable discretion of the state government, and the incentive of workers to migrate to states with a favourable wage rate, thus resulting in inconvenience and administrative complexities. Instead, a constant minimum wage rate should have been fixed across the country to ensure sufficient guarantees and uniformity. Moreover, the dispute settlement procedure stipulated under this Code is problematic due to the unjustified power that the Gazetted Officer has to resolve disputes without any legal experience. Additionally, the power to impose penalties has been given to executive officers rather than a judicial magistrate, violating the separation of powers principle enshrined under Article 50 of the Constitution.
The Industrial Relations Code provides for a fourteen-day notice period before resorting to strikes. This undermines the very purpose of strikes while significantly curtailing workers’ rights. Furthermore, The Occupational Safety, Health and Working Conditions Code is exclusionary because it does not apply to charitable and non-profit organisations. Even within its purview, it does not mandate maximum working hours for workers except working journalists. This is not only discriminatory but also oblivious to the fundamental safeguard of workers. Although the Code on Wages provides for twelve hours a day as the maximum threshold, this is unjustified because it is a significant rise of fifty per cent from the previous mandate of eight hours. Considering the stride towards worker protection, this increase is unsound and goes against the very objective of this enactment. These contentious issues necessitate reforms and the Indian Government will have to strive towards implementing the International Labour Organisation (ILO) standards to bring about an effective and secure labour landscape.
ACHIEVING COMPLIANCE WITH ILO STANDARDS: ENHANCING LABOUR PROTECTION AND GLOBAL ALIGNMENT
The ILS released by the ILO, are guidelines that elucidate principles to be followed to protect the rights of the workers and enhance social justice. They trace their legitimacy and effectiveness from the experience and productive discussion that entails their formation. They can be broadly categorised into two types: conventions which are binding instruments entered into or ratified by the member states and recommendations which are non-binding guidelines. Conventions include multilateral and bilateral treaties alongside statutory enactments whereas recommendations include guidelines evolved by ILO itself. These recommendations have been carefully curated by experts who constitute the ILO and can bring about considerable positive changes if implemented correctly. Additionally, by ratifying conventions which comprise binding norms, significant enhancement in labour protection can be brought about. For example, the Hours of Work (Industry) Convention, 1919, mandates the upper limit of working hours to be eight hours a day and forty-eight hours a week. The Code on Wages in India places this at a higher pedestal of twelve hours which is directly contrary to this Convention and leads to the deterioration of workers’ rights. Such differences are detrimental to the well-being of workers and must be reconciled.
Additionally, the Code on Social Security extends benefits to contract workers, including coverage under schemes like the Employees’ State Insurance Corporation and Provident Fund Scheme. However, compliance is often inadequate, with many contract workers not receiving these benefits. In contrast, the ILO approach, as outlined in Conventions 102 and 118, emphasises the universal right to social security for all workers, including contract labour. Furthermore, although the Indian codes provide for collective bargaining rights, they do not adequately address the specific challenges faced by contract workers, whereas ILO Conventions 87 and 98 explicitly protect the rights of all workers to organise and engage in collective bargaining without interference or discrimination, ensuring that workers can form and join unions to negotiate better terms and conditions. Although the Indian codes include provisions mandating the registration of contractors and regular compliance checks, their enforcement has been inconsistent. A higher standard of scrutiny is the need of the hour, similar to the ILO which stresses the importance of robust regulatory frameworks and effective enforcement, including regular inspections, penalties for non-compliance, and protections for all workers, regardless of their contract type. An example of this is the ILO Convention 158 which specifically addresses termination of employment, requiring due process and reasonable grounds for dismissal.
Today, in India, a fair playing field is not guaranteed, as different codes apply unequally to various categories of workers, leading to unequal levels of protection. This underscores the need to adopt ILS, not only because of their well-crafted provisions that balance worker protection and flexibility but also to align India’s labour framework with global standards. Targeted initiatives will be suitable only if they help move overall compliance with ILS closer to universality, aligning with the ILO’s objective of attaining universal compliance with its standards.
CONCLUSION
Today, India has ratified forty-seven labour conventions and one protocol. To achieve the aim of becoming an international force to be reckoned with, it is non-negotiable to increase labour protection and safeguard worker rights, alongside maintaining employer flexibility. A step in this direction was made by introducing the four labour codes but their inherent challenges and lackadaisical implementation has resulted in them being nothing more than a failed attempt. This is evident in the devastating situation that the workers found themselves in during the Covid-19 pandemic which witnessed large-scale migration and extensive lay-off. The problems associated with these enactments necessitate an alignment with the ILS to achieve an optimum balance between worker protection and employer flexibility.
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