The Second Labour Commissionwhich was set up in 2003 decided that, the various labour laws that were existent at that time should be amalgamated under separate labour codes. This was done with the intent to streamline the laws and avoid friction between various Acts. One such Code, which is due to come into force is the Code on Wages, 2019. Section 9 of the said Code has incorporated a new concept of ‘floor wage’ whereby, the minimum wages supposed to be paid to each and every employee cannot float back anywhere below the floor wage set by the Central Government.
Previously, under the Minimum Wages Act, 1948, both the Central and State Governments were given the power to decide wages with respect to the employments mentioned under the schedule. However, under the new Code on Wages, the power to determine ‘floor wage’ solely rests with the Central Government. Thus, where under our Constitution, federalism construes the basic feature and cannot be abrogated, is conferring power solely on the Central Government arbitrary and violative of the Constitution?
Concept of Floor Wage
The Minimum Wages Act, 1948 was proposed at the time when India, as a developing country, was facing a large-scale unemployment issue. The situation was such that workers were ready to work even for starvation wages. The Minimum Wages Act, 1948 was, therefore, enacted to curb the menace caused to the ignorant, less organized and less privileged members of the society at the hands of the capitalists.[i] Deviating from the earlier concept of absolute freedom of contract and doctrine of laissez faire, the Act was brought to give life to principles of social welfare and common good, an idea envisaged in the Constitution.[ii]
The Code on Wages, 2019 widened its scope by including organized as well as unorganized sectors within its ambit[iii] as compared to the Minimum Wages Act[iv] which gave way only to sweat labour. Moreover, to each of these establishments, the Code prescribes to have minimum wages not be less than the floor wage as specified by the Central Government. This provides an incentive to the employees to be able to earn so much that they could produce the same amount of work or the amount of work which is expected of them, every subsequent day.
The rationale behind having a ‘floor wage’ goes to the very core of having a minimum wage rate. As upheld in the case of Hydro (Engineers) P Ltd. v. Workmen:
“Minimum wages rate must ensure not only the mere physical needs of the worker which would keep him just above starvation but must ensure for him not only his subsistence and that of his family but also preserve his efficiency as a workman. It should, therefore, provide for some measures of educational, medical requirements and amenities.”
Resolving the dispute
The rationale behind resting power of fixing a floor wage solely in the hands of the Central Government can be justified on the grounds that: firstly, the authority to bring in a law for improving the conditions of labour, related to industrial or non-industrial concern, is granted under the Concurrent List, Entry 22 and 24, empowering both the Central and State government to make laws for labour welfare. This means the power to affix minimum wage is Constitutional in nature. Secondly, India has adopted a quasi-federal form of Government with a strong bias towards the centre. This sort of federalism is a part of basic structure of the Constitution and this cannot be amended.
The Central Government has surely been given wide discretionary powers in matter of fixing a floor wage as there is no review procedure for the same.Nevertheless, it is well within the purview of law. Therefore, stating that this might cause difficulty to the employers in carrying out their business on their own settled principle, cannot solely be the ground for declaring the provision unreasonable. The idea is reflected in the Latin maxim actus legis nemini facit injuriam thereby meaning that an act of law does no one wrong.[v] Moreover, the Code obligates to establishan Advisory Board whose recommendations it would have to take into consideration.[vi] Hence, the power is very much guided.
In the present matter, fixing of floor wage cannot be trapped in the question of its constitutionality for the Government is competent to enact such laws under the concurrent list. Also, discretionary power of such wide amplitude is shielded by the quasi-federal structure of Government adopted by our Constitution. Moreover, it was essential to have a minimum wage and a floor wage to prevent exploitation of the employees[vii]and provide them so much so that they could maintain a basic standard of living[viii]. This is in the interests of the general public and hence even though the minimum wages and floor wage under the new Code would interfere with the right to freedom of contract[ix], it cannot be invalidated.
[i] S.N. Mishra, Labour & Industrial Laws, (29th ed. 2019).
[ii] Y.A. Mamarde v. Authority under M.W. Act, AIR 1972 SC 1721.
[iii] Section 2, The Code on Wages, 2019.
[iv] Section 2, Minimum Wages Act, 1948.
[v] Black’s Law Dictionary.
[vi] Section 9, The Code on Wages, 2019.
[vii] Edward Mills Co. Ltd., Beawar v. State of Ajmer, (1954) II LLJ 686.
[viii] Art. 43, Constitution of India.
[ix] Art. 19(1)(g), Constitution of India, 1950.
a 3rd year B.A. LL.B. student at NUSRL Ranchi
Image credits: Hindustan Times