Exemption from Labour Laws: Unleashing the "New Normal"?

Labour Laws
Labour Laws

As India tiptoes towards the post-lockdown period, the foremost and maybe the deepest impact of COVID-19 is beginning to be seen in states like Uttar Pradesh and a few others. In a bid to introduce pro-business reforms, these states have decided to chop the supposedly harsh labour laws.

Going by their opinion, without being constrained by labour laws, businesses will roar back to health and achieve their latent potential of being world-beaters. This may potentially also attract new investors looking for an alternative to China. Unsurprisingly, a select few are elated by these changes.

On the other hand, such exemptions or "reforms" are seen to unleash an unfathomable assault on labourers, as it strips them of basic rights which, of course, were not easy to be established in the first place. It casts a brazen unequal burden upon labourers to revive the economy by creating an "enabling environment" for exploitation.

With this backdrop, this article aims to analyze the: (i) Implications of the proposed changes; (ii) Rights of labour vis-à-vis Constitutionalism; (iii) Issues underlying labour laws; and (iv) Suggestive changes.

Implications of the exemptions

The proposed exemption by the State of Uttar Pradesh brutally undermines the basic rights of the labour as per well recognized principles of the Constitution. Section 3 of the proposed Ordinance stipulates that all factories and establishments engaged in the manufacturing process shall be exempt from operation of ‘all labour laws’ for period of three years.

However, it excludes from its ambit the applicability of a few provisions such as Section 5 of Payment of Wages Act, provisions concerning safety and security under the Factories Act, and labour laws concerning employment of children and women.

1. Abrogation of legislations and the Constitution

As the Ordinance absolves businesses from the gamut of legislation that regulate the relationship in employment, the scope of analysis has been confined to certain key areas.

(a) Industrial Disputes Act (IDA) & Factories Act

The exemption from IDA denies the right of workmen to raise any disputes against the employer. Resultantly, provisions such as layoffs/retrenchment, strike/lock-out, and compensation will no longer safeguard the interests of the workmen. Thus, it provides an unfettered right to the employer to lay-off/retrench the workers for "no probable cause". Such unregulated right of the employer violates Article 14 and 21 as it jeopardises the livelihood of a terminated workman.

The eight-hour work policy has been exempted as the Factories Act shall no longer be applicable.

Further provisions relating to health, including cleanliness, are being done away with. Globally, given the disastrous impact of the pandemic on the workplace, regulations concerning sanitation are most essential, but the Ordinance imposes no such measures.

(b) Minimum Wages

The Ordinance secures the minimum wages of the workers "as notified by the government". Interestingly, the Ordinance mandates minimum wages, but excludes the Minimum Wages Act, 1948. In light of the fact that no factors/considerations are laid down by the Ordinance, otherwise provided under the statute, the government will have a free reign to either modify/overhaul the factors while deciding minimum wages.

In case the notified minimum wages fail to secure "minimum living standards", it will amount to violation of Article 21 and 23 as held by the Supreme Court in the cases of Sanjit Roy v. State of Rajasthan and PUDR v. Union of India.

(c) Equal Remuneration

The Equal Remuneration Act, 1976, ensures the concept of "equal pay for equal work" irrespective of gender, race, caste, or religion. Such an exemption is bound to subject workmen to unequal treatment for various social concerns, especially in a country like ours. The Supreme Court in the case of Randhir Singh v. Union of India declared that refusal to pay equal remuneration for equal work amounts to a violation of Article 14 of the Constitution.

(d) Trade Union legislation

The suspension of trade union legislation impairs the collective bargaining power of workmen for decent working conditions, wages and allied concerns. Establishment of trade unions derives its sanctity from Article 19(1)(c), which guarantees the right to form associations.

2. Assault on Constitutionalism

For a vibrant democracy, the actions of the State are not only required to be constitutional, but should also conform to the principles of constitutionalism. Distinguishing from constitutionality, which necessitates the state to act as per explicit terms of the Constitution, constitutionalism mandates a broader commitment. It elaborates the principle that authority of the government is limited by a body of fundamental law.

(a) Undermining federal structure of the Constitution

The Ordinance undermines the basic federal structure, which is an essential feature of constitutionalism. It is important to mention that the Ordinance has been pushed at a time when labour code reforms are already in pipeline before Parliament. The recent announcements made by the Union government made it clear that it is driving reforms towards worker welfare, ensuring universal basic wages, and introducing the "national floor wage" concept, which aims to overcome the disparity in minimum wages across the states.

Hence, the proposed Ordinance turns turtle to Centre's version of labour reforms. A conjoint reading of Articles 213 and 254 (2) of the Constitution grant power to the state government to override central laws, subject to the President's assent. However, when the Union is formulating new laws, the state government's move to legislate on such an issue seems unwarranted, and undermines the federal structure of our Constitution.

(b) Disregard for Directive Principles of State Policy (DPSP)

The DPSPs act as an effective tool for "transformative constitutionalism", applying the constitutional mandate to transform a society, economy, and polity through legal–political means. Article 38 directs that state policies be framed in a manner that secures social and economic justice by eliminating economic inequalities. Article 39 secures equal pay for equal work. Article 43 poses an obligation upon the State to ensure living wage and proper working conditions for workers. Therefore the Ordinance, apart from the violation of fundamental rights, stands in stark contradiction to the DPSPs.

(c) Ethical Labour Standards:

The Ordinance violates multiple internationally recognized ethical labour standards prescribed by International Labour Organization (ILO). It is relevant to mention that Article 51(c) of the Constitution requires the governments to foster respect for international law and treaty obligations. Various conventions dealing with rights of workers are majorly pari materia to our labour laws and require no further deliberation.

It is thus evident from the analysis that labour laws are an essential substratum of constitutional values that ensures that a worker not be a slave beholden to his work.

It is amply clear that any step to promote investment should not be at the cost of denying the basic rights of workers. Hence, a phased multi-track approach to enabling recovery ought to take account of social protection and employment measures, which are essential parts of industrial development.

Effective regulation; not de-regulation

There can hardly be any debate that the existing labour regime is far from satisfactory. It is embroiled in a labour bureaucracy that is prone to corruption; adjudicatory mechanisms are inefficient; and rights of the stakeholders are effectively submerged in a creaking judicial system, thus providing no real relief.

However, not having a legal framework cannot be an answer to the problem, as protection of basic rights requires legislation. Thus, the State should be cautious while hopping from one extreme to the other. In reality, the proposed Ordinance is an "empty vessel which makes the most noise" with no substantial benefits to the industries.

(1) "Gasbag‟ Policy

The proposed Ordinance, rather than promoting investment and quality enhancement, is bound to optimise low skill, low wage, low quality, and low-value economy. For the global markets, high quality produced by workmen by offering decent work is a sine qua non, as consumer conscience plays an essential role in the global markets.

In addition to the above, this proposed Ordinance is not a trigger for investment, but a deep dive into the ocean of policy uncertainty. Consider this: Even if we believe that these exemptions will pass the Union and judicial muster, how will the government benefit by designing a policy for just three years? Practically, even for the relatively modest set-ups, by the time a factory is built and all licences and permissions are received, at least a year, or sometimes two, are already gone before the operations begin.

Hence, a three-year window of concessions add up to nothing for any new and serious investor. What the investors actually require is policy stability, consistency, and predictability, which the Ordinance has conveniently failed to take into consideration.

(2) Way forward:

Rather than uprooting substantive labour rights, the governments should consider providing impetus to easing processes and compliances. Such reforms include expedited registrations, extended licenses, and non-arbitrary labour inspections. In short, one registration, one license, one form and one compliance.


The Ordinance is a clear manifestation of thoughtless action. It attacks a fundamental proposition of what it is to be human. It renders livelihood of labourers even more precarious, and raises the question: what does the Indian Constitution mean for the worker?

The stipulations of the Ordinance seek to dismantle the gains of the labour movement that the working class has made over decades. Investment in human capital and abalance between capital and labour rights are the fundamental considerations for any country‟s growth.

If these Ordinances are not withdrawn or refused, we risk a return to a regime where labour is again pushed back to fighting for elementary rights, including their dignity. It is especially true in these times where the compulsion of economic circumstances leaves no choice to a person in need and compels him to provide labour, which is no less a form of forced labour. If left unchecked, such a precedent will make exploitation of the workers as the "new normal".

[The author is an advocate practising before the Delhi High Court]

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