Centre in a fix over amending British-era industrial labour law reform

The National Democratic Alliance (NDA) government’s efforts to amend the British-era industrial relations law — touted as its most ambitious labour law reform — is facing its biggest hurdle so far: the state governments.

Pressure from the labour unions had forced the Centre to dilute several proposals in the draft Industrial Relations Bill 2015, including easing the retrenchment norms for industries and curbing outsiders’ role in trade union management at the industry-level.

This has put the labour and employment ministry in a fix in more than one way. If the Industrial Relations (IR) Bill in its present form becomes a law, the labour law amendments of various state governments will go into the dustbin as the central law will take precedence over the others.

Government sources said the labour and employment ministry has sought the opinion of the law ministry if it can insert an enabling provision in the proposed Bill, so that the state government’s labour law reforms are unaffected. “However, this looks like an unlikely situation. We haven’t been able to find a solution to this. We are awaiting a response from the law ministry,” a labour and employment ministry official said.

Labour law advocate Ramapriya Gopalakrishnan said that the IR code could have made the present laws, which it seeks to replace, redundant. "The state governments would have to go through their assemblies to get amendment to the Code in place if it thinks the provisions are not conducive for them," she said.

She further said that adding an enabling provision in the code was not a solution and the law ministry is likely to suggest the same to the labour ministry.

Soon after coming to power in May 2014, the NDA government had promised the industry that it will bring in labour and land reforms as a step towards the “ease of doing business”. The Centre started an ambitious exercise of combining 44 labour laws into four codes, amending various provisions in existence from the pre-Independence era.

One such code was the draft Industrial Relations Bill that proposed to combine the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.

However, states such as Rajasthan and Madhya Pradesh took the lead and brought their own reforms to the Industrial Disputes Act, 1947 in 2014 and 2015, respectively.

Under the Constitution, labour is a subject in the concurrent list where both the central and state governments are allowed to enact their own legislation. States can bring its amendments with a final nod from the Centre, but if the Centre amends the main Act itself, then it will take precedence over the rest.

At the central level, the government had proposed allowing factories with up to 300 workers to retrench, lay off or shut shop without seeking the government’s nod in the Industrial Relations Bill. At present, factories with up to 100 workers can do so. The Centre had also proposed increasing the severance pay for retrenched workers three times to 45 days’ salary for each completed year, from the current 15 days.

Since the Centre’s efforts to reform the labour laws related to the industrial relations ran into hurdles, including severe opposition from the central trade unions, which went on a one-day strike in 2015 and 2016, the states decided to bring in their own amendments.

Over the past few years, Gujarat, Jharkhand, Uttar Pradesh, Haryana, Andhra Pradesh, Maharashtra and Assam have allowed factories with 300 workers to retrench without official sanction, along with bringing their own set of amendments in various Acts that were to be clubbed into a single code.

However, in the Cabinet note circulated for inter-ministerial consultations, the central government dropped the contentious proposal to allow factories with a big workforce to retrench and lay off workers or shut shop without seeking its nod. This is in contradiction with the labour law reforms that the state governments have already enacted, with the approval of the central government.

“While the central government is yet to implement it, nine states have already done it. My worry is whether industry has taken note of it and whether investments have increased in those states… That needs to be studied. Our feedback is that not much has happened there,”

What's at stake

Key proposals
 

• Easing retrenchment norms for industries
• Curbing outsiders’ role in trade union management at the industry level
   

Looking ahead 
 

• States that have amended the Industrial Disputes Act, 1947, to ease retrenchment norms: Madhya Pradesh, Rajasthan, Gujarat, Jharkhand, Uttar Pradesh, Haryana, Andhra Pradesh, Maharashtra, and Assam
• Gujarat and MP have put a one-year limit for raising disputes
• Gujarat, Rajasthan, MP have hiked retrenchment compensation several times  
• Karnataka, MP and Rajasthan have exempted some sectors, such as micro industries, from applicability of the Industrial Employment (Standing Orders) Act, 1946