Labour codes: Trade unions raise red flag over modified retrenchment clause

The provision in the new labour codes notified on Friday to increase the threshold for requiring the government’s approval for undertaking retrenchment, layoffs, and closure to 300 workers from 100 workers at present has drawn criticism from certain trade unions and observers.

 

However, overly rigid labour laws have historically made firms wary of growing beyond certain sizes, as crossing low statutory thresholds exposes them to intrusive approvals, higher compliance burdens, and reduced flexibility in managing their workforce.

 

Tapan Sen, general secretary, Centre of Indian Trade Unions says that the new Industrial Relations code ‘cripples’ the right to strike by imposing various conditions, for all sectors, banning strikes during and after conciliation and extending restrictions across all establishments.

 

“Raising the retrenchment, lay off and closure threshold to 300 workers for prior government permission enables hire-and-fire in more than 90 per cent of the Indian workplaces. More than 12,00,000 disputes are now pending for adjudication with an average disposal period ranging from 3 to five years for more than 75 per cent of the disputes,” he added.

 

The Joint Platform of Central Trade Unions (CTUs), comprising 10 Central Trade Unions including (CITU), have called for protests from November 26.

 

Santosh Mehrotra, research fellow at IZA Institute of Labour economics says that provisions like raising the strike advance notice period from 14 days to 60 days and increasing the threshold for requiring government approval for undertaking layoffs curtail bargaining powers of trade unions and workers and give more power to the employers.

 

“In any case, firms are bypassing these provisions by counting any workers above a legal threshold as contract or casual workers, hence outside the law’s purview,” he added.

 

Echoing similar thoughts, social scientist Dhiraj Nite of Ambedkar University says the new codes provide a ‘free rein’ to hire and fire in the labour-management relations and the disciplinary/punitive action for breaches of labour codes will officially become weak, given the reliance on self-declaration of compliance by the employers.

 

Sen contends that the wage code removes the earlier provision allowing fines of up to 10 times for even the first delay in wage payments, and excludes MNREGA from timely wage payment rules, effectively letting the government evade responsibility for paying rural workers on time. 

 

However, the Bharatiya Mazdoor Sangh (BMS) led Confederation of Central Trade Unions (CONCENT) welcomed the notification of the new labour codes as a “landmark and progressive reform” that replaces fragmented, outdated colonial-era labour laws- thus benefiting 400 million unorganised workers.

 

Meanwhile, K R Shyam Sundar, professor of practice, Management Development Institute says that labour is a concurrent subject and the new codes require each state to notify its own rules locally which will make the rollout uneven. As of now, five states and union territories are yet to pre-publish draft rules under any one of the four codes - West Bengal, Tamil Nadu, Kerala, Karnataka and Delhi.

 

“One hopes the implementation aspects of the codes will be taken care of as they touch the lives of millions of people. But the legislative process has left a lot to be desired as it has put undue weightage on the rulemaking process. There is every possibility that it will again lead to a maze of rules and regulations,” he added.