India: Labour Law Changes In India

Last Updated: 23 October 2015
Article by Pushpalatha Iyer

The amendments to the Labour laws in Rajasthan that was proposed by the Chief Minister Vasundhara Raje Scindia had been approved by the President of India late last year. The Rajasthan Legislative Assembly had passed Bills amending the rules under the central government of four key labour laws, with the intention of easing the process of hiring, training and dismissing worker easier as well to strengthen the rules for trade union registration, among other things. The amendments were to the Factories Act 1948, the Industrial Disputes Act 1947, the Apprenticeship Act 1961 and the Contract Labour (Regulation and Abolition) Act 1970. These statutes as they existed made it difficult for industrial unit owners not only to engage temporary labour but also to close factories that employed 100 or more workers.

Amendments to the Industrial Disputes Act, 1947: 

  • Industrial unit owners and employers can lay off employees or shut down units if the company employs up to 300 employees without permission of the government as against the earlier maximum limit of 100 employees; 
  • In case such retrenchment, the worker may raise an objection in three months as opposed to no time limit earlier); and
  • A labour union can be formed if there is 30 per cent of the total membership as against the earlier 15 per cent. 

Amendments to the Factories Act, 1948:

  • Those factories operating without power  may employ a maximum of 40 labourers (as opposed to 20 earlier) and the factories operating with power may employ a maximum of 20 labourers ( as against 10 earlier) 
  • Any employee with a grievance against his employer for the violation of this Act may seek redressal in any court of law. 

Amendments to the Contract Labour Act, 1970:

This act is now applicable to establishments employing 50 contract workers, the earlier threshold being 20. This increase in upper limits ensures better compliance be small entrepreneurs and contractors. 

Amendments to the Apprenticeship Act 1961:

It includes a third party training provider and easing rules to add more trades. 

Impact of the Amendments: 

Companies now have the flexibility to hire employees or lay them off to adjust to the demand-supply scenario that exists in the markets at any given time. Loss- making businesses can be dumped without delay or without loss of precious resources. With the reduced thresholds for labour union memberships, inter-union conflicts and multiplicity can be reduced or even completely avoided. The management-labour interface reduces leading to fewer conflicts and lessens the losses due to these conflicts. With the Amendments in the Factories Act reducing the number of workers in a factory, companies now have reduced burden of compliance, allowing factory a management greater accent on production innovation and harnessing efficiencies.

As anticipated, business chambers in India have welcomed these changes as a positive  step towards encouraging employment generation and focus on production. The Confederation of Indian Industry has stated "We have been recommending these key reforms for bringing in simplification and flexibility in engagement and deployment of labour, which should be the two key cornerstones for any labour law reforms. 

While these amendments are seen on the whole by the industry as innovations that opens a window to opportunities globally, the labour unions not unnaturally contend that this move will hurt workers badly.  With these amendments, both the central and state governments have firmly taken the side of Industry and the laws protecting the poor labourers are amended to facilitate more rapid Industrialisation. 

With the 'Make in India' campaign of the Prime Minister uppermost in priority, the state governments are making hay. Madhya Pradesh is following suit and states like Gujarat and Haryana are not far behind.  The Madhya Pradesh (MP) Government has proposed amendments to eight labour laws including the Industrial Disputes Act 1947, Factories Act 1948 and the Contract Labour Act 1970. MP also proposes changes to The Building and Other Construction Workers (BOCW) Act, the BOCW Workers Cess Act, The Child Labour Act and the Inter-State Migrant Workmen and Motor Transport Workers Act.   

'Make in India' can only be success if the labourers are also wooed with sweeteners like this amendment woos the industry.  India is a land of human- resource plenty. If India Inc has to flourish, the scales cannot be tipped against the major Indian resource that is the 'Common Man'. 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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