Labour Laws

Employment Laws in India: An Overview 

calendar11 Sep, 2023
timeReading Time: 12 Minutes
Employment Laws in India

The term “labour laws” sometimes refers to “employment laws.” They are the body of legislation, judicial decisions, and precedents that deal with the legal privileges and impediments enjoyed by workers and their organisations. Labour regulations regulate the interactions between an employer or group of employers and their employees. Because it has a greater impact on both men and women than any other branch of law, this one has the broadest applications. It is also the most fascinating because of its huge meanings and numerous aspects.

The following are some of the areas that India’s employment laws cover:

  • Industrial relations, which cover collective bargaining, certification of unions, labour-management relations, and unfair labour labour practices.
  • Safety and health at work
  • Employment aws norms, which cover general holidays, annual leaves, working hours, minimum wage, and termination processes.

The social justice, social security, and socioeconomic conditions serve as the foundation of Indian labour legislation. India’s labour laws are created at both the federal and state levels. Therefore, each state has its own state-specific legislation, such as the Shops and Establishment Act. The Ministry of Labour and Employment (Ministry) introduced four bills in 2019 to combine 29 central laws related to labour laws in order to harmonise and consolidate the various legislations pertaining to employment, social security, wages, industrial disputes, and other pertinent labour/employment laws-related matters.

Historical perspective

The need for better working conditions, the right to organise, and employer demands to limit employee rights in numerous organisations and keep labour costs down led to the development of labour law. One of the first bodies to address labour issues was the International Labour Organisation (ILO). Following the Treaty of Versailles signing, the ILO was founded as a League of Nations body.

In India, the law governing labour and employment is sometimes referred to as industrial law. The history of British colonisation and the development of employment law in India are intertwined.

The history and origin of labour laws in India likely began about 1860. The public’s attention was drawn to the appalling working conditions in Bombay factories in 1872. As a result, the Factories Act was passed for the first time in 1881. It was subsequently changed numerous times before taking shape in 1948. Even though the ESI Act of 1948 [Employees’ State Insurance Act] provided social security to industrial workers, additional social security was supplied through the Workmen Compensation Act of 1923 by implementing certain ILO treaties.

What are the key sources of employment laws in India?

In this section, the authors have talked about two sources of employment laws, i.e., the Constitution of India and Judicial bodies. The core source that talks about employment laws is covered in the later part of this article.

Constitution of India: Here is the list of Articles under the Indian Constitution that are related to employment:

  • Article 14 talks about equality before the law
  • Article 16 prohibits the state from discriminating on the basis of religion, race, caste, sex, place of birth, residence, and equal opportunity in public employment. 
  • Article 19 talks about the right to free speech and expression, the right to assemble in unions or associations, and the right to practise any profession.
  • Article 21 encompasses the right to life and liberty.
  • Article 23- States that human trafficking and beggar and other similar forms of forced labour are prohibited. The article also states that if the employer is not paying the minimum wage to the worker, then it will account for slavery.
  • Article 24 prohibits the employment laws of children under the age of 14 in any factory, mine or any hazardous occupation.
  • Article 39 (a) states that every citizen of the country has the right to earn a livelihood without getting discriminated against on the basis of their sex.
  • Article 39 (d) – It directs the state to make a Policy towards securing; that there is equal pay for equal work for both men and women. Wages will not be determined on the basis of sex. Rather they will be according to the amount of work done by the worker. 
  • Article 41- It talks about the right to work, and the state has the duty to secure the right to work and education. 
  • Article 42 – It talks about the upliftment of the working conditions for workers. It talks about creating a suitable and humane workplace. This article also talks about maternity relief, i.e., leave provided to women when they are pregnant.
  • Article 43 – It talks about the “living wage” for its citizens. Living wage not only includes the “bare necessities of life” but also the social and cultural upliftment of the person. It also includes education and insurance for a person.

Judicial bodies: The primary judicial bodies and government agencies responsible for the enforcement of Indian employment laws have been mentioned below:

  • labour courts, industrial tribunals and the National Tribunal are responsible for adjudicating labour disputes;
  • The Regional or Chief Labour Commissioner undertakes enforcement relating to the payment of salaries, gratuities, contract labour, employee compensation and working conditions, among other things;
  • The Directorate of Factories enforces provisions relating to health and safety in factories;
  • The Provident Fund Commissioner is responsible for enforcement relating to the Provident Fund; and
  • The chairperson of the Employees’ State Insurance Corporation is responsible for enforcement relating to employees’ state insurance, among other things.

Landmark cases under employment laws

  • Gammon India Ltd v. Union of India[1]
    The Court ruled that the government had the authority to forbid the employment of contract labour.
  • Air India Statutory Corporation v. United Labour Union[2]
    In this decision, the Hon’ble Court ruled that the end of contract labour requires the former principal employer to hire the workers in regular job
  • International Airport Authority of India v. International Air Cargo Union[3]
    Suppose the contract between the principal employer and the contractor is for the provision of labour. In that case, the contact employees will work under the direction of the principal employer. Still, because the contractor pays the salary, the ultimate oversight, control, and responsibility reside with the contractor.
  • Uttar Pradesh Rajya Vidyut Utpadan Board v. Uttar Pradesh Vidyut Mazdoor Sangh[4]
    While the CLA requires wage parity between regular and contract workers for similar types of work, the principal employer can consider various factors such as workers’ skills, reliability, and responsibility in determining whether similar job done by the two categories of workers can be considered at par or otherwise for payment purposes.
  • Hindustan Steelworks Construction Ltd. v. Commissioner of Labour[5]
    The principal employer is not obligated to make up the difference in pay paid to contract workers who perform the same task as regular workers.
  • In Jacob Puliyel v. Union of India & Ors,[6]
    The Supreme Court of India ruled that the restrictions imposed on those who have not been immunised against covid-19 are not legally valid. The Court also ruled that bodily integrity is a fundamental right protected by Article 21[7] of the Indian Constitution, and no one can be forced to be vaccinated.
  • In Sudipta Banerjee and Ors v. LS Davar & Company and Ors.[8]
    While hearing a dispute over breach of confidentiality, the Calcutta High Court delved into non-compete covenants and noted that Indian law has not advanced related laws as other jurisdictions have given the country’s complete ban on post-termination non-compete covenants. The Court emphasised the importance of revisiting current Indian contract law in terms of the inclusion of negative covenants in contracts.

Codes of Employment laws

In recent times, the Government of India has implemented labour law reforms across the country in accordance with the recommendations of the 2nd National Commission of Labour. The commission stressed the need to consolidate and simplify employment legislation. 

Prior to the introduction of the codes, there were 40 laws that governed pay, industrial relations, social security, workplace safety, and working conditions. The new labour codes aim to integrate India’s multiple labour laws while also streamlining the country’s various compliance requirements. Each Code governs a particular area of labour law

Here is a summary of each Code, intending to show the changes that can be expected once the four codes and rules are in place.

The objectives of the Labour Code: Some of the Labour Code’s aims are as follows:

  • Consolidation of 29 laws concerning pay, working conditions, social security, safety, and health. 
  • To maintain consistency in definitions for ease of compliance.
  • To improve company accessibility, generate jobs, and provide firms with greater hiring flexibility more flexibility in terms of employee mix hiring.
  • Simplifying and clarifying the issues concerning contract labour
  1. The Code of Wages, 2019 (Wage Code) : Four different laws, that were, the Payment of Wages Act of 1936, the Minimum Wage Act of 1948[1], the Payment of Bonus Act of 1965, and the Equal Remuneration Act of 1976—were combined and integrated under the Wage Code. Understanding the fundamental elements of the Wage Code and how they differ from previous legislation is crucial since the implementation of the Wage Code is anticipated to have extensive effects on the majority of industries.

The following wage legislation are consolidated in the Code:

  1. Minimum Wages Act of 1948;
  2. Payment of Wages Act of 1936;
  3. Payment of Bonus Act of 1965;
  4. Equal Remuneration Act of 1976.

The Wage Code has changed the concept of “employee” from the existing meaning in the Minimum Wages Act of 1948. Under the Minimum Wage Act of 1948, “employees” were restricted to workers in particular designated kinds of scheduled employment; however, the Wage Code has expanded this definition to include all sorts of establishments, regardless of whether they are in the organised or unorganised sectors. It indicates that the benefits under the Wage Code regarding wage payment and minimum wages apply to all employees, including those performing skilled, semi-skilled, or unskilled manual, operational, supervisory, managerial, administrative, technical, or clerical work, regardless of whether the terms of employment have been expressly conveyed or merely implied. This significantly broadens the scope. The vast majority of workers in India’s unorganised sector, who frequently lack written contracts on which to rely, will particularly benefit from this development.

Furthermore, “wages” have now been given a consistent framework as opposed to the previously stipulated diverse definitions. The Wage Code’s definition of “wages” includes the following:

  1. Basic pay; 
  2. dearness allowance; and 
  3. Retaining allowance and expressly excludes components such as statutory bonus, the value of house accommodation, overtime, gratuity, and so on, unless such exclusions exceed more than 50% (fifty per cent) of total remuneration, in which case the amount exceeding 50% (fifty per cent) shall be considered remuneration and added to the wages thereof.
  4. The Wage Code has also introduced the concept of “floor wages,” which will be fixed on the basis of a worker’s minimum living standards within the relevant geographical area, and where the minimum rate of wages fixed by the respective State Government is higher than the floor wage, the former shall be retained.

2. The Industrial Relation Code, 2020 (IR Code): The Industrial Relation Code was enacted to codify and alter the rules controlling trade unions, working conditions in industrial enterprises, conducting investigations, and resolving industrial disputes. 

The IR Code requires a “sole negotiating union” in organisations when there are multiple trade unions. A single union that is negotiating must have 51% or more workers as members. Only the bargaining union will be able to negotiate with the employer. The IR Code outlines steps that employees can take to rejoin the workforce after being let go. Additionally, it creates a system for resolving labour disputes, which will be established by the national government and comprise a national industrial tribunal and one or more other industrial tribunals. Additionally, a worker must approach the authority responsible for handling grievances.

The IR Code also outlines the notice requirements that employees must meet before engaging in contract-violating strikes or lockouts. The IR Code specifies that, as opposed to the prior threshold of one hundred (100), the provisions of standing orders now apply to all industrial facilities with three hundred (300) workers. Other provisions of the IR Code include things like layoffs, plant closings, industrial tribunals, and more.

The IR Code incorporates and modifies the following labour laws:

  1. Industrial Disputes Act of 1947;
  2. Trade Unions Act of 1926;
  3. Industrial Employment (Standing Orders) Act of 1946.

3. The Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code): The Occupational Safety, Health, and Working Conditions Code, 2020 incorporates and modifies the following pieces of legislation:

  1. Factories Act of 1948
  2. Contract Labour (Regulation and Abolition Act of 1970
  3. Mines Act of 1952
  4. Dock Workers (Safety, Health and Welfare) Act of 1986
  5. Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act of 1996 
  6. Plantations Labour Act of 1951
  7. The Motor Transport Workers Act, 1961
  8. Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act of 1979
  9. Working Journalist (Fixation of Rates of Wages) Act of 1958
  10. Cine Workers and Cinema Theatre Workers Act of 1981
  11. Sales Promotions Employees (Conditions of Services) Act of 1976
  12. Beedi and Cigar Workers (Conditions of Employment) At of 1966

The Contract Labour (Regulation and Abolition) Act of 1970, the Factories Act of 1948, and other significant pieces of labour-related legislation have all been incorporated into the OSH Code and made a part of a single, comprehensive act. The OSH Code has changed several key definitions, including those for “contract labour,” “employee,” “employer,” “establishment,” “principal employer,” “wages,” and “workers.”.

Every employer has obligations under the OSH Code with regard to their workplace and employees. According to the OSH Code, the employer must also establish and maintain welfare programmes for workers as may be required by the Central Government and to ensure that they live decently. Additionally, with regard to factories, mines, dock work, buildings and other construction activity, or plantations, the OSH Code mandates a stricter set of obligations for employers. According to the OSH Code, it is the duty of the architect, project engineer, or designer in charge of any building or construction project, or the design of any project related to such a building, to ensure that, at the planning stage, due consideration is given to the safety and health aspects of the building workers and employees who are employed in the erection, operation, and execution of such projects..

The minimum amount of contract workers required to be covered under the OSH Code has been increased from twenty (20) to fifty (50). The primary employer of the establishment is required to provide welfare amenities as defined by the OSH Code to the contract workforce employed in such establishments. By mandating that the contractor provide all benefits that are provided to a worker under the various labour laws to inter-state migrant employees as well, the OSH Code has also protected the rights of migrant workers from other states. Additionally, every applicable establishment’s employer must provide interstate migrant workers with a lump sum fee for their round-trip travel to and from their place of employment laws to their home country.

4. The Social Security Code, 2020 (SS Code): The SS Code was enacted to reform and codify the social security laws with the intention of extending social security to all employees and workers in both organised and unorganised sectors, as well as any other sectors. The following central labour laws are merged into and amended by the Social Security Code of 2020:

  1. Employees’ Compensation Act of 1923
  2. Employees’ State Insurance Act of 1948 
  3. Employees’ Provident Funds and Miscellaneous Provisions Act of 1952 
  4. Employment Exchanges (Compulsory Notification of Vacancies) Act of 1959 
  5. Maternity Benefit Act of 1961
  6. Payment of Gratuity Act of 1972
  7. Building and Other Construction Workers Welfare Cess Act of 1996 
  8. Unorganised Workers’ Social Security Act of 2008
  9. Cine Workers Welfare Fund Act of 1981

The SS Code introduces new definitions in this context which are as follows:

  • Aggregator – has been described as a marketplace or digital intermediary that connects a service user or buyer with the service provider or supplier.
  • Gig Worker – according to the SS Code, is a person who engages in employment or other labour arrangements and derives income from them and does not have a traditional employer-employee connection.
  • Platform work – A “platform worker” is a person who engages in or undertakes platform work. It has been described as a work arrangement outside of a traditional employer-employee relationship in which businesses or individuals use an online platform to contact other businesses or individuals in order to solve specific problems or provide specific services or any other activities that may be announced by the Central Government, in exchange for payment.
  • Social Security: It means the protections provided by the SS Code to employees, unorganised workers, gig workers, and platform workers to ensure their access to health care and financial security, especially in the event of old age, unemployment, illness, invalidity, work injury, maternity, or the loss of a breadwinner..
  • Unorganised Sector – implies a business owned by individuals or self-employed employees that is involved in the manufacture or sale of goods or the provision of any type of service, and if the business employs workers, the number of such workers is fewer than ten (10).
  • Unorganised Worker – denotes a worker in the Unorganised Sector who works from home, is self-employed, or is paid.

One significant shift brought about by the SS Code is the inclusion of platform workers’ and gig workers’ benefits within its purview. However, the SS Code gives the Central Government and State Government the right to announce schemes for these workers related to life and disability cover, health and maternity, provident fund, employment injury benefit, housing, etc. Even though the SS Code does not currently stipulate any specific social security to be provided to Gig Workers and Platform Workers. The SS Code stipulates that a combination of payments from the federal government, state governments, and Aggregators may be used to fund the schemes. Every Unorganised Worker, Gig Worker, and Platform Worker must be registered according to the SS Code. Every qualifying gig worker, platform worker, or unorganised worker must submit an application for registration together with the required paperwork, which must include their Aadhaar Number. Each application for registration is given a unique number. The ultimate form of the programmes enacted by the State or Central Government will determine whether they will apply to all unorganised workers, gig workers, and platform workers regardless of the amount of pay they get. The Social Security Code has also brought about a number of further adjustments to provident fund benefits, gratuity benefits, and other existing social security policies.

It will be crucial for establishments to evaluate the implications and revisit the compliance requirements under each Code once it is brought into effect along with the final rules and state amendments, given the changes that the new labour codes have made to the current Employment Laws in India.

Year in review

The key trends in employment law in 2022 were the following:

  • A number of industrialised states, including Gujarat, Karnataka, Telangana, Maharashtra, and Haryana, have released draught regulations for part or all of the future labour laws. The corresponding state governments have not yet given notice of the draught rules.
  • On January 15, 2022, the Haryana State Employment of Local Candidates Act 2021 was passed and announced by the Haryana government. According to the Act, Haryana residents are eligible for a 75% reservation of jobs in the private sector. The Punjab and Haryana High Court is reviewing the Act’s constitutional legality despite the fact that it has been notified.
  • The Special Economic Zones Rules, 2006, were changed by the Indian government by a notification dated July 14, 2022, enabling personnel (including contract workers) employed in special economic zones to do so from home or from any other location.
  • The epidemic has caused considerable changes in the Indian labour market, including the adoption of hybrid working arrangements and a higher rate of layoffs and redundancies, which have significantly increased the use of side jobs. As a result, companies must make their employment contracts’ restrictive covenants stronger.
  • To create a more welcoming and friendly workplace, organisations have established a number of workplace policies. Some of these initiatives include providing possibilities for employment to people with disabilities, protecting LGBTQ+ employees from discrimination, and implementing gender-neutral parental leave policies.
  • The Personal Data Protection Bill 2019 was withdrawn by the Indian government on August 3, 2022, as a result of the numerous changes and suggestions made by the joint parliamentary committee.
  • The Ministry of Electronics and Information Technology (MEITY) submitted the initial version of the Digital Personal Data Protection Bill, 2022, for public comment on November 18, and it was accepted through December 20, 2022.

Conclusion

The Centre has finally proposed the codification of 44 labour laws into 4 codes as part of the long-awaited legislative reform of the labour laws in order to streamline the labour laws in India, give workers full legal protection, and give employers more flexibility in how they conduct business.

The majority of the acts, it was stated in the report produced by the Second Commission on Labour Law, were out-of-date and had outlived their usefulness, necessitating an immediate overhaul of the labour laws. In order to nationalise labour regulations, increase corporate efficiency, and protect the interests of the working class, these laws were consolidated. Additionally, the Union Labour Ministry intends to develop the web portal ‘Santusht’ in order to ensure the proper application of labour regulations.

Read Our Article: All You Need To Know About The Labour Codes In India

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