Punjab Latest to Effect Labour Reforms; ‘Race to the Bottom’ in Labour Standards, Says Expert

The Congress-led Punjab government will soon bring an ordinance and become the latest state to effect labour law reforms, including eased retrenchment norms in the state, in a move that can be seen as following in the BJP’s footsteps to jump ranks in ‘ease of doing business’.

Ahead of an investor’s summit held in Mohali in December 2019, the state’s cabinet had approved several amendments, including changes to key provisions under the Industrial Disputes Act, 1947, Factories Act, 1948 and Contract Labour (Regulation & Abolition) Act, 1970.

The draft bill has reportedly been given the President’s approval now, paving the way for its implementation in the state following the governor’s approval. It is because labour is a concurrent subject under the Constitution of India, allowing states to frame their own laws, but requiring the Centre’s approval.

An ordinance (to bring in the approved changes) is ready and has been sent to Punjab Governor V.P. Singh Badnore for his approval, and will be notified soon, a report by Hindi daily Jagran quoted V.K. Janjua, additional chief secretary, Punjab labour department, as saying.

The details of the changes in the labour laws, to be notified by the ordinance, are not yet known. However, if one goes by the draft bill, the changes – now set to be effected in the backdrop of the COVID-19 pandemic – are not new, but an imitation of other state governments which have reformed labour laws recently.

“Two major waves can be witnessed in bringing changes to labour law provisions by state governments,” said K.R. Shyam Sundar, professor and labour economist at XLRI Jamshedpur. According to him, “the first is between 2014 to 2016, while the second wave can be seen now, when state governments are more daringly effecting changes in laws under the pretext of COVID-19.”

States which are mostly helmed by Bharatiya Janata Party (BJP) governments, including Rajasthan, Madhya Pradesh, Haryana, Maharashtra, and Assam among others, have approved similar amendments since 2014, all in the name of ‘business-friendly labour reforms’.

Now, in the name of getting the economy – brought to a grinding halt due to the nationwide lockdown – back on track, labour reforms are being announced by state governments, even as codification of 44 labour laws, a move purported to achieve standardisation of laws, is underway at the national level.

A parliamentary panel chaired by Biju Janata Dal (BJD) leader Bhartruhari Mahtab wrote to state governments seeking an explanation on the changes brought to labour laws. According to reports, a total of 13 state governments had amended the labour laws in the month of May, with several of them extending daily working hours.

Regional changes in labour laws present “grave concerns”, not only from an academic perspective, but also to ensure their proper implementation, said Sundar.

“Such state-level changes are extremely disturbing, for the very reason that they often replace the democratic process of enacting laws; the executive route often bypasses legislature and ignores social dialogue with all the stakeholders,” he said.

If this is to continue, Sundar asked what the relevance of a national law making process, for which so much energy is being spent in the name of codifying the labour laws, would be.

The changes proposed by the state governments primarily include further limiting the ambit of applying labour laws by tweaking the threshold limits – which can be read as potential dilution of the labour regulatory framework.

For example, this month, the Gujarat government allowed factories with up to 300 workers to retrench, lay off or close down the unit without seeking the government’s permission. Earlier, only factories with up to 100 workers could do so. In the process, the state government has reportedly also done away with the payment of wages to workers for the notice period before retrenchment, as earlier mandated under Section 25N of the Industrial Disputes Act, 1947.

In another instance, on July 15, the Goa government’s cabinet gave approval to amendments, including to the Contract Labour (Regulation & Abolition) Act, 1970, thereby proposing to limiting the registration requirement for a contractor who employs not less than 50 workers. The present threshold limit stands at 20.

In May, the aforementioned parliamentary panel was informed the by Union Ministry of Employment and Labour that a dozen more states are considering making similar changes.

Sundar believes this will result in the creation of “regional labour markets”, which will lead to “a race to reach the bottom of labour standards” among the states.

“We are moving from a national labour market to regional ones. This is exactly what China had reversed in the early 1990s. In India, such a policy direction will lead to unhealthy competition between the states. We are already seeing demands to reserve jobs for the locals. We may soon create countries within a country with respect to labour,” he explained.

The consequence of which will be further informality of labour, who will be much more difficult to organise, Sundar added.

States including Uttar Pradesh, Madhya Pradesh and Gujarat have proposed substantial dilution to labour provisions during the pandemic, with the former suspending nearly three dozen labour laws altogether. Haryana is the latest state that is considering following suit, announcing concessions to industrial establishments.

These dilutions – be it by state governments or by the Centre, in the name of codification – have been flayed by the central trade unions and other workers’ bodies, who have staged demonstrations and general strikes, time and again, to register their opposition.

Trade unions had reached out to International Labour Organization (ILO), of which India is a founding member, against the sweeping changes in labour laws, The United Nations (UN) body had responded by asking the authorities to ensure that relaxations adhere to global standards.