APPENDIX G

Labour Laws

Introduction

The HRM functions of organizations of a country are governed by its legislative framework. The Indian system of labour laws, which regulates the employment relationships and labour markets, is very extensive and complex. There are around 250 labour laws at the central and state levels. Labour law is actually the body of laws, administrative rulings, and precedents. These laws, also known as employment law, shape and influence the working conditions of Indian employees and organizations. Generally, labour legislations play an important role in shaping the course of industrial relations in India. The basic principle that guided the origin and development of labour legislation in India is the establishment of social justice at work places.

In India, the labour legislation has a history of over 125 years. The Apprentice Act, 1850, was the first act passed in the country to facilitate the children brought up in orphanages to get employment at appropriate age. Since then, many labour laws covering various aspects of industrial employment have been passed. These labour laws have three-fold objectives of (i) protecting workers from exploitation by employers, (ii) promoting and preserving industrial relations, and (iii) making machinery available for settling industrial disputes and protecting the welfare of workers. In this context, the labour laws also specify the rights and obligations of workers, employers, and trade unions in the workplace.

The underlying principles that form the foundation of labour legislations in India are as follows:

1. Principle of protection: It protects the interests of workers who are unable to protect these interests on their own.
2. Principle of social justice: It aims at eliminating discrimination suffered by particular groups of labour and thereby ensuring equality in social relationships.
3. Principle of regulation: It primarily regulates the relationships between the employers and employees and their associations.
4. Principle of welfare: It seeks to provide basic welfare amenities to the workers and their family members.
5. Principle of social security: It looks to provide social assistance benefits to persons against the loss of earnings that may result from the retirement, disability, or death of the family provider.
6. Principle of economic development: It enacts labour laws that have direct or indirect bearing on the industrial and economic development of the country. Laws relating to physical working conditions, prohibition of unfair labour practices, restrictions on strikes and lock-outs, and regulation of hours of work are based on this principle.
7. Principle of international obligation: It aims at enacting labour laws that give effect to the provisions of resolutions passed by international organizations such as ILO, UN, and other competent institutions.

HRM and Labour Laws

Broadly speaking, the Indian labour legislation covers three important domains connected with HRM. These are industrial relations, workplace health and safety, and employment standards. However, most of the labour legislations in India cover just 2.8 crore workers employed in organized sectors. In specific terms, the labour legislation is mostly restricted to the organized sector of employment such as factories, mines, plantations, shops, and commercial establishments. Unfortunately, the large Indian workforce employed in unorganized sector (constituting nearly 94% of total workforce of 46.5 crore) still remains out of the purview of Indian labour legislations.¹

At the same time, some of the articles in the Indian Constitution directly relate with labour legislations and guarantee a few fundamental rights to all the citizens of the nation. (These articles are already discussed in page 51 of Chapter 3 – the evolution and environment of Human Resource Management). A few other articles in Indian Constitution deal with the service conditions of central and state government employees. For instance,

Article 309 refers to recruitment and conditions of service of people employed by government.

Article 310 specifies the tenure of persons holding office.

Article 311 refers to dismissal, removal, and demotion of government employees.

Article 246 and the Seventh Schedule of the Constitution of India specify the distribution of powers between the central and the state governments. In this, labour is placed in the Concurrent List where both the central and the state governments are competent to enact legislations.

We shall now discuss about the important labour legislations in India.

Labour Legislations

Labour legislation is classified under three broad headings, namely Protective and Employment Legislation, Social Security Legislation, and Regulatory Legislation.

Laws Related to Employment Standards

1. Payment of Wages Act, 1936: The objective of this act is to ensure the payment of wages to employees at periodic intervals and with no unauthorized deductions. This act specifies the relief available to employees in the event of unauthorized deductions in wages (Section 7) or non-payment wages in time (Section 5). This act elaborates on the list of permissible deduction in the wages of employees of business organization.
2. Payment of Bonus Act, 1965: This act is applicable to all factories covered by the Factories Act, 1948, and other establishments that employ 20 or more persons during the accounting year.  Every employee of an establishment covered under this act is entitled to bonus from employer in an accounting year provided he/she has worked in that establishment (i) for not less than 30 working days and (ii) on a salary/wages not exceeding ₹10,000 per mensem. This act explains the method to be followed for computing the bonus payable to the employees. It also specifies the minimum bonus (Section 10) and maximum bonus (Section 11) payable to the employees of the establishments. To enable the employees to get minimum bonus even in the absence of any allocable surplus during the accounting year, this act permits the employers to use the technique known as ‘set on’ (when the allocable surplus exceeds the amount of maximum bonus payable to the employees for any accounting year, then the excess shall be carried forward for being set on in the succeeding accounting year) or ‘set off’ (adjusting the current year bonus amount against next year’s allocable surplus).
3. The Shops and Establishment Act, 1953: States pass this act to regulate the working conditions of employees engaged by the shops and commercial establishments located within their jurisdiction. This act provides for statutory obligations of employers of establishments such as residential hotels, restaurants, eating houses, and theatres including unorganized sectors. This act provides for compulsory registration of shops and establishments within 30 days of commencement of business. This act also makes it compulsory for shops and establishments to communicate the closure of its business within 15 days.

   The Shops and Commercial Establishment Act lays down the rules for hours of work, overtime wages, rest intervals, and holidays. It also specifies the rules for sickness and causal leaves, maternity leaves, annual leaves, employment, and termination of services. This act places restrictions on the employment of children, young persons, and women during nights. This act also provides for maintenance of statutory registers and records in addition to the display of notices. Many states have made several important amendments in this act to meet the changing business environment (e.g., permission for employment of women during nights and 24-hour operation).

4. The Equal Remuneration Act, 1976: The aim of this act is to ensure the payment of equal remuneration to men and women workers and prevent discrimination based on the ground of sex, against woman, in the matter of employment. This act looks to fulfil Article 39 (A and D) of constitution that directs the states to make sure that there is equal pay for men and women. This act insists on the following:
   1. No discrimination to be made while recruiting men and women workers. In other words, it is the duty of employer to pay equal remuneration to men and women workers for same work or work of a similar nature (Section 4).
   2. No discrimination on promotion, training, or transfer except where employment of women is restricted (Section 5).
   3. Maintenance of prescribed registers and documents by employers in relation to workers employed by them (Section 8).
5. The Trade Union Act, 1926: This act is discussed in detail in Page nos. 555 to 557 of Chapter 24 on Trade Union.
6. The Industrial Employment (Standing Orders) Act, 1946: This act is mentioned in Page no. 513 of Chapter 22 on Employee Grievance.
7. The Industrial Disputes Act, 1947: It is discussed in Page no. 513 of Chapter 22 on Employee Grievance; Page nos. 520 and 526 of Chapter 23 on Industrial Disputes and Collective Bargaining. The general complaint against this law is that it has rigid provisions such as compulsory and prior government approval in the case of layoffs, retrenchment, and closure of industrial establishments employing more than 100 workers.   This clause applies even when there is a good reason to shut shop or worker productivity is seriously low.
8. The Minimum Wages Act, 1948: The primary objective of this act is to stop the exploitation of workers working in organized sector (scheduled employment) by providing them minimum wages. This act empowers the government to take appropriate steps for fixing minimum wages and also revising it in a timely manner.
9. The Factories Act, 1948: It is explained in Page nos. 401–402 of Chapter 17 on Employee Welfare and Social Security.
10. The Maternity Benefits Act, 1961: It is explained in Page no. 413 of Chapter 17 on Employee Welfare and Social Security.
11. The Workmen’s Compensation Act, 1923: It is explained in Page no. of Chapter 17 on Employee Welfare and Social Security.
12. The Employees State Insurance Act, 1948: It is explained in Page nos. 412 and 413 of Chapter 17 on Employee Welfare and Social Security.
13. The Employee Provident and Miscellaneous Provisions Act, 1952: It is explained in Page no. 368 of Chapter 17 on Employee Welfare and Social Security.

Labour Laws in IT and ITES Sector A widespread misconception in the IT industry is that many labour laws are not applicable to the IT industry. However, this is not true as acts like The Shops and Commercial Establishments Act, 1961; Industrial Disputes Act, 1947; and even Trade Unions Act, 1926, are applicable to this industry.  Individual states have evolved need based specific acts to regulate the functioning of IT industry in their own states. Many states use The Shops and Commercial Establishments Act to deal with labour-related matters such as working hours, overrates, and employment of women at night.

Similarly, Industrial Employment (Standing Orders) Act, 1946, which requires the employer to define and publish uniform conditions of employment, is also applicable to IT industry. This act is strict on classifying workers, working hours and shifts, wages, leave, and attendance. However, some states have given exemption to IT companies from this act. A few of these states which have granted such exemption earlier are now withdrawing the same and enforce the relevant provisions on IT industry. Incidentally, certain state governments have allowed self-certification instead of inspection from certain acts like The Factories Act, The Employment Exchange (Notification of Vacancies Act), The Payment of Wages Act, The Minimum Wages Act, The Contract  Labour  (Regulation and Abolition) Act, The Workmen Compensation Act, The Shops and Establishments Act, and The Employees State Insurance Act.

Notes

1. Ministry of labour and employment, Government of India, available at http://labour.nic.in/content/