Labour reforms in India: The Narendra Modi government has brought in four labour codes — the wages code, the social security code, the industrial relations code, and the occupational safety code – to replace 29 central labour laws that were in force. The codes met with strong opposition from trade unions, which complained that social dialogue and tripartite consultations did not happen before these codes were introduced, and this constituted the violation of international labour standards.
India embarked on labour reforms in the last couple of years. The four codes were passed in Parliament and went on to become Acts, for which the rules are being framed. Implementation dates are still awaited. As per international standards, any change in existing labour laws or introduction of new laws should be preceded by social dialogue and tripartite consultation. Major trade unions allege that adequate dialogue or consultation did not happen in the case of the four codes, which have several contentious provisions.
Why labour reforms were necessary
Last May, 10 central trade unions jointly wrote to the director general of the International Labour Organisation (ILO), drawing attention to the plight of migrant workers during the Covid-19 crisis as well as to attempts by some state governments to dilute or suspend labour laws. In the letter, the unions pointed out that the suspension of certain labour laws would take away the workers’ right to freedom of association and collective bargaining. Some of the changes, including the increase in working hours, were later withdrawn by some states, after protests by trade unions.
In September last year, the Union labour ministry introduced three labour codes. The code on wages was introduced earlier in August 2019. The central trade unions opposed various aspects of these codes and expressed concern that certain long-standing workers’ rights would be eroded when these codes come into operation.
The problems with the proposed codes include deregulation of the labour market in the form of increasing threshold of employees from 100 to 300 with regards to lay-offs, retrenchments, closure and framing of certifying standing order, introduction of fixed-term employment without safeguards, deregulation of contract labour by increasing applicability threshold from 20 to 50, longer retaining hours at work, absence of universal social security and exclusion of informal sector workers from many facilities and basic labour rights.
The Union government and many state governments are currently finalising the rules. Last Month, the Union labour ministry said it was withholding implementation of the codes for the time being as most of the states are yet to frame rules. As labour is on the concurrent list, unilateral implementation on the part of Union government would have created a legal complexity in the states. That might be the reason behind postponing notification of four new codes. However, these codes are to be made operational in near future once most states notify their rules.
In the letter to the ILO, the unions pointed out that the government brought in labour reforms without adequate social dialogue and tripartite consultation with trade unions. According to these trade unions, this violated ILO convention 144. This convention, ratified by India in 1978, mandates a tripartite consultation process involving government, employers and workers. In response to this letter from trade unions, ILO assured that it would take up the issues with the Indian government.
Subsequently, ILO director general Guy Ryder wrote to prime minister Narendra Modi, emphasising the fact that India should uphold international commitment and encourage effective social dialogue and tripartite consultation before framing new laws or changing existing laws. ILO made an appeal to the Indian government to make sure that social dialogue is being used because it is an effective tool for coming out of the crisis in a stronger and more resilient manner and to build a more egalitarian and cohesive society.
Social dialogue and consultation
Social dialogue is defined as: “All types of negotiation and consultation, and also the exchange of information between, or among, representatives of governments, employers and workers on issues of common interest relating to economic and social policy.” It has been long employed as a tool in the governance to deliver sustainable economic growth, social justice and high-trust work relations that are not only valuable in themselves, but can also improve business performance and increase workers’ share in rising profits. It includes tripartite social dialogue, collective bargaining and workplace cooperation.
Collective bargaining is defined in ILO’s Collective Bargaining Convention, 1981 (No. 154), as “all negotiations which take place between an employer, a group of employers or one or more employers’ organisations, on the one hand, and one or more workers’ organisations, on the other, for: (a) determining working conditions and terms of employment; and/or (b) regulating relations between employers and workers; and/or (c) regulating relations between employers or their organisations and a workers’ organisation or workers’ organisations.”
Freedom of association and the effective right to collective bargaining are the preconditions for successful social dialogue.
ILO conventions and labour reforms
The rationale for social dialogue and tripartite consultation lies in the fact that the relations between workers and employers are unequal. The very purpose of freedom of association and the effective recognition of the right to collective bargaining is to place employers and workers on an equal footing in the labour market—by protecting the rights of workers for freedom of association. This provides a remedy for the unequal bargaining power inherent in employer-employee relationship.
Another important outcome of collective bargaining and freedom of association is that there is a strong correlation between bargaining power and inequality. Lesser bargaining power leads to increase in inequality. If the objective is to promote a more equal society, tight to collective bargaining and freedom of association need to be upheld.
Any fundamental changes in labour laws should be preceded by adequate social dialogue and tripartite consultation. Introduction of codes implies important changes are being made to the existing laws. For example, increasing applicability threshold from 100 to 300 in case of retrenchment of workers as proposed in the Industrial Relations Code.
This implies that establishments employing 299 or less workers need not take prior approval from the government if they desire to retrench or lay-off workers. In other words, establishments employing 299 or less workers, are free to retrench or lay off or close down units as and when the management deems fit.
This provision violates the spirit of ILO convention 158 of 1982 on termination of employment. The spirit of this convention is that the employment of a worker shall not be terminated for reasons related to the worker’s conduct or performance before he is provided an opportunity to defend himself against the allegations made, unless the employer cannot reasonably be expected to provide this opportunity. Further, in case of collective redundancy, government should be notified and workers be consulted.
The government needs to be notified because large redundancies will have significant impact on the labour market. So, this would call for a public response and public management of the consequence of such redundancy. Notifying the government would enable the government to anticipate and take the corrective measures. The second requirement about the workers’ consultation is important because such engagement may lead to identification of all possible alternative measures.
Inadequate social dialogue and consultations
Public policy response effectively hinges on social dialogue and consultation. All the stakeholders can come together and discuss these seemingly conflicting issues and there are possibilities that they arrive at a consensus, which is beneficial to all concerned. Unilateral decision by either of these parties does not provide such scopes of reconciliations. Also, in case of eventualities, state can draw up plans to protect workers’ interest and ease the difficult period of transition.
It is a matter of great concern that introduction of four labour codes took place without adequate social dialogue as alleged by the major trade unions in their letter to the ILO. So far, government did not clarify its position. It seems that government is not in a position to put forward the argument that adequate social dialogue and tripartite consultation happened before the passing of these four labour codes.
There were some rounds of consultation and subsequently the government came up with respective draft codes. Such drafts were put up in public domain and suggestions were invited from stakeholders. However, what happened to the suggestions received in the process is not transparent at all. The government did not engage stakeholders in any meaningful social dialogue platform subsequent to call for suggestion. The government came up with the final drafts in Parliament in September 2020. The Bills were passed in both houses of Parliament and subsequently all the bills received presidential assent.
One important forum for social dialogue and tripartite consultation is Indian labour Conference (ILC). ILC would have been the most appropriate forum to discuss proposed labour codes in all its details among the stakeholders. The last such ILC was in 2015. Since then, no ILC was convened. Prior to 2015, ILC used to be a regular affair. It is evident that no ILC was held prior to introduction of these four labour codes. Code agendas were never been discussed in a holistic manner.
There is no denying of the fact that India needed labour law reforms. There were too many laws. Most of them had overlapping and conflicting provisions. Laws were old and some of those became obsolete over time as world of work underwent significant changes. Under such circumstances, labour law reforms had become imperative and India did come up with four labour codes encompassing existing 29 labour laws. But the problem is that such initiatives were not accompanied by adequate social dialogue and tripartite consultation as needed under various international labour standards.
India has ratified these ILO conventions and is committed to its implementation. It’s a fact that carrying out social dialogue and tripartite consultations are not always easy. Process is long and difficult as objectives are conflicting. Still, those are important processes. It is important to engage with stakeholders such that an outcome is generated which will to be accepted and implemented both by employers and workers. As implementation of codes have been deferred, this period can be used to engage in social dialogue involving all the stakeholders and accordingly rules can be finalised.