Coronavirus crisis: Why MP's labour law changes are more balanced than UP

KEY HIGHLIGHTS

• MP focuses on incentivising new factories but it has not done that at the cost of labour rights
• Workers can work over-time, up to 72 hours a week if they are willing and are paid overtime
• UP's stance of suspending most labour laws is extreme but MP has amended a few Acts
• While states are doing their bit to revive the economy, labour laws need to be looked holistically
• Make hire and fire easy for manufacturing units but create retrenchment company fund, offer unemployment benefits and create state-wise employment exchanges to help find alternative jobs.

While the ordinance passed by the UP government is a blanket suspension of all labour laws for the next three years, barring three (payment of timely wages, the prohibition of bonded labour, and health and safety of workers), MP has amended a few Acts. It has exempted 11 industries -- textile, leather, cement, iron and steel, electrical goods, sugar, electricity, public motor transport, engineering, including manufacturing of motor vehicles -- from the Madhya Pradesh Industrial Relations (MPIR) Act, 1961. This, in turn, will affect trade unions.

Also read: UP allows industry to hire and fire! Suspends all labour laws, except three

MP has also streamlined regulations under the Contract Labour (Regulation and Abolition) (Madhya Pradesh) Rules, 1973. This law applies to agencies who supply labour to industries, making compliance easy. Earlier, they had to apply or seek a modification of their licence each time new labour joined or left the job. Now, their licence will be valid for a fixed term, irrespective of people joining or leaving.

Many provisions of Industrial Disputes Act, 2000, in MP have been disabled for new industries that will be set up in the next 1,000 days, subject to conditions. The objective of the Act is to create a mechanism to address industrial disputes between workers and employers. Industries won't be required to seek government permission for suspending workers but will need to do so while removing them from the job. They will also have to create a separate mechanism to deal with industrial disputes.

Also read: UP labour law reforms: The big climbdown

The central state has exempted non-hazardous factories, which employ up to 50 workers, from the inspection process, subject to a government-recognised third-party certification. It also allowed workers to work overtime, up to 72 hours a week if they are willing and are paid overtime. "It can be seen that UP has taken a very hard stance, while MP's stand is comparatively moderate," says Virag Gupta, Supreme court lawyer and Partner at the law firm VAS Global.

UP's laws are same for all manufacturing establishments, old and new, making it easy for them to hire and fire, and if deemed fit, withdraw rights such as maternity benefits, paid leaves, access to courts or even compensation for termination. "MP has focused to make it easy for new factories that set up in the state and even then it has not done that at the cost of labour rights," says Atul Gupta, Partner at law firm Trilegal.

He adds that MP has not amended the laws to protect workers from wrongful termination and large factories (with 300 or more workmen) will require government approval before retrenchment or closure of the establishment. "It has not played on any other provision such as paid leave, overtime as well."

While MP has tried to maintain the balance, and a lot of these changes are helpful but not enough. "The amendments will provide a reprieve to new organisations from a litigation perspective, but it will be limited. Provisions related to retrenchment, closure of the unit continue to apply for factories with 100 employees. Taking approvals from the labour authority is one of the biggest problems in the country that firms face today," says Pooja Ramchandani, Partner at law firm Shardul Amarchand Mangaldas. If at all, it should be for firms with more than 300 workmen, she says.

Also read: BT BUZZ: Why UP labour law ordinance is unconstitutional

What is important to note is that many of these labour laws are under central legislation and the proposed changes will require the assent of the President. Also, these changes in the law might be challenged in court. Many changes may also be against other Indian laws and international agreements to which India is a party, says Virag Gupta. He suggests that a consultative process with all stakeholders would have been better rather than passing an ordinance or amending the Acts to ensure the proposed changes get passed and are accepted.

There is also a need to look at labour laws holistically. Currently, the labour laws are archaic and haven't evolved with time. They have to be more business-friendly and make it easier for firms to decide the number of workforces they require, minus the compliances.

But, while laws are being modified to offer labour flexibility to firms, they also have to ensure labour welfare to protect the interest of all stakeholders, says Ramchandani of Shardul Amarchand Mangaldas. "One of the ways that can be done is by providing unemployment benefit. It is currently available to a very small section of people, earning less than Rs 21,000, under the Employees State Insurance Act. There should be an unemployment benefit for everybody, leaving out CXOs." Also, state governments should create employment exchanges to help retrenched employees find jobs.

Virag Gupta says during the lockdown the scrapping of labour laws through executive orders and parallelly letting firms start operations post lockdown through NDMA restriction under the provisions of the Disaster Management Act may lead to a constitutional paradox. Because in case of a grievance, the aggrieved party will not have access to courts and right to a proper judicial review, given the lockdown, he explains.

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