Analysis: Relaxation on labour laws

Reading time: 8-10 minutes.

In the wake of the pandemic, the world economy is undergoing huge shifts. As a developing country that aims to become a super-power soon, India cannot ignore the effect of the lockdown on its businesses. The aim is to “revive the economy”, that has led states such as Uttar Pradesh and Madhya Pradesh to amend various labour laws, to keep the industries continue working through the lockdown period.

The government of Uttar Pradesh has recently passed ordinances that suspend all but four labour laws for the next three years, to attract itself to the investment of new companies amidst the Covid pandemic. Following suit, there are now ten states that have now done so.

Labour is a concurrent subject under the Indian Constitution; therefore, each state can frame their own labour laws, which will then be subject to the approval of the Centre. The Parliamentary Standing Committee on Labour has sought clarification from these states in the matter of their dilution of labour laws. The panel has given them a period of two weeks to justify their actions and to clarify whether they adhere to the proposed codes of the Union Government.

Significance of this development

The lockdown is a huge challenge to the world economy. India undoubtedly has a lot to lose if effective laws are not implemented. The relaxation and simplification of labour laws is the need of the hour. The significance of the effective action it holds, can be elaborated in the following 4-pronged approach:

  • Challenges as a developing nation

The Indian economy had been going through a steady decline even before the pandemic. If no effective measures are taken, India could be on the brink of an economic crash. As one of the most heavily populated countries in the world, the concept of social distancing is fairly new in the Indian lexicon. Imposing such rules and providing for safety gear will take a large chunk off its monetary vault. This brings in a further need for the continuance of industrial work just so India can afford a healthier workplace for its labourers.

  • Rising unemployment

The Centre for Monitoring Indian Economy states that since April 2020, nearly 9.13 crore small traders and labourers have lost employment, bringing the unemployment rate in the country near 25%. The hiring of more labourers must ensure labour costs and timely wages. The relaxation of laws has led to a mass criticism of the suspension of minimum wages and trade union dispute settlement. However, we must realise that it is a time of crisis, and that we must solve the issues at hand, to avoid a looming, dire future of financial instability.

  • India’s economic revival

China has been facing a lot of heat for the pandemic. As countries shift away from China, India is prepping itself to become the next manufacturing behemoth with the continuance of industrial work in many states. The government backing the Micro Small and Medium Enterprises (MSMEs) Development, ushers India to become increasingly self-reliant. The pandemic has restricted access of the public to many foreign businesses. The greenlight given to these MSMEs could replace these industries, leading to an industrial boom to businesses that have been over-looked for a long time.

  • Simplifying Indian labour laws

The relaxation of labour laws, with the exception of four laws, will lead to a more simplified approach to industries. At the need of the hour, the numerosity of laws will only be counter-productive to the Indian agenda of economic revival. Further, the simplicity of laws and the suspension of all but the essential four laws will be seen as an incentive to new investors.

Which laws have been relaxed?

The following is a state-by-state guide on the relaxation of laws:

  • Uttar Pradesh

The Uttar Pradesh Cabinet has recently approved of the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020, thereby exempting all factories and establishments from labour laws for the next three years, subject to the fulfilment of certain conditions, as follows:

  1. There must be a minimum wage and the workers cannot be paid below the wage amount.
  2. The workers must be paid within the time limit that has been established under the Payment of Wages Act, 1936
  3. The health and safety conditions under the Building and Other Construction Workers Act, 1936 and the Factories Act, 1948, must continue to be adhered to.
  4. The workers must not be compelled to work more than 11 hours a day and the spread of work must not be more than 12 hours a day.
  5. The Employees Compensation Act, 1923 will still be adhered to, providing compensation in case of work-related accidents.
  6. The Bonded Labour System (Abolition) Act, 1976 will continue to remain in force.
  7. Labour Law provisions relating to the employment of women and children will continue to remain in force.
  • Madhya Pradesh

The Madhya Pradesh Labour Laws (Amendment) Ordinance, 2020 amends the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 and the Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982.

  1. The amendment now brings upon the constitution of a Fund that will finance welfare labour activities.
  2. Any establishment can now be exempted from the provisions of the Kalyan Nidhi Adhiniyam Act, via a notification.
  3. Provisions of the Industrial Disputes Act, 1947 related to industrial dispute resolution, strikes, lockouts and trade unions will not be in effect, for the next 1,000 days.
  • Rajasthan, Gujarat, Punjab, and Himachal Pradesh

These states have addressed the need for relaxations that will help the country undergo an industrial recovery and have amended their respective Factories Acts to allow for an extended, 72-hour work week, from the previous, 48-hour work week.

Legal basis

Since Labour falls under the Concurrent List in the Indian Constitution, the Parliament as well as the State Legislatures have the power to regulate laws under this subject. This has led to the formation of a large number of labour laws that have made this area rather inflexible. To simplify the process of codifying the numerous labour laws as the Labour Code on Industrial Relations, Labour Code on Wages, Labour Code on Social Security and Labour Code on Occupational Health Safety and Working Conditions.

The regulation of these laws take place, on the state level, via the state, that passes it own labour laws or amends the Centre’s labour laws, according to the requirements of the state. In an event where the state’s laws are incompatible to the Centre’s, it is the Centre that prevails. The state’s law in question, will be void, unless it gets the approval of the President.

The need of the hour calls for effective action. As the pandemic causes great destruction, there is a silver lining that can be created, if India can successfully implement a relaxation of its labour laws that help the country attain its dream of becoming a manufacturing behemoth.

Crtical analysis

The relaxation of such laws is a huge and a rather risky legislative move, especially when India is already on its way to codify the labour laws that are in existence. A critical approach to this topic would bring in the following issues:

  • Has there been a Tripartite Consultation Involved?

In the wake of numerous legislative amendments throughout the country, there must be a tripartite consultation that involves the government, the working class, and the employers of the organisations. Anything that does not adhere to the full consent of these three parties will be considered arbitrary.

  • Labourer Representation

The exemption of Trade Unions, and industrial dispute resolution mechanism has by far been the biggest factor of criticism, along with the abhorrent increase in working hours. Central Trade Unions in the country has termed the action of the states as an “inhuman crime”.

  • Violation of ILO Guidelines

India is one of the founding members of the International Labour Organisation (ILO). The Fundamental Principles and Rights at Work was adopted by India that states that all members of the ILO have to “respect and promote the freedom of association and the effective recognition of the right to collective bargaining”.

Clearly, these amendments that eliminate Trade Unions will be a gross violation to these rules. The absence of a workers association will leave open a large possibility of the abuse of the rights of the workers.


The rationale behind the relaxation of labour laws has been to not only revive the economy but to bring about a transparency of laws: a codified, concise amount of laws will be easier to regulate. Further, it answers a distress call of the various labourers at risk of unemployment. However, these decisions must be taken with great responsibility since the relaxation of laws during these difficult times can also lead to desperate working conditions for labourers. India, as a party to the International Labour Organisation must adhere to the guidelines set down by them, and ensure solidarity between the government, the employers, and the workers.

Author: Anjali Roy from Alliance School of Law, Alliance University, Bengaluru.

Editor: Avani Laad from Symbiosis Law School, Pune.

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