Labour Laws in India

Guest blog by Shikhar Nehru

Labour is a concurrent subject under the Constitution of India, states can frame their own laws but need the approval of the Centre for making amendments to central laws.

Traditionally, Indian governments have sought to ensure a high degree of protection for workers (for political gains), but in practice, this differs with the party in power. BJP, which claims to be investor-friendly, and has a more capitalist mind-set rather than socialist, is inclined towards favouring the business owners rather than the labourers. 

Indian labour laws make a distinction between people who work in “organised” sectors and people working in “unorganised sectors”. The laws clarify as to the conditions in which these apply. As regards businesses which do not fall within these sectors, the Contracts Act applies.

Why are Labour Laws in News?

UP, MP and Gujarat approved bold ordinances that summarily suspend most of the Labour Laws, including the Minimum Wages Act for 3 years. Apart from them, several other states, ruled by the Congress (Rajasthan and Punjab) as well as BJD-ruled Odisha have proposed changes to the Labour laws.

Uttar Pradesh Governor has approved an ordinance exempting companies from almost all labour laws in the state for a period of three years. This has as yet not been approved by the President.


As the economy struggles with the lockdown and lacs of firms and crores of workers stare at an uncertain future. Some of the major concerns are given below:

1.     No assurance of minimum wages to the labourers. 

2.     Working hours have been increased from 8 hours to 12 hours. This is likely to create an environment favouring exploitation of labourers by the employers.

What is Government’s Stance?

“To bring economic activity back on track, new investment opportunities would need to be created along with fastening the business processes and productivity”, said an official statement by UP Government.

The Centre is even weighing options to push Labour Reforms. Labour Reforms are important because according to some credible reports, less than 10 % of the workers are “formally employed” while over 90% of the workers are in the “informal” sector, bereft of social security.

While the government takes hurried steps aiming at MNCs looking to shift production facilities from China, The International Labour Organisation (ILO) has appealed to the Prime Minister to “send a clear message” to the Central and State governments to uphold international labour laws after the recent proposed dilution of laws by some States.

Findings at Ground-level

I spoke to some factory/business owners from UP to understand what the ground reality is.

Person 1: Runs Metal fabrication Unit with 25 Workers.

  • According to him, Minimum Wages Act was not applicable unless more than 20 workers were gainfully employed. In any case, he had workers on contract and did not wish to get into the trouble of complying with the labour laws. 
  • He said that he had heard about the passage of the ordinance. However, promulgation of the ordinance and the date from which it came into effect was not known.
  • When asked if workers were paid during 40-50 days’ complete lockdown, he said “only money was given and treated as advance salary”. This petty amount was planned to be deducted from the future wages of the workers.

Person 2: Runs Reputed Export-oriented Factory with over 100 Workers.

  • He complies with labour laws.
  • Claims that during pandemic, 60% wages were paid to workers. (I think as per law, when an employer is not earning, the Board may decide to exempt the employer from paying wages.) 
  • Says that apart from their company, most others paid no wages for the period of the complete lockdown.
  • With the suspension of labour laws for 3 years, he would seriously consider reducing wage rates once better clarity is available on the subject.

To understand the plight of workers, I managed to speak to a couple of them.

Worker 1

The powder coating plant that he worked at and got wages at “market rates”, did not pay any wages. To make ends meet, he started selling vegetables.

He was not aware of the new ordinance being passed, at the time of my speaking to him.

Worker 2

He received “VDA” portion (variable daily allowance) of his wages. 

He did not know about the suspension of the labour laws. He seemed extremely worried by hearing this, but was also grateful to his employer that when others did not get any money during lockdown, at least he was paid something.

Role of Central Government

·       Union government has withdrawn its order directing employers to pay wages passed on 29 Mar 2020 to workers with units remaining shut during lockdown in May 2020.

·       The central government is favourable towards the employer rather than the employees. It is apparent from the withdrawal of the order, as also the attitude displayed in making it difficult for the labour to leave their work places and go to their respective homes.

Role of Judiciary

A 3 judges’ bench of the Supreme Court on 16 May restrained the government from taking coercive action against employers who do not pay workers their entire salary during the lockdown in violation of a ministry of home affairs notification of March 29 that directed them to pay full wages.


·       When we elect incompetent and poorly educated representatives to govern us we get something like what we are witnessing in the form of these actions. 

·       India was in need of labour reforms and this was being stated by the industry since quite some time. However, suspension of practically all the labour laws cannot be termed as, “labour reforms”. The method of labour reforms is to introduce bills in the Parliament, debate them and then amend the laws. Bringing in ordinances without any debate is in simple words against democratic norms.

·       The actions of the state governments apparently are to take advantage of a large pool of labour which has come to the economically backward states like UP from better off states. The clear aim is to pave the way for legal exploitation of labourers. 

·       The labour laws were as it is not providing much support to the poor labourers, who were mostly working on contract basis, keeping the employers out of their moral obligation of taking care of their employees.

·       The best summary of these so called reforms has been given in the words of Rajiv Bajaj: ‘You Can’t build a world class business with third class policies’.


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Thanks and Regards Shikhar NehruMeerut, IndiaM| +91 97610 04688O| +91 12126 43332

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