Suspension of Labour Laws: A Fact Check

As part of the recovery plan from COVID-19, state governments see the suspension of labour laws by way of notifications/ordinance, as a policy measure that’s expected to boost economic recovery. This decision has been surrounded in hyperbole and rhetoric, with fake and ambiguous news circulating as well. There have been claims of total suspension of labour laws and employers actioning widespread exploitation. This article aims to provide an objective view of the facts surrounding the situation as well as an indication of their potential effects.

Fact Check

The Madhya Pradesh State Government has issued a series of notifications (Click HERE to view all notifications) bringing such suspensions into effect. The notification suspended the application of the Factories Act, 1948 in its entirety with the exception of Chapter-IV of the Act. Other provisions relating to grant & renewal of licence, overtime pay, annual leave with wages, display of signboard and hazardous processes shall also remain in force, with the exemptions applicable for 3 months from the date of the notification’s issuance. It also eases certain procedural requirements for obtaining and renewing a licence under the Madhya Pradesh Contract Labour (Regulation and Abolition) Rules. Industries are also exempted from the application of the Industrial Disputes Act, 1947, except Chapter-VA and certain provisions under Chapter-VB remaining in force. The notification also provides that no shop or commercial establishment shall be opened earlier than 6AM and kept open later than 12PM.

The MP Labour Laws Amendment Ordinance, 2020 increases the threshold of the MP Industrial Employment (Standing Orders) Act by making it applicable to establishments that have more than a hundred employees. It also adds an additional clause [clause-3] to Section-28 of the MP Shram Kalyan Nidhi Adhiniyam, empowering the State Government to exempt any establishment from all of the provisions of the Act by way of notification. Therefore, the suspension is not total and complete, it is subject to several conditions and certain essential parts of labour laws are still in force.

The UP government has stated in a press release that it is mulling over a similar type of suspension of labour laws, however the same hasn’t been put into effect. Several leading newspapers have reported that the UP government has introduced an ordinance as opposed to the aforementioned notification route. The reasons for this change are examined in the next part of this article.

Maharashtra, Gujarat, Himachal Pradesh, Rajasthan, Haryana, Goa, Uttarakhand and Assam have also extended working hours in their states. However, there has been no further suspension of labour laws in these states.

Constitutional Issues Surrounding Suspension of Labour Laws

Taking the example of Uttar Pradesh, we must understand that the State Government is not at liberty to suspend the operation of Central Laws. As a consequence the State Government has placed the Ordinance before the President for assent. If we compare the approaches taken by the Madhya Pradesh and the Uttar Pradesh Governments, we find that the former is more structured in its approach, providing a level playing field for both employers and employees.

Whereas the latter has merely placed a single provision nullifying the operation of labour laws in the state without any clarifications on the numerous legal disputes that are bound to arise from this.

The Supreme Court of India has acted as a guardian of labour rights and has proactively defended the rights of workers/labourers. In the case of Krishna Kumar Singh v. State of Bihar, a seven judge bench of the Supreme Court held that the satisfaction of the President of India under Article-123 as well as that of the Governor under Article-213 while issuing an ordinance is not immune from judicial review.

In the same case it was also held that laying an ordinance before the Parliament or State Legislature is a mandatory constitutional obligation. This is because the legislature has to determine the need for such a measure, validity and the degree of expediency required.

The grounds for challenging an ordinance are two-fold, the first is to challenge its provisions in a manner similar to how the provisions of an ordinary parliamentary legislation would be challenged. There exists a conundrum as the Supreme Court has held in T. Venkata Reddy v. State of Andhra Pradesh that the power to enact ordinance is legislative and not executive in nature. Therefore its exercise cannot be questioned on the grounds of propriety, necessity, expediency and non-application of mind. This however was overruled in the above case in view of the judgement in S.R. Bommai v. Union of India.

The second is to challenge the manner in which it was enacted, meaning the process prescribed in law – both constitutional as well as law laid down by the Supreme Court.

Implications of these Policies

While State governments justify the introduction of such measures citing foreign investment and boosting production in manufacturing as reasons, the same requires closer examination. Several employers have expressed their concerns with such policies as they may pose a threat to the trust between themselves and their employees. Similarly, these policies may not directly result in greater foreign investment as companies are reluctant to enter markets that lack a strong regulatory framework. This is due to the potential for exploitation of workers leading to PR scandals as well as the ambiguity in framing employment agreements, HR policies and other employment related documents. The lack of uniformity may lead to employees making different demands when it comes to negotiating employment contracts, as well as imposing a burden on HR personnel due to the lack of a common point of reference with regards to formulating a policy.

Furthermore, there is also the likelihood of litigation arising in courts due to the numerous grey areas raised by such actions. Especially if they are implemented in an ambiguous manner, as some State Governments have done.

What approach do you think State Governments should employ while implementing such measures? How can the government balance the rights of workers while providing a basis for economic recovery in a post-COVID-19 world? Will the unilateral suspension of labour laws withstand judicial scrutiny?

Please drop your thoughts in the comments section below.