Verdict corner: Welcome push for labour reforms

Written by Indu Bhan | Indu Bhan | Updated: Oct 29 2014, 08:08am hrs
In a move to revamp labour laws for boosting manufacturing and creating jobs, the Narendra Modi government is proposing to move amendments to the archaic Factories Act 1948, the Apprentices Act 1961, and Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act 1988 in the winter session beginning November 24.

Though the process of amendments to the Factories Act was initiated by the UPA government in 2011 by setting up an expert committee, the attempt to do so gained momentum after the Vasundhara Raje government in Rajasthan moved to amend four central laws which include the Industrial Disputes Act, the Contract Labour Act, the Factories Act, and the Apprentices Act. The BJP had, in its manifesto, signalled its intent to pursue labour law reforms.

Changes to the Apprentices Act will increase the availability of skilled manpower in the country, provide industries the flexibility to hire apprentices and improve the monetary compensation given to them. And amendments to the Factories Act will allow the industry to scale up operations by doubling the overtime to 100 hours in a quarter, lift the bar on hiring women workers for night shifts, and cut down on cumbersome procedures by permitting online registration of units and e-filing of compliance returns by employers through a single unified form. The labour laws on the anvil will also simplify filing of returns and reduce legal hassles.

Cheering at the proposed amendments, companies feel that the intention to move ahead with labour reforms augurs well for the manufacturing sector, will send a strong signal to global investors and boost job creation. The industry has been all through insisting on doing away with obsolete provisions and restrictions under the current legislative framework. Policy experts feel such greater labour market flexibility would boost productivity, curtail corruption and facilitate development of industry.

The Factories Amendment Bill, 2014, proposes to revise the definition of a factory by effectively doubling the threshold of the number of workers employed in such a unit. The minimum number of workers in a factory is sought to be doubled to 20 for units with power and 40 for non-power units. Even micro, small and medium enterprises employing up to 40 workers will now be brought under the purview of this law.

With womens participation in the labour force dipping sharply over the past decade, the new law will help improve opportunities for them also. Based on the expert panel suggestions, the Bill instead of explicitly barring all women from doing any work near or on machinery in motion allows state governments to make rules allowing women to work night shifts in factories upon fulfilling certain conditions.

Under the new Bill, the employers must transfer wages into bank accounts instead of making cash payments.

As per the labour ministrys data based on returns submitted by factories under the 1948 Act, of the 67,508 factories that submitted returns (except from Odisha) in 2010, 35,208 units had employed less than 20 workers. However, the number of workers employed by these units was just 3,78,970 workers, as compared to the total 44.96 lakh workforce in factories.

While industry experts have cautioned that adequate safeguards need to be put in place to ensure security of women workers before the reforms kick in, trade unions remained sceptical of the governments stance saying such amendments would end up in greater violations by factories, unregulated working conditions and encourage unhealthy competition amongst small manufacturers. The unions have also warned that no such unilateral move should be made without consulting them. According to them, the amendments have been introduced to appease industries, corporates and multinational corporations as against the interests of workers.

Legal experts feel that the process of labour reforms would give confidence to the industry to hire more people. There is a need to create a balance between growth and welfare of workers. Too much of rules and inspector raj needs to go and labour laws need to be simplified. Factories Act does not make any economic sense as of now, Supreme Court Lawyer Gaurav Goyal said, adding the government will have to incentivise the manufacturing sector to keep pace with other countries.