Tamil Nadu’s new law is anachronistic, will hit state
Though desirable, given the potential backlash, it is not surprising India’s political class is taking time to reform rigid labour laws that most recognise are a big reason for the poor growth of India’s industrial sector and hence jobs in the organised sector. While this has held back a large part of the industrial sector, several states have tried to find ways to liberalise rules for certain sectors like the fast-growing IT one. Formation of trade unions, though not formally disallowed, never really took place in the industry for a variety of reasons. For one, with 25-30% attrition levels till recently, workers always got a good deal. Two, with average salaries quite high, as also education qualifications, few employees in the IT sector equated themselves with shop-floor workers who needed to form trade unions. More important, most states allowed IT to function under what is called the Shops and Establishments Act as opposed to the Industrial Disputes Act. What this meant was that IT firms had more flexibility to fire workers or shut shop if need be—like, in the case of BPO units, when a lot of the business was lost to countries like the Philippines. States like Karnataka, Andhra Pradesh and Telangana also classify IT as an ‘essential service’ where strikes or bandhs are banned. While Bangalore has traditionally been the country’s IT hub, a good number of firms also set up shop in Tamil Nadu and Andhra Pradesh.
It is this that is now under threat thanks to a new law in Tamil Nadu. After TCS fired employees last year and they formed a union and approached the court, the government responded by saying that the IT sector was covered by the Industrial Disputes Act and that unions can be formed. The real problem here is not the formation of unions but putting the industry under the Industrial Disputes Act. As it is, growth in the sector is slowing down and, more important, jobs creation is also slowing in the face of greater automation. So, if IT firms with more than 100 persons wish to retrench staff, they can do so only after taking the permission of the state government—since that can take a long time, chances are firms will be that much more reluctant to expand in the state now. Strict implementation of rules will also mean that firms will not be able to get employees to work 24×7, for instance, to complete mission critical work; even asking women to work after a certain time in the evening can become a problem if the rules are strictly implemented—indeed, while IT is under the Shops and Establishment Act in Delhi, the reason why BPOs flourished in Gurgaon and not Delhi was that the rules for hiring women were even more liberal in Gurgaon. As in all such cases ostensibly meant to protect workers, the biggest sufferers are workers. Pity an otherwise progressive state like Tamil Nadu should choose to forget this. At the central government level, it would be good to revisit the definition of a workman. Ever since a bench headed by Justice VR Krishna Iyer had expanded the definition of industry, a workman includes any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work—narrowing down the definition to exclude a certain category of worker, or those paid above a certain amount, is a good place to start.