By KR Shyam Sundar
The Industrial Relations Code has sought to combine three laws, viz. the Trade Unions Act, 1926, the Industrial Disputes Act, 1947 (ID Act) and the Industrial Employment (Standing Orders) Act 1946 (Standing Orders Act). Lawmakers are justifying the Code on two major grounds, protection of workers’ interests and promotion of ease of doing business.
It is well-known that the average size of the factory in the organised sector has declined due to technological factors and organisational strategies (supply chain)—according to the Annual Survey of Factories data, the workers per factory declined from 59.71 during 1981-85 to 47.65 during 2013-16. The decline at the aggregate level is a significant indicator of the kind of fragmentation happening at the disaggregate levels. Unlike other Codes, which sought to widen the coverage of workers and establishments, this one largely retains the thresholds.
For example, the Standing Orders Act required the employers to frame ‘standing orders’ to eliminate discrimination in the conditions of employment and that Act was applied understandably to establishments employing 100 or more workers; this was the case at the initial stages of industrialisation in the late 1940s. Similarly, in the ID Act the applicability of the bi-partite forum, ‘works committee’ was pegged at 100 in 1947. These benign provisions should be made applicable to establishments employing at least 50, if not 20, after more than seven decades of initial law making. In fact, more workers’ protective provisions are needed in the small and medium establishments as there is enough research evidence to show that the probability of presence of workers’ voice rises/falls with the size of establishments.
The Code provides for recognition of trade union(s) for collective bargaining purposes. This reform has been pending for more than seven decades. But the good work is undone by unrealistic and unimaginative legislating. In the case of multiple unions, a union having 75% membership will be designated as the sole bargaining agent, failing which a negotiating council will be formed with constituent unions having at least 10% membership in the bargaining unit. By setting a stiff threshold of 75% membership for sole bargaining agent status, the law defeats its very objective of providing for it; either the lawmakers have no grip on the empirical realities or they are insincere about their noble purposes. Then, the law in fact enables multi-union and crowded (theoretically 10 unions in any firm) negotiating council. It fails to recognise the probability of a larger union say with say 33-49 % membership being treated on par with that having 10% membership. These will make union sector in a firm a battle ground, which would ultimately lead to inefficient bargaining.
The Code wrongly claims that it has removed several adjudicating bodies like the Court of Inquiry, Board of Conciliation and Labour Courts, and provides for a single body, the Industrial Tribunal. First, the Court of Inquiry and the Conciliation Boards do not have adjudicatory powers in the ID Act. Second, providing for one forum, the Tribunal is not the solution that will address the concerns of the workers or the employers. Currently, the adjudication process suffers from two serious shortcomings, viz. absence of quick and efficient system of industrial justice delivery (which means time-based dispute resolution processes) and inadequate number of adjudicatory tribunals and officials proportionate to the workforce. Maybe it is time to revive the Labour Appellate Tribunal as the higher courts, the High Courts and the Supreme Court occupied with all sorts of litigations have unmanageable workload. Judicial reform in the wide sense is the remedy and not just meaningless changes in nomenclatures. Apart from the aforementioned weaknesses, the tougher conditions for legal strikes (which include accidental mass casual leave), the lower status for collectively bargaining agreement as opposed to conciliated settlements and judicial awards in terms of their differential coverage weaken bi-partism.
Ease of Doing Business
Electronic compliance, where necessary, has been provided. But major concerns of the employers have not been addressed adequately. Despite the fact that none of the State governments notified the fixed term employment (FTE) reform carried out in March 2018 by the Central government, the Code has included it. The irony is that FTE benefits neither workers nor employers. Workers do not benefit because of absence of regulations on the contracts’ tenure and the number of renewals. Workers fear that they will be permanently temporary and live on the mercy of the employers as they cannot unionise for fear of losing renewal prospects. For the employers, FTE is far costlier than contract labour in many ways. For example, they apart from higher monetary costs, increase the transaction costs of cycles of renewals and the monitoring and disciplinary costs (being their direct employer). Further, when more flexible and easier options are available, the principle employer is least incentivised to use FTE. Finally, who is going to supply skill-ready FTEs to the employer?
The threshold with respect to retrenchment of workers and closure of establishments has been left untouched in the Code despite loud demands from the employers for relaxing them or even doing away with them. Though the Code has a provision to have it changed through executive order by the appropriate governments. This will not inspire the confidence of the foreign investors. Assuming that regional governments relax the thresholds, flight of capital will have to take place and they have tremendous costs (land, labour, legal, tax, etc.). What is the guarantee that the state which relaxes exit threshold scores high on other aspects of ease of doing business. Assam and Jharkhand should be securing higher foreign direct investment, but do they? Further lobbying costs for employers will increase as the lobbying centres are equal to the number of regions and not just the central government. To the foreign investors, the legal map of Indian sub-continent will be frightfully crowded and confused. Reform at the federal level will create a level playing field and remove uncertainty on this front. Adding to their unease, apart from tackling separation costs, they have to cough up money to the reskilling fund. So the state has cleverly shifted three primary costs on to the employer, viz. the skilling, unemployment allowance and social security (gratuity cost to contract labour is threatening them!)
Finally, everyone knows that most strikes in India are indeed illegal, and no punitive action can be taken by the government for fear of backlash unless judiciary flays the erring parties. They hoped for clarity, on the recognition front, so that efficient collective bargaining could be conducted. Now, the poorly drafted reforms concerning recognition have dashed their hopes. In the absence of recognition laws, tougher employers could slug it out wearing out contesting militant trade unions. Now they must contend with a crowd of trade unions lest they will be hauled up under the Code!
The Code is confused, badly drafted, unimaginative, unrealistic, empirically ungrounded and most woefully lacks a perspective. It is a cut-copy-paste with minor and often mindless tinkering. So it pleases neither the Labour nor the Capital!
Professor, XLRI, Xavier School of Management.