The variance between states' rules and laws hobbles companies with pan-India presence as compliance needs dedicated manpower
Over the last three years, while many labour reforms and legislative changes have been proposed by the government, the Union government has not really been to see most of them through—either due to resistance from employee representatives and trade unions or on account of lack of majority in Rajya Sabha. It is now largely clear that with less than two years left for general elections, the government is not going to push through hard labour reforms but instead look at the states to undertake and execute many of these reforms at their end, especially the BJP-ruled states. This begs consideration on a related issue of implementation of labour laws across states. Since labour laws in India are a concurrent subject—both central and state government can legislate—there are different kinds of labour laws in India. We have central laws with central rules, central laws with state rules, central laws with central and state rules and finally state legislated laws. Except for a handful of central laws where the Union government has the sole responsibility for enforcement—The Employees’ Provident Fund and Miscellaneous Provisions Act, 1952, and The Employees’ State Insurance Act, 1948, being the two key ones in this category—most of the labour laws have an involvement of either both states and the Centre or are state-specific. This kind of complexity in terms of applicability and jurisdiction is not only an administrative nightmare that employers have to reckon with, but what makes matters worse is that within the same law, states have different rules, and organisations, therefore, to track rules, procedures, documentation process at a very granular for every state separately and adhere to it. For instance the CLRA Act—which is a central Act with central and state rules—requires all employers to obtain a registration certificate before employing contract manpower beyond a certain threshold number. This threshold number also varies from state to state. In some states, it is as low as five and in some states its 50. Additionally, this registration certificate has to be obtained separately for each establishment/office of the employer organisation leading to complete duplicity of work.
Further, this kind of variance in rules creates even more confusion where it is linked to employee benefits. As per the Shops and Establishment Act, the state rules for giving leaves to employees vary. Some state have a provision for 21 days leave, some states have a provision for 38 days. It becomes very difficult for any company with pan-India presence to adhere to such vastly differing guidelines because they can’t have different rules within their own company. State laws as well as central laws enforced by states also mean state-wise separate inspecting authorities. So, an organisation with presence in 10 different states faces the likelihood of having to undergo multiple inspections in each of the states—since within the state also, there would be different regulatory bodies for different laws.
While empowering states to do labour reforms is a welcome idea, some uniform and broad guidelines—on lines of Model Shops and Establishment (Regulation of Employment and Conditions of Service) Bill, 2016—need to be framed at the central level which the states can adopt to ensure homogeneity or at least avoid significant variance on same parameter. While enforcement or adoption will still rest with states and therefore will have its own associated challenges, at least defining a certain path for states to adopt reforms and thereby reduce possibilities of massive divergence across states, making the administrative compliance to these laws easier for employers, is necessary. Inspections need to be replaced by self -certification and, if still required, a random sample should be subjected to inspections. It is often said that with respect to labour laws, India has many laws but poor governance. While the government has its own long-term vision to consolidate the 44 central labour laws into four labour codes, the aspect of standardisation of central laws with state rules and state laws across the country also should be considered and acted upon. This is critical for the government’s vision of making doing business in India easier. Reducing the compliance burden of employers and saving hundreds of unproductive man-hours spent in each organisation in adhering to varying compliance requirements across multiple states will go a long way.