Understanding Indian Labor Laws: What Do "Central and State" Categories Really Mean?

Clarification on Indian Labor Laws

Indian labor laws are divided into four categories based on enactment and enforcement. Could someone clarify what the following two categories mean:

- Laws enacted by the Central government and followed by both Central and State. Please help clarify what "followed by both Central and State" means. Does it mean it will be applicable to establishments under both Central and State? Or does it mean that the authority overseeing the acts will be a joint one with representation from both Central and State?

- Laws enacted by the Central government and followed by the State. Does it mean it won't be applicable to establishments under the Central government but only those under the State? Or does it mean that the authorities overseeing the implementation of the relevant laws will only be from the State government with no involvement of the Central government?

Thanks for your help.

Understanding the Enforcement of Indian Labor Laws

The Factories Act is a central Act. However, the rules under it are made by and enforced by States. Laws on ESI, EPF, dock workers, mines, etc., are central Acts enforced by the central government only. Acts on holidays, recognition of trade unions, professional tax, Shops & Commercial Establishments, etc., are state Acts enforced by States only. Other Acts are enforced by both the central as well as state governments, although they are central Acts.

Regards,
Varghese Mathew

Thanks for your reply. Additional clarification is needed: in cases where acts can be enforced by both the state and central government:

1. Would rules made by the central government be imposed on all states or only on selected states if opposed by the states?

2. What if the state and central government rules differ on the same subject? I don't have any examples, but could it happen?

Understanding the Concurrent List in Indian Labour Law

Labour law comes under the Concurrent List of the Constitution of India. Laws under this list can be enacted either by the Central Government or by the State Government/Union Territory, or by both. That is why we have certain laws like the Factories Act, Employees Provident Fund and Miscellaneous Provisions Act, and Maternity Benefit Act, etc., enacted by the Central Government, and certain Acts like the Shops and Commercial Establishments Act, and Payment of Subsistence Allowance Act, etc., by the State Government. There are some Acts like the Payment of Gratuity Act enacted by both Central and State Governments.

A Central Act will also designate the state as the enforcing authority, and accordingly, the state will notify the rules for enforcing the provisions of the Act.

Whether a Central Act or State Act, the applicability will be as decided in the Act. Accordingly, there will be an appropriate authority, which may be either the central labour ministry or the state labour ministry. For those establishments under the control of the Central Government or such private establishments or factories that operate in different states, for example, banks with branches nationwide, the appropriate authority would be an officer of the central labour department. In the case of factories or establishments under the control of the State Government or private companies operating within a state, the officer of the State labour department would be the appropriate authority, and so on.

Therefore, the term "appropriate authority" holds significant importance in HR/IR practice, and we should interpret the Act after determining who would be the appropriate authority concerning our establishment.

Regards,
Madhu.T.K

I appreciate the explanation given by Shri Madhu. Though he mentioned the Payment of Gratuity Act, I may add a few more words for those interested in knowing more about Labour Laws.

History of Gratuity Legislation in India

The first Act on Gratuity was passed in Kerala as the "Kerala Industrial Employees' Payment of Gratuity Ordinance 1969," which was enacted as the "Kerala Industrial Employees' Payment of Gratuity Act 1970." Subsequently, the West Bengal Employees' Payment of Compulsory Gratuity Act was introduced as an ordinance on 3.6.1971 and passed as an Act on 28.8.1971. The Central Government, aiming to establish a uniform Act for the country, enacted the Payment of Gratuity Act 1972, which came into effect on 16.9.1972.

If a particular subject falls under both central and state laws, compliance with both is necessary. For example, a ground handling company managing airline contracts may be registered under a state law, such as the Shops and Establishment Act. However, since it handles airlines that are registered under the central act, the company must obtain relevant licenses under both acts.

Regards,

Understanding the Incorporation of State Provisions into Central Acts

Like the Payment of Gratuity Act 1972, there is another state from which certain provisions were incorporated into the Central Act. This is only for the information of those who are interested in knowing more about labor laws.

The Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act (MRTU & PULP Act) 1971

Passed in 1972, this Act came into effect on 8th September 1975. Schedule II of this Act covers Unfair Labor Practices on the part of the employer, and Schedule III covers Unfair Labor Practices on the Trade Unions.

Both these schedules, Schedule II and III, were combined and incorporated into the Industrial Disputes Act 1947 as the Fifth Schedule "Unfair Labor Practices" with effect from 21.8.1984. The definition of ULP was included in Section 2(ra) w.e.f. 21.8.1984 in the ID Act 1947.