Are New Labor Reforms Enough to Protect Employees from Unpaid Salaries?

Key Labor Reforms and Their Impact

I take reference to the following news:

PM Narendra Modi unveils key labour reforms to end 'inspector raj' - The Times of India

The moot point is, will these reforms stop the formation of persons like Vijay Mallya in the future? More than two years have passed since he has not paid salaries to his staff working in Kingfisher Airlines (KFA), yet no labor law comes to the rescue of the employees. Real reforms will occur where crooks like Mallya have some fear of labor laws.

Nothing happens in India when employers do not remit the TDS or fail to make contributions to PF/ESI. In a country like the USA, this is unthinkable. Today, labor needs protection from this side also. The problem in forums like CII, ASSOCHAM, etc., is that membership is only for the employers and not the employees.

The saddest part is that various HR forums also remain silent on the issues of non-payment of salaries to the staff. HR professionals who brag about being full of energy do not spend even an ounce of their energy to take up the causes of employees.

Who will listen to the woes of employees?

Regards,
Dinesh Divekar

The reason behind the reforms to end the Inspector Raj is to safeguard the closure of companies like DLF Construction Wing and, at present, Nokia, which is planned to close its operation in Chennai (where 8,000 workers will become unemployed) with effect from 01 Nov 2014. If a worker sustains an injury, it will impact only the individual or their family, but if a factory is closed, it will affect the entire financial condition of that society either directly or indirectly. Hence, this is a required action being taken by our Honorable Prime Minister.

But we must also consider the scenario from your point of view. The ending of the Inspector Raj will not give any wrong or negative signals to any organization to act as per their will and wish, stopping or reducing the benefits being rendered to the employees. If the aggrieved persons approach the concerned authorities, obviously they will get relief for their grievances. But in the name of inspection, the Factories Inspectors/Labour Inspectors are influencing and earning undue benefits from the employers in the name of inspections; this can be avoided by this reform.

Regards

Management Practices and Labor Laws in India

DLF Construction Wing or Nokia's decline is due to poor management practices. They should have foreseen the risks in running their businesses and taken timely action to obviate those risks. Their closure or decline has nothing to do with the labor laws of India. Indian companies have grown notwithstanding the prevailing labor laws.

By the way, has anybody taken a survey of the employees working in the companies that have become sick? Do employees working in these companies hold labor laws or the management responsible for their company's sickness?

This is the problem. The politicians listen only to the entrepreneurs and not the other side. Poor labor laws are nothing but a cover used to hide the inefficiencies of the corporate honchos. I am against this. Not that I am against the labor reforms in their entirety.

Now the reforms are launched with much fanfare. Will CII or ASSOCHAM come up with a study after two years to show how these reforms have helped the Indian companies to grow?

Basically, I am against a person like Vijay Mallya who roams scot-free. While launching the reforms, whether Mr. Narendra Modi will tame these boorish businesspersons, that remains to be seen.

Thanks,

Dinesh Divekar

Concerns About Labor Laws and Economic Growth

Really, this is a point of concern. Even when all the labor laws are in place, the swindling of PF money and non-payment of salaries continue. In such a situation, how can one say that they are effective? What we need is an effective labor policy that will benefit the workers and, at the same time, help the industry.

Unnecessary Inspector Raj harasses genuine industries while aiding unscrupulous elements on both sides. Therefore, instead of an ineffective labor policy, what we need is an effective and workable policy so that the country's economic growth will be on par with other developed countries.

Going by the cursory look of the PM's speech, I have to confess nothing significant is going to happen from what he was promising. On one side, he spoke of "Inspector Raj," and on the other, he spoke about the colors of collars. What he has announced has nothing in store either for entrepreneurs or employees. All he highlighted were the so-called labor reforms that could be covered by issuing one administrative order by a Deputy Secretary of the Government of India.

Things like Maruti or Nokia factories or Kingfisher have nothing to do with the labor laws of India. These are results of mismanagement, lack of knowledge, and unwillingness to adopt proper corporate governance. If an entrepreneur is not prepared to contribute to EPF & ESI of his employees, let him not open any establishment. Many other countries have stricter norms than India has. Inspectors are not doing a good job, agreed, but that doesn't mean they should be totally disbanded. At least now, erring units fear an inspection by an Inspector once in a lifetime. Of course, he may inspect more frequently as possible depending on his requirement for cash flow.

Despite these checks, millions of laborers are exploited, deprived of their just facilities and benefits. Wage levels are very low, safety is sacrificed, and there is no security of continuous employment. What have we done to address all these issues? Unfortunately, all the laws that were enacted for the protection of factory laborers who were prone to exploitation by capitalists, industrialists, and managers are nowadays extended to cover hospitals, educational organizations, service organizations, etc.

The entire country knows thousands of B.E. graduates are languishing for a paltry few thousands, and doctors are on daily wages. Look at this - on the other hand, when the same activity is conducted by an organization owned by a local body or Panchayats or Nagar Nigams or Zila Panchayats, corporations, PSUs, government offices, etc., all laws are bypassed or managed with the connivance of authorities and law enforcement inspectors. No one is held accountable for unfair labor practices except on a few occasions where pocket money is not forthcoming.

In India, for everything, there is a price. Millions work as casuals over decades. Who cares? The PM's sermon is good enough only to fill the columns of newspapers and TV news slots. It's time to think qualitatively with an open mind, keeping our conscience clean and upright.

Regards,

Narendra Modi's Government and Labor Reforms

Narendra Modi's government would continue to serve the interests of employers in the name of labor reforms, and its 'Shramev Jayate' program means "nothing much" for the working class.

Noting that the program was billed as an end to 'Inspector Raj,' despite inspections, many labor laws and social security schemes like EPF and ESI were not being implemented for a large chunk of workers. The new norms will only worsen the situation and encourage further violations by employers.

The pronouncements on the 'Shramev Jayate' program have to be seen linked with the labor law amendments already moved by the Centre and state governments in Rajasthan and Madhya Pradesh.

Some more proposals have been announced by the Government of India, which will amend the definition of small industries, removing all establishments with 40 workers out of the purview of 14 very important labor laws.

In the name of Shramev Jayate, the Modi government is acting in the interests of investors and not workers. It is also condemnable that changes in labor laws and other moves, which affect the workers, are being implemented without even discussions with the trade unions.

Observing that the program launched by the Prime Minister yesterday means nothing much to the working people in the country, it said the Universal Account Number for Employees Provident Fund Subscribers facilitating portability in case of a change in employment was being worked out for the last few years. The present government has just signaled its implementation.

The government must, in view of bank account details of every EPF member being made a necessary requirement, first amend Section 6 of the Payment of Wages Act to mandatorily open a salary account for every worker in a bank and make all payments through cheque or bank transfer of salary to all the workmen, including contract labor and apprentices engaged in any unit.

I would like to contribute to this important discussion by highlighting that the 2nd National Commission on Labour submitted its report in 2002. The Commission made various recommendations, including suggestions for the unification of different labor laws. However, the majority of these recommendations are still pending examination by the appropriate government.

The fear of an "Inspector Raj" is propagated by those who advocate for a free economy without any labor laws. The existence of multiple labor laws further complicates the situation. For instance, there are Acts such as the Payment of Wages Act, Minimum Wages Act, Equal Remuneration for Equal Work, Payment of Bonus Act, and possibly more. The question arises as to why these labor laws have not been unified and amended despite more than 12 years passing since the Labor Commission's recommendations were received.

The idea of eliminating the "inspector raj" seems to stem from policymakers who aim to create a more liberal and free economy. There have been suggestions to allow practices like "hire and fire" in the Indian labor system. Currently, the Contract Labour (Regulation and Abolition) Act (CLRA) appears to be the only labor act widely followed to cater to the interests of those advocating for a labor-law-free and completely free economy in India.

The overall compliance with labor laws in the country is generally very poor. In the past, serious accidents have occurred in factories where it was later discovered that many workers were not even listed on the muster-rolls or wage registers of those factories or units.

In a nutshell, I would like to mention that, like other fast-track courts, the judges at Labour Courts are also held accountable and given incentives for delivering speedy justice. These practices are not as common in the higher courts. Implementing mediation settlements will certainly instill faith in the Indian Judicial System and evoke a sense of lawfulness in the eyes of employees who may consider wrongdoing, as well as for employers who face swift consequences when found guilty.

Ensure there is a single line break between paragraphs.

Reasons for Company Closures in India

The basic reason for the closure of companies or entrepreneurs not coming to India is not the inspection policy of the labor law enforcement authorities. In many cases, the closure was given a disguised reason of labor problems or unnecessary interference by law enforcement authorities. In many cases, it was profit that bypassed all other factors. When competition started coming in, the mobile company also found it difficult to continue, and the company decided to shut down despite the fact that the current situation also guaranteed a good amount of profit, but less than what they expected.

Government Inspection and Enforcement Policy

The government cannot practically do away with inspection or enforcement policy because this is the way in which an inspector (whether under the Factories Act, EPF Act, Shops Act, or ESI Act) is able to make easy money. There are inspectors who make rounds of various industries under their jurisdiction (sometimes unknowingly or knowingly (!), they may cross the boundaries also) whenever they want money, and this is a simple way of mobilizing funds. With the new inspection policy, will their visits come to an end? I don’t think they will stop coming, and even if they come, I don’t think that we will not entertain them. We will continue to entertain them, and at the end of the day, the policy becomes a policy confined only to paper.

HR Forums' Contribution Towards Workers

Regarding HR forums' contribution towards workers, I think the advice that we give has helped a lot of aggrieved persons. Being a forum that consists of persons from distant places, our presence to defend the injustices may not be possible, but our involvement has always been there.

Regards,
Madhu.T.K

Just now, one of the HR fraternities from Haryana emailed me, saying that a Deputy Labour Commissioner came to his office for conducting an inspection. He was worried about why this officer has come despite the announcement of a new inspection policy by the Prime Minister. He was also concerned about why the DLC has come when the Labour Officer is the appropriate authority under various Acts. The answer is simple: let us complete the mobilisation before the policy becomes fully operational.

"Make in India" when we have a lot of bureaucrats who are "made in India"!

Regards,
Madhu.T.K

If an employer, whether of a smaller establishment or a larger one, and their HR Officer understand labor laws and comply with them properly, I believe the issue of repeated visits by various inspectors to the factory or establishment becomes irrelevant. For instance, under the ESI Act, 1948, if the employer has timely deposited contributions, submitted returns for all employees, provided declaration forms, submitted accident reports as required, and ensured that all employees have their Identity Cards including Family Identity Cards, there should be little fear or hesitation for the employer or their officer to produce records before any Social Security Officer of ESIC or to meet with them.

The problem arises only when the employer or their HR officials fail to comply in a timely manner or do not produce the records on the date and time set by the Social Security Officer of ESIC. Consequently, repeated visits are made by the officials, including their senior officers and branch office managers.

A similar situation may occur concerning the verification of records for other labor laws. In my view, it would be unfair to solely blame law enforcement agencies. The primary issue lies in whether the employer or their relevant official has ensured proper compliance and provided all the benefits and facilities mandated by various labor laws to their employees.

Even if visits by inspectors and government officers to establishments/factories were completely banned, the question remains: would such an action lead to further welfare for the working class and improved compliance with various labor laws? I believe it would only result in more exploitation of the labor/working class without any tangible benefits.

Thank you.

Sravamev Jayathe: A Political Slogan

Take it for granted that what is said will not be done. It is not the government that runs the country; it is the Capitalists/Industrialists/Managers. To the maximum extent, they do not concern themselves with the workforce. The workforce is not in a commendable position to do anything to get their rightful share from Capitalists/Industrialists/Managers.

Inspection Raj and Its Impact

From the workers' point of view, Inspection Raj not only fills the authorities' bellies but also fills the workers' bellies. As such, Capitalists/Industrialists/Managers, who are unhappy with both Labour Authorities (because they get something and also see that workers are getting something for themselves), now achieve two goals with one action. First, they aim to eliminate the existence of Inspection/Labour Authorities, and workers, who are already struggling, may vanish forever. This is the aim and approach of the present government.

Labour Law Reforms: A Twofold Objective

Labour law reforms must have twofold objectives. The law must protect employers from harassment by inspection and permit raj. Equally important is to protect workers from employers who flout laws in connivance with bureaucracy to deny workers whatever meager protection the laws currently bestow upon them.

The current focus predominantly aims to curb petty bureaucracy from harassing employers through inspections and denial of permits. On the other hand, labour law reforms to secure genuine protection for workers, as is available globally in civilized societies, which is the most pressing need, are becoming taboo, as if not worthy of any serious public discussion. As a result, workers do not get any protection as laws are often twisted and maneuvered to oppress them.

Where Labour Reforms Must Begin

The following four fundamental/human rights conventions adopted by the ILO have not yet been ratified by India, though our country is one of the founding members of the ILO established in 1919 and continues as a member:

1. Freedom of Association and Protection of Right to Organize (Convention No. 87 of 1948)
2. Right to Organize and Collective Bargaining (Convention No. 98, 1949)
3. Minimum Age (Convention No. 138, 1973)
4. Worst Forms of Child Labour (Convention No. 182 of 1999)

The urgent need for the Government, if it cares for the poor and the workers, is to ratify these four ILO Conventions aforementioned.

Ease of Doing Business in India

Large businesses and prominent Indian business houses are fairly happy with the current situation. However, when globalization arrived, the ease of doing business in India based on certain readily measurable parameters designed by the World Bank became a subject of focus. Global business tycoons are embarrassed to allow bribing petty officialdom, though the same tycoons feel no compunction to indulge in corrupt practices to secure hugely profitable business opportunities.

The question is, what should have the priority?

First, put in place effective laws to protect workers from being oppressed by denying fundamental human rights.

Secondly, repeal vexatious laws that (1) do not protect workers; and (2) cause unnecessary interference in doing business.

Further, while discussing with the CII people, it is understood that the so-called labor reforms will be a waste. The Centre has amended the Factories Act, but if the state does not amend the Factories Rules as per the Centre guidelines, then this will not have any impact in the factories.

Minimum 40 workers are to be engaged for coverage under factories in the latest amendment. If the state does not incorporate the same in Factories rules, then the factories are to apply for a license if the strength exceeds 10/20.

For closure of the factory as per the latest amendment, government permission is not required if the strength is less than 300. But if the same is not amended in State rules, then the factory must obtain permission from the government for those engaged with more than 100 workers.

Earlier, if a hazardous activity was carried out in any location, then it would affect only that area. But with this amendment, the entire factory premises will be considered as a hazardous factory.

Earlier, if you filed the return, and if you did not manage the authorities, then only they would try to find the fault. But due to online filing, the authorities can easily compile the entire data and find out the fault within no time, and they will start demanding more from the employers.

Instead of concentrating on the so-called reforms, they can make required amendments by compiling all the acts into three or four acts:

1. Payment-related Act: PoW Act, Equal Remuneration Act, MW Act, PoG Act, PoB Act, and additionally, they can remove the compensation part for accident and retrenchment/termination benefits from EC Act and ID Act and the formats for Wages Register, Muster Rolls, OT Register, Accident-related compensation formats, and Retrenchment/termination related compensation in one act.

2. Safety, Welfare, and Working Conditions Related Act (Industry-wise): BOCW Act, Contract Labour Act, ISMW Act, Industrial Establishment Standing Orders Act, Factories Act, Mines Act, Plantation Act, S&E Act, etc.

3. Social Security Related Act: PF & MP Act, ESI Act, EC Act, MB Act, Sexual Harassment at Workplace Act, Trade Union Act, etc.

Let us hope our government concentrates on the positive side and amends the acts accordingly.

Dear S. Bhaskarji,

1. I fully agree with the views expressed in your remarks above.

2. In my earlier remarks submitted in this thread, I mentioned the Report of the 2nd National Commission on Labour. I am reproducing some important recommendations of the said Commission relevant to the above subject as follows:

"6.21 Existing sets of labour laws should be broadly grouped into four or five groups of laws pertaining to (i) industrial relations, (ii) wages, (iii) social security, (iv) safety, and (v) welfare and working conditions, and so on. The Commission is of the view that the coverage as well as the definition of the term 'worker' should be the same in all groups of laws, subject to the stipulation that social security benefits must be available to all employees, including administrative, managerial, supervisory, and others excluded from the category of workmen and others not treated as workmen or excluded from the category of workmen.

6.22 The Commission agrees with the Study Group that it is necessary to provide a minimum level of protection to managerial and other (excluded) employees too, against unfair dismissals or removals. This has to be through adjudication by a labour court or Labour Relations Commission or arbitration.

6.38 One of the most important steps that one needs to take in rationalising and simplifying the existing labour laws is in the area of simple common definitions of terms that are in constant use; such terms include 'worker', 'wages', and 'establishment'. By making the law applicable to establishments employing 20 or more workers, irrespective of the nature of the activity in which the establishment is engaged, we have avoided the need to define 'industry'. After examining all aspects of the question, we have concluded that persons engaged in domestic service are better covered under the proposed type of umbrella legislation, particularly in regard to wages, hours of work, working conditions, safety, and social security.

6.106 The provisions in respect of small establishments can be in the form of a separate law named Small Enterprises (Employment Relations) Act or be included in the general law as a separate chapter. As may be seen from the draft law given at the Appendix, the law seeks to cover all aspects of employment, including wages, social security, safety, and health, and so on. A system of self-certification has been introduced to offset the criticisms of 'Inspector Raj'. An obligatory provision for social security, with contributions from the employer and from the worker, as well as a compulsory annual bonus at 8⅓% of the wages (a month's wage), are also features of the law that we have proposed. These provisions will ensure that the interests of the workers are fully protected, even while lessening burdens on the management and providing them with vigilance in exercising managerial functions."

3. I think, in the present situation, when there are proposals for reforms in the Labour Laws, the above recommendations of the said Commission may be relevant to a great extent.

Regards,

I just want to say something: Mr. Modi is a very cunning politician. Remember this: last year, at the FICCI conference, one of our great ministers said, "Islands of plenty cannot survive in oceans of poverty." This statement was made after the passing of the Companies Act, 2013.

Why is the Government Weak in India?

1. There is a huge rate of unemployment and poverty.
2. Some companies (not all but a few) view human resources or human beings as incompetent or expendable. Some individuals may agree to their terms and conditions, while others do not, leading to internal conflicts.
3. Labor laws increase liabilities for companies.
4. There is immense pressure on the government to boost the rate of employment and employability.
5. In the guise of generating employment, the government often compromises with corporate entities, providing them with tax benefits or reducing legal responsibilities.
6. The immediate effect of (5) is an increase in the employment rate, but in the long run, society does not benefit as the hire-and-fire policy is established, leading to employee exploitation.
7. As a result of (6), the rich become richer and the poor become poorer. The power of citizens to refuse a particular offer diminishes.
8. The Prime Minister's plan to decrease the percentage of people below the poverty line and elevate the middle-class ceiling in society is predicted to fail. This is because under this scenario, the middle class will cease to exist within 15 years, leaving only the upper and lower classes.
9. The biggest problem in India is the lack of a skilled workforce. While Indians may be highly qualified, many are not employable. Improving the employability of Indians should be a primary focus before increasing the employment rate.
10. In certain sectors, the License Raj should be implemented first. The government's objective should be to establish proper corporate governance and control while enhancing the nation's employability.
11. Corporate entities that follow hire-and-fire policies and prefer weak labor laws will not survive in the long run. This is due to the laws of economics. The government will not be able to shield or regulate exploiters, leading to the rise of socialist or communist powers in society, potentially resulting in conflict.
12. The United States may assert a preference for an open market, but upon closer inspection, it appears more akin to a communist nation where the government indirectly imposes communism on corporate entities. This form of governance allows socialism to coexist with trade and commerce without negative repercussions.

Explanation of 12:

The key principle of a Communist Government is that it will provide for the needs of society, with a segment of society contributing to serve the greater good. The US government enforces taxes like the FUTA (Federal Unemployment Tax Act), where all working individuals contribute to support the unemployed. Additionally, the government provides stipends to the unemployed, maintains warehouses for food distribution, and ensures basic necessities are covered by insurance policies provided by insurance companies. Life in the US is more secure, as evidenced by the allocation of unique Social Security Numbers to citizens.

The government in the US actively promotes trade and commerce while implementing strict laws to ensure control. Although there are tax havens in the US, they operate differently from those in India. In India, various taxes such as Income Tax, Service Tax, VAT, wealth tax, and trade fair tax are present, but the US has a more extensive tax structure.

In India, the Income Tax Act of 1961 dictates that companies must pay taxes on income accrued within India, leading to potential income loss from foreign intermediaries, especially in the case of MNCs. In contrast, the US utilizes mechanisms like Subpart F income to tax foreign incomes, indicating a more comprehensive approach to taxation. While the US takes steps to increase revenue by taxing foreign incomes, India often resorts to raising prices or making settlements with corporate entities to avoid taxing their foreign earnings, highlighting a disparity in tax policies.

Ultimately, India faces challenges in transitioning to a developed country due to societal issues like corruption, lack of initiative in labor laws, and resistance to change. To progress, active engagement with the government and a collective effort to address systemic shortcomings are essential.

Thanks & Regards,

Sovik B

I also totally agree with the points shared by my friends and colleagues. I am not against the reforms made but would have been happier if, instead of just implementing, they would have suggested major changes so that the exploitation of labor could have been stopped.

I would like to know how many have helped the employees to understand what PF and ESIC are and the importance of them. As far as I know, none. If an employee faces any troubles, very few take up their trouble as their own and help them.

The simple reason is they do not know how PF and ESIC help them. I have come across many employees who, even at this stage, ask me, "Sir, what is this PF, will I get any benefit?" "Sir, why should I deduct ESIC when I am not able to get any benefit from ESIC, or getting such benefits is very troublesome."

Brief Scenario of Incidents with Employees

I would like to give below a brief scenario of a few incidents that occurred with my employees:

1. One of the employees rang me and said that his father has been hospitalized and needs 6 injections as prescribed by the doctors in the ESIC hospital. I said, "Ok, go and have them from the dispensary or contact them where to get if not available there." He stated that he had done everything but of no use. He further stated that the total cost of the injections is around Rs 2.5 lakhs. I was surprised to know the cost and asked what the exact problem he was facing was. The one word he stated was the inter-departmental problem.

Please tell why, because of inter-departmental issues, he is going to face a problem.

I request all senior members, for heaven's sake, to start protesting and state your grievances to the PMO. These MNCs are too powerful; they are using their muscle power, financial power, etc., to exploit employees. The High Court and the Supreme Court do their best to prevent you from bringing the issue before a judge. They employ many tricks, and how many people have the courage to engage in a legal battle? Labor laws, justice, and the court system have become a joke...

Need for Updated Labor Laws

We need laws that impose severe penalties for breaches. We want laws that address the current situation's requirements, not outdated laws made 50 years ago. We want the court to deliver justice within a specified timeframe. We are not against corporate entities; we want them to conduct business ethically, without exploiting or draining their employees.

Call to Action

I am sharing a link through which the PMO can be easily contacted. Nevertheless, I urge all professionals to write to the PMO. The good news is that people are waking up from their long slumber and starting to voice their complaints. We need stringent laws in this regard.

LINK GIVEN BELOW:

Prime Minister of India

Regards,
Sovik B

Discussion on Legal Framework and Implementation in India

This is a very nice topic of discussion. Looking at all submissions, I feel compelled to add a bit to the pool. Our Constitution postulates a duty on the state to frame laws protecting the weakest sections of society from unemployment, sickness, loss of work, etc. The ILO has passed certain conventions over the years, which India is bound to implement by appropriately passing laws. We have a twofold system of lawmaking and implementation, namely Central and state governments. Certain Central legislation includes the Factories Act, Industrial Disputes Act, Bonus Act, ESI and EPF Act, MW Act, Standing Orders Act, etc.

However, the agency through which these acts are implemented is the State Governments, except for the ESI and EPF Act, and there is a significant difference in approach in every state.

Besides this, the state is also empowered to frame rules to acts. For example, the Factories Act is a centrally passed act, but rules are framed by each state. Similarly, the MW Act is central legislation, but Minimum Wages are declared by the State. If we study the rules of all states, MW notifications, etc., we find a great difference in them.

Besides this, we have some state legislations. In Maharashtra, we have two special enactments that are not found in other states: Maharashtra Recognition of Trade Unions and Unfair Labour Practices Act, 1971 (MRTU & PULP) and Maharashtra Industrial Relations Act, 1946 (MIR Act). Interestingly, the concept and provisions of Unfair Labour Practice were lately embodied in the ID Act by the Central Government.

The problem is not with legislation, but with the implementing agency. The watchdog is not fair, transparent, and honest in its work and duty. It is corrupt. It malfunctions and many times fails to function at all. This is rampant not only with labor laws but with every law-implementing agency such as Police, Excise, Income Tax, Sales Tax, Electricity, Industrial Development Corporations, Pollution Control Department, and so on.

When we invite foreign companies to start business in India, are we going to greet them with such poor, corrupt, malfunctioning state of governance and offices? We need reforms, basically in the mental set-up of these offices. The question is, how is this going to happen?

Thanks and warm regards,

Adv. K. H. Kulkarni

Dear Mr. Kumar,

Initially, I felt it was one more act to confuse the labor law. But by seeing Section 54 of the Small Factories Act, 2014, they have made all the provisions for all the related acts. Furthermore, they have added one more clause to make provisions for the states to create their own rules for their respective states. The definitions for wages and worker still cause more confusion. According to this act, we have to deduct PF and ESI even for OT Allowance.

Here, the confusion about which format to follow is mitigated. Let our learned members give their opinions.

Applicability of the Proposed Act to Small Factories

The proposed Act is applicable to factories employing 39 or fewer employees (the Act states it is less than 40, but it should be worded as 'not more than 40'). However, many Acts like the PF Act and ESI Act are applicable to factories employing a smaller number (20 or 10, as the case may be) of workers. When a Central Act (Small Factories Act) covers the holidays, then the (state) Industrial Establishments (National and Festival Holidays) Act will have to be amended to state 'nothing in this Act shall apply to a factory covered by the Small Factories Act'.

Currently, factories employing 20 or more workers in Kerala should provide 13 holidays, which in Tamil Nadu is 9 and in Karnataka is 10. The Bonus Act is also applicable to smaller firms presently, but the Act has an infancy protection of 5 years which is not present in the new bill for small factories. Similarly, unlike other Acts, there should be clarity on the definition of a worker. Another point raised by Bhaskar is that overtime wages should be excluded from statutory wages.

Concerns Regarding the Minimum Wages Act

The coverage of the Minimum Wages Act is another concern because without the coverage of the said Act, section 9 of the new Act will not be relevant. Therefore, I believe most of the existing Acts will require amendments, either by increasing the number of employees required for applicability or by adding a sentence like 'nothing in this Act would apply to factories covered under the Small Factories (Regulation and Conditions of Service) Act'.

Regards,
Madhu.T.K

India's Business Reforms: A Step Towards Ease of Doing Business

"In order to make India a better place to do business, the government is working to cut down the time for registering a business from 27 days to a single day. Towards this end, it has readied a raft of measures, such as single registration for all labor laws, overhaul of tax systems, reduction in the number of permits required, easing up property registration, quick electricity connection, and property registration - measures that are expected to make the country a friendlier investment destination.

Currently, India has the reputation of being a notoriously difficult place to do business. According to The World Bank's "Ease of Doing Business" index, India ranked 134 out of 189 countries in 2014, behind China (ranked 96) and behind neighbors Pakistan (110) and Bangladesh (130). During the launch of the 'Make in India' campaign, Narendra Modi had announced that his government would take steps to bring the country's ranking among the top 50."

Attaining the 50 ranking is a very tall order for a democratic country like India, but still achievable if India targets the parameters that are working against it. We need not get disturbed by Pakistan and Bangladesh ranking ahead of India. This would also involve a common legislation bringing all states under one umbrella, a common central act like EPF/ESI prescribing uniform definitions, norms, etc., but still, we would have separate legislation for J & K. Acts like Professional Tax could be converted to a central act, taking cues from what is most beneficial for the employees (as this will not affect employers and is not expected to receive strong objections from them) applicable to all the states. I don't think this will pose big problems for states as there are no provisions impacting them too much. Practically, if we weed out corruption at various stages, we would have achieved a world of good in the reforms front.

Hope to see the light at the end of the tunnel.

All these are good initiatives, but they will only be materialized when the bureaucrats enforce them properly. Even currently, many states in India have online registration and an online system for filing returns, etc., but I am not sure if these are working properly. I had a bitter experience with the Karnataka Labour Department when I tried to get one of our branches registered online. The Officer/Inspector (under the Shops and Commercial Establishments Act) had told me that I should do it through a consultant. However, I thought, after all, it is online registration, and for that, why should I engage a consultant? I started doing it myself. I got the user ID and password and did something, but I could not proceed further due to some unnecessary fields, like details of family members connected with the Managing Director, etc., without which we cannot go to the next step. Since ours is not a family-run business and we do not have any such relative of the MD working with us, it was not possible for me to proceed further. Even the PF number, which is centralized with the Kerala code, was not acceptable in the online system, and finally, I had to engage a consultant who himself is a retired Labour Department official. He did not ask for our user ID or password(!) but managed to do everything perfectly. He even had admin powers in the system that allowed him to do it easily.

The above incident is not a rare occurrence but is common. I have not seen anywhere except courts such a number of lawyers inside a civil office like the one I saw in Karnataka. All these are consultants or agents of officers. If the new policy is going to put an end to these practices, it is good. But the introduction of the new system should not be a burden for us because already with the introduction of the online system by PF, many tasks that the EPF organization's clerks and officers should do have been shifted from them to our executives. It should not happen that keeping the existing laws dormant (for the time being), the new Acts like the Small Factories Act will be introduced, and once the government changes, the other Acts will also become active, and we will be constrained to follow both the old Act and the new Acts.

Regards,
Madhu.T.K

It's very much true in Bangalore; what you described may not be different in other states. Unless a big revolution descends in our country, these people are not going to change totally. Babus will not behave like government servants unless and until there is a sea change in the mental thinking of our people to cast all the corrupt persons into untouchables and socially boycott them without exception.

To Cite HR Members

SUB: LABOUR REFORMS - PM'S STATEMENT - KINGFISHER'S EMPLOYEES' SALARY - VIJAY MALLYA

This is in reference to the comment of Shri Dinesh Diwekar on the PM's statement regarding labor reforms and also the non-payment of salaries to the employees of Kingfisher - Vijay Mallya for over two years.

As rightly pointed out by Shri Dinesh, many factories/industries owned by politicians (most politicians only have factories and other establishments in India rather than the government) suddenly close or do not pay for months when a recession or other situations like the Supreme Court ban on iron ore in Karnataka result in the closure of many steel plants. Though there are IDA and other acts to protect workers' interests, they are seldom implemented, resulting in suffering for the employees and not for the top people.

As Mr. Dineshji has been highlighting the plight of the employees of Vijay Mallya's Kingfisher due to non-payment of salaries for more than two years, it would be useful for the readers to recall the issues involved leading to the workers' problems in Kingfisher. Please share the issues, the role of the Labor Commissioner, and the present status of the legal matters involved. This will help us understand the current situation. Vijay Mallya may be flying or enjoying himself around the world, leaving misery for the people who worked for his pet project, KINGFISHER.

Regards

As far as the payment of salaries to the staff of KFA is concerned, nothing significant has happened in the last two years. All that Mr. Vijay Mallya has done is to pay the salary for one month and nothing further. Neither the union of KFA pilots has filed a lawsuit in court, nor has any political or non-political organization come forward to take up their cause. Probably, employees have resigned to their fate. There is no scope to get justice on this count. The national media is too busy in their hunt for the "breaking news," so why would they chew cud of this stale news?

Mr. Vijay Mallya has kept all the political parties in good humor; hence, none of them raises questions about him. Around a year ago, Mr. Sharad Yadav of JD (U) raised questions about KFA; however, nothing has happened. He has been elected to the Rajya Sabha from the state of Karnataka with the backing of all the political parties. Hence, major political parties like BJP or Congress are just silent.

Our vociferous HR forums like NHRD or NIPM are also silent. Their leadership starts and ends at writing articles on their blogs, giving lectures at B-schools, or conducting seminars. In fact, this incident was a very good occasion to assert themselves and gain visibility. But then, these forums are nothing but a larger reflection of the average HR in some company. Just as much as the average HR in some company is laid back, so are these organizations at a national level.

I am a member of NHRD, Bangalore Chapter. Around a year ago, the President of the Bangalore Chapter was due to visit Delhi for the all-India meeting of the presidents of all chapters. I had personally told him to bring up this point for discussion. I doubt whether he has done anything on this count.

The real reforms will happen when the labor gets all their dues, and they are not taken for a ride.

Thanks,

Dinesh Divekar

Some Salient Features of the New Small Factories Bill (SFB)

I was recently going through the 44-page draft of the new Small Factories (Regulation of Employment and Conditions of Services) Bill, 2014, and I wish to highlight some of its features compared to the old Factories Act, 1948 (FA).

Scope Widened or Restricted?

The newly introduced SF Bill intends to apply to every premise where a manufacturing process is carried out and where less than 40 persons are employed.

-  This enlarges the scope of applicability. The requirement of "where 10 or more persons are employed and the manufacturing process is carried on with the aid of power or 20 or more workers are employed and the manufacturing process is ordinarily carried on" is missing. This means any workshop, auto repair centers, tea/fast food making centers, tailoring shops, petrol pumps, power looms, furniture making shops, testing/repair centers, and many such activities that fall under the definition of "manufacturing process" will now be small factories when they employ 1 to 39 persons. These small factories will be required to register with the State Government and obtain a Labour Identification Number (LIN). It appears there is no license required, only registration.

-  Factories employing between 10 to 39 workers were required to obtain a license each year. Now, they will only require registration.

-  An exception is given to the small factory if it is carrying on a hazardous manufacturing process.

Consolidation of Provisions

Consolidation of many provisions from other Acts such as the MW Act, ID Act, Factories Act, PWA, PBA, PGA, etc., is suggested. A grievance settlement procedure is provided.

Provision of PF and Insurance for Employment Injury

Provision of PF and insurance for employment injury is suggested. However, the rate of contribution is 10 percent by both parties (totaling 20% of wages) for insurance, which is very high. Such a high premium is nowhere found. It should be about 5 to 6% in all (i.e., 4.50% by the employer and 1.50% by the worker). Moreover, the ratio of contribution should not be less than 10% of consolidated wages. This means all that is paid as allowance, OT, etc., are required to be considered for PF and insurance.

Weekly Holiday, Annual Leave, and Holidays

In the new Bill, a paid weekly holiday is proposed. Every year, 20 days of leave with wages, 7 days of casual leave, 7 days of sick leave with wages, 3 paid national holidays, and 5 festival holidays are suggested.

These are some of the features.

About Small Factories (Regulation of Employment and Conditions of Service) Act

I have made the following comments to the Ministry for consideration:

1. In section 2(f), the definition of small factories should use "not more than forty" instead of "less than forty" because "less than forty" means 39 or fewer workers, but "not more than forty" includes factories employing 40 workers.

2. Section 2(h)(b) - Definition of wages: Overtime wages may be excluded from the scope of wages.

3. Section 2(h)(c) - Definition of wages: Bonus may be excluded from the scope of wages.

4. Section 2(h)(d) - Definition of wages: Terminal benefits as per law (ID Act and Payment of Gratuity Act) or others may be excluded from the scope of wages.

5. Section 2(j) - The definition of worker should be more descriptive to avoid ambiguity relating to persons employed in sales, R&D, stores, and similar functions where they have no reportees. This will help decide whether a factory falls under the Small Factories Act.

6. Proviso to section 4(2) - Appropriate authority: The labour department and the Department of Factories and Boilers work parallel to each other. Is it necessary to include the Labour department as well?

7. Section 4(3) - Control over Inspector: It would be preferable if the control is by the Chief Inspector/Director of factories and not the Labour Commissioner.

8. Section 5(a) - Powers of Inspector: Should align with the new inspection policy and, as far as possible, avoid surprise visits by inspectors.

9. Section 14 - Payment of Bonus: This section mandates paying a bonus from the date of commencement, with no infancy protection for small factories, contrary to the Payment of Bonus Act, which allows five years. The Payment of Bonus Act applies to small factories, making a separate section contradictory.

10. Section 22(iii) - Absence from work by concerted action or illegal or uninformed strike and deduction of wages: Under the Payment of Wages Act, it is the same for small factories. Why not deduct eight days' salary if five or more workers are absent?

11. Section 23(3) - Earned leave: Twenty days of EL per year is high; let it be one day for every 20 days worked. The eligibility conditions as per the Factories Act should continue.

12. Section 23(5) - National and festival holidays: Since there is a State Act regulating these holidays, applicable to establishments with 20 or more employees, small factories will also fall under this Act. For example, Kerala has four national holidays and nine festival holidays, Karnataka has five national and five festival holidays, and Tamil Nadu has four national and five festival holidays. It is advisable to leave it as is and apply the state Industrial Establishments (National and Festival Holidays) Act to small factories where available. In states like Maharashtra, where a similar Act is unavailable, this section should apply.

13. Section 24 - Maternity leave: Maternity benefits for workers should be substituted with maternity benefits for "female" workers.

14. Section 24(1) - Entitlement of maternity benefits: Since the Maternity Benefit Act applies to small factories, it is advisable to make the qualifying service 80 days. Is it necessary for miscarriage benefits to also require qualifying service? Under the Maternity Benefit Act, there is no service condition for miscarriage benefits (six weeks leave). Moreover, the qualifying service is counted during the 12 months immediately preceding the expected delivery date.

15. Section 24(2) - Number of maternity leave: Under the Maternity Benefit Act, it is 12 weeks, i.e., 84 days. Therefore, it is advisable to make it 84 days.

16. Section 24(3) - Leave for miscarriage: Under the Maternity Benefits Act, it is six weeks or 42 days. It is advisable to make it 42 days instead of the proposed 30 days.

17. Section 25(1) - Social security: Provident fund: A small factory employing 20 or more is expected to be covered by the Employees Provident Fund and Misc. Provisions Act. Therefore, establishments covered by the EPF & MP Act should be exempted from this section.

18. Section 25(2) - Health insurance: A small factory employing 10 or more is expected to be covered by ESI Schemes. As such, exempt such establishments from this section.

19. Section 25(3) - Gratuity: The Payment of Gratuity Act applies to establishments with 10 or more workers. It requires clarification that it is not in addition to what the worker receives under the Payment of Gratuity Act. The third proviso to this section, "The Insurance cover shall include the amount already payable under the Payment of Gratuity Act, 1972, on the date of the enforcement of this Act," requires clarity.

20. Section 32(1)(c) - Labour court: Unfair practices by union: Recognition of trade unions by law is only in a few states like Kerala. In the absence of a law to recognize and de-recognize unions, the provision lacks clarity.

21. Section 42 - Latrines and urinals: Separate facilities for male and female workers should be included.

22. Section 54 - Non-applicability of certain Acts: 4. Minimum Wages Act should be deleted because section 9 provides for payment of minimum wages as per the Minimum Wages Act.

23. Section 54 - Non-applicability of certain Acts: 7. Employees State Insurance Act: A small factory with 10 or more workers will automatically come under the ESI Act. Either the ESI Act or this Act requires amendment.

24. Section 54 - Non-applicability of certain Acts: 8. Employees Provident Fund and Misc. Provisions Act: A small factory with 20 or more workers will automatically come under the EPF & MP Act. Either the EPF Act or this Act requires amendment.

25. Section 54 - Non-applicability of certain Acts: 11. Interstate Migrant Workmen (Regulation of Employment and Conditions of Service) Act: Most small factories require labor from other states. Therefore, the significance of this Act cannot be ruled out.

26. Section 54 - Non-applicability of certain Acts: 13. Equal Remuneration Act: The objective of this Act is genuine and should be applicable to small factories.

27. The Act aims to regulate employment in small factories. The need for "regulating" employment is unclear. It is an Act providing conditions of service for employees in small factories. Therefore, it is advisable to name the Act as Small Factories (Conditions of Service) Act.

Regards,
Madhu.T.K

Important Considerations for the Small Factories Act, 2014

I appreciate the comments and suggestions made by Sh. Madhu T.K. to the Ministry of Labour & Employment regarding the draft Small Factories (Regulation of Employment and other Conditions of Service) Act, 2014. However, I would like to submit the following important points for consideration by the seniors and experts.

Definition of "Small Factory"

The term "small factory" has been defined as "any premises wherein a manufacturing process is carried out and which employs fewer than forty workers." Will this mean that all factories, even those employing fewer than 10 workers (i.e., employing 1 to 9 workers), will also be covered under the said Act? If so, it is doubtful whether an employer employing 1 to 9 employees will be able to maintain all the records as mentioned in the draft Act. It is also uncertain whether a small employer employing 1 to 9 employees will be able to provide all social security benefits to their workers. If this is the case, I believe it would be a positive step for employees working in such small establishments. Factories presently employing 1 to 9 persons are currently classified under the "unorganized sector."

Definition of "Worker"

Furthermore, the term "worker" has been defined as "a person who is wholly or partly employed, whether directly or through any agent or contractor, for wages or rewards in connection with the work of any small factory to which this Act applies, but does not include a person performing administrative, supervisory, or managerial functions." According to section 54 of the Act, the ESI Act, 1948, and the EPF & MP Act, 1952 will not be applicable to workers categorized as "performing administrative, supervisory, or managerial functions." Therefore, such employees may not be covered under the proposed Act, the ESI Act, or the EPF & MP Act, 1952, and may not have access to social security benefits.

Concerns About Multiplicity of Laws

Moreover, as I mentioned in previous comments, the Government has not addressed the recommendations of the 2nd National Commission on Labour. If the proposed Act is passed, it will potentially become the 45th Labour Law enacted by the Parliament of India, adding another authority in the form of Labour Inspectors as established under the proposed Act. If the Government had acted upon the recommendations of the 2nd Labour Commission, this situation could have been largely avoided. I would like to cite the following famous quotes by eminent jurists/writers on the multiplicity of laws:

- CICERO: "THE MORE LAWS, THE LESS JUSTICE."
- WINSTON S. CHURCHILL: "IF YOU HAVE TEN THOUSAND REGULATIONS, YOU DESTROY ALL RESPECT FOR LAWS."
- LEO TOLSTOY: "WRITING LAWS IS EASY, BUT GOVERNING IS DIFFICULT."

Even after the proposed Act is passed, enforced, and implemented, questions will undoubtedly arise regarding who will ensure compliance with the Act, especially considering that visits by the said "Inspectors" have been restricted by administrative instructions from the departments. Additionally, the compliance status of labor laws is generally quite low.

Thank you.

Sincerely

1. I may further add that under Section 25, Chapter VIII of the said proposed Act, employees will be required to pay a contribution of 20% of wages (as defined), and the employer will also be required to pay contributions at 20% of wages as defined. 10% of such share is marked for the provident fund, and 10% for health insurance. These rates are higher than the present rate of 1.75% + 4.75% as applicable in the ESI Act, 1948, and perhaps will be less favorable to such employees.

2. Further, in the said proposed Act, there is no mention of the wage ceiling of Rs. 15,000/- presently applicable in respect of both EPF and ESI. It will perhaps mean that all workers (except managerial, etc., as defined), irrespective of any wage classification/limit, will be coverable under the said Act. Even in small establishments, there are a number of employees getting wages exceeding Rs. 15,000/-, especially in sectors like IT, etc. Such provisions will not be beneficial to the employees receiving higher wages.

3. Further, it is also mentioned in the above Chapter VIII that such schemes will be framed under the provisions of the IRDA Act, 1999. The said Act, as I understand, controls schemes framed as commercial insurance, and in such schemes, there will always be some cap on amounts and the level of medical facilities. Thus, such health insurance schemes, which will be commercial insurance schemes in nature, will not be beneficial to the workers of small factories.

4. I submit my doubts as above for consideration by seniors and experts on the subject.

Regards.

I think it's high time the CiteHR administration should try to pool and consolidate all the opinions, suggestions, and counters expressed in the forum. They should submit a rejoinder to the Ministry in response to the notification issued by the Government of India before the bill takes the shape of amendments to the respective Acts or Laws. Let this be a contribution of the Forum.

Coverage of New Act for Smaller Establishments

The new Act will cover establishments employing fewer than 10 workers, which were not under the coverage of the present Factories Act. However, certain industries are covered even if they employ a lesser number of workers, through state government notification as empowered by section 84 of the Act. It seems acceptable for such companies because, at least, some kind of administrative and statutory control will be imposed on them. This will result in enforcing some service conditions through which workers can benefit from the provident fund and other social welfare benefits.

Potential Confusion with Existing Regulations

But when we start covering factories in which 39 workers are employed under the new Act, there will be a lot of confusion. This confusion arises mainly because many such factories would already be under the statutory regulations of the Factories Act, and the workers would be receiving statutory benefits like PF at 12% instead of 10%, as proposed in the new Act. Similarly, ESI at 1.75% instead of 10% as proposed by the new Act, leaves, holidays, etc.

Therefore, as suggested by Kumar, it is high time that we take this matter seriously before the Act is passed.

Regards,
Madhu.T.K

Views on The Small Factories (Regulation of Employment and Conditions of Service) Act, 2014

Disadvantages (in brief):

1. Many benefits previously available are lost when the workforce is fixed at 40.

2. The time frame is relaxed for paying terminal benefits at the employer's discretion.

3. Terminal benefits such as leave salary and gratuity are denied in disciplinary cases.

4. Factories can close at will and then inform the relevant authorities.

5. The quantum of penalty that can be imposed on a worker for any default is unspecified.

6. In case of worker default, losing the case results in paying 25% of the claimed amount.

7. Working hours can range from 8 to 12 hours in split shifts.

8. Maternity leave in case of a miscarriage is reduced to 30 days from the current 6 weeks/42 days.

9. Provident Fund subscription is set at 12%, with various benefits under the Provident Fund Act being lost, such as funeral expenses, EDLI, and the government's 1.16% contribution.

10. The Employees State Insurance Corporation of India is not available.

11. The responsibility for the insurance scheme, previously borne by the factory management, now includes a 10% recovery from the worker. This kind of health and medical scheme with a significant contribution is unprecedented in the country.

12. Under the ID Act, the number of eligible workers has been reduced to 51%.

13. All workers must support a complaint for it to be registered.

14. There is no mention of union registration and recognition, except in cases of recognition cancellation.

15. Some acts mentioned in the draft are deemed not applicable.

The management is empowered to implement the "HIRE AND FIRE" policy.