LABOUR LAW IN INDIA: STRUCTURE AND WORKING

Debi S. Saini

I. INTRODUCTION
Especially after the Second World War, labour law has enjoyed a significant place in developed
as well as developing economies. It is expected to work as an important instrument of welfare
state. It has helped countries to lay down foundations of societies as well as some of the basic
postulates of organizational governance. The subject has occupied a prominent place in general
economic and social discourse as well. Labour lawespecially industrial relations lawcan
also be seen as an instrument of maintaining some kind of balance between incomes of people
as also a medium of securing dignity of worklife to working people. Most nations view labour
rights as fundamental for ensuring fairness in the carrying out of the labour process. In actuality,
labour rights reflect some kind of compromise between notions of productivity, efficiency and
freedom of contract on the one hand and social justice and labour standards on the other.

After Independence from the colonial rule in 1947, the Indian state consciously chose the
path of passing labour legislations on different spheres of work. A number of such laws were
enacted with the active role of trade union leadership. This branch of law has come to be
accepted as distinct from rest of the Indian legal system. For example, most labour laws in
the country envisage quasi-judicial bodies for expeditious settlement of labour claims under
different labour laws. India adopted a system of Five-Year plans for planning its economic
development. Most five-year plans have made particular mention of promoting growth with
social justice; and labour laws were given a prominent place in this regard. The Indian
judiciary has played a salutary role in progressive interpretation of these laws.
This chapter attempts to analyze the structure of Indian labour law in the overall context of the
notion of social and economic justice as enshrined in the Constitution of India. It also focuses on the
working of the labour law framework in terms of its stated goals as also the changing needs of a
globalizing economy. It deals with questions, among others: the constitutional context of labour law;
the structure and functioning of different branches of labour law i.e. law of working conditions, labour
relations law, law of wages and monetary benefits, law of social security; and a review of the working
of these laws. While discussing the working of these laws in the last part, the chapter focuses,
among others, on the implementation of labour laws and the role being played in this regard by the
state and its agencies. The concluding part discusses how the realization of labour law objectives
can be made more realistic from the view point of the constitutional promise of socio-economic
justice, as also the changing context of the employer and employees power position.

II. CONSTITUTIONAL FRAMEWORK AND LABOUR LAW

The Constitution of India the super-ordinate law of the land guides all legislative, executive and
judicial actions in the country. The Seventh Schedule of the constitution envisages distribution of
*

Professor & ChairpersonHuman Resource Management Area, Management Development Institute,

Mehrauli Road, Gurgaon-122001, Haryana.

legislative powers between central and state legislatures on different matters. The Schedule contains
three lists Central List (List I), State List (List II) and Concurrent List (List III). For matters contained in
List I only Parliament, the Central Legislature, can enact a law; for matters specified in List II only the
State Legislature concerned can enact a law; and for matters contained in List III, both Central and State
Legislatures can enact a law. In case a matter falls in List III, and a case of repugnancy arises between
the laws passed by the Central Legislature and the State Legislature, then the Central law will prevail
over State law. But in case such legislation is submitted to the President for his assent, and which is duly
accorded, then the State law will prevail over the central law.

Most labour matters find place in List III (Concurrent List). Among others, these includes: trade
unions; industrial and labour disputes; social security and social insurance; employment and
unemployment; welfare of labour including conditions of work; provident funds; employers liability;
workmens compensation; invalidity and old age pensions; and maternity benefits. However,
regulation of labour and safety in mines and oilfields is the exclusive domain of the Central
Legislature as these matters are specified in list I. Likewise, relief for the disabled and unemployable
is under the exclusive jurisdiction of the State Legislatures as these matters are specified in list II.
Since most labour matters fall in the Concurrent List, Parliament has enacted labour laws in almost
all these matters. However, states have made amendments in the central Acts as per their local
requirements and have obtained the Presidents assent to the changes made.
Perhaps the most important parts of the Indian Constitution are provisions of Chapters III and IV. The
former is titled, the Fundamental Rights and the latter, the Directive Principles of State Policy. The
Fundamental Rights are modeled after the American Bill of Rights. Their violation can be challenged
though the writ jurisdiction of the Supreme Court and the High Courts. These rights limit the power of
the legislature to enact laws. Among others, the Fundamental Rights pertain to right to equality
before law, along with rights to particular freedoms. These particular freedoms include speech;
association; movement throughout the territory of India; residence; profession, trade and business;
protection of life and personal liberty and religion. The Constitution confers a fundamental Right on
children, as per which it prevents employment of children below 14 years of age in hazardous
employments. It also prevents traffic in human beings and employment of forced labour.1
The Preamble of the Constitution is also an important source of power to the legislature for enacting
laws for the protection of labour. It promises to secure to the people justice, social, economic and
political; liberty of thought, expression, belief, faith and worship; equality of status and of opportunity
. The Directives Principles of State Policy as envisaged in Part IV of the Constitution are not
enforceable in any court of law. But they have been held by the Supreme Court of India to be
nevertheless fundamental in the governance of the country. And, the judiciary in general has time
and again expressed its advice to the Government/legislature to apply them in making laws. It has
often taken the support of this chapter in holding the constitutional validity of many labour laws.
A reading of Part IV of the constitution and its Preamble helps to know the basic philosophy of the
Constitution. The Directive Principles contained in Part IV represent certain key values which are to
be rooted in the reconstruction of Indian society and Government along lines of a modern welfare
state (Galanter, 1989). Some of these directives relate to promotion of welfare of people 2 including
minimizing inequalities; 3 directing the States policy towards securing fulfillment of certain minimum
needs;4 right to work, education, and to public assistance in certain cases;5 provision of just

and humane conditions of work and maternity relief; living wage , participation of workers
8
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in management of industries; free and compulsory education for children; and to improve
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public health.
Interestingly, much of the development of labour jurisprudence in the country owes to the
above-mentioned provisions contained in Part IV. This part in a way legitimizes the labours
demands raised through demand charters submitted to managements. While delivering
many judgements, the judiciary has often reminded the executive and the legislature to
enact legislations that provide for basic needs of the people and to enforce them as per the
spirit in which they have been created. The directive principles are considered so important
that some jurists have described them as the soul of the Constitution (Dhavan, 1989: xxii).
Premised in the framework of the directive principles, labour legislation in the country provides a
large number of central (federal) labour statutes. These laws can be classified into mainly four
categories: conditions of work; labour relations; wages and monetary benefits; and social security.
Since labour is a subject in the concurrent list of the Constitution, the 28 states and 6 union
territories comprising the Indian federation have in some cases enacted their own labour legislation.
This is over and above the central enactments on the same matters to suit indigenous situations and
local power realities. So, the central and state labour enactments in the country add up to more than
200. In fact, India is often being viewed as a society where labour is overprotected through law
(Debroy, 1996). However cases of labour law violation are too many; so much so that often when
one sees the working conditions of the unorganized labourers, one would wonder whether any
labour law exists at all for them (Saini, 1998, 1999; Patel and Desai, 1995).

In all, over 60 major central labour legislations have been enacted by the central
legislature. Similarly, about over 150 labour legislations have been enacted by the state
legislatures; each of these legislations is specific to the needs of the state concerned. Some
of the central labour legislations in India that are considered to be important are as follows:
Apprentices Act, 1961
Beedi & Cigar Workers (Conditions of Employment) Act,
1966 Bonded Labour System (Abolition) Act, 1976
Building and Other Construction Workers (Regulation of Employment Service)
Act, 1996 Child Labour (Prohibition & Regulation) Act, 1986
Cine-Workers and Cinema Theatre Workers (Regulation of Employment)
Act, 1981 Contract Labour (Regulation & Abolition) Act, 1970
Dangerous Machines (Regulation) Act, 1983
Dock Workers (Regulation of Employment) Act,
1948 Dock Workers (Safety, Health and Welfare)
Act, 1986 Emigration Act, 1983
Employees Provident Fund & Miscellaneous Provisions Act,
1952 Employees' State Insurance Act, 1948
Employment exchanges (Compulsory Notification of vacancies)
Act, 1959 Employers' Liability Act, 1938
Equal Remuneration Act,
1976 Factories Act, 1948
3

Industrial Disputes Act, 1947

Industrial Employment (Standing Orders) Act, 1946
Inter-State Migrant Workmen (Regulation of Employment & Conditions of Service) Act, 1979
Labour Laws (Exemption from Furnishing Returns & Maintaining Registers by Certain
Establishments)
Act,
1988 Maternity Benefit
Act, 1961 Mines Act, 1952

Minimum Wages Act, 1948

Motor Transport Workers Act, 1961
National Commission for Safai Karamcharis Act,
1993 Payment of Bonus Act, 1965
Payment of Gratuity Act, 1972
Payment of Wages Act, 1936
Plantations Labour Act, 1951

Public Liability Insurance Act, 1991

Sales Promotion Employees (Conditions of Service) Act,
1976 Trade Union Act, 1926
Weekly Holidays Act, 1948
Workmen's Compensation Act, 1923
Legislation is only one of the sources of labour law. Almost each labour legislations is
supplemented by a commensurate secondary legislation, which consists of Regulations and
Rules made by the appropriate GovernmentCentral as well as stateto give effect to the
legislations or to administer them. Case law in the form of decisions of the Supreme Court and
various High Courts are also a very important source of labour law. Thousands of such
decisions have been delivered; many of them have been overruled to bring in fresh perspectives
of the legal position concerned. Further, terms and conditions of a labour contract could be
derived from a collective bargaining contract or an individual contract between employer and
employee. International standards laid down by bodies like International Labour Organization
(ILO) too have been referred by especially the higher judiciary to support its decisions; thus they
are considered as important sources of labour law in appropriate situations.

III. THE LAW OF WORKING CONDITIONS

There are several classes of work organization where people are employed. These include:
factories, establishments, shops, mines, plantations, etc. Agriculture too is a major activity,
which employs the largest number of workers in India; but most parts of agricultural operations
are not regulated through law. The issue of conditions of employment needs state attention in
case of contract workers; they are normally made to work in difficult work environment. Interstate migrant workers and child workers too are highly susceptible to exploitation. Indian state
has enacted legislation for regulating conditions of work of such categories of workers. Most of
the provisions of laws regulating conditions of work relate to health, safety and welfare of
workers. The judiciary has often expanded the scope of these provisions by giving them liberal
interpretation. In doing so, it has repeatedly referred to the Directive Principles of State Policy
stated in the previous section. We may discuss these legislations as under:

The Factories Act, 1948

The Factories Act, 1948 regulates the work conditions of most workers employed in the
organized manufacturing sector in India. The first legislation on factories in India dates back to
1881. Ten years later it was replaced by the Indian Factories Act, 1891. Soon after
independence the Factories Act, 1948 was enacted to further humanize the conditions of work in
factories. The word factory has been defined as premises or precincts where a manufacturing
process is carried on by 10 or more workers with the aid of power or by 20 or more workers
without the aid of power. The word manufacturing process has been given a very wide definition;
and includes even processes such as repairing of movable things for the purpose of sale or
disposal; and pumping of oil, water, etc. The word worker too has a wide definition and includes
all persons involved in the manufacturing process; the scope of this definition was further
widened in 1976 to include workers employed through or by contractor.
This legislation mainly deals with the following: provisions related to health, welfare, and safety;
working hours for adults and children; and protection to women and children against certain hazards.
The Act also provides for registration and licensing of factories; obtaining the approval of factory
sites; obligations of occupier of a factory; and provision of annual leave with wages to workers. The
Act provides a maximum of nine hours of work per day with a rest interval of at least half an hour
after five hours of work. Also provided is a daily spread over of not more that ten and a half hours.
Overtime work in a factory has to be paid double the rate. The Act provides for a weekly holiday.
Children below 14 years of age are not permitted to be employed in any factory. The health
provisions deal with, among others, issues like cleanliness, disposal of wastes, ventilation, dust and
fumes, artificial humidification, over crowding, drinking water, latrines and urinals and spittoons.
Provision has also been made for welfare facilities like washing, storing and drying of clothes, places
of sitting, rest shelters and lunch rooms, first aid appliances, canteens and crches.
Safety provisions include, among others, detailed specification of space to be provided for every
person working; installations of and working on machines; hoists, lifts, lifting machines, chains,
ropes, etc.; pits sumps, opening in floors; carrying of weights; precautions in case of fire. In 1984,
the Bhopal Gas disaster took place at a factory of the Union Carbide Ltd. in Bhopal, Madhya
Pradesh. This led to killing of nearly 8000 people and disabling several thousand. This tragedy
showed holes in the safety provisions of the Factories Act, 1948. This led to an amendment in the
Act in 1987. Consequently, chapter IV-A was added to the Act which has been titled: Provisions
Relating to Hazardous Processes. This chapter provided new sections from 41-A to 41-H. Two new
schedules were added to the Act in the form of the First Schedule and the Second Schedule. The
First Schedule provides a list of 29 industries that involve hazardous processes. The Second
Schedule provides the permissible levels of certain chemical substances in work environment.
Provisions of the new chapter IV-A relate to, among others, constitution of site appraisal committees,
compulsory disclosure of certain information by the occupier, permissible limits of exposure of
chemical and toxic substances, workers participation in safety management, and rights of workers to
be warned against imminent danger. The amended Act also gives a right to every worker (section
111-A) to obtain from the occupier information related to workers health and safety at work and get
trained in health and safety matters at the expense of the employer.

Certain authorities like inspectors, welfare officers, certifying surgeons have been provided, who
are expected to ensure the implementation of the Act. Penalties for violation of the Act have
been substantially hiked by the 1987 amendment to the Act. For example, the general penalty
for offences can be imprisonment up to two years and a fine of Rs. one hundred thousand.

The Shops and Establishments legislation

India does not have any central legislation for shops and establishments. It has been left to be
enacted by the state legislature. Each state has enacted its own legislation, and has framed its own
rules under the Act. Most state legislations have similar provisions, with minor differences here and
there. This area of work pertains to mostly workers in the unorganized sector, as most shops and
establishments are small. However, larger establishments are also covered. Those units which do
not fall in the definition of the Factories Act, 1948 due to less number of people employed are
covered under the Shops & Establishments law. Mostly the state governments can exempt, either
permanently or for a specified period, any establishments from all or any provisions of its shops and
establishment legislation. It is applicable to all persons employed in an establishment with or without
wages, except the members of the employer's family. The Act provides for compulsory registration of
shop/establishment concerned. Provisions related to hours of work per day and week as well as the
guidelines for spread-over, rest interval, opening and closing hours, closed days, national and
religious holidays, overtime work, etc. are usually there in each such law. The Delhi Shops and
Establishments Act 1955 has extended the provisions of workmens Compensation Act 1923 to all
workers covered by that Act. Most Acts are administered by inspectors.

The Mines Act, 1952

The Mines Act, 1952 contains provisions for measures relating to the health, safety and welfare of
workers employed in mines. According to the Act, the term 'mine' means any excavation where any
operation for the purpose of searching for or obtaining minerals has been or is being carried on and
includes all borings, bore holes, oil wells and accessory crude conditioning plants, shafts, opencast
workings, conveyors or aerial ropeways, planes, machinery works, railways, tramways, slidings,
workshops, power stations, etc. or any premises connected with mining operations and near or in
the mining area. Among others, the Act provides for supply of drinking water, conservancy, and
medical appliances. There is provision also for giving notice to appropriate authorities in case of
accidents and certain diseases. Over time rate has been provided to be twice the daily wage both for
workers working above and below the ground work. Women workers are not allowed to work below
the ground. A person below the age of 18 years is not allowed to work in a mine. But apprentices
and other trainees not below the age of 16 years may be allowed to work under proper supervision
by the manager. Provision has also been made for annual leave with wages. Such leaves are to be
calculated at the rate of one day for every fifteen days work.

The Act is administered by inspectors and certifying surgeons. Since it is fully under the
central jurisdiction, the central Ministry of Labour and Employment through the Directorate
General of Mines Safety (DGMS) has been entrusted the responsibility for administering this
law. DGMS conducts inspections and inquiries, and issues competency tests for the
purpose of appointment to various posts in the mines. It also organizes
seminars/conferences on various aspects of safety of workers.

The Plantations Labour Act, 1951

The Plantation Labour Act, 1951 regulates the conditions of work for plantations labour. It applies to
tea, coffee, rubber, and cinchona plantations. The state governments may apply it to any other
plantation. All plantations are required to be registered with a registering officer. It mainly provides for
health and welfare measures. According to the Act, the term plantation means any plantation to
which this Act, whether wholly or in part, applies and includes offices, hospitals, dispensaries,
schools, and any other premises used for any purpose connected with such plantation.
Among others, the Act provides for drinking water, conservancy, medical facilities, canteen, crches,
recreational facilities, educational facilities, and housing for workers and their families. Also, there is
provision for supply of umbrellas, blankets and rain coats. Employers are obliged to provide and
maintain necessary housing accommodation for every worker (including his family) residing in
plantation; and for every worker and family residing outside the plantation, who has put in six months
of continuous service in the plantation and has expressed a desire to reside in the plantation.
Children under 12 years of age are prohibited for employment in any plantation. Children of workers
between the age of 6 and 12 have to be provided free educational facilities. The Act regulates
working hours, provides for a weekly holiday, and leave with wages. It also provides for appointment
of suitable inspecting, medical or other staff for the purpose of securing compliance with various
provisions of the Act. The Act is administered by inspectors and certifying surgeons.

The Motor Transport Workers Act, 1961

The Motor Transport Workers Act, 1961 seeks to regulate the conditions of work of motor
transport workers. The Act applies to every motor transport undertaking employing five or more
motor transport workers. The State Government has been authorized to extend the Act to any
motor transport undertaking employing less than five motor transport workers. It can do so after
giving notification in the Official Gazette. According to the Act, a motor transport undertaking'
has been defined as an undertaking engaged in carrying passengers or goods or both by road
for hire or reward and includes a private carrier. Every employer of a motor transport
undertaking to which this Act applies is obliged to register such undertaking under this Act.
The welfare and health provisions to be made available to all workers include: canteens where 100
or more motor transport workers are employed, restrooms where workers are required to halt at
night, uniforms, and medical and first-aid facilities. No adult motor transport worker can be required
or allowed to work for more than eight hours in any day and forty-eight hours in any week. The hours
of work can not spread over more than 12 hours in any day. Provision has been made for weekly
day of rest and compensatory day of rest. Children are prohibited to work as motor transport worker.
Also, no adolescent shall be employed or required to work as a motor transport worker in any motor
transport undertaking for more than six hours a day including rest interval of half-an-hour; and
between the hours of 10 P.M. and 6 A.M. Overtime has to be paid at the rate of twice the ordinary
rate of wages. Annual leave with wages are payable on similar pattern as in case of factory workers.
The Act is administered by inspectors and certifying surgeons.

The Contract Labour (Regulation & Abolition) Act, 1970

Contract workers are subjected to intense exploitation by contractors as well as the principal
employers. These workers are generally engaged in agricultural operations, plantation,
construction industry, ports & docks, oil fields, factories, railways, shipping, airlines, road
transport, etc. The Contract Labour (Regulation & Abolition) Act, 1970 (CLA) was enacted to
regulate employment of labour employed by contractors so as to provide some sense of
security to workers working with them. It also regulates the conditions of work of such
workers. The Act provides for registration of all employers covered by the Act, and licensing
of contractors and sub-contractors. It requires payment of wages by the contractor in the
presence of the representative of the principle employer, who has to certify that correct
payment has been made in his presence. There is provision for constitution of Central and
State Advisory Boards for advising the appropriate government for administering the CLA.
Chapter V of the CLA provides for certain welfare and health measures for contract labour.
In case 100 or more contract labourers are employed a canteen has to be provided. Where
contract labour is supposed to halt at night, rest rooms have to be provided. First-aid
facilities have to be readily made available. Other welfare facilities to be provided include:
wholesome drinking water; sufficient number of latrines and urinals; and washing facilities.
The Act is implemented both by the Centre and the State Governments. The Central
Government has jurisdiction over establishments like railways, banks, mines, etc. and the
State Governments have jurisdiction over units located in that state.
The Inter-State Migrant Workmen (Regulation of Employment & Conditions of
Service) Act, 1979
The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act,
1979 (ISMWA) was enacted to protect the rights of migrant workers, and thus safeguard their
interest. It regulates their employment and provides for minimum conditions of work for this
category of workers. It applies to every establishment and the contractor that employs five or
more inter-state migrant workmen. Among others, it provides for compulsory registration of
principal employers and licensing of contractors. The Act fixes responsibility on the contractor
and the principal employer for payment of wages. It is provided that all liabilities of migrant
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labourers are deemed to be extinguished after the completion of the period of employment.

The Act has provision for issue of Pass-Book to every inter-state migrant workman with full
details, payment of displacement allowance, payment of journey allowance including
payment of wage during the period of journey, suitable residential accommodation, medical
facilities and protective clothing, payment of wages, equal pay for equal work irrespective of
sex, etc. The Act fixes the responsibility of wage payment on the contractor as well as the
principal employer. The Act is administered by inspectors.
Child Labour (Abolition and Regulation) Act 1985
No enlightened society can allow its children to be subjected to work at a tender age. World over
child labour is a serious issue for human right activists. There is considerable pressure on states for
its complete abolition. Indian situation on employment of child labour is quite bad. Even as the best

friends of children were waiting for compulsory primary education to become a reality and abolish
child labour altogether, the Indian Parliament passed the Child Labour (Prohibition and Regulation)
Act 1985. This Act banned the employment of children below the age of 14 years in hazardous
occupations; which among others, include glass and glassware, fireworks and matchmaking, and
carpet weaving. The Act regulates the work of children where they are permitted to work. It fixes the
number of hours for child work. It is provided that the total spread over of childs work shall not
exceed 6 hours. There is a provision of weekly holiday. There are provisions for health and safety of
children employed or permitted to work in any establishment. It lists 24 areas in which governments
are expected to frame rules for the protection of child labour. These, among others, include
cleanliness, disposal of wastes, lighting, drinking water, safety issues, maintenance of buildings, etc.
The Act provides stringent punishment for violation of the Act.

IV. INDUSTRIAL RELATIONS LAW

The individual contract of employment is known to favour the employer, who is a stronger side in
the employment relationship. The common law envisages some strong managerial prerogatives
for employers that they exercise over workers. This gives rise to the need to allow labour to
unite, form collectives, and thus struggle to seek workplace justice on its own. Unionization and
collective bargaining lie at the root of most labour relations issues. Interestingly, Article 23 of the
Universal Declaration of Human Rights adopted by the United Nations Organization as a
common standard of achievement for all people in all nations recognizes the legitimacy of union
rights. It provides, among others, for everyone the right to form and to join trade unions, for the
protection of his interests. The constitutional guarantee provided by Article 19 (1) (c) of the
Indian Constitution, envisages provision of association/union rights to citizens in general. The IR
law provides a framework to operationalize the spirit behind this fundamental guarantee. The
disputant parties also need to be made available a system of effective industrial dispute
resolution. In India, the industrial dispute resolution law can be found in the Industrial Disputes
Act, 1947 (IDA). The Industrial Employment (Standing Orders) Act 1946 provides that every
employer should make available to its employees just and fair terms of employment.
Perhaps, the most crucial aspect of labour laws in any country is the law of industrial relations.
As per this thinking, the state should so evolve a legal framework of IR that it is able to play the role
of a neutral referee. Also, it should enable the weaker party to safeguard itself against the use of
unfair labour practices (ULPs) by the other side. If the state is able to ensure this, then the parties
can develop some kind of bilateral bargaining framework to carve out rules of workplace working.

The principal IR legislations in India are: the Trade Unions Act 1926 (TUA); the Industrial
Employment (Standing Orders) Act 1946; and the Industrial Disputes Act 1947 (IDA). These
laws have been enacted by the central legislature. The framework of these laws can be
discussed as follows:
The Trade Unions Act, 1926
The Trade Unions Act, 1926 (TUA) is one of the oldest labour legislations in India. The early
enactment of the TUA and the constitutional provision of guaranteeing freedom of association have
helped trade unions to legitimize their existence and operations. It envisages the procedure for

registration of unions. A union can be organized by workers employed in industry; however, the
definition of worker is wide enough to include even managers. A trade union can be registered
by any seven or more members. But this is subject to a minimum of 10 per cent of workers
employed in an industry or 100 whichever is less. When registered, a trade union gains the
status of a legal entity distinct from the members of the union. The TUA specifies their rights and
obligations, including conferring certain immunities on a registered trade union against certain
actions which otherwise could violate civil and criminal law. The Act provides the minimum rates
of subscription for union membership in rural, unorganized and organized industries, which are
Rs. 1, 3, and 12 per annum respectively. It also contains rules relating to constitution of general
fund and political fund of a trade union, and the objectives in furtherance of which they could
be spent. Provision has been made for filing of annual returns by a trade union to the registrar of
trade unions. Outsiders are permitted to become special members of a union; the number of
such persons is different in organized and unorganized sector. The 2001 amendment to the TUA
has reduced the maximum number of outsiders in a trade union from to 1/3 or 5 persons
whichever is less. This is expected to promote insider leadership.

The TUA confers on workers the immunity against civil and criminal liability for taking
industrial action for certain acts done in furtherance of an industrial dispute. It was so
provided to acknowledge the necessity of collective bargaining for securing dignified and
lasting peace. The Industrial Disputes Act 1947 (IDA) is the main law for processing of
industrial disputes in India. Technically, the structure of the IDA is such that an industrial
dispute can be espoused by a substantial number of persons. The Supreme Court has held
about 20 per cent or more of the workforce can constitute substantial number of persons in
this regard. Thus, collective bargaining and collective industrial dispute espousal in India are
possible without forming a trade union. In actuality, however, it rarely so happens.
The TUA provides only for registration and not recognition of trade unions. However, provision
for union recognition was made in the TUA by way of amendment in 1947. But this has not been
enforced till date. Today, recognition can be gained by a union only through show of its strength.

The Industrial Employment (Standing Orders) Act, 1946

The Industrial Employment (Standing Orders) Act, 1946 (IESOA) envisages framing of standing
orders by the employers to whom this legislation applies. It applies to industrial establishments
employing 100 or more workers. But its applicability can be extended by the appropriate government
to establishments employing 50 or more workers. The Act is administered by the appropriate
government, the definition of which is more or less the same as in case of the IDA. The IESOA
provides for certification of standing orders by a certifying officer, who is a government officer.
Standing orders are the conditions of employment related to matters given in the schedule to the Act
that have been so certified. When certified, each standing order is deemed to form part of a workers
contract of employment. Contract of employment is known to be a relationship between unequals
(Kahn-Freund, 1977: 1) and therefore the weaker side needs to be protected. The IESOA recognizes
this. The Act requires employers in industrial establishments to define with sufficient precision the
conditions of employment and make them known to the workers employed by them.

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The IESOA provides that the draft standing orders are submitted by the employer to the certifying
officer. The certifying officer is supposed to invite workers representatives to discuss the draft and
take into view their point of view before certifying the draft. After certification, they are entered into
the register of standing orders. The employer is supposed to post them on the notice board. Some of
the issues that are mentioned in the schedule, among others, are classification of workmen,
discipline, shift working, attendance and late coming, conditions for applying for leaves, termination
of employment, and means of redressal of grievances. The Act also provides for suspension
allowance to be paid to a worker while s/he remains suspended for disciplinary action.

While certifying the standing orders, the certifying officer is obliged to satisfy himself that
they are just and fair. There is a provision of appeal against the decision of the certifying
officer. The Act provides penalty for violating the Act.
The Industrial Disputes Act, 1947
The Industrial Dispute Act, 1947 (IDA) is the principal industrial relations law in India, which deals
with machinery for industrial disputes resolution. It provides a conciliation-arbitration-adjudication
model of collective as well as individual disputes resolution. It envisages seven forums for
processing of industrial disputes. There is provision for constitution of works committee in every
industry employing 100 or more workers. This committee consists of representatives of employer as
well as workers, and is expected to promote amity and good relations especially in the shop floor
working. The conciliation machinery consists of conciliation officer (CO) and board of conciliation
(BOC). COs are government officers, who are trained in promoting negotiation among disputant
parties. There is a provision of constitution of a court of inquiry by the appropriate government for
determining matters connected with an industrial dispute. The adjudication of industrial disputes can
be done by labour courts, industrial tribunals, or a national tribunal, depending upon the nature of the
dispute. Adjudication is not automatic but depends on reference of the dispute by the appropriate
government to an adjudicatory body. Reference is discretionary on the part of the government. There
are two important schedules to the Act: the second schedule and the third schedule. The former
enumerates rights matters, which fall in the jurisdiction of a labour court, and the latter contains
interest matters, which normally are in the jurisdiction of an industrial tribunal. The central as well as
state governments have been designated as appropriate governments under this law in different
sets of employments. In case a dispute is of national importance or involves workers in more than
one state, such a dispute can be referred by the central government to a national tribunal. An
adjudicatory body delivers an award, which has to be published in governments official gazette
before it becomes enforceable.
Even though entering into conciliation in a dispute is discretionary on the part of the conciliation
officer (CO), in actuality it is usually done in all disputes. If a dispute is settled before the CO, he has
to register a settlement12. In case the CO fails to resolve the dispute, he has to send a failure report
to the appropriate government. On receipt of the failure report, or on its own motion, the appropriate
government can refer the dispute to a labour court or an industrial tribunal, which are adjudicatory
bodies under this Act. This process is technically called reference. The awards of adjudicatory
bodies are sent to the appropriate government which is obliged to publish them in the official gazette
within a period of 30 days from the receipt of the award. The award is enforceable after the expiry of
another 30 days from the date of is publication.

11

The IDA also provides for arbitration of industrial disputes. An arbitrator is appointed by the
disputant parties. He is supposed to give award after holding the arbitration proceedings.
Ironically, however, arbitration is almost dead in India as parties especially workers often
fear that they can be influenced by the employers.
The IDA also regulates strikes and lock outs in public utilities and non-public utilities. The
government interventions in strikes and lock outs are believed to be indeed quite excessive. Under
section 10 (3) of the IDA, the appropriate government can prohibit the strike that was in existence in
case it decides to refer the dispute for adjudication. It is believed that the law of strikes and lockouts
in India is so structured that a legal strike/lockout is almost impossible (Ramaswamy, 1984).

This Act prohibits lawyers to appear before COs. And, there are restrictions on their
appearance before labour courts and tribunals as well. However, with the passage of time,
the presence of lawyers in adjudication proceedings has become a reality in most cases.
Penal provisions have been made for violation of awards and settlements.
Working of the IR Laws
The three IR laws have played a key role in creating working class consciousness about
their collective and individual labour rights. Progressive interpretation of these laws by the
judiciary heightened the clash between workers aspiration and employers willingness to
grant benefits. During the 1960s and 1970s, the personnel managers in India were seen as
children of the IDA; for their main work involved maintenance of peaceful industrial relations
a sphere where labour law played the key role.
At the same time, being a labour surplus economy, the countrys labour market realities helped the
employers to make cheap labour available to them. The situation was such that it led them to violate
minimum employment standards by colluding with the labour bureaucracy, and in many cases with briefcase union leaders (Saini, 1995b). Thus, the IR system has so worked that employers have learnt to
subvert the legal requirements through various means. A large number of labour relations consultants
provide legal and extra legal advice to facilitate this process. The IDA model has played the key role in
shaping the IR environment in India. This model could not be replaced or even diluted despite a 55-year
debate on its fate. The influence of the adjudication system envisaged in the IDA has been so strong that
arbitration as a method of industrial disputes resolution is almost dead, except to some extent in the
Mumbai-Thane-Pune industrial belt, where it is still resorted to. Especially in the private sector most
employers make widespread use of the legal institutions to dilute the efficacy of unions than indulging in
genuine collective bargaining. Variegated unfair labour practices (ULPs) are seen as being committed by
both sides but more by the employers as they are a stronger party.

Research has revealed that the compulsory adjudication system for industrial dispute resolution has
kept the trade unions week. The adjudication system has reflected: undue delays in its working
(baxi, 1994; Upadhyay, 1995); lack of accessibility from especially the viewpoint of workers as they
perceive its working as unjust; and formalism in its working including juridification 13 of IR (Saini,
1999; 1995). The powers of the COs under the IDA appear small as they cannot impose their own
views on the disputant parties. But the working of the IDA shows that these powers have been

12

abundantly misused including at the instance of the political executives under whose overall
direction they work (Saini, 1995). Due to widespread presence of the IDA in the dispute
process, a large number of trade union leaders are running consultancy services for workers
by representing them before these bodies; in actuality, they have become brief-case union
leaders (Saini 1995b), and hardly involve themselves in any labour organization process.
So far as unionization in the country is concerned, it saw rapid growth in the organized sector in
the country (both private and public) during 1950s and 1960s. But unionization started declining
after the famous Bombay Textile Strike in 1982, which lasted more than a year. Thus unions
have become defensive in their fight against perceived unfairness. This has brought a sea
change in the concept of collective bargaining, which is now less and less on industry basis and
more on unit basis (Business India, 1998). The recent signals from the judiciary in the labour
field have further depressed the union power. Lately, some of the recent labour judgments in
India reflect the belief that the judiciary is more sympathetic with the employers and realizes
their susceptibilities in the new environment. The number of strikes resorted to is much less than
the lockouts, (Business India, 1998; Mishra, 2001). So, the objective of the industrial relations
laws are far from realized as per the projections made.

V. THE LAW OF WAGES AND MONETARY BENEFITS

Wages and monetary benefits are perhaps the most important issues of conflict between employer
and employees. Mostly, IR issues centre around wages and bonuses. There are four important laws
that fall in this branch of labour law. They are: the Minimum Wages Act 1948; the Payment of Wages
Act, 1936 (POWA); the Payment of Bonus Act, 1965 (POBA); and the Equal Remuneration Act, 1976
(ERA). It is interesting to note that the definition of the term wage is not uniform under all these
laws. Also, coverage of workers under these laws is also different. POWA has a wage limit of Rs.
6,500 for its application. POBA covers employees getting upto Rs. 3,500 per month. It has a further
limit of Rs. 2,500 for the purpose of calculation of bonus amount. Since its coverage limit is so low,
most workers remain out of the Act. The ERA has universal application, and covers all categories of
employees irrespective of the functions they perform and the wages they get. The MWA provides
only the minimum wage payable; the actual wages are fixed as per collective bargaining agreement
in the unionized sector or by wage boards in some sectors like steel or unilaterally by the employer.
We may discuss the broad features of these laws as follows:

The Minimum Wages Act, 1948

The Minimum Wages Act, 1948 (MWA) seeks to provide a comprehensive machinery for fixation and
revision of wages in certain industries. These are especially those industries which employ sweated
labour. The central as well state governments are appropriate governments for fixing minimum wage rates
in their respective jurisdictions. The Act is applicable to persons employed in those employments that are
provided in the schedule to this Act, which consists of two parts. Part I lists a number of industries
including woolen carpet making, rice mill, flour mil, construction and maintenance of roads, municipality,
public motor transport, docks and ports, and most of the mines. Different state governments have made
amendments to the schedule to list additional set of industries. Part II includes employment in most of
agricultural activities. Taking work from workers against payment of less than the minimum wages has
been held by the Supreme Court to be violative of

13

14

article 23 of the constitution and thus forced labour. It has been held by the Supreme
Court of India that no industry has a right to exist unless it is able to pay its workmen at
15
least a base minimum wage.
Wages under the Act can be fixed in the form of a time rate or a piece rate (with a guaranteed
time rate) and an overtime rate. The law provides that different rates of wages can be fixed for
different employments in the Schedule. And, different rates can be fixed for adults, adolescents,
children and apprentices. They can even be different for different localities. It has been held by
the Supreme Court that no employer has the right to carry on his industry if he pays wages that
16
are below those fixed under the Act. MWA gives a blank cheque to the wage fixation authority
as it does not provide any guidelines on the basis of which minimum wages are to be fixed.
However, the judiciary has tried to provide some broad guidelines to them.
A wage rate can be fixed per hour or per day or per month or any longer wage period. The
minimum wage rates can be fixed by any of the two methods: 1) the committee method: under
this method the appropriate government appoints a committee that studies the issue of desired
minimum wage and also takes advice of the Advisory Boards; or 2) gazette notification method:
under this method the appropriate government gives a gazette notification of the proposed
minimum wage rates that it wishes to fix and later on invites objections to them, if any, from the
employers and the employees, before finalizing the minimum wage rates.

The Act is administered by inspectors. It also envisages appointment of a quasi-judicial

authority to hear and decide claims related to payment of less than the minimum wage and
making delayed payment of minimum wage. Penal provisions have been made for violating
this Act. Penalties and procedures for violation of the provisions of the Act have been
specified. The rule-making powers have been vested in the appropriate government.
The Payment of Wages Act, 1936
In the initial stage of industrialization, some of the common malpractices adopted by employers were
delayed payment of wages and undue deduction from wages. On the recommendation of the Royal
Commission on Labour 1931, the Payment of Wages Act, 1936 (POWA) was passed so as to
overcome such practices. The main objective of this law is to ensure that wages are paid to the
workers on time, in current coins or currency and without impermissible deductions. The Act applies
to factories, railways and other establishments. The responsibility of payment of wages is of the
employer. In addition, the person who is responsible to the employer for supervision and control has
also been made responsible. The Act requires that a wage period can not be more than one month.
Wages must normally be paid before the expiry of the 7th day from the last day in the wage period.

It contains a list of permissible deductions that the employer can make from the employees
wages. Some of the permissible deductions that can be made from wages are: fines;
absence from duty; damage or loss of goods entrusted to employed person; accommodation
and service; recovery of advance; recovery of loans; income tax, etc. Employers are obliged
to maintain registers and records. The Act is administered by central as well state
governments in their respective jurisdictions through inspectors. Employers have been
obliged to display a notice containing abstracts of the Act and the rules made there under.

14

Like the minimum Wages Act, 1948 this legislation also envisages the constitution of a
quasi-judicial authority to hear and decide claims related to non-payment of wages. An
employee can approach the prescribed authority within a period of 6 months for claiming
unpaid or delayed wages. There is provision for appeal against the decision of the authority.
Penalty has been prescribed for violating the provisions of the Act.
The Payment of Bonus Act, 1965
The Payment of Bonus Act 1965 (POBA) extends to the whole of India, and applies to every
factory as defined under the Factories Act, 1948; and every other establishment wherein 20
or more persons are employed on any day during the accounting year. The Act seeks: 1) to
impose a statutory liability upon every establishment covered under this legislation to pay
bonus to its employees; 2) to define the principle of payment of bonus according to the
formula prescribed under this Act; 3) to provide the payment of minimum and maximum
bonus and link the payment of bonus with the scheme of set off and set on; and 4) to
provide a machinery for enforcement of the payment of bonus liability under the Act. The Act
does not define the term bonus, nor does the term bonus exist in any other Act.
The bonus formula provides that first of all the gross profit for the bonus year has to be
determined as per the relevant entries given in the second schedule of the Act. From the gross
profit so derived certain deductions have to be made. These deductions have been envisaged
under sections 5, 6 & 7 of the Act. These include the notional normal depreciation, development
rebate, investment allowance and development allowance, the direct tax, and such further sums
rd
as are specified in the 3 schedule. The bonus has to be paid from the resulting allocable
surplus. Every employee is entitled to bonus provided he has worked for not less than 30 days
in a year. And, an employee shall be disqualified to receive bonus if he is dismissed from service
for: fraud; or riotous or violent behaviour while on the premises of the establishment; or theft,
misappropriation or sabotage of any property of the establishment.

In case in an accounting year the allocable surplus falls short of the minimum bonus, the
minimum bonus will have to be paid according to section 10. And if the allocable surplus
permits, bonus should be paid up to the maximum bonus prescribed under section 11. In
any case the principle of set on and set off comes into play. The purpose of set on and set
off principle is to envisage payment of a minimum bonus to the workman even in the cases
of losses. POBA also provides for machinery for enforcement of the Act. Qualifications and
disqualifications of employees entitled to receive bonus has also been prescribed.
POBA envisages payment of minimum annual bonus even in situations of loss. So bonus under the
Act is a deferred wage in certain situations, for Indian realities are not considered similar to those of
the developed countries where there is no such system of payment of bonus. But in the first five
years of the setting up of the establishment, bonus is payable only if it has allocable surplus. The Act
provides that the employer and employees can agree to devise their own scheme of bonus that is
linked to production or productivity in lieu of bonus based on profits as envisaged under this Act.

15

The Act is administered by the appropriate government through inspectors. Imprisonment

as well as fines is provided for violation of the Act. In case there is a dispute about payment
of bonus, it is considered as an industrial dispute under the Industrial Disputes Act, 1947.
The Equal Remuneration Act, 1976
It was during 1975the international year of the womenthat India promulgated the equal
remuneration ordinance to give effect to Article 39 of the Constitution, which envisages
equal remuneration for men and women. Later on, the ordinance was replaced by the Equal
Remuneration Act 1976 (ERA). The Act applies to all establishments, employmentspublic
and privateincluding domestic service.
The Act puts a duty on every employer to pay equal remuneration to men and women workers
for doing same work or work of similar nature. In order to warrant payment same remuneration,
the work done by a female and male employee need not be identical. Broadly, the skill, efforts,
and responsibilities required are to be the same when performed under similar conditions. The
ERA also prohibits discrimination between men and women while making recruitment for the
same work or work of a similar nature. However, this provision will be inapplicable to any priority
or reservation in favour of Scheduled Castes or Scheduled Tribes, ex-servicemen, retrenched
employees or any other class of persons. The Act provides for constitution of advisory
committees for giving advice in matters of providing increasing employment opportunities for
women. The appropriate government may appoint authorities for hearing and deciding
complaints regarding contravention of the Act and claims arising out of non-payment of equal
wages. The Act is administered by the appropriate government through inspectors. Penalties in
the form of fines and imprisonment have been provided for various violations of the Act.

VI. THE LAW OF SOCIAL SECURITY

The Directive Principles of State Policy as enshrined in the Constitution of India recognize
the right to social protection for all citizens. Following these directives, the Indian state has
provided for, or reinforced the existing provisions of, some measures of social protection
through legislation and policy. Collective agreements in the formal sector between
employers and unions also reflect provision of social security measures by the employers.
At the global level, social security consists of two forms of protections: social insurance and social
assistance. The Indian system of social security in the organized sector can be divided into five
broad types, namely: creation of employers unilateral liability; social insurance; provident fund;
social assistance; and welfare funds. The most usual type of Indian social security with widest
coverage envisages creation of employers unilateral liability. Four laws can be said to fall under this
heading: Workmens Compensation Act 1923 (WCA); Maternity Benefit Act 1961 (MBA); Payment of
Gratuity Act 1972 (PGA); and Industrial Disputes Act 1947 (IDA). The key law falling in the category
of social insurance laws is the Employees State Insurance Act 1948 (ESIA). Countries in South Asia
including India have a unique system of social protection called the provident funds. They are
envisaged, among others, by laws such as the Employees Provident Funds (and Miscellaneous
Provisions) Act, 1952 (EPFA). The state Governments also provide for some amount of social
protection, especially to senior citizens and disabled people. This falls in the category of social

16

assistance. In some spheres of employmentlike bidi making, film production, etc.welfare

funds have been created by the Central Government for protecting the employees concerned.

The Workmens Compensation Act 1923

India had no social security system before the British Indian Government enacted the Workmens
Compensation Act 1923 (WCA). This Act symbolizes the beginning of social security in India. It was
passed in 1923 on the model of a similar Act in Britain. It provides for payment of compensation
unilaterally by the employer to his workmen in certain cases. Compensation under this Act is also
payable to the dependants in case of death of the employee. Certain categories of occupational
diseases too are covered. Injuries by accident also include contracting of some diseases in certain
circumstances. The WCA applies to any person who is employed, otherwise than in a clerical
capacity, in railways, factories, mines, plantations, construction, electricity generation, cinemas,
circus, and other hazardous employments as specified in Schedule II of the Act. The Act excludes
those who are covered by the Employees State Insurance Act 1948 (ESIA).
Interestingly, the employers liability is not based on any negligence on the part of the employer.
However, cases covered must have a rational nexus with the employment. The accident resulting in
injuries or death must normally take place during the working hours and at the employers premises,
except where the premises are notionally extended. Compensation is payable for death or
disablement (temporary or permanent) resulting from accidents arising out of and in the course of
employment. Thus, the WCA overrides the common law rule of voluntary assumption of risk under
which the employer was mostly not responsible to pay damages to his employees as they were
presumed to be working subject to the risk involved in the work. The facts and circumstances of
each case will have to be examined very carefully in order to determine whether the accident arose
out of and in the course of employment of a workman, keeping in view at all times the theory of
notional extension [of employers premises]17
All persons covered by the definition of workman are entitled to compensation in the event of
specified contingencies. But there is wage ceiling of Rs. 4000 per month for the purpose of
calculation of compensation. Compensation depends on wage and the relevant factor as specified in
Schedule IV of the Act. The relevant factor depends on the age of the worker concerned.
In case of death the compensation payable is an amount equal to 50 per cent of the monthly wages
of the deceased workman multiplied by the relevant factor; or an amount of eighty thousand rupees,
whichever is more. Where the worker suffers permanent total disablement, he is paid an amount
equal to sixty per cent of the monthly wages of the injured workman multiplied by the relevant factor,
or an amount of ninety thousand rupees, whichever is more. In case the permanent disability is not
total, then the workman is given that percentage of the compensation payable for total disablement
as is the reduction in the earning capacity. In case of temporary disablement, the compensation is
paid fortnightly at the rate of around 25 per cent wages per fortnight.
The WCA is administered by the state government; it has a unique method of administration. The
administrative and adjudicatory powers are vested in the same person called the commissioner. The
functions of the commissioner include: settlement of disputed claims; deciding cases of injuries
involving death; and revision of periodical payments. In exercise of his adjudicatory powers, the

17

commissioner distributes the amount of compensation to the dependents as defined under the
Act in his discretion. In case of persons under legal disability, the commissioner may invest the
money the way he likes. The commissioner also advises the workers about the available course
of action to a workman in different situations. The Act does not allow contracting out. In case the
employer does not pay compensation as per the Act, the workman concerned can make an
application to the commissioner within a period of two years from the date of the accident. The
commissioner can recover the amount due to a worker as arrears of land revenue.

The Employees State Insurance Act 1948

The key social insurance law in India is the Employees State Insurance Act 1948 (ESIA), which
envisages an employees state insurance scheme (ESIS) administered by the Employees State
Insurance Corporation (ESIC) created by this Act. The ESIA applies in the first instance to factories
employing 20 or more persons. The provisions of the Act have been gradually extended to smaller
power-using factories employing 10 to 19 persons, shops, hotels and restaurants, and cinemas. It
applies to workers getting salary up to Rs. 7,500 per month. It also covers administrative staff. The
ESIS is contributory in character whereby employers, employees and to a little extent the State
contribute to a fund, out of which various types of benefits are provided to the beneficiaries. The
amount of benefit is usually proportionate to the average daily wage of the employee concerned.

The present rates of contribution to be made by the employer and the employee are 4.75 per
cent and 1.75 per cent of the employees monthly wages respectively. Employees whose
average daily wages are below Rs. 40 per day are exempted from making any contribution. The
responsibility of the employer is to pay contribution in respect of his own employees as well as
of contract labour. He can deduct contract labours contribution from his bills. In case of default:
Employer has to pay 15 per cent interest per annum. In addition, the ESIC may impose
damages, not exceeding the arrears due. These contributions are deposited in the ESI Fund,
which is administered by the Employees State Insurance Corporation (ESIC), which is an
autonomous institution. The State Governments contribute only a portion of the expenditure on
the provision of medical care, whose share presently is one-eighth (12.5 per cent) of the medical
expenditure of the ESIC. The Standing Committee of the ESIC looks after its working.
The Act envisages sickness and extended sickness benefit, maternity benefit, disablement benefit,
dependents benefit, reimbursement of funeral expenses, and medical benefit. Sickness benefit is
payable in case of certified sickness at the standard daily benefit rate (SBR), which is roughly 50 per
cent of wages. This is specified in the Standard Benefit Table. The maternity benefit is payable for 12
weeks at twice the SBR. The extended sickness benefit is payable for 309 days in two consecutive
benefit periods. The rate of extended sickness benefit is about 25 per cent more than the ordinary
SBR. The disablement benefit is payable at SBR plus 40 per cent of it per month. If injury suffered is
not given in the schedule, the disablement is determined by the Medical Board. There is appeal
against the Boards decision which can be made to the Medical Appeal Tribunal
The medical benefit consists of restricted medical care, expanded medical care, and full medical care.
The State Governments are obliged to provide to the insured persons (i.e. the employees covered under
the Act) and their families in the State reasonable medical, surgical and obstetric treatment through
dispensaries, hospital and diagnostic care centers run by it. However, it may with the

18

approval of the ESIC arrange for their medical treatment at clinics of private medical practitioners.
The State Government also enters into an agreement with the ESIC in regard to the nature and
scale of the medical treatment that should be provided by it to the insured persons and their families.

Cash benefits payable under the Act are not liable to attachment in relation to payment of
any debt by the employee. Any dispute under the provisions of the Act can be decided by
the Employees Insurance Court and not by any civil court. The Act provides for penalties
and imprisonment for various offences.
The Employees Provident Fund (and Miscellaneous Provisions) Act 1952
Along with the ESIA, the Employees Provident Fund and Miscellaneous Provisions Act 1952 (EPF
Act) too is a key social security legislation in India. It applies to any factory relating to any industry
specified in Schedule I to the Act in which 20 or more persons are employed, and also to other
establishments employing 20 or more persons which may be specified by the central government by
a notification in this regard. As on 31 March 2005, this includes 180 industries; and covers 41.11
million workers under the Employees Provident Fund Scheme (EPFS) both in exempted and
unexampled sectors. An all, 408,831 establishments are covered under this Act. The Act covers
employees getting salaries up to Rs. 6,500 per month. For workers employed in coal mines, the
relevant law is the Coal Mines Provident Fund and Miscellaneous Provisions Act 1948.
The EPF Act provides for creation of three important schemes. These are: the Provident Fund
Scheme; the Deposit-linked Insurance Scheme; and the Employee Pension Scheme. The
Employees Provident Fund Scheme (EPFS) is a kind of savings and pension scheme in which the
employees as well as their employers pay regular contribution into a fund. Such contributions are
credited to the accounts of the subscribers concerned. The fund is invested as per the norms laid
down in this regard. Annual interest is credited to the account of the employee on the total amount of
provident fund (PF) deposit in his/her account. When an employee superannuates or dies or seeks
retirement, the balance standing to the account is refunded.
The Employees Pension Scheme 1995 (EPS) provides for pension on superannuation, retirement,
permanent total disablement and death. The Employees Deposit-Linked Insurance Scheme 1976
(EDLIS) provides an insurance cover to the persons covered without payment of any premium for
this purpose. The insurance cover has been linked to the average balance in the provident fund
account of the deceased during 12 months preceding his or her death subject to a ceiling.
The Employees Provident Fund Scheme (EPFS) is financed through contributions from employees
with matching contributions from employers. The normal rate of contribution to the provident fund by
the employees and the employers prescribed under the EPF Act earlier was 10 per cent of wages
for unnotified industries and establishments. This rate has been hiked to 12 per cent of wages for
employees working in notified18 industries and establishments employing 50 or more persons.
The EPS derives its financial resource from and out of the contributions payable by the employer in
each month under the EPF Act and the rules framed under it. Contribution representing 8.33 per
cent of the employees pay has to be remitted by the employer to the pension fund The Central

19

Government also contributes to the Pension Fund at the rate of 1.6 per cent of the employees
pay. Neither the employer nor the employee is required to make any additional contribution.
The Act is administered by the Employees Provident Fund Organization, which works under the
overall supervision and direction of the Central Board of Trustees and Committees. The Central
Provident Fund Commissioner (CPFC) is the Chief Executive Officer of the Organisation. The
Board of Trustees (BOT) is a body corporate having perpetual succession and a common seal.
Unlike the ESIC, however, the Board of Trustees of the EPFO enjoys much less autonomy; the
control of the Central Government in its working is much stronger.
CBOT is empowered to appoint such officers and employees as it may consider necessary for the
efficient administration of the schemes under the Act. These officers have been conferred quasijudicial powers. Thus, they conduct inquiry as they deem necessary to determine the liability of the
employer and make order on the basis of the inquiry so conducted. These authorities under the Act
have a statutory duty to see that the provisions of the Act are complied with.

Maternity Benefit Act, 1961

The Maternity Benefit Act, 1961 (MBA) seeks to regulate the employment of women workers in
certain establishments for certain period before and after child birth. This law provides that all
women employees shall be paid maternity benefit in case of child birth, miscarriage or sickness
arising out of pregnancy. A worker when governed by the ESI Act cannot claim maternity relief
under the Maternity Benefit Act. This Act also envisages a unilateral responsibility of the
employer and the scheme contains no insurance element in it. It applies to factories, mines,
circus, plantations, and shops and establishments employing 10 or more persons. However, in
case a women employee is covered by the ESI Act, then this Act does not apply to her. The
application of this legislation can be extended to other establishments by a State government
after the prior approval of the central government. The central government is responsible for
administering this Act in mines and circuses, and the state governments are responsible for its
administration in factories, plantations and other establishments. The central Act has been
19
adopted in nearly all the states in the country except Manipur, Nagaland and Sikkim.
The maximum periods for which the maternity benefit is available to any woman worker is 12
weeks of which not less than six weeks shall precede the date of her expected delivery. In case
of miscarriage, a woman is entitled to leave with wages at the rate of maternity benefit for a
period of six weeks immediately following the day of her miscarriage. In case of illness arising
out of pregnancy, delivery, premature birth of a child or miscarriage, the woman is entitled to
leave with wages at the rate of maternity benefit for a maximum period of one month.

A woman whose maternity benefit is improperly withheld may make a complaint to the
inspector. Inspectors have been conferred powers, including quasi-judicial. If the inspector
after making the inquiry is satisfied that the benefit was improperly withheld, he may direct
the payment of maternity benefit in accordance with his orders. An appeal over the decision
of the inspector lies to the prescribed authority in this regard. Any amount payable under the
Act is recoverable by the collector in the same manner as an arrear of land revenue.

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The Payment of Gratuity Act 1972

Payment of gratuity is another important social security benefit in India. Gratuity is a lump sum
payment which is payable under the Payment of Gratuity Act 1972 (PGA). Gratuity is believed to
be an award which the employer pays to the employee on retirement out of gratitude for a long
and meritorious service. It replaces at least partly the loss of income at the time of
superannuation, retirement or resignation, and death and disablement due to accident or
disease. The PGA applies to factories, mines, oilfields, plantations, ports, railway companies,
shops and other establishments where 10 or more persons are employed.

Gratuity is a benefit payable by the employer for termination of service of an employee. But
it is also payable in case of superannuation, retirement, resignation, death or disablement
due to accident or disease. It is payable to every employee, other than apprentice,
employed in an establishment to which the provisions of the Act apply. It is payable at the
rate of 15 days wages for every completed year of service or part thereof, in excess of
seven months. There is no wage ceiling for coverage under the Act. Ordinarily, for being
entitled to gratuity, an employee must have completed with the employer concerned at least
five years of continuous service. The maximum amount of gratuity payable under the Act
was raised from Rs. 100000 to Rs. 350000 with effect from 24 September, 1997.
Gratuity can be forfeited wholly or in part to the extent of loss if the service of an employee is
terminated for an act or willful omission or negligence causing damage or loss to employers
property. Also, it can be forfeited if services of an employee are terminated for riotous or
disorderly conduct or other act of violence or for moral turpitude in the course of employment.
There is provision for compulsory insurance of his liability on the part of the employer unless he
constitutes an approved gratuity fund. Quasi-judicial powers are vested in the controlling
authority which decides matters related to any disputes arising from non-payment. The Act is
administered by central as well state governments in their respective jurisdictions.

Labour Welfare Funds

In many work areas India has found it difficult to reach contribution-oriented social security for
various reasons. So a unique method has been coined for protecting workers employed in certain
specified employments. The concept of Labour Welfare Fund was evolved to this end. Five welfare
funds were set up under the Ministry of Labour and Employment. These funds are aimed to provide
housing, medical care, water supply, educational and recreational facilities to workers employed in
beedi industry, certain mines and cine workers. Such funds are financed out of the proceeds of cess
levied under respective Cess/Fund Acts. The various legislation have been enacted to set up these
funds. These include: the Mica Mines Labour Welfare Fund Act, 1946; the Limestone and Dolomite
Mines Labour Welfare Fund Act, 1972; the Iron Ore Mines, Manganese Ore Mines & Chrome Ore
Mines Labour Welfare Fund Act, 1976; the Beedi Workers Welfare Fund Act, 1976; and the Cine
Workers Welfare Fund Act, 1981 (For details, see Saini, 2001). These Acts provide that the fund may
be applied by the Central Government to meet the expenditure incurred in connection with measures
and facilities which are necessary to provide the welfare of the workers concerned.

Chapter V-A and V-B of Industrial Disputes Act 1947

As such, India has no system of providing social security in the contingencies of

unemployment. This is so despite the right to work having been provided for in the
Constitution as a Directive Principle of State Policy. Perhaps, the unemployment and the
underemployment situation in the country is so acute that no government has gone into the
feasibility of introducing a system of unemployment insurance.
The Industrial Disputes Act 1947 (IDA) provides some semblance of unemployment security in
a limited sense under its provisions relating to lay off, retrenchment, closure, and transfer of
industrial establishments. The idea underlying the retrenchment and closure compensation is to
help the workers to maintain themselves until they are able to find alternative jobs.

Review of Social Security law

It is noticeable that a large part of social security legislation in India is in the form of creation of
unilateral liability of the employer. However, it is important to note that this form is also believed
to be the most primitive and is sometimes described as the decaying form of social security;
for it does not contain any insurance or assistance element in it. It merely involves a statutory
liability of the employer in the event of certain contingencies so as to provide certain protection
to the employee. It is for this very reason that such laws are prone to being violated by the
employers. The employer has the option to insure its liability under some of these laws or create
a fund for meeting its liability. But despite this, the tendency to avoid his/its liability is quite high.
Therefore, a progressive social security system should replace such schemes with
professionally organized social insurance schemes. Further, there is a strong need for extending
the scope of the ESI Act. The ESIC needs structural reforms, as many unions do not want to be
covered by it, and seek exemption from its coverage so as to negotiate for devising alternative
schemes (Saini, 2001). At the same time, better enforcement mechanism is needed for the
Maternity Benefit At 1961. The incidence of violation of this Act is very high.

It should also be noted that protections envisaged in most of these schemes apply to the
organized sector. In effect, the informal sector employees enjoy very little or no social
protection through law. However, some sections of these employees in the informal sector
are covered under certain laws. For example, the Workmens Compensation Act, 1923 and
the Minimum Wages Act apply to many types of establishments in the unorganized sector.
VII. CONCLUDING REMARKS
Post-independence India sought to implement the concept of welfare state as envisaged in the
Preamble of the Constitution of India and its chapter on the Directive Principles of State Policy. A
number of labour laws were enacted in all its four broad categories. The Indian judiciary gave liberal
interpretation to many provisions of these laws; often rooting the liberal interpretation in the Directive
Principles of State Policy in doing so. A plethora of public interest litigation (PIL) was initiated in this
sphere by public-spirited citizens in the last 25 years or so. This also energized many nongovernmental organizations (NGOs) in the informal sector to play a more active role in labour law
implementation. But cases of labour law violation were still too many (Patel and Desai, 1995; Advani
and Saini, 1995). Many strong nexuses worked to neutralize the legislative intention by forging
alliances to serve personal interests. For example, almost negligible number of reinstatement

decisions of labour courts and industrial tribunals were implemented (Saini, 1999, 1994).
This included even some of the Supreme Court and high Court decisions.
The Indian labour law model, as also those of the advanced Europe, was built on the basic
postulates of the welfare state. The new economic policy of India in 1991 promised reform, but they
were never carried out due to lack of strong central (federal) governments and fear of public
reaction. Changes in labour policy were more at the executive and implementation level than by
amending the labour laws. Globalization warrants laws promoting greater flexibility in the formal
labour market. A study by Budhwar (2001: 82) found that a large percentage of Indian managers
(61.5 per cent) believe that Indian national labour laws influence their HRM practices the most. This
study also found that their actions and prerogatives are constricted by these laws. Employer would
want more freedom in operating in the labour market especially in view of the chaotic competition
caused by the new dispensation. Therefore, amendment in labour law framework is long overdue.
In fact, Indian labour market can be said to be characterized by a sharp dichotomy. It is understandable
that labour law is creating inflexibility for the organized sector which is difficult to sustain the era of
globalization. At the same time, a large number of establishments in the unorganized sector remain
outside any regulation, while the organized sector has been regulated fairly stringently. The organized
sector is believed to have provided too much of job-security for too long, resulting into inertia and
inefficiency, while the unorganized sector has provided too little to too many. In their present form, many
aspects of Indian labour laws do not suit the globalizing environment. These laws apply only to the
organized sector. Consequently, these laws have restricted labour mobility, have led to capital-intensive
methods in the organized sector and adversely affected the sector's long-run demand for labour. Since
labour is a subject in the Concurrent List in the Constitution of India, state-level labour regulations are
also an important determinant of industrial performance. States like Kerala which have enacted more proworker regulations have lost out on industrial production in general. Interestingly, countries like China
learnt to adjust to the environment much faster. With a history of extreme employment security, China has
drastically reformed its labour relations and created a new labour market, in which workers are highly
mobile.

An enlightened society would like to enact labour laws that are relevant to the societal
values adopted in a particular country. But it is important that they change when new values
are adopted. But this has not happened in India. Especially the labour laws that fall in the
category of industrial relations laws need to be re-looked.
The most talked-about provision in the Indian industrial relations law is Chapter V-B of the IDA. This
chapter requires all employers employing 100 or more workers in factories, mines and plantations to
seek permission from the Government in matters of lay-off, retrenchment, and closure. It has been
seen that this has led to unnecessary bureaucratization and harassment of employers. The Indian
bureaucracy has been arbitrary in granting permission under this chapter; often extraneous
considerations have dominated in these decisions. Many times, organizations which have been
perennially sick have been refused permission under this chapter. Presently, a thinking is surfacing
that the number of workers for application of this chapter should be raised to 300, though at time it
was sought to amend the chapter to make it applicable to industries emphasizing 1000 or more
workmen. Another area of controversy is section 9-A of the IDA. This section requires that a notice of
21 days should be given by the employer to workmen for effecting change in any of their service

conditions. This section has also resulted in workers resistance to flexibility needs of the
employers in this regard. When such a notice is given employee unions raise an industrial
dispute, which creates resistance for implementing the desired change.
More and more employers want to implement variable service conditions for different sets of
workers. Competency mapping is being used for creating a greater degree of differentiation amongst
workers. So find the Industrial Employment (Standing Orders) Act, 1946 (IESOA) to be problematic.
The labour laws in India are known to be very complex. Some of the problems in this regard relate to
applicability; definition of worker/employee, appropriate government, wages; different administrative
mechanisms; and different quasi-judicial bodies. This creates confusion and dependency on lawyers.
For example, the term wages has been differently defined under different Acts. Some laws cover
employees receiving monthly wages as low as Rupees 3500 per month (e.g. the Payment of Bonus
Act, 1965), others cover even clerical and administrative employees (e.g. the Employee State
Insurance Act 1948; the Employees Provident Fund Act, 1952; and the Gratuity Act 1972). For some
there is no wage limit for coverage (e.g. highly paid pilots are workmen under the IDA). A plethora of
case law has been delivered by the judiciary to clarify these complexities in variegated situations.
This has made the grasping of labour laws a very complex affair (for a detailed discussion, see
Debroy, 1996). In fact, labour law complexity has converted union leaders into full time pleaders,
who have set up labour law practice as a vocation (Saini, 1995; 1994).

There is a case for harmonization and unification of labour laws. This is an important area of
reform, for tremendous ambiguities have been caused by complexities of the labour legislation.
The National Labour Law Association (NLLA) has drafted a proposal to enact a National Labour
Code 1994 (Draft), which has been appreciated as laudable. But if one looks at its contents, it is
surely not likely to be acceptable to employers as they will fear that their competitive position will
be adversely affected by extremely high rates of contribution that have been suggested in it.
The social security laws in the country reflect lack of a comprehensive vision about the future of
Indian society (Saini, 2001: 260). The system caters to only less than 7 per cent of the
workforce. The definition of social security in developing countries including India is bound to be
different as a large chunk of population does not have access to basic minimum needs. There is
a need to integrate social security policy with anti-poverty policies (Guhan, 1994) and Indian
laws have to reflect this thinking. Especially, there is a need to create low-cost group insurance
scheme to meet the needs of self-employed people in rural as well as urban areas (Saini, 2001).
In a country like India, the executive branch of the state has many constraints in performing its
constitutional duties. There is a need for greater degree of public interest litigation for enforcing
minimum labour standards and developing some basic postulates of sound labour relations. It can
be a very useful instrument in the Indian context. But this needs to involve people who are genuinely
interested in poverty alleviation. Globalization can not take away the need for labour law. The state
needs to focus on better implementation and ensure that these laws do not become a mockery.

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