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UP suspends labour laws: What stays, what goes and why ‘it is a step in right direction’

While those supporting move felt this will give flexibility to industry, labour law experts called ordinance 'atrocious' that will result in termination of all permanent employees' services.

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New Delhi: The Uttar Pradesh government Wednesday approved an ordinance exempting all establishments, factories, and businesses from the purview of most labour laws for three years.

The Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020, only retains the Bonded Labour Act, 1976, Employee Compensation Act, 1923, and Building and Other Construction Workers’ Act, 1996.

Reports say laws pertaining to women and children, like the Maternity Act, Equal Remuneration Act, Child Labour Act, and Section 5 of the Payment of Wages Act, which states that wages of a person earning less than Rs 15,000 a month cannot be deducted, are also being retained.

Some of the laws that would no longer apply include the Minimum Wages Act, Trade Unions Act, Industrial Disputes Act, Factories Act, Contract Labour Act, Payment of Bonus Act, Inter-State Migrant Workmen Act, Working Journalists Act, Employees’ Provident Funds and Miscellaneous Provisions Act.

The ordinance has been sent for approval to the central government, since labour is on the concurrent list of subjects.

‘Workers will continue to be protected’

Arguments in favour of the ordinance have largely been focussed on the coverage of these labour laws, with supporters pointing out that these protections were available to only 10 per cent of the national labour force.

Uttar Pradesh Chief Secretary R.K. Tiwari told Business Standard that the move will help provide employment to workers who have migrated back to the state.

“The idea is that in the present circumstances where we need to provide employment to workers who have migrated back to the state and to protect the existing employment, some flexibility has to be given to business and industry,” he said.

He added that workers will “continue to be protected”, as some of the labour laws have been kept intact.

Chandrajit Banerjee, Director General, CII, also appreciated the move, saying the ordinance “will give huge flexibility to industry in their labour practices”.

He said, “Coming at such disruptive times, when livelihoods have come under pressure and multitudes of people have had to move away from their workplaces, these new policy interventions will come as a huge relief to economic activity.”

“There is a need to re-skill and map the workers who have been displaced and re-employ them as per the needs of the industry. The ordinance in UP and the new relaxations in the norms in MP will allow the industry to adapt and rise to the new economic realities swiftly,” he added.

Also read: Labour law reforms must for industrial growth. UP, MP have done it, now others must follow

‘Should have been done decades ago’

Shruti Rajagopalan, senior research fellow with the Mercatus Center at George Mason University, says the ordinance is a step in the right direction, and that “this should have been done decades ago, even without Covid”.

Rajagopalan tweeted that these laws, “while well intentioned, have had terrible unintended consequences of creating a monstrous unorganised sector”. She explained that Indian regulations make labour “more costly”.

“So either firms switch to capital, or don’t hire labour and instead ‘contract out’ using middlemen to supply workers without formal contracts. This is not just to avoid paying above market wages, but also to avoid compliance costs,” she wrote.

Rajagopalan pointed out that 90 per cent of India’s labourers did not have the legal protections in the first place. “(The laws) only served unionised labour, a small fraction of Indians in the formal sector, labour inspectors, middlemen, and champagne socialists. The cost of keeping this small contingent in business has left 90 per cent in the informal sector, totally unregulated, and with no protection,” she stated.

‘Disregard of worker rights’

However, Delhi-based labour lawyer Sanjoy Ghose said given the size of the population, even the formal sector is made up of several lakh workers, who will be affected by the ordinance.

Ghose told ThePrint that the arguments referring to unorganised and organised workers are “bogus”, because Parliament had passed the Unorganised Workers’ Social Security Act in 2008, with an objective “to provide for the social security and welfare of the unorganised workers and all matters connected with it”.

“If they wanted to protect the unorganised workers, the legislation was there, but till date, no state has implemented it,” Ghose said.

The ordinance would result in the termination of the services of all permanent employees the moment it receives the President’s nod, and they would be replaced with contract workers, Ghose said, adding that the legislation is “absolutely atrocious”.

He highlighted the issue of gratuity payments. “A person who has worked for 30 years and knows that he will get this money to build his house post-retirement… just because is retiring now during the pandemic, he would not get any gratuity?”

Another Delhi-based lawyer Urvi Mohan also felt that while trying to generate more employment and revive the suffering economy, “the UP government has acted in complete disregard to the rights of the various categories of workers who were enjoying the benefits of labour laws”.

Mohan said the ordinance has “arbitrarily and absolutely unfairly done away with the very basic rights of all those covered by labour laws”.

She said the state government could have instead “resorted to adopting certain features of the consolidated labour code, if it wanted to balance the interests of employers vs employees/workmen”.

Also read: UP-MP labour reform: Wooing investors post-lockdown or taking advantage of Covid crisis?


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  1. Totally condemn this ordinance, it gives even more rights to the employers to exploit workers and take away all the bargaining powers from the workers.
    Labour laws in India anyway have never been labor friendly, now it will be even worse.

    This must be revoked! Strongly condemn

  2. This is Indeed a Big and Bold step that is needed to be done not just in a state but all over India. These Oppressive Labour laws have been Both Anti Market and Anti Labour because they do not allow entrepreneurs to invest in labour intensive sectors of our economy that have potential and labours do not get the best employment and always remain at risk of losing employment once and for all. These laws have been the reason why India is behind China and many East Asian Nations in terms of uplifting its poor and downtrodden. A policy that was meant to protect them is leading to their destruction only and not the betterment as thought.

  3. A conundrum that has been there since the first factories started. How to prevent exploitation while balancing the fact that a business needs to control cost – labor being a major one. Most “developed” countries have managed by separating out the humane/social security by mandating huge payments to a social system giving protecting workers, employees freeing business from that burden. Why look to employers for social security? Let market forces drive labour costs…

  4. Beginning of the end of constitution started with CAA, now beginning of the end of labour protection law started with Covid 19, now let us await for land reforms and withdrawal of reservation………… Dream of selective will be fulfilled

  5. The government should come up with job insurance policy, to protect the livelihoods of employees, for a fixed time after layoffs. This way the risks of failures is shared by larger group of companies and employees are also protected.

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