Labour Reforms in India, 2020


“Desperate times breed desperate measures” a beautiful remark by William Shakespeare holds the utmost relevance in the recent times, when the world has come to a standstill. The novel covid19 virus has not only posed great danger to the wellbeing of mankind but has also tampered the very means by which it sustains by virtually crippling all means to earn a livelihood. The government has to assume a role which they have undertook and call for decisions that they had never undertaken in such an unprecedented situation. This premise is what has been greatly exhibited by the move of three states towards making changes in the existence and implementation of the labour laws governing industries.

Being a home to a populace of 1.3 billion, India possess manpower skilled as well as unskilled in a humungous quantity. This manpower is the prime strength of the industrial hub of India that makes them compete in an International Market. So as per the Indian context, the relation between an employee and an employer possess quite a semblance to a symbiotic relation between a fungus and a bacterium which is basically the relation for survival through mutual benefit obtained through mutual cooperation. Any hindrances that disturb one of these parties does alter the position of the other.

There have been some recent developments concerning the industrial sector and the labour employed in it. Government of three states- UP, MP, Gujarat have passed an ordinance to alter laws regarding working in Industries for the next thousand days under its jurisdiction to do so as per concurrent list.[1] Following their footsteps, several other states like Punjab, Rajasthan etc.[2] are also contemplating on introducing some reforms to incentivise industries. The introduction of these law reforms has thrown the gates open for a plethora of alterations in the Indian economic activity as well as in the position of India in the global platform. This article attempts to highlight the probable pros and cons of such implementation.

Economical Impact:

Labour laws were formulated to help in efficiency and just supervision over the working of Industries and the economical, mental and physical state of the working class. However, these regulations did result in certain unintended consequences that served as an instrument in endangering the very class of people it aimed to protect by creating disincentives for industries in terms of scaling, expansion and operation.

The regulation made the employers view hiring labour and increasing the size of their industry as a ‘risk factor’. Also, the red tapesim faced by the employers during the registration and closure of companies made the process cumbersome. Various unemployment benefits that are ought to be provided by the employer regardless of the circumstances posed a serious threat to the continued working of the industries. This dilemma often made the industrialists take harsh decisions such as shifting to capital or creation of white-collar jobs to preserve their business or using these laws unethically and creating a problem for whole nation, these were the special factors due to which we have negative Balance of Trade (BOT). This not only has affected the working class but also India’s position in the international market as it cannot compete with most of the countries in terms of pricing and quality.

The recent labour reforms which are creating headlines for the past few days seek to address these issues. The aim of the reforms is to retrack investment and create jobs that could accommodate the addition of around 10-15 lakh migrant labours to the already existing workforce of the states. The principle of “Ease of doing Business by introduction of flexibility” is what is being claimed. Foreign investment due to the reforms is highly anticipated as the major need of these firms is fulfilled which is transparency and ease in compliance with the law and ability or manage the workload[3].

Like every coin has two sides, this major step also has serious adverse impacts that can indeed weigh down the benefits it provides. If we only extrapolate on the economic situation, the reform does seem promising but seem to be ‘ill timed’ and ‘poorly coordinated’ as while trying to increase the production by providing large scale employment, certain other factors governing this premise are overlooked. Apart from the law rigidities hampering the operation of the industries, there are other factors that effect this operation such as infrastructure, skilled manpower and regional benefits. Further once the process of migration is done, a lot of industries will have to counter shortage of manpower that were provided by so called Hindi heartland states such as UP, MP[4].

Furthermore, if we are to go by the famous economic maxim- ‘Good capital chases high labour sector’, the present reform fails. For instance- the reforms that increase the working hours and limits redressal of grievances relating to dispute resolutions will make the workers discontent which will definitely have an impact on the production of goods. The goods produced in such a case will be of inferior quality which will neither generate much revenue nor provide a global standing to replace china in the international market. Also, how can the government guarantee long term capital using a policy that is only up to three years as the investors will wish for consistency in laws governing their area of investment. Further a study of four states namely Uttar Pradesh, Andhra Pradesh, Madhya Pradesh and Andhra Pradesh made by VV Giri National Labour Institute illustrated that past amendments in laws do not guarantee investments or creation of jobs.[5]

Legal Aspect:

The Latin maxim of “Salus Populi Suprema Lex Esto” has reiterated the pivot around which all the legislations evolve and revolve. The maxim asserts that that the welfare of the people is the prime factor to determine the justification and efficiency of any law. However, it also covers within its ambit, the shifting parameters of deciding this ‘welfare’ based on the prevailing circumstances. So, in dire situation the government is forced to take some harsh decisions ought to be taken in order to preserve the nation as a whole.

To put in layman terms, the government maybe justified in passing any law or implementing any policy that restricts the rights and liberty of the people in order to ensure their security when it is absolutely necessary. The security here talked about is not only in terms of physical wellbeing but also economical and social one. The same has been reflected in the Indian Constitution as this principles echoes in the restrictions that are placed on the extent of the exercise of the Fundamental Rights endowed upon the citizens. These restrictions are present in almost all fundamental rights enlisted from under part of the constitution ranging from article 14 to article 32 with the sole exception of article 21- Right to life and personal liberty. The criterion that can lead to restrictions of the rights can be broadly classified into public health, morality and against public policy.

So what is debatable in the recent move by several state governments to dismantle several labour laws in order to provide incentive to the industries by relaxing regulations which is assumed to provide a boost in providing employment and production of goods can actually be the ground to restrict almost every law that favours the vulnerable working class which were basically the reinforcement of their fundamental rights.

Suspension of the operation of total 38 laws with the exception of section 5 of payment of Wages Act, 1936, the Employees Compensation Act, 1932, The Bonded Labour System (Abolition) Act, 1976 and the Building and other construction Worker Act, 1996 for a period of three years will certainly result in surge in the economic activity but at the cost of creating situation in which a aggrieved labourer is bound to get exploited.

The UP Industrial Minister proudly commented that ‘the rights and benefits enjoyed by the employers and employees are supplementary in nature’. Thus, these laws will not lead to exploitation of labourers as in such a pursuit even employers will be affected which is not at all desirable by them. However, the reforms bring forward a different picture.

The Registration of trade unions, safety and welfare in factories, terms of employment, retrenchment, lay-offs and termination of workmen, payment of terminal benefits and closure of industries are all affected by the sudden inactivation of the laws. This step runs contrary to the right to form associations under Article 19.[6]

The most shocking exclusion is the Minimum Wages Act, 1948 which has been changed to extent that workmen will not be provided with basic minimum wage that is supposed to be paid. So now onwards, the workmen are not left with any solution to approach the law. The higher bargaining power of the employer gives him the chance to override the employee’s will and he has a choice to decide whatever amount he wants to pay, and the employee has to accept this. This is a limpid violation of article 14[7] which advocates right to equality before laws but here the representation of the suits relating to labour disputes is barred.

The Shops and Establishment Act and Factories Act contain stipulation on overtime wages, work hours and work holidays. Now as this ordinance allows employer to exempt this all condition, they can create conditions similar to bonded labour due to the absence of any proper working hours and weekly holiday. This violates article 21[8] of the constitution that includes living in a secure environment and right to health. In the case of Textile Labour Association Vs. State of Gujarat[9] high court guided the association, that it cannot take basic rights that are been provided in industries dispute act.

The laws retained by the government do not seem to have an ambit that is wide enough to provide redressal for all the grievances of the labourers who are already the worst hit in this testing time. In utter destitution a desperation, the labourers have no other way out for self-preservation other than migrating to their native places and struggling to find a means to earn their bread. Such a move can aggravate their already miserable status as the legal framework supporting them has been enfeebled with no alternative recourse.

The contention that the even the existing laws covered only 10% of the workforce which constituted organised sector while the remaining 90% comprising of the unorganised sector were always out of the purview of the said laws is nothing but a statement reiterating organized class supremacy and the slack shown by the government in implementing the “ The Unorganized Worker Social Security Act”.

Also, the manner in which these reforms were carried out raises many concerns that why wasn’t the tripartite decision ensured before such implementations. The labour body is aggrieved by the fact that in the name of reforms, the government without paying any heed to their views implemented a decision that results in weakening of labour standards. The same was echoed by the head of the Bhartiya Mazdoor Sangh, Mr. Narayan who remarks that such reforms “turn the clock back 100 years”[10], a time of complete industrial anarchy.

India is a signatory to about 40 International Labour Organisation (ILO) conventions. This move of certain state governments runs in violation of most of these conventions such as the deviation from internationally accepted no. of working hours which is eight per day envisaged by core convention of ILO, ILO Convention 87 regarding right to freedom of association, ILO Convention 98 regarding the rights to collective bargaining, ILO convention- 144 regarding tripartism in decision making. This would taint the image of India at a global platform[11].

Environmental Effect:

Amidst the tussle between boosting economy and preserving the rights of the vulnerable, the government seemed to have overlook a very significant area of concern which might not pose adversities today but will surely do in the near future. The area that is being referred to here is the Environment we live in. it is indeed a pragmatic approach to weigh economic crisis more than anything else so as to preserve our standing as a nation in the world however at the same time, the government must not forget that its action will lead to further deterioration of the already terrible Indian environment. Our nation has been struggling to implement laws to limit pollution created by Industries. Most of the industrial hubs of India are among the world’s most polluted cities as per the reports.[12]

This stresses on the fact that any further addition to the industrial field done without any preventive measures to safeguard the environment will only aggravate the situation as in the long run , the high level of pollution will take a toll not only on the health of the people involved in the Industries but also the citizens residing in these areas. The health issues can be so severe that India might have to face a “Climate Emergency” just like some of the European Nations. Of course, the economic backlog which is cause due to the novel corona virus needs to be cleared and also like every country in the world, India does aspire to become ‘economic power: a manufacturing powerhouse’ but this cannot be done on the cost of loss of natural resources and environmental degradation.

Hence, in order to limit the pollution and provide a fillip to the economy, the govt needs to strike a balance between easing the laws that increase production and preserving the environment from the aftermath of such a drastic step.


The preamble of the Indian Constitution with great pride envisages India as a “democratic, republic, socialist, secular and sovereign nations” with principles of Justice, liberty and fraternity forming the basis of the nation. However, the recent turn of events has brought light to the failure of the government to take into account the enshrined principles of the Constitution. Times like these indeed call for the need to revamp the functioning of economic sectors that support the population of 1.3 billion but what is appalling is the reckless disregard shown to the most vulnerable sect of the populace. The reforms show government discriminates between the haves and have nots. We must not succumb the temptation of country’s economy on the cost of sacrificing basic rights of the citizens. At the end of the day, we all are equal in the eyes of law so how can there be any different treatment which does not provide upliftment. Through such a conduct, we have also failed the father of our nation, Mahatma Gandhi who had propagated the principle of true democracy as the one where the most vulnerable are taken care of.

Thus, the current reforms may have its own share of benefits to offer which are termed as long term benefits but what indeed will be a long term effect of these reforms is the aggravation in the already deplorable state of the labourers whose backbone has already been overburdened due to the lockdown period. What will be more devastating than the current pandemic, would be the ruin it would bring to the labour class, the ones on whose shoulders the economy of the entire nation rests.


[1] ‘New labour law in Gujarat, M.P. and U.P.’ Economic Times (09 May, 2020)

[2] Samrat Sharma, ‘India moves big labour law to limit corona virus change’ Financial Express(08 May, 2020

[3] Yuthika Bhargava, ‘change in labour laws, drastic step to revive’ The Hindu (09 May, 2020 11.06 IST)

[4] Archana Sawant, “contemporary issue and challenges in labour reform: an overview” [2015] PL 43

[5] Aditya Nigam, ‘No significant outcome of labour law changes’ The Hindu Business Line(27 January, 2018)

[6] Part three, Article 19 of the Constitution of India, 26 November, 1949.

[7] Part three, Article 14 of the Constitution of India, 26 November, 1949.

[8] Part three, Article 21 of the Constitution of India, 26 November, 1949.

[9] Textile Labour Association v State of Gujarat And Ors. [29 September,1993] High court of Gujarat, IILJ 303

[10] Shanker Arnimesh, ‘labour law changes bigger than pandemic’ The Print(09 May, 2020)

[11] Zia Haq, ‘some states put freeze on labour laws to get business going’ Hindustan times (09 May, 2020)

[12] Rati Thakur, ‘India tops world is bad air quality’ The Times of India (02 May, 2018)

Author Details:

Prachi Tandon is a student at Institute of Law, Nirma University.

Prachi Agnihotri is a student atUniversity of Petroleum and Energy Studies

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