Indian states' decision to suspend labour law amid COVID-19 crisis is delirious policy-making not backed by empirical analysis

As the fourth iteration of the lockdown commences, the bulk of India’s labour force continues to be sacrificed at the altar of public health and now, the economy. Over the past weeks, several states — Maharashtra, Madhya Pradesh, Haryana, Uttarakhand, Himachal Pradesh Uttar Pradesh and Gujarat—have announced a slew of labour law suspensions. While in Gujarat, exemptions from certain labour norms have been proposed as the carrot for new enterprises, in Uttar Pradesh nearly the entire gamut of labour law application is proposed to be suspended. Several other states are expected to follow suit.

Statistics released by the Centre for Monitoring of the Indian Economy for India indicate that
nearly a quarter (24 percent) of India’s workforce is now out of gainful work, a precipitous rise in unemployment from already record levels of 8 percent. In the last week of April 2020, states with large variances in their industrial activity; Bihar, Tamil Nadu, Tripura, and Haryana have all reported unemployment figures of close to 50 percent, signalling that the issue of mass layoffs is widespread. While the impact of the COVID-19 outbreak may have prompted the corresponding suspension measures, the ideological backing is provided by the larger project of the vilification of India’s labour law framework as “regulatory cholesterol”. Prompted by the liberalisation of India’s product markets in 1991, the key goal then, as now, has been to generate greater labour flexibility — a euphemism for employers to be able to hire and fire workers at will, dole out starvation wages and not expend resources on ensuring safe workplaces.

The stated policy vision is that these pervasive suspensions will bring about greater ‘labour flexibility’ and revive economic activity by (a) providing employment to workers who have migrated back to the state, and (b) attracting investment by creating a positive atmosphere for industry. The larger goal here appears to be that of becoming an attractive destination for international firms seeking to move production out of China. This is delirious policy making, not backed by empirical analysis and a move akin to ‘spinning the wheels in the sand’: the illusion of regulatory agility without demonstrable impact.

 Indian states decision to suspend labour law amid COVID-19 crisis is delirious policy-making not backed by empirical analysis

As the fourth iteration of the lockdown commences, the bulk of India’s labour force continues to be sacrificed at the altar of public health and now, the economy. Image for representation only. Reuters/File Photo

This move ignores a vast body of evidence documenting the lack of correlation of protective labour law regimes in stunting economic growth. In 2014-15, several states had instituted employer friendly relaxations in several state-specific legislation, such as relaxations in Chapter VB of the Industrial Disputes Act, 1950, the Contract Labour Act, 1970 and the Factories Act, 1948. Published in 2017, a study analysing the impact of these amendments in Rajasthan, Uttar Pradesh and Andhra Pradesh found that these amendments had no impact in incentivising the investment of capital, growth or employment. It also found that no impact could be felt in terms of increased exploitation or worsening conditions of service as a result of the amendments.

Similarly, the Gujarat model of development, often treated as aspirational, was characterised by relaxation and non-implementation of labour laws in special economic zones. While this certainly triggered capital in-flows, the result was capital-intensive growth (in industries such as petrochemicals) without the corresponding increase in employment hoped for. Thus, the relaxation of labour norms has been unable to establish itself as an economic model for job creation. On the contrary, data shows that employment in establishments within the purview of labour laws grew faster than those that didn’t.

Notwithstanding the economic case for the suspensions, their legal and socio-political foundation is particularly precarious. The design of India’s labour law framework has been a product of its obligations under the International Labour Organisation’s conventions, constitutional obligations, decades of jurisprudence and hard fought struggles of the working class. Fundamentally, the socio-political case for a labour law framework emerges from the power asymmetry between labour and capital. Labour laws, then, are meant to countervail the inequality of bargaining power by preventing the unilateral setting of the terms of service by the owners of capital.

A balanced inter-play between labour and capital pushes economic growth upward without the spectre of social unrest that can potentially erase gains in productivity and purchasing power. Typically, this has taken two conceptual forms in democractic settings. One has been the industrial democratic approach in which the law enables and recognises the role of worker collectives in managerial decision-making. The German model of “co-determination” is a successful example of this approach. Another approach is that of traditional social contract where the state seeks to empower individual workers by giving them enforceable rights, social protections and an industrial disputes resolution mechanism. The Indian labour law framework was originally conceptualised as a derivation of both (with rights accorded to individual workers as well as rights of recognition and bargaining accorded to trade unions), but over time has seen an increased placing of encumbrances on the rights accorded to trade unions. For example, the right to strike as an essential feature of the right to form trade unions has been eroded by the carving out of arbitrary sectoral exemptions.

Notwithstanding weak enforcement, the securing of these rights itself can sometimes be sufficient in ensuring less precarious labour conditions. The redaction of these rights is a tellingly regressive policy mis-step. It is a feudal move reminiscent of the Statute of Labourers, 1351 to bolster the Ordinance of Labourers, 1349 in the aftermath of the bubonic plague in England. In what was a spectacular failure to appease holders of capital through the coercive engagement of labour at starvation wages, the Statute was a major contributory factor in Peasants’ Revolt of 1381 that broke out in large parts of England. This incident is widely regarded as the first great popular uprising in English history which triggered emergency course corrections in tax and labour statutes at the cost of large-scale loss of life and property. Astute policy-makers, with the advantage of historical analysis, should not be walking down this dangerous path.

In India,the pronouncements of the 7-judge Supreme Court bench in Krishna Kumar Singh v.
State of Bihar holds important takeaways. Recognising that the power to make ordinances has been abused for far too long by legislatures, the Court held that ordinances were subject to judicial challenge. At the very least, the suspension of the Equal Remuneration Act, the Minimum Wages Act, the Contract Labour Act and the Minimum Wages Act raise fundamental rights challenges as was held in PUDR v. Union of India and in Bandhua Mukti Morcha v. Union
of India. These state ordinances should be subject to judicial scrutiny and be liable to be struck down on constitutional grounds.

On weak economic, legal and moral footing, what then is the purpose of proposing these draconian measures? The answer, arguably, lies in political virtue signalling. The existence of labour protections was a crucial discursive tool to accord dignity to the labouring class. That the Uttar Pradesh ordinance is not drafted with any degree of seriousness is telling. The Madhya Pradesh ordinance, for all of the talk around labour flexibility, does not suspend the operation of the hotly contested Chapter VB of the Industrial Disputes Act. The chapter applies to industrial establishments employing 100 workmen on an average per working day for the preceding 12 months.

The chapter mandates such establishments to seek prior government sanction before laying off workers or closure of the establishment. Chapter VB has been the target of relentless lobbying for pro-business reforms as it is argued to prevent “labour flexibility”. The suspension of labour laws, then, are designed with an important objective of virtue signalling a forbearance for untethered labour exploitation. In retaining control over retrenchment while suspending all other labour protections, an environment of widespread distress-driven employment is the only possible outcome.

The utter disregard for the value of human life could not be starker than in using the COVID-19 crisis as the foreground for the whittling down of labour rights. The proposed moves are the most short-sighted manifestation of the hasty assumptions that continue to undergird the case for neoliberal reform of India’s labour law framework. That is not to say that reforms need not be undertaken; despite the complex web of laws that comprise the regulation of labour in India, nearly 90 percent of its workforce has not been able to secure any of the rights that should accrue to it. However, what is needed is a scalpel, not a sledgehammer. The period of introspection that labour law has gone through needs to be tapped into, to create a framework that is inclusive and more cognisant of the divides amongst labour that labour law can exacerbate.

With vast swathes of the precariat already battered by the loss of sustenance and livelihood, the state’s coercive machinations, and multiple avoidable workplace accidents, many workers have voiced their anguish at the betrayal they have felt at the hands of their employers — a betrayal augmented by the loud silence of the professional class. What lies ahead will be defined by the response of the working class themselves. One option, is to continue to trust the now stripped bare framework of individual worker rights and return to work in bonded labour conditions. The other option is to recognise that labour participation can be leveraged to push for laws that protect collective industrial action. Collective action and negotiation equalise power relations between labour and capital in a way that the State has failed to do in India. Both options will involve radical transition from the status quo and the socio-economic costs of such a transition will not be insignificant. Policy-makers must decide whether political virtue signalling is worth the spectre of loss of life, livelihood and property that looms ominously on the horizon. The precariat cannot be made to bear the costs of the lockdown.

Aayush Rathi is a lawyer, and researcher affiliated with the Centre for Internet and Society, India, and BBC Media Action.

Sreyan Chatterjee is a researcher with Vidhi Centre for Legal Policy.

Updated Date: May 22, 2020 10:59:54 IST



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