Labor Laws: Indian Nations And Their Unique Rights

India has a complex employment law profile, with a combination of Central and State laws. The Central laws regulate payment of minimum wages and employee benefits, while the State laws expand upon or amend provisions of Central laws or enact specific laws for the protection of employees. Foreign companies looking to establish themselves in India should be aware of the multiple federal labour laws and regulations, as well as locally enacted laws that are specific to the state, industry, and size of the firm.

The Indian government has proposed codifying various employment laws under four codes: the Code on Wages, the Code on Social Security, the Industrial Relations Code, and the Occupational Safety, Health and Working Conditions Code. These codes aim to reduce the compliance burden on businesses by merging multiple registrations, licenses, and returns into streamlined processes, with a focus on worker safety, fair wages, and social security.

The Code on Wages, 2019

The Code on Wages applies to all employees, with the central government making wage-related decisions for specific sectors like railways, mines, and oil fields. State governments determine wages for all other employment sectors. Wages encompass salary, allowances, and other monetary components, excluding bonuses and travel allowances.

A notable feature of the Code is the introduction of a floor wage, which the central government sets while considering workers' living standards. This floor wage serves as a minimum threshold for the minimum wages decided by the central and state governments. The Code prohibits employers from paying less than the mandated minimum wage, with penalties for violations.

The Code also addresses overtime, with the central or state government empowered to define a standard working day. Employees working beyond this standard are entitled to overtime wages, which must be at least double their regular rate of pay.

Additionally, the Code standardises the mode of wage payment, specifying that wages must be paid in coins, currency notes, cheques, bank transfers, or through electronic means. It also sets out permissible deductions from employees' wages, such as fines, absence from duty, and accommodation provided by the employer. These deductions are capped at 50% of the total wage.

The Code on Wages also ensures annual bonuses for employees whose wages fall below a specific monthly amount, as notified by the central or state government. This bonus is calculated as either 8.33% of their wages or Rs 100, whichever is higher. Furthermore, employers must distribute a portion of their gross profits among the employees, proportional to their annual wages, with a maximum bonus of 20% of their annual pay.

The Code explicitly prohibits gender discrimination in matters of wages and recruitment for the same or similar work, promoting equal pay for equal work.

To ensure effective governance, the Code establishes advisory boards at the central and state levels. These boards, with significant female representation, advise the respective governments on various issues, including fixing minimum wages and enhancing employment opportunities for women.

The Code on Social Security, 2019

The Code on Social Security, 2020, subsumes nine central labour legislations. These include The Employees' Compensation Act, 1923, The Employees' State Insurance Act, 1948, and The Employees' Provident Funds and Miscellaneous Provisions Act, 1952. The objective of the Code on Social Security, 2020, is to amend and consolidate existing labour laws relating to social security, with the wider goal of extending social security benefits to all employees and workers, irrespective of belonging to the organised or unorganised sector.

The Industrial Relations Code, 2019

The Industrial Relations Code, 2020, is one of four labour codes passed by the Indian parliament in 2019 and 2020. The other three codes are The Code on Wages, 2019, The Code on Social Security, 2020, and The Occupational Safety, Health and Working Conditions Code, 2020. These four codes consolidate 44 existing labour laws.

The Industrial Relations Code, 2020, consolidates and amends the laws relating to trade unions, conditions of employment in industrial establishments, and the investigation and settlement of industrial disputes. The act combines and simplifies three central labour laws: The Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946, and The Industrial Disputes Act, 1947.

The Industrial Relations Code, 2020, covers the following:

• The appropriate government may exempt any new industrial establishment or class of establishments from the provisions of the Code in the public interest.
• Applicability of standing orders: The 2019 Bill provided that all industrial establishments with 100 workers or more must prepare standing orders on specific matters, including classification of workers, manner of informing workers about work hours, holidays, paydays, and wage rates, termination of employment, and grievance redressal mechanisms for workers. The 2020 Bill applies to establishments with at least 300 workers.
• Powers to the central government to revise the threshold: The 2019 Bill provided that the central government may make the provisions related to standing orders applicable to establishments with less than 100 workers through a notification. The 2020 Bill removes this provision.
• Change in employee strength: The 2019 Bill stated that once an establishment is covered under the provisions related to standing orders, these provisions will continue to apply even if its employee strength reduces below the threshold (100 workers) at any time thereafter. The 2020 Bill removes this requirement.
• Closure, lay-off, and retrenchment: Under the 2019 Bill, an establishment with at least 100 workers was required to seek prior permission from the government before closure, lay-off, or retrenchment. The 2020 Bill provides that prior permission will be required for establishments with at least 300 workers.
• Powers to the central government to revise the threshold: The 2019 Bill empowered the government to increase or decrease the threshold for establishments to seek prior permission before closure, lay-off, or retrenchment. The 2020 Bill only allows an increase in the threshold through notification.
• Negotiating Union and Council: Under the 2019 Bill, if there were more than one registered trade union of workers functioning in an establishment, the trade union with more than 75% of workers as members would be recognised as the sole negotiating union. The 2020 Bill lowers this threshold to 51% of workers.
• New provision under the Bill: The 2020 Bill classifies any dispute related to discharge, dismissal, retrenchment, or termination of service of an individual worker as an industrial dispute. The worker may apply to the Industrial Tribunal for adjudication of the dispute. The worker may apply to the Tribunal 45 days after the application for the conciliation of the dispute was made.

The Industrial Relations Code, 2020, also includes provisions for fixed-term employment, which refers to workers employed for a fixed duration based on a contract signed between the worker and the employer. Fixed-term employment may allow employers flexibility in hiring workers for a fixed duration and for work that may not be permanent. It also reduces the role of a middleman, such as an agency or contractor. However, unequal bargaining powers between the worker and employer could affect the rights of such workers since the power to renew contracts lies with the employer.

The Industrial Relations Code, 2020, also covers strikes and lock-outs, prior notice requirements, the power of the government to modify or reject tribunal awards, and provisions for the formation of a negotiation council.

The Occupational Safety, Health and Working Conditions Code, 2020

• The Factories Act, 1948
• The Plantations Labour Act, 1951
• The Mines Act, 1952
• The Working Journalists and other Newspaper Employees (Conditions of Service and Miscellaneous Provisions) Act, 1955
• The Working Journalists (Fixation of Rates of Wages) Act, 1958
• The Motor Transport Workers Act, 1961
• The Beedi and Cigar Workers (Conditions of Employment) Act, 1966
• The Contract Labour (Regulation and Abolition) Act, 1970
• The Sales Promotion Employees (Condition of Service) Act, 1976
• The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
• The Cine Workers and Cinema Theatre Workers Act, 1981
• The Dock Workers (Safety, Health and Welfare) Act, 1986
• The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996

The code outlines employer duties for ensuring a safe work environment across different industries and types of workers, including electronically registering working hours and rest days. It also establishes safety boards for both central and state governments to inspect businesses for any hazards. Penalties for non-compliance can reach up to INR 300,000.

The 2020 bill provides for the establishment of a Social Security Fund for the welfare of unorganised workers. The amount collected from certain penalties under the code, including the amount collected through compounding, will be credited to the Fund.

The bill fixes the maximum daily work hours for workers at eight hours per day. It also provides that women will be entitled to be employed in all establishments for all types of work under the bill. In cases where they are required to work in hazardous or dangerous operations, the government may require the employer to provide adequate safeguards before their employment.

The bill defines an "interstate migrant worker" as a person who has been recruited by an employer or contractor for working in another state and draws wages within the maximum amount notified by the central government. It also specifies that any person who moves to another state on their own and obtains employment there will also be considered an interstate migrant worker.

The bill provides certain benefits for interstate migrant workers, including the option to avail of the benefits of the public distribution system in either their native state or the state of employment. They are also entitled to the availability of benefits under the building and other construction cess fund in the state of employment, as well as insurance and provident fund benefits available to other workers in the same establishment.

The bill empowers the state government to exempt any new factory from the provisions of the code to create more economic activity and employment.

The Employees' State Insurance Act, 1948

The Act applies to non-seasonal factories employing 10 or more people. The scheme has also been extended to stores, hotels, restaurants, theatres, cinemas, road motor vehicle establishments, newspaper establishments, and private educational and medical institutes with 10 or more employees. As of January 1, 2017, the current monthly pay ceiling for coverage under the Act is Rs.21,000.

The Employees' State Insurance Act contains several parts that give medical benefits and insurance to employees who work in factories that are registered with the ESI Corporation. Employees must enroll in the plan to receive medical treatment and other benefits. The financial aid provided by the scheme may be used to compensate employees for lost wages due to illness.

This is a self-financing program in which employees and employers contribute a certain percentage of their wages to the scheme on a monthly basis. The employer's contribution is 4.75% of the earnings paid to employees, while employees are required to contribute 1.75% of their gross compensation.

Employees are entitled to benefits under Section 46 of the ESI Act as social security in the event of injury while on the job. There are six different sorts of advantages available:

• Medical benefit
• Sickness benefit
• Maternity benefit
• Dependents’ benefits
• Disability benefits
• Additional benefits

These benefits are guaranteed to employees as soon as they are hired and also apply to their family members. This benefit pays for any treatment costs incurred by the employee as a result of medical difficulties. From the first day of insurable employment, an insured person and their family receive full medical treatment. There is no limit on how much an insured person or a family member can spend on treatment. On payment of a nominal annual premium of Rs.120/-, medical care is also provided to retired and permanently disabled covered persons and their spouses.

Section 46(1)(a) of the ESI Act allows covered employees to receive periodic payments in the event of sickness, as long as the medical condition is validated by an authorized medical practitioner. The compensation is roughly 70% of their salaries, with a maximum of 91 days of compensation each year. The employee must have worked for a minimum of 78 days over a 6-month term of employment to be eligible for the benefit.

In the case of 34 malignant and long-term conditions, the sickness benefit can be extended for up to two years at an enhanced rate of 80% of salaries. Insured persons undergoing sterilization for 7 days/14 days for male and female workers receive an enhanced sickness benefit equal to their full earnings.

An insured woman can receive periodical payments under Section 46(1)(b) of the ESI Act in the event of confinement (labour that leads to birth or birth after 26 weeks), pregnancy-related illness, or childbirth complications. The benefit is payable for three months, with a one-month extension available if needed. In the year preceding the pregnancy, a minimum of 70 days of employment must be completed.

Section 46(1)(d) provides for recurrent compensation (typically provided monthly) to the dependants/family members of someone who dies while working, with the cause of death being an employment injury or occupational hazard. Compensation is usually 90% of the employee's salary.

In the event that an employee is disabled as a result of an injury sustained while on the job, the disability may be transitory or permanent in nature. The disablement benefit, unlike the other benefits, does not require a minimum work contribution, although eligibility will be evaluated by the Medical Board. This decision will impact the amount of compensation awarded, if any, with the average percentage of wages awarded being about 90%.

The temporary disablement benefit is paid at a rate of 90% of the wage from the first day of insurable employment, regardless of whether or not any contributions have been paid, in the event of an employment injury. For as long as the disability lasts, this benefit is provided. The permanent disability benefit is provided in monthly installments at a rate of 90% of the wage, depending on the level of loss of earning capacity as determined by a Medical Board.

Other benefits include funeral expenses, vocational rehabilitation for disabled workers, old-age medical care for retired employees or those who have left their jobs due to an injury, confinement expenses for insured women, physical rehabilitation in the event of a physical disability caused by an occupational harm, and the Rajiv Gandhi Shramik Kalyan Yojana unemployment allowance plan.

The Employees' State Insurance Act also regulates many other indirect aspects of effectively managing the Employees' State Insurance Corporation established by the Act, such as sales proceedings, account management, and power separation among its many officers.

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