Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020
By Gaurav Bharadwaj, 29 August, 2020, 03:52 PM
This Ordinance was passed with a broader objective of halting certain provisions of labour laws from their application. In simple words it is temporary exemption available to the manufacturers from some labour laws for a period of three years. However, it is to be noticed here that exemption doesn’t mean complete reversal of the existing labour laws but only temporary relief to the manufacturers keeping in view the current situation i.e. Covid-19 pandemic. The move certainly was politically motivated and claimed to be taken only to pacify the business community against a previous order issued by the government. The order was not just heavily criticized but it also bought the business community (i.e. employers, manufacturers, etc.) together, who stood against the government of Uttar Pradesh as a pressure group.
“Balance of laissez faire & social welfare”
Adam Smith (1723-1790) the Scottish philosopher-economist and a professor at University of Glasgow in his book “Wealth of Nations (1976)” insisted upon a “Free Market Economy”. His proposition was that the ‘invisible hands’ of the ‘market forces’ will bring the equilibrium in the economy and a general well being to the countrymen. His writings formed the basis of classical economics which resulted into capitalist economy. He is also known as father of classical economics. His theory was adopted in the form of liberal policies to recover from the “Great Depression” of 1929. We should remember that in an era of LPG (liberalization, privatization and globalization) i.e. post 1991 since when the Indian economy opened for the world it has become easier for India to benefit from the global trade. This was only possible partially due to IMF (International Monetary Fund) recommendations and partially by the efforts of the Indian Government which over the years since 1991 has put in lot of efforts in making economic growth and in turn resulted in the prosperity of Indian masses in general. Least to say business class had been since the most benefitting class from these liberal policies adopted by the government. Keeping view of these long drawn strategies from the past and taking a complete u-turn now by ignoring them would not just prove detrimental for the economy but would also create immense distrust in the business community in totality. So far now we’ve remained a mixed economy since 1991 i.e. partially socialistic and partially capitalistic. Making policies with only socialistic approach now would mean going back to pre-1991 era wherein the interest of the business community is ignored completely to give preference to social welfare. In our case this particular Ordinance i.e. “Uttar Pradesh Temporary Exemption from Certain Labour Laws” seeks to balance the two clashing interests of the capitalist class and the labour class which will be discussed in the next sections.
“Constitutionality of the Ordinance”
The Ordinance came on 08.05.2020 as a necessity to rectify the mistake of the past by the Uttar Pradesh Government. Earlier before this Ordinance came into effect an order was issued by way of a notification by the Principal Secretary (Labour) that workmen must be paid all the wages with holidays during the lockdown period. This was not to the liking of the business owners across the state. Through its Section-3 it provides for exemption from all labour laws for three years which will be available to all the factories and establishments engaged in manufacturing. According to Justice V Gopala Gowda, one of the critiques, this move by the state is unconstitutional as in his views it goes against the meaning of public emergency in Section-5 of the Factories Act, 1948. He terms Covid-19 as the most devastating pandemic but also quotes that it doesn’t qualify as public emergency within the meaning of Section-5 of the Factories Act. The critique is true as the meaning of Section-5 does not cover a pandemic like Covid-19 but we should also not forget it is “The Pandemic” which has pulled the brakes on pace of development around the globe and not just India. India’s GDP (Gross Domestic Product) growth least to say has been badly hit by this pandemic to worsen off the situation. We should also not forget that the move was welcomed by large organizations such as FICCI. This means that the Ordinance had the positive impact on the targets it was meant for. So, do the arguments of the critiques hold any ground? We all know that in a nation which is governed through the Constitution it’s the responsibility of the State to not just safeguard the interests of the weaker or people in general but it also has to protect its geographical boundaries. With reference to this Ordinance what the critiques overlooked was the national security. Sometimes, the national security is not directly in threat but indirectly linked to internal issues, and economics has a major role to play in it. We can safely say this because we know that a major chunk of government expenditure and spending is driven by the taxes which they levy on businesses directly and indirectly. To disappoint this sector would not only upset the economy in general but also the government spending in key infrastructures esp. defense infrastructure. Whereas, none can deny that for government the workmen are also an important class of citizens for the industrial works in an indirect way. But, if we compare the taxes paid by the workmen to that of the business community then we can better understand the actions of the government in the forms of Ordinances like this. Therefore, there is no denying of the fact that the Ordinance is a little bit lopsided and favors the business community a little more as compared to the labour class. It’s also justified as most of the defense acquisitions are through the taxes. So where on one hand Section-5 of the Factories Act, 1948 gives in its explanation that public emergency is “grave emergency whereby security of India is threatened” and it certainly leaves us to think in our imagination that the “Threat” must be direct and tangible. However it’s not so, the constitution makers never wanted us to stick to rigid laws. If that had been the case then there was no purpose for including Article 368 in the Constitution. It is included purposely to amend laws as per the needs and requirements of the present generation and the generations to come. Keeping in view of the global politics, when we closely look on the actions of the two of our notorious neighboring countries i.e. China and Pakistan, then we can easily conclude that we have very less defense acquisition as to what it actually should be. Threat becomes more imminent when not just one of them but both of them are adopting aggressive postures and policies towards us. If we look at the past few months then it wouldn’t be wise for us to let our guard down. For doing so government needs revenue which largely comes from the businesses paying taxes directly to the government. So to say that Ordinance was unconstitutional and not in accordance with the Section-5 of the Factories Act, 1948 would not be wise thing to do, that too without taking into account the broader implications. While looking into the meaning of the “Explanation” given under Section-5 if we infer to its direct meaning then we would certainly be limiting ourselves to a parochial and a narrow approach towards it, which will limit us to achieve the larger and greater goal of nation development. A nation sometimes faces direct threats and the other times it faces indirect (causative) threats. Ignoring either of them would go against the principles of the Constitution.
“Features of the Ordinance”
The Ordinance u/s. 3(a) provides for the electronic entry of the attendance on the attendance register and in a manner as prescribed in Section-62 of the Factories Act, 1948. It should contain the name together with the details of all the workers employed in a factory/establishment. In the very next clause i.e. u/s 3(b) it has mandated that all the workers employed shall not be paid less than the minimum wage prescribed by the UP Government. Further, through S. 3(c) it has mandated for the payment of wages to be done within the time limits prescribed u/s. 5 of the Payment of Wages Act, 1936. Under Section-5 of the Payment of Wages Act, 1936 it has been laid that the wages must be paid to the workmen before 7th days after the expiry of the wage period e.g. if the wage period is from March 1st to March 30th then the wage must be paid before 7th of April. This time has been fixed for the payment of wages in the case of establishments with less than one thousand workmen. In the establishments where the number of workmen is more than one thousand, the time limit has been fixed to be before the 10th day after the expiry of the wage period. So, we can see that provisions which are based on humanitarian principles are still in application with respect to the labour laws. Ordinance u/s. 3(d) seeks for the payment to be made only to the bank accounts of the workmen. This provision is ambiguous as in many cases the payments are made in cash. With Section-3(e), the Ordinance ensures the safety and security of the workmen as it is another condition which is a prerequisite for the application of the Ordinance. It makes sure that the provisions of the Factories Act, 1948 and Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 remain applicable. The Ordinance has provisions which tried to take as much humanitarian principles into account as it could. The next is Section-3(f), which has fixed the time limit per day at 11 hours/day for which workmen can be made to work. The spread over of work time has been fixed at 12 hours which mean that they cannot be made to work for more than 12 hours in a day. Next in Section-3(g) it provides that the Employees Compensation Act, 1923 shall remain into effect. It therefore means that any death or disability being caused during the course of employment or by any accident arising out of it shall be liable to be compensated in accordance with Employees Compensation Act, 1923. The provisions relating to the employment of women and children will continue to remain applicable as has been stated u/s. 3(h) of the Ordinance. Lastly, the provisions of the most important legislation i.e. Bonded Labour System (Abolition) Act, 1996 has also been included as an exception to the exemptions of the Ordinance. These are the most important provision on the legislation to protect the laborers’ from the exploitation by the industrialist. Exemption from any of the provisions would have been akin to touching a hot coal as it could have led to a lot of political turmoil for the already troubled government in the times of Covid-19. The government cautiously included it in the exceptions from the exemptions and it was the wisest thing it could do wherein lot of unwelcoming critic had already been drawn for its previous orders issued earlier by the Principal Secretary (Labour).
The mistakes done in this case i.e. issuance of a flawed order which was made hurriedly by the executive machinery of the State of Uttar Pradesh should be avoided as it sometimes leaves no room for any further correction immediately. It almost took two months for the government to come up with a working Ordinance and nullify its previous order. All this gave a bitter experience to the State government for the future and hopefully they do not repeat such mistakes wherein the executive makes lopsided orders with the potential of badly impacting a section of the society. It cannot be denied that the government took a socialistic stance initially but it soon realized that it had been projecting itself as anti-capitalist. This surely isn’t good for a growing economy esp. a tiger economy. We as Indians cannot afford any impediment in the path of our growth and development at this stage where we’re still hoping for a larger FDI (Foreign Direct Investment) inflow. Projecting any wrong image of ourselves in front of the outer world would only cost us heavily as it would not just have direct effect on FDI inflows but also the domestic production. As a developing economy we must ensure a conducive environment for the businesses to grow and inflow of businesses from outside of the country. Our governments through their executive machinery should make sure that they use policies which are best in the interest of the economic growth and social well being of its citizens. Although corrected within two times as a knee jerk reaction, it had merely created an image of the UP Government as more socialistic which was not to the liking of the capitalist class. A balanced approach is always desired in a mixed economy like India and striking a balance between the interests of different sections of the society is the key for a successful democracy to prosper.
Ramesh Singh, Indian Economy 1.5-1.6 (7h ed. 2015).
Christina D. Romer, Great Depression, Britannica, https://www.britannica.com/event/Great-Depression.
Apoorva Mandhani, UP suspends labour laws: What stays, what goes and why it is a step in right direction, The Print (May. 8, 2020, 4:59 PM), https://theprint.in/india/governance/up-suspends-labour-laws-what-stays-what-goes-and-why-it-is-a-step-in-right-direction/417186/.
V Gopala Gowda J, Dilution of labour laws is unconstitutional, The New Indian Express (June 20, 2020, 04:00 AM), https://www.newindianexpress.com/opinions/2020/jun/20/dilution-of-labour-laws-is-unconstitutional-2158931.html.
The Factories Act, 1948, No. 60, Acts of Parliament, 1948 (India).
The World Bank & OECD.
INDIA CONST. art. 368, cl.1.
Payment Of Wages Act, 1936, No. 4, Acts of Parliament, 1936 (India).
Bonded Labour System (Abolition) Act, 1976, No. 19, Acts of Parliament, 1976 (India).