IAS Gyan

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New labour codes will force workers into a more precarious existence

15th October, 2020 Editorial

Context: New labour codes will force workers into a more precarious existence

  • The essential thrust of the new labour codes is the generalization of a paradigm of labour–capital relations, which is based on reduced state intervention or deregulation and bipartite industrial relations.

New code

  • Parliament passed the three new labour codes that replaced 25 existing labour laws.
  • The codes revise the pre-existing thresholds, which were used to earmark the ambit of labour law enforcement; the size of an establishment’s workforce.
  • The Industrial Relations Code, allows establishments employing up to 300 workers to layoff and or close units without prior approval of the government, Earlier this threshold was 100 workers.
  • It categorically doubles the threshold for the applicability of the Factories Act, 1948, i.e. from 10 to 20 workers in the case of establishments run on electricity, and from 20 to 40 workers in the case of units run without electric power.
  • The Industrial Employment (Standing Orders) Act, 1946, under which an establishment with at least 100 workers was mandated to formally define employment conditions, has been enhanced to 300 workers.
  • The Occupational Safety, Health and Working Conditions Code, increases the threshold limit of contractor-employed workers from 20 to 50 while allowing the hiring of contract workers in all areas, including core production.
  • These labour codes will replace the state governments labour laws, which the state have formulated as they too have authority as labour law fall under the concurrent list
  • State periodically amend the Industrial Disputes Act, Factories Act, Industrial Employment Act, etc. to attract foreign and domestic investment.

Small and micro industrial establishments

  • The bulk of amendments have concentrated on introducing self-certification of employers’ compliance with labour laws in small and micro industrial establishments.
  • These units are exempted from the ambit of crucial labour laws.
  • In 2014, the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act was amended to change the definition of “small” establishments.
  • It covered units employing a larger number of workers than the original piece of legislation.
  • Now, with the Central Acts being modified and superseded by the new labour codes, the protection offered by the law to workers of larger establishments stands withdrawn.

Why there is a need to discuss and debate the new code?

  • The real thrust of the new labour codes is the generalisation of a paradigm of labour–capital relations, which is based on reduced state intervention or deregulation.
  • The consolidation of this deregulation marks a shift towards the more brutal, early colonial labour conditions in which the state refrained from regulating work relations, using the logic that employer-employee relations are a private matter or private domain of social relations.
  • In the Indian context of the historical struggles of collective labour, a more interventionist role of the state in labour-capital relations is needed.
  • The tripartite industrial relations machinery is needed that persisted till the start of the liberalisation era of the 1990s.
  • However, with successive governments steadily withdrawing from the regulation of industrial relations, the domain of the workplace will be reduced to a private domain in which employers can unilaterally fix wages, extract overtime, manage leaves, determine compensation, hire and fire, etc.
  • Given that labour, inspection has shifted towards the self-certification system and third-party inspection by the employer, the private power of employers is expected to grow with the enforcement of the labour codes.
  • Henceforth, state intervention will be restricted to the use of the criminal law framework to curb labour unrest.

The consequence of this move:

  • The immediate consequence of deregulation is the generalisation of the highly oppressive paradigm of work relations in the informal sector.
  • The informal sector, which is labour-intensive, lower-segment jobs, the absence of the state can nurture the condition of quasi-magisterial powers of employers over the work contract.
  • Enhanced private power of employers with respect to the work contract will be the norm across a large part of the formal sector as well.
  • Attack on higher segments of the labour market will have a spillover effect on the lower rungs where informal workers will be exposed to exceedingly higher levels of exploitation.
  • Enhanced deregulation of work relations would mean periodic unemployment of higher-skilled workers, crowded lower-skilled and informal sector jobs.
  • Subsequently, the existing informal workforce shall be compelled to negotiate their survival through lowering of wages, longer spans of overtime, the enhanced quantum of work, etc.


  • The context of deregulation, backed by the criminalisation of the labour movement, the collective force of labour ensuring the implementation of welfare legislation can force the government to extend social security to a larger section of workers.