[Guest Post] Consequences of Dilution of Labour Laws with respect to Strengthening Economic Structure by Arpit Sharma | Expert Views

- Arpit Sharma


The COVID-19 pandemic situation in India has made many states to suspend or liberalize labour laws in order to give a boost to the economy and stand in a competition to attract more investors. In the pandemic situation, different states come up with amendments or ordinances for dilution of labour laws to boost up the circulation of the economy. The approaches taken up by various states are in consonance of unilateral viewpoints like increasing hour for worker may boost up an economy in the form of tax on profitability is an unilateral viewpoint whereas this may leads to unemployment, deteriorate the health of worker physically and mentally, leads more crime due to unemployment. The most significant changes were announced by the states of Uttar Pradesh, Gujarat, Madhya Pradesh followed by Rajasthan and Punjab. These states use these tools for mobilizing an economy with adherence guidelines of social distancing within factories and establishment, ignored many aspects of welfare states and economist theories on labour laws.

Significance of Labour Laws vis-a-vis Impact of Dilution

Approximately, there are more 200 state laws and more 50 central laws but not of them define the term ‘labour laws’. Some of the legislation are even before independence era, broadly speaking we have four categorization for labour laws i.e. Social Security laws, Wage & Remuneration Laws, Welfare Legislations, Industrial relation laws. Dilution of these labour laws creates a havoc situation where exploitation of labours is the most prominent outcome. On the outset of rigid labour laws the literature of empirical evidences by International labour Conference in 2002[1] on “Decent work and informal economy” that for regularizing workforce there should be balanced labour laws.

Welfare of workers vis-a-vis Health Issues

The main aim of the Factories Act is to ensure basic safety measures on factory premises, and promote health and welfare of workers whereas ignorance of these objectives may lead to haphazard medical issues to these workers. The Shops and Commercial Establishments Act, on the other hand, main objective is to regulate hours of work, timely payment, overtime, and weekly day off with pay, other holidays with pay, annual leave, employment of children and young persons, and employment of women. The states amending laws enforce long hours duration for workers whereas the literature speaks that the effect of long duration creates occupational health disease. The study by WHO reveals that in order to maintain quality of work and working environment for the development of society there should sustainable balance[2]. Long working hours are an existing phenomenon amongst most working organisations where the duration of time spent on work, comprising main tasks of job, related tasks, commuting, and travel, is too long and detrimental to the health of workers directly or indirectly.[3] Many studies reveal that there is a relation of long working hours and chances of high blood pressure[4]. The Supreme Court in Occupational Health and Safety Association of India v. UOI[5] held that “the right to health of workmen has been recognised as a part of the right to life in a number of judgments — including providing PPEs to workers exposed to hazardous conditions.”

Suspension of Wage & Remuneration Code

The main aim of ILO in different conventions point out that there should not be an exploitation of workers and always pressed upon to incorporate domestic laws so that the worker wages are not exceptionally low[6]. The states dilute the labour laws in relation to timely wage, overtime time during lockdowns many states like Gujarat not only extend the duration of the shift of workers but also mentioned that the extra hours of enhancement of time will not be considered overtime. In the case Workmen Represented by Secretary v. Management of Reptakos Brett. and anothers [7] the Supreme Court held that “The management can revise the wage structure to the prejudice of the workmen in a case where due to financial stringency it is unable to bear the burden of the existing-wage. But in an industry or the employment where the wage structure is at the level of minimum wage, no such revision  at all, is permissible-not even on the  ground  of financial stringency.” In Killick Nixon Limited v. Killick & Allied Companies Employee Union[8] held that “The employees are entitled to the minimum wage at all times and under all circumstances. An employer who cannot pay the minimum wage has no right to engage labour and no justification to run the industry”

The Supreme Court in Sanjit Roy v. State of Rajasthan[9] held that non-compliance of minimum wage amounts to forced labour under Article 23 of Constitution of India which is constitutionally prohibited. The labour laws are there in concurrent list. The question arises whether suspension of the minimum wage will strengthen the economy? The economist[10] reflected through research that gradually rising the minimum wage would be good for workers, good for the economy as well as good investors. The Supreme Court in PUDR v. Union of India[11] held that “laws protecting contract labour and inter-state migrant workmen were intended to ensure basic human dignity; violating these laws would violate the right to life under Article 21. Further, the Court held that “forced labour”, prohibited by Article 23, included not just physical force but also the threat of imprisonment or fine.” Radhika Kapoor, a fellow at the Indian Council for Research on International Economic Relations mentioned that these reforms not only exploit workers but strip off the basic right of workers, which means the employer may fire all present employees and employ them at low wage.

Comparative Study with other countries government’s measures

In Canada, the Government will contribute to employer wage bills in order to reduce the layoffs and pay cuts where the government introduced the package of $2.1 billion for low income essential workers and $ 1400 to workers and self-employed people who faced income loss. In Vietnam, the government introduces a package for employers to pay $70/three months on unpaid leave and workers with unemployment insurance or social security pay $40 for three months. The United Kingdom government came up with the Coronavirus Statutory Sick Pay Rebate Scheme in March, 2020 where firms can claim the sick pay for coronavirus patients as well as pay the government are paying 80% wage to laid off for four months.

Whether these changes in labour laws encourage economic growth?

The dilution of labour laws in the past did not have a significant impact on the economy and could not attract the investment. The labour economist analyzed that this is the wrong time and the government is moving in the wrong direction and this move may resulting fall in wages which will further depress the overall demand in the economy, thus hurting the recovery process. The changes made in labour laws under the gamut of COVID-19 pandemic supposedly for the boost of economic activities and market reforms which in reality amount to forced labour. When everyone is waiting for the early end of the economic crisis and health issue due to COVID-19 pandemic, the states are coming up with dilution of labour laws in order to boost economic growth on the outset of sacrificed workers' rights.


The dichotomy during these pandemic times where Indian states are trying to suspend or dilute labour protection laws and make it easier for employers to sack workers whereas other countries are trying to minimise lay-offs in this situation of crisis by giving wage subsidy or share the wage burden with employers to induce them to keep the workers on the payroll. These schemes or programs are recourse to reduce displacement, distress, and loss of worker morale, and at the time of economic recovery less friction and deskilling. The wage subsidies are quite significant in Europe, Canada, Australia, and New Zealand. It is also being attempted in some developing countries like Argentina, Bangladesh, Botswana, China, Malaysia, Philippines, South Africa, Thailand, and Turkey. The United States among developed countries and India among developing countries are conspicuous exceptions. In India, the intention should be to ensure more people have jobs, then states should not have increased the shift duration from 8 hours to 12 hours. They should have allowed two shifts of 8-hours each instead so that more people can get a job during these tough times for being welfare states not for employers but for workers as well.

Mr. Arpit Sharma is Assistant Professor, Institute of Law, Nirma University. He can be reached at [email protected] 

[1] International Labour Conference on agenda “Decent work and informal economy”  https://www.ilo.org/public/english/standards/relm/ilc/ilc90/pdf/rep-vi.pdf  (Last accessed on 23.05.2020)

[2] Occupational Health: A Manual for Primary Health Care Workers. WHO; Geneva, Switzerland: 2001.

[3] Lee S., McCann D., Messenger J.C. Working Time Around the World. Trend in Working Hours, Laws and Policies in a Global Comparative Perspective. International Labour Office; Geneva, Switzerland: 2007.

[4] Kapo Wong,* Alan H. S. Chan, and S. C. Ngan, The Effect of Long Working Hours and Overtime on Occupational Health: A Meta-Analysis of Evidence from 1998 to 2018, Int J Environ Res Public Health. 2019 Jun; 16(12): 2102.

[5] Writ Petition (Civil) No.79 of 2005 as decided in 2014.

[6] C026 - Minimum Wage-Fixing Machinery Convention, 1928 (No. 26)


[7] 1991 SCR Supl. (2) 129

[8] 1975 SCR 453

[9] 1983 SCR (2) 271

[10] Ben Zipperer, Gradually raising the minimum wage to $15 would be good for workers, good for businesses, and good for the economy, https://www.epi.org/publication/minimum-wage-testimony-feb-2019/

[11] 1982 AIR 1473

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