Amidst the prevailing COVID-19 crisis, states are now contemplating taking diverse measures to offset the economic impact and boost investment opportunities. With this goal, the states of Madhya Pradesh and Uttar Pradesh have introduced several relaxations under various labour laws to ease the compliance burden on employers.
The Madhya Pradesh government has introduced a slew of labour law reforms with a view to attract investments and consequently increase employment opportunities in the State. On 5 May 2020, it invoked its powers and enabling provisions under various labour statutes to issue exemptions and amendments therein, which are as under:
1. Madhya Pradesh Labour Laws (Amendment) Ordinance, 2020
Ø Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 (MP IESO Act)
The threshold for applicability of the MP IESO Act has been increased from 50 to 100 employees. The MP IESO Act inter alia requires employers to get standing orders (essentially service conditions governing its employees) certified by the concerned authorities. The standing orders which typically contain provisions around leave, disciplinary process, treatment of misconduct, termination of employment etc. are to be finalised in consultation with the trade union or employees (where no trade union is present). An increase in the threshold for applicability would certainly ease compliance requirements for employers with a strength of less than 100 employees. Employers would not be bound by any certified standing orders or model standing orders and would be at a liberty to prescribe service conditions at their discretion (typically in the form of policies / employee handbooks).
Ø Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982 (LWF Act)
Through the ordinance, the state government has been given the power to issue conditional notifications to exempt establishments or categories of establishments from any or all provisions of the LWF Act. The LWF Act, requires employers as well as employees to make contributions to the Labour Welfare Board on a half yearly basis. While the contribution required under the LWF Act is a nominal sum of INR 40 per employee (INR 30 as employee’s share and INR 10 as employee’s share) for every 6 months - this requirement may now be relaxed. A subsequent notification by the government is expected in this regard. The notification would clearly set out the type of establishments which would be exempt from these provisions.
2. Other amendments and exemptions
Ø The Contract Labour (Regulation and Abolition) (Madhya Pradesh) Rules, 1973
I. An online form has been introduced for application of a license by a contractor. The state government had already introduced the online application process for registration vis-à-vis the principal employer through notification number 598/1233/17/B-16.
II. The license granted under the Contract Labour (Regulation and Abolition) Act 1970 will now be valid for the period of the contract for which the application is made. The licence was, earlier, only valid till 31 December of the year in which the license was granted. This would obviate the need for repeated renewals and related (often lengthy) administrative process.
III. The amendment requires fees to be paid based on the number of years (calendar years) for which the application is made.
Ø Factories Act 1948 (Factories Act)
I. A 3-month suspension of provisions
a) Power to exempt: The state government has exempted factories from select provisions of the Factories Act as well as state rules framed thereunder, for a period of 3 months. Interestingly, the exemption has been issued under Section 5 of the Factories Act, which can only be invoked by state governments in case of a public emergency, defined narrowly as ‘a grave emergency whereby the security of India or of any part of the territory thereof is threatened, whether by war or external aggression or internal disturbance.’ Though the pandemic is no less of an emergency, it may be difficult to bring it within the ambit of the aforesaid definition, given the specific use of the words ‘war or external aggression or internal disturbance’.
b) Major relaxations: The provisions which continue to apply inter alia relate to registration and approval requirements, safety measures, annual leave entitlements, notice in case of accidents, non-employment of young children etc. Thus, employers have received major relaxations and may not be required to follow prescribed health measures (under Chapter III) and welfare facilities (under Chapter V). They would also not need to maintain / submit registers and returns during the exemption period.
c) Working hours: The exemption also extends to provisions relating to maximum hours of work, weekly holidays, intervals of rest, etc. Note that such an exemption had already been granted by a state notification issued on 24 April 2020. However, the notification has set outer limits of 12 hours and 72 hours of daily and weekly work respectively, with a minimum 30 minutes of rest interval after every 6 hours of work. Further, both the notifications as well as the exemption safeguard the provision on overtime payments. Thus, employers would still be required to compensate workers at double the rate of ordinary wages for all overtime work done by them.
II. Third-party inspection
The Madhya Pradesh government has amended its rules under the Factories Act to provide for third-party inspection. As per the new rule, any person or agency, as authorised by the state Labour Commissioner, may conduct inspections subject to any specified restrictions. Consequently, factories engaged in non-hazardous processes with up to 50 workers are required to submit a third party inspection certification report for applicable compliances before the 31 January every year. These factories will be exempted from the routine inspection process and may be inspected with prior permission of the Labour Commissioner only in case of a serious / fatal accident or a complaint received in relation to any non-compliance.
Ø Madhya Pradesh Shops and Establishments Act, 1958 (S&E Act)
The state government has now directed that no shop or commercial establishment situated in the local areas where the S&E Act is enforced shall on any days (a) be opened earlier than 6:00 am, and (b) be kept open later than 12:00 pm. From the information available in public domain, we believe the intent was to extend permissible hours of operations to midnight, by providing an outer limit till 12:00 am and not 12:00 pm. This appears to be a typographical error.
Ø Industrial Disputes Act, 1947 (ID Act)
I. Power to exempt: In exercise of its powers under Section 36-B of the ID Act, the state government proposes to exempt all new industries to be registered under the Factories Act, from all provisions of the ID Act for a period of 1,000 days from the date of publication of the said notification The provisions of Chapter VA and Sections 25-N, 25-O, 25-P, 25-Q and 25-R may continue to apply.. However, do note that the power under Section 36-B is limited only to industries and undertakings carried on by an any department of the appropriate government. In other words, the state government here may not have the power to exempt an undertaking, establishment or classes of establishments or undertakings, carried on by private enterprises.
II. Dispute resolution mechanism: Pursuant to the exemption, key provisions around dispute resolution by Labour Courts / Industrial Tribunals, unfair labour practices, notice of change in conditions of service of employees, restrictions on strikes and lockouts etc. will not apply. Under Section 36-B. the state government has power to grant an exemption if satisfied that adequate provisions exist for the investigation and settlement of industrial disputes. Having said that, no guidance has been given on the procedures to internally resolve industrial disputes, without any recourse to Labour Courts.
III. Permission to lay-off: While the provisions around lay-off, retrenchment, and closure have been largely retained, Section 25-M has been specifically exempted from application. Section 25-M requires certain industrial establishments, to obtain prior permission of authorities before laying-off workmen, except for specified special circumstances. The exemption may give factories engaging 50 or more workmen to lay-off workmen without any permission, by paying 50% lay-off compensation under Section 25-C of the ID Act.
Ø Madhya Pradesh Industrial Relations Act, 1960 (IR Act)
Specified industries such as textile, iron and steel, electrical goods, sugar and its by-products, cement, electricity generation, public motor transport, engineering including manufacture of motor vehicles, chemical and chemical products, leather industry, etc. have been exempted from the provisions of the IR Act. Notification will come into force from its publication and will not affect pending cases before any court of law. .
Based on the Chief Minister’s earlier announcement, it appears that certain changes on validity of factories’ licenses, increase to the thresholds of applicability under the Factories Act and the Contract Labour (Regulation and Abolition) Act, 1970 are also proposed. An official notification is yet to come out in this regard.
By press release dated 6 May 2020 (Press Release), the Uttar Pradesh government announced the Uttar Pradesh (Temporary Exemption from Certain Labour Laws) Ordinance, 2020 (UP Ordinance) to grant some relaxations While the UP Ordinance is not yet available, The Press Release states that the relaxations are towards bringing economic activities “back on track” by increasing investment opportunities in the state. The Press Release notes, all ‘factories and manufacturing establishments’ shall be exempted from labour laws applicable to them for a period of 3 years (presumably from the date of promulgation of the UP Ordinance).
The Press Release, however, provides the following caveat:
Ø The provisions under Bonded Labor System (Abolition) Act, 1976, Employees’ Compensation Act, 1923, and Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996 (BOCW Act) will continue to apply.
Ø The provisions pertaining to employment of children and women will also remain in force.
Ø The benefiting entities will be required to comply with Section 5 of Payment of Wages Act, 1936 (dealing with time of payment of wages).
Several questions are being raised on the Press Release / UP Ordinance. For instance, the reference to BOCW Act is causing confusion as the Press Release specifies only ‘factories and manufacturing establishments’ as the intended beneficiaries. While the Press Release states that establishments will continue to be bound by the provision relating to timely payment of wages, it does not provide clarity on the quantum of wages payable to employees (whether reduced or full). This issue has been a cause of vexation for establishments facing financial hardships as a result of the lockdown. The Press Release also does not elaborate on the available dispute resolution mechanism to resolve issues relating to terms and conditions of employment, including termination.
The Madhya Pradesh and Uttar Pradesh governments seem to have introduced / proposed these changes with a view to jumpstart the economy and increase employment opportunities. While these relaxations are definitely pro employer aimed at ease of doing business in the state, a number of provisions relating to protection of employees’ rights and interests seem to be missing. The reforms have drawn flak from trade unions and employee organizations, who view this as an attempt to dilute their rights vis-à-vis employers. Considering the radical changes and existent ambiguities, it would be interesting to see how these ambitious reforms play out practically and whether they stand the test of judicial scrutiny.
- Anshul Prakash (Partner), Vinay Joy (Partner), Deepak Kumar (Principal Associate), Srishti Ramkrishnan (Associate), Deeksha Malik (Associate) and Kosheel Gupta (Associate)
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