Labour Rights and Globalization in India: Challenges to and Opportunities for Trade Union Movement in India

K.R. Shyam Sundar

Professor, HRM Area, Xavier Business School, XLRI, Jamshedpur

In the current globalized context, rights of every constituent of the society, be it racial, caste, class, gender, etc. is a subject of discourse and a source of collective concern and action.  I dwell on labour rights here which of course cannot be delinked from other identities, say gender, tribal, etc. The controversies that surround the land rights especially in the mining pursuits highlight the intersectionality of rights. As the discussion of labour rights is contextualized in the intersectionality of rights, the struggle agenda becomes broader and more inclusive.   Trade unions are institutions of empowerment and act as swords of justice and they should play a vanguard role to promote and protect labour rights in these adversarial times.  

Conventional Labour Reforms Argument

India embarked on the path of economic liberalization as the “Hindu growth rate” of 3 percent was attributed to the failures of the command economy.  The liberalization of the product market and the opening up of it to foreign capital, technology, goods was expected to launch India on the “Asian Tiger if not Cub growth rate” trajectories.  During 1996-2005 economic growth was an average of 6.42 per cent per annum and it accelerated to 8.39 percent per annum during 2006–11. However, growth slowed down to 5.73% in 2012 and 5.1% in 2013.   While growth rate deceleration is perhaps due to economic slow-down at the global level, pro-reformers insist that as India is significantly insulated, labour reforms complementing the product market reforms are necessary for sustainable growth rate.

The pro-reformers further argued that what was good for the product market is also good an even necessary for the factor market, especially the labour market.  The legal framework derived from the command economy regime is argued to be characterized by rigidities that hamper the free working of the market forces and these in turn hurt the competitiveness of the economy in general and the firms in particular.

Employers demand that the firms should enjoy labour flexibility to fire workers and close down unviable firms as per market dynamics, employ workers on temporary contracts such that they could be dispensed with when not necessary, have the power to initiate technological and other changes in work organization and production and enjoy freedom from the nosy labour inspectors.   Also, there are strong criticisms pertaining to the dearness allowance in India, the bonus system, political affiliations of trade unions, the role of outsiders in the trade unions at the shop floor and so on. 

Re-strategizing Trade Unions’ Protests and Agenda

The trade unions have to a larger extent resisted and even stalled some of the labour reform measures introduced at the national level.  However, there is a need to reconsider some of their protest techniques, strategies and even their agenda. I outline the cardinal principles and arguments briefly here.

(a) The unified trade union movement has gone on national strike on a ten-points agenda and in the earlier strikes issues included issues concerning food security via public distribution system etc. The general economic policy issues like inflation, food security and foreign direct investment (FDI) will anyways be taken up by the political parties including those associated with the trade unions; the trade unions can make these as “secondary issues” in the general strikes and include issues like FDI in their sectoral strikes, say by defence or insurance sector.  The “core issues” must be re-structured in the light of the demands presented below.

(b) There must be in the public space the conceptual and empirical bases for formulation of trade unions’ demands.  Further, from the generic specific demands must be generated.  For example, on the enforcement of labour laws issues, there is a need to provide statistical and/or strong anecdotal evidence for formulating specific solutions.  These strengthen the social legitimacy and create bases for negotiations.

(c) The effectiveness of protest techniques needs to be critically assessed.  The trade union reports show that while the UPA government initiated dialogue with the trade union leaders post-the February national strike in 2013, the government was simply buying time to delay any possible policy action in favour of the workers. Further, the trade union movement should assess as to how long the same demands should stay in the protest space – it at once reflects the stagnation of trade union movement and the lack of delivery on the demands by the government.

(d) While trade unions and perhaps the government take technical assistance of ILO for ratification of the un-ratified ILO Core Labour Standards, it is clear the government is slippery on its commitment.  There is a perhaps a serious need to project this issue (which enjoys policy legitimacy as they have been re-christened globally as the Fundamental Human Rights) in the public domain and perhaps explore possibilities taking them to the judicial body? Also, the trade unions must include all the four un-ratified conventions in their struggle agenda.

(e) The fight for workers’ rights needs to be waged not merely on the streets as the battle is largely fought in the realm of ideas.  There is a serious need for research that can counter the highly visible pro-reform research output and significant projection of the same in the public space via media (supported by big business houses) and influence over the policy-makers through soft lobbying.  In other words, research by trade union organizations must be a priority thrust.  While labour flexibility has come to enjoy social and even intellectual legitimacy as it is seen as a driver of economic growth and employment generation, trade unions’ opposition has not earned them positive points in the public space. This is a serious challenge for the trade unions.

(f) As the conventional trade unions make forays through their inclusive labour agenda, the institutional interface between the conventional organizations and the workers’ new forms of organizations needs to be strengthened.  The trade unions must be at the vanguard of the new working class movement and the protests are not restricted to the factory gates but spaces less traversed before.  

(g) The labour reforms agenda must be projected to earn legitimacy: it must be projected to show they not only promote the welfare of the working class but also contribute to the economic efficiency.  For example, universal coverage, effective and statutory and national floor level minimum wage, safe workplaces, sound and less cumbersome governance and so on promote workers’ welfare and at the same time enhance productive efficiency via better labour standards, nutritional, high work-effort (via less absenteeism) and motivational effects on the one hand and reduce unit labour costs due to higher productivity and lower conflicts, less scope for litigations and reduced compensations on the other hand.  Perhaps, the biggest gain is shared monitoring by both managerial supervision and trade union supervision.  In other words, trade unions become a part of workplace governance. 

(h) India has adopted the Decent Work Country Programme (DWCP) in 2010 for a five-year period and is committed to the pursuit of programmes designed to lead to decent and productive, social protection and elimination of all forms of unacceptable forms of work.  The decent work agenda is necessarily productivity-friendly agenda.

(i) From a random survey of the cases filed before the ILO Committee on Freedom of Association (CFA) one sees that most cases have been field by CITU only.  Though a careful study is required to get a clear picture, the trade unions must resort to lodging complaints to CFA.  In the case of MRF recognition issue, the Madras High Court took cognizance of the complaint and the ILO comments in delivering its judgment in which it asked the Tamil Nadu government to conduct membership verification to determine the bargaining agent in the absence of law for the same.  Neither the employers not the government could go scot free under the pretext of absence of law for union recognition. 

(j) Another important source of assertion of workers’ rights is to make use of Right to Information Act, 2005 which trade unions in Pune are making good use to their advantage.  This is especially useful in correcting deficits in enforcement and securing vital information in the cases involving contract labour employment.

(k) The regionalization of industrial relations governance has shifted the reforms agenda to the states.  While the national trade unions and others wage battles targeting the central government much reform actions are taking place at the micro levels quietly.  There is a need to “imitate” the structure of protest actions at the regional level as well.   

The Good Labour Reform Agenda

Universal Coverage of Labour Laws

The use of the “thresholds” (size of employment, seasonal nature of industries, tenure, etc.) to exclude vast sections of workforce is exclusionary governance.  Nearly about 75 percent of total workers in India in 2005 were employed in the establishments employing less than 10 workers. These workers are most likely to be not covered by most labour laws save the Shops and Establishments Act at the state level and the federal Minimum Wages Act, 1948.  The gradual coverage of all the workers would ensure not only protection to the workers but also floor level labour standards which could enhance productivity through incentives (better labour standards) and penalties (better enforcement). 

Fundamental Labour Rights

The eight ILO Core Conventions have been designated as the Fundamental Human Rights (on child labour, forced labour, non-discrimination, and trade union and collective bargaining rights) and the most immediate agenda of the labour movement is to have the un-ratified four ILO Core Conventions ratified and give effective effect to them.  While mere ratification does not lead to solutions, non-ratification cannot be the block towards social progress.  The commitment of the Indian government for decent work makes it all the more imperative; however, the delays on the delivery of the promises of ratification show that the government is slippery on this.

Complementary Institutions

The social actors need to resort to market techniques such as negotiations, industrial sanctions and so on to govern their world of work – but what is missing is the facilitative legal framework. At the same time, the union movement needs to set its house in order on the issue of method of determination of the bargaining agent.  Five specific labour reform measures in this regard are, viz. (a) provision for method of recognition, (b) notification of ULPs, (c) deemed registration of trade unions upon expiry of a specified period, and (d) information sharing for meaningful and productive collective bargaining, and (e) strengthening of trade union governance.  

Towards an Effective Minimum Wages Regime

The complexities and the inefficiencies associated with minimum wages in India often defeat the very objectives of it.  Minimum wages is at the centre of decent wage agenda and technical research and social dialogue can secure this. This could probably correct the declining shares of wages in gross value added in the factory sector (from 27 percent in 1980-81 to around 11 percent in 2011-12) which could represent a model for equitable work regime in the society. 

Effective Compliance Regime

The need for better labour market governance is felt in the market economy more than before thanks to profiteering and cheap labour cost regime.  While the accusations of over drive of inspection regime and rent seeking tendencies in the regulatory regime are true, the inefficiencies arising out of deregulation are perhaps stronger than the former?  Indeed, better compliance, technological progress, pro-active role of trade unions and some rationalizing of labour laws (removal of absurd and complex clauses) would weed out these inefficiencies.  The ratification of ILO Convention on Labour Inspection Convention 1947 by India requires the maintenance of effective inspection regime necessary. 

Strong Penal and Just Rights Regime

As a complement to the effective enforcement, penalties need to kept high enough to dissuade cheating and as in the football penal system repeated acts of violation must lead to de-registration of firms from business.  In the case of non-payment of statutory compensation, speedy and high cost-penal system should be devised to punish both the defaulting employers.  . 

The judicial dispensation system is known for its tardy progress if not for delivery of some controversial judgments. The social actors must insist on speedy resolution of industrial disputes.  It is costly not only for the workers but also for the employers in the age of intense competition. The trade union movement must operationalize their demand for effective enforcement regime by including the demand of optimum ratio of enforcement officials and judicial officials to workforce.  

Safe Workplace and Safe and Green Environment

Trade unions must focus on workplace safety and health as a major national issue and a labour reform agenda. The sorry tales of non-payment or delay in payment of compensation to the fatally injured workers and the family of the deceased workers reflect not only poor governance but also weak monitoring by trade unions.  The “must labour reform” is the fast-tracking of compensation to the industrial accidents, especially the fatal ones. The erring employers and the slack enforcement agencies must be penalized sufficiently.  In the larger sense, from safe workplace we need to move on to a safe and green environment. 

Skills Building and Human Resource Development

Trade unions must focus on skill building though this has begun to receive policy attention of late.  Skill emphasis will shift the debate from employment security to employability.  Trade unions must demand just allocation of social resources in building the human resources of the country which would mean going beyond the workplace issues to macro-economic issues.  The labour flexibility drive could have grave social consequences in that with lower levels of income and health hazards including stress could lead to multiple forms of deprivations not only for the present workers’ generation but also for the future generation. The working class cannot provide adequately for the health (nutrition) and education of their children.  It is not only the burden of public debt that poses dangers to the posterity but human capital deficit as well.

Livelihood Issues

It is to the tribute of the working class movement that some measure of social security (I am aware of the inadequacies), the right to street vending and the right to limited job assurance in the rural areas have been secured. Many others wait on the wings, the forest workers, the tribals, and the fisherpeople and so on.  The trade union movement’s demands on universal pension and the creation of social security funds are important issues which need sustained action as the government denies this in the name of fiscal prudence.

The agenda is vast but there is promise as workers are increasingly becoming cohesive and the intersectionality of issues and agencies is structuring the movement and the agenda.

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Labour Law Reforms: Shift from Labour Market to Industrial Relations is the Key!

K.R. Shyam Sundar

Violence-laced industrial conflicts and long, sustained and costly industrial conflicts have taken place in the 2000s as they did in the 1970s and the 1980s primarily on the trade union recognition issue, though the complementary labour flexibility strategies followed by the employers in the post-reform period has been additionally responsible for the conflicts.

Consequent to reforms relating to the product market both domestically and on the external front since 1991 the industry leaders and others have been loudly and insistently clamouring for reforms of certain clauses of labour laws (core labour law reforms) and of the labour governance system.  They demand labour flexibility in terms of freedom to hire contract labour without the fear of prohibition, retrench workers and close down undertakings without the compulsion of prior government endorsement and enjoy the freedom to introduce technological changes having loss of employment implications.  Further, they want a liberal labour inspection system and a rational and modern system of records compliance.  The employers may have a case here or there in these demands. 

But there are other compelling issues which hurt industrial relations governance at the plant level the cure of which would, along with the aforementioned demands – granting their economic rationale for a moment – enhance the competitiveness of the firms.  One of the core issues is the absence of provisions in the central trade union law providing for mechanism for determination of collective bargaining agent, resolution of intra-union disputes by labour judiciary and allied aspects such as unfair labour practices as they do in some state labour laws like in Maharashtra.  These measures would surely pre-empt and prevent the incidence of a significant share of the industrial conflicts and provide a basis for building sound industrial relations governance.  The labour flexibility and governance issues have disproportionately dominated the debates on the labour law reforms and this issue has not been mentioned in them.  

In the given legal context, the multiple unions fight for recognition by the employers and the inter-union rivalries vitiate the industrial relations at the workplace.  Even if an employer wishes to negotiate with the trade union, in a multiple trade union set-up with which union does he negotiate? What is the basis on which the bargaining agent status be granted as several methods such as membership verification, check-off and secret ballot compete for attention?  The trade unions are divided over the method of determination.  In the absence of a law on union recognition even a minority union could raise industrial disputes and affect industrial relations.  The intra-union disputes especially over the election of office-bearers are taken up for resolution in the civil court which as is well-known lead to excessive litigation.  Even if the employer enjoys labour flexibility, these issues would lead to worsening of the industrial relations governance and labour flexibility often becomes counterproductive. 

As archaic as any other labour law is the Trade Unions Act, 1926 and it is of limited use unlike most labour laws.  Cast in the colonial period and constructed along the lines of the then extant British law it merely provides for voluntary registration of trade unions, affords certain protections and regulates rather severely the internal affairs of the trade unions.  With a rather liberal eligibility condition of seven members for formation of a trade union and given the splintered nature of Indian society and polity, these fostered unbearable multiplicity of trade unions resulting even in intra-union splits.  It took exactly 75 years to cure this malady! In 2001, the law was amended to raise the eligibility conditions for formation of trade unions.  The protective clauses of the law were rendered technically superfluous once the Constitution of India assured the fundamental right of association.  

Despite the incidence of bloody industrial conflicts in Tamil Nadu (e.g. Simpson strike, the TVS strike) and the Bombay textile industry strike and despite the recommendations of several high profile commissions, the Central government has remained unshaken.  It has kept the central law as tepid as possible.  It blamed the trade unions for not coming to an agreement on the choice among the competing methods of determining the bargaining agent.  The dominance of INTUC and its political mentor, Congress’ long rule helped to sustain the stalemate.  

State level laws and voluntary code of discipline were considered sufficient to deal with this crucial issue!  Maharashtra led the show by enacting the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act [MRTU (PULP) Act] in 1971.  Several state governments like Madhya Pradesh, Rajasthan, Kerala, Bihar have either legislated rules or made regulations for determination of collective bargaining agent.  The long industrial conflict in MRF Company’s plant in Tamil Nadu in 2009 over the recognition of trade union further exposed the inadequacies in the central law on trade unions and revealed the imbalances in the legal structure on the same subject in the country.

The absence of a national legislation providing for determination of collective bargaining agent exposes the irrationality on the part of the central/state governments.  The governments and others persistently cite the need to provide labour flexibility to capital to precisely attract foreign productive investment into the country.  Labour flexibility is necessary to manage the labour market factors efficiently.  But workplace governance is even more important as cordial labour relations are essential for productivity and progress which can be ensured only by sound industrial relations governance.  The invite to [foreign] capital is inadequate as there is no law on union recognition.  The foreign firms complain that even if they desire to – an ambitious thought given the recent trends! – negotiate with trade unions they need to know with which trade union should they negotiate among the several that crowd the negotiating table.  As industrial conflicts thanks to these inadequacies play spoilsport, the government and others are unduly preoccupied with securing labour flexibility as if it is the only magic wand that would ensure competitiveness of a firm or the economy.  It is another matter that India unlike its neighbours in South Asia has not ratified the Fundamental ILO Conventions on freedom of association and the right to collective bargaining even after 65 years of their adoption. 

The dormancy on the part of employers and trade unions on this issue is striking.  Even if the employers did not make the demand for recognition law, the trade unions purely to make themselves attractive in these adverse times should demand legal mechanisms to set their distraught house(s) in order. 

The government, the employers and the trade unions need to apply their minds on this crucial even basic issue of union recognition before or along with effecting other reform measures to ensure efficient and equitable outcomes.

K.R. Shyam Sundar

XLRI

17 September 2014

krshyams@xlri.ac.in

Central Government – It’s time to Enter the Labour Reforms Boxing Zone!

K. R. Shyam Sundar

Professor, HRM Area, Xavier Business School, XLRI, Jamshedpur

krshyams@xlri.ac.in

The labour reforms agenda has been there ever since the economic reforms aimed at liberalizing the product market were initiated in a significant sense since 1991.  It has been argued that reforms of the labour market and the industrial relations system (IRS) would complement the product market reforms and ensure better realization of pay-offs arising out of the latter.  While there are host of labour reform measures, three critical labour reforms demanded by the employers comprise relief from labour inspection regime, freedom to retrench workers and closure of establishments without prior government permission and freedom to hire contract labour without fear of prohibition of it by the government.  There are two major pillars of the labour reforms argument.  One, if India did not initiate these labour reforms ease of doing business in India would be “perceived” to be “difficult” and foreign capital would go to other developing and emerging countries.  Two, absence of labour reforms and especially the exit-prohibiting rigid labour laws affect the growth of firms, especially the labour intensive ones and hence hurt employment creation as firms fragment or adopt capital intensive technologies; as a result, the “missing middle” in the Indian industrial structure epitomizing efficiency and welfare gains is proving to be costly.  

The United Progressive Alliance-1 (UPA-1) was a non-starter as far as labour reforms are concerned thanks to the presence of arm-twisting Left-parties and strong minor regional political parties in the coalition. The UPA-2 failed despite the freedom it enjoyed.  Thus, the election of Narandra Modi-led BJP government with a considerable majority in the Lok Sabha has strongly revived the hopes of delivery on the labour reforms front.  Thus, it is not a coincidence that the state governments of Rajasthan, Haryana, and Madhya Pradesh irrespective of political parties in governance have initiated labour reform proposals. 

The cabinet of the central government has approved amendments to the Apprentices Act, 1961, the Factories Act 1948 and the Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by Certain Establishments) Act, 1988.  Predictably, the trade unions have voiced strong protest for the unilateral executive sanction to the labour laws ignoring the tripartite consultative forums that exist in the country.

There are reportedly 0.3 million apprentices which constitute around 10 percent of the organized sector employment and a poor 0.01 percent of the total workforce – the latter is not a correct measure as it includes the vast informal workers.  But the point is, in its quest for skill-building, the government needs to make amendments to the law and the schemes concerning apprentices to cover a significant share of the organized sector, to start with.  In that sense, liberalization of the apprentice law is welcome.  The good part of the Factories Act amendments relates to strengthening of workplace safety, by giving a broad definition of hazardous process, which, in the wake of rather frequent incidence of fatal industrial accidents, is a good news.  The penal clause of imprisonment of employers is a serious threat and should be used judiciously and legitimately in labour laws – it is certainly not required for laws like the Apprentices Act but necessary even essential in the case of legalities concerning workplace safety.  The removal of restrictions on night work of women subject to “adequate safeguards” is welcome, though the corporates must ensure strong and uncompromising governance for the safety of women.  The gender imbalance in the labour market opportunities is corrected with this, though partially.  The extension of exemptions from labour bureaucracy to the establishments employing between 10 and 40 workers (as opposed to the current 10-19 spectrum) is expected to contribute to the growth and higher productivity of small enterprises.  While employers in this segment surely require relief from the heavy labour bureaucracy, workers in this segment are as much vulnerable.  To win the trade unions’ consent, strong penal clauses for violations for and strict compliance with social security legislation by employers in this segment will be required. 

The point is that India watchers will be keen to see whether this central government is able to push through these reforms, irrespective of whether they are worker-friendly or employer-friendly.  The India watchers are tired of still-born labour reform baby bodies thus far.   

It is important to understand the policy-stalemate at the centre. The central governments, viz. the National Democratic Alliance (NDA) led by BJP or the UPA-1 or 2 led by Congress could not carry out the critical labour reform measures for two principal reasons.  The labour reform issues unlike the capital market reforms belong to “mass politics” and hence enjoy huge social visibility.  The opportunist politics played by the political parties, i.e. oppose the reform measures when not in power and the strident protests by workers’ organizations unnerve the ruling party at the centre from carrying out this reform measure.  The workers in the organized sector whom these affect are though small in number as compared to the unorganized sector workers are well organized (and has powerful Left presence) and can and in fact did inflict tremendous costs through agitations on the government.  The political costs of labour reforms outweigh the unsure economic benefits from the labour reforms. 

As a result, the labour reforms mantle was often passed on to the state governments.  The state-level labour reforms enjoy[ed] the advantage of muted and low-decibel protests by trade unions and the divisions in the political spectrum did not aid consolidation of opposition to labour reforms measures.  The regionalization of industrial relations governance has been an “escape route” for the willy-nilly central government thus far.

It is significant to note that the current labour reform measures do not include the critical reform measures mentioned earlier.  But the proposed labour reform measures constitute a “test case”.  The Modi-government is using these somewhat-neutral labour reforms measures to test the waters.   The political failures in the past may not haunt the current BJP government as it is early in the day. Further, it has unassailable majority in the Lok Sabha; it needs to battle only in the Rajya Sabha.   The divisions in Congress and the opportunistic regional political parties (who may wish to appear reform-friendly) offer hopes of slender majoritizing in the upper body.  It appears that the central government is in no mood to hold social dialogue on the current reform proposals.  It is surely not healthy to bypass the consultative forums, but the government appears to be keen to change the “India Doing Business” image.    

On the other hand, the critical labour reform measures involving amendments to the central labour laws have been lobbed by the state governments to the Federal power centre for nods from the President, which necessarily involve the executive cabinet’s involvement in them.  The central government may continue to use the federal politics channel to “wait” till the critical state elections (Maharashtra) are over.  While the industry leaders may be pleased if these reform processes are carried out successfully, they are waiting for the critical labour reform measures.  At any rate, the Modi government has surely entered into a “benevolent trap” of high-expectations-high performance.  Sooner or later, it has to enter the “critical labour reform boxing zone”!