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Class notes - Industrial relations

Lecture 3: Evolution of Labour Laws in India
The History of Labour Laws in India dates back to Pre-Independence British Era as
these Labour and Industrial Laws were enacted by British Administration to protect interests
of British Employers and Industrialists.
The industrial development took place in the middle of the nineteenth century. After
industrial development, the first organization that came into being was that of the
industrialists. The owners of the industries formed an organization.
The industrialists organized themselves in order to protect and safeguard their
interests; but there was no organization for the protection of interests of the labour class.
With further industrialization, the exploitation of labour increased and a need for separate
labour organization was felt.
International Labour Organisation (ILO) was one of the first organisations to deal
with labour issues. The ILO was established as an agency of the League of Nations following
the Treaty of Versailles, which ended World War I. Post‐war reconstruction and the
protection of labour unions occupied the attention of many nations during and immediately
after World War I. In Great Britain, the Whitley Commission, a subcommittee of the
Reconstruction Commission, recommended in its July 1918 Final Report that "industrial
councils" be established throughout the world.

Stage I- Prior to the World War I

Though the origin of labour movements was traced to the 1860s, first labour
agitation in the history of India occurred in Bombay, 1875. It was organised under the
leadership of S.S Bengalee. It concentrated on the plight of workers, especially women and
children.

• This led to the appointment of the first Factory commission, 1875. Consequently,
the first factories act was passed in 1881.
However, the efforts of Mr. Bengali did not bear much fruit and there was no
substantial improvement in the lot of Indian labour.
Narayan-Meghji Lokhande:
The Government of India promulgated the first Factory Act in 1881. In 1881, Mr
Narayan-Meghji Lokhande made renewed efforts for reform in the conditions of Indian
labour. Mr Lokhande a workman summoned a summit conference of workers engaged in
mills in Bombay Presidency. In this conference, the essential demands of labour were
considered and a number of resolutions were passed.
The major demand of this conference was that the workers should be granted a weekly
holiday and given half-an-hour rest every day. Besides, it was also insisted that workers
suffering from accidental injuries should be adequately compensated. The efforts of this
conference bore some healthy fruits. Some industrialists accepted some of the above
demands.
As a consequence of success achieved by the conference, Mr Lokhande felt encouraged and
he established a trade union in Mumbai.

• He christened this organization Bombay Mill Hands Association 1890.

• He also helped in the publication of a labour magazine- “Deenbandhu”.

Thus, Mr Lokhande stood by the working class and did a great deal to improve their lot.
But after the death of Mr Lokhande, the momentum of the, work being done by him was
lost. Afterwards railway employees organized themselves into a union.
After the Partition of Bengal 1905 and till 1909, a number of strikes on various issues were
organized. In 1908, an eminent national leader Shri Lokmanya Tilak was imprisoned for six
years.
As a protest against this injustice a very big strike was organized. In this period, a number of
trade unions came into being. Like:-

• In 1897, the Amalgama Society of Railway Servants of India was established and
registered under the Companies Act.
• Printers’ Union Calcutta (1907),
• Postal Union (1907),
• Kamgar Hitwardhak Sabha (1909) and
• Social Service League (1910).
However, these organisations could not make the real start in the Labour Movement till
World War I.

Stage II: Between the Two World Wars:

The modern history of labor movement in India dates from the First World War. The World
War I (1914-19), the Russian Revolution (1917), Swaraj Movement and the establishment
of International Labour Organisation gave a new life to the labour movement and by the
year 1920, the trade union emerged on the Indian scene in almost all the sectors to
safeguard the interests of the working class.

• National leaders devoted particular attention to working classes. As a result of the

efforts made by Lokmanya Tilak, Annie Besant, and Gandhi, the working classes
began to get organized.
• General Strick at Cotton mill in Ahmadabad in 1918 supported by Mahatma Gandhi.
Mahatma Gandhi along with Anasuya Sarabhai and Shankerlal Banker founded the
Ahmadabad textile labour association in 1920. He applied the theory of non-
violence in industrial relations, it was first hunger strike.
• This first properly registered trade-union was started in Madras by the initiative of
Mr. B.P. Wadia who established the Madras Labour Union in 1918.
• Many other national leaders devoted particular attention to working classes. As a
result of the efforts made by Lokmanya Tilak, Annie Besant, and Gandhi, the working
classes began to get organized.
Establishment of International Labour Organization (ILO) by the 1919 Peace Conference
that followed World War I. Its original constitution, which formed part of the Treaty of
Versailles, established it on 11 April 1919 as an autonomous organization associated with
the League of Nations.

• A branch of International Labor Organization was established In India and a regular

conference of I.L.O. was started in India.
All India Trade Union Congress (A.I.T.U.C), the oldest trade union federation in India was
set up in 1920.

• It was founded by Lala Lajpat Rai, Joseph Baptista, N.M Joshi and Diwan Chaman
Lall.
• Lajpat Rai was elected the first president of AITUC.
With the establishment of this trade union, the labor movement in India received
tremendous fillip. A special step toward progress was made, when the then Government
passed the Trade Union Act of 1926 and Industrial Disputes Act, 1929.
With the passage of Trade Union Act, the trade unions were greatly benefited as they
were conferred a legal and corporate status on registered trade unions and granted them
certain immunities in regard to trade disputes. The act makes provision for two matters.
1. The conditions governing the registration.
2. The right and privilege accorded to registered unions.
3. The Act also allowed the funds of the registered unions to be spent for the conduct
of trade disputes and for the provision of benefits to its members.

The organization of trade unions underwent a great change in 1926. When the leadership of
trade unions went over to communists. The communists made radical changes in the
policies and organization of trade unions and as a consequence of this the trade unions
divided themselves into two.

Royal Commission on Labour in 1929

During World War I, in 1917, John Henry Whitley chaired a committee which produced a
report on the ‘Relations of Employers and Employees’ identifying good industrial relations
as a vital need for industrial relations.

• Amidst the world economic depression, associated rise in unemployment and

continued agitation for Independence, the British government established the Royal
Commission on Labour in 1929.
• The commission received resistance and large scale boycott from the Indian labour
movement. Nevertheless, the Commission handed down its report and the outcome
of these reports made way for a series of labour legislations from 1932 to 1937.
• Some of the key legislations passed included Factories Act, 1934, Payment of Wages
Act, 1936, Children (pledging of Labour) Act, 1933 which empowered employers to
deduct wages of employees absent from work without reasonable cause.
• Trade Disputes (Amendment) Act 1938, which authorized government to appoint
conciliation officers to settle disputes.

In pursuance of the recommendation of the Royal Commission on Labour in India 1929, the
Office of Chief Labour Commissioner (Central) was set up in April, 1945 by combining the
former organizations of the conciliation Officer (Railways), Supervisor of Railway Labour and
the Labour Welfare Advisor. It was then charged mainly with duties of prevention and
settlement of industrial disputes, enforcement of labour laws and to promote welfare of
workers in the industrial establishments falling within the sphere of the Central Government.

The workers owing allegiance to old leadership had a peaceful and constructive outlook,
whereas those owing allegiance to communists had radical outlook. Owing to difference of
outlook, the two trade unions were always at loggerheads. The mutual strife between
unions was advantageous to the employers.
The mutual strife among trade unions kept on increasing. In 1929, Indian National Trade
Union Congress held its 10th session in Nagpur. This session was presided over by an
eminent social reformer Pandit Jawaharlal Nehru. Subsequent to this session, some trade
unions severed their connection with the parent body.
The unions, which separated themselves from AITUC, formed their own all India
body under the name All India Trade Union Federation. The struggle between trade unions
did not limit itself up to here only. As a result of the mutual strife in 1931, a new All India
Trade Union under the label All India Red Trade Union Congress came into being.
At length in 1934, this mutual strife ended. In this year, a grand session of Indian Trade
Union Congress took place. This session was presided over by Pandit Harinath Shastri. In
this session, an agreement was reached between All India Red Trade Union Congress and
Trade Union Congress.
Efforts of Shri V.V. Giri:
According to this agreement. All India Red Trade Union Congress was abolished.
Subsequently in 1938, Trade Union Federation was also merged in All India National Trade
Union Congress. The credit for this agreement is due to the efforts made by the former
President of India, Shri V.V. Giri. Thus, once again in 1940, a united body of trade unions was
established. However, this mutual amity among unions proved to be short-lived and the
Second World War brought to surface once again mutual dissensions and dis-agreements.

Stage III: During and After the World War II

The Second World War lowered standard of living for the workers further and this led to
the strengthening of the movement. The question of war effort created a rift between the
Communists and the Congress. This, coupled with other issues, led to further split in the
movement.

• As a result of this rift, “Indian Trade Union Labour Federation” came into existence
led by M.N. Roy.
However, the movement as a whole got stronger due to the compounding issues. This
included mass entrenchment post-war and the massive price rise that accompanied it.
Legislations like Industrial Employment Act, 1946 and Bombay Industrial Relations Act,
1946 contributed to strengthening the trade union movement. In general, the movements
got more vocal and involved in the national movement.
The two parallel labour unions continued to function. The dissensions and conflicts
among communists and Congressmen persisted and ultimately due to the efforts of
Gulzarilal Nanda and Sardar Patel, Indian National Trade Union Congress was established
1947.
As the Indian National Trade Union Congress has the largest membership in the
country it was declared the representative union of Indian labour. Subsequently,
Communists also set up an all India trade union. This trade union was labelled as Hind
Mazdoor Sabha. This trade union of Communists though did not escape the scourge of rifts
and dissensions it split up into two groups in 1949. As a result of this split, a new trade union
came into being and this was named United Trade Union Congress. Professor K.T. Shah
headed this trade union.
Bhartiya Mazdoor Sangh: In 1955, Jan Sangh also established a labor organization. The
trade union under the aegis of Rashtriya Swayamsevak Sangh (RSS) was known as “Bhartiya
Mazdoor Sangh”. Its headquarters was in Bhopal.
Among them INTUC and HMS were affiliated to the "Industrial Confederation of the Trade
Union" (ICFTU) which is one of the international labour organizations. AITUC was affiliated
to the World Federation of Trade Unions.
Stage IV- After Independence
Independence and partition of the country smashed the hope of the workers for
getting higher wages and better working conditions from the national Government. With a
view to retaining the amenities which they have earned earlier, a series of strikes swept the
country.
The number of strikes and man days lost were the highest ever recorded in the
country. Various political parties formed and kept control over various trade unions. In
1948, Praja Socialist party started another trade union known as Hind Mazdoor Panchayat.
Indian Federation of Labour and Hind Mazdoor Panchayat were amalgamated and formed
Hind Mazdoor Sabha (H.M.S) in 1948.

Planned economic development and emphasis on Trade union

The Planning Commission drafted its first five year plan, setting therein necessary targets of
production - industrial as well as agricultural - to be achieved during the next five years. For
having industrial advancement industrial Policy Resolution in 1948, was also prepared.
As the economic progress is bound up with the Industrial peace so for the successful
implementation of the plans, particularly in the economy organised for planned production
and distribution and aiming at the realisation of social justice and the welfare of the masses,
the co-operation from Trade Unions was considered absolutely essential at different stages
of the execution of the plans.
Accordingly, it was realised that the question of maintenance of smooth industrial
relations was not a matter between employers and employees alone. But it was a vital
concern of the community. Therefore their relationship has to be of a partnership in this
constructive endeavour. this was the reason why it was provided in the first five year plan
that the dignity of labour must be recognised so that the workers who on account of
hardships of illiteracy and ignorance and lack of opportunities have not been able to play as
effective a role in the working of industry as they should, could understand and carry out
their responsibility and could take an increasing share in the industry.
Accordingly the workers "right of association, organisation and collective bargaining
was accepted" and it was laid down in this plan that they (Trade unions) should be
welcomed and helped to function as part and parcel of the industrial system.

Code of Discipline of Industries of 1958

The code was approved by all central organisations of workers and employers in 16th Indian
Labour Conference at the initiative of the then Labour Minister, Shri G.L. Nanda.
The code reflects the policy of the government to build up an industrial democracy on
voluntary basis and is the sheet anchor of Mahatma Gandhi’s philosophy of industrial
relations. It aims at preserving industrial peace with the help of employers and employees.
It represents a voluntary moral commitment and is not a legal document.
The issue of discipline in industry was discussed in the Indian Labour Conference and the
code of discipline was framed and introduced by that tripartite body in 1958. Discipline in
the relationship between workers and employers can better be enforced if both the parties
accept their responsibilities and show a willingness to discharge them. In the absence of any
statutory provision at the all-India level for the recognition of trade union, the provision in
this regard has been incorporated in the Code of Discipline.
The main elements of the code are:
i) The two parties agree to utilise the existing machinery for the settlement of industrial
disputes.
ii) The parties shall not resort to strikes and lock-outs without first exploring all avenues of
settlement
iii) The parties accept that the disputes not settled mutually shall be referred to voluntary
arbitration.
iv) The code specifies the criteria for the recognition of trade union and creates an
obligation on employers to recognise the majority union in an establishment or industry.
v) The two parties shall not resort to the unfair labour practices detailed out in the code.
vi) Managements and trade unions agree to establish grievance procedure on a
mutually agreed basis.

First National Commission on Labour

First National Commission on Labour in 1966- was set up on 24 December 1966 under the
Chairmanship of Justice P.B. Gajendragadkar. The Commission submitted its report in
August, 1969 after detailed examination of all aspects of labour problems, both in the
organised and unorganised sectors. The first National Commission on Labour recommended
that works committee be set up in any unit which has a recognised union. It also
recommends growth of collective bargaining recognition of union, prohibition and
regulation of strikes & lockouts

Stage V: Present
Second National Commission on Labour
Second National Commission on Labour was set up on 15 October 1999 under the
chairmanship of Ravindra Verma which submitted its report to the then Prime Minister Atal
Bihari Vajpayee on 29 June 2002.

Need for Second National Commission on Labour

• During the period of three decades since setting up of the First National Commission
on Labour, there has been an increase in number of labour force etc. because of the
pace of industrialisation and urbanisation.
• After the implementation of new economic policy in 1991, changes have taken place
in the economic environment of the country which have in turn brought about
radical changes in the domestic industrial climate and labour market.
• Changes have occurred at the work places, changes in the industry and character of
employment, changes in hours of work and overall change in the scenario of
industrial relations. These changes have resulted in certain uncertainties in the
labour market requiring a new look to the labour laws.

Recommendation of Second National Commission of Labour:

It recommended that the existing Labour Laws should be broadly grouped into four or five
Labour Codes on functional basis by simplifying, amalgamating and rationalizing the
relevant provisions of the existing about 44 Central Labour Laws.
Accordingly, the Ministry has taken steps for drafting four Labour Codes:
1. Labour Code on wages
Code on wages will subsume legislations like The Minimum Wages Act, the Payment of
Wages Act, the Payment of Bonus Act, the Equal Remuneration Act. It aims to provide a
national floor for minimum wage. It also has provisions to consider regional variations like
geography, economy etc.
2. Labour Code on Occupational Safety, Health and Working Conditions
Code on Industrial safety and welfare will replace legislations like the Factories Act, the
Mines Act and the Dock Workers (Safety, Health and Welfare) Act. This will put in place a
uniform regime across the nation to ensure industrial safety.
3. Labour Code on Industrial Relations
The Labour Code on Industrial Relations will combine the Trade Unions Act, 1926, the
Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.
The focus here is to set the stage for the way labour unions can protect labour interests. It
also seeks to abolish deadlocks and promote worker welfare while promoting investment.
4. Labour Code on social security
Code on social security will merge important legislations like Employees’ Provident Fund and
Miscellaneous Provisions Act, Employees’ State Insurance Corporation Act, Maternity
Benefits Act, Building and Other Construction Workers Act and the Employees’
Compensation Act

Note: The Labour Code on Wages was approved by Parliament in August 2019 and has been
draft rules has been notified under the code.
While the Labour Code on Occupational Safety, Health and Working Conditions have been
referred to the standing committee on labour.
Govt notifies draft rules for Code on Wages
Highlight of the draft rules for Code on Wages:
• Centre has reduced normal working hours in a day to eight hours from nine
proposed in the earlier.
• Would fix a national floor minimum wage based on minimum living standard
including food, clothing, housing and any other factors prescribed by the
government.
The normal working day shall comprise of “eight hours of work and one or more intervals of
rest which in total shall not exceed one hour”, the draft said, adding that provisions of
Factories Act will not be affected by this rule. Recently, as many as 12 states had extended
working hours to 12 amid the COVID-19 pandemic.
Net intake of 2,700 calories per day, 66 meters cloth per year per standard working class
family, housing rent expenditure as 10 per cent of food and clothing expenditure, three
adult consumption unit are some of the factors that would determine the fixation of the
national minimum wage.
Introduced in Lok Sabha in August 2017 The Code replaces the following four laws:
(i) the Payment of Wages Act, 1936,
(ii) the Minimum Wages Act, 1948,
(iii) the Payment of Bonus Act, 1965, and
(iv) the Equal Remuneration Act, 1976.

Detailed explanation:
Who will be entitled to minimum wages?

• Currently, the Minimum Wages Act, 1948 lists the employments where employers
are required to pay minimum wages to workers.
• The Act applies to the organised sector as well as certain workers in the unorganised
sector such as agricultural workers.
• The centre and states may add more employments to this list and mandate that
minimum wages be paid for those jobs as well.
• At present, there are more than 1700 employments notified by the central and state
governments.
The Code proposes to do away with the concept of bringing specific jobs under the Act, and
mandates that minimum wages be paid for all types of employment – irrespective of
whether they are in the organised or the unorganised sector.
The unorganised sector comprises 92% of the total workforce in the country. A large
proportion of these workers are currently not covered by the Minimum Wages Act, 1948.
Experts have noted that over 90% of the workers in the unorganised sector do not have a
written contract, which hampers the enforcement of various labour laws.

Will minimum wages be uniform across the country?

No, different states will set their respective minimum wages. In addition, the Code
introduces a national minimum wage which will be set by the central government. This will
act as a floor for state governments to set their respective minimum wages. The central
government may set different national minimum wages for different states or regions. For
example, the centre can set a national minimum wage of Rs 10,000 for Uttar Pradesh and Rs
12,000 for Tamil Nadu. Both of these states would then have to set their minimum wages
either equal to or more than the national minimum wage applicable in that state.
The manner in which the Code proposes to implement the national minimum wage is
different from how it has been thought about in the past. Earlier, experts had suggested
that a single national minimum wage should be introduced for the entire country. This
would help in bringing uniformity in minimum wages across states and industries. In
addition, it would ensure that workers receive a minimum income regardless of the region
or sector in which they are employed.

International experience
The concept of setting a national minimum wage exists in various countries across the
world. For instance, in the United Kingdom one wage rate is set by the central government
for the entire country. On the other hand, in the United States of America, the central
government sets a single minimum wage and states are free to set a minimum wage equal
to or above this floor.

On what basis will the minimum wages be calculated and fixed?

Currently, the central government sets the minimum wage for certain employments, such as
mines, railways or ports among others. The state governments set the minimum wage for
all other employments. These minimum wages can be fixed based on the basis of different
criteria such as type of industry or skill level of the worker. For example, Kerala mandates
that workers in oil mills be paid minimum wages at the rate of Rs 370 per day if they are
unskilled, Rs 400 if they are semi-skilled and Rs 430 if they are skilled.[8]
The Code also specifies that the centre or states will fix minimum wages taking into account
factors such as skills required and difficulty of work. In addition, they will also consider price
variations while determining the appropriate minimum wage. This process of fixing
minimum wages is similar to the current law.

Will workers be entitled to an overtime for working beyond regular hours?

Currently, the central or state government define the number of hours that constitute a
normal working day. In case an employee works beyond these hours, he is entitled to an
overtime rate which is fixed by the government. As of today, the central government has
fixed the overtime rate at 1.5 times normal wages in agriculture and double the normal
wages for other employments.
The Code proposes to fix this overtime rate at twice the prevailing wage rate. International
organisations have recommended that overtime should be 1.25 times the regular wage.

Does the Code prohibit gender discrimination between workers?

Currently, the Equal Remuneration Act, 1976 prohibits employers from discriminating in
wage payments as well as recruitment of workers on the basis of gender. The Code
subsumes the 1976 Act, and contains specific provisions which prohibit gender
discrimination in matters related to wages. However, unlike in the 1976 Act, the Code does
not explicitly prohibit gender discrimination at the stage of recruitment.

How is the Code going to be enforced?

The four Acts being subsumed under the Code specify that inspectors will be appointed to
ensure that the laws are being enforced properly. These inspectors may carry out surprise
checks, examine persons, and require them to give information.
The Code introduces the concept of a ‘facilitator’ who will carry out inspections and also
provide employers and workers with information on how to improve their compliance with
the law. Inspections will be carried out on the basis of a web-based inspection schedule
that will be decided by the central or state government.
Problems faced by the labour movement post Independence
• Uneven growth: They are concentrated in the metropolises, largely catering to
organised sector. Rural Agricultural labour and small-scale labour are grossly
underrepresented.
• Low membership: Trade union membership is growing, but the vast majority of
India’s labour is not part of any trade unions. This reduces their collective bargaining
power.
• Weak financial position: Membership fees are set too low (25 paise) by the Trade
Union Act, 1926. They are particularly disadvantaged against corporate lobbying
groups that are flush with cash.
• Political leadership: Careerist politicians and vested political agenda mean that
worker interests are sidelined. Since the leadership may not be from the labour
force, they are held captive to party politics. This lead to further exploitation.
• The multiplicity of unions: Bargaining power is diluted and it is easy for employers to
divert the attention of the labour.
• Inter-union rivalry: There are conflicts of interest and party politics between the
unions.
• The problem of recognition: Employers are under no obligation to give them
recognition. This means that docile unions get recognition and genuine ones may be
sidelined.
• Diverse nature of labour: Most unions don’t have properly differentiated
organisational structure to cater to different classes of labour. Eg: Differences
between agricultural, formal and informal labour.
• Lack of public support: Especially post 1991, trade unionism is looked down as an
impediment to growth and development. This has led to a general ebbing of the
movement across the country.

Major Labour Unions and their Political Affiliation

1. All India Trade Union Congress – Communist Party of India.
2. Indian National Trade Union Congress – Indian National Congress.
3. Bhartiya Mazdoor Sangh – Rashtriya Swayamsevak Sangh (Bharatiya Janata Party).
4. Centre for Indian Trade Unions – CPI(M).
5. Hind Mazdoor Sabha – Samajwadi Party.
6. Self Employed Women’s Association – Unaffiliated.
7. United Trade Union Congress - Revolutionary Socialist Party.