5th Annual International Conference no Law, Regulations and Public Policy (LRPP 2016)
IMPACT OF GLOBALISATION &
LIBRALISATION ON LABOUR MARKET
REGULATORY LAWS IN INDIA*
Dr. Suresh V. Nadagoudar**
I. Introduction:
The Constitution of India, particularly
under Directive Principles of State Policy,
provides the basic policy framework for the
industrial relations policy of the Government.
The preamble of the Constitution promises to
secure justice “Social, Economic and Political”
to all the citizens. The chapter on fundamental
rights guarantee its citizens several rights such as
right to freedom of association, rights against
exploitation, prohibition of beggar and other
similar forms of forced labour and prohibits
employment of children below 14 years in any
factory or mine. A combined reading of relevant
fundamental rights and Directive Principles of
State Policy makes it clear that the framers of the
Constitution made it obligatory for the state to
promote industrial development, peace, harmony
and also labour welfarism.
The following observation of the
Supreme Court of India in one of the decided
cases clearly indicates the importance given to
the Preamble, Fundamental Rights and Directive
Principles.
* Paper presented at 5th Annual International
Conference on Law, Regulations and Public Policy
(LRPP-2016) 30-31 May 2016, Singapore,
organized by Global Science and Technology
Foundation (GSTF).
** M.A., LL.M., Ph. D, Professor, Principal and Dean,
Faculty of Law, (Specialised in Labour Law) P. G.
Department of Studies and Research in Law, University
Law College, Bangalore University, Jnanabharati,
Bangalore -560056, INDIA
.
5th Annual International Conference on
Law, Regulations and Public Policy (LRPP 2016)
Copyright © GSTF 2016
ISSN 2251-3809
doi: 10.5176/2251-3809_LRPP16.31
“Above all, in deciding any case which
may not be covered by authority, our courts have
before them the bacon light of the preamble to
the Constitution. Lacking precedent, the court
can always be guided by that light and the
principles underlying the fundamental rights and
the directive principles enshrined in our
Even the recent judicial
pronouncements declared that the labour welfare
legislations intended to implement the above
directives ensure to the working class the right to
live with human dignity, which is an integral part
of Article 21 of the Constitution. 1
In order to give effect to the principles
enshrined in the Constitution for the promotion
of industrial growth, industrial peace and
harmony and welfare of the working class, the
Government has enacted several legislations.
However, now as a result of
Globalisation competition among nations to
attain higher industrial productivity and to attract
more investments in industry is becoming more
intense. Industrial growth and economic
development have been receiving the highest
priority in the agenda of policy perspectives of
every nation, particularly in the developing
countries. India, being one of the developing
countries, has kept its doors wide open
for foreign investments in all sectors of
industry by liberalising its policies of industrial
controls and the licensing system. One of
the important conditions for succeeding in
these objectives is to provide a peaceful
industrial relations climate.
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In this background, the paper intends to i) Industrial Disputes Act, 1947: This Act
highlight the important labour market provides for regulation of industrial relations and
regulatory laws in India and their effect machinery for settlement of industrial
on employment, causes for dilution of disputes, which occurs between workmen and
employers. Industrial disputes cannot be
labour laws. The paper concludes with
ruled out forever, nor can be wished away. In the
suggestions to achieve the desired words of Barnard Gourney, there is only one
objective of promotion of peaceful and place in the world which is free from conflicts and
harmonious industrial relations, which that is the graveyard2. This law protects the
is a must for industrial growth of every workmen against illegal Lay-off, Retrenchment
country. and closure of industry and also provides for
payment of compensation to workmen under
certain circumstances and thereby ensures security
of employment. The law also regulates the strikes
and lockouts and thereby protect the interest of
II. An Overview of important Labour Market both employer and workmen from hardship and
Regulatory Laws in India: loss. Further, this law provides for settlement of
The Parliament has enacted several disputes through negotiation, conciliation,
labour legislations to regulate employment arbitration and adjudication. The law also
conditions and to govern the industrial relations. empowered the appropriate
Some of the important such legislations are as
under.
Government for regulation of
industrial relations to maintain peaceful and
i) Trade Unions Act, 1926: This Act
harmonious relations. Industrial
conferred rights on workmen and employers to
iii) Employment (Standing Orders) Act, 1946: This
form Trade Unions and also to get them
registered under the law. The Trade Unions plays
Act deals with the service
a pivotal role in regulation of industrial relations
conditions of
the employees
and champion the cause of workmen. The Unions
employed in factories, industries and
can effectively bargain with the employer and get
establishments employing 100 or more than
their demands fulfilled without straining the
100 workers. It prescribes the working
industrial relations. However, lack of statutory
hours, leave, holidays; shift working etc. This
provision in the central Act for recognition of
law also deals with the acts which constitutes
Trade Unions for the purpose of collective
misconduct and disciplinary action for such acts.
bargaining is causing hindrance for successful
As such it protects the interest of both
collective bargaining in India. As such
employees and employers.
recognition must be made compulsory. Further,
the Trade Unions in India are suffering from
many other problems such as inter Union and iv) Contract Labour (Regulation and
intra-union rivalry, outsiders’ leadership, Abolition) Act, 1970: This Act prohibits
financial problems etc. contract employment in case if the
employment is perennial in nature and
regulates the conditions of employment of
employees whose employment is considered
as non-perennial in

2
1
PUDR v. Union of India, Bandhuva Quoted in Livisbitz and Nikitinshky, An
Muktimorcha & Neeraja Chowdary cases. Outline of Soviet Labour Law, 1977,p-193

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nature by imposing certain restrictions The Congress Government, which came to

on both the contractor and the principal power in 1991, introduced the New Economic
employer. Thus the law helps to Policy (NEP) with the main thrust of
prevent exploitation of labour by the liberalization, privatisation and globalisation of
employers. national economy. All controls on industry have
been lifted and the doors are thrown open for
v) Wage Regulation Laws in India: The foreign investments even in vital infrastructure
Minimum Wages Act, 1948, The Payment sector. During the last few years of the operation
of Wages Act, 1936 and Equal of the NEP, lakhs of industrial units have been
Remuneration Act, 1976 are the major wage closed down rendering millions unemployed.
regulatory laws. The Minimum Wages Act Voluntary retirement schemes, known
deals with the minimum wage that has to be fashionably as “golden handshake”, are in vogue
paid to the workmen employed in different in many public sector industries, which are set to
categories of employment. The reduce their staff strength.
payment of wages Act provides for The employers, whose co-operation is
regular payment of wages and prohibits essential for the successful implementation of the
illegal deduction from wages of the workmen NEP, have taken the advantage to demand exit
and Equal Remuneration Act provides for policy and a right to hire and fire a free hand in
payment of equal pay for equal work to dealing with workers. They want more curbs on
both male and female workmen. Thus all strikes and freedom to lay-off, retrench or close
these laws aimed to protect the workmen down without any restrictions.
from exploitation and champion the cause
of aspiration of the Constitution. The trade unions are busy fighting
vi) Social Security Laws: Apart from against the evil effects of NEP on workers. Their
aforementioned employment and wage concentration is now to protect the jobs of
regulation laws, we have several laws workers through prevention of closures and
intends to enhance the welfare and retrenchments. The government just does not
wellbeing of the working class, bother to take their opinion in the matter of NEP.
particularly those who are working in The public sector in the country is slowly getting
factories, industries and other establishments dismantled. The public sector is programmed to
i. e., employed in so called go private in future. This situation clearly
organised sector. The important social indicates the resurrection of the laissez faire
security laws in India are Factories Act, policy.
1948, Provident Fund and Misc.
Provisions Act, 1952, E.S.I, Act,1948, IV. Second National Commission on Labour:
Maternity Benefits Act,1961 and Payment of
Gratuity Act, 1972 etc. The Second National Commission on
Labour was asked to take note of the
developments that have followed liberalization
and globalization, the demands that they make,
and the effects they have on our working class,
our industry, our Government and all sections of
our society; and to make recommendations on
the law and systems that we need to offer
III. The New Economic Policy: protection and welfare of our working

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population, and increase the economic efficiency
and competitiveness of our industry.
Further, the specific terms of reference
of the Second National Commission on labour
were. i) to suggest rationalization of existing
laws relating to the labours in the organized
sector and ii) to suggest an umbrella legislation
for ensuring a minimum level of protections to
the workers in the un-organized sector. 3 The
commission has submitted its report to the
Government on 29th June 2002.
Recommendations of Second NCL
The commission has made certain
recommendations for introduction of changes in
Industrial Disputes Act and Trade Unions Act.
And also proposed for enactment of new
legislation called Labour Management Relations
Act-2002, by consolidating Industrial Disputes
Act, 1947, Trade Unions Act, 1926 and
Industrial Employment (Standing Order) Act,
1946, and made applicable to establishment or
undertaking wherein 20 or more workers are
employed. Further the Commission
recommended that all the establishments
employing less than 20 workers would be taken
out of the purview of the general labour laws and
brought within the ambit of a separate legislation
called “ The Small Enterprises (Employment
Relations) Act, 2002 to cover all aspects of
employment including wages, social security,
safety, health etc.,
1) Retrenchment of Workmen: The
Commission has recommended for removal of
the present requirement of obtaining the prior
permission of the appropriate Government for
retrenchment of workmen in an industry
employing more than 100 workmen and
observed that prior permission is not necessary
for retrenchment in an establishment of any
3
Second National Commission on Labour
Report, (2002), Akalank Publications Vol.-I, p.7.
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employment size. It is recommended that
retrenchment of workmen should be
accompanied by adequate Compensation. This
Compensation should be different for charitable
institutions, sick and running companies. In case
of sick ones (defined as erosion of capital for 3
years of filing for liquidation), the retrenchment
compensation should be 30 days wages for every
completed year of service. In case of charitable
institutions and non- profit organizations,
retrenchment compensation should be 45 days
wages for every completed year of service and
for running companies the compensation should
be 60 days wages for every completed year of
service. Further, on retrenchment, the workers
would also be entitled to two months notice or
pay in lieu of notice.4
2) Lay off: The commission has recommended
for removal of prior permission of appropriate
Government for lay-off of workmen in an
establishment of any employment size. It would,
however recommend that, in case of
establishment employing 300 or more workers
where lay-off exceeds one month, such
establishments should be required to obtain post
facto approval of the appropriate Government. 5
However the commission has recommended for
continuation of the present system of 50% wage
in case of lay-off 6
3) Closure: The Commission has recommended
that the provisions of Chapter V–B of Industrial
Disputes Act pertaining to permission for closure
should be made applicable to all establishments
to protect the interests of workers in
establishments which are not covered at present
by this provision if they are employing 300 or
more workers. The provision for permission to
close down an establishment employing 300 or
more workmen should be made a part of chapter
4
Supra note 3, p. 44.
5
Ibid.
6
Ibid.
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V-A and chapter V-B should be repealed. Commission has also recommended that the “
Further, such employer shall make an application Go–Slow “ and “ Work to rule “ must be
for permission to the appropriate Government 90 regarded as misconduct.9
days before the intended closure and also serve a
5) Conciliation, Arbitration and
copy of the same on the recognized negotiating
Adjudication: The Commission has
agent. If the appropriate Government within 60
recommended to make the conciliation more
days of receipt of application does not grant
effective and proposed for conferring of
permission, the permission will be deemed to
sufficient authority to enforce attendance at
have been granted. On Closure of an
proceedings of conciliation. It is also
establishment the compensation should be 30
recommended that reporters should not be
days wages for every completed year of service
appointed as conciliation Officer.10
in case of sick industry, which has continuously
The Commission has favoured the
run into losses for the last 3 financial years or
arbitration as a method of settlement of disputes
has filed an application for bankruptcy or
than adjudication; though adjudicatory method is
winding up and other non profit bodies like
considered as inevitable in determining disputes
charitable institutions etc., and 45 days wages for
between management and labour. Named
every completed year of service in case of profit
arbitrator or panel of arbitrators of all disputes
making organizations. It is also provided that,
arising out of interpretation and implementation
the workers dues should be paid prior to the
of the settlement and any other disputes also
closure of the unit, instead of waiting for the
recommends it for incorporation of a clause
liquidators to liquidate the company7
providing for arbitration. The panel of
4. Strikes and Lock-Outs: The Commission has
arbitrations may consist of persons having
recommended that strike could be called only by
experience in labour management relations,
the recognized negotiating agent and that too
labour lawyers, trade union functionaries, retired
only after it had conducted a strike ballot
judicial officials etc.,11
amongst all the workers, of whom at least 50%
support the strike correspondingly, the employer
The Commission has recommended for
also is not allowed to declare lock-out except
development of a integrated adjudicatory system
with the prior approval at the highest level of the
in Labour matters, consisting of labour courts,
management and except in case of actual or
Lok Adalats and labour relations commissions
grave apprehension of physical threat to the
(LRC) with a power to deal with not only
management or to the establishment. It is also
matters arising out of employment relations but
recommended that illegal strike or illegal lockout
also trade disputes in matters such as wages,
should attract similar penalties. A worker who
social security, safety and health, welfare and
goes on an illegal strike should lose three days
working conditions etc. It is recommended for
wages for every day of illegal strike, and the
establishment of Labour Relations Commission
management must pay the worker wages
at the State, Central and National level.12
equivalent to three days wages per day of the
duration of an illegal lockout. Further,
recommended that the union, which leads an
illegal strike, must be de-recognized and
debarred from applying for registration or
9
reorganization for a period of 2-3 years. 8 The Ibid ., p. 39.
10
Ibid., p. 45.
7 11
Ibid. Ibid.
8 12
Supra note 3, pp. 46–47. Ibid.

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The Commission has recommended for
removal of the present system of publication of
awards of labour courts etc in the official Gazette
and advocated that they shall be deemed to have
come into effect unless an appeal is preferred
within the prescribed period it is recommended
that labour courts shall be empowered to grant
interim relief in cases of extreme hardship. The
Commission has also recommended for
providing of legal aid to workers and trade
unions that are unable to hire legal counsels and
for levy of token court fee in respect of all
matters coming up before labour courts and
labour relations commissions.
The other important recommendations
of the commission includes: i) appointment of
bi-partite or tri-partite committees in the area of
industrial commercial activities to function as
watch dogs to ensure implementation of labour
laws and to bring to the notice of administration
in any cases of violation., ii) Establishment of all
India Judicial Service and iii) All India Labour
Administrative Service to ensure effective and
quick disposal of cases and proper
implementation of laws respectively. 13
6) Re-Defining of Workman: The Commission
has recommended for removing highly paid
employees, who takes independent decisions,
such as airline pilots, from the definition of
“Workmen”. The Commission suggested an
alternative that the Government should fix a cut–
off limit of remuneration which is substantially
high enough i.e Rs.25, 000/- per month, persons
paid less than Rs.25, 000/- per month shall be
treated as workmen. The laws would entitle him
right to work of his choice, right against
discrimination, prohibition of child labour,
access to just and humane conditions of work,
right to social security, protection of wages
including the right to guaranteed wages, right to
redressal of grievances, right to organize and
form trade unions and right to collective
13
Ibid.
101
bargaining and the right to participate in the
management.14
7) Recommendation on Trade Union Laws:
The Commission has recommended for inclusion
of a provision to enable workers in the un-
organized sector to form trade unions, and get
them registered even where an employer–
employee relationship does not exist or is
difficult to establish, and the provision
stipulating 10% of membership shall not apply in
their case.15 Further, the commission has
recommended for reference of disputes relating
to inter–union or intra -union to the labour courts
for adjudication. The commission has
recommended for effective collective bargaining
and to promote settlement of disputes through
dialogue and negotiations. It is also
recommended for selection of negotiating agents
for recognition on the basis of the check off
system, with 66% entitling the union to be
accepted as the single negotiating agent, and if
no union has 66% support, then unions that have
the support of more than 25% should be given
proportionate representation on the college.
Check off system in an establishment employing
300 or more workers must be made compulsory
for members of all registered trade unions.
Further, it is recommended that recognition once
granted, should be valid for a period of 4 years,
to be co-terminus with the period of settlement.
No claim by any other trade Union
/Federation/Center for recognition should be
entertained till at least 4 years have elapsed from
the date of earlier recognition .The individual
workers authorization for check off should also
be co-terminus the tenure of recognition of the
negotiating agent or college16.
Criticism of Recommendations by the Trade
Unions: Many national level Trade Unions have
criticized these recommendations of the
Commission as anti labour and made to facilitate
14
Supra note 3, pp. 36-37.
15
Ibid ., p.40.
16
Ibid., pp. 40–41.
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globalization and liberalization policy of the citizens. As such proper regulation of industrial
Government. Further, it is said that the relations is necessary for maintenance of
proposals strengthen the ‘Hire and Fire’ policy industrial peace and harmony and in the interest
of the employers and take away the legal of the society at large.
protection given to the workers in case of lay -
Further, there are no evidences that it is
off, retrenchment, closure etc. Except some
the employment and wage regulation laws in
proposals of the Commission, the proposals such
India and other countries which have lead to
as 1) Total removal of prior permission to lay-off
dilution of labour laws or less effective
and retrenchment 2). Raising the limit from 100
implementation of labour laws. In pact, the
to 300 for applicability for closure.3) Chapter V-
dilution of labour laws is only to facilitate
B is to be repealed progressively 4) Post
globalization and liberalization policies of the
permission after 1 month of lay-off in
government and less implementation of labour
establishments with more than 300 workers 5).
laws is because of corrupt practices of the law
Varying scale of compensation for sick units and
enforcement agencies. It is said that though the
profits making units. 6). If the Government
department of labour is established to implement
within 60 days of the receipt of application does
these laws and to look after the welfare and
not grant permission the permission will be
wellbeing of workmen, it seems they are more
deemed to have been granted are said to be
interested in their won and employer’s welfare
devoid of any rationale. That is the reason why
rather than the employees. The political
even after elapse of several years after
interference on industrial lobby in law
submission of the report by the commission, no
enforcement has added fuel to the fire.
steps have been initiated for implementation of
the recommendations. The informalization of workforce in
formal or organized sector is not because of
V. Effect of Labour Market Regulations on employment or wage regulatory laws but it is
Employment: solely because of Governments apathy and
failure of law enforcement machinery to
It is rather illogical and imprudent to
implement these laws effectively. Though we
say that the above discussed employment
have several labour legislations the percentage of
protection, wage regulation and social security
workforce covered is only 6% and remaining
legislations in India have hindered job creation.
94% of the workforce in unorganized sector
Since majority of workmen, even in organized
doesn’t have any protection from any of these
sector are illiterate and ignorant about their
laws and are still subjected to exploitation.
rights, they can be easily exploited by the
However, the Unorganized Workers’ Social
employers. Those who control the industry have
Security Act, 2008 was enacted to provide some
a natural tendency of multiplying their wealth
kind of social security measures to the workers
and if this tendency is not checked the rich grows
in the unorganized sector and the Act needs to be
on richer and the poor becomes poorer. This
implemented properly.
economic disparity leads to struggle between
haves and have knots, where the latter is VI. Conclusion and Suggestions:
exploited. The liberalization and Globalization Despite protective measures, beneficial
should not be at the cost of throwing our legislations and sympathetic judicial
principles and values enshrined in the pronouncements the workers are still made to
Constitution, which aimed to establish socialistic suffer and continue to be exploited. Thus there is
state, wherein there is equitable distribution of no basis for the argument, if any, that
wealth and means of production and also employment and wage protection laws hinder job
provides to subserve the common good of all

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creation. The governments attempt for dilution of

labour laws is only to facilitate liberalization and
globalization even at the cost of undermining the
very purpose of enactment of our labour
legislations and the principles and values
enshrined in the constitution and also human life.
Informalisation of workforce only leads to
exploitation and resurrection of the policy of
“Hire and Fire”. However, even the workers in
the formal sector should discharge their work
with utmost diligence, sincerity and commitment
and indiscipline should be seriously looked into
to ensure efficiency and productivity.
Therefore, it is suggested that, 1)
Recognition of Trade Unions by the employers
shall be made compulsory by bringing suitable
amendment to the existing central law as it is
provided under some state enactments. 2) The
liberalization of labour laws should not be at the
cost of life and welfare of workers and the
employment protection given to the workmen
under existing labour legislations should be
continued to prevent exploitation of labour. 3)
There should be effective implementation of all
these laws by expanding their scope and
application wherever necessary. 4) Steps are to
be taken for creation of awareness among
workers about their rights 5) Indiscipline on the
part of workmen should be sternly dealt with.
These measures would help to uphold the rights
of workmen and prevent exploitation and also
maintain peaceful and harmonious industrial
relations, which is a must for industrialization of
any country.

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