UNIT 6 LABOUR LAWS IN INDIA

Organised sector
LABOUR LAWS are covering 2 sectors
Unorganised sector

ORGANISED SECTOR UNORGANISED SECTOR

The organised sector is one that is The unorganised sector can be
incorporated with the appropriate understood as the sector, which is not
authority or government and follows its incorporated with the government and
rules and regulations. thus, no rules are required to be
followed.
related to business, government, latter include small scale operation,
industry involving large-scale petty trade, private business, etc. 
operations,
Various acts like Factories Act, Bonus Not governed by any act.
Act, PF Act, Minimum Wages Act etc
Regular monthly salary Daily wages
Job security No job security
Working hours fixed No working hours fixed
Employees get add-on benefits like No such benefit provided
medical facilities, pension, leave travel
compensation, etc.

Definition of Organised Sector

The sector, which is registered with the government is called an organised sector.
In this sector, people get assured work, and the employment terms are fixed and
regular. A number of acts apply to the enterprises, schools and hospitals covered
under the organised sector. Entry into the organised sector is very difficult as
proper registration of the entity is required. The sector is regulated and taxed by
the government.

There are some benefits provided to the employees working under organised sector
like they get the advantage of job security, add on benefits are provided like various
allowances and perquisites. They get a fixed monthly payment, working hours and
hike on salary at regular intervals.

Definition of Unorganised Sector

The sector which is not registered with the government and whose terms of
employment are not fixed and regular is considered as unorganised sector. In this
sector, no government rules and regulations are followed. Entry to such sector is
quite easy as it does not require any affiliation or registration. The government does
not regulate the unorganised sector, and hence taxes are not levied. This sector
includes those small size enterprises, workshops where there are low skill and
unproductive employment.
The working hours of workers are not fixed. Moreover, sometimes they have to work
on Sundays and holidays. They get daily wages for their work, which is
comparatively less than the pay prescribed by the government.

LA B O U R LA W S

INDUSTRIAL RELATIONS

WAGES/SALARY

SOCIAL SECURITY

INDUSTRIAL RELATIONS
Nature of Industrial Relations

Industrial relations is always a mixture of cooperation and conflict. However

much cooperation may be sought as an organizational objective some conflict will
always remain. There are at least three reasons for this

 1. Both the groups (labour and management) develop different orientation

and perceptions of their interest. They also develop generally negative images
about each other.
 2. There are no mutually accepted yardsticks or norms to tell to the two
groups how far they should go in the pursuit of their objectives in the
absence of norms both groups claim complete rationality for their demand.
 3. There is no neutral field for the groups to meet on. This means that
whenever the two groups meet each other for negotiation they bring with
them some carry over from the past besides their inherent distrust and
suspicion for each other.

Aspects of Industrial Relations

Industrial relation is concerned with the relationship between management and

workers and the role of regulatory mechanism in resolving any industrial dispute.
Specifically industrial relation covers the following areas.

 1. Collective bargaining.
 2. Role of management, unions and government.
 3. Trade union and labour legislation.
 4. Industrial relations training (employers ‘organization).

Scope of Industrial Relations

Industrial relations between employee and employer in their day to day work.

Hence, it is continuous relationship.

 1. Development of industrial democracy.

 2. Maximizing social welfare.
 3. Creating a mutual affection, respect and regard.
 4. Making a mutual link between the management and the workers.
 5. Stimulating production as well as industrial and economic development.

Meaning and Definition of Trade Unions

Trade unions are a major component of the modern industrial relations system

through trade unions occupies a unique position, yet their role is variously
interpreted and understood by different groups in the society.
 According to webs-a trade union is a continuous association of wage earners for
the purpose of maintaining and improving the conditions of their working lives.

According to Lester- a trade union is an association of employees designed

primarily to maintain or improve the condition of employment of its members.

Nature of Trade Unions

According to the trade union act, 1947, a trade union means any combination
whether temporary or permanent formed.

 1. Primarily for the purpose of regulating the relation between.

o     a. workmen and employers or
o     b. between workmen and workmen, or
o     c. between employers and employers objectives/ goals of trade
union
 2. Representation-trade unions represent individual workers when they
have a problem at work. If an employee feels he is being unfairly treated he can ask
the union representative to help sort out the difficulty with the manager or
employer. Unions also offer their members legal representation.
 3. Negotiation- negotiation is where union representatives discuss with the
management issues which affect people working in an organization.
 4. Member services—during the last few years, trade unions have increased
the range of services they offer their members.
o     a. Education and training.
o     b. Legal assistance.
o     c. Financial discount.
o     d. welfare benefits.

Meaning and Definition of Grievance

Grievance can be defined as any discontent or dissatisfaction with any aspects of

the organization.

According to prof. Jucius- grievance is any discontent or dissatisfaction whether

expressed or not whether valid or not arising out of anything connected with the
company that an employee thinks believe or even feels is unfair unjust or
inequitable.

According to Keith Davis.-grievance is any real or imagined feeling of personal

injustice which an employee has concerning his employment relationship.

According to beach- grievance is any dissatisfaction or feeling of injustices in

connection with one’s employment situation that is brought to the notice of the
management.
 According to dale Yoder- grievance is a written complaint field by an employee and
claming unfair contract.

Characteristics of Employee Grievances :

 » a grievance may be written or verbal.

 » a grievance may be voiced or unvoiced.
 » a grievance refers to any form of discontent or dissatisfaction with an
aspect of the organization.

Causes/sources of Employee Grievance :

1. Grievance resulting from working conditions

    a) Tight production standards.

    b) Poor relationship with the supervisor.

    c) Bad physical conditions of work places.

2. Grievance resulting from management policy

    a) Overtime

    b) Leave

    c) Transfer

3. Grievance resulting from alleged violation of

    a) Past practice

    b) Company rules

    c) Central or state laws.

Meaning and Definition of Industrial Disputes

An industrial dispute refers to any disagreement in industrial relations which may

be in the form of a strike and or other form of industrial action between employers
and employee.

According to the industrial dispute act, 1947, industrial dispute mean any dispute

or difference between employers and employers or between employers or workmen,
organization or between workmen and workmen which is connected with the
employment or non-employment or with the condition of labour of any person.
 Nature and scope of Industrial disputes :

 1 Industrial conflict is a human conflict it is just one aspect of the general

conflict inherent in the capitalist society based upon the pursuit of self interest in
the economic life by every individual and the group to which he belongs.
 2. The coming together of workers motivated by their urge of obtaining the
highest possible wages and the owners of capital motivated by profit maximization
is the basic cause of industrial conflict in the capitalist economic system.
 3. Conflict is like the conflict between any buyer and seller. The seller seeks
to sell his commodity at the highest possible price that he can extract and the
buyer seeks to pay the lowest possible price.

Forms of Industrial disputes :

 1. Strikes—strikes are a spontaneous and concerned withdrawal of labour

form production temporarily in order to demonstrate mass reaction to injustice.
 2. Lockout—lockout is the counter part of strike. If the weapon available to
the employer to close down the factory till the workers agree to resume work on the
conditions laid down by the employer.

Strikes and lockouts are the last resort actions taken by the employees and
employers respectively to ensure that both get what they are demanding for. They
are said to be the last resort after conciliation measures have deemed unfruitful.

Strikes happen when employees agree to stop working as a way of compelling the
employer to hid to their demands while lockouts happen when employers close
down the workplaces to bar employees from working with aim of getting employees
to adjust to their demands as well.

The law gives room for strikes and lockouts to take place in industries on condition
that they are peaceful causing no harm to the society and no vandalism to public
or industrial property by the Industrial Disputes Act, 1947.

Strikes are not allowed

 The employee has not given a notice of the strike within six weeks before
commencing the strike
 Before the end 14 days after giving the notice
 Or when no proper notice at all is provided

Lockouts are not allowed

 The employer has not given a notice of the strike within six weeks before
commencing the strike
 Before the end 14 days after giving the notice
 Or when no proper notice at all is provided

When this proper route is not followed by the employee and employer then the
strikes are considered to be illegal.

WAGES AND SALARY IN INDIA

Our Constitution enjoins on the Government to endeavour to secure of work
ensuring a decent standard of life and full enjoyment of leisure, social and cultural
opportunities. Minimum Wages Act, 1948 was passed to provide fixing minimum
wages in certain employments and provisions of the Act are intended to achieve the
object of doing social justice to the workers employed in schedule employment by
prescribing minimum rates of wages for them.

Along with above mentioned Act, there is the Payment of Wages Act, 1936 which
guarantees payment of wages on time and without any deductions except those
authorised under the Act.

The provisions of the Act are duly applicable to the contract labour employed by
any factory or establishment if the employment in which they are engaged is
otherwise covered by the Payment of Wages Act.

As per the manner and procedure mentioned under the Minimum Wages Act, 1948
for fixation and revising of minimum wages, the Government appoints a committee
which consists equal number of representatives of employers and employees in the
scheduled employment and independent persons not exceeding one-third of total
number nominated by Government. Committee makes the recommendation to the
Government and on acceptance will be published in the Official Gazette and will
come into force from the date of notification.

As per the provisions under Payment of Wages Act, 1936 wages needs to be paid-

 Before the expiry of the 7th day after the last day of the wage period, where
there are less than 1000 workers employed and in rest case on the 10th day;
 In current coin or currency notes and by cheques or by crediting the wages
in the employee’s bank account after obtaining his written authority;
 On a working day;
 Before the expiry of the second day, to the person whose employment is
terminated.

Every employer shall be responsible for the payment of all wages required to be
paid under the Payment of Wages Act, 1936 to persons employed by him and in
case of persons employed-

 In the case of contractor, a person designated by such contractor who is

directly under his charge;
 A person designated by the employer as a person responsible for complying
with the provisions of the Act

Minimum Wages Act, 1948

The Minimum Wages Act, 1948 (the Minimum Wages Act) provides for fixing of
minimum rates of wages in certain employments. The minimum wages are
prescribed by States through notifications in the State's Gazette under the
Minimum Wages Rules of the specific State.

In terms of the provisions of the Minimum Wages Act, an employee means (i) any
person who is employed for hire or reward to do any work, skilled or unskilled
manual or clerical, in a scheduled employment in respect of which minimum rates
of wages have been fixed; (ii) an outworker, to whom any articles or materials are
given out by another person to be made up, cleaned, washed, altered, ornamented,
finished, repaired, adapted or otherwise processed for sale for the purposes of the
trade or business of that other person; and (iii) an employee declared to be an
employee by the appropriate Government.

The term "wages" has been defined to mean all remuneration capable of being
expressed in terms of money which would, if the terms of the contract of
employment express or implied were fulfilled, be payable to a person employed in
respect of his employment or work done in such an employment and includes
house rent allowance but does not include:

The value of:

 Any house accommodation or supply of light, water and medical attendance;

or
 Any other amenity or any service excluded by general or special order of the
appropriate Government;
 Any contribution paid by the employer to any personal fund or provident
fund or under any scheme of social insurance;
 Any travelling allowance or the value of any travelling concession;
 Any sum paid to the person employed to defray special expenses entailed on
him by the nature of his employment; or
 Any gratuity payable on discharge.
 Further, the Minimum Wages Act requires the employer to pay to every
employee engaged in schedule employment wages at a rate not less than
minimum rates of wages as fixed by a notification without any deduction
(other than prescribed deductions, if any).

Payment of Bonus Act, 1965

The Payment of Bonus Act, 1965 (the "Bonus Act") provides for the payment of
bonus to persons employed in certain establishments in India either on the basis of
profits or on the basis of production or productivity and is applicable to every
establishment in which 20 or more persons are employed and to all employees
drawing a remuneration of less than Rs 10,000. Those employees who have worked
for less than thirty days are not eligible to receive bonus under the Bonus Act. The
Bonus Act provides for the payment of bonus between 8.33% (minimum) to 20%
(maximum). However, for the calculation of bonus, a maximum salary of Rs 3,500
is considered.
SOCIAL SECURITY

The concept of social security is well reflected in the ILO definition. It can be taken
to mean the protection which society provides for its members, through series of
public measures, against the economic and social distress that otherwise would be
caused by the stoppage or substantial reduction of earnings resulting from
sickness, maternity, employment injury, unemployment, invalidity, old age and
death the provision of medical care and subsidies for families with children.

Broadly speaking the approaches of social security are three fold in nature:

(i) Compensation

(ii) Restoration

(iii) Prevention

(i) Compensation means income security during spell of risks because the

individual and his family not be subjected to a double calamity involving both
destitution and loss of life, health and work. Under worker compensation, workers
are compensated in case of any permanent disability reducing permanently or
temporary earning capacity of aggrieved employee. It is compensating a suffered
employees due to contingencies and unexpected mishaps by providing financial
support.
(ii) Restoration. It means giving individuals and their families the confidence that
their level of living and quality of life will not suffer as far as possible due to any
social and economic loss. “It aims at restoring the previous social and economic
status of the employee by providing financial and social help under different
provisions of social security Acts. Due to restoration of one’s previous status
financial position the self- confidence and self-esteem of the employee can be
maintained.”

Restoration mean reemployment and providing self-confidence through cure of

sick/injured employees.

(iii) Prevention. Social Security is a basic instrument of social and economic

justice among members of the society.” It not only aims at compensation and
restoration of one’s financial and social status; it further aims prevention of
mishaps, industrial injury and occupational diseases.
Prevention aims at avoiding loss of productive capacity due to sickness i/injure or
Unemployment.
Factory Act, Industrial safety Act and worker’s Compensation Act are helpful in the
preventions of different Industrial hazards leading to injury and occupational
diseases. Prevention is better than cure.”
There are several legislative acts that are providing social security to workers in
India. These legislations provide social security to workers from each and every
contingencies like risks and mishaps which they are exposed to:

(i) “Employee’s provident fund and Miscellaneous provision 1952: It emphasis on

employee’s pension and family pension.

As provident fund in India plays a major role in contributing the savings of the
employee, it is the responsibility of all the citizens to understand the basic
knowledge of provisions of the act. This article tries to explain the applicability,
contribution rates, various methods for calculation of contribution, types of
provident fund, taxability of contribution to various funds and so on.
Applicability of the Act:
(a) to every establishment which is a factory engaged in any industry specified in
Schedule I and in which 20 or more persons are employed and
(b) to any other establishment employing twenty or more persons or class of such
establishments which the Central Government may notify.
Wage limit for Contribution of Provident Fund:
Employees drawing basic salary up to Rs.15,000 have to compulsory contribute to
the provident fund and employees drawing above Rs.15,000 have an option to
become member of the provident fund.
Section 6: The contribution which shall be paid by the employer to the Fund shall
be 12% (Basic wages + dearness allowance + retaining allowance)
Components for calculation of contribution:
Provident Fund contribution is required to be made @ 12% on the ‘Monthly Pay’
which is understood as:
– Basic wages (as defined in Sec 2(b) of the PF Act),
– Dearness Allowance
– Cash Value of Food Concession
– Retaining allowance.

(ii) Payment of gratuity Act 1972. It provides reward for providing a decent and long
service of an employee towards his organization.

PENSION

In India there is an Act called as The Employees’ Pension Scheme, 1955 which is
applicable to all factories and other establishments to which the Employees’
Provident Funds and Miscellaneous Provisions Act, 1952 applies. This Scheme is
meant for members of the Provident Funds subscribing to Employees’ Provident
Fund Scheme, 1952 or any scheme exempted thereunder. The pension policy is
introduced as a social policy to the employees to survive their livelihood after the
age of retirement. This is a social benefit by which the employees do not need to
worry about their sustenance in their later stage of live.

There are two forms of membership availability under the scheme:

 Membership of the scheme under The Employees’ Pension Scheme, 1955 is

compulsory for – All Provident Fund subscribers including those employed in
Exempted Establishments contributing to the Employees’ Family Pension
Scheme 1971, and - To all new entrants to the Provident Funds Scheme,
1952 from November 16, 1995 onwards, automatically become members of
the Employees’ Pension Scheme.
 Membership under the scheme is also available on Optional basis – Existing
members of exempted and un-exempted Provident Fund Scheme as on
November 15, 1995 who are not members of the Family Pension Scheme,
1971. – Members of the Family Pension Scheme, 1971 who left employment
between April 1, 1993 to November 15, 1995 whether they have withdraw
their benefits of not. – Beneficiaries of Family Pension Scheme, 1971 who
have died on or after April 1, 1993.

The benefits that are provided to the members under the Employees’ Pension
Scheme, 1995 are:

 Pension Payment for life on Retirement/Superannuation.

 Pension Payment for life on invalidation during employment.
 Lump sum amount payment to the member by way of commutation of
Pension upto one third pension amount on optional basis.
 Capital return in option formula basis upon cessation of members pension
payment.

 The benefits that are provided to the family members upon the death of the
member are as follows:

 Payment of pension to spouse for life or until remarriage.

 Payment of pension to children (two at a time) till they attain the age of 25
years additionally along with pension payment to spouse. For total and
permanently.
 Orphan Pension to children at higher rate upon cessation of Pension
Payment to spouse.
  To Nominee / Dependant parents for life in case member is unmarried or
having no eligible family member.

The scheme covers members death risk unconditionally – irrespective of whether

such death occurs:

 While in service.
 Away from employment and not contributing to the fund, or
 After retirement as a pensioner.

CONSTITUTIONAL ARTICLES PERTAINING TO LABOUR LAW

FUNDAMENTAL RIGHTS

Article 14 commands State to treat any person equally before the law.
Equality before the law which is interpreted in labour laws as “Equal pay for Equal
work”. It does not mean that article 14 is absolute. There are a few exceptions in it
regarding labour laws such as physical ability, unskilled and skilled labours shall
receive payment according to their merit.
In the case of Randhir Singh vs Union of India, the Supreme Court said that
“Even though the principle of ‘Equal pay for Equal work’ is not defined in the
Constitution of India, it is a goal which is to be achieved through Article 14,16 and
39 (c) of the Constitution of India.

Article 16 deals with the equality of opportunity in matters of public employment.

Equal opportunity is a term which has differing definitions and there is no
consensus as to the precise meaning. The Constitution of India has given a wide
interpretation of this article. Equal Employment Opportunity (EEO) principles
apply to:
 Access to jobs
 Conditions of employment
 Relationships in the workplace
 The evaluation of performance and
 The opportunity for training and career development. 

There shall be equality of opportunity for all citizens in matters relating to

employment or appointment to any office under the State. The rule applies only in
respect of employments or offices which are held under the state. i.e., the person
holding office as subordinate to the state. The clause accordingly, does not prevent
the state from laying down the requisite qualifications for recruitment for
government services, and it is open to the authority to lay down such other
conditions of appointment as would be conducive to the maintenance of proper
discipline among the servants.

The qualification pointed may, besides mental excellence, include physical fitness,
sense of discipline, moral integrity and loyalty to the state.

The expression ‘ Matters relating to employment and appointment’ must include

all matters in relation to employment both prior and subsequent to the employment
which are incidental to the employment and form parts of the terms of the
conditions of the such employment.
Thus the guarantee in clause (1) will cover the (a) initial appointments, (b)
Promotions, (c) Termination of employment, (d) Matters relating to the salary,
periodical increments, leave, gratuity, pension, Age of superannuation etc. Principle
of equal pay for equal work is also covered in section 16(1).

Right to Freedom Article 19: Protection of certain rights regarding freedom of

speech, etc.- (1) All citizens shall have the right- (c) to form associations or unions;

Right against Exploitation Article 23: Prohibition of traffic in human beings and
forced labour.- (1) Traffic in human beings and begar and other similar forms of
forced labour are prohibited and any contravention of this provision shall be an
offence punishable in accordance with law.

Forced labour refers to situations in which persons are coerced to work through

the use of violence or intimidation, or by more subtle means such as accumulated
debt, retention of identity papers or threats of denunciation to immigration
authorities.

Forced labour, also called Slave Labour, labour performed involuntarily and

under duress, usually by relatively large groups of people. Forced labour differs
from slavery in that it involves not the ownership of one person by another but
rather merely the forced exploitation of that person's labour.

Bonded labour Also known as debt bondage, bonded labour is a specific form of

forced labour in which compulsion into servitude is derived from debt. ...
Child labour, agricultural debt bondage, and bonded migrant labour are
persistent forms of modern slavery that fall under the Indian constitutional
definition of forced labour.

(i) in consideration of an advance obtained by him or by any of his lineal

ascendants or descendants (whether or not such advance is evidenced by any
document) and in consideration of the interest, if any, on such advance, or

(ii) in pursuance of any customary or social obligation, or

(iii) in pursuance of an obligation devolving on him by succession, or

(iv) for any economic consideration received by him or by any of his lineal
ascendants or descendants, or

(v) by reason of his birth in any particular caste or community, he would-- (1)
render, by himself or through any member of his family, or any person dependent
on him, labour or service to the creditor, or for the benefit of the creditor, for a
specified period or for an unspecified period, either without wages or for nominal
wages,

Article 24: Prohibition of employment of children in factories, etc.- No child below

the age of fourteen years shall be employed to work in any factory or mine or
engaged in any other hazardous employment.
LAW DEFINES CHILD LABOUR AS
under the Act, „Child‟ means a person who has not completed his fourteenth year
of age. Any such person engaged for wages, whether in cash or kind, is a child
worker. According to UNICEF, all the children not being provided education at a
school are considered as Child Labours.

AREAS WHERE CHILD LABOUR IS RAMPANT  Bidi making  Carpet weaving

Constitutional Provisions and Legislations for Child Labour in India 135  Garages
 As Servants at Homes  Farming  Building and construction industry  Tea Stalls
 Cement manufacture including bagging  Cloth printing, dyeing and weaving 
Manufacture of matches, explosives and fireworks.  Diamond Industry  Soap
manufacture  Tanning  Wool-cleaning  Manufacture of slate pencils (including
packing)  Shoe Polishing.

The Supreme Court held that “hazardous employment” includes construction

work, match boxes and fireworks therefore; no child below the age of 14 years
can be employed. Positive steps should be taken for the welfare of such children as
well as for improving the quality of their life.

Child Labour below age 14 years in any industry

14 to 17 years of age in non-hazardous industries

Working hours 4 to 5 per day

Salary should be equal to an adult working for 8 hours a day.

DIRECTIVE PRINCIPLES OF STATE POLICY

Article 39: Certain principles of policy to be followed by the State.- The State shall,
in particular, direct its policy towards securing- (a) that the citizens, men and
women equally, have the right to an adequate means of livelihood; (d) that there is
equal pay for equal work for both men and women; (e) that the health and strength
of workers, men and women, and the tender age of children are not abused and
that citizens are not forced by economic necessity to enter avocations unsuited to
their age or strength; (f) that children are given opportunities and facilities to
develop in a healthy manner and in conditions of freedom and dignity and that
childhood and youth are protected against exploitation and against moral and
material abandonment.

Article 41: Right to work, to education and to public assistance in certain cases.-
The State shall, within the limits of its economic capacity and development, make
effective provision for securing the right to work, to education and to public
assistance in cases of unemployment, old age, sickness and disablement, and in
other cases of undeserved want.

Article 42: Provision for just and humane conditions of work and maternity relief.-
The State shall make provision for securing just and humane conditions of work
and for maternity relief.
Article 43: Living wage, etc., for workers.- The State shall endeavour to secure, by
suitable legislation or economic organisation or in any other way, to all workers,
agricultural, industrial or otherwise, work, a living wage, conditions of work
ensuring a decent standard of life and full enjoyment of leisure and social and
cultural opportunities and, in particular, the State shall endeavour to promote
cottage industries on an individual or co-operative basis in rural areas.

Article 43-A: Participation of workers in management of industries.- The State

shall take steps, by suitable legislation or in any other way, to secure the
participation of workers in the management of undertakings, establishments or
other organisations engaged in any industry.