MP labour law changes: Relaxed licence norms for contract workers

Labourers work at a construction site amid dense fog, on the outskirts of Jammu. Photo: PTI
While companies will be able to take a licence for hiring contract workers for a longer duration, recognition of trade unions for collective bargaining will no longer be possible for key industrial sectors, including automobile and textiles, in Madhya Pradesh.

According to a notification issued by the state government on May 5, as many as 11 categories of industries will be exempt from the Madhya Pradesh Industrial Relations (MPIR) Act of 1961. This includes textile, leather, cement, iron and steel, electrical goods, sugar, electricity, public motor transport, engineering including manufacture of motor vehicles, among others.

The state government has said that “the validity of licence will be for the period as applied for” under the the Contract Labour (Regulation and Abolition) (Madhya Pradesh) Rules, 1973. Right now, contractors, who help companies get contract workers, have to obtain multiple licences for different firms within a state. This licence is applicable for a period of one year and contractors have to pay a fee every time, according to the number of workers employed.

The Contract Labour (Regulation and Abolition) Act of 1970 comes into force when a contractor provides at least 20 contract workers to companies.

“The process of obtaining a licence for hiring contract workers through manpower agencies is nightmarish. Such companies have to obtain different licences in all states and for all firms and the processes are cumbersome. Every time the headcount changes, contractors need to apply for updating their licence because the fee varies and that is no less than taking a fresh licence. This is regulatory cholesterol,” Rituparna Chakraborty, founder trustee and former president, Indian Staffing Federation, which helps firms in hiring contract wokers, said.

The Madhya Pradesh government has disabled the applicability of a majority of provisions of the Industrial Disputes Act, 1947 for new manufacturing units that will come up in the next 1,000 days. Such companies will no longer be required to seek permission of the government to lay-off workers, but will still be required to do so for retrenchment and giving  retrenchment compensation to workers, failing which will attract penalty. This relaxation, however, will not be applicable to existing firms.

Significantly, the MP government has invoked a never-used-before provision in the ID Act, 1947 to make these changes

through an administrative order. In the past, the state governments approached the central government to seek changes to the law to suit their needs.

In labour law parlance, there is a slight difference between lay-off and retrenchment. Lay-off is temporary in nature, when workers cannot be given work for a temporary period of time, as against retrenchment. A lay-off can be for multiple reasons.

For instance, shortage of coal, power or raw materials, break-down of machinery or natural calamity – factors usually beyond the control of workers – under the present law.

One important condition for availing the exemptions under the ID Act is that the new “industries have to make adequate provisions for investigation and settlement of industrial disputes of workmen employed by them,” according to the notification.

The lay-off compensation (50 per cent of wages for 45 days) is given only in case the size of a firm is 50 or more in terms of the workforce.

The MPIR Act of 1961 gave recognition to trade unions and employers’ associations to act as a bargaining agent for settling disputes or engaging in a discussion related to terms of employment of workers in a particular industry at the local level. In MP, the 11 sets of industries will now be exempt from the law for an indefinite period of time.

While there is no provision for recognition of trade unions for collective bargaining in the central labour law governing them i.e. the Trade Union Act of 1926, some states such as West Bengal, Kerala, Maharashtra and Rajasthan have a separate rule for this purpose – which is aimed at ensuring peace and industrial harmony.

Many companies have multiple trade unions, which leads to a situation of inter-union conflict as well as a situation where the company owners also exploit the situation in their favour by dealing with unions, who have the least representation among workers, XLRI Jamshedpur professor and labour economist K R Shyam Sundar said. In some cases, managements refuse to engage with the unions as the Trade Union Act of 1926 is only meant to register them and protect them from criminal liability.

“The ID Act has a provision for government referring industrial dispute cases to the labour courts. This will no longer apply in MP. In such a situation, employees will have to go to civil jurisprudence. This is a repression of workers’ rights,” Sundar added.


For new firms

*Most of the provisions of the Industrial Disputes Act will not apply, including need to seek permission to lay-off
*Permission still required for retrenchment or closure of firms and to give retrenchment compensation
*No mechanism for raising industrial disputes

For existing firms

*No recognition of trade unions and employer bodies for collective bargaining
*Term of licence for hiring contract workers will be valid for more than a year

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