Labour codes – An analysis from the point of view of both the worker and the employer

Correspondence between Francesca Maria De Matteis (Sapienza Università di Roma, Erasmus student at University of Antwerp) and Anannyo Bhattacharjee (student at Xavier Institute of Social Service – Ranchi)

Dear Anannyo,

I hope that you are safe and that the current pandemic-related situation is not affecting your studies excessively. At the moment, I am in the middle of my exchange period in Belgium, but I am also a final-semester Italian Master’s student. In half a year, I will hopefully have graduated. It is quite easy to feel discomfort when I think about the struggle in the labour market worldwide. Moreover, my home country has reached one of the highest rates of unemployment – the Italian National Institute of Statistics registered a 9.5% rate – the highest it has ever recorded since the Second World War. From that moment on, the dichotomy of a male breadwinner and the female housekeeper started collapsing. Yet, the goal of perfect equality among genders is far from being reached.

After the health and economic crisis of the COVID-19 outbreak, the labour market has suffered one of the biggest downturns in recent world history. The most penalized workers have been part-timers and women. The former is also the main category relying on non-full-time employment. Inequalities, as a worldwide rising trend, and their policy implications, is my main academic research field of interest and I really hope that this might match and complement yours. The labour market is probably the main field that perfectly embraces law, economics and finance, sociology, public policy, schooling and education, political sciences and diplomacy.

According to empirical research on inequalities, the trend towards poverty is due to residuals. This fact made me think about how crucial the role of legislation is to guarantee a level playing field for both workers and employers. Indeed, what our societies must achieve is a fair balance between the bargaining power of capital and labour. Worldwide, capital is concentrated in very small percentages at the very top of the income distribution; while labour permeates the whole population. The activity of labour coders must be fostered by incentives, government spending and investments, but also by the spread of greater concern and awareness among all levels of society.

Italy is a Democratic Republic founded on work. This is stated in Article 1.1 of the Constitution of my country. As you can see, the very first sentence of our most important piece of national legislation highlights the centrality of the activity of work. Our Constitution entered into force in 1948, having been written in the aftermath of the Second World War, and since then the Italian legislator has strengthened the provision in labour codes, mainly through ordinary legislation. The Italian Civil Code dedicates the whole Libro Quinto to labour. Yet, quite surprisingly, Italy does not have a unified Labour Code. But Italy does have some ad-hoc labour institutions protecting workers, the retired and the unemployed.

Italy is one of the six countries that founded the European Union. Title IV of the Charter of Fundamental Rights of the European Union, along with Title IV of the Treaty on the Functioning of the European Union (TFEU), aims at protecting and facilitating the work activity of all European citizens from the most basic level, such as by defining the meaning of the word worker itself. Nevertheless, the definition of worker is under the hermeneutic monopoly of the Court of Justice of the European Union, which helps national courts to better understand and, hence, protect both workers and employers. Despite the differences and complementary roles of workers and employers in the labour market, which might very well be understood by everybody, it is quite controversial when it comes to attributing fair guarantees, rights and duties to each of them.

When I started thinking about the dualism between workers and employers, many arguments and counter arguments started arising in my mind, and immediately I started realizing how difficult the role of the labour legislator is. Workers have families, social lives and ambitions. Some of them might be working for passion and personal interest, some others just to earn a wage. Employers seem to be on the other side of the coin: concerned with profits, production and productivity. But are they not also workers, after all? Moreover, it is not very surprising how such arguments are mostly related to the sociological and social aspects of the labour market, and that the counterarguments mainly come from a specifically economic way of thinking.

The agency of the United Nations called the International Labour Organization (ILO) is what India and Italy have in common when it comes to labour law. Yet, I well understand how many differences there might be within and between countries. I would really like to delve deeper into this matter with you, but sadly the word counter runs fast.

Before concluding, I want to stress my concern about the struggle for decent work that so many countries of the world were already facing even before the COVID-19 pandemic. Now the list is even longer and the number of workers who have become unemployed or are performing much more marginal tasks in their working environment is higher every month. The current challenge is to give dignity back to people by guaranteeing them employment and social protection, both through labour-specific legislation and public policy activity.

I am really looking forward to reading your opinion and to learning something new from your experience and your studies on labour codes.

Take care,

Francesca

1-APRIL-2021, Antwerp

Dear Francesca,

Thank you for the letter, I am doing well here and I hope you too are doing fine during these tough times. It was indeed a pleasure to read your point of view on the labour scenario in Italy, as well as in general. Some of the points raised – especially those supporting equal pay for equal work without gender stereotyping have hit the nail right on the head; also, it was great to know that your research field also hovers around a similar space and that you also look to the labour market as a possible bridge to reach the ultimate goal.

I am currently pursuing my Post Graduate Diploma in Human Resource Management at Xavier Institute of Social Service, Ranchi. It is one of the premier institutions in the country when it comes to labour law/industrial relations, as it has been operating in these fields for the last 65 years. Prior to this, I had completed my undergraduate degree at Jadavpur University, Calcutta, in business management and had also worked briefly with the Human Resource Department of an Indian IT giant.

The reason for actually selecting this topic was something very close to my heart. India is currently going through a labour law renaissance. It may be of great interest for you to know that labour falls under the Concurrent List of the Indian Constitution. Therefore, both Parliament and state legislatures can make laws regulating labour. So, prior to these codes (which have not yet been implemented), we were still running under 100 state and 40 central laws regulating various aspects of labour, such as resolution of industrial disputes, working conditions, social security and wages.

With regard to solving this problem, the Central Government convened the second National Commision on Labour (NCL) headed by Mr Ravindra Varma, which presented its report in 2002 and recommended that all the central labour laws be combined into four or five codes so as to improve ease of compliance and ensure uniformity. With relation to labour laws, the NCL recommended the consolidation of central labour laws into broader groups, such as (i) industrial relations, (ii) wages, (iii) social security, (iv) safety and (v) welfare and working conditions.

In 2019, the Ministry of Labour and Employment introduced four Bills on labour codes to consolidate 29 central laws. These Codes regulate: (i) Wages, (ii) Industrial Relations, (iii) Social Security and (iv) Occupational Safety, Health and Working Conditions. The Code on Wages was passed by the Parliament and received the President’s assent in August 2019, and the draft rules thereof have been circulated by the Ministry of Labour and Employment for feedback, while the three remaining labour codes, i.e. the SS Code, the OSH Code and the IR Code, were passed by the Parliament on 23 September 2020 and received the President’s assent on 28 September 2020. All the above codes were supposed to be implemented from 1 April 2021, but the government has pushed the deadline back for some time as the country is dealing with a lot of other issues pertaining to both the second wave of COVID-19 and also related to these laws.

So, has the codification of these laws been a good move or a bad one? This has been a constant point of debate in a labour intensive country like India. At this point, I will provide you with a very basic understanding of the four codes, and in the coming weeks will provide some in-depth explanation of each code and how it is shaping up for both the employers and the employees.

1: So starting with the Code on Wages, 2019

The Code appears to be a well-intentioned piece of legislation which aims to balance the interests of the employer and the employee. Though the Code contains substantial portions of the repealed legislation, it makes a decent attempt to replace the obsolete provisions. The provisions of the Code should inspire confidence in the business community.

2: Code on Industrial Relations

The IR Code appears to be a step in the right direction in terms of providing a more simplified mechanism for dispute resolution. The introduction of a negotiating union/council should also assist in reaching amicable settlements between employers and workers more rapidly. By increasing the threshold for industries requiring prior permissions under the IR Code, more businesses will have freedom in relation to retrenchment of workers and closure of establishments. However, what remains to be seen is the effect of the IR Code on the workers’ right to strike.

3: Code on Social Security

The SS Code will subsume various existing labour laws in India. The SS Code has widened the coverage by including the unorganized sector, fixed-term employees and gig workers, platform workers, etc., in addition to contract employees. It will therefore be very important for establishments to assess the implications and revisit the compliance requirements under the SS Code, once it is brought into effect.

4: The Occupational Safety, Health and Working Conditions Code, 2020

The enactment of the OSH Code comes at a crucial juncture wherein the rights of workers have been debated heatedly in every forum and their plight has captured the spotlight during the pandemic. There is a clear impetus in the OSH Code to address the issues that have come to the fore, including that of inter-state migrant workers. Furthermore, there is an obvious shift towards the simplification of the compliance regime by the introduction of the single licence. Therefore, while the OSH Code has all the ingredients of well-rounded legislation, it is prudent to await its passage into the implementation stage before declaring it an overall success.

It is during this pandemic that the life of an Indian labourer was exposed to the outside world, in terms of the mass exodus that they had to undertake to survive. One of my core areas of concern has been the life of the inter-state migrant worker who moves all over the country just to survive and thrive. In the coming few weeks, I will share a closer glimpse of how the existing legislation largely failed to protect them and how the current codes can at least try to protect them, if certain rising concerns can be addressed.

I hope to hear back from you soon, also I hope this has helped you get some understanding of the current labour phenomenon that India is dealing with.

Take care,

Anannyo

5-APRIL-2021, Ranchi

Dear Anannyo,

Thank you very much for your inspiring and informative letter. Your detailed explanation of the main issues currently at stake in labour codes in your country helped me to find a connection between what I have read in books and news and from watching movies about India so far and what the reality is. Despite the difficulties imposed by the pandemic, I am sure that one day it will be possible to travel freely again, and indeed India is on my bucket list.

From your last letter, I can understand that one of the goals that the labour legislator is aiming for is to ease and facilitate the comprehension of the provisions that regulate the labour market within India. When I look in astonishment at the extremely low take-up rate of government benefits by both Italian and European citizens, I start wondering whether something is being overlooked in this process. The formality required by the law-making process is fundamental as far as the people involved in the debate are insiders, but what about common workers?

One further question arises strongly and clearly: How much can labour codes and labour market-related provisions help the average worker act for her rights – and moreover, the worker at the very bottom of the distribution – who might not be educated or skilled enough to read or understand them, but for whom they are enforced? The obvious answer would ultimately be that this is what the government, both at a central and especially at a local level, is there for.

We all know what an ideal and utopian society would look like, yet I am afraid this is not the case, and it will quite likely never be the case. What I personally think is that our societies deserve clarity, fairness and attention when dealing with labour market rules and labour codes, and every worker must be in a position to understand the legislation that protects them, whether they are employers or employed persons. Bureaucracy in Italy can be discouraging, and it may represent a disincentive to proper behaviour by workers.

Instead of providing you with more information, in this letter I tried to explain my point of view and my concerns a bit better. The labour market requires very articulated and precise regulation, but at the same time this needs to be accessible and understandable by everybody. Do you think that this is likely to be achieved soon in India? I am quite disillusioned by the current Italian situation. The European Union might be of help: to coordinate and to find a level playing field for all the 27 member states could, on the one hand, make the provisions easier to understand, or on the other hand, weaken the protection and the guarantees granted to workers.

I await your answer with interest and anticipation.

Take good care,

Francesca

9-APRIL-2021, Antwerp

Dear Francesca,

I read your letter with great enthusiasm, because I seriously enjoy the way that you articulate your thoughts, which makes me concentrate on areas that people would actually miss out on when it comes to the legislative stand point of any act or code. Also, I hope that everyone at your place is safe and sound during these uncertain times, and definitely once the World Order is restored back to the ‘Original Normal’ – Please do visit India, and allow us the privilege to host you.

Now getting down to the main context of discussion, it was surprising to learn that ‘Bureaucracy in Italy is very discouraging’, given the perception that runs high in India that our counterparts from First World countries tend to do a lot better in this regard. In terms of how the treatment of labour has been in India, it can be very well highlighted by the fact that we are still referred to as a ‘Developing Country’.

In recent times, with the second wave of COVID-19 hitting India, the fallacies in both the laws and their implementation have come to the fore again. As mentioned in my last letter, we are trying to amend our labour legislation in order to create something better, but it would amaze you to know that the real purpose for doing so is not based on improving the lives of the working class but mostly to create an image in the market of being an easy place to operate businesses.

I will highlight one area (among many) from the Code on Wages, 2019, that would actually showcase to you that this process has been more of a hasty composition of acts rather than a meaningful document of purpose.

The code seeks to consolidate and simplify four pieces of legislation — the Payment of Wages Act, 1936, the Minimum Wages Act, 1948, the Payment of Bonus Act, 1965 and the Equal Remuneration Act, 1976 — into a single code. The previous four pieces of legislation had a total of 119 sections; the new Code has 69 sections – barring a few new concepts, the new Code retains almost all provisions.

The penal provisions found hitherto in any piece of labour legislation have never had an impact on employers. In People’s Union For Democratic Rights and Others vs. Union Of India & Others, 1982 (Asiad case), the Supreme Court of India observed: ‘If violations of labour laws are going to be punished only by meager fines, it would be impossible to ensure observance of the labour laws and the labour laws would be reduced to nullity. They would remain merely paper tigers without any teeth or claws’.

But, curiously, a new provision (Section 52) has been introduced where an officer of the government will be given the power to impose a penalty in the place of a judicial magistrate. What is sought is that an essential judicial function is to be vested with the executive, in contravention of Article 50 of the Indian Constitution, where the State has been mandated to separate the judiciary from the executive in public services.

The point that I am trying to raise is very similar to the point raised by you in your previous text: that the labour market requires very well-articulated and precise regulation, which needs to be accessible and understandable by everybody, and sadly India is yet to reach a common ground in this regard, especially when the objective on which such policies were initiated has now been completely let go.

Take care,

Anannyo

14-APRIL-2021, Ranchi

References

P. Craig, G. de Bùrca, EU Law, Text, Cases and Materials, Seventh Edition, UK Version, Oxford

Official European Union webpage: https://europa.eu/

Official International Labour Organization Webpage: https://www.ilo.org/i

M. Baldini, S. Toso, Diseguaglianza, povertà e politiche pubbliche, Il Mulino, 2004

B. Conforti, Diritto Internazionale, Editoriale Scientifica, 2018

Istituto Nazionale di Statistica, ISTAT, Official Website: http://dati.istat.it/

For the latest updates about minimum income provisions in Italy: https://www.redditodicittadinanza.gov.it/

For the latest updates about minimum income – secondary – legislation in the European Union: https://www.consilium.europa.eu/en/press/press-releases/2020/10/12/strengthening-minimum-income-protection-in-the-covid-19-pandemic-and-beyond-council-adopts-conclusions/