To contain the spread of COVID-19 in India, the central government imposed a nation-wide lockdown on March 24, 2020.  Under the lockdown most economic activities, other than those classified as essential activities, were suspended.  States have noted that this loss of economic activity has resulted in a loss of income for many individuals and businesses.  To allow some economic activities to start, some states have provided relaxations to establishments from their existing labour laws.  This blog explains the manner in which labour is regulated in India, and the various relaxations in labour laws that are being announced by various states. 

How is labour regulated in India?

Labour falls under the Concurrent List of the Constitution.  Therefore, both Parliament and State Legislatures can make laws regulating labour.  Currently, there are over 100 state laws and 40 central laws regulating various aspects of labour such as resolution of industrial disputes, working conditions, social security, and wages.  To improve ease of compliance and ensure uniformity in central level labour laws, the central government is in the process of codifying various labour laws under four Codes on (i) industrial relations, (ii) occupational safety, health and working conditions, (iii) wages, and (iv) social security.  These Codes subsume laws such as the Industrial Disputes Act, 1947, the Factories Act, 1948, and the Payment of Wages Act, 1936.   

How do state governments regulate labour?

A state may regulate labour by: (i) passing its own labour laws, or (ii) amending the central level labour laws, as applicable to the state.   In cases where central and state laws are incompatible, central laws will prevail and the state laws will be void.  However, a state law that is incompatible with central laws may prevail in that state if it has received the assent of the President.  For example: In 2014, Rajasthan amended the Industrial Disputes Act, 1947.  Under the Act, certain special provisions with regard to retrenchment, lay-off and closure of establishments applied to establishments with 100 or more workers.  For example, an employer in an establishment with 100 or more workers required permission from the central or state government prior to retrenchment of workers.  Rajasthan amended the Act to increase the threshold for the application of these special provisions to establishments with 300 workers.  This amendment to the central law prevailed in Rajasthan as it received the assent of the President. 

Which states have passed relaxations to labour laws?

The Uttar Pradesh Cabinet has approved an ordinance, and Madhya Pradesh has promulgated an ordinance, to relax certain aspects of existing labour laws.  Further, Gujarat, Rajasthan, Haryana, Uttarakhand, Himachal Pradesh, Assam, Goa, Uttar Pradesh, and Madhya Pradesh have notified relaxations to labour laws through rules.

Madhya Pradesh:  On May 6, 2020, the Madhya Pradesh government promulgated the Madhya Pradesh Labour Laws (Amendment) Ordinance, 2020.  The Ordinance amends two state laws: the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961, and the Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982.  The 1961 Act regulates the conditions of employment of workers and applies to all establishments with 50 or more workers.  The Ordinance increases this threshold to 100 or more workers.  Therefore, the Act will no longer apply to establishments with between 50 and 100 workers that were previously regulated.  The 1982 Act provides for the constitution of a Fund that will finance activities related to welfare of labour.  The Ordinance amends the Act to allow the state government to exempt any establishment or class of establishments from the provisions of the Act through a notification.  These provisions include payment of contributions into the Fund by employers at the rate of three rupees every six months. 

Further, the Madhya Pradesh government has exempted all new factories from certain provisions of the Industrial Disputes Act, 1947.  Provisions related to lay-off and retrenchment of workers, and closure of establishments will continue to apply.  However, the other provisions of the Act such as those related to industrial dispute resolution, strikes and lockouts, and trade unions, will not apply.   This exemption will remain in place for the next 1,000 days (33 months).  Note that the Industrial Disputes Act, 1947 allows the state government to exempt certain establishments from the provisions of the Act as long as it is satisfied that a mechanism is in place for the settlement and investigation of industrial disputes.

Uttar Pradesh

The Uttar Pradesh Cabinet has approved the Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020.  According to news reports, the Ordinance seeks to exempt all factories and establishments engaged in manufacturing processes from all labour laws for a period of three years, subject to the fulfilment of certain conditions.  These conditions include:

  • Wages:  The Ordinance specifies that workers cannot be paid below minimum wage.  Further, workers must be paid within the time limit prescribed in the Payment of Wages Act, 1936.  The Act specifies that: (i) establishments with less than 1,000 workers must pay wages before the seventh day after the last day of the wage period and (ii) all other establishments must pay wages before the tenth day after the last day of the wage period.  Wages must be paid into the bank accounts of workers. 

  • Health and safety:   The Ordinance states that provisions of health and safety specified in the Building and Other Construction Workers Act, 1996 and Factories Act, 1948 will continue to apply.  These provisions regulate the usage of dangerous machinery, inspections, and maintenance of factories, amongst others. 

  • Work Hours:  Workers cannot be required to work more than eleven hours a day and the spread of work may not be more than 12 hours a day. 

  • Compensation:  In the case of accidents leading to death or disability, workers will be compensated as per the Employees Compensation Act, 1923. 

  • Bonded Labour: The Bonded Labour System (Abolition) Act, 1976 will continue to remain in force.  It provides for the abolition of the bonded labour system.   Bonded labour refers to the system of forced labour where a debtor enters into an agreement with the creditor under certain conditions such as to repay his or a family members debt, due to his caste or community, or due to a social obligation.  

  • Women and children:  Provisions of labour laws relating to the employment of women and children will continue to apply.  

It is unclear if labour laws providing for social security, industrial dispute resolution, trade unions, strikes, amongst others, will continue to apply to businesses in Uttar Pradesh for the period of three years specified in the Ordinance.  Since the Ordinance is restricting the application of central level labour laws, it requires the assent of the President to come into effect. 

Changes in work hours

The Factories Act, 1948 allows state governments to exempt factories from provisions related to work hours for a period of three months if factories are dealing with an exceptional amount of work.  Further, state governments may exempt factories from all provisions of the Act in the case of public emergencies.  The Gujarat, Himachal Pradesh, Rajasthan, Haryana, Uttar Pradesh, Goa, Assam and Uttarakhand governments passed notifications to increase maximum weekly work hours from 48 hours to 72 hours and daily work hours from 9 hours to 12 hours for certain factories using this provision.  Further, Madhya Pradesh has exempted all factories from the provisions of the Factories Act, 1948 that regulate work hours.  These state governments have noted that an increase in work hours would help address the shortage of workers caused by the lockdown and longer shifts would ensure fewer number of workers in factories allowing for social distancing to be maintained.   Table 1 shows the state-wise increase in maximum work hours. 

Table 1: State-wise changes to work hours

State

Establishments

Maximum weekly work hours

Maximum daily work hours

Overtime Pay (2x ordinary wages)

Time period

Gujarat

All factories

Increased from 48 hours to 72 hours 

Increased from 9 hours to 12 hours 

Not required

Three months

Himachal Pradesh

All factories

Increased from 48 hours to 72 hours 

Increased from 9 hours to 12 hours 

Required

Three months

Rajasthan

All factories distributing essential goods and manufacturing essential goods and food

Increased from 48 hours to 72 hours 

Increased from 9 hours to 12 hours 

Required

Three months

Haryana

All factories

Not specified  

Increased from 9 hours to 12 hours 

Required

Two months

Uttar Pradesh

All factories

Increased from 48 hours to 72 hours 

Increased from 9 hours to 12 hours 

Not required

Three months*

Uttarakhand

All factories and continuous process industries that are allowed to function by government

Maximum 6 days of work a week

Two shifts of 12 hours each.

Required

Three months

Assam

All factories

Not specified

Increased from 9 hours to 12 hours 

Required

Three months

Goa

All factories

Not specified

Increased from 9 hours to 12 hours 

Required

Approximately three months

Madhya Pradesh

All factories

Not specified

Not specified

Not specified

Three months

Note: *The Uttar Pradesh notification was withdrawn

As of May 29, 2020, there are 1,65,799 confirmed cases of COVID-19 in India.  47,352 new cases have been registered in the last week (since May 22).  Out of the confirmed cases so far, 71,106 patients have been cured/discharged and 4,706 have died.  Most cases are in the state of Maharashtra (59,546) followed by the states of Tamil Nadu (19,372), Delhi (16,281) and Gujarat (15,562).  

With the spread of COVID-19, the central government initially undertook many measures to contain the spread of the pandemic, including restrictions on travel and movement through national lockdown.  With gradual resumption of activities, the central government has recently announced measures to ease restrictions on travel and movement.   Further, the government has continued to announce policy decisions to ease the financial stress caused by the pandemic, and to contain further spread of the pandemic.  In this blog post, we summarise some of the key measures taken by the central government in this regard between May 23 and May 29, 2020.

Figure 1: Day wise number of COVID-19 cases in the country

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Source: Ministry of Health and Family Welfare; PRS.

Finance

RBI announces additional measures to ease financial stress caused by COVID-19

On May 22, the Reserve Bank of India (RBI) issued a statement with various development and regulatory policies to ease the financial stress caused by COVID-19.   These measures include: (i) improving liquidity in the market; (ii) support to exports and imports; and (iii) easing capital financing.  Subsequently, following measures have been notified by the RBI: 

  • In March 2020, the RBI had permitted all lending institutions to grant a moratorium of three months on payment of all term loans outstanding as of March 1, 2020.   This has been extended by another three months (till August 31, 2020).  Such deferment will not result in downgrade in asset classification.
     
  • For working capital such as cash credit or overdraft as well, lending institutions are permitted to allow a deferment of another three months on recovery of interest (till August 31, 2020). 
     
  • Currently, the exposure limit of a bank to a group of connected counterparties is 25% of the eligible capital base of the bank.  As a one-time measure to ease difficulty in raising funds, this limit has been relaxed to 30% of capital base of bank. 

Travel and Movement 

Domestic Air travel resumes; fare limits set by government

Domestic passenger air travel has been resumed in a phased manned (with one-third capacity of operations) from May 25, 2020 based on the announcement of the Ministry of Civil Aviation on May 21.  To ensure that airlines do not charge excessive fare and to ensure that journey is only for essential purposes, the Ministry of Civil Aviation issued an order to limit the minimum and maximum fare that airlines can charge from the passenger.   The routes have been divided in seven sectors based on the approximate duration of the flight.  For routes with shortest duration (for example, Delhi to Chandigarh), the minimum and maximum fare will be Rs 2,000 and Rs 6,000, respectively.  For routes with the longest duration (for example, Delhi to Thiruvananthapuram), the minimum and maximum fare will be Rs 6,500 and Rs 18,600, respectively. 

Further, the Ministry announced that all operational routes under the Regional Connectivity (UDAN) Scheme with up to 500 km of length or operational routes in priority areas (North East region, hilly states or islands) are permitted to resume operations.  This is in addition to the one-third capacity of operations announced earlier. 

Health

Guidelines for international arrivals issued

The Ministry of Health and Family Welfare issued guidelines for international arrivals.  All travellers are required to give an undertaking that they will undergo a 14-day mandatory institutional quarantine at their own cost (7 days in institutional quarantine followed by a 7-day isolation at home).  In emergency cases (such as pregnancy or death in the family), home quarantine will be permitted.  Use of Aarogya Setu app will be mandatory in such cases.  Only asymptomatic passengers will be allowed to board (flight/ship) after thermal screening.  On arrival, thermal screening will be carried out for all passengers.  The passengers found to be symptomatic will be isolated and taken to a medical facility. 

Movement of migrant labourers

Supreme Court gives an interim order regarding problems of migrant labourers

The Supreme Court of India took cognisance of the problems of migrant labourers who have been stranded in different parts of the country.  In its order, the Court observed that there are lapses being noticed in the process of registration, transportation and in providing food and shelter to the migrant workers.  In view of these difficulties, the Court issued the following interim directions:  

  • Free of cost food should be provided to the migrant workers who are stranded at different places in the country by the concerned state governments.  This information should be publicised and also notified to workers when they are waiting for their turn to board the train or bus.
     
  • The states should speed up the process of registration of migrant workers and provide help desk for registration.  Complete information regarding the modes of transport must be publicised to the workers.  
     
  • Fare should not be charged from migrant workers for travel by train or bus. The railway fare shall be shared by the states as per their arrangement.  The originating state of travel must provide water and meal during transportation.   In case of a train journey, Railways must provide water and meal during the journey. 
     
  • After the migrant workers reach their native place, the receiving state must provide health screening, transport and other facilities free of cost. 
     
  • Migrant workers found walking on highways or roads must be provided transportation to their destination and all facilities including food and water.

The Court directed the central and state governments to produce record of all necessary details such as the number of migrant workers, the plan to transport them to their destination, and the mechanism of registration. 

Other measures

PM CARES Fund included in the list of CSR eligible activities

The Ministry of Corporate Affairs notified the inclusion of PM CARES fund in the list of activities eligible for Corporate Social Responsibility (CSR) under the Companies Act, 2013.  Under the Act, companies with net worth, turnover or profits above a specified amount are required to spend 2% of their average net profits in the last three financial years towards CSR activities. This measure will come into effect retrospectively from March 28, 2020, when the fund was setup

For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.