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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 |
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Not required |
Three months |
|
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Required |
Three months |
|
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 |
|
All factories |
Not specified |
Increased from 9 hours to 12 hours |
Required |
Two months |
|
All factories |
Increased from 48 hours to 72 hours |
Increased from 9 hours to 12 hours |
Not required |
Three months* |
|
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 |
|
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 |
All factories |
Not specified |
Not specified |
Not specified |
Three months |
Note: *The Uttar Pradesh notification was withdrawn
As of April 20, 2020, there are 17,265 confirmed cases of COVID-19 in India. Since April 13, 8,113 new cases have been registered. Out of the confirmed cases so far, 2,547 patients have been cured/discharged and 543 have died. As the spread of COVID-19 has increased across India, the central government has continued to announce several policy decisions to contain the spread, and support citizens and businesses who are being affected by the pandemic. In this blog post, we summarise some of the key measures taken by the central government in this regard between April 13 and April 20, 2020.
Source: Ministry of Health and Family Welfare, PRS.
Lockdown
Lockdown to remain in force until May 3, 2020
The lockdown has been extended until May 3, 2020 with certain relaxations taking force as of April 20, 2020. Activities that continue to remain prohibited after April 20, 2020 include: (i) all international and domestic travel except for healthcare workers and security purposes, (ii) passenger travel in trains, buses and taxis, (iii) industrial activities and hospitality services (other than those permitted), (iv) all educational institutions, and (v) all religious gatherings. Activities that are permitted after April 20, 2020 include: (i) all health services such as hospitals, clinics, and vets, (ii) agricultural operations, fisheries, and plantations, (iii) public utilities including provision of LPG and postal services, (iv) financial establishments such as non-banking financial institutions, banks and ATMs, (v) e-commerce for essential goods only, and (vi) industrial activities such as oil and gas refineries and manufacturing. Persons who do not follow the lockdown may be punishable with imprisonment up to one year and a fine, or both. States and union territories may not dilute these lockdown guidelines specified by the central government. However, they may implement stricter measures.
Certain areas within hotspots demarcated as containment zones
Hotspots refer to areas where there are large COVID-19 outbreaks or clusters with a significant spread of COVID-19. Within hotspots, certain areas may be demarcated as containment zones by the state or district administrations. There will be a strict perimeter control in the containment zones. Inward and outward movement from the containment zones will be restricted except for essential services such as medical emergencies, and law and order related activities.
Movement of stranded migrant labour
The Ministry of Home Affairs has permitted the movement of stranded migrant labour within the state in which they are stranded for work in activities permitted after the relaxation of the lockdown on April 20, 2020. These activities include industrial work, manufacturing, and construction. State governments may undertake skill mapping of migrant labourers and transport them to worksites if they are asymptomatic and willing to work. Movement of migrant labour across state borders continues to be prohibited.
Financial Measures
RBI announced additional measures to combat economic situation due to COVID-19
The International Monetary Fund’s Economic Counsellor has estimated the cumulative loss over 2020 and 2021 to global GDP due to the global economic lockdown to be around 9 trillion dollars. To combat the economic impact of COVID-19 in India, the Reserve Bank of India (RBI) has announced several additional measures. These include: (i) reduction in reverse repo rate from 4% to 3.75%, (ii) targeted long-term repo operations for an aggregate amount of Rs 50,000 crore, (iii) refinancing of financial institutions such as National Bank for Agriculture and Rural Development, Small Industries Development Bank of India, and National Housing Bank for a total amount of Rs 50,000 crore to enable them to meet the financing needs of sectors they cater to.
Dividend payments by banks
In light of the economic impact of COVID-19, the RBI announced that banks shall not make any further dividend payouts from the profits pertaining to the financial year which ended on March 31, 2020. According to RBI, this will allow banks to conserve capital to retain their capacity to support the economy and absorb losses. This restriction will be reassessed based on the financial results of banks for the quarter ending in on September 30, 2020.
Short term credit to states
RBI has announced an increase in the Ways and Means Advances (WMA) limits for states and UTs. WMA limits refer to temporary loans given by the RBI to state governments. The WMA limit has been increased by 60% from the limit as on March 31, 2020, for all states and UTs. The revised limits will be in force between April 1 and September 30, 2020.
Travel and export
Travel restrictions to continue
Since the lockdown has been extended until May 3, 2020, domestic and international travel remains prohibited. All domestic and international flights will not function until May 3, 2020. Further, the Director General of Civil Aviation has specified that airlines should not start allowing ticket bookings from May 4, 2020 onwards as there has been no clearance for such activities to commence. All passenger trains will also remain cancelled until May 3, 2020. There will be a full refund for flight tickets purchased during the lockdown period for travel before May 3, 2020. Further, there will be a full refund for tickets booked for trains that were cancelled during the lockdown and cancellation of advance bookings of tickets for trains not yet cancelled.
Export of paracetamol
The Ministry of Commerce and Industry has specified that formulations made of paracetamol may be freely exported from April 17, 2020 onwards. However, the export of paracetamol active pharmaceutical ingredients (APIs) will continue to be restricted. On March 3, 2020, the export of both formulations made of paracetamol and paracetamol APIs was restricted.
For more information on the spread of COVID-19 and the central and state government response to the pandemic, please see here.