code-on-wages-2019-an-analysis

 

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Context: Three new labour codes (The Industrial Relations Code, the Social Security Code and the Occupational Safety, Health and Working Conditions Code, 2020) were passed by the Parliament.

More on news:

  • The three Bills are part of the government’s labour law reforms agenda, of which the first, the Code on Wages, which proposes universalisation of minimum wages, was passed by Parliament last year. 
  • The government had announced its plan to amalgamate 44 central labour Acts into four codes in 2014, with the aim of simplifying the laws and ensuring a conducive and harmonious environment for doing business.
  • The Second National Commission on Labour had suggested consolidating all labour laws into four codes.

Constitutional background

  • Labour is a subject in the Concurrent List where both the Central & State Governments are competent to enact legislation subject to certain matters being reserved for the Centre. 
  • Article 23: Traffic in human beings and begar and other similar forms of forced labour are prohibited
  • Article 24: No child below the age of fourteen years shall be employed to work in factories, mines and other hazardous occupations.
  • Article 39 (d): “The State shall, in particular, direct its policy towards securing; that there is equal pay for equal work for both men and women
  • Article 43A directs the state to take steps to ensure workers participation in management of industries.

Salient features of Code on Wages, 2019:

  • The Code on Wages, 2019 seeks to consolidate and simplify four pieces of legislation — Payment of Wages Act, 1936, 
    • Minimum Wages Act, 1948, 
    • Payment of Bonus Act, 1965 and 
    • Equal Remuneration Act, 1976
  • The govt. has said the Code on Wages, 2019 would expand the coverage of workers in all industries in the unorganised sector as the old Minimum Wages Act covered only 30% of the total workforce. 
  • Minimum wages: In the repealed Minimum Wages Act, there was provision to fix minimum wage in an employment which has more than 1,000 workers. The new Code has dispensed with the necessity of having a minimum number of workers.
    • 10,000 slabs of minimum wages that existed before the code, would now be reduced to 200 slabs.
  • Definition of worker: The Code will have the same definition of the term “worker”; but, a person employed in a supervisory capacity drawing up to ₹15,000 will also be considered a worker. 
  • Floor wage: The central government will have the power to fix a “floor wage”. Once it is fixed, State governments cannot fix any minimum wage less than the “floor wage”. 
  • MGNREGA: There was a conflict between the minimum wages fixed by the State governments for agriculture workers. 
    • Several High Courts have placed the Minimum Wages Act to override MGNREGA. MGNREGA has been excluded from the purview of the Code on Wages.
  • Enforcement provisions: The Code has created an inspector-cum-facilitator who will act as per the inspection scheme framed by the government. 
    • He will advise employers and workers to comply with the provisions of the code and may carry out inspections as may be assigned by the government .
  • Claim mechanism: A government official without legal and administrative background can hear such claims. 
    • However, any dispute regarding bonus will continue to go before the Industrial Tribunal. 
    • The new Industrial Relations Code Bill provides for a two-member Tribunal. 
  • Provisions on penalty: An officer (not below the rank of an under secretary to the government will be notified with power to impose a penalty in the place of a judicial magistrate. 

Concerns:

  • Retains old provisions: Barring a few new concepts, the new Code retains almost all provisions such as the procedure for fixing minimum wage, limit for fines and deductions in wages, minimum and maximum bonus, calculation of allocable and available surplus, as well as gender neutral consideration in fixing wages.
  • Numerous slabs: As minimum wages mostly help the unorganised worker, the 200-slab categorisation may not have much of an impact.
  • Complex document: All the four repealed pieces of legislation were enacted historically at different points in time and to deal with different situations. The combining of asymmetrical laws into a single code is complex.
  • Dual wage rates: The central government will have the power to fix a “floor wage”. 
    • It is unwarranted since many States always fix minimum wages higher than the existing rates, depending upon the employment and workforce involved. 
    • The concept should be for a binding minimum wage and not have dual wage rates — a binding floor wage and a non-binding minimum wage.
  • Qualifications of appellate authority: As against the decision of the Gazetted Officer, one can prefer an appeal to an appellate authority who must be one rank higher than the competent authority.
    • The Code does not prescribe the qualifications and experience required for appointment of competent authority.
  • Separations of powers: An essential judicial function of penalising is now to be vested with the executive in contravention of Article 50 of the Constitution, where the State has been mandated to separate the judiciary from the executive in public services.
    • By merging the judicial function in the executive, the basic structure of the Constitution is affected
  • Exemptions from penalty: The Code also exempts employers from penal provisions under certain conditions.
    • 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 meagre fines, the labour laws would be reduced merely paper tigers without any teeth or claws.”

Considering the extent of economic distress in the country, concerns of labour must be placed at the centre of such policy initiatives. 
Image source: Economic Times

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Q) Critically analyse the main provisions of Code on Wages, 2019. Do you think fixing the ‘Floor wage’ will resolve the issue of minimum wages? (250 words)