Merging the wants of employers and employees into law reforms palatable to both sides is no easy task, writes Sanjoy Ghose

Businesses view Indian labour laws as a growth inhibitor, cumbersome, discouraging investment and expansion, and sustaining corruption, while workers’ unions have hailed the same as insulating the vulnerable working class from the laissez-faire economics of hire and fire.

Suffice to say, neither party has been satisfied and the evolution of labour laws has been a perpetual struggle between management and the workers, with the state playing the role of referee. In the socialist ‘80s, it was felt that this referee’s sympathy lay with the working class, but the new millennium changed that perception.

Certain crucial factors must be noted at the outset:

  • More than 85% of the Indian labour market is informal and totally unregulated by labour laws. In 2008, legislation was enacted on “unorganized workers”. Until that year, most Indian states had not even framed rules for implementation;
  • Labour laws have two components: (1) substantive law; and (2) procedural law. In the former, most of the law is “judge made” i.e., evolved through judicial precedents, which may or may not have been subsequently codified. For example, the right of a worker to get his/her job back with backpay, in the event that the termination has been found unlawful by a labour adjudicator, is completely evolved through case law and to date no statute codified it. As a result, there is great uncertainty as various courts have given divergent judgments: (i) granting reinstatement with full backpay; (ii) granting reinstatement with partial backpay; (iii) granting only reinstatement; or (iv) granting only compensation. This flux also hampers companies from planning effective exit strategies;

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    Sanjoy Ghose is a labour and employment lawyer practising in New Delhi, India.