Labour Code Reforms in India

Context:

Recent reforms aim to streamline labour regulations, improve working conditions, and support industrial growth. States and Union Territories (UTs) are aligning laws with industry needs to attract investment and position themselves as investment-friendly destinations.

Labour Code Reforms in India

Background of Labour Code Reforms (2019–2020)

Between 2019 and 2020, Parliament passed four consolidated labour codes to replace 29 outdated central labour laws:

Code	Key Focus Areas
Code on Wages, 2019	Regulates minimum wages, bonus payments, payment timelines, and ensures equal remuneration.
Industrial Relations Code, 2020	Covers trade unions, hiring/firing rules, industrial disputes, and employment conditions.
Code on Social Security, 2020	Integrates provisions on EPF, ESI, gratuity, maternity, and pension schemes; extends benefits to gig and platform workers.
Occupational Safety, Health and Working Conditions Code, 2020	Regulates safety standards, working hours, health, welfare, and leave policies across industries.

Objectives of the Labour Code Reforms:

• Simplify compliance for employers and reduce multiplicity of laws.
• Promote worker welfare and safety.
• Boost industrial productivity and formalization.
• Ensure protection for new-age workers like those in gig economy.

Labour Being a Concurrent Subject: State Involvement

• Labour falls under the Concurrent List of the Constitution (Seventh Schedule).
• Hence, both Centre and States need to draft rules for implementation.
• Several states have proactively framed or amended their labour laws to align with the new codes.

Key Amendments and Trends by States/UTs

Reform Area	States/UT Action
Retrenchment, Layoff, Closure Threshold	20 states/UTs increased the threshold from 100 to 300 workers for prior government approval.
Factories Act Threshold	19 states/UTs raised threshold: • From 10 to 20 workers (with power) • From 20 to 40 workers (without power)
Contract Labour Act Applicability	Threshold increased from 20 to 50 workers in 19 states/UTs.
Women in Night Shifts	31 states/UTs allowed women to work night shifts, with mandated safety conditions (transport, lighting, security).
Inspector Raj Reform	All states/UTs implemented rules requiring compliance notice before prosecution—promoting transparency and reducing harassment.

Implications for Employers and Workers

• Ease of Doing Business: Simplified norms, especially for MSMEs.
• Gender Inclusion: Legal backing for night shifts for women.
• Gig Economy Recognition: Gig/platform workers formally recognized under Social Security Code.
• Labour Flexibility: Relaxed thresholds aid business restructuring.
• Worker Protection: Codes mandate wage security, safety standards, and legal safeguards.

Constitutional Provisions Related to Labour Rights

India’s Constitution provides a strong framework for protecting labour rights:

• Article 14 – Equality before the law for all persons.
• Article 19(1)(c) – Freedom to form associations or unions.
• Article 21 – Right to life and personal liberty.
• Article 23 – Prohibits forced labour (begar).
• Article 24 – Prohibits employment of children below 14 years in hazardous jobs.

Directive Principles of State Policy (DPSP)

Often considered the “Magna Carta” for India’s working class:

• Article 39(a) – Right to adequate means of livelihood.
• Article 39A – Access to free legal aid.
• Article 41 – Right to work, education, and public assistance.
• Article 42 – Humane working conditions and maternity relief.
• Article 43 – Right to a living wage and decent conditions.
• Article 43A – Workers’ participation in industrial management.

Legislative Framework

• Labour falls under the Concurrent List in the Constitution (Seventh Schedule), allowing both Central and State governments to enact laws.
• Over 44 central labour laws and more than 100 state-specific laws currently govern the Indian labour ecosystem.

Second Labour Commission Recommendations (2002)

The Commission suggested consolidation of labour laws into five core categories:

• Industrial Relations
• Wages
• Social Security
• Safety
• Welfare & Working Conditions

Key Objectives of the Labour Codes

• Promote ease of doing business.
• Ensure protection of workers’ rights.
• Increase formalization of employment.
• Enable transparency and reduce compliance burden.

BS