Guide to Labour Laws of India

  • Blog|Labour & Industrial Laws|
  • 12 Min Read
  • By Taxmann
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  • Last Updated on 18 February, 2023

Labour laws

Table of Contents

1. Constitutional Background of Labour Laws

2. Apprentices Act, 1961

3. Child and Adolescent Labour (Prohibition & Regulation) Act, 1986

3A. Code on Wages, 2019

4. Contract Labour (Regulation and Abolition) Act, 1970

5. Employee’s Compensation Act, 1923

6. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

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1. Constitutional Background of Labour Laws

India is a Union of States. The structure of Government is federal in nature. Government of India (Central Government) has certain powers in respect of whole country. India is divided into various States and Union Territories and each State and Union Territory has certain powers in respect of that particular State.

Article 246 of our Constitution indicates bifurcation of powers to make laws, between Union Government and State Governments. Parliament has exclusive powers to make laws in respect of matters given in List I of the Seventh Schedule to the Constitution (called “Union List” ). List II (State List) contains items under jurisdiction of States. List III (concurrent list) contains items where both Union and State Governments can exercise power.

Matters connected with labour laws are covered in List III Concurrent List of Seventh Schedule to Constitution of India. Entries relevant to labour matters in this concurrent list are as follows—

Entry No. 22 – Trade Unions; industrial and labour disputes.

Entry No. 23 – Social security and social insurance; employment and unemployment.

Entry No. 24 – Welfare of labour including conditions of work, provident funds, employers’ liability, workmen’s compensation, invalidity and old age pensions and maternity benefits.

Entry No. 36 – Factories.

The only exception is that Industrial Disputes concerning Union Employees is a List I i.e. Union subject.

Thus, Central Government as well as State Governments can pass laws in respect of labour matters. However, most of laws relating to labour matters have been passed by Parliament and are uniform all over India. Some of the Acts are suitably modified by States to suit their requirements. Main Acts like gratuity, bonus, provident fund, ESI, Apprentices Act, Factories Act etc. are uniform all over India. In some of the cases, even when Act is passed by Centre, its implementation is done by State Government authorities.

2. Apprentices Act, 1961

The main purpose of the Act is to provide practical training to technically qualified persons in various trades. The objective is promotion of new skilled manpower. The scheme is also extended to engineers and diploma holders.

The Act has got added importance in view of thrust of present Government on training and employment generation.

The slogan of Modi Government is ‘Seekho Hunar, Bano Honhaar’. The intention is to make India the Skill Capital of the world. ‘Make in India’.

As per basic scheme of the Apprentices Act, every employer is required to provide training to apprentice [section 8 of the Act].

The appointment of apprentices may be for designated trade or optional trades.

In addition to designated trade, an employer is free to have ‘optional trades’. He himself can design syllabus for such optional trades.

The scheme is applicable to engineering, non-engineering, technology or any vocational course.

The employer is required to provide training facilities to apprentices.

Multiple employers to come together, either themselves or through an approved agency to provide apprenticeship training to apprentices under them. Thus, the facilities of training apprentices in theoretical subjects can be shared among employers.

The employer is required to pay minimum stipend to apprentice. In some cases, burden of part of stipend is borne by Government.

The number of apprentices to be trained will be on the basis of number of workers employed in that industry, directly or indirectly (i.e. direct employment or through contractor.

The period of training for each designated trade has been specified.

The apprentice should have specified educational qualification and minimum physical fitness as specified.

Employer is required to enter into Apprenticeship Contract with Apprentice. The contract is required to be registered with Apprenticeship Adviser.

Hours of work and leave of apprentices will be as per the discretion or policy of the employer.

A portal site is being developed to use Information Technology to file Apprenticeship Contract, periodic returns etc.

The employer is liable for compensation in case of injury to the Apprentice, as per provisions of Employee’s Compensation Act.

Labour laws like ESI, PF, Minimum Wages Act, Industrial Disputes Act etc. are not applicable to the apprentices. However, health, safety and welfare regulations as contained in Factories Act, Mines Act etc. are applicable in respect of apprentices also.

After the training, the trade apprentice may appear for the test (on optional basis) conducted by National Council.

The employer is not bound to offer employment to the trainees after their training period is over, but can have its own policy for recruiting apprentices who have completed the apprenticeship training. It is not mandatory to offer employment to the apprentices after training.

Central Government shall be ‘Appropriate Government’ for (a) Establishments which are operating business or trade from locations situated in four or more States (b) Establishments owned, controlled or managed by Central Government (c) Public Sector Companies owned by Central Government.

In other cases, State Government will be the ‘Appropriate Government’.

Amendments made to Apprentices Act in 2014Major amendments have been made in December 2014 in the Apprentices Act. The Amendment Act has received assent of President on 5-12-2014.

The major amendments are as follows —

    • Non-engineering areas covered under the provisions of Apprentices Act.
    • Employer allowed to provide for ‘optional trades’. He can design his own syllabus for that purpose.
    • Multiple employers can join either themselves or through an agency to provide apprentices training.
    • Hours of work and leave will be as per the discretion or policy of the employer.
    • If employer is employing 500 or more workers, he is required to make provisions of basic training to those who had not undergone any institutional training. In other cases, the basic training will be provided by institution having adequate facilities.
    • Details are to be filed electronically on ‘portal site’ to be developed.
    • Punishment for offences will be fine (no imprisonment).

3. Child and Adolescent Labour (Prohibition & Regulation) Act, 1986

As per section 2(ii) of the Child and Adolescent Labour (Prohibition & Regulation) Act, 1986 (amended w.e.f. 1-9-2016), “child” means a person who has not completed his 14th year of age. Adolescent means a person who has completed his fourteenth year but has not completed his eighteenth year.

The Act prohibits employment of children in any occupation or process. However, he can work in his family business in non-hazardous process after school hours. He can also work as artist in any audio-visual entertainment industry. [section 3].

Adolescent is not permitted to work in any hazardous occupations or processes specified in Schedule (section 3A inserted w.e.f. 1-9-2016).

Under the Act, a ‘Technical Advisory Committee’ is constituted to advice for inclusion of further occupations & processes in the Schedule [section 5].

The Act regulates the condition of employment of adolescents in all occupations and processes which are not prohibited under the Act (Part III – sections 6 to 13).

Any person who employs any child or adolescent in contravention of the provisions of section 3 of the Act is liable for punishment with imprisonment for a term which shall not be less than six months but which may extend to one year or with fine which shall not be less than Rs. 20,000 but which may extend to Rs. 50,000 or both. [section 14].

The Central and the State Governments enforce the provisions of the Act in their respective spheres.

3A. Code on Wages, 2019

Code on Wages, 2019 consolidates four different Acts. There is no radical change made from earlier laws in basic scheme, while consolidating these four Acts into one.

However, scope of Payment of Wages Act, Minimum Wages Act and Equal Remuneration Act has been considerably expanded and coverage widened with enlarged definition of ‘establishment’.

Scope of Payment of Bonus Act has not been much enlarged.

Following are major highlights-

    • Four Acts i.e. (1) Equal Remuneration Act (2) Minimum Wages Act (3) Payment of Wages Act (4) Payment of Bonus Act are consolidated into Code on Wages, 2019. These Acts will be repealed when Code on Wages, 2019 is notified.
    • Some definitions like employer, employee, establishment, wages and worker in Code on Wages apply to all the provisions of Code on Wages, 2019. The new definitions are more or less parallel to earlier definitions.
    • New definition of ‘establishment’ covers any place where any industry, trade, business, manufacture or occupation is carried on and includes Government establishment. The scope has been widened to include all types of establishments. The term ‘occupation’ in the definition vastly increases the scope of definition of ‘establishment’. Any establishment where even one employee or worker is employed will be ‘establishment’.
    • The Equal Remuneration Act was applicable only to workers and that too of notified establishments and employments only [Many State Governments had not bothered to issue such notifications]. Scope of Code on Wages, 2019 is much wider that Equal Remuneration Act, as now all employers and all employees in any establishment are covered.
    • In case of Minimum Wages, scope has been widened. Concept of ‘scheduled employment’ has been eliminated. Thus, the provisions can apply to all employees and employers.
    • Scope of provisions relating to payment of wages has also been widened and coverage extended to all establishments.
    • Scope of provisions relating to bonus has been more or less same as per earlier provisions. There is not much change in basic provisions relating to bonus.
    • Overtime rate shall not be less than twice the normal rate of wages (Earlier, overtime of twice the normal rate was mandatory only in respect of workers covered under Factories Act).
    • Full wages are payable to part time employees also [This is to avoid payment of full wages by showing the employee as part time. In fact, this provision is in existing Minimum Wages Act also].
    • Time limit for payment of wages in case of monthly payment has been made uniform as 7th of following month. Earlier, in some cases, payment was allowed to be made within 10 days of following month.
    • Deduction from wages can be maximum upto 50% of wages. Earlier, deduction upto 75% was allowed, if deduction included payments to co-operative societies.
    • Upper limit of salary of Rs. 21,000 for eligibility of bonus has been removed from definition, but such limit can be prescribed under section 26(1) of Code on Wages by notification by ‘Appropriate Government’.
    • Contractors and Sub-Contractors have been specifically included in definition of ‘Employer’. Thus, they would be treated as ‘Employer’ for all purposes of Code on Wages.
    • Inspector-cum-Facilitator is expected not only to inspect by also advice employers and workers.
    • Provisions for claims under Code on Wages, 2019 and its recovery from employer have been made.
    • Penalties can be imposed by officer of State Government not below the rank of Under Secretary.
    • Penalty of fine and in some cases imprisonment has been provided. The case can be compounded. Thus, cases will be filed in criminal court very rarely.

4. Contract Labour (Regulation and Abolition) Act, 1970

Purpose of the Act is to regulate employment of contract labour and to provide for abolition of contract labour in certain cases.

The Act is applicable to every establishment in which 20 or more workmen are employed as contract labour or were so employed anytime during last 12 months. [section 1(3)(a)]. Act will not apply to establishment where work of an intermittent or casual nature is performed. [section 1(5)(a)].

‘Establishment’ means any office or department of Government or a local authority or any place where any industry, trade, business, manufacturing or occupation is going on. [section 2(1)(e)].

Every such establishment is required to get itself registered under the Act. [section 7].

Manager or occupier of factory or head of department of Government/local authority is termed as ‘Principal Employer’. [section 2(1)(g)].

Principal Employer should maintain register of contractors in prescribed form. [section 29]. He is required to ensure that contractor makes adequate provision for canteen, rest rooms, supply of drinking water, latrines, urinals, wash rooms etc. to contract labour. If contractor fails to do so within prescribed time, the Principal Employer shall provide the amenities. The Principal can recover from contractor the cost incurred by him in providing these amenities. [section 20].

Even if the employer is not registered or contractor is not licensed under the Act, the workers of contractor do not become employees of Principal Employer – Bharat Cocking Coal v. Workmen 2010 LLR 69 (Jhar. HC).

Contract Labour – A workman is deemed to be employed as ‘contract labour’ in or in relation to work of the establishment, if he is hired for such work by or through a contractor, with or without knowledge of principal employer. [section 2(1)(b)].

Contractor – The Act applies to every contractor who employs 20 or more workmen. [section 1(3)(b)]. The contractor will be licensed. [section 12]. Contractor is required to maintain muster roll and register of wages. [section 29].

The contractor is required to follow other provisions as may be contained in Rules made by Appropriate Government. Contractor is required to pay wages to workmen on time, in presence of authorised representative of principal employer. [section 21].

The Contractor should issue wage slips to workman and obtain signature or thumb impression on wage register.

If contractor fails to make payment of wages, Principal Employer is liable to make payment of wages to contract labour. He can recover this amount from contractor. [section 21(4)].

Procedure for issuing license to contractor, records to be maintained etc. – Procedure for issuing license to contractor, fees payable for obtaining license, records to be maintained etc. have been made in Contract Labour (Regulation and Abolition) Central Rules, 1971. Each State Government has also made similar rules.

Contractor to provided facilities to contract labour – Contractor is required to provide canteen facilities, first-aid, rest rooms, drinking water, latrines and washing facilities, as per rules made by State Government. [sections 16 and 17].

The requirements of rest rooms, first aid etc. is specified in Contract Labour (Regulation and Abolition) Central Rules, 1971. Each State Government has also made similar rules.

Creches to be maintained by contractor – Chief Commissioner of Labour Commissioner (Central) has issued ‘Standards of construction and Maintenance of Creches’ vide Notification SO 143, dated 8-9-1972.

Other laws applicable to contract labour – Besides Contract Labour (Regulation and Abolition) Act, various other Acts are applicable to contract labour – (a) Factories Act – The Act makes no distinction between persons directly employed and employed through contractor (b) Employees Provident Funds Act (c) ESIC (d) Payment of Wages Act (e) Minimum Wages Act (f) Industrial Disputes Act (g) Employee’s Compensation Act.

Prohibition of employment of contract labour – Appropriate Government can prohibit employment of contract labour in any process, operation or work in any establishment, by issuing a notification. Such order can be issued after consultation with Advisory Board. [section 10(1)].

Before issuing such order in respect of any establishment, Government will consider aspects of conditions of work and benefits provided to contract labour, whether process operation or work is incidental or necessary for the industry/trade/business, perennial nature, whether it is done ordinarily through regular workmen in other similar establishment. [section 10(2)].

5. Employee’s Compensation Act, 1923

Employee’s Compensation Act, 1923 is a very old enactment for providing social security to workmen. The Act was known as Workmen’s Compensation Act, but was named as Employee’s Compensation Act w.e.f. 18-1-2010 as now employees in clerical capacity are also eligible for compensation.

Under this Act, an employee who dies or suffers disablement (partial or total) due to accident is entitled to get compensation from employer.

Applicability of Act to Apprentices – Employee’s Compensation Act, 1923 has been made applicable to apprentices under the Apprentices Act, with minor modifications as given in Schedule to the Apprentices Act.

Since an employee is entitled to get compensation from ESIC, an employee covered under ESI Act is not entitled to get compensation under Employee’s Compensation Act, as per section 53 of ESIC.

An employer is liable to pay compensation if personal injury is caused to an employee by accident arising out of and in the course of his employment. [section 3(1) of Employee’s Compensation Act].

Employee means (i) railway servant but not permanently employed in railway office) (ii) crews of ship or aircraft, driver, helper, mechanic or helper of a motor vehicle or a person recruited for work abroad by a company; who is employed outside India in capacity as specified in Schedule II to the Act (iii) Employed in any capacity as specified in schedule II but does not include person employed in arm forces [section 2(dd) of Employee’s Compensation Act as amended w.e.f. 18-1-2010].

‘Workman’ means * railway servant * crew of ship * Crew of aircraft * Driver, cleaner, helper or mechanic of motor vehicle * Person recruited abroad * Employed in capacity specified in Schedule II. (Now the definition has been deleted 18-1-2010).

Mode of computation of compensation is given in section 4 of the Act. Compensation is payable to employee for total or partial disablement. Compensation is payable to dependents of employee in case of death.

If a workman accepts compensation under the Act, he cannot file civil suit against employer for damages. If a workman has instituted claim for compensation before Commissioner for Workmen’s Compensation, he cannot file a civil suit. [section 3(5)].

The compensation paid under the Act is protected, i.e. it cannot be attached or assigned. [section 9 of Employee’s Compensation Act].

Principal Employer is liable to pay the amount of compensation for the injury suffered by workman employed through contractor, if the accident arises as a result of accident arising out of and during the course of employment. [section 12].

A Commissioner for Employee’s Compensation is appointed by Government. Qualifications of Commissioner have been prescribed in section 20(1) of Employee’s Compensation Act.

The compensation must be paid only through the Commissioner of Employee’s Compensation in case of death or total disablement. Any lump sum payment to employee under the Act must be made only through Commissioner.

Appeal against order of Commissioner can be filed under section 30(1) of Employees Compensation Act to High Court. Appeal can be filed only if amount involved is not less than Rs. 10,000 or such higher amount as may be notified by Central Government [amendment w.e.f. 15-5-2017].

Appeal can be filed only if amount is deposited.

An employer can insure his liability for payment of claim under Employee’s Compensation Act.

The employee is eligible to get ‘disablement benefit’ only when the injury arises out of and during the course of employment. Similarly, a workman is entitled to get compensation only if accident is ‘arising out of and during the course of employment’.

6. Employees’ Provident Funds and Miscellaneous Provisions Act, 1952

The Act is social security legislation to provide for provident fund, family pension and insurance to employees.

Act applies to factories and other notified establishments employing 20 or more persons. Once an establishment is covered, its departments and branches, wherever they are, are covered. Once establishment is covered, it continues to get covered even if employment goes below 20.

Employees Provident Fund, Employees’ Pension Scheme and Employees’ Deposit-Linked Insurance Scheme [EDLI] are the three schemes covered.

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