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Effect of Covid 19 on Labour Laws

Indian Labour laws are referred to as the laws regulating labour in India. Labour laws are one of the most complex and often criticised set of laws in India. With India being a labour surplus economy, it becomes imperative to discuss about the laws that govern the Labour. Labour falls in the Concurrent List which means that both the Union government and the state governments have the power to make laws with respect to the subject. There is no specific definition of Labour Laws in India. Before touching upon the effects of the COVID pandemic on the Labour laws, we shall first analyse the types of labour laws.

Types of Labour Laws in India

There is no specific categorisation of Labour Laws in India, but they can be broadly divided into four categories.

Conditions of work:

The primary objective of laws like the Factories Act of 1948 is to maintain industry safety measures while also promoting worker health and wellbeing. Other laws in this category include the Contract Labour (Regulation and Abolition) Act of 1970, Shops and Commercial Establishment Acts, and other similar statutes.

Wages and Renumeration:

These laws regulate the wages and to provide for equal renumeration without any discrimination. Under this category includes laws such as the Shops and Commercial Establishments Act were enacted with an aim to regulate working hours, wages, overtime, a weekly day off with pay, additional paid holidays, annual leave, the employment of children and young people, and the employment of women. Other laws in this category include the Minimum Wage Act of 1948 and the Payment of Wages Act of 1936, among others.

Social Security:

These laws provide for the general welfare and to provide adequate provisions for Social Security to the Labour. The Minimum Wages Act, for example, covers more workers than any other piece of labour legislation. Other laws are: Employees Provident Fund Act, 1952; Workmen’s Compensation Act, 1923; Employees State Insurance Act, 1948 etc.

Employment Security and Industrial Relations:

Layoffs, retrenchment, and closure of industrial businesses, as well as strikes and lockouts, are all covered by these regulations. Industrial Disputes Act, 1947; Industrial Establishments (Standing Orders) Act, 1946, and others fall within this category.

Major Changes and Relaxations in Labour Laws

The subject of labour laws falls under a concurrent list, which allows both the state and the union government to make changes. Some changes/ relaxations of labour laws in some states are given below:

In May 2020, the state of Uttar Pradesh witnessed the most significant developments. The Uttar Pradesh Temporary Exemption from Certain Labour Laws Ordinance, 2020, was announced by the state administration, and it would suspend the execution of all labour laws in the state for three years (excluding those related to women and children). The Bonded Labour System (Abolition) Act of 1976, the Employees Compensation Act of 1923, and the Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act of 1996 are the only exceptions to these new amendements. The reasoning offered for this is to jump-start the economy and mitigate the negative effects of the new coronavirus outbreak. For the duration of this period, laws governing workplace safety, industrial disputes, health risks and working conditions, trade unions, contract labour, and migrant labourers will be almost non-existent. Because the collective bargaining methods have been gone, this will give companies a free hand in how they treat their employees. This move will open up the possibility for exploitation because it comes at a time when the worldwide epidemic has left a large number of workers jobless and impoverished. Furthermore, one cannot ignore the states' timing in enacting these measures, which would otherwise have been faced with fierce opposition by trade unions organisations.

The global pandemic has created such an environment that is unsuitable for large-scale demonstrations by a group of people who are fully aware that their government is unprepared to defend them from the infection. Gujarat, Punjab, Odisha, and Himachal Pradesh have revised the Factories Act of 1948 to raise the maximum working hours from nine to twelve per day and the maximum number of hours per week from forty-eight to seventy-two. In various treaties, the International Labour Organization (ILO), of which India is a founding member, emphasises the idea of a 48-hour workweek. As a result of allowing 12-hour workdays, the employers will force workers to spend more than half of their day (including transport) away from home.This will have a disproportionately negative impact on women in the workplace, while also being undesirable for men. This complete disregard for the ILO's calls for decent working time to ensure health and safety, work-life balance, gender equality, increased productivity, and to facilitate workers' choice and influence over working hours has a chilling defiance to it.

The changes made by the Madhya Pradesh government have put the rights and recognition of labour unions in jeopardy. The Trade Unions Act, 1926, which covers the statutory provisions governing trade unions in India, and the Industrial Disputes Act, 1947, which covers the same for resolving disputes between trade unions and employers, are among the laws that the Madhya Pradesh government has declared defunct for new establishments for a period of 1000 days. This eliminates the prospect of creating new trade unions at such establishments, at least in the short term, while also putting existing ones in jeopardy. There's a good chance that these developments will 'informalize' the formal sector, and that worker will be considered as just another variable cost of production. With job security removed, companies will have no hesitation over treating workers as disposable. As salaries fall down till the minimum level, there will be a noticeable decline in spending by the working class, which might be disastrous to the economy. Two serious industrial tragedies have happened in Vishakhapatnam and Delhi in the last six months, sparking questions about the workplace safety regulations. Relaxing the laws in this sector is likely to have a negative impact.

The Kerala State Government, on the other hand, has stated that the wellbeing of employees would not be sacrificed for the sake of the economy. The government revealed new ways to boost the economy. In a week's time, the Industry License would be issued for the new factories would be issued. During the lockdown, the state has extended the payment of salaries to contract, casual, day wage, and outsourced workers until May 17, 2020.

In several labour laws, the state of Rajasthan has also allowed a blanket exemption. For three months, the state has exempted the regulations of the Factories Act concerning adult workers' working hours. The working day has been extended from eight to twelve hours. 4 hours of extra will be authorised, and overtime will be paid according to the guidelines. Workers will be required to work a maximum of 6 days per week, with a weekly overtime limit of 24 hours. Movement from work to home and return throughout the day will be limited to half an hour and will be permitted only once during the day and once during the night.

Other states like Himachal Pradesh, Uttarakhand, and Haryana have also relaxed some of their existing labour laws. Some other South Asian countries have also changed/relaxed their labour laws.

There have been attempts to modify labour laws in Pakistan, Sri Lanka, Bangladesh, and Nepal, with negative impacts for workers' rights.

Anton Marcus of International Labour Organisation added,

“Employers in Sri Lanka proposed many anti-worker and anti-women workers labour law changes including increasing working hours, changed working conditions, unilateral termination of employees without government approval and even called for suspension of labour laws.”

The anti-worker policy measures were fiercely condemned by both the Indian and Sri Lankan trade union organizations. India's labour unions staged widespread strikes and demonstrations. Affiliates in Sri Lanka worked to guarantee that employees were paid during the lockdown period. However, the government and companies continue to advocate for revisions to the labour laws.

Pakistani union delegates highlighted their concern on the suggestions to stop labour inspections and the absence of enforcement of labour laws, emphasising the need to gradually integrate labour regulations across provinces and institutionalise national level social dialogue.

According to union representatives in Bangladesh, working people's rights are being taken away, particularly in the readymade garment industry. Workers' representation in government tripartite committees dealing with labour legislation are frequently ignored, which harms the country's social discourse.

Rationale behind the changes in Labour Laws and its implications

During the pandemic, to encourage investment and industrial activity, governments have moved to relax labour laws. These labour law reforms also aim to safeguard current jobs and to re-employ people who have returned to their states. These are expected to increase transparency in administrative operations and turn the problems of a failing economy into opportunities. These are also projected to boost state revenue, which has decreased as a result of the shutdown of industrial facilities during the Covid-19 lockout. For a long time, industries have demanded labour reform. The changes were needed because the were trapped in a complex number of laws. Because of the national lockdown, businesses and economic activity have halted, and labour welfare has suffered as a result.

But on the contrary, there are some implications to the above given changes and relaxations to the existing labour laws.

Implications of the recent changes and relaxations:


This move is expected to create an environment for exploitation. This is because these changes are far from being called reforms, which essentially means an improvement, the removal of all labour laws will not only strip the labour of its basic rights but also drive down wages. Some states like UP have summarily suspended almost all labour laws including the Minimum Wages Act. This this move is characterized as “creating an enabling environment for exploitation”. This can cause firms to fire their old employees and bringing in new employees at even lower wages. Moreover, there has always been a wide gap between formal and informal wage rates. For example, a woman working as a casual labourer in rural India earns just 20% of what a man earns in an urban formal setting. Thus, if all labour laws are removed, most employment will effectively turn informal and bring down the wage rate sharply. And there will also be no possible way for any worker to even seek grievance redressal.

As for the suspension, most of the provisions under the Factories Act, 1948 and the Industrial Disputes Act,1947 would mean workers in factories may be denied basic working facilities such as cleanliness, proper ventilation, drinking water, canteens, and restrooms.


Instead of increasing the formalisation of the labour, this measure will change existing formal workers into informal employees since they would no longer be covered by social security.

3. Will reduce demand in the economy

Scrapping labour laws to save on labour costs will not help start the economy but will do exactly the opposite. This will reduce the existing wages and lower the earnings (particularly of low wage workers) and will also reduce consumer demand.

4.Unlikely to spur economic growth?

Even though on paper it is possible to generate more employment in a market with fewer labour regulations. However, as per the previous experience of states that have relaxed labour laws in the past suggests, dismantling worker protection laws have failed to attract any significant investments and increase employment. It is unproven if they can cause an increase in worker exploitation or deterioration of working conditions. However, in the long run, employment will not increase, because of several reasons.

5. Enacted without any scrutiny:

For any change in an Act, there is a rigorous process that is to be followed, of public consultation, scrutiny by committees of Parliament, and debates in the House before being approved. But the changes and relaxations described here have not gone through such a process. However, most of these have a three-month time limit, and any extension would need to be approved by the legislature.

Suggestions and Conclusion

For India's industrial growth to be sustainable, comprehensive labour law changes are required, allowing enterprises to develop while protecting workers' interests, culminating in the formalisation of the Indian economy. Rather than suspending the laws, the government could have done the following:

Allow two shifts:

What the states could have done was decrease the time of each shift and allow two shifts. Because there is already too much-unused capacity due to which industries are cutting salaries by up to 40% and making job cuts. The overall demand has fallen. No industry will hire more employees right now.

If the goal was to enhance the number of people with jobs, governments should not have raised the shift duration from 8 to 12 hours. Instead, the states might well have authorised two shifts of eight hours each, allowing more individuals to find work. This action, together with the consequent wage decrease, would further weaken overall demand in the economy, hurting the recovery process.

Partner with the industry:

Most governments throughout the globe have collaborated with industry and given 3% to 5% of GDP to share the wage burden and ensure the health of the workforce. Aside from labour rules, businesses confront several of the additional challenges, such as a scarcity of trained labour and weak contract enforcement, to name a few. The government could have collaborated with industry to dedicate a proportion of GDP to sharing the wage burden and safeguarding workers' health. At this moment, firms are more concerned about securing labour.


Ekamjot Singh Bagga

Course: BA LLB (First Year)

Batch: May

College: Rajiv Gandhi National University of Law, Patiala

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