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Explainer: What Are Labour Laws, And Why Are States Changing Them?

By on May 11, 2020 0 943 Views


After relaxation in lockdown, companies and firms started their production again. But, as soon as they lifted their shutters, they were facing a big administrative problem. Should they fire the workers who are unable to come? Should they cut the wages of every employee as the profits are on an all-time low? Aren’t they violating labour laws, if they do so?

To solve these problems of companies and firms and to run the economy smooth, the state governments changed the labour laws. The Yogi Adityanath government went as far as suspending almost every law in its state.

Before you make an opinion on the matter, make sure you know everything.

What Are Labour Laws?

In India, the laws that govern employment contracts, wage regulation, health and safety of workers and employees, and their pensions and insurance are called labour laws. These laws come under both – the central and the state government as the various taxes from companies and firms are collected from both the governments.

There are many acts that come under the broad umbrella of labour laws. For example – the Factories Act. It deals with the safety and health of factory workers. There is also the Shops and Commercial Establishments Act, which deals with work hours, payments, employment of children, day-offs, and holidays. It is estimated that there are more than 200 state laws and around 50 central laws that come under a broad category.

Why Do Economists Loathe Them?

Because of their inflexibility, these labour laws are often criticized by capitalists and economists. Even to fire an employee, firms (having more than a hundred employees) have to take permission from the government. But, to avoid the hassling process, firms often hire people without any formal contracts.

The labour laws are so complicated that even lawyers can’t fully demystify them, let alone companies and capitalists. Eventually, these laws cause harm to labour rather than benefitting them. Economists have been demanding some relaxation in the laws since the 1950.


Changing Labour Laws Amid COVID-19

Theoretically, if the state governments are relaxing the laws, it should make the economists happy. But, in reality, they are not.

Economists were demanding to declutter and relax the laws, not abrogating them, like what the Uttar Pradesh government has done.

Talking to media about the changes made in the labour laws by UP government, Radhicka Kapoor, a Fellow at the Indian Council for Research on International Economic Relations (ICRIER), said that this could create an opportunity for companies to exploit their employees. According to her, the firms may fire their employees and hire them again at a lower salary.

However, the states have just made the changes, and the real results of changes are yet to come in the future.

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