President okays Rajasthan's labour reforms

Paving the way for the first set of labour reforms in the country, President Pranab Mukherjee has given his assent to Rajasthan's amendments to three laws. 

Among major changes, the Industrial Disputes Act will allow companies employing up to 300 staffers to lay off workers or close down without taking the government's prior approval. Earlier, those with up to 100 employees were allowed to do so.

"The government of Rajasthan received assent papers on November 7 on three labour law amendment Bills relating to the Industrial Disputes Act, 1947, the Contract Labour Act, 1970 and the Factories Act, 1947," Rajat Mishra, Rajasthan' labour secretary, told Business Standard.

Mishra said these amendments were aimed at creating employment opportunities through greater investments and at easing the conduct of business in the state.

The Rajasthan Assembly had three months ago passed Bills amending the three laws, as well as the Apprenticeship Act. Since these laws fall under the Constitution's concurrent list, where both the Centre and states can legislate with the central law prevailing in case of a difference, they needed the President's assent before becoming law. 

"This will go a long way in providing relief to industry, especially small-scale industry. We hope the ambit of such reforms will be expanded in the near future. This will also play a major role in setting the direction for labour reforms," said Chandrajit Banerjee, director-general of the Confederation of Indian Industry (CII). Industry chambers have demanded similar changes at the Centre as well. 

Other states are expected to follow Rajasthan, with the Union Labour Minister Narendra Singh Tomar signalling states can amend labour laws to suit local conditions. Madhya Pradesh's Cabinet has approved amendments on similar lines. 

The steps taken by Rajasthan will facilitate flexibility in hiring and bring more workers under the labour legislation. Rajasthan expects this to make it a better investment destination. Mishra said Indian and foreign investors were showing interest in the state since announcement of the changes. 

"The amendments are expected to create better opportunities in the organised labour sector, which is essential for quality employment. More investments will open up new avenues for labour," said a senior state government official who did not wish to be named. 

The official said investors feared employing more than 100 workers in factories because they had to approach the government over small issues. "Investors will now concentrate on doing business rather than spending time on formalities. These moves will help workers, too, as more people will be on payrolls rather than on contract," the official added. 

Official estimates show around 85 per cent of factories in Rajasthan employ less than 100 workers. The move would generate 1.5 million additional jobs in the state, Rajasthan Chief Minister Vasundhara Raje had said.

Kicking off reforms

• Some of the important changes to laws 
• Industrial Disputes Act
• Firms employing up to 300 workers can retrench or shut shop without govt's permission (against current limit of 100)
• In case of retrenchment, a worker should raise an objection within 3 months (there is no time limit at present)
• Trade union can be formed only if it gets 30% of the workers as members (15% condition currently)

Factories Act

• The Act will apply to factories with 40 workers, if without electricity; and 20 workers, if with electricity (the present condition respectively is 20 and 10)
• Complaints against an employer about violation of this Act would not receive cognisance by a court without prior written permission from the state govt
• A provision for compounding of offences has been added

Contract Labour Act

• The Act will apply to companies employing more than 50 workers (against 20 currently)
• The industries will be able to hire more temporary workers without passing on to them the benefits contract workers are entitled to