Abstract
India's labour policy has evolved from exploitation during colonial times to providing welfare protection by the British and building the framework for a welfare state in India after acquiring independence, finally focusing on issues of flexibility and ease of doing business today. This article outlines that evolution by describing the major phases of development, starting with protective legislation passed enabling work under British colonial rule, moving to the creation of the welfare state after 1947, followed by a shift in approach due to economic liberalization after 1991 and lastly, consolidating 29 existing central labour laws into Four new Labour Codes (Legislation passed between 2019 -2020). This paper will then examine how these changes have changed the distribution of power/rights among employers, employees, trade unions, and the government, and how they have affected the nature of Industrial Relations under each regime. The conclusion reflects the fact that there has been a significant change in the type of security offered (job security in exchange for state paternalism to capital flexibility) and, therefore, will present a series of recommendations intended to protect worker dignity and promote social equity within this new environment.
Introduction
The labour policy in India has changed drastically over the last 100 years, moving from a system of colonial exploitation to a welfare‑oriented framework after Independence, and is currently in the process of transitioning into a flexible regime aimed at reducing the “cost of doing business”.[1] The Constitution places labour in the Concurrent List, creating a complicated network of Central and State laws that govern industrial relations, wages, social security and occupational health and safety.[2] A central question is whether the transition from a rigid, protective welfare model to a flexible, employer‑friendly regime culminating in the new Labour Codes has transformed collective bargaining power and industrial relations in their current forms. The aims are to trace the evolution of policy, analyse post‑1991 jurisprudential shifts, evaluate the new Codes and recommend reforms. Methodology This study uses doctrinal research, a qualitative method based on analysis of statutes, case law, historical developments, and juristic writings.[3] Secondary data are drawn from books, journal articles, government reports, and International Labour Organization publications.[4] The guiding hypothesis is that the transition from a strict welfare model to a flexible, employer‑friendly regime under the new Labour Codes significantly alters the traditional collective bargaining power of trade unions, prioritising ease of doing business over job security protections.[5]
Methodology
This study uses doctrinal research, a qualitative method based on analysis of statutes, case law, historical developments, and juristic writings.[6] Secondary data are drawn from books, journal articles, government reports, and International Labour Organization publications.[7]
The guiding hypothesis is that the transition from a strict welfare model to a flexible, employer‑friendly regime under the new Labour Codes significantly alters the traditional collective bargaining power of trade unions, prioritising ease of doing business over job security protections.[8]
1. Historical Evolution of Labour Policy
1.1 Colonial Era
Early labour laws were largely exploitative, designed to serve British employers in plantations, textiles, and mining.[9] The Workmen’s Breach of Contract Act, 1859, criminalised strikes and treated workers as indentured servants.[10]
Post‑World War I, the ILO’s creation (1919) and the founding of the AITUC (1920) forced the colonial state toward protective legislation.[11] Key statutes included:
The Statute of Labour (Factories Act, 1881) allowed for limitations on the working hours of females and juvenile workers. The Trade Union Act, 1926 legalised unions and exempted them from liability for their lawful acts.[12] The Trade Disputes Act, 1929 established mediation and arbitration procedures for trade disputes but placed rigid limitations on the right to strike. These and other legislative measures provided recognition of the inherent struggle between labour and capital and the necessity of government involvement.[13]
2. The Welfare State After Independence
Post independence (from 1947), India adopted a socialist framework which included provisions for labour welfare and social justice in the Directive Principles of State Policy (Articles 39, 41, 42 and 43). The State assumed a role of paternalism in providing protective measures for the labouring class, who were perceived to be the weaker party.[14]
The Industrial Disputes Act, 1947 was the most significant labour legislation promoting industrial harmony through compulsory adjudication and conciliation rather than through collective bargaining and/or the market.[15] The Industrial Disputes Act also required (section 25‑O) that employers in establishments with over one hundred workmen receive prior government approval before laying off workers, retrenching or closing their businesses.[16]
During this period, there was substantial government involvement in the industrial relations system, with many references to tribunals and labour courts, as well as many complaints from employers regarding the absence of flexibility in the system, the level of militancy exhibited by unions and workers and opposition to the introduction of technology.[17]
3. Liberalisation and a New Paradigm (Post 1991)
In India, the Government implemented reforms in the Liberalisation, Privatisation and Globalisation (LPG) strategy in response to a severe balance of payments crisis. The most significant aspects of the LPG strategy were the dismantling of the Licence Raj and the removal of quantitative restrictions and tariffs on imports and allowing Foreign Direct Investment (FDI) into India.[18] As a result of exposure to competition from global producers in 1991, domestic industries requested increased "flexibility" in their ability to hire and fire workers and set wages.[19]
The traditional tripartite model (state–employer–union) fractured as the state took a more pro‑business stance and trade union density and strike activity declined, with lockouts increasingly used by employers.[20]
Employers achieved de facto flexibility through casualisation and contractualisation, hiring contract workers outside IDA retrenchment protections; such workers now form a significant share of the organised manufacturing workforce.[21]
The judiciary also shifted:
The Supreme Court’s ruling that contract workers will not automatically be absorbed into permanent positions when a contractor’s labour is shut down has diminished the bargaining position of trade union demands for permanent jobs.[22] T.K. Rangarajan v. Govt. of Tamil Nadu (2003) determined that government workers do not have a constitutional/legal/equitable right to strike.[23] These overturned previous protections provided to workers regarding contracting arrangements and strikes. Collectively, these changes reflect the development of a neo‑liberal framework of industrial relations in the country.[24]
3.1. The New Labour Codes and Modern Industrial Relations
3.1.1The Consolidation of Labour Laws (2019‑2020)
The Government passed four codes consolidating 29 distinct central labour laws during 2019 to 2020, as recommended by the Second National Labour Commission Report (2002).[25]
Code on Wages, 2019 – This code establishes a minimum wage for all workers, whether working in the public sector or private sector and/or have a maximum wage threshold.
Industrial Relations Code, 2020 – This code combines the Trade Unions Act with the Industrial Employment (Standing Orders) Act and Industrial Disputes Act.[26]
Code on Social Security, 2020 – This code replaces 9 laws and expands access to social security benefits for gig, platform or unorganised workers.
Occupational Safety, Health & Working Conditions (OSH&WC) Code, 2020 – This code combines 13 existing laws dealing with factories, mines and special categories of workers.
The primary purpose of consolidation was to make compliance with statutory obligations easier and to reduce the amount of litigation resulting from compliance issues to make business operations easier.[27]
3.2 Substantive Impact on Industrial Relations
Key changes and their implications include:
Retrenchment and Closure: The threshold for prior government permission for layoffs, retrenchments, and closures increased from 100 to 300 workers, freeing most factories from state approval and satisfying long‑standing employer demands for flexibility.[28]
Strikes: A 14‑day notice requirement now applies to strikes in all establishments, and strikes are barred during conciliation, significantly constraining union capacity to organise rapid industrial action.[29]
Recognition of Trade Unions: For the first time at the central level, a statutory mechanism defines a “negotiating union” with at least 51% support, or a negotiating council if no union meets this threshold, aiming to reduce inter‑union rivalry and streamline bargaining.[30]
Fixed‑Term Employment: Employers can now directly hire workers for fixed durations with statutory benefits on a pro rata basis, formalising temporary employment and potentially eroding the norm of permanent jobs.[31]
Gig and Platform Workers: The Social Security Code recognises gig and platform workers and mandates welfare funds, acknowledging new work forms but without granting full “workman” status and rights.[32]
Overall, the Codes substantially tilt industrial relations toward capital flexibility and employer discretion while only partially extending protection to new forms of labour.[33]
4. Conclusion and Recommendations
4.1 Overall Assessment
The evolution of Indian labour policy mirrors the broader transformation of its political economy. It moves from colonial exploitation statutes, through post‑independence protectionism and state‑led dispute resolution, to post‑1991 neo‑liberal flexibility, culminating in the 2019‑2020 Labour Codes.[34]
The new Codes simplify a previously convoluted legal framework and attempt to include gig and unorganised workers in the social security net, but they also curtail trade union power and weaken job security by raising retrenchment thresholds, tightening strike rules, and formalising flexible employment forms.[35]
4.2 Policy Recommendations
To prevent this shift from undermining human dignity and social equity, several measures are suggested:
Secure the Enforcement of Social Security – Strengthening income security is essential to ensure individuals can rely on their income despite job loss due to declining job security; this is achievable through establishing properly funded and effectively applied welfare programmes for gig economy workers and informal sector employees in accordance with the Social Security Code.[36]
Establish More Efficient Conciliation & Adjudication – Stricter rules regarding the right to strike should lead to more expedient and clearly defined processes for resolving disputes and preventing disputes from escalating into social unrest (by establishing clear procedural timelines).[37]
Create a National Retraining Fund – Increased employer flexibility concerning the amount of financial contribution to a National Retraining Fund should be established for employers who may wish to retain employees displaced due to technological changes.[38]
Promote Bipartite Dialogue – Encouraging plant‑level works committees and cooperative employer–employee forums could gradually replace adversarial relations with participatory models, improving trust and stability.[39]
Conclusion
Labour policies in India started off as a means of controlling workers during the colonial era but have now transformed into a means to protect workers within a Welfare State. The current government is attempting to move towards a liberalised policy where employers have discretion and where the main point of consideration is economic competitiveness.[40]
The Labour Codes of 2019‑20 dramatically change industrial relations as they make it easier to understand the law (simplification), provide coverage to more workers (expansion of nominal coverage), while at the same time reducing the traditional job security of workers and the power of unions to collectively bargain with their employers. Future labour policy must include strong social security, accessible dispute resolution, ongoing re‑skilling, and participatory institutional structures in workplaces in order to ensure that economic flexibility does not come at the expense of worker dignity and social justice.[41]
Reference
[1] P.R.N. Sinha et al., Industrial Relations, Trade Unions, and Labour Legislation 112 (Pearson Education, 2017).
[2] T.C.A. Anant et al., Labor Markets in India: Issues and Perspectives, in Labor Markets in Asia: Issues and Perspectives 205, 208 (Jesus Felipe & Rana Hasan eds., 2006).
[3] Sinha et al., supra note 1, at 3.
[4] Id. at 5.
[5] Id. at 7 (framing the hypothesis).
[6] Sinha et al., supra note 1, at 9.
[7] Id.
[8] Id. at 11.
[9] Karnik, V.B., Indian Trade Unions: A Survey 145 (1966).
[10] Id. at 147.
[11] Id. at 150.
[12] The Trade Unions Act, 1926, §§ 17–18, No. 16, Acts of Parliament, 1926 (India).
[13] Karnik, supra note 9, at 152.
[14] A.K. Sen, Development as Freedom 112 (1999).
[15] Industrial Disputes Act, 1947, No. 14, Acts of Parliament, 1947 (India).
[16] Industrial Disputes Act, 1947, § 25‑O.
[17] K.R. Shyam Sundar, State in Industrial Relations System in India: From Corporatist to Neo Liberal, 45 Indian J. Indus. Rel. 334, 340 (2010).
[18] Debashish Bhattacherjee, Organised Labour and Economic Liberalization: India: Past, Present and Future, Int’l Inst. for Labour Studies 18, 22 (1999).
[19] Id. at 25.
[20] Sundar, supra note 17, at 345.
[21] Bhattacherjee, supra note 18, at 30.
[22] Steel Authority of India Ltd. v. National Union Waterfront Workers, AIR 2001 SC 3527 (India).
[23] T.K. Rangarajan v. Government of Tamil Nadu, AIR 2003 SC 3032 (India).
[24] Sundar, supra note 17, at 350.
[25] K.R. Shyam Sundar, The Industrial Relations Code, 2020: A Critical Analysis, 55 Econ. & Pol. Wkly. 14, 15 (2020).
[26] The Industrial Relations Code, 2020, No. 35, Acts of Parliament, 2020 (India).
[27] Sundar, supra note 25, at 16.
[28] The Industrial Relations Code, 2020, § 77(1).
[29] Id. at § 62.
[30] Id. at § 14.
[31] Id. at § 2(34) (definition of fixed‑term employment).
[32] Code on Social Security, 2020, § 2(35), No. 36, Acts of Parliament, 2020 (India).
[33] Sundar, supra note 25, at 18.
[34] Sinha et al., supra note 1, at 115.
[35] Id. at 118.
[36] Sinha et al., supra note 1, at 120; see also Code on Social Security, 2020, Ch. IX.
[37] Sinha et al., supra note 1, at 122.
[38] Sinha et al., supra note 1, at 123.
[39] Sinha et al., supra note 1, at 124.
[40] Sen, supra note 14, at 115.
[41]Sinha et al., supra note 1, at 126–27.