Relaxation of Labour Laws: An Explainer

What are labour laws?

Labour laws protect an employee’s rights and set forth an employer’s responsibilities towards his employees. They help in securing equal opportunity and pay, physical and mental wellbeing, workplace safety, job security and more. They also regulate the functioning of trade unions.

Who are labour laws applicable to?

Labour laws are only applicable to the formal sector — both private and public. This means that workers employed in the informal sector are not protected by them. The informal or unorganized sectors includes but is not limited to: domestic workers, fisherfolk, small and marginal farmers, landless farmers, manual scavengers, midwives, et al.

What are the Indian labour laws?

In India, both the Central and State Governments can make labour laws. There are 44 central and 150 state labour laws. They can be divided into four types:

  1. Laws relating to conditions of work (ventilation, toilets, holidays, working hours)

  2. Laws on social security

  3. Laws pertaining to wages and remuneration

  4. Laws relating to industrial relations (collective bargaining, labour-management relations) and employment security (unfair dismissals, layoff procedures)

Some common labour laws are: Factories Act, Industrial Disputes Act, Payment of Wages Act, Minimum Wages Act, Equal Remuneration Act, Contract Labour Act, Payment of Bonus Act and the Workmen’s Compensation Act.

In the past few weeks various State governments have introduced major changes in labour laws. The most significant changes were introduced by the states of Uttar Pradesh, Madhya Pradesh, and Gujarat. But Himachal Pradesh, Assam, Goa, Haryana, Rajasthan, Maharashtra, Punjab, and Uttarakhand have also made changes in their structure.

On the face of it, these changes have brought to incentivise economic activity in their respective states.

Changes in Labour Law Structure

Uttar Pradesh

35 out of 38 labour laws have been abrogated for a period of 3 years, with the exception of the Bonded Labour Act, provision for timely payment of wages, and the Employee’s Compensation Act. Provisions relating to the safety and security of workmen, and the laws relating to women and children have also been retained.

What does this imply?

The implication of this is that

  • The employers have no obligation to pay the workers anything more than the prescribed wages.

  • No social security obligations (gratuity, provident fund).

  • Employers will have total flexibility in hiring and firing employees.

  • Employers need not provide basic amenities to the workers (toilets, ventilation, lighting, protective gear, facilities for sitting, creches, lunch room, rest rooms, drinking water)

  • Employers need not maintain proper cleanliness.

  • Workers will not have any redressal mechanism to address their grievances.

  • No requirement for a weekly day off with pay, no payment of overtime.

  • New trade unions cannot be registered for a period of 3 years.

Madhya Pradesh

1. The Madhya Pradesh government has amended 2 state laws: the Madhya Pradesh Industrial Employment Act and the Madhya Pradesh Shram Kalyan Nidhi Act.

What does this imply?

The implications are as follows:

- Workers are prevented from bargaining for better working conditions.

- Employers will not have to make contributions towards employee welfare.

2. All new factories are exempted from certain provisions of the Industrial Dispute Act, However, provisions related layoffs, retrenchment of workers and closure of establishments will continue to apply. However, the other provisions of the Act such as those related to industrial dispute resolution, strikes and lockouts, and trade unions will not apply. This exemption will remain in place for the next 1000 days (33 months).

3. All factories are exempted (for 3 months) from the provisions of the Factories Act except those relating to registration, licensing, approval, safety and hazardous processes, overtime wages, and a few others.

What does this imply?

- Employers need not maintain adequate ventilation and temperature, lighting, toilets, drinking water.

- Employers need not take measures to prevent overcrowding.

- Employers need not maintain proper cleanliness.

- Facilities for sitting are not mandatory.

- Need not provide first aid kits, canteens, shelters, restrooms, lunch rooms, creches.

4. 11 types of industries are exempted from the application of the Madhya Pradesh Industrial Regulations Act which regulates industrial disputes.


Gujarat is in the process of promulgating an ordinance exempting new units from the application of all labour laws with the exception of the Minimum Wages Act, the Employee’s Compensation Act and the safety-related provisions of the Factories Act for a period of 3 years. The implications of this are the same as in Uttar Pradesh.

Other States

Maharashtra, Rajasthan, Gujarat, Goa, Madhya Pradesh, Uttarakhand, Assam, Punjab, Haryana and Himachal Pradesh have amended the Factories Act to increase the number of working hours from 8 to 12 hours per day.

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