Vasundhra Raje rejigs labour laws, clears major changes to the Industrial Disputes Act of 1947

Source: ET      Date: 11 Jun 2014 15:24:24

ByVikas Dhoot, ET Bureau | 9 Jun, 2014, 04.00AM IST
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The Raje cabinet last week cleared major changes to the Industrial Disputes Act of 1947, the Factories Act of 1948 and the Contract Labour Act of 1971, making it significantly easier for firms to hire people on a formal basis while improving working condi

NEW DELHI: The Vasundhara Raje government in Rajasthan has taken the lead in modernising governments' approach to policymaking by scrapping the state's PlanningCommissionand replacing it with a Chief Minister'sAdvisory Councilled by eminent economistArvind Panagariya.

The state has also become the first to make far-reaching changes to India's outdated labour laws that have been blamed for throttling job creation for over two decades and yet not been changed due to the lack of political courage at the Centre to take on trade unions over the critical issue. The Raje cabinet last week cleared major changes to the Industrial Disputes Act of 1947, the Factories Act of 1948 and the Contract Labour Act of 1971, making it significantly easier for firms to hire people on a formal basis while improving working conditions for employees.

Raje told ET that her government's decision should be viewed as a forward-looking urgent reform for creating jobs and boosting investments, instead of terming it simply as 'labour law reforms' that has come to denote a regressive and backward-looking approach.

"It's not about labour laws, it's about turning Rajasthan into a good habitat for jobs creation. We have a huge mandate and have promised to create 15 lakh jobs in the state before the next election," the CM said.

Experts believe this could be part of an unstated strategy of the NDA government to encourage states to undertake reforms in contentious areas that are in the concurrent list of the Constitution.

Both states and the Centre can enact laws and rules in these subjects, but a law passed by a state assembly needs to receive the President's assent after the central ministry in question approves it.

Over the past decade, such progressive laws proposed by state governments like Gujarat, Andhra Pradesh and Maharashtra were rejected by the UPA government as they were seen to be crossing the line of its National Common Minimum Programme. The Rajasthan government is confident that won't be a problem anymore.

"We now have a gentleman in charge at the Centre who has done some very good work to transform the state of Gujarat. I believe he (Prime MinisterNarendra Modi) will be keen to help the entire country develop on the same lines and let states develop and compete for investments," the state'schief ministersaid. "I believe the Centre now is very progressive and it's not a question of your party or my party," she added.

"If we need to create jobs, we need reforms as all sectors are very closed... we felt this was absolutely urgent and could immediately double or treble jobs as we have raised critical thresholds based on number of employees," Raje said.

Explaining the state's decision to move away from the traditional Plan panel approach, Raje said that it was a sign of the state's decision to move forward.

"A Planning Commission doesn't sound like a good strategy, so we have changed the outlook by merging it with the CM's Advisory Council that we had set up in my last term as CM," she said. "This should bring more ideas on the table," she said.

Rajasthan'schief secretaryRajeev Mehrishisaid that Rajasthan is the first state to okay changes to the labour laws that have been termed as 'anti-employment' for years.

In the Industrial Disputes Act, the state has approved a three-year time limit for raising disputes as opposed to the current law which sets no such limit. While the central law says that all firms hiring over 100 employees need to seek the government's permission before they are retrenched, the state has raised this limit to 300 workers.

Another major change is to double the number of employees that a union must have before it can be recognized as a trade union. Currently, any group with 15% of a firm's employees can form a union so managements have to contend with as many as six unions. This has been doubled to 30%, so that firms have to deal with three employee unions at the most.

Employee-friendly clauses have also been ratified by the cabinet, requiring firms to give workers not just three months notice, but also three months' wages as compensation in the event of job losses.

The state has raised the employee thresholds for the Contract Labour Act to be applicable on firms, from the current limit of 20 employees to 50 employees.

Similarly, the thresholds set in the Factories Act, which covers firms with more than 20 employees in electrified activities and 10 employees for (non-electrified work) have been doubled.

 
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