Trade Unions Angry Over Labour Law Exemptions To Startups

It may be a populist move aimed at incentivising the Start-Ups but the trade unions are up in arms. The central government has issued an advisory to the States/Union Territories virtually exempting the Start-Ups from any physical inspection by the officials representing the labour enforcement agencies. These exemptions will mean no physical inspection by labour enforcement officials for up to five years from the date the Start-Ups get operational. The exemptions to Start-Ups will be from nine labour laws including the Industrial Disputes Act, Trade Union Acts, Payment of Gratuity Act, Contract Labour Act and the Employees PF and Miscellaneous Provisions Acts among others. Which means until written complaints are made, the workers employed by the Start-Up firms can be at the mercy of the employers.

Can this act be interpreted as bypassing the Parliament that is mandated to pass or amend laws?

As per the advisory issued by the labour ministry, the Start-Ups will only have to furnish self-certification for the first year and thereafter self-certified returns. Inspections, if any, by officials will happen only in the instance of violations for which written complaints have been filed. Even then, prior approvals from "higher authorities" will be required. The advisory does not expand on who these "higher authorities" will be.

It should be noted that these labour laws do not have built-in exemptions for any category of business from physical verification by the labour enforcement officials.

"It has been suggested that if such start-ups furnish self-declaration for compliance of nine labour laws for the first year from the date of starting the start-up, no inspection under these labour laws, wherever applicable, will take place," the advisory issued by the labour ministry said.

"From the second year onwards, up to 3 year from the setting up of the units, such start-ups are required to furnish self-certified returns and would be inspected only when credible and verifiable complaint of violation is filed in writing and approval has been obtained from the higher authorities," it said.

However, the advisory makes it clear that it is not meant to allow the State Governments to exempt the Start-ups from the ambit of compliance of these labour laws but to provide an "administrative mechanism" to regulate inspection of the Start-Ups under these labour laws, "so that Start-ups are encouraged to be self-disciplined and adhere to the rule of law," it said.

With the advisory, the central government added that the intention was to avoid harassment of the entrepreneurs by restricting the discretion and arbitrariness of the labour inspectors. "Punitive action shall, however, be taken whenever there is a violation of these labour laws," it said.

But this has not convinced the trade union bodies. The Centre of Trade Union termed it as "anti-worker" designs of the government which will grant virtual exemption to the start-ups companies. Angry trade union bodies have shot off letters to the labour secretary pointing out that these "concessions" impose "conditions of virtual bonded labour" on the workers that are going to be employed in these start-ups.

"This means suppression of workers’ rights. Any advisory that does not to allow formation of trade unions or denies welfare benefit to construction workers, reckless contractorization and leads to denial of basic social security benefit like EPF, ESI etc. are dangerous precedence," said a senior functionary of the trade union body.

"CITU calls upon the working people and the trade union movement to expose such anti-worker deceptive designs of the NDA government unitedly," it said in a letter adding that such brazen anti-worker designs sought to be pushed through, in a dubious and deceptive manner, warrants all-out condemnation and opposition by the trade union movement irrespective of affiliations.

Now the decision to adopt the advisory falls with the respective state governments. Instead of a blanket exemption, it would have been wiser to either go in for amendments to the labour laws whereby clauses granting any such exemptions would have been brought in and debated on the floor of the Parliament. After all, the start-up phenomenon is here to stay.