Do the New Age Industries Misuse Labour Laws?

With the Big Billion sale right around the corner, consumers are not the only ones that get to purchase in bulk. To meet the demands of the approaching festive season, ecommerce companies are all set to hire additional manpower for meeting surge demand in business.

Such measures often lead to a debate on the utility and legality of these modes of engagement. Do these issues qualify as exploitation of labour laws? Are we living in an outdated world alleging misuse of labour laws in the new age industry?

An overall analysis of labour laws and the various ways in which the new age industries use them, including the debate on the temporary staffing model is highlighted below in the article.

Are labour laws the problem?

Contract Labour ( Regulation & Abolition) Act, 1970 which is the main driver for such method of engagement and prevention of any exploitation thereon is a very well structured piece of legislation covering all related aspects of such labour engagement / practices, which when followed leaves no room for exploitation. The law was set in a different economic environment and there has been a strong demand from the industry to make revisions suiting the trends or needs of the modern industry. What can be distinctly said is that even in its existing form, the law has been meeting the needs largely being asked for by the new age industry which has been in existence for over decade and a half. One of the key aspects of this legislation being abolition of engagement of contract labour in Core jobs in an industry has seen very low level of enforcement or prohibition of such practices thereby meeting the requirement of the industry inadvertently while the several judicial decisions have made sure that perennial engagement of such labour not being a right for permanent employment. In addition to these, several States have taken steps in further liberalizing the enforcement by enhancing the numbers for coverage under the law ensuring a free hand to an employer in engaging such labour. The wish list of the industry for a flexible hire and fire policy with respect to project based hires or temporary staff as they are called therefore gets very much embedded within the legal provision and the consequent enforcement of such provision as we see in the today’s industry. What therefore the law further needs is a clear set of guidelines for enforcement and a liberty to handle such engagement through a self – governance mechanism, which could be subject to scrutiny of the financial or business process instead of keeping this as an option for enforcement.

What are the ways in which exploitation may occur?

Despite laws being stringent and awareness being increased against labour exploitation, concerns on such exploitation raises its ugly head in several ways and continues to be prevalent in the industry. Entry level and temporary staffing jobs are the ones that are most hit by exploitation especially in industries such as transport, construction, garments etc. Exploitation generally arises in the following three areas:

  • Type of engagement:
    While the new age service industry appears to follow proper processes in engagement of temporary staff, the brick and mortar industry does not appear to engage labour with proper licensing or through permitted norms. Some of the examples of such industries could be in Transport, Construction, Infrastructure development, Telecom and rural workforce based industries. A star example of such violation is the cracker manufacturing industry in Sivakasi or agarbathi or beedi workers where child labour is rampant, a practice which is not just an exploitation but a prohibited one. To avoid detection, employers often pass off seven or eight year old children as fourteen and keep a record of 5 work hours per day. Without a formal engagement method evidenced by documentation and a written appointment letter, employers often get away with enforcing their whims and fancies over their employees who have no basis to claim their rights.
  • Wages:
    The entry level jobs are often underpaid than what is promised or due. Given the aggressive approach of the Governments across India in raising minimum wages, costs of engaging temporary staff has risen substantially over the last 5 years and coupled with the administrative costs of the service provider together with the service tax, these costs hover in a range similar to that of the full time employee and hence there are unscrupulous practices in the industry by way of underpayments or unreported employees camouflaged as a contract for service instead of contract of service. Not even an organized and well meaning industry like IT escaped this practice until recently towards payments of security guards or house keeping staff. Given the strength of the enforcement as opposed to the growth of the companies in India such practices are hard to detect and moving this responsibility to the employer by way of formulating a labour standard for self governance would be a good means of control.
  • Working conditions:
    The industry is quite aware of the practices necessitated by law as well as best practices within each industry in providing appropriate working conditions, amenities and benefits to employees. Most of the industry has voluntarily adhered to such practices and looks upon them as a way of employee satisfaction. However, temporary staff do suffer a step motherly treatment in the hands of the industry on such practices and are not treated on par with full time employees. Unfortunately, such employees do not have a means of raising a H R issue with their employer who happens largely as an employer on record and has no ways and means to manage that. Most of the times contractors attempt to meet legal obligations in large industries merely to create records of compliance than meeting needs of their employees.

How do employees suffer from exploitation?

Temporary employees suffer due to poor working conditions. Amenities such as toilets, canteens, accommodation are rarely provided, especially to contractual labour. Such employees hardly receive any training in brick and mortar industries and their careers are more driven towards earnings for the day / month as opposed to a career seeking full time employee.

Another typical violation is the denial of statutory benefits. It is not unheard that a woman temporary staff when found to be pregnant, is made to resign since the costs associated with maternity benefits when extended need to be borne by the contractor who operates on wafer thin margins and prefers to avoid such costs. For a man who is sick, insurance or ESI cards are denied to him given the low level of formal engagement procedures prevalent particularly in the brick and mortar industry. This is again a moot point for self governance than enforcement and the principal employer would be in a better position to report such information than a contractor.

Need for labour standards in the country

Labour standards are the need of the hour and the government must start working towards them and make the corporate employer observe such practices on a self governance mode in lieu of the current practice of enforcement. The classification of labour into skilled, semi skilled or unskilled is quite non uniform across states and across industries. The recent declaration of the ministry of labour of treating Security Supervisor as a Skilled manpower appears to be a hurried classification and not based on facts or practices. The industry landscape for security varies hugely between urban to semi urban to rural areas while the needs are further more distinct industry wise.

Labour standards and definition of skills are a sine qua non for better workforce management and in preventing labour exploitation.


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