Introduction
Earlier there were around 45 central and state laws regulating different aspects of labour, such as laws pertaining to various working conditions, industrial disputes, social security and laws relating to wages, gratuity and bonus payments. However, the same was really cumbersome and confusing and therefore there were various recommendations that these laws should be consolidated for easier compliance and wider benefit. [i]
Following these recommendations, the Code on Wages was introduced in 2017, then referred to a standing committee and finally passed in 2019. The Wage Code Bill, 2019 subsumes four existing laws i.e. Payment of Wages Act, 1936, Minimum Wage Act, 1948, Payment of Bonus Act, 1965 and Equal Remuneration Act, 1978. The Code consolidates all the important provisions of the four legislations, and further tries to solve the loopholes that existed in the current regime by significantly changing provisions related to floor wage, minimum wage rate, overtime, payment of bonus, setting up of advisory boards, eliminating gender and regional discriminations over many others.
Wage Trends in India
India Wage Report published by International Labour Organisation (ILO) indicates that inequality in wages and low payment causes a significant obstacle in achieving labour welfare and growth. A report published by Indian Journal of Labour Economics shows that in 2011-12, the average wage rate in India was Rs. 247 per day, while for a casual worker was Rs. 143 per day. [ii]Further, regional disparities over average wages have significantly arisen with time. Wages have risen rapidly at a much greater rate in high wages states as compared to low wage states. Based on one of the primary research conducted on a group of casual contract workers in Patna, Bihar and Mumbai by the researcher, it is very evident that such disparities exist even now. The research signifies that there has been rise of only 20% in wages per day since 5 years in Patna compared to 60% in Mumbai. The gender wage gap also continues to remain high compared to international standards. The average daily wages of causal woman worker amounts to only Rs 104 per day. Lastly, Labour share [iii]has also fallen to 35.4% in 2013 from 38.5% in 1981.[iv]
Wage Policy in India
The Minimum Wages Act was one of the most crucial piece of labour legislation to be adopted in 1948. It safeguards regular and casual labourers, and even workers at organised and unorganised sector. However, the said act had various shortcomings which caused a declining wage trend in India. The Act only covered workers working in specific scheduled employments and was state specific. As a result, there were around 1700 different wage rates prevalent in the country, and the application of minimum wages only extended to less than 50% wage workers. [v]Furthermore, there was no uniformity in method to determine wage rates, which resulted in ambiguity in such calculation. Therefore, majority of wage workers were still paid less than minimum wages.
Code on Wages, 2019
The code has brought various significant labour legislations under one umbrella. It has widened the definition of employee and employer to include both organised and unorganised sector. Further, minimum wages act extended to workers mentioned in scheduled employments only. However, this code extends to all establishments and covers 100% wage workers. The benefits under the code stretches to all employees which includes skilled, semi-skilled, manual, operational, managerial, administrative, technical and clerical work. Therefore, the applicability of the benefits of the Code is much larger compared to earlier legislations. It further uniforms definitions of terms like wages which were very ambiguous in previous legislations as separate definitions existed in different legislations. This will ensure that employers take a uniform approach and thereby eliminate multiple interpretations. As per the code, a national floor rate for wages will be set keeping in mind the minimum living standards of workers in different geographical areas. State Government can accordingly fix a minimum wage rate for their regions which should be greater than the floor rate. Moreover, such rates shall be reviewed at intervals of period not more than 5 years. One of the significant inclusions in payment in reference to overtime which is set as twice the rate for normal wages. The code also ensures equal remuneration and no discrimination on the basis of the gender. With reference to settlement of monthly wages, it has been fixed as on 7th of the succeeding month compared to 10th of the succeeding month in earlier legislations. The code also replaces inspector with inspector cum facilitators to handle inspections, for transparency and removing ambiguity and malpractices. The Code provides for inspection which is web based and automatic, thereby eliminating any corrupt practices which were earlier carried by the Inspectors. Therefore, Code on Wages standardises and streamlines various provisions of labour law for better implementation.
Shortcomings
The Code on Wages, 2019 has been said as one of the landmark legislations. However, on a closer analysis, it shows that the code has omitted or diluted important provisions of existing laws. The code has reiterated aspects of minimum wages from previous provisions, while it still fails to define a uniform methodology to calculate or fix an adequate minimum wages. It fails to recognise the recommendations of Indian Labour Conference in 2015[vi], and even the Supreme Court Ruling in the Raptakos Brett case[vii], which laid a methodology to determine minimum wages giving priority to needs of the workers instead of identifying them as mere factors of production. However, this bill gives discretionary power to administrators to decide a minimum wage rate without any clarity or standard for the same. As a result, the national floor rate was set at Rs. 178 per day which has been referred as starvation rate by the ILO and is only Rs 2 more than the national minimum wage rate set two years before. [viii] Further, one of the major shortfalls is giving state government with unlimited power to set minimum wages. This causes states racing to compete with one another to lowest wage rates so as to bring in investments. This will result into repressed wage rates throughout the country and will lead to negative welfare. Moreover, the Code gives a lot of discretionary power to the government officials/ administrators which may lead to adversarial situation. Some of such powers are deciding on factors to determine the minimum wage rate, the selection of members of adversarial boards.
With respect to enforcement mechanisms, the concept of surprise visits or examine persons which were a significant way of vigilance by the inspectors to keep a check on the employers have been removed and replaced by web based automated inspections. This gives the employer leeway to create a false labour welfare scenario when they realise an inspection is around the corner, thereby defeating the idea of inspection in itself. Further, the employers are given an option to choose for automated self- certification scheme as well, where they will naturally show themselves compliant with labour provisions. Additionally, the punishment has been made lenient as compared to earlier labour legislations. In earlier Minimum Wages Act, the employers had criminal liability which has been shifted to civil liability. In one of the earlier judgements of Supreme Court, Sanjit Roy v. State of Rajasthan[ix], it was clearly stated that non adhering to minimum wages leads to forced labour and should be strictly punishable by law. However, in the present Code, the same has been made employer friendly.
One of the critical changes brought by the bill is that it takes away the jurisdiction of the courts to listen to matters pertaining to low wages. A quasi-judicial body and an Appellate body will be formed to restore such violations which are not subject to review by any court of law. Hence, they have given sole and unlimited power to adjudicate on such matters. This violates Section 9 of CPC[x] and therefore needs to be repealed. The Code tries to balance the interests of employer and employee for labour welfare, however, some of its crucial provisions make it pro employer. The Code removes the liability of principle employers to pay wages by restricting its definition, thereby giving workers under contract labour difficult to push the liability towards them, further violating the concept of vicarious liability. Further, it gives employers, who already are in position to dominate, power to cut the wages of employees as per their whims and fancies on the basis of low performance. This again gives arbitrary power to the employers. Lastly, there are different establishments mentioned in the Code that are exempt from paying any bonuses to the workers. However, as no time period is mentioned for these establishments, most of the factories/ employers can misuse the tag to escape the liability of bonuses.
One of the important criticisms, points to the concept of “back wages” which has been ignored by the Code. In common parlance, there have been large number of cases where the workers are removed by the employer under unjustifiable circumstances. There were no legislation with respect to the same, however various jurisprudence stated that if the termination or removal of workman/ employee turns out to be illegal, unjust, unfair and opposed to the law, reinstatement will be awarded along with back wages. One of the significant judgement on the same is Regional Chief Engineer v. Their Workmen, where the Supreme Court has reinstated workers with back wages removal based on unjust cause. The Court in the case, drew various conditions of payment of back wages which includes that if the employer during the period of termination, takes employment in any other establishment, no payment of wages or reinstatement will be made. This leaves an ambiguity as the Court nowhere mentions about the difference of remuneration that the worker may be earning in the new establishment, nor the conditions on which he had to take up the emergency employment. By a primary research conducted, on two Uber Eats delivery agents, the researcher analysed that more than 40% of such delivery executives were terminated when Uber Eats was taken over by Zomato[xi]. Such a termination in completely baseless, unlawful and without any just cause. However, as there are not strict labour legislations of the same, such employers do not have any recourse against Uber eats to grant reinstatement or back wages for the period of unemployment. One of the other landmark case on the concept is A.N.Nakul v. Phillips India & Ors[xii]., in which the employment of workers were terminated due to change in business plans. However, the court failed to enforce any liability on the employer but a mere compensation was paid only due to lack of legislations on the same. This is one of the significant loopholes that the Code has ignored despite multiple live examples, where workers do not have any or little remedy against such illegal termination of employment.
Conclusion and Way Forward
The Code is said to be one of the most important and landmark legislations in the history of India, which consolidates different legislations to form an umbrella legislation which focuses on labour welfare. However, on critical analysing the same, various loopholes and shortcomings makes the Code archaic and it seems merely a dilution of old conventional legislations with no or little enforcement mechanisms. The code as already enunciated misses out on important labour welfare provisions and gives arbitrary and unlimited power to the authority with no uniform standards.
The code instead of reiterating already existing enforcement mechanisms, should focus more on successful implementation of the same by improving the standard of regulatory authorities. The government should not form a uniform standard legislation for all types of workers, but frame specific guidelines for daily wage workers, contract workers who are the prime victims of exploitation. Moreover, the code should analyse the current situations and thereby include provisions for concepts like back wages that are very much prevalent in our current economy. Further, the floor rate ceiling should be set keeping in mind the international standards and the recommendations of various standing committee appointed in labour conference. Also, a uniform methodology should be accepted to determine such minimum wage rates so as to restrict state government from arbitrary decisions. Therefore, it is a need of the hour to understand the true importance of Code of Wages, 2019 and fill the existing loopholes that this code is creating.
“No establishment which depends for existence on paying fees less than living wages to its workers has any right to continue. By living wages, it is meant more than the bare subsistence level- the wages of decent living” – Franklin D. Roosevelt
[i] Report of National Commission of Labour, 2002; Ministry of Labour & Employment. https://www.prsindia.org/uploads/media/1237548159/NLCII-report.pdf. (12th February, 2020)
[ii] Indian Wage Report, ILO. https://www.ilo.org/wcmsp5/groups/public/—asia/—ro-bangkok/—sro-new_delhi/documents/publication/wcms_638305.pdf. (11th February, 2020)
[iii] Labour share is the proportion of national income to labour compensation
[iv] Supra Note 2.
[v] Economic Survey Report 2018-19, Department of Economic Affairs. https://www.ibef.org/economy/economic-survey-2018-19. (13th February, 2020)
[vi] 46th Session of Indian Labour Conference, 2015. https://labour.gov.in/46th-session-indian-labour-conference. (12th February, 2020)
[vii] 2008 (2) MhLj 229
[viii] New Wage Code will push migrants into poverty. https://www.business-standard.com/article/economy-policy/with-rs-178-as-minimum-wage-new-wage-code-will-push-migrants-into-poverty-119091700117_1.html. (12th February, 2020)
[ix] 1983 AIR 328
[x] Section 9 of CPC states that the courts shall have jurisdiction to try all suits of a civil nature and that every law is subject to review.
[xi] Over 100 employees face uncertainty. https://www.businesstoday.in/current/corporate/zomato-acquires-uber-eats-rs-2485-crore-100-employees-uncertainty/story/394253.html (12th February, 2020)
[xii] CS(OS) 2188 of 2003 & IA No. 4895/06
This article is written by Priyanshu Agarwal & Vaishnavi Vyas of NMIMS KPM School of law, Mumbai.
Disclaimer: This article is an original submission of the Author. Lex Insight does not hold any liability arising out of this article. Kindly refer to our Terms of use or write to us in case of any concerns. You may also refer to our Copyright regulations
lexinsight.wordpress.com 
One thought on “Critical Analysis of The Wage Code Bill, 2019”