Revamping labor legislation in India for worker needs

As labor legislation in India faces an overhaul, more provisions come into play, and global companies look ahead at supply chain repercussions.

by Sunita Paudyal

Labor legislation in India is on the brink of much-needed modernization to its occupational health and safety regulations. And upcoming consolidation of its laws and acts means out with the old, in with the new OHS. According to 2020 statistics, there are more than 500 million workers in India. Yet the current labor laws for this workforce – one of the largest in the world – are incredibly limited. To better align with the evolving economy and technologies, and improve the ease of doing business, India has called for an update. Below we look at what these laws lack today and what to expect from new regulations.

Existing labor legislation in India – and its safety shortcomings

Currently, labor legislation in India protects workers in only 4 industry sectors: factories, construction, mining, and docks. Even though some states have instated fundamental health and welfare provisions for office and warehouse workers, for the most part, these employees aren’t covered under this type of Indian employment laws.

And for the covered workers, these laws are generally inadequate. Rarely revised and loosely enforced, the legislation fails to address new challenges from evolving technologies, changing workforce, demographics, and environment. They don’t impose any requirements on manufacturers and suppliers to provide safe and risk-free products to workplaces, increasing risk. Moreover, these laws’ provisions apply only to a fraction of the workforce within that limited list of industries. For instance, the factories and construction laws require a medical examination of only those workers involved in hazardous processes and dangerous work, leaving out the rest.

Multiplicity makes it complicated to be compliant

With 13 existing national acts and 13 other rules, the long list of legislation in India imposes an increasing compliance burden on companies. As one example, businesses are required to register, file annual returns, and obtain licenses/permits under these various laws separately. This creates a confusing – and eventually ineffective – process.

Language issues further intensify the problem. The combination of uneducated workers and the lack of appropriate educational support in (the many) regional languages leads to lack of understanding, and therefore non-compliance with health and safety protocols. In turn, facilities suffer a higher rate of occupational health hazards and accidents.

Protecting more workers through less labor legislation in India

To address these and other shortcomings, India began revamping its labor laws in 2018, when the Occupational Safety, Health, and Working Conditions Code (“Code”) was proposed. The Code was then adopted in 2020. Alongside it, the Occupational Safety, Health, and Working Conditions Draft rules 2020 (“Draft Rules”) were also published for public consultation in 2020. Though estimated to come into force in April of 2021, we have yet to see these changes take place.

Together, the Code and Draft Rules aim to consolidate the existing 13 national acts and 13 rules. And states will need to follow suit with their own local legislation. The idea is “less is more.” That is, making safety simpler through easier-to-follow laws that are more actively enforced. This new labor legislation in India will manifest through many changes. Of particular importance, the new laws will apply to all establishments, including industry, trade, business, and occupations where 10 or more workers are employed.

Also, India’s first national and state Occupational Safety and Health Advisory Boards (OSHAB) will come into place. The OSHAB will frame and implement standards, regulations, and bylaws, as well as issue OHS-related policies and programs. Of the anticipated changes, companies should expect new technical safety provisions for several OHS modules, such as personal protective equipment, health officers, and confined spaces.

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Regulations will be easier to achieve, yet more actively enforced

The new labor legislation in India will also minimize the business burden of multiple redundant regulations – and the companies’ resulting duplicated efforts. Under the Code and Draft Rules, businesses would no longer need to obtain separate permits, licenses, or registrations. Nor would they need to file separate annual returns.

Additionally, India has launched efforts to ensure that Government services are available to the public electronically. This involves the digitization of processes, such as application procedures, license, permit, and registration renewals. The transparency for the public translates into a plus for businesses as well with online documentation and record keeping streamlining many processes.

However, the ease of doing business brings with it stricter enforcement and higher penalties for non-compliance. For instance, if a worker dies as result of a company not complying with the OHS Code, the responsible will face up to 2 years imprisonment, a fine of approximately USD 6,700 – or both.

Big impact to businesses outside of India.

For the first time, labor legislation in India will directly apply to companies outside of the country. The laws will mandate manufacturers, designers, importers, and suppliers of products – including machinery and chemicals – for Indian workplaces to ensure that their products are safe. While this honorable approach will minimize hazards, multi-national corporations must prepare for the regulatory ripple effect on their own operations.

Next steps for new labor legislation in India – and beyond

Despite an unclear effectual date, local jurisdictions are already making moves to modernize. Anticipating that the Code will come into effect in the near future, some states have already issued Draft rules for public consultation, which could be even more stringent than the upcoming national labor legislation in India. If your company operates in India or collaborates with businesses in the country, watch this space for how these massive changes (and more to come in other EHS areas) will impact your supply chain.

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