Offences and Imprisonment under Labor Codes – a challenge to Ease of Doing Business
An article on “Offences and Imprisonment Under Labour Codes – a challenge to Ease of Doing Business” has been written by Prof. Ullas Kumar Saha, IRS (Retd.) Former TIC / Principal of MIES R M Law College, which is one of the best Law Colleges in India. MIES R M Law College is one of the best law schools in West Bengal, situated at Sonarpur, South Kolkata. MIES R M Law College, Kolkata has completed many years of its glorious journey in the field of law education. Nevertheless, MIES R M Law College is one of the best legal education providers in India. MIES R M Law College is one of the renowned Law Colleges in West Bengal. Affiliated under Vidyasagar University and approved by the Bar Council of India.
Offences and Imprisonment under Labor Codes – a challenge to Ease of Doing Business.
Ullas Kumar Saha, IRS (Retd.)
Former Principal MIES R.M. Law College.
India, being a welfare State, has taken upon itself the responsibility of extending various benefits of Social Security and Social Assistance to its citizens. The social security legislations in India derive their strength and spirit from the Directive Principles of the State Policy as contained in the Constitution of India.
Article 41 of the Constitution
Although the Constitution of India is yet to recognize Social Security as a fundamental right. It does require that the State should strive to promote the welfare of the people by securing and protecting, them as effectively as it may. A social order in which justice social, economic and political shall inform all the institutions of national life. Especially, Article 41 of the Constitution requires that the State should within the limits of its economic capacity make effective provisions for securing the right to work, to education and to public assistance in case of unemployment, old age, sickness and disablement.
Article 42 requires that the State should make provisions for securing just and humane conditions of work and for maternity relief. Article 47 requires that the State should raise the level of nutrition and the standard of living of its people and improvement of public health as among its primary duties. The obligations cast on the State in the above Articles constitute Social Security.
India today is considered to be one of the major forces in the global economic market. Though India is a developing economy, its economy has a major impact on global trading. The majority of the world’s leading developed nations are keen to have or expand their ties with India. Thanks to its huge market base and the fast-developing spending habits of middle-class Indians. India is a preferred destination for investors over other major countries, be it any country around the globe.
Concurrent List of the Constitution
Labour falls under the Concurrent List of the Constitution. Therefore, both Parliament and state legislatures can make laws regulating labour. The central government has stated that there are over 100 state and 40 central laws regulating various aspects of labour. Such as the resolution of industrial disputes, working conditions, social security and wages. The Second National Commission on Labour (2002) found existing legislation to be complex, with archaic provisions and inconsistent definitions. To improve ease of compliance and ensure uniformity in labour laws, it recommended the consolidation of central labour laws into broader groups.
The amalgamation and codification of 29 labour statutes into 4 codes – A Challenge to Ease of Doing Business
Code on Wages, 2019. Industrial Relations Code, 2020. Code on Social Security, 2020. And Occupational Safety, Health and Working Conditions Code, 2020 (‘Labour Codes’) – streamlines and simplifies complex labour law-related procedures. The aim of such amalgamation is to reduce the burden of compliance and promote the ease of doing business. One salient feature of the Labour Codes is the decriminalisation of offences. Decriminalization of offences in central labour laws will automatically apply to areas falling within the jurisdiction of both state and central governments. The four codes have reduced the number of sections from 1,228 to 480. Of these, only 22 sections contain imprisonment as a penalty for a first-time offence and just four of them provide for imprisonment of one year.
Need for Decriminalization—
The implementation of the labour codes will relieve employers from the fear of imprisonment as the labour ministry has decriminalised all general penalty clauses under the four labour codes barring grievous cases while protecting the rights of the workers.
Further, imprisonment provisions under multiple sections of existing labour laws have been replaced with compounding provisions, valid for three to five years, depending on the codes.
The rationale behind decriminalization is that imprisonment is too severe a consequence for economic offences that do not involve mala fide. The legal process around an offence involving imprisonment greatly increases the anxiety among employers and reduced the possibility of improved ease of doing business. Criminal penalties, especially the risk of imprisonment, often unintentional offences, are a major reason for low business investment. Thus, decriminalization of certain, unintentional corporate crimes is desirable as far as possible because they hinder both domestic and international investors.
1. The Ministry of Labour and Employment
The Ministry of Labour and Employment intended to introduce provisions with greater fines under the labour codes to create strong deterrence while reducing the possibility of imprisonment. The idea is that strong deterrent provisions with heavy fines would force employers to have watertight internal organizational and operational mechanisms to ensure that there are no lapses in compliance. Decriminalization, coupled with the ease of maintaining registers and furnishing records under the new Labour Codes, ensures that the compliance process is smoothened and the likelihood of committing non-serious, non-wilful offences due to weak internal systems is reduced. These legislative decriminalization measures will remove penal provisions that act as obstacles and build trust in doing business.
Men’s rea/Intention as a Relevant Factor in Offences—
Most offences relating to penalties do not mandate imprisonment as a punishment and the judge has a choice between sentencing the offender to imprisonment or merely imposing a fine. This ensures that imprisonment as punishment is invoked judiciously and that the judge has a strong, valid reason for the same.
However, for intentional violations by the employer, the Codes impose strict penalties. For example, Section 133(a) read with Section 133(i) of the Code on Social Security prescribes imprisonment of up to 3 years and not less than 1 year if contributions, such as insurance and provident fund contributions, have been deducted by the employer but not paid. This is because there is an intentional and wilful default by the employer in this scenario and it, therefore, must be dealt with strictly under the law. The Codes do not allow for grave and intentional contraventions by employers to go unpunished.
If the employer fails to pay a contribution but does not deduct it from the employee. Then the prescribed punishment is lesser since the gravity of the crime is reduced. The employer may then be sentenced to six months in prison with two months’ imprisonment being mandatory.
1. The provision to Section 131(1)
The provisions of Section 131(1) make room for the judge to accord a lesser term. The judge has the discretion to impose a lesser sentence after recording adequate and special reasons. While there is no clarity on what reasons may qualify as “adequate and special”. The provision gives the court a certain amount of leeway and flexibility to impose lesser punishment in non-serious cases.
2. Section 104 of the Occupational Safety
Similarly, Section 104 of the Occupational Safety, Health and Working Conditions Code. Makes an employer liable if they act in contravention of any special or general order issued under Section 38 of the Code, which relates to safety and dangerous/hazardous conditions in mines, factories and docks. A heavy fine of a minimum of INR 2 lakh, which may be extended to INR 5 lakh, is provided. However, the court has been permitted the discretion to impose a fine lesser than 2 lakh rupees after recording reasons. A plausible reason for imposing a lesser fine could be cases of non-wilful and non-intentional default or negligent contravention.
Opportunity to Comply before Prosecution—
An interesting addition, which will further reduce unnecessary prosecution under the Labour Codes, has been under Section 54(2) of the Code on Wages, Section 110 of the Occupational Safety Code, and Section 137 of the Code on Social Security. These provisions require an opportunity to given to the employer for complying with the relevant provisions before initiating prosecution proceedings against them.
If the employer complies with such provisions within the specified duration, then no criminal proceedings will be initiated against them. This provision is in line with the rationale of decriminalization and seeks to ensure that employers have sufficient opportunity to comply with the labour codes before any criminal proceedings are instituted. It will act as a safety net for employers, giving them sufficient opportunity to comply. It will also increase confidence among businesses, especially when they face prosecution for unintentional non-compliance and omissions under the Code.
1. Code on Social Security and the Occupational Safety Code
It is relevant to note that such an opportunity will not be provided to the employer if a violation of the same nature of such provisions is committed by the employer within 3 years of the date of commission of the first violation under the Code on Social Security and the Occupational Safety Code. Under the Code on Wages, the duration is 5 years from the date of commission of the first violation.
To create a strong deterrence, the quantum of fines for contraventions has been significantly increased under the different Codes and to rebut this introduction of a high quantum of fines, the provision of compounding has been introduced.
2. Quantum of fines
Compounding of an offence gives an employer one opportunity to rectify non-compliance in the first instance without having to pay hefty penalties as prescribed and the specified offences can be compounded by a notified Gazetteer Officer. It is only in the second or subsequent offence the penalty and penal provisions will be applicable
Though there is an increase in the quantum of fines levied, the concept of compounding offences helps employers, giving them a chance to remedy non-compliance. The option of compounding, however, is available to only certain offences with certain conditions as specified under each Code.
Overall, the new labour reforms not only provide ease but also transform the overall process of doing business in India.
Hope I am able to clear the whole concept of Offences and Imprisonment Under Labour Codes – a challenge to Ease of Doing Business. If one follows all the rules it will help him or her to face the challenge of Ease of Doing Business. MIES R M Law College is one of the law colleges in south Kolkata. They provide three years LL.B degree course. MIES R M Law College (Under the MIES R M Foundation Trust) has a highly qualified and competent team of faculty. Enormous world-class infrastructure and facilities are most conducive to academic pursuit. Along with its remarkably successful campus placements along with the student-friendly environment. Some of our ex-students are the best law practitioners practising in different courts including the High Courts and the Supreme Court of India. This is one of The Top Law colleges in West Bengal, India.
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