Indian Labour Laws: Impact on Unemployment

The labours laws are extensive and divisive which governs and regulates the organizing body. And protects the rights and privileges of the labours who workers in various fields under the employer. Starting from the International Labour Organization to the United Nations the main motive of the labour association is to ensure the welfare of workers in different working conditions. Labour law in India emerged due to the British Invasion. Though the laws made are favorable only to the English people later some changes made when the goods fabricated satisfied. After Independence, interpretations were made in various acts of labour laws to maintain the dignity of the workforce. The vast and vague scope of labour laws restricts the external mass production industries to invest in India and dispose of organized labour from the establishments paved the way for unemployment on the legal side.


The purpose of the law is to govern the society and protect the people’s rights; maintaining the grade of equality in mankind; to settle any quarrel among the people of or by the State by imposing certain rules as guidelines to be practiced. Law also refers to the phrase ‘unity in diversity’. It clears that there are several branches of law, but the intention is like govern and protect everyone from all fields of matter. Likewise, Labour laws have diverse branches and the intention is also to regulate and govern the labour community. Labour laws are enacted to prevent the people, and organization/authority comes under it from any unlawful activity. It also ensures the rights of the employees. And regulates combined working of organization with proper guidelines for the entire association and the employee to work in a peaceful platform without inequitable industrial issues.


World War-I played a major role to fabricate the ILO – International Labour Organization. This organization was implemented through the Treaty of Versailles. The ILO is considered as the first organization formed to sort out all demands of the workers and establishments. Later the war there exists a huge crisis in all fields of habitation. To develop and emerge again as a powerful country whole manpower of each country was striving towards their hard work to achieve global power. For that the workforce of each unit under every country had to work for more hours, rights of labours were limited and their health concerns were not taken into consideration. In 1918, Whitley Committee of the England and American Federation of Labour of the United States recommended their own detailed documentation on forms of the labour community [1].

The International Federation of Trade Union was set up to hear all schemes suggested by various countries in 1919. The United States attended another meeting in Paris and avoided the Trade Union since there aroused another threat to war between the USA and Great Britain. The International Federation of Trade Union directed and demanded to abolish the process of wage employment and as a result introduced the concept of socialism and communism. After this conference, England put forward an idea on International Parliament in which two representatives as one employee and one manager of establishments from each Country should participate. The Objective of the parliament is to gather all problems under working unit and enact laws to regulate them [2].

This idea was inconsistent with the USA Government and the International Labour Body emerged by the USA. This committee drafted certain recommendation which was accepted with restrictions by all countries. Some suggestions are worker must not be considered as a mere commodity; duration of work will be of 8 hours per day; workers are granted freedom of association; salary given must be sufficient to lead life. The other international bodies suggest that there must be a holiday for at least one day in a week and can extend: equal status for overseas/migrant labours and instant scrutiny on conditions of the workplace. After drafting, this report was approved by the Paris Peace Conference in 1919. In 1946, the association of labour conference came to the end and the International Labour Organization was added to the United Nations [3].

Advancement in India

India is one of the colonized countries of Great Britain. Thus, certain laws relating to employee and the establishment are introduced during the period of the British invasion. The East India Company established several industries and it is said that some Indian labours were forced to work in a periled workplace. The laws enacted by England were only favourable to their income-profits and to safeguard their managements or industries. The goods fabricated in India gave immense toughness to England’s clothing industry. Thus, experts of the textile industry in Manchester and Lancashire stressed the English Government to make goods exported at a high price and raise the range of labours in India. The result made Parliament of England to enact the Factories Act, 1883. Such that Indians are secured with certain rights like to work in the unit for not more than eight hours per day; an increase of payment to the workers who worked for extra hours; abolished child labour and restricts the working hours for women i.e. only allowed to work at day, not at night [4].

Later Legal legislation of England drafted and passed the Trade Dispute Act, 1929. This act is considered as the first statutory provision which confers on the management and its labours in India. The legal regulations framed are partial since it contains only the benefits of the English management and not the workforce of India. This act restricts the rights of employees to form an association, to strike, and protest the unlawful activities of the management or industry. There were also no provisions regarding the settlement of disputes aroused among the employees and the management of that Company [5].

There were a huge number of protests and various forms of strikes by the employees since they have struggled a lot in the workplace and rights were restricted. After Independence, a three-party committee was formed and accepted the idea to undergo a relationship with the employee and capital working process; such that it was believed Indian would attain development in the economic and production sector. The committee repealed the Trade Dispute Act, 1929 and enacted the Industrial Disputes Act, 1947. This committee also ensures that every labour working under their company will be allotted with equitable remuneration with sufficient good working circumstances and to regulate the industries and to protect the rights of the employees [6].

Labour Laws in India

Labour laws are very diverse in nature. Labour laws in India are there to protect or prevent or safeguard the rights of employees who work under the registered and well-organized management in one hand. On the other hand, it also governs and regulates the organization with certain rules that ensure the organization does not go illegal. It nearly consists of over 200 legislations enacted by the State Government and over 50 legislative provisions enacted under the Central. Further, the nature of the job or business and demands of the organization may changes-over-time. So, the knowledge of labour laws is important since it gets interpreted while the mode of business or demands changes in a firm. Thus, the scope of labour laws is very vast and vague.

Labour legislations are distinguished in the forms of employment conditions, factorial relations, salaries or remuneration, common welfare of benefits, and social security [7].

Under-Employment Conditions

Factories Act, 1948

The written statutory laws in Factories Act, 1948 deals with the legal guidelines on health matters of sections 11 to 20 under Chapter – III; on safety matters of the workplace under Chapter – IV from sections 21 to 41; on welfare facilities of the staffs under Chapter –V from sections 42 to 50; on the correct working hour of the employees under Chapter – VI of sections from 51 to 66; on the employment of young persons under the Chapter – VII of sections from 67 to 77; and on providing reasonable annual leave with wages under Chapter – VIII of sections 78 to 84. Only factories under people working with not less than 20 without any aid are applicable under this act. This act imposes general duties on the general inspectors and facilitates them with certain powers. The act provides certain provisions and special provisions on hazardous circumstances. This act mostly ensures cleanliness and good medical safety is maintained for a convenient workplace.

Shops and Establishment Act

Each state can decide and draft their laws on unorganized establishments. This act moreover relates to the same provisions of the factories act like safety, working hours concerns, holidays on various circumstances but it confers on unorganized sectors like shops, etc. Both skilled and unskilled labours are benefited under this act according to the legislative provisions created by the State. The meaning of factories under this act also comes under the same meaning for factories mentioned in the Factories Act, 1948 [8].

Contract Labour (Regulation and Abolition) Act, 1970

The purpose of this act is to forbid the hiring of contract workers and to regulate the employment conditions of the contract workers where this kind of employment is not yet stopped. A contractor is a person who has not less than twenty employees working under him and the appropriate government may by notice to the official newspapers or journals before two months of the same notice make the provisions applied to those contract firms’ not less than ten labours. A worker is a person who is hired by the contractor or renounced as they work as contract labour under this act.

This act is not applied to those firms’ works which are periodical. The act is for a time hence the contract labour is not allowed to perform eternal works. This act gives the license to the contractor of the firm and restricts without a license the contract is prohibited to perform his works. It is also necessary that the contractor should register is firm under this act [9].

Industrial Establishment (Standing Order) Act, 1946

The objective of this act is to bring consistent terms and conditions among all the Industries. Applicability of the act confers the industries with a hundred or more than a hundred workforces is placed. Under this act, the owner is directed to submit draft copies of the standing order which he tends to adopt for his establishment to the certifying officer. And the employer should make aware of the standing orders to his employees. The standing order may include types of labours, payment, time-shifts, suspension or dismissals, leaves, etc. The nature of employees may be temporary or permanent or apprentice or agreement [10].

Factorial Relations

Industrial Disputes Act, 1947

This is enacted to resolve the disputes arouse in the industry through detailed inquiry on the issues regarding such disputes. The dispute raises may be within the management/employer and the labour or within the labour or the management. It may be resolved through a dispute resolution mechanism either traditional through courts, tribunals, or alternative through arbitration. Without prior one month notice the organization cannot fire or retrenchment anyone until his/her service provided is for a continuance of one year [11].

Trade Unions Act, 1926

This act requests for the protection and registrations of trade unions that emerged in India. The act discusses the application and registration procedures of trade unions in India under Chapter – II of sections from 3 to 14. The trade union also vested with certain rights and liabilities under Chapter – III of sections from 15 to 28. And imposes legal sanctions on the failure of performance.

Salaries or Remuneration

Payment of Wages Act, 1936

In this act, responsibility confers more on the owner or employer. The employer of a firm is bound to pay remuneration to his workers which he is entitled to the same. He must maintain a certain period and allot his workers with remuneration. For which the employer can give salary for the working period per day or week or month. But he must ensure that payment is given within one month. In case of any termination of a worker from the organization, the salary should be settled within later two days of termination. The payment made must be in present currency or coins. Moreover, the mode of payment can be paid through cash or cheque or even direct bank transaction. Any deductions of payment can be done on certain grounds mentioned in this act, but the deduction made is not more than 50% of the employee’s salary. So, the employer must maintain a register for which the salaries are paid and deducted for certain reasons.

Minimum Wages Act, 1948

Minimum remuneration is determined by the State or Central Government based on the labours work done per hour or work is done per piece or work done for overtime is determined on time-related to pieces done. This remuneration is without the floor wage fixed by the Central Government based on the suggestions of the Central Advisory Body. The salary which is determined is varied in all case employment it changes to the nature of the work done by the labour. This code applies to all employees working in all fields. The purpose of this act to ensure minimum reasonable payment is enjoyed by all labourers whether skilled or unskilled [12].

Payment of Bonus Act, 1965

The payment of a bonus is applied to the factories in which people work more than 20. The provisions may apply with less than 20 members may the appropriate government allows through official Gazette (Newspaper) by notice before two months of the establishment. The payment of bonus is computed by allocable and available surplus. There must be not less than thirty people worked on any day of the accounting year. Labours whose remittance is below Rs. 21,000/- are allowed for the bonus maximum of 20% and a minimum of 8.33%.

Social Security

Payment of Gratuity Act, 1972

The act refers to any organized and unorganized sectors not less than ten members working in the accounting year that comes under this act. Thus, it applies to all industries, shops, etc. This act provides plans for payment of rewards in gratuity mode only to the persons who achieved continuance work of 5 years in an organization. The gratuity is paid of pension, of retirement, of termination, of any accident caused to the death of diseased. The amount is also given for fifteen days of remuneration for every successful completion of a year of service subjected to which the amount must not increase to 10 lakhs [13].

Workmen’s Compensation Act, 1923

During working if any inevitable accident took place with due care to the employee. The employee is entitled to a monetary remedy under this act for which the owner should pay as compensation for harm suffered by the employee. If such an accident leads to the death of an employee for that the proprietor or owner must submit a statement to the commissioner as the result of an accident caused death under a situation. The report should be submitted within seven days of such an incident and the statement should be submitted within thirty days of the notification given for the same [14].

Common Welfare of Benefits

 Equal Remuneration Act, 1976

This act is applied to all organizations or industries where required employees work in the accounting year. This act is enacted to prevent discrimination on grounds of sex protected by fundamental rights in the Indian Constitution refers to women in the fields of all employment. And ensure an equal amount of payment of wages is given to the workforce irrespective of men and women [15].

Maternity Benefit Act, 1961

Every woman working under a firm is entitled to acquire maternity benefits before and after childbirth under this act. For that, she must be worked for at least eighty days in an accounting year before the expected date of childbirth. This act does not imply any industries which come under the State Insurance Act, 1948. The purpose of this act is to regulate the course of a job for women who undergo maternity tenure. The employer should provide certain benefits comprises of maternity wages, bonuses, medical leaves, or breaks for certain reasonable periods [16].

All the above-stated acts are contained with a set of penalties if there is any failure of performance of duties or functions on those enacted laws. The offender will be subjected to legal sanctions.

Constitution with Labour Laws

Labour Laws are enacted by States and by Central Government. These labour laws come under the concurrent list mentioned in schedule seven of the Indian Constitution. The fundamental rights under Part – III and Directive Principles of State Policies are interconnected with the Labour laws. Articles 14, 15, 16, 19 (1) (c), 23, 24 are the fundamental rights guaranteed to the citizens where everyone is equal before law; the State should not discriminate people on sex, religion, race, etc; the equal opportunity is provided to all; to form union or association; to abolish forced labour and child labour system. These rights are inserted with labour laws to guarantee that no one is deprived of their dignity in course of their employment and fundamental rights vested with them.

Articles 38(1), 38(2), 43(A) under Directive Principles of State Policy deals with the State shall strive to maintain a justice, social, economic, and political order that promotes the welfare of the public; to decrease the inequality in income not only to individuals but also to society; to affirm the entire participation of workers of a particular organization engaged in all events of their industry. The workings of these rights are ensured by the State for welfare of the labours. Further entry 22 and 24 of the concurrent list ensures working of trade unions and industrial disputes; deals with the health and safety conditions of the workplace and maternity benefits, etc [17].

Impact on Unemployment

Unemployment is considered as a crucial complication in India. After an instant discussion in the country, legal researchers stated that labour laws are not stable in nature and lack sufficient background in the favour of the employers. The limited characteristics of labour law create an unadoptable and inflexible labour market in the labour community. It is said that the existing vast and vague scope of the labour laws in India enacted by the Central and various State Governments is also one of the reasons for unemployment. Some international mass production industries observe the extensive, limited, and ambiguous scope of labour laws in India. Also observed similar limitations are not followed in many other countries. So, the investors are taking a cutback on investments in India. The labour laws influence only on formal or organized employment unit. The dispose of workers from an organized employment unit by existing vast restrictive labour laws showed the growth in the number of quantities of unemployment. Indian Labour community needs a labour platform or market where the laws are not only referred to employees but also refers to the employers which make labour compliance for the uncomplicated industry [18].


Case Studies on Labour Law

In Syndicate Bank v. K. Urnes” Nayak, [AIR 1995 SC 319], the employees of were protested and performed strike to claim their unpaid wages. The court held that to be benefited by the wages using the legal principle ‘no work no wages’ the performed strike should be reasonable and justified before the court of law. If it is not justifiable the labours are not entitled to the required wages [19].

General Mi.lnager, Ajudhia Textile Mills v. Presiding Officer, Labour Court, [1990 I CLR 842 (Del HC)], the court decided that the junior clerk is not entitled to get the same remuneration of chief clerk for the functions of the chief clerk is done by a junior clerk [20].

In Midhani Workers and Staff Union v. Mishradhatu Nigam Ltd., [(2000) ILLJ 698 AP], the court stated that according to section 10 of the Payment of Bonus Act, 1965 a minimum bonus must be paid by the owner/proprietor to his labour. It is considered as one of the statutory duties confers on the employer/proprietor. In failure to do so, the court has the authority to invoke a writ of mandamus to make sure that statutory duty is performed [21].

In the case of Airfrieght Ltd. v. State of Kamataka, [1998 LLR 972 (Kam HC)], the salaries of persons who work under a courier service are guaranteed with a determined or fixed minimum amount of wages under the Shop and Establishment Act [22].

Ahmedabad Pvt. Primary Teachers v. Administrative Officer& Ors., [2004 LLR 97], the Court stated that under the Payment of Gratuity Act, 1972 a teacher profession does not mention in the definition of section 2 clause e of the act. Thus, a teacher is not guaranteed with the rewards on any modes of the gratuity under this act [23].

In this case, Asmolh Beebi (Died) v. Marimulhu, [1990 LLR 450 (Mad HC)], the employee was working in the construction site under his employer. During work, the employee gets injured in an accident. The employee is entitled to monetary compensation under the Workmen’s Compensation Act, 1923 [24].

Rakhi P.V. v. The State of Kerala [2018 SCC OnLine Ker 864], the workplace in which the petitioner works was denied maternity benefits such as leave, wages, etc. The court held that since the nature of employment was on a contractual basis the petitioner cannot be deprived of the rights of maternity benefits. Hence, the petitioner was given with maternity benefits by her workplace management [25].


Labour laws are to govern and prevent the rights of workers and to regulate the managing body of the Company. In India, employees are an enormous rate in both foreign and own Nations. Since the increased numbers of employees Labour Laws were mostly conferred only on employees. This becomes a major drawback. However, these laws paved the way for unemployment in India. The rise of New Education Policy 2020 can make changes in economic growth a little later in future India. This policy hinders a chance to decrease the rate of employees and increase the rate of employers in India. Today a greater number of manpower is working in external countries tomorrow this state can be changed where a greater number of foreign manpower shall work under employers in India.


Q.1. When Did Labour Laws Emerge in India?

India is one of the colonized countries of Great Britain. Thus, certain laws relating to labours and the establishments are introduced during the period of the British invasion.

Q.2. What Are the Constitutional Provisions Regarding Labour Laws?

Articles 14, 15, 16, 19 (1) (c), 23, 24 are the fundamental rights guaranteed to the citizens relate with labour laws to guarantee that no one is deprived of their dignity in course of their employment and fundamental rights vested with them. Articles 38(1), 38(2), 43(A) under Directive Principles of State Policy ensure State to protect the welfare of the labours.

Q.3. What Are the Statutory Provisions Deals with The Social Security of The Labours?

The statutory provisions deal regarding the social security status of labours are the Workmen’s Compensation Act, 1923, and the Payment of Gratuity Act, 1972.

Q.4. What Is the Purpose of The Industrial Disputes Act?

      The purpose Industrial dispute act is to resolve the disputes arouse in the industry through detailed inquiry on the issues regarding such disputes. The dispute raises may be within the management/employer and the labour or within the labour or the management. It may be resolved through a dispute resolution mechanism either traditional through courts, tribunals, or alternative through arbitration.

Q.5. Laws Made to Regulate the Labour Community Leads to Unemployment?

The vast and vague scope of labour laws restricts the external mass production industries to invest in India and paved the way for unemployment on the legal side.



























One Reply to “Indian Labour Laws: Impact on Unemployment”

  1. The article clearly explains the labour law legislations and the cases, to the mark!
    Indeed a very helpful piece of info!

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