Governor of Karnataka, vide ordinance no 15 of 2020 dated 31st July 2020, promulgated the Industrial Disputes and Certain other laws (Karnataka Amendment) Ordinance, 2020 to amend The Industrial Disputes Act, 1947, The Factories Act, 1948 and The Contract Labour (Regulation and Abolition) Act, 1970. The objective of the Ordinance, as mentioned in the Statement of Objects and Reasons, is to promote ease of doing business in the State of Karnataka. In this writeup, we attempt to highlight and analyse the key implications of the amendments brought about by the Ordinance.
1.Increasing the threshold limit for seeking permission for Closure, Lay off or retrenchment under The Industrial Disputes Act, 1947.
Under the present regime, provisions relating to lay off, retrenchment and closure of an industrial establishment are contained in Chapter VB. Section 25K, which lays down applicability of the Chapter, stipulates that the provisions of the Chapter are applicable to establishments where not less than 100 workmen are employed on an average per working day during the preceding twelve months. Sections 25M, 25N and 25O, which also constitute part of Chapter VB and respectively deal with lay-off, retrenchment and closure of such establishment, mandate, inter alia, prior permission from the Appropriate Government before proceeding to such measures. The requirement is both, cumbersome and time consuming. The Ordinance amends Section 25K pertaining to applicability of the said provisions by increasing the existing threshold of 100 workmen to 300 workmen. The Ordinance would have key impact on facilitating ease in restructuring of business, in as much as, no permission would be required to be obtained, to undertake such measures, where an industrial establishment employs up to 300 workmen.
2.Increase in threshold limit for registration of factories under The Factories Act, 1948.
Applicability of the Factories Act, 1948 is contingent upon the definition of factory. Under the present legal framework, factory is defined in Section 2(m) of the Act to mean any premises where 10 or more workers are working and a manufacturing process is carried out with the aid of power, and where 20 or more workers are working and a manufacturing process is carried out without the aid of power.
The Ordinance amends the definition of factory and raises threshold from existing 10 workers to 20 workers, for factories operating with the aid of power, and from existing 20 workers to 40 workers for factories operating without the aid of power, for the applicability of the Act.
The amendment is expected to ease burden of compliance, as factories which do not meet the threshold of workers under the Ordinance, would no longer be required to get themselves registered.
3.Increase in Overtime limit for Quarter under The Factories Act, 1948.
Under the present regime, the Act provides for exemption, under certain circumstances, from all or any of the provisions relating to weekly hours, weekly holiday, daily hours and spread over, which may be granted by the State Government by an Order under Section 65 (2). Such exemption may be claimed by a factory or a group or class or description of factories. The limited ground available for claim of such exemption is that the applicant factory is required to deal with exceptional press of work. The exemption, once granted, is subject to certain conditions contained in the provision, which stipulates, inter alia, that the total number of hours of overtime in any quarter, in such cases, shall not exceed 75.
The Ordinance raises the threshold of overtime hours, in such cases, from existing 75 hours to 125 hours in a quarter. Consequently, overtime of up to 2 hours per day is allowed within the overall limit of 125 hours per quarter in such cases. As a result of the Ordinance, flexibility is afforded to factories to allow its workers to work overtime in cases of exceptional press of work. The amendment also benefits workers, in as much as it facilitates payment of overtime wages to such workers at twice the ordinary rate of wages paid to a worker.
4.Increase in threshold limit for registration under The Contract Labour (Regulation and Abolition) Act, 1970.
Section 4 of The Contract Labour (Regulation and Abolition) Act, 1970 [CLRA Act] lays down applicability of the Act. Under the present regime, the provisions of the CLRA Act become applicable to every establishment in which 20 or more workmen are employed or were employed on any day of the preceding twelve months as contract labour. The Ordinance amends Section 4(1)(a) of the CLRA Act and increases the threshold for applicability of the CLRA Act from the existing 20 or more workmen to 50 or more workmen. As a consequence, an establishment in Karnataka which employs up to 50 contract labour will not be required to obtain registration from the date on which the Ordinance came into effect.
The Ordinance, at once, has brought about amendments in four labour legislations and is a step in the right direction enabling ease of doing business. The amendments are expected to ease burden of compliance under the respective provisions of all the legislations, which are the subject matter of the Ordinance, particularly in terms of registration and seeking permission for retrenchment, closure and lay off of workers. The Ordinance is also expected to encourage setting up of new factories and establishments in Karnataka, besides increasing productivity and making up for the loss of time and opportunity.