Archaic Labour Law Returns to Haunt Indian IT Sector

This is a retelling, in our own words, of the Times of India report (July 2012).

The software industry in India's technology capital was worried that the malevolent gaze of arcane rules was falling upon it. Employers in Bangalore, home to some of the world's most prominent software companies, feared that a law newly made applicable to IT companies had the potential to cause severe headaches — at a time when the young industry was going through one of its worst phases.

For more than a decade, IT companies had enjoyed exemption from the Industrial Employment (Standing Orders) Act, 1946. That exemption had now lapsed, and the industry's reaction was sharp. TV Mohandas Pai — the Infosys veteran who had been instrumental in securing the original exemption — called it a retrograde step, arguing the law belonged to another century and ignored the realities of a globalized industry. The original exemption, he noted, had been won to stop harassment by the labour department and the inspector raj.

The companies' specific fears were concrete. The Act requires employers to define employment conditions "with sufficient precision," post them on special boards near the entrance workers used, and get the standing orders approved by labour unions or staff representatives — a process the industry read as an invitation to unionization in a sector largely free of labour organizing. Mid-sized firms, already being contacted by the labour department for certification of standing orders, warned that the law's rigid categories fit manufacturing, not an industry with bench employees, contract staff, and temporary workers cycling between projects.

The exemption had been a deliberate carrot: the government had used it to attract Indian and multinational software investment, and the industry had grown into the fastest-growing segment of Karnataka's economy — contributing nearly a quarter of the state's GDP, with software exports from Karnataka topping Rs 1.3 lakh crore in 2011-12.

But the state had its own case. Labour Commissioner S.R. Umashankar said the exemption was rescinded in response to an outcry from employees: in the previous year alone, the government had received some 1,000 complaints about unreasonable termination, overtime, and sexual harassment. Compliance, he argued, would bring greater accountability. Karthik Sekhar of UNITES Professionals, the software employees' association, said the law would curb unfair practices by employers.

Nasscom, the industry body, expressed concern and pointed to the industry's self-certification processes. Infosys and Wipro — the country's second- and third-largest software exporters — declined to comment.

The standoff captured a familiar Indian tension: an industry built on benign government neglect, suddenly confronting the regulatory state — and a state arguing that growth without accountability had run its course.

Source: The Times of India