Law And Policy

Constitutional Scheme for Labour Regulation in India

Preamble & Constitutional vision

The Preamble commits India to social, economic, and political justice; labour rights are central to this transformative promise and were seriously considered for placement as justiciable rights during constitution-making.

Distribution of legislative power

• Concurrent List (Labour as a subject): Both Parliament and State Legislatures can legislate on labour.
• Union List: Entry 55 (Labour & safety in mines/oilfields), Entry 61 (industrial disputes concerning Union employees), Entry 65 (Union training institutions).
  • Concurrent List: Entry 22 (trade unions & industrial disputes), Entry 23 (social security, employment & unemployment), Entry 25 (vocational & technical training of labour).
    

Three patterns of labour legislation

1. Central laws + Central enforcement (e.g., ESI Act 1948, EPF & MP Act 1952).
2. Central laws + shared enforcement (e.g., Industrial Disputes Act 1947, CLRA 1970) via the “appropriate government” device (centre or state depending on establishment).
3. State-made and state-enforced laws (e.g., Maharashtra Mathadi Act 1969; WB Unorganised Sector Workers’ Welfare Act 2007).
   

Why is labour in the Concurrent List?

• Enables state-level responsiveness to local labour markets and experimentation with different regulatory models (including sectoral or migrant-specific approaches).
• States may amend central laws or enact state-specific legislation to suit local realities (e.g., Rajasthan’s arbitration chapter in the ID Act; UP’s own ID Act 1947).
  

Critiques of plural regulation

• Complexity & compliance costs for multi-state businesses;
• duplication of paperwork;
• incentives for central uniformity from large firms.
  

Fundamental Rights, Directive Principles & Labour Law

Fundamental Rights (Part III):

• Art. 23: Prohibits traffic in human beings & forced labour.
  • Art. 24: Prohibits child labour under 14 in factories/mines/hazardous work.

Directive Principles (Part IV):

• Article 38, 39 (incl. equal pay), 39A, 41 (right to work/education/public assistance)
• Article 42 (just & humane work; maternity relief)
• Article 43 (living wage), 43A (worker participation)
• Article 47—non-justiciable but “fundamental in governance,” guiding legislation and interpretation.
  

Legislative follow-throughs

• Minimum Wages Act 1948,
• Factories Act 1948
• ESI Act 1948,
• Maternity Benefit Act 1961, etc., flow from the DPSPs.
  

How courts use the Constitution in labour cases ?

1. Interpretive compass: Labour statutes read in the light of Part IV & the Preamble; referring Air India Statutory Corpn. v. United Labour Union (1997), emphasizing egalitarian goals and social justice in construing labour enactments.
2. Limit on state power: Excel Wear v. Union of India (1978) struck down ID Act s.25-O as an unreasonable restraint on Art. 19(1)(g) (right to carry on business).
3. Filling gaps- rights creation: Vishaka v. State of Rajasthan (1997): in absence of statute, SC framed workplace sexual-harassment guidelines under Arts. 14, 15, 21 → later codified by POSH Act 2013.
4. Enforcement via PIL: PUDR v. Union of India (1982) treated non-payment of minimum wages as forced labour under Art. 23; issued directions for better enforcement of multiple labour laws on public works.
   

Contract Law ↔ Employment Law: Interfaces & Doctrines

Why contract still matters

• Employment is contractual in form, even as statutory labour law overrides private ordering to correct power asymmetry.
• Contract principles continue to influence:
  1. Implied duties in employment contracts,
  2. Unconscionability control over unfair terms,
  3. Restraint of trade & restrictive covenants.
     

A) Implied duties in employment contracts (common law)

Implied duties of employers (with leading cases):

• Provide work (value beyond wages to skill/pride) — Langston v AUEW; Denning LJ’s rationale.
• Not require illegal acts — Gregory v Ford.
• Safe premises / safe system of work — Mathews v Kuwait Bechtel; Johnstone v Bloomsbury AHA (duty of care; limits on overwork).
• Mutual trust & confidence — Malik v BCCI (stigma damages).
• Civility & dignity — Lloyd v Imperial Parking.
• Act on harassment/abuse by co-workers — Haggarty v McCullogh (employer liable for failing to correct abusive superior).

Implied duties of employees:

• Competence, diligence, loyalty; reasonable skill & care — Lister v Romford Ice.
• Indemnify employer for liabilities caused by employee’s wrongful acts — American Southern Ins. v Dime Taxi.
• Conduct with decency & propriety (US authorities cited).

Indian position on implied terms: Courts recognize a “doctrine of implied terms” in service contracts; employee duties like competence, obedience, fidelity, confidentiality; employer duties like reasonable notice implied where absent — Dattatraya Shankarrao Kharde (Bom HC).

B) Unconscionability in employment contracts

• Courts will not enforce unfair/unreasonable bargains. SC characterizes unconscionable contracts as those shocking conscience or arising from gross inequality of bargaining power.
• Central Inland Water Transport v Brojo Nath Ganguly: termination “at will” clause in service rules struck down as “wholly unconscionable.” See also DTC v DTC Mazdoor Congress (1991).
  

C) Restrictive covenants & restraint of trade (s.27 ICA; Art. 19(1)(g))

• During employment vs post-employment:
  • During: reasonable restrictions (e.g., non-compete while employed) generally enforceable.
  • Post-employment: non-compete typically void; non-disclosure and non-solicitation may be enforceable if reasonable.
  • Key cases: Superintendence Co. v Krishan Murgai (post-employment non-compete void), Gujarat Bottling v Coca-Cola (in-term restraint can be valid unless harsh/unconscionable), Percept D’Mark v Zaheer Khan (post-term restraint void).
    
• Non-compete reasonableness test: Niranjan Shankar Golikari party supporting restraint must show it’s necessary to protect legitimate interests; opponent can show public injury. Paramount Coaching Centre v Rakesh Jha upholds in-term restraint.
  
• Training bonds: Enforceable only to the extent of reasonable, provable costs; no penalties.
• Satyam Computer v Ladella Ravichander (reduced amount; no actual loss shown), Toshniwal Brothers v Eswarprasad (liquidated damages allowed if training investment proved).
  
• Garden leave:
  • VFS Global v Suprit Roy — court hostile where clause restrains trade without adequate compensation.
  • Kouni Travel v Ashish Kishore — acceptable with full remuneration during leave.
  • Tapash Kanti Mondol — rejected where no remuneration provided.
    
• Non-solicitation & confidentiality:
  • Injunctions may issue to prevent poaching clients/employees or using confidential data—but must be fact-sensitive.
  • Dessicant Rotors, FL Smidth (what counts as “solicitation”), Embee Software (no inducing breaches), Diljeet Titus v Alfred Adebare (return/cease use of client lists & proprietary info).

Synthesis

• Concurrent competence allows both innovation and complexity; Centre and States co-shape labour law.
• FRs & DPSPs both animate labour legislation and discipline state action; courts have used them to expand protections (e.g., Vishaka) and strike down over-reach.
• Employment law ≠ pure contract: implied duties, unconscionability, and restraint-of-trade doctrines re-balance power in workplace contracts.
  

A) Constitutional hooks → Typical statutes

Constitutional hook	What it implies	Example statutes
Art. 23, 24 (FRs)	No forced labour; no child labour	Minimum Wages Act; Child Labour laws
Arts. 38–43A (DPSPs)	Living wage, humane conditions, worker participation	Factories Act; ESI; Maternity Benefit; IR framework

B) Restrictive covenants — enforceability snapshot

Covenant	During employment	Post-employment	Notes/cases
Non-compete	Often valid	Usually void	Superintendence, Percept
Non-solicit	Usually valid	Often enforceable if reasonable	FL Smidth, Embee
NDA/confidentiality	Valid	Valid if reasonable	Diljeet Titus
Garden leave	Valid if paid	N/A (applies during notice)	Kouni Travel vs VFS Global