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Devolving labour

May 09, 2018

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IN December 2017, the Supreme Court ordered the regularisation of the outsourced employees of Pakistan State Oil. This year in February, the Sindh High Court decided that profit shares of trans-provincial companies would be distributed proportionately among workers employed in more than one province. In March, the SC concluded that the Federal Industrial Relations Act (FIRA), 2012, was applicable to such companies. Two of these judgements pertain to repercussions caused on account of the 18th Amendment, which devolved labour laws to the provinces in 2010.

Since then, it remained unclear whether trans-provincial companies would be governed by federal or provincial labour laws. Trans-provincial companies have factories or offices in more than one province. The SC’s landmark judgement declaring FIRA a valid piece of legislation is comprehensive and discusses various case laws of local and Indian superior courts before arriving at a conclusion. Regarding union activities, the SC held: “The federal legislature does but the provincial legislature does not have legislative competence to legislate to regulate the trade unions functioning at the trans-provincial level.”

Working within the same company but having different terms of employment for similar jobs generates feelings of discontent among employees, which will not happen after this judgement. Trans-provincial firms with establishments in more than one province may also have collective bargaining agent unions in those units. By virtue of having a common law to govern industrial relations, employers of such companies can maintain internal equity by allowing similar increases in salary and benefits across various locations.

Many legal issues involve trans-provincial firms.

While considering the competence of the federal legislature to frame and promulgate FIRA, the court relied heavily upon Entry 32 of the Federal Legislative List, under which the federal government is competent to enact federal laws notwithstanding the provincial governments’ mandates. This entry enables the federal parliament to enact laws to implement international treaties for Pakistan’s territories, even if the said subject has been devolved. Pakistan has ratified 36 ILO conventions upon which the majority of our existing labour laws are based. Relying on the principle laid down in this judgement, it may be inferred that the federal legislature is competent to legislate a few other critical acts for the benefit of trans-provincial firms.

These include the Industrial and Commercial Employment (Standing Orders) Act, Shops and Establishments Act, the Factories Act, etc. Sindh has made drastic amendments to these acts, while the other provinces have made no such changes. Besides creating many other differences in Sindh, the Standing Orders Act has been made applicable to all employees of an establishment except the occupier and manager, having the authority to hire and fire. In the same act, the dismissal of a worker on account of misconduct or absence without leave for more than 10 days has been made conditional.

In Sindh, workers’ overtime hours under the Shops Act have been reduced from 624 to 150 hours per annum. Sick leave under the Factories Act has been changed from 16 days at half pay to 16 days at full pay, which will promote absenteeism. Factories in Sindh operated by trans-provincial firms are compelled by labour inspectors to be closed during frequent provincial government holidays, which are not allowed to workers in the same firm in other provinces.

If the federal legislature also enacts such legislation, trans-provincial companies will be able to maintain a similar structure of salary and benefits within the whole company without disrupting its smooth functioning anywhere. Like banks and other institutions operating in more than one province, their factories in Sindh may also observe only those holidays that are declared at the federal level.

The Sindh High Court judgement also lays down the principle of distribution of profit share to workers under the Sindh Companies Profits (Workers’ Participation) Act, 2015. This act had repealed a similar law enacted by the federal government in 1968. The Sindh High Court decided that profits would be distributed proportionately among workers of a trans-provincial company.

While implementing the judgment, trans-provincial firms functioning in provinces other than Sindh face an issue: the wage ceiling by which workers become eligible to receive a share in their company’s profit is Rs10,000 while the minimum wage itself is Rs15,000. If the federal legislature brings in suitable amendments in the act of 1968 and makes it applicable to trans-provincial companies, all issues confronted by the latter will be addressed.

Such measures need to be taken by the federal legislature to prevent negative ramifications of the 18th Amendment and make the laws realistic and investor friendly.  

The writer is an industrial relations professional.

Published in Dawn, May 9th, 2018