A Special Economic Zone (SEZ) is a geographical region that has economic laws more liberal than a country’s typical economic laws. The SEZs are expected to have hi-tech industries suitable to the process of globalisation. This means that the local population, which is not skilled enough for such jobs, will not find any employment in the new economic activities; rather the locals will find employment as unskilled labour. Since the labour laws of India, as they stand today in statute books, are not going to be made applicable in the SEZs, the protections under existing labour laws will not be available to these workers. That will mean that unskilled labour in the SEZs will be working as daily wagers at the mercy of the contractors who hire them. This will cause the self-reliant agricultural community to be converted into a dependent community of bonded labourers. When the local population, dependent on agriculture, loses their land, they will lose their livelihoods too. Article 21 of the Constitution of India guarantees the fundamental right to life and livelihood for all the Indian citizens. The development of India is, of course, necessary. However, development cannot take place at the cost of the enslavement of workers and in violation of the Indian Constitution.

Jurisdiction of the Labour Commissioner and Labour Courts

Under the law, the Labour Commissioner is the highest authority of the state to ensure implementation of labour laws. However, the Labour Commissioner has no power, authority or jurisdiction over SEZs created within his territorial jurisdiction. The powers of the Labour Commissioner have been delegated to the Development Commissioner (DC). Under sub-section (3) of section 12 of the SEZ Act 2005, the DC is the overall in-charge of the SEZ and has overall administrative control and supervision over its officers and employees. The office of the DC comprises nominees from (i) Industries and Mines departments (ii) Forest and Environment departments (iii) Energy and Petrochemicals departments (iv) Labour and Employment department. The DC is empowered to designate officers to function as Registration Officer, Conciliation Officer and Inspector, under various labour laws.

The DC is the head of the Unit Approval Committee. The functions of the Unit Approval Committee include (i) the registration of the unit and the granting of licenses for starting, running and operating the unit, site clearance under Factories Act (ii) the approval of the plans for establishing a factory (iii) the registration of boilers (iv) the resolution of commercial disputes and (v) the resolution of any dispute between the unit and the developer, etc.

As for inspections relating to workers’ safety and health, units will be permitted to obtain inspection reports from accredited agencies, as may be notified by the state government. This provision is made mainly to escape from the liability arising out of workers’ welfare legislations such as (1) The Employees State Insurance (ESI) Act (2) Factories Act and (3) Workmen’s Compensation Act. Under the provisions of the ESI Act, it is mandatory for the employer to register his employees and issue ESI cards to them. Workers covered under the ESI Act are entitled to receive certain benefits such as sickness, maternity, disablement, defendant and funeral benefits. If a workman meets with an accident during the course of his employment or falls sick, the employer must send him to the ESI hospital for treatment. In case a workman becomes disabled, the employer must refer the case to the medical board to determine the extent of disability. The disability determined by the Medical Board can be challenged by the worker before the Medical Appeal Tribunal (MAT). The order of MAT may be appealed against in the ESI Court; and this may be further appealed against in the High Court. Compensation is payable to the workman on the basis of final determination of the disability by the High Court and the periodical payment of compensation is for the lifetime of the workman since such compensation is by way of insurance.

By creating an accredited agency under the SEZ Act, the entire liability of the employer and the ESI Corporation is given a go-by. In other words, the periodical inspection of the factory, required to be made by the Factory Inspector under the Factories Act and ESI Act, is made by the accredited agency. The report of the accredited agency has no binding force under the Factories Act and ESI Act. Therefore, no penal action can be taken against the employer for industrial accidents, occupational disease or hazards.

Units in the SEZs are responsible for filing a Consolidated Annual Report with the DC on the implementation of the Workman Compensation Act 1923, Payment of Wages Act 1936, Factories Act 1948, Minimum Wages Act 1948, Maternity Benefits Act 1961, Payment of Bonus Act 1965 and Contract Labour (Regulation and Abolition) Act 1970.

Similarly, the jurisdiction of the existing labour courts and criminal courts has been curtailed. Instead, a Special Court, created under the SEZ Act, shall exercise powers under the labour laws as well. Under Section 23 of the SEZ Act, the state government is empowered to designate one or more courts (A) to try all suits of civil nature arising in the SEZ and (B) to notify the evidence committed in the SEZ. No court other then the designated court is empowered to try any suit or conduct the trial of any evidence.

Organising Labour in the SEZs

All industrial units to be set up in SEZs are deemed by the SEZ Act to be ‘Public Utility Services’ as defined in the Industrial Disputes (ID) Act. This means that workers cannot go on strike in the ordinary course. Even if a unit is manufacturing undergarments, it will be treated as a public utility service. The term ‘public utility service’ is defined under Section 2(n) of the ID Act. It includes the railways, motor-transport, air transport, ports or docks, post, telegraph, telephone, water and sanitation services as public utility services. Workers, employed by the public utility services, have restricted rights under the ID Act. They cannot go on strike during conciliation proceedings and without giving six weeks’ advance notice. A strike by the workers of public utility services would become illegal if it is in contravention of Section 22 of the ID Act.

The Trade Union Act has been so amended that the entry of central trade unions into SEZs has been barred. The consequence is that employer-sponsored trade unions will hold the monopoly and will act as the agents of employers to suppress any genuine labour struggle. Under Section 22 of the Trade Union Act 1926, of the total number of office bearers of the registered trade union in an unorganised sector, 50 per cent can be the persons not employed in the industry. Thus, trade union leaders not employed in any industry can be become office-bearers of the registered trade union. In Schedule-II of the SEZ Act, a proviso has been added to Section 22 of the Trade Union Act, with respect to SEZs, which reads as under:

“PROVIDED further that all the office bearers of the registered trade unions of the industry registered trade unions of the industrial establishment situated in the Special Economic Zone declared as such by the Government of India shall be persons actually engaged or employed in an industry with which trade union is concerned.”

In this view of the matter, national trade unions such as CITU, AITUC, INTUC, etc., cannot form their unions within an SEZ.

Control of Movement

All persons, including employees, residing within an SEZ must compulsorily have identity cards issued by the DC. The identity card contains all personal details and operates as a passport. The movement of such identity card holders within SEZ and outside the SEZ will be constantly monitored. Whenever a worker leaves the SEZ, he/she will be required to produce the identity card at the gate, where the date of entry or exit will be recorded. In effect, the worker is like bonded labour. This is similar to the workers, who go to the Gulf countries with the help of contractors, and have their passports taken away by their employers so that they cannot leave the country. The labour force in an SEZ will be reduced to bonded labour simply by having their identity cards taken away.

Hire and Fire

The conditions precedent to retrenchment of workmen as stipulated under section 25-F of the ID Act shall have no application within SEZs. Section 25-F provides as under:

“No workman employed in any industry, who has been in continuous service for not less than one year, under an employer shall be retrenched by that employer until:

(a)      the workman has been given one month`s notice in writing, indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice;

(b)      the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days` average pay for every completed year of continuous service or any part thereof in excess of six months; and

(c)      notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate government by notification in the official gazette.”

If a workman is removed from service without complying with any of the aforesaid conditions, the termination of service becomes illegal. Consequently, the workman is entitled to be reinstated in service with full back wages and all consequential benefits as if he was never removed from service. This has been the settled law for several decades. Now this law is being unsettled. Section 25F has no application in SEZs, giving a free hand to employers to throw out any worker at will without the payment of retrenchment or compensation. The workman shall also not be entitled to reinstatement or back wages. The workman cannot approach the Labour Court on any of these issues.

Minimum Wages

The Act is silent on the question of the applicability of the Minimum Wages Act within SEZs. This, combined with the fact that minimum wages are generally not paid by employers, gives the latter complete freedom to give wages that are less than the rate prescribed under Minimum Wages Act. The most serious problem in an SEZ is the self-certification of compliance with the Minimum Wages Act.

Units in SEZs are required to furnish consolidated annual reports in the prescribed form to the DC in respect of periodical returns under the following Acts: (1) The Workman Compensation Act (2) Payment of Wages Act (3) The Factories Act (4) The Minimum Wages Act (5) Maternity Benefits Act (6) Payment of Bonus Act (7) The Contract Labour (Regulation & Abolition) Act and such other Acts as the state government may specify in the notification.

At the end of the consolidated form, the employer himself has to certify, for example, as under:

“My establishment is covered under the Minimum Wages Act, 1948 and Rules made thereunder and all workers/office staff are paid wages and overtime wages as prescribed by the Government of Gujarat. I have maintained all the registers and records as required under the law.”

This self-certification operates as conclusive proof of compliance with the Minimum Wages Act. Under the Minimum Wages Act, wages are notified by the state government periodically; non-payment of Minimum Wages or payment of wages less than the rate prescribed under Minimum Wages Act is not only a criminal offence but also violative of Article 23 as held by the Supreme Court in the case of PUDR vs Union of India 1982(3) SCC-235, and a writ petition under Article 226 is maintainable in High Court. Self-certification by the employer in SEZs grants total immunity to the employer.

Sexual Exploitation of Women Employees

Relaxation of the provisions of the Factories Act empowers employers to engage female workers during night shifts. This gives rise to the sexual exploitation of women.

Contractualisation

The Contract Labour Abolition Act shall have no application in the SEZs. The entire workforce can be engaged through contractors, registered or not. This will lead to enslavement of migrant workers by contractors. As per the provisions of the Contract Labour (Regulation and Abolition) Act, workers cannot be employed through contractors for work of a regular and perennial nature. However, in the case of SEZs, workers can be employed by the employer through contractors even for work of a regular and perennial nature. All that the employer in the SEZ has to do to comply with this Act is to furnish relevant details in the consolidated annual return. Part-C of the consolidated annual report provides as under:

“Part A, B & C are to be furnished, if the establishment has employed more than 9 contract labour on any day during the order under report (The details to be provided by the Principal employer).

My establishment is covered under the Contract Labour (Regulation and Abolition) Act, 1970 and the workers are paid wages and overtime wages as prescribed by the Government of Gujarat. I have maintained records and registers as per the Act.”

Thus, by virtue of the aforesaid self-certification, the employer in an SEZ can employ the entire workforce through contractors and can easily escape responsibility as a direct employer.