Hard labour

India’s antiquated labour laws throw up major roadblocks for investors. Ajay Raghavan outlines instances where India’s labour regime is out of sync with most other jurisdictions

India’s economic growth over the past two decades has received considerable attention. Reforms carried out by the government and the development of an entrepreneurial mindset have led to great progress in certain sectors of the economy.

However, one key facet of India has failed to keep pace with the rest: the country’s labour laws. As a result of the lack of reform in this vital and often overlooked area, employers in India find themselves with little wiggle room when dealing with staffing issues.

The following scenarios highlight challenges that employers in India typically face:

Scenario 1: A multinational car manufacturer sets up a factory in India that employs around 1,000 workers. Ten workers become redundant when the company installs some cutting edge technology and they are found to be lacking in any skills that would allow the company to redeploy them elsewhere in the factory. The company decides to terminate them immediately, assuming that as the employer it has the inherent right to terminate workers for a valid cause.

Ajay Raghavan is a partner in the Bangalore office of Trilegal, where he heads the firm’s employment law practice. Atul Gupta and Swarnima, both of whom are lawyers at Trilegal, contributed to the article.