Owing to the nation-wide lockdown imposed to tame the pandemic, manufacturing activity in India, particularly in relation to non-essential goods, virtually came to a standstill for a considerable time period. As businesses now strive to recuperate briskly, there is a perceptible focus on amplifying production to offset the incurred financial losses. Against this backdrop, a prevailing legal question assumes greater significance – is overtime work in factories permissible under Indian law? If yes, how should such work that is undertaken beyond normal working hours be compensated for?
Under the Factories Act, 1948 (Factories Act), a worker can neither be required nor allowed to work for more than 9 hours in a day or 48 hours in a week. It is imperative to note that for the typical 6-day work week in the manufacturing sector, the daily limit on work would effectively be 8 hours, to keep within the weekly threshold. Further, this 8-hour limit would include only actual hours of work; such that inclusive of rest intervals, the spread-over of work in a day can go up to 10.5 hours.
Having said the above, Section 59 of the Factories Act specifically deals with overtime and stipulates that for work beyond the aforesaid limits, a worker “shall, in respect of overtime work, be entitled to wages at the rate of twice his ordinary rate of wages.” Further, unlike the provisions of most state-specific Shops and Establishments Acts (which prescribe working conditions for other kinds of commercial establishments), this provision does not specify any numeric limit on overtime hours either. On first reading, Section 59 may appear to be a statutory sanction for unrestricted overtime work, provided that workers are fairly compensated at the prescribed rate. However, such an inference would be premature and fallacious.
Section 59 must be necessarily read with other succeeding provisions of the Factories Act. It is Section 64 which empowers the State government to make rules granting exemptions from work hour limits for only specified nature of operations, such as seasonal or intermittent work, urgent repairs etc. Similarly, Section 65 allows the state government / Chief Inspector to issue written orders granting such exemptions to a factory or a class of factories dealing “with an exceptional pressure of work”. These exemptions are also circumscribed by specified upper limits on the extended work hours inclusive of overtime.
Reading these provisions harmoniously, it becomes inescapably clear that statutory limits of work hours can only be extended through an exemption granted by the state government / Chief Inspector either under Section 64 or Section 65. It is only in such an exemption scenario that the rate of overtime wages stipulated under Section 59 comes into picture. Therefore, in the absence of an exemption, an employer cannot require factory workers with a 6-day work week to work in regular shifts exceeding 8 hours of work, whether with or without additional compensation. This conclusion is supported by various state exemptions issued in the wake of COVID-19 discussed below.
COVID-19 state exemptions
Owing to travel restrictions and the resultant dearth of manpower, nearly a dozen state governments issued exemption notifications in April and May 2020 temporarily increasing factory work hour limits to 12 daily hours and 60 / 72 weekly hours. The underlying rationale here was that fewer workers working longer shifts would also facilitate better social distancing. Notably, while most state exemptions explicitly protected the workers’ right to receive twice the rate of wages for the additional hours clocked, notifications issued by the Governments of Uttar Pradesh and Gujarat respectively diluted this requirement by half, stating that overtime wages shall be paid only in proportion to existing wages.
The two aforesaid orders were predictably met with acute criticism as well as legal challenge. Pursuant to a notice issued by Hon’ble High Court at Allahabad in a public interest litigation filed in this regard, the Uttar Pradesh notification was instantly withdrawn with a week of issuance.
On the other hand, the fate of the Gujarat exemption was eventually decided on 1 October 2020 by Hon’ble Supreme Court of India (Court). The Court, in Gujarat Mazdoor Sabha and Another v State of Gujarat [WP (Civil) No. 708 of 2020], struck down the notification and the extension thereof on multiple grounds. First, the Court invalidated the use of exceptional exempting powers under Section 5 of the Factories Act, and noted that the pandemic, despite its disastrous impact, did not constitute a “public emergency” as narrowly defined under Section 5. Second, and more importantly, the Court preserved the sanctity of Section 59 stating the double rate of overtime wages is a “bulwark against the severe inequity that may otherwise pervade a relationship between workers and the management”. The Court went on to hold that the notifications “are an affront to the workers’ right to life and right against forced labour that are secured by Articles 21 and 23 of the Constitution”.
Labour Code 2020
As with other labour codes, the Occupational Safety, Health and Working Conditions Code, 2020 (OSH Code) has received Presidential assent but is yet to be notified as effective. To steer clear of the aforesaid exemption issue, the OSH Code accords wide-ranging exemption powers to the appropriate government in case of a “public emergency or disaster or pandemic”.
Further, in line with ILO Standards, the OSH Code reduces the daily work hours limit from 9 to 8 hours, leaving other matters of rest intervals and spread over to be prescribed under rules. Regarding overtime, in a crucial departure from the current position, the OSH Code allows overtime work at double the rate of wages provided the concerned worker consents to such work, and within maximum overtime limits which shall also be prescribed under rules yet to be framed by the appropriate government. While it would be wise to await the rules, this could be a win-win situation that gives employers some flexibility in designing work schedules, affords employees the necessary agency to accept or refuse overtime work, and also provides a statutory limit check to prevent any exploitation emanating from the obvious inequality of bargaining power on the operationally crucial question of work hours schedules.