With an aim to incentivize entrepreneurs to transform their ideas into working realities by setting up their own start up ventures and thus creating employment opportunities within the nation, the Ministry of Labour and Employment issued an advisory to all state governments to grant exemption to startups from adhering to strict application of labor laws. This takes startup venture outside the direct purview of several acts like the Industrial Disputes Act 1947, the Trade Unions Act, 1926.
In its advice to government bodies, the ministry has suggested that if startups for the first year of functioning, can furnish a self-declaration for compliance of the nine labor laws, no inspection under such law should be made. Such startups will also be provided with the option of submitting self-certified returns. An inspection would only take place in cases where the complaints are given in writing, verified and approved by higher authorities.
When the issue of concessions for start-ups was raised in the Lok Sabha, Union labor and employment minister Bandaru Dattatreya said that the advisory was not to exempt start-ups from the ambit of compliance of the labor laws but to provide an administrative mechanism to regulate inspection of the start-ups under the laws, so that they are encouraged to be self-disciplined and adhere to the rule of law. "These measures intend to avoid harassment of entrepreneurs by restricting discretion and arbitrariness. Punitive action will be taken whenever there is a violation of the labor laws,'' he said
The final decision to adhere to this advisory will now rest with the state governments. It is necessary for them to define the stakeholders that would be affected by this move, and listen to their concerns to come up with a holistic plan which, building from the intent of the advisory, is able to create favourable conditions for startups to function. Having loose terms like “higher authorities” would bring ambiguity in the fray, diminishing the potential of the move. If this is to work, state governments need to formulate guidelines keeping in mind the demands of both the labour unions and entrepreneurs to ensure each stakeholder gets their due. With the end in mind being to strengthen the functioning of startups and helping them to create favorable employment opportunities, it becomes imperative for governments to do a balancing act.