THE EVOLUTION OF LABOR LAW IN THREE ASIAN NATIONS: AN INTRODUCTORY COMPARATIVE STUDY

Transcription

1 THE EVOLUTION OF LABOR LAW IN THREE ASIAN NATIONS: AN INTRODUCTORY COMPARATIVE STUDY Sean Cooney, Petra Mahy, Richard Mitchell, and Peter Gahan I. INTRODUCTION Labor law scholars interested in the systems of labor market regulation across national borders have increasingly turned their attention to the operation of labor markets in developing countries. 1 This inquiry has been driven by the political importance of many of these countries in international terms and in their economic transformations. Yet it remains the case that there is still a relative dearth of in-depth historical accounts of the evolution of labor law in these countries, and this gap remains a serious obstacle to coming to understand how labor markets are regulated and function across different societies. Some recent scholarship in comparative law has set out to explain the evolution of law and economic development through highly generalized arguments that group countries according to their legal origins, the pattern of their development, and their particular regulatory style in shaping markets (including labor markets). 2 With few exceptions, these lines of Professor, Melbourne Law School, University of Melbourne. Postdoctoral Research Fellow, Centre for Socio-Legal Studies, University of Oxford. Adjunct Professor, Department of Business Law and Taxation, Monash University. Professor, Department of Management and Marketing, University of Melbourne. 1. See, e.g., GLOBALIZATION, FLEXIBILIZATION AND WORKING CONDITIONS IN ASIA AND THE PACIFIC (Sangheon Lee & François Eyraud eds., 2008); LABOUR LAW AND WORKER PROTECTION IN DEVELOPING COUNTRIES (Tzehainesh Teklè ed., 2010) [hereinafter LABOUR LAW AND WORKER PROTECTION]; LAW AND LABOUR MARKET REGULATION IN EAST ASIA (Sean Cooney, Tim Lindsey, Richard Mitchell & Ying Zhu eds., 2004); REGULATING FOR DECENT WORK: NEW DIRECTIONS IN LABOUR MARKET REGULATION (Sangheon Lee & Deirdre McCann eds., 2011). 2. RICHARD MITCHELL, ANTHONY O DONNELL, SHELLEY MARSHALL, IAN RAMSAY & MEREDITH JONES, LAW, CORPORATE GOVERNANCE AND PARTNERSHIPS AT WORK (2011); CORPORATE GOVERNANCE AND LABOUR MANAGEMENT: AN INTERNATIONAL COMPARISON (Howard Gospel & Andrew Pendleton eds., 2006); VARIETIES OF CAPITALISM: THE INSTITUTIONAL FOUNDATIONS OF COMPARATIVE ADVANTAGE (Peter A. Hall & David Soskice eds., 2001); John Armour, Simon Deakin, Priya Lele & Mathias M. Siems, How Do Legal Rules Evolve? Evidence from a Cross-Country Comparison of Shareholder, Creditor and Worker Protection, 57 AM. J. COMP. L. 579 (2009); Juan C. Botero, Simeon Djankov, Rafael La Porta, Florencio Lopez-de-Silanes & Andrei Shleifer, The Regulation of Labor, 119 Q.J. ECON (2004); Sean Cooney, Peter Gahan & Richard Mitchell, Legal Origins, Labour Law and the Regulation of Employment Relations, in RESEARCH HANDBOOK OF 23

2 24 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 inquiry have chiefly engaged with developed rather than developing countries, and thus many of the issues dealt with remain open for examination in the countries with which we are concerned here. Other studies have emerged that have questioned the earlier work and suggested that the development of a proper understanding of legal systems requires less generalization and greater particularity: every legal... system must be understood on its own terms, rather than by reference to an ideal type or another system which has... been held up as a model. 3 These cautions, too, must flow across into any proper analysis of labor market regulation and organization in developing countries. The purpose of this Article is to contribute to this discussion by providing a historical account of the evolution of labor law in three countries: India, Indonesia, and China. 4 Our founding question is how do we understand, or how do we explain, the evolution of labor law in these countries, and what does this understanding add to the present discourse? In particular, what do our studies tell us about the prominent issue of legal origins (i.e., the extent to which the labor market systems in India, Indonesia, and China have been characterized by the regulatory style of the systems from which their labor laws were initially drawn); and the extent to which the labor law systems of those countries been shaped under the influence of international pressures? COMPARATIVE EMPLOYMENT RELATIONS 75 (Michael Barry & Adrian Wilkinson eds., 2011); Simon Deakin, Priya Lele & Mathias Siems, The Evolution of Labour Law: Calibrating and Comparing Regulatory Regimes, 146 INT L LAB. REV. 133 (2007); Edward L. Glaeser & Andrei Shleifer, Legal Origins, 117 Q.J. ECON 1193 (2002). 3. Curtis J. Milhaupt, Beyond Legal Origin: Rethinking Law s Relationship to the Economy Implications for Policy, 57 AM. J. COMP. L. 831, 841 (2009); see generally CURTIS J. MILHAUPT & KATHARINA PISTOR, LAW & CAPITALISM: WHAT CORPORATE CRISES REVEAL ABOUT LEGAL SYSTEMS AND ECONOMIC DEVELOPMENT AROUND THE WORLD (2008). On the failure of legal origins to predict the path of legal evolution beyond generality see Beth Ahlering & Simon Deakin, Labour Regulation, Corporate Governance and Legal Origin: A Case of Institutional Complementarity, 41 L. & SOC Y REV. 865 (2007); Gordon Anderson, Peter Gahan, Richard Mitchell & Andrew Stewart, The Evolution of Labor Law in New Zealand: A Comparative Study of New Zealand, Australia and Five Other Countries, 33 COMP. LAB. L. & POL Y J. 137 (2011); Deakin, Lele & Siems, supra note 2; Richard Mitchell, Peter Gahan, Andrew Stewart, Sean Cooney & Shelley Marshall, The Evolution of Labour Law in Australia: Measuring the Change, 23 AUSTL. J. LAB. L. 61 (2010). See also the literature review by Professor Mark Barenberg, Refining the NAS-ILAB Matrix, Literature Review and Bibliography, U.S. Department of Labor, Bureau of International Labor Affairs, Office of Trade and Labor Affairs (revised Mar. 6, 2011). 4. The research forms part of a larger project in which we have sought to investigate the development of both labor law and corporate law across several countries in the Asia-Pacific Region. The project utilizes both quantitative and qualitative measures and accounts of national developments. There are a number of international colleagues associated with the project. The project s details are available at MELBOURNE LAW SCHOOL, Legal Origins: The Impact of Different Legal Systems on the Regulation of the Business Enterprise in the Asia-Pacific Region, cclsr/centre-activities/research/major-research-projects/legal-origins-the-impact-of-different-legalsystems-on-the-regulation-of-the-business-enterprise-in-the-asia-pacific-region (last visited Aug. 4, 2014).

3 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 25 Recent works on labor law and labor market regulation in developing countries have tended to focus particularly on the impact of globalization in the later decades of the twentieth century. 5 Nevertheless, there is also an appreciation in some of this literature of the importance of much earlier influences in the development of labor law, and the critical relevance of the political and socio-economic contexts within which those early labor law systems were constructed or into which they were transferred or transplanted. 6 On this point, we have found the contributions in a recent volume edited by Tzehainesh Teklè particularly helpful. Teklè writes: Starting from the hypothesis that the capacity of (labour) law to exert its function is influenced by the nature of its relationship with the context in which it is inserted and on which it is intended to impact, the following variables appear to be particularly relevant: the labour market structure; the socio-political structure; the state legal framework (beyond labour law); the legal culture; non-state regulatory systems and social norms; and the economic and ideological environment. A law in context approach is consequently crucial, and, in turn, the context needs to be considered in its local, national, regional and international often interrelated dimensions. It is an analytical approach that also involves an historical perspective. 7 Inevitably certain questions arise in the wake of these notes of caution. In particular, if it is the case that the labor laws of developing countries had their foundations or origins in the models of colonial powers, or at least if labor law has been derived from Western models in even a general sense, how influential has that transference been; or might it be the case that the significance of such influences has been overstated? This Article argues that, while modern labor laws in each of the three countries were, in origin, Western imports (whether by colonial imposition or adoption), they have, in many fundamental respects, developed in a very different way from the equivalents in the putative country of legal origin. This analysis calls into question taxonomies that attribute particular importance to the legal family to which these three countries belong. Those taxonomies depend on the idea of institutional transplantation, that is, countries have regulatory styles that are pervasive across activities and shaped by the origin of their laws. 8 If institutions were never fully transplanted and/or were subsequently altered in major ways, it becomes 5. See supra note 1 and accompanying text. 6. See, e.g., Rachid Filali Meknassi, The Effectiveness of Labour Law and Decent Work Aspirations in the Developing Countries, in LABOUR LAW AND WORKER PROTECTION, supra note 1, at 51; Kamala Sankaran, Labour Law in South Asia: An Inclusive Approach, in LABOUR LAW AND WORKER PROTECTION, supra note 1, at 225; Tzehainesh Teklè, Labour Law and Worker Protection in the South: An Evolving Tension Between Models and Reality, in LABOUR LAW AND WORKER PROTECTION, supra note 1, at Teklè, supra note 6, at Botero et al., supra note 2, at

4 26 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 difficult to find a mechanism that would generate an underlying style of labor market regulation that reflected that of the country of origin. At the least, it would seem that the mechanism would need to be located outside the labor institutions themselves and somehow counterbalance the reorientation of the indigenous labor law system away from that of its source country. Furthermore, even if there were extensive institutional transplantation initially, it may be the case that prevailing socio-economic conditions led to the institutions operating in very different ways from those in the country of origin. 9 The structure of the Article is straightforward. After an initial overview of the three countries, we examine each in turn, tracing the histories of labor law in each, generally with regard to the factors suggested by Teklè. In the case of Indonesia and China, we have complemented the English language literature with indigenous language accounts. We then draw together our conclusions. There are two important preliminary points. First, in the case of India and Indonesia, it is important to draw a distinction between the laws of the country of origin, and colonial laws. The subsequent discussion makes plain that the two were quite different. Second, it is widely acknowledged in the literature that the formal labor laws of many developing countries are, in comparison with those of developed countries, often of much less relevance to how the labor markets are actually organized and operate in practice. 10 This appears to be true of the countries we examine here, albeit to varying extents. This phenomenon further calls into question the degree of institutional transplantation from origin countries. It also raises the question of what regulatory institutions and rules are in fact operating in the informal labor market. II. THE EVOLUTION OF LABOR LAW: INDIA, INDONESIA, AND CHINA We turn to examine the legal evolution of labor law in our three countries. Each of these is a nation of major international significance. As a group, they constitute three of the four most populous countries in the world (the fourth being the United States). They have large economies constituting three of the six largest economies outside the OECD (together with Brazil, Russia, and Turkey). They are also largely non-western 9. See, e.g., Daniel Berkowitz, Katharina Pistor & Jean-François Richard, Economic Development, Legality, and the Transplant Effect, 47 EUR. ECON. REV. 165 (2003) (arguing that for a transplant to be effective there must be local demand for the law, so that it is actually used in practice); Gunther Teubner, Legal Irritants: Good Faith in British Law or How Unifying Law Ends Up in New Divergences, 61 MODERN L. REV.11.(1998) (arguing that even in developed countries, the different socioeconomic environment can lead a transplanted legal norm to operate in unexpected ways). 10. See, e.g., Meknassi, supra note 6; Teklè, supra note 6.

5 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 27 societies, in the sense that the overwhelming majority of their populations are of non-european extraction, and continue to be influenced by non- Western cultural and/or religious systems. Notwithstanding their non-western identity, each of these three nations has implemented legal systems notionally based on, or influenced by, Western legal models, whether as a result of colonization or adoption. While the notion of legal family is an oversimplification in many ways, 11 it is possible to describe the Indian legal system as belonging to the common law family and, perhaps less straightforwardly, Indonesia to the civil law family. China is more difficult to classify. 12 Its first modern legal system was largely based on civil law models. These were replaced by socialist legal institutions, with the influence of the Soviet Union being particularly strong. The current Chinese legal system is eclectic, retaining some socialist features while drawing on both civil and common law models, although the relatively insignificant role of judicial precedent suggests that it does not belong to the common law family. 13 In the following three sections, we outline the evolution of the labor law system in each of the three countries, situating developments in the law within the wider political, economic, and social history. 14 As part of the 11. There is considerable debate over the validity of the distinction made between civil and common law systems in the literature. See generally Nuno Garoupa & Mariana Pargendler, A Law and Economics Perspective on Legal Families, in THE METHODOLOGIES OF LAW AND ECONOMICS (Thomas Ulen ed., forthcoming 2014), and on labor market regulation, see Cooney, Gahan & Mitchell, supra note Indonesia may be very broadly classified as belonging to the French civil law family, but this is complicated by a number of factors. The foundations for Indonesia s legal system were laid down during the colonial era when many Dutch laws and concepts were imported into the Netherlands Indies. The major Dutch codes were based on the French Napoleonic Codes. However, many elements of Indonesia s legal system inherited from the Netherlands Indies did not correspond directly with the system in the Netherlands. In particular, the race-based plural legal system instituted by the Dutch colonial regime had repercussions over a long period of time. Adat (customary law and practices) and Islamic law continued to apply to large sections of the population in various private law matters. See Daniel S. Lev, Colonial Law and the Genesis of the Indonesian State, 40 INDONESIA 57 (2000) (demonstrating that what Indonesia inherited was Dutch colonial law and not just Dutch law, with particular reference to the plural legal system). Classifying Indonesia as a civil law heritage country has been further complicated by some more recent transplants of common-law type concepts and practices, such as the appointment of noncareer (ad hoc) judges and the acceptance of dissenting judgments in the newly established specialist courts. See Gary F. Bell, Indonesia: The Challenges of Legal Diversity and Law Reform, in LAW AND LEGAL INSTITUTIONS OF ASIA: TRADITIONS, ADAPTATIONS AND INNOVATIONS (E. Ann Black & Gary F. Bell eds., 2011) (giving a general account of the plural legal system in Indonesia and the recent introduction of specialist courts). 13. JIANFU CHEN, CHINESE LAW: CONTEXT AND TRANSFORMATION (2008). Chen writes that the best we can say is that Chinese law, in its forms, structure and methodologies, has undoubtedly become Western and is largely fashioned in a Continental (i.e., Civil Law Family) style in its legislative techniques. Id. at 73. See also John K. M. Ohnesorge, China s Economic Transition and the New Legal Origins Literature, 14 CHINA ECON. REV. 485 (2003) (arguing that China is unlikely to become a common law country as this would entail the unacceptable relinquishing of power to make law to the judiciary). 14. The data used in this Article is drawn from a range of secondary sources in both English and original source languages, as well as templates drawn up examining the evolution of labor law in two of the three countries examined (China and Indonesia). The templates employ a longitudinal approach,

6 28 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 study we have tried to provide an account of the different factors that were influential in bringing about legal change as well as of the effects or impacts the developments have had in the society concerned. This includes, importantly, the effectiveness of legal change. A. India 1. Early Years to Post-Independence It has been argued that in the early years of colonization the British authorities in India paid little attention to the organization of work apart from the adoption of versions of the English Masters and Servants legislation aimed toward securing labor supply and discipline. 15 These and other penal style provisions continued to have effect until the 1920s. 16 Following these early provisions, from about the 1880s onwards, the colonial government began to introduce legislation similar to the protective Factories Acts then operating in the United Kingdom. This legislation, which included the Factories Acts of 1881, 1891, and 1911, was designed to regulate working hours and conditions, holidays, safety, and so on, and had a particular focus upon the welfare of women and children. Similar laws were passed regulating conditions of work on the railways, in ports and mines, and on plantations. 17 In the 1920s, several factors combined to alter the industrial and political landscape in India, including the emergence of a strong nationalist movement, the development of a powerful trade union movement (most importantly, with the formation of the All India Trade Union Congress in 1920) and the emergence of Communist influence in the labor movement following the successful Bolshevik Revolution in Russia in Around the same time the International Labor Organization (ILO) also began to taking a lengthy historical view of the development of formal labor laws across twenty-one variables. The focus on the formal dimensions of the law raises important issues of its own, and these are discussed further later in the paper. The twenty-one variables examined in the databases include developments in both individual and collective labor law, and also provide information on aspects of social security law and on regulatory agencies charged with the supervision and enforcement of the labor law system. The material on India draws on the following study by Richard Mitchell, Petra Mahy & Peter Gahan, The Evolution of Labour Law in India: An Overview and Commentary on Regulatory Objectives and Development (Working Paper No. 18, Workplace and Corporate Law Research Group, Monash University, 2012, forthcoming in the Asian Journal of Law and Society). 15. Michael Anderson, India, : The Illusion of Free Labor, in MASTERS, SERVANTS AND MAGISTRATES IN BRITAIN AND THE EMPIRE, , at (Douglas Hay & Paul Craven eds., 2004). 16. Id. at Early legislation of this kind includes the Indian Mines Act 1901 and the Assam Labour and Emigration Act 1901.

7 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 29 have an impact on the development of Indian labor law. 18 This influence saw the introduction of a considerable volume of new protective legislation, including laws pertaining to hours of work, rest periods, female and child labor protections, and health and safety provisions. 19 Importantly, this period of international influence in the 1920s also gave rise to the first industrial relations legislation in India. The Trade Unions Act of 1926 provided for the registration of trade unions, although registration was not compulsory. Registration provided unions with legal status and some protections against civil and criminal liability in the course of an industrial dispute. This Act was followed by the introduction of the Trade Disputes Act of 1929, which provided for the compulsory reference of industrial disputes to a Conciliation Board or Court of Inquiry, and tightly regulated the right to strike. 20 The late 1920s and the 1930s were periods of turmoil in Indian labor relations. In the context of the worldwide economic depression, large scale unemployment and mass dismissals were accompanied by strikes and industrial disruption. The British government established a Royal Commission on Labor in 1929, and while it was boycotted by the All India Trade Union Congress, many of its recommendations made their way into a string of new labor legislation as the 1930s unfolded. 21 Virtually all of this law was aimed at protecting individual workers in factories and mines, and, prior to the Second World War, there were few attempts to experiment further with laws concerning collective labor relations. 22 During the Second World War most of the government s labor policies were inevitably designed to secure labor cooperation with the war effort, typified in the Essential Services Act 1941, and the Defense of India Rules introduced in 1942 and Each of these sets of provisions laid down very strict rules limiting strikes and other forms of industrial action, including general and political strikes. It is important to bear in mind that much of this restrictive legislation continued to characterize Indian labor law in the following decades. 18. See ALI AMJAD, LABOUR LEGISLATION AND TRADE UNIONS IN INDIA AND PAKISTAN (2001); CHRISTOPHER CANDLAND, LABOR, DEMOCRATIZATION AND DEVELOPMENT IN INDIA AND PAKISTAN (2007). 19. New protective legislation of this time included the Factories Act 1922, the Mines Act 1922 and the Workmen s Compensation Act See generally AMJAD, supra note 18, at 33 47; V. K. R. Menon, The Influence of International Labour Conventions on Indian Labour Legislation, 73 INT L LAB. REV. 551 (1956). 20. See generally AMJAD, supra note 18, ch It has been estimated that of the twenty-four pieces of labor legislation introduced by central and state governments in India between 1933 and 1937, nineteen arose from the Royal Commission s recommendations. See Menon, supra note 19, at See Mitchell et al., supra note 14, at 8 9.

8 30 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 India secured independence from the United Kingdom in 1947, and in the same year introduced the pivotal Industrial Disputes Act, which continues, along with the Trade Unions Act of 1926, to provide the basic national legal framework within which the Indian industrial relations and labor market systems are ordered and regulated. As noted, the evolution of labor law in this period basically followed the same pattern established in the legislation of the pre-war years, and particularly those of the war years themselves. 23 In form and outlook Indian labor law, particularly in the content of the Industrial Disputes Act 1947, was highly restrictive, designed essentially to enable governments, through their agencies, to investigate industrial disputes over terms and conditions of employment and to settle them where necessary. While trade unions were legalized, there was very little formal or practical systemic inducement of employers to recognize unions or to bargain with them. Government, at both National and State levels, exercised strong controls over the circumstances in which disputes might be referred to adjudication, the industries to which the legislation applied, and which unions might be permitted to notify such disputes. In only a few States were there exceptions made to the discretionary power of government to refer or not to refer disputes for adjudication, and in only a few States were laws introduced that created some kind of an obligation upon employers to recognize and negotiate with unions. 24 Within these limitations, Indian labor law continued to evolve throughout the decades of the 1950s to the 1980s, particularly in relation to the individual relationship between employer and worker. Some of this regulation concerned minimum wages, maternity benefits, leave and holidays, health and safety, and so on, but the period is most marked for its attention to strengthening the laws against dismissals and redundancies. When it was first introduced, the Industrial Disputes Act 1946 provided very few limitations upon the employer s right to hire and fire as it saw fit. However, amendments to the Act in 1953, 1976, and again in 1982 saw the introduction of important new regulations pertaining to individual dismissals, retrenchments, layoffs, and plant and industry closures. 25 Other 23. See Ramapriya Gopalakrishnan & Lisa Tortell, Access to Justice, Trade Union Rights, and the Indian Industrial Disputes Act, 1947, 22 INT L J. COMP. LAB. L. & IND. REL. 529 (2006); K. R. Shyam Sundar, State in Industrial Relations System in India: From Corporatist to Neo-Liberal?, 48 INDIAN J. LAB. ECON. 917 (2005). 24. One example was the Bombay Industrial Relations Act of 1946, which distinguished several types of unions and extended to some of those unions the right to represent workers in particular industries and areas. See K. R. SHYAM SUNDAR, IMPACT OF LABOUR REGULATIONS ON INDUSTRIAL DEVELOPMENT AND EMPLOYMENT: A STUDY OF MAHARASHTRA (2008); C. K. Johri, India, in INTERNATIONAL ENCYCLOPAEDIA OF LABOUR LAW AND INDUSTRIAL RELATION SUPPLEMENT 262, at (Roger Blanpain ed., 2002). 25. See Mitchell et al., supra note 14, at

9 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 31 legislation over the same period strictly limited and regulated the use of contract and agency labor Economic Liberalization and the Challenge to Labor Law The most recent period of labor law reform in India arose as a result of the economic crisis that confronted the country in the late 1980s. Under the influence of the World Bank and the International Monetary Fund, the Indian government began to introduce new policies to liberalize the country s economy. This included a shift to a less regulated labor market and, in particular, to a lessening of the tight legal controls imposed on dismissals, redundancies, and the use of contract labor. 27 In general terms, legal reform deregulating the labor market has been slow. The Central government s policies have not been particularly effective, and, as a consequence, the most important movements toward liberalization in labor law have been made at State government level. Even here, though, political and union opposition has mainly blocked more serious reforms. Most change has occurred with respect to the employment of women at night, greater ease in shift working, and relaxed regulation on the use of contract labor. Other changes have been facilitated through administrative procedures, including the minimization of workplace inspections and record keeping under factories legislation Legal Origins, Colonial Influence, and Informality In briefly tracing through the evolution of Indian labor law, we can observe very obvious parallels with the explanatory framework suggested by Teklè and her collaborators. 29 There was an early influence of British labor law in the form of laws regulating labor supply and control, and then with protective workplace regulation. International influence on legal developments was also in evidence; trade unions were legalized, and trade union objectives and activities protected. One can also see the continuation of the substance of these laws in the post-independence period. But the question remains exactly what this correspondence tells us. What does the detail of legal evolution in Indian labor law tell us about the influence of its legal origins? Much of the literature dealing with the emergence of labor regulation systems in developing countries during the post-colonial period points to a 26. See id. One example of this legislation is the Contract Labor (Regulation and Abolition) Act, 1970, No. 37, Acts of Parliament, 1970 (India). 27. See Mitchell et al., supra note 14, at See id., at See supra note 6 and accompanying text.

10 32 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 common controlling role of the state, and the repression of trade unions and labor in the search for economic development. 30 In post-independence India, the state adopted an outwardly supportive role for labor. Avowing a state socialist stance, Indian governments proposed development through central planning, extensive regulation of the private sector, and a strong state sector. 31 The Indian Constitution (1949) contained several guarantees specific to labor s interests, including the right to work, the right to just and humane conditions of work, the right to a living wage, and the right to form trade unions among others. 32 Earlier labor-oriented proposals had been even more far-reaching, but these had failed to obtain political support. Despite this stance, however, the general approach by the Indian state toward labor was, as we have noted, largely in line with the preindependence approach; that is to say that it sought to privilege economic development over collective labor rights, but at the same time to extend the protection of labor rights through individualized protections, particularly in restrictions on dismissals and the use of irregular contracts. Most importantly, there was very little legal or institutional support for the development of collective bargaining in the Indian system. 33 Rather, the state sought to both control the settlement of disputes through its own processes (which were slow and laborious) and limit the legality of industrial action in the pursuit of industrial demands. The result was a high level of industrial action and conflict, and a relatively low impact of trade union influence over working conditions at the workplace. It follows that we must adopt careful distinctions in making arguments about legal origins and colonial influence in the development of labor law. For example, Teklè makes the point that the labour law systems of the countries of both regions [South Asia and Africa] have been largely shaped around the legal models of the respective colonial powers, 34 and she cites Sankaran as follows: the origins of much existing law in the subcontinent [South Asia] lies in the British system of the common law and [t]he British law of master and servant laid the foundation for much of the present labour law. 35 At one level, this is undoubtedly true, but one 30. See FREDERIC C. DEYO, BENEATH THE MIRACLE: LABOR SUBORDINATION IN THE NEW ASIAN INDUSTRIALISM (1993); LABOUR LAW AND INDUSTRIAL RELATIONS IN ASIA: EIGHT COUNTRY STUDIES (Stephen Deery & Richard Mitchell eds., 1993); Teri L. Caraway, Labor Standards and Labor Market Flexibility in East Asia, 45 STUD. COMP. INT L DEV. 225 (2010); Cooney et al., supra note Sarosh Kuruvilla, Linkages Between Industrialization Strategies and Industrial Relations/Human Resource Policies: Singapore, Malaysia, the Philippines, and India, 49 INDUS. & LAB. REL. REV. 635 (1998). 32. See, e.g., INDIA CONST. arts. 14, 15, 19, 39, 41, 43, and 43A. 33. For example, India has never ratified either of the key ILO Conventions (nos. 87 and 98) on collective organization and collective bargaining. 34. See Teklè, supra note 6, at Id.; see also Meknassi, supra note 6, at 54 ( In the decolonised countries, labour law is modelled on, or borrowed from, the legislation of the former colonial power. ).

11 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 33 must be very reserved about the value of such observations in view of the many environmental factors influencing the relevance and practical effect of such transplanted labor law models. As we have noted, the British law certainly was an important early influence in the development of Indian labor law. And the labor law constructed under those early influences continued to be relevant after independence. But critical in assessing the character of Indian labor law and its subsequent evolution is the fact that it did not take the same path as might have been suggested by that of its country of legal origin. Its formal law in relation to employment and labor markets may have contained similar concepts and institutions (employment contracts, trade unions, the right to strike, and dispute settlement mechanisms), but by virtue of its socioeconomic and political context its regulatory style failed to develop along the same lines as the bargaining model of the United Kingdom. While there is some evidence to suggest that a British-style collective bargaining system might have been a possible outcome for India, 36 any such objective was rendered largely irrelevant by the failure of the Indian economy to industrialize and develop in ways that might have been anticipated in the post-independence period. 37 A second example concerns the idea of the employment contract. From quite early on, the notion of employment through voluntary contractual arrangement had begun to develop as the juridical device upon which employment relationships were constructed and regulated. 38 And this remains the case today in the terms of most, if not all, of the relevant formal labor legislation. However, the idea that the common law contract of employment was, and remains, a major influence in Indian labor law inherited from British labor law requires closer investigation. It is very clear that Indian labor markets are not organized and regulated according to free contractual negotiations. Rather there is a plurality of regulation, based upon a mixture of traditional customs and practices combined with transplanted legal obligations. 39 These include influences grounded in labor-land relations, in sect, religion, caste, kinship, gender, etc. It is through these kinds of relations that labor supply is organized, labor discipline secured, conditions of work set, and the means of living acquired by labor Wartime Developments in Trade Union Organisation in India, 53 INT L LAB. REV. 349 (1946). 37. Renana Jhabvala, Excluding the Majority: Workers, Producers and Categories of Employment, 44 INDIAN J. LAB. ECON. 243 (2001); C.K. Johri, Industrialism and Industrial Relations in India: The Task Ahead, 25 INDIAN J. INDUS. REL. 230 (1990). 38. Michael R. Anderson, Work Construed: Ideological Origins of Labour Law in British India to 1918, in DALIT MOVEMENTS AND THE MEANING OF LABOUR IN INDIA (Peter Robb ed., 1993). 39. See id.; Meknassi, supra note See BARBARA HARRISS-WHITE, INDIA WORKING: ESSAYS ON SOCIETY AND ECONOMY (2003) (particularly chapter 1); Anderson, supra note 38; GEERT DE NEVE, THE EVERYDAY POLITICS OF

12 34 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 There are multiple reasons why this plurality of regulation in developing countries remains relevant to how we should view labor law in India, and, eventually, what this means for labor law as a field of inquiry. One important point concerns the failure of developing countries, in many cases, to industrialize and modernize in accordance with a path set by earlier developed nations. As we noted above, it appears to have been assumed that labor law in the modern and formal sense would in time characterize systems everywhere: that legal insecurity, social inequality and economic discrimination and the socio-legal pluralisms with which they are associated would disappear with time. 41 This has not proven to be the case in India. There, labor markets are regulated by formal labor law across only a narrow section of the economy. According to Sankaran, in 2005, of a total workforce of 457 million persons, some 395 million were engaged in the informal sector. More than half of the Indian workforce was (and still is) engaged in agricultural labor. Of those in the formal sector, it is estimated that only about 53% were actually covered by the Indian labor laws, the remaining 47% constituting what might be considered as informal employment in the formal sector. As a consequence, it is estimated that well over 90% of the workforce falls outside of the law s putative protection and organization. 42 Only a very small proportion of India s workers are members of trade unions, 43 and only a very small proportion are covered by collective agreements. 44 Across all of this large body of unorganized workers, and potentially even within the formally regulated workforce, employment relations are regulated through the mixture of formal labor law and customary regulation pointed to earlier in this discussion. These form part of the socioeconomic contexts within which transplanted or externally influenced labor law (as formally defined) must operate. A second point of relevance concerns the highly selective application of formal labor law, and the generally poor state of legal enforcement, which together contribute further to the ineffectiveness of formal labor law in some developing countries. 45 Once again, the content and operation LABOUR: WORKING LIVES IN INDIA S INFORMAL ECONOMY (2005); MARK HOLMSTRÖM, INDUSTRY AND INEQUALITY: THE SOCIAL ANTHROPOLOGY OF INDIAN LABOUR (1984). 41. See Meknassi, supra note 6, at 73; Teklè, supra note 6, at 18; see also Jhabvala, supra note 37, at See V.N. PRASAD, LABOUR REGULATION IN SMALL ENTERPRISES: COVERAGE AND IMPACT 83 (2008); Sankaran, supra note 6 at 231; see also Gopalakrishnan & Tortell, supra note 23 (estimating that only about 7% of the Indian workforce is in the organized sector). 43. Gopalakrishnan & Tortell, supra note 23 (giving the figure at 2%). 44. In the late 1990s, it was estimated that 2% of the total workforce or 30% of formal sector workers were involved in collective bargaining. Coverage since then has also been very low. See PONG-SUL AHN, THE GROWTH AND DECLINE OF POLITICAL UNIONISM IN INDIA: THE NEED FOR A PARADIGM SHIFT 65 (2010). 45. See Meknassi, supra note 6; Teklè, supra note 6.

13 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 35 of labor law in India illustrates these points. The application of much Indian labor law including key provisions such as the Industrial Disputes Act 1947 and a good deal of the protective legislation regulating hours of work, health and safety, and other conditions is limited in varying ways by reference to size of an establishment, type of economic activity, type of employment relationship, type of employment position, and so on. 46 The reach of formal labor law is limited accordingly. Moreover, even where labor laws do apply in principle, the law is often easy enough to evade in practice, 47 and enforcement is generally very poor. Research suggests that among many shortcomings, there is corruption and collusion between inspection agents and employers, 48 an overall decline in the rate of inspections and prosecutions for breaches of the laws, 49 and deficiencies in the qualities of inspectors. 50 Coinciding with this state of affairs, the general weakness of the trade union movement, coupled with the poor education levels among the workforce generally, 51 means that labor has been unable to reverse these outcomes to any significant degree. The way in which we explain or understand the evolution of labor law in India is, in certain respects, critically dependent upon what we mean by labor law itself. If we mean the formal laws introduced following the perceived forms and objectives of earlier industrialized countries in Europe, North America, and Australasia (the dominant labor law model 52 ), then we can, at least in part, explain the evolution of Indian labor law in terms of legal origin, colonial influence, and international labor standards. As we have noted, British labor law in the form of masters and servants legislation, the contractual employment relationship, the legalization of trade unions and industrial action, and protective workplace regulation all feature prominently in the history of Indian labor law, and continue to do so. 46. Such laws construct what Meknassi calls a proliferation of legal statuses determining the legal situation of workers in developing countries. Meknassi, supra note 6, at 58 59; see also Sankaran, supra note 6, at See M. Singh, Unorganised Industries: Conditions of Work and Labour Laws, 23 INDIAN J. INDUS. REL. 373 (1988); K.R. Shyam Sundar, Emerging Trends in Employment Relations in India, 45 INDIAN J. INDUS. REL. 485 (2010). 48. See Ahmad Ahsan, Carmen Pagés & Tirthankar Roy, Legislation, Enforcement and Adjudication in Indian Labor Markets: Origins, Consequences and the Way Forward, in DIPAK MAZUMDAR & SANDIP SARKAR, GLOBALIZATION, LABOUR MARKETS AND INEQUALITY IN INDIA (2008); C. Navin, Legal Regulations of Labour Market, 42 INDIAN J. LAB. ECON. 855 (1999); Carolyn Penfold, Off-Shored Services Workers: Labour Law and Practice in India, 19 ECON. & LAB. REL. REV. 91 (2008). 49. See D. NARASIMHA REDDY, LABOUR REGULATION, INDUSTRIAL GROWTH AND EMPLOYMENT: A STUDY OF RECENT TRENDS IN ANDHRA PRADESH (2008); Ahsan, Pagés & Roy, supra note Scott E. Kauff, Compulsory Disclosure of Hazards, Emergency Planning, and Training in the Workplace: India s Factories Act and the United States Hazard Communication Standard, 17 COMP. LAB. L. J. 565 (1996). 51. See id., at , See Teklè, supra note 6, at 9.

14 36 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 But it is important to note that we cannot take this argument much beyond this level of generality. Even when defined in this relatively confined way, it would still be necessary to be very particular in exploring the evolution of labor law in India. While it may be accurate enough to point to British colonial, and common law, influence to a point, and even to recognize the continuing relevance of these influences to the present day, we do not take the view that the evolution of Indian labor law can be understood in more generalized terms so as to say either that the protective strength of the law reflects its legal origins, or that its labor law system has been largely shaped around the legal model of [its] respective colonial power (i.e., Britain). 53 Taking the legal origins point first, detailed quantitative analyses of Indian labor law 54 show quite idiosyncratic results in measuring the protective quality of India s labor law against both the common law and civil law country families. 55 Of the five countries examined in the work of Deakin, Lele, and Siems, India is measured as the third most protective, ranked above the two other common law countries (the United States and the United Kingdom) but below the countries of civil law origin (Germany and France). 56 This position largely held true for the entire period surveyed ( ). Subsequent work by other researchers has indicated that India also ranks above two other common law countries (Australia and New Zealand) in terms of their protective strengths in labor law, and again this position largely held true throughout the period with the exception of New Zealand from about 1974 until the early 1990s. 57 This means that of all five common law origin countries represented in the sample, Indian labor law appears to be most protective, and importantly for our argument, it ranks most closely with Germany, a civil law system. This suggests that in terms of regulatory style India follows most closely a continental-european rather than British model. However, when Indian labor law is examined using this data, but at a subaggregate level, an even more complex picture emerges. Viewed at that level, what is shown is that in relation to the forms of employment contracts that can be entered into, and in relation to dismissal in particular, Indian law is very protective. It is ranked above all six other countries surveyed on dismissal, and above all 53. Id. at There are not yet any equivalent studies of Indonesia and China. 55. As a note of caution, there are numerous difficulties involved in applying a leximetric approach to India, including the high level of informality we discuss in this Article, and the complexity generated by India s federal system of government. 56. See Deakin, Lele & Siems, supra note See Anderson et al., supra note 3; Mitchell et al., supra note 3. This discussion largely draws upon that in Mitchell et al., supra note 14, at

15 2014] LABOR LAW IN INDIA, INDONESIA, AND CHINA 37 four other common law origin countries in relation to alternative employment contracts. 58 However, the position appears quite different when one turns to an examination of collective labor rights. When compared with the systems of the civil law countries, and even some of the common law countries, India ranks relatively low in relation to employee representation through trade union recognition and support for collective bargaining. Other recent leximetric studies examining Indian labor law have tended to the same view. For example, a study by Sarkar indicates that almost all serious legislative change in Indian labor after 1970 occurred in relation to individual rights and dismissals rather than to collective rights. 59 What this evidence suggests, then, is that the particular case of labor law s evolution in India is complex, and not explainable solely by reference to either common law origin, or the British labor law model. Historically, the legal model in Britain was shaped largely to facilitate the regulation of employment relationships and labor markets through voluntary collective bargaining, and the state generally eschewed direct intervention. Notwithstanding the obvious legal institutions drawn from Britain and international influences, the principal characterizing feature of Indian labor law, on the other hand, was the firm control exercised by the state over the conduct of industrial disputes, and hence the limited impact of trade union influence and collective bargaining even within the sectors where the formal terms of the law could take effect. In this respect, Indian labor law does not have very much in common with the domestic system of its British colonizers, nor with any of the systems in the advanced industrial economies with which the British model might be compared (whether of common law or civil law variety). The Indian system was designed to subordinate the interests of labor to the development of the economy: that is what the law in context tells us. Yet, at the same time, the formal law was also developed to protect the interests of labor in relation to dismissals and individual contracts. This confirms our analysis. The particularity of the Indian case lies in its socioeconomic and political contexts. Legal concepts and ideas may be drawn from many different sources and 58. Gordon J. Anderson, The Labour Market Regulation Index, New Zealand : Variable Definitions and Descriptions of the Data (2010), available at abst ract_id= ; Sean Cooney, Peter G. Gahan, Shelley D. Marshall, Richard Mitchell & Andrew Stewart, The Labour Regulation Index, Australia : Variable Definitions and Description of the Data (2010), available at Simon Deakin, Priya Lele & Mathias Siems, CBR Labour Regulation Index for the UK, the US, Germany, France and India (Ctr. Bus. Res., Univ. of Cambridge, Dec. 2007), available at Labour%20regulation%20index%20references%205%20countries.pdf. 59. Prabirjit Sarkar & Simon Deakin, Indian Labour Law and Its Impact on Unemployment, : A Leximetric Study (2011), available at

16 38 COMP. LABOR LAW & POL Y JOURNAL [Vol. 36:23 influences, but what matters is the way they work in their context, how they operate in a systemic way, and what outcomes they produce. For reasons we have outlined here, our analysis has largely been concerned with the formal regulation of workplaces and employment relationships. But in point of fact, we have noted that this law has very little impact in practice for a variety of reasons that we do not need to revisit at this stage. It suffices to say that Indian labor law has been widely portrayed as ineffective, 60 and the industrial relations system that it regulates as absurd. 61 This situation pertains, of course, only if one confines the investigation of Indian labor law to its traditional or usual definition (i.e., to the formal labor law created by courts and legislatures). There are, however, other approaches to the subject. Labor law is increasingly defined more broadly. For example, one line of inquiry is to define labor law in terms of labor market regulation. 62 If this slightly reshapes the inquiry of labor law to include not merely what would be regarded as traditional or conventional labor law but also other regulatory influences on both employment relationships and labor markets more widely, then the broader influences in India come into play. The point is that the great bulk of the Indian workforce is regulated: that is to say, the securement of labor supply, labor control and discipline, rights and responsibilities of work, working conditions, pay and entitlements, employment security, etc. are, as noted, regulated through other (contractual or noncontractual) forms. Viewed as labor market regulation this is Indian labor law, and, in many respects, it is of greater practical relevance to work and labor in India than are the conventions of formal labor law. B. Indonesia 1. Early Regulation and the Civil Code As was the case in British India, labor regulation during the Dutch colonial era in Indonesia was largely oriented toward the creation of a compliant workforce; particularly, in the Indonesian case, to secure labor supply and discipline for Dutch enterprises. In the early years, the Dutch East India Company often enslaved local workers, and there were forced 60. See OSCAR A. ORNATI, JOBS AND WORKERS IN INDIA 82 83, (1955); SUNDAR, supra note 24; T. S. Papola & Jesim Pais, Debate on Labour Market Reforms in India: A Case of Misplaced Focus, 50 INDIAN J. LAB. ECON. 183 (2007). 61. See Elizabeth Hill, The Indian Industrial Relations System: Struggling to Address the Dynamics of a Globalizing Economy, 51 J. INDUS. REL. 395 (2009). 62. LABOUR LAW AND LABOUR MARKET REGULATION: ESSAYS ON THE CONSTRUCTION, CONSTITUTION AND REGULATION OF LABOUR MARKETS (Chris Arup eds., 2006); see also Meknassi, supra note 6, at