Introduction to Labor Laws

Chapter 1
 What is “Law”?
• Austin's definition of Law:
– “Law is the command of the sovereign”
Command (Order)
Sovereign (Ruler)

• Simple definition of Law:

– “Law is the right of one,obligation of the other, maintained by law
enforcing authority”
Right (legally allowed)
Obligation (Duty)
Enforcing authority (Implementing Power)
Classification of Law
 Advantages of Law
• Uniformity and certainty
– The first of the advantages is that the law imparts uniformity and certainty to the
administration of justice. This advantage enable the people to know what the law is
what would be the decision of the court.
• Equality & impartiality
– The law is made for no particular person or for no individual case and so admits no
respect of person which is incompatible with justice. None can escape from the
clutches of law.
• Protection from errors
– The law serves to protect the administration of justice from the errors of individual
judgment. The establishment of the law is the substitution of the opinion and
conscience of the society at large for those of the individual to whom judicial
functions are entrusted.
 Disadvantages of Law

• Rigidity
– Because of law's rigidity it applies without any allowance for special circumstances and
without turning to the right hand or to the left. In other words rigidity is the failure of
law to conform itself to the requirements of special circumstances.
• Formalism
– Another vice of the law is the formalism. By this is meant the tendency to attribute
more importance to technical requirements than to substantive rights and wrongs. In
modern time registration and attestation are examples of formalities.
• Needless Complexities
– The fourth defect of law is undue and needless complexity. The law becomes more and
more complex due to the excessive development of legal system and it becomes too
difficult to understand the law.
 Labour Law: A Profile on Pakistan

• Pakistan is the sixth most populated country in the world having a

population of 167M as estimated by the Population Census Org.
• The estimated labor force is 51.78M (32.2% participation rate),
comprises all persons ten years of age and above who fulfill the
requirements for including among employed or unemployed.
• 49.09M employed and 2.69M unemployed and more than half
population is concentrated in the rural areas.
• Of the employed labor force, women constitute only 20% (10M)
 Introduction
• Agriculture sector employs 44%, second to it is service sector (employing
35%).
• Industry and manufacturing employ only 20% of the labor force.
• Formal sector account for only 27% of economic activity while informal
sector is catering more than 70% of the activity outside agriculture.

Source : Labour Force Survey, GoP : 2007 – 08

 Pre-Independence Era
• The Indian Subcontinent, of which Pakistan is only one part, was ruled over
by British for nearly a period of 200 years (1757-1947).
• The East India Company profited the resources of this region firstly by
getting goods manufactured at lowest prices (mostly textile and spices) and
then selling these in UK and Europe at higher prices.
• In the wake of industrial revolution, British Crown took control of
subcontinent, the market for these goods was closed for Indian competitors.
• After WWI the Labor-management relations were given importance for the
first time, earlier the common law principle of conspiracy applied to labor
unions.
 Pre-Independence Era
• The Indian Trade Union Act was passed in 1926 and after a span of three
years, Trade Disputes Act, 1929 was also passed, in which it provided
the prevention and settlement of disputes between employers and
employees.
• Legislation related to labor welfare was introduced during this period, it
included Factories Act 1934, Payment of Wages Act 1936, Mines Act
1923, Workmen Compensation Act 1923 and Dock Labor Act 1934.
• It is important to mention the aforementioned Act was last piece of
labor legislation before the partition of subcontinent and subsequent
independence of Pakistan.
 Post Independence Era (1947-69)
• After Independence, Pakistan inherited following legislations from British
India: Trade Union Act 1926; Industrial Employment (Standing orders) Act
1946; Industrial Disputes Act 1947 and Factories Act 1934.
• These laws provided the basis for labor laws and policy making in the
country.
• Under the Trade Union Act 1926, the trade unions could also constitute a
separate fund for promotion of civil and political interests of the members
(Section 16) which meant that labor unions could use their funds in
supporting some political party and in response gain support for pro-labor
legislation in the parliament.
 Post Independence Era
• The Trade Union (Amendment) Ordinance 1960, reduced the number of
outsider officers from 50 to 25 percent. It also included the unfair labor
practices, both on the part of Employers and Employees.
• The Industrial Disputes Act 1947 was replaced with Industrial Disputes
Ordinance 1959 by a military ruler, Ayub Khan.
• The workers could not go on a strike without giving due notice to the employer
nor could they strike when the matter was pending before a conciliator or a
court.
• During Yahya Khan Regime, the second military dictator, labor legislation was
rewritten with emphasis on two points: the trade union movement should
remain factory/plant based and delinked from the party politics.
 General Constitutional Framework
• Legislation has its origins from the law of contract (earlier the “law of master and slave”
and later ‘the law of master and servant’) and industrial relations regulations are
considered as deviations from common law
• Labor is a concurrent subject under the constitution of the Islamic Republic of Pakistan,
making both the federal and provincial governments responsible for enacting laws and
regulations regarding labor issues
• Provincial governments have the authority to limit the application of federal laws; this was
witnessed when the Province of Punjab banned the workplace inspections in 2003 (under
its Punjab Industrial Policy, 2003)
• Pakistan follows a system of non self-executing treaties which means that any international
ratified treaty (convention, covenant etc.) can be implemented only when a statute is
enacted writing the country’s obligations into a law.
 Provisions on Labor Rights
Article 11:
• All forms of forced labour and traffic in human beings are prohibited.
• No child below the age of fourteen years shall be engaged in any factory or mine or any other hazardous employment.
 
Article 17:
• Every citizen shall have the right to form associations or unions, subject to any reasonable restrictions imposed by law
in the interest of sovereignty or integrity of Pakistan, public order or morality.
 
Article 18:
• Every citizen shall have the right to enter upon any lawful profession or occupation, and to conduct any lawful trade or
business.
 
Article 25:
• All citizens are equal before law and are entitled to equal protection of law.
• There shall be no discrimination on the basis of sex alone.
 Provision on Labor Rights
Article 27:
• No citizen otherwise qualified for appointment in the service of Pakistan shall be discriminated against in
respect of any such appointment on the ground only of race, religion, caste, sex, residence or place of birth.
 
Article 37(e):
• The State shall make provision for securing just and humane conditions of work, ensuring that children and
women are not employed in vocations unsuited to their age or sex, and for maternity benefits for women in
employment.
 
Article 38:
• The State shall secure the well-being of the people, irrespective of sex, caste, creed or race, by ensuring
equitable adjustment of rights between employers and employees.
• Provide for all persons employed in the service of Pakistan or otherwise, social security by compulsory
social insurance or other means.
 Industrial Relations
• It was in 1969 that laws relating to industrial disputes and trade unions were
merged and consolidated into a single law, namely Industrial Relations
Ordinance 1969.
• It aimed at resolving more and more disputes through statutory provisions
and leaving the least for collective bargaining and strikes.
• The ordinance was promulgated by yet another military dictator, Yahya Khan;
however it was amended by the populist and pro-union leader, Zulfiqar Ali
Bhutto (1971-77).
• In 2008, the newly elected government of Pakistan Peoples’ Party repealed
the IRO and enacted a new (interim) legislation, Industrial Relations Act, 2008
 Freedom of Association
• Freedom of Association is guaranteed under article 17 of the
Constitution of the Islamic Republic of Pakistan.
• The Supreme Court of Pakistan held (PLD 1997 SC 781) that right
to form a trade union/association is a fundamental/constitutional
right and includes the right of collective bargaining.
• The legal anomaly of this decision is that it regards collective
bargaining as the fundamental right but not the right to strike/go
slow which are the weapons of labour for effective collective
bargaining.
 Union Registration & CBA
• All the members of a trade union must be actually engaged or employed in the industry
with which the union is connected and where two or more unions are registered, every
new union must have at least one-fifth of the total workmen employed as its members
(IRA 2008: Section 6.2)
• The right of trade unions to elect the representatives of their own choosing(by getting
25% outsiders as its executive) was taken away (in banking industry only) by introduction
of section 27-B in the Banking Companies Ordinance 1962 (amended in 1997).
• Collective Bargaining was first introduced in Pakistan with the promulgation of IRO 1969.
Collective bargaining has also been called a fundamental right which emanates from
article 17(1) of the Constitution.
• if more than one union exists in the premises, the registrar of trade unions will conduct a
secret ballot election/referendum and will issue the CBA certificate to union securing
votes not less than one third of total votes.
 Worker Participation and Management
• Under the new IRA-2008, workers have a three pronged system of
participation in the workplace management. These include “management
committees, joint management board and work council”.
• A factory employing 50 or more persons has to set up a management
committee of which worker representatives will be 50%. These
representatives are either elected (if no CBA exists) or nominated (if CBA
is there) for a period of at least one year.
• The IRA provides five institutions at the plant level (CBA, Shop Stewards,
Management Committee, Joint Management Board and Works Council) in
order to improve the bilateral relations.
 Disputes and Strikes
• The CBA or employer finds that an industrial dispute has arisen or likely to arise, it can
communicate the views to the other party through Works Council.
• Upon receipt of this communication, parties are obliged to settle the dispute through bilateral
negotiation within 10 days (or more if agreed). If bilateral negotiations fail, either party can serve
the notice of strike/lockout to the other within 7 days. The duration for notice of strike or lockout
is 14 days.
• If both parties agree, they need to make a joint request for arbitration. The arbitrator needs to
give award within a period of 30 days and this award is final and no appeal can be made against it
for a period of two years.
• If the conciliation process fails and parties don’t want the arbitration, the workers can go on strike
and employer can lockout the workers.
• The matter is then decided by the Labor court following an inquiry by the labor department and if
the order of court is contravened, it can order dismissal of striking workers and registration of
trade union/CBA can be cancelled (IRA 2008: Section 63-64).
 Labor Judiciary
• Labor Judiciary is composed of three parts: Labor Courts, Labor Appellate Tribunals and
National Industrial Relations Commission.
• Labor courts are the successor of industrial courts established for the first time after
enactment of Industrial disputes Act 1959.
• The labor court can work both as a civil court and a criminal court. Territorial jurisdiction of
labor courts is described in section 52.4 of the Act.
• A party aggrieved by the order of a labor court can appeal to the labor appellate tribunal
(headed also by a judge) and award given by it is final.
• National Industrial Relations Commission (created for the first time in 1972), composed of
seven members (one member each from employer and worker side) has the functions of
promotion and formation of trade unions, registration of industry-wise federations, determine
CBAs among industry-wise trade unions, educating workers of their rights and most
importantly to deal with unfair labor practices (either on part of workmen or employers).
 Unionization
• After independence, Pakistan inherited a very small percentage (9%) of industrial
establishments in the Indian subcontinent (Ansari et.al, 2006: 991).
• The area which constituted Pakistan had also a very low level of union organizing,
mostly because a large part of workforce was involved in agriculture. The union
membership as a percentage of total labor force was only 0.7 % (in 2000) while if
you look at the union density, it is about 2% of the employed labor force.
• Labor unions have shrunk both in size and power. The trade unions as pressure
groups had emerged again during Bhutto regime (1972-77) but the military
takeover in 1977, deregulation and privatization (1991 onwards) and military
takeover (again in 1999) diluted their value as a pressure group.
• Thousands of workers have been fired in the wake of privatization and right-sizing.
 Agricultural Sector
• Although agriculture employs 44% of the labor force, it is still not included in the
ambit of labor laws.
• There has been no provision in any of the three successive laws (1969, 2002 and
2008) allowing agricultural workers as they are not defined as an industry. It is
worth mentioning here that Pakistan has also ratified a convention (although this
Convention was ratified by pre-partition India in 1921.
• Pakistan inherited this) regarding grant of freedom of association rights to the
agriculture workers (Convention No. 11).
• All the successive labor laws, although not explicitly, exclude agriculture but
these also do not expressly cover this and seem to be excluding small agriculture
workers like tenants, sharecroppers and self employed from their definition.
 Employment Contract and Termination
• Industrial and Commercial Employment (Standing Industrial and Commercial Employment
(Standing Orders) Ordinance 1968 was enacted in 1968 to address to the contractual
relationship between employer and employee.
• The ordinance is applicable to establishments employing 20 or more workers. The ordinance
classifies workmen in six classes: permanent, probationers, badlis, temporary, apprentices
and contract workers (last was added in 2006).
• The legislation requires that workmen should be provided the contract in writing, showing
the terms and conditions of his service, at the time of hiring, promotion and transfer. It also
requires that the wage rates paid to different categories of workers/work should be posted
on the notice boards.
• Termination of an employment contract may be either termination simpliciter, which is
termination on grounds other than misconduct after a notice (section 12) or termination on
account of misconduct (section 15).
 Employment Contract and Termination
• Notice of termination, for termination simpliciter, is mandatory for permanent employees. A
notice of one month must be served before severing the employment relationship or payment of
one month’s wages in lieu of notice may be provided (Section 12.1).
• If the employer wants to close down the whole business or is terminating the employment of 50
or more workers, it must get the prior approval of labor court.
• An individual whose employment is terminated has first to use internal mechanisms for dispute
resolution (shop stewards, CBA through grievance procedure), however if he is not satisfied with
the decision, may appeal to the labor court. In that case, labor court is authorized to go into all
the facts of the case and determine whether the termination was valid and bona fide or not.
• The above mentioned ordinance also provides for severance pay/gratuity to be paid (when an
employee resigns or his services are terminated other than misconduct) equivalent to 30 days
wages for every completed year of service or any part thereof in excess of 6 months(For 20 years
of service, this means 90 weeks of severance pay)
 Equality and Non-discrimination

• Articles 25 and 27 of the Constitution deal with the issues of equality and discrimination
and prohibit discrimination on the basis of race, religion, caste, residence or place of birth.
• Currently, Government is in the process of labor law reform and Employment and Service
Conditions Act (draft) has provisions on equal pay for work of equal value. Quota has been
fixed for women in the public sector jobs (10%) and they can also compete on the
remaining 90% seats.
• Recently, the government has enacted a new law to make provisions for protection of
women against harassment at the workplace.
• The law also calls for imposing of fine (unspecified), a part of which will be payable to the
complainant. A person committing harassment can also be dismissed/removed from
service.
 Working Hours
• The Factories Act, 1934 (Section-34), Mines Act, 1923 (Section 22-B, C), Shops and
Establishment Ordinance, 1969 (Section 8) and Road Transport Ordinance, 1961 (Section-4)
are used to determine working hours and rest time in different industries.

• Section 34 of the Factories Act provides that “no adult worker shall be allowed or required)
to work in a factory for more than 48 hours in a week; if the factory is seasonal, 50 hours a
week and if the work is of continuous nature, he may work for 56 hours in a week. As for
the daily hours, these may not be more than 9 hours a day (in case of seasonal; 10 hours).
• The working hours of a child/adolescent (15-18) are 5 hours in a day.
• The factories Act is applicable to all the precincts employing 10 or more workers. The law
makes provisions for one weekly holiday and if that is not given, a compensatory holiday
must be given as soon as possible. Shops and Establishments Ordinance 1969 and Mines
Act 1923 also limit the weekly hours to 48 hours.
 Leave and Maternity Benefits
• Under the factories act, if a worker has completed 12 months of continuous service in a factory, he
shall be allowed a paid annual leave of 14 consecutive days. Every worker is entitled to 10 days
casual leave with full pay during a year. Workers are also entitled to 16 days sick leave with half pay
(8 days with full pay) in a year.
• Festival holidays as notified by the provincial government with full pay (usually 10-13) are also
allowed. If a worker is required to work on a festival holiday, he will be given one day additional
compensatory holiday with full pay and a substitute holiday (300% of usual wages).
• Maternity leave, under Maternity benefits Ordinance 1958, is also allowed to pregnant women for a
period of 12 weeks with full pay. It is unlawful for an employer to dismiss a women worker who is
on maternity leave.
• The qualifying period for getting this leave is four months of preceding employment with the
employer. Maternity benefit and maternity leave of 16 weeks is also provided under the Mines
Maternity Benefits Act, 1941(section 5).
 Wages
• The laws relating to fixation and payment of wages are Payment of Wages Act 1936,
Coal Mines (Fixation of Rate of Wages) Ordinance 1960, Minimum Wages Ordinance,
1961 and Minimum Wages for Unskilled Workers Ordinance 1969
• No wage period should exceed one month (section 4) and wages are to be paid within
seven days after the end of wage period (except for establishments employing more
than 1000 workers, they can pay within 10 days).
• The Parliament specifies the minimum wages for unskilled though the Minimum Wage
for Unskilled Workers Ordinance, 1969 from time to time (currently PKR 6000 per
month: $75).
• The Minimum Wages for Coal Mines Workers are fixed under the Coal Mines (Fixation of
Rate of Wages) Ordinance, 1960 after (non binding) consultation with Mines Welfare
Board.
 Occupational Safety & Health

• As regards the Occupational Safety and Health (OSH), following legislation

exists in Pakistan: Dock Labourers Act 1934, Factories Act 1934, Mines Act
1923 and Workmen’s Compensation Act 1923.
• The OSH laws in Pakistan mainly cover the formal sector manufacturing
industry.
• The Factories Act, 1934, the main law containing OSH provisions is applicable
to manufacturing enterprises employing 10 or more workers.
• In addition the Mines Act 1923 covers the mining sectors. Other sectors are
either not covered under OSH or the coverage is very limited.
 Workers Welfare
• The workers welfare legislation includes Employees Old Age Benefits Act 1976 (with
provisions for old age pension, old age grant, invalidity and widow(er) pension).
• This act is applicable to establishments employing 5 or more workers. Contribution has to be
made both by the employer (5% of minimum wages) and employee (1% of minimum
wages).
• Employees Social Security Ordinance 1965 (applicable like EOAB Act) provides benefit to the
employees in cases of sickness, maternity, employment injury or death.
• The amount in this scheme is contributed only by the employer. The Workmen’s
Compensation Act, 1923 provides for the compensation to be paid by employer to workers
or their legal heirs in cases of death, permanent total disablement, permanent partial
disablement and temporary disablement during working in an establishment.
• The Standing Orders 1968 also provides for compulsory group insurance against natural
death and injury for all the permanent employees in a workplace.
 Conclusion
• Pakistan has more than 70 laws relating to labor issues. The government of Pakistan
is currently in the process of consolidation and rationalization of labor laws and all
these laws are being consolidated in five broad categories of Industrial Relations,
Employment and Service Conditions, Occupational Safety & Health, Human
Resource Development and Labor Welfare & Social Safety Net. A tripartite labor
conference was held at the start of 2009 to discuss the draft laws relating industrial
relations, employment and service conditions and occupational safety and health.
The problem with laws is the weak enforcement mechanisms at the provincial level.
• However the irony is that countries like Pakistan (with good labor rights provisions)
are unable to attract the global capital as shown by the Doing Business Indicators or
Global Competitiveness Index (World Bank, 2008: 126). These markets are called
rigid markets with less flexibility in hiring and firing as well as high severance pay
costs.