Archaic labour law returns to haunt Indian IT sector

The software industry in India's technology capital, which has been a beneficiary of benign government neglect, is concerned that the malevolent gaze of arcane rules and regulations may be falling upon it.

Employers in Bangalore, home to some of the world's most prominent software companies, are worried that a law made applicable to IT companies starting this year has the potential to cause them severe headaches at a time the young industry is going through its worst phase.

IT companies have enjoyed exemption from this archaic law - the Industrial Employment (Standing Orders) Act, 1946 - for more than a decade.

"This is a retrograde step. This law belongs to the 19th century and does not take into account the ground realities of a globalised world," said industry veteran TV Mohandas Pai, a former member of Infosys' leadership team who was instrumental in getting the earlier exemption.

"Originally, the exemption was secured to stop harassment from the labour department and the inspector raj."

IT companies worry they will be made to comply with what they believe are complicated and unnecessary procedures, be exposed to 'inspector raj', and end up encouraging union activity in a sector that has been largely free of labour groupings.

The law mandates companies to "define with sufficient precision the conditions of employment" and make these conditions known to employees by posting them "on special boards to be maintained for the purpose at or near the entrance through which the majority of the workmen enter the industrial establishment". Moreover, these so-called "standing orders" must be approved by labour unions or staff representatives.

This, companies fear, could be an invitation of unionisation.

"It will only encourage non-performing employees to cite the law in order to create the scope for a preventable unionised approach. We are part of the IT industry and like every organisation in our industry, we have formulated our own working norms, guidelines and practices which are based on the spirit and purpose of fulfilling more than what the law is meant for," a spokesman for mid-sized IT company Infinite Computer Solutions said.

Exemption from the standing orders was a carrot that the government used to attract investment from Indian and multinational software companies, which now employ more than a million professionals in Bangalore alone. The software industry is the fastest-growing segment of Karnataka's economy and contributes to nearly a quarter of the state's GDP. Software exports from Karnataka make up over a third of total software exports from India and in 2011-12, Karnataka exported Rs 1.3 lakh crore worth of software services.Smaller and mid-sized IT companies are the ones that are beginning to see the effects of the exemption end right now as they are being contacted by the labour department for certification of standing orders. Many of them were not even aware of the changed circumstances.