A landmark judgment on labour laws

BY virtue of a double bench judgment of the Sindh High Court (March 27) given on Feb 26, amendments carried out by the government in five labour laws through the Finance Act, 2007, have been nullified.

According to the court, the amendments did not fall within the ambit of a money bill and should have been passed by both the houses of parliament, National Assembly and the Senate.

In pursuance of this judgment, it may not be possible to make recoveries of money paid to workers as increased amount of minimum wage or enhanced amount of monthly contributions paid by organisations to the Employees’ Old-Age Benefits Institution or the recovery of excess amount of pensions paid by the EOBI.

However, the following two amendments, brought in the Companies’ Profits (Workers Participation) Act, 1968, and declared null and void by the judgment, will have significant impact on the affected workers:

(a) Workers employed by or through the contractors are no longer eligible to receive share in the ‘Workers Profit Participation Fund’(WPPF) maintained by companies under the above law and (b) Maximum allocation of each eligible worker’s share in the WPPF will decrease from four times of the minimum wages for unskilled workers to three times of the minimum wages as was the situation prior to the amendment of 2007.

When the amendment to the law to allow share in the WPPF to their contractors’ workers had come in 2007, employers were quite perturbed and confused whether or not to disburse the amount to such workers.

Till then the employers were not bothered as to who the contractors’ employees were and how much salary they were paid.

The only interest they had was that the contractors provided them the stipulated services in accordance with the terms of their contract.

Amendment to the law made the employers feel insecure that providing share in profit would induce the contractors’ workers, especially those having long association with the company, to claim the status of permanent employees.

After initial resistance by some companies, they did not find escape from the law and had no choice but to comply with the legal provision.

Now the situation has reversed unless the government prefers an appeal against the judgment or regularises the law through an act of parliament.

The maximum allocation of each eligible worker’s share in the WPPF, which would have been Rs28,000 this year, will now be Rs21,000, i.e. three times of the minimum wage of Rs7,000 in view of the judgment.