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Circular No. C – 170                                                                                                                                                                                     Date: -28-11-2016

 

 

Latest Decision of the Supreme Court deciding

various amendments made in the Labour Laws by

 Finanace Act, 2006, 2007 and 2008

 

1-   The Federal Government had adopted an easy course to amend, inter alia, labour laws not being parts of the Money Bill through the Finance Acts of 2006, 2007 and 2008. The Senate has no say on the Finance Bill and in the National Assembly debates take place only on financial proposals of the Bill, and the amendments in the labour laws get automatically passed without discussion/debate on the same along-with the financial matters of the Finance Acts.

 

2-   This controversy was started when a DB bench of Sindh High Court in its decision dated 26-02-2011 in the Const. pet No. D-260 / 2008, Employers Federation of Pakistan & others V/s Fed. Govt. declared the amendments made in Labour laws through Finance Act, 2007 ultra-vires of the provisions of the Constitution.

 

3-   Federal Govt. for years made various amendments by the Finance Acts of 2006, 2007 and 2008. Its details are as under:

 

Amendments made in Eight Labour Laws through the Finance Bill 2006    

                                                                    i.            Workmen’s Compensation Act, 1923.

                                                                  ii.            Factories Act, 1934.

                                                                iii.            Minimum Wages for Unskilled Worker Ordinance, 1969

                                                                iv.            E.O.B. Act, 1976.

                                                                  v.            West Pakistan Industrial & Commercial Employment (Standing Orders) Ordinance, 1968.

                                                                vi.            Company’s Profits (Workers Participation) Act 1968.

                                                              vii.            West Pakistan Shops and Establishment Ordinance, 1969.

                                                            viii.            Workers Welfare Fund Ordinance, 1971.

Amendments made in Five Labour Laws through the Finance Bill 2007   

                                                                    i.            Workmen’s Compensation Act, 1923.

                                                                  ii.            West Pakistan Industrial & Commercial Employment (Standing Orders) Ordinance, 1968.

                                                                iii.            Minimum Wages for Unskilled Worker Ordinance, 1969.

                                                                iv.            Employees Old – Age Benefits Act, 1976.    

                                                                  v.            Companies Profits (Workers Participation) Act 1968.

Amendments made in Five Labour Laws through the Finance Bill, 2008

                                                                    i.            Provincial Employees Social Security Ordinance,1965:

                                                                  ii.            West Pakistan industrial & Commercial Employment (Standing Orders) Ordinance,1968:

                                                                iii.            Employees Old-Age Benefits Act,1976:

                                                                iv.            Workers Welfare Fund Ordinance, 1971:

                                                                  v.            Minimum Wages for Unskilled Worker Ordinance, 1969

 

4-   It may also be noted that the Labour Laws being not part of the Money Bill any amendments in the same would not go to both the houses of the Parliament but amending the same through the Finance Acts deprives the Senate it’s Constitutional right as the Senate has no say on the Money Bill / Finance Act.

 

5-   Thereafter on the basis of the said decision in the Const. pet No. D-260 / 2008, another Const. Petition challenged therein the Finance Act, 2008. In the decision reported at PLJ 2013 Karachi 24, (Soneri Bank Ltd. V/s Fed.  of Pakistan) the DB Bench of the Sindh High Court held that the EOBI contribution is in nature of fee and not a tax and the amendments made in the EOB Act, 1976 by the Finance Act, 2008 were without lawful authority and of no legal effect and further decision of Lahore High Court in  the  judgment  dated  19.8.2011 reported  as East  Pakistan Chrome  Tannery  (Pvt.)  Ltd  Vs.  Federation of Pakistan and others (2011 PTD 2643).

 

6-   Finally  said controversy went to the Supreme Court in about 122 appeals/petitions and three Hon’ble Judges gave Judgment dated 10-11-2016 (Workers Welfare Funds Ministry of Human Resources Development Islamabad and others v/s East Pakistan Chrome Tannery (Pvt.) Ltd. and others). The judgment having far reaching effect on various amendments made by the Federal Govt. through the years by the Finance Acts of 2006, 2007 and 2008. Only some important points decided by the Supreme Court are as under:

 

i.                    Hold that the contributions made to the Workers’ Welfare Fund are not in the nature of a tax but a fee, therefore, amendment made through Finance Acts in the Workers’ Welfare Fund Ordinance, 1971 are illegal and unconstitutional and dismissed 16 Civil Appeals filed by the Workers Welfare Funds Ministry of Human Resources Development Islamabad.

ii.                  Hold that the five  different  labour  laws  amended  by  the Finance  Act  of  2007 including the amendment made to the Employees Old – Age Benefits Act, 1976, Workmen Compensation Act, 1923, Companies Profits (Workers Participation) Act 1968 and West Pakistan Industrial & Commercial Employment (Standing Orders) Ordinance, 1968 are related to the payments  made  by  employers  are  very  specific as opposed to having a generic purpose to meet the State’s expenses and can therefore by no stretch of imagination be referred to as a tax and cannot be amended through Finance Act.

iii.                Lastly hold that the amendments  made by the various Finance Acts    of    2006,    2007    and    2008    pertaining    to    the    subject contributions/payments do   not   relate   to   the   imposition,   abolition, remission,  alteration  or  regulation  of  any tax,  or  any  matter  incidental thereto (tax) and all the amendments in the respective Finance Acts are declared to be unlawful and ultra vires of the Constitution.

7-   No doubt the above decisions would create confusion, problems and controversies which require the provincial Governments (as now labour is the provincial subject by the 18th Amendment of the Constitution) to move fast and take proper legislative steps to correct the situation created by the Federal Govt. through Finance Acts in violation of the Constitution of Pakistan. The courts are bound to give decisions only according to the law and the Constitution.

 

8-   The employers may consult their Labour Laws Consultants to know as to how much impact are directly or indirectly made by various Federal Laws in which several amendments made by the  Federal Govt. through Finance Acts of 2006, 2007 and 2008. It may be important to mention here that new provincial Labour Laws made by any Provincial Governments have no impact by the said decision of the Supreme Court.

 

For M/s S. M. Yaqoob

Industrial Relations Advisers

& Labour Laws Consultants