Workers’ profit participation law: a long-due relief for workers

One of the main functions of a state is to make laws for its people that could efficaciously protect their rights and address their grievances. It is unfortunate that despite several promises, the current government’s efforts to bring legal reforms have been nothing short of miserable. The reason could be their thin majority in parliament or their current priorities, but there are many areas where the government and opposition could work together to provide relief to the deserving people, such as workers of various companies of Pakistan. The Companies Profits (Workers’ Participation) Act, 1968 (WPPF Act) is one of those laws where the government and opposition could and should forget about their differences and legislate as soon as possible.

The WPPF Act was enacted to provide for participation of workers in the profits of companies. The law ensured welfare of workers, and provided them social security in the shape of a share in the profits of their employer company. The profit-sharing plan gave the employees a share in profits, which was primarily aimed to give them a sense of ownership and greater participation in the company. The term worker defined in the WPPF Act included, mainly, all employees working in a non-management capacity. In effect, five percent of a company’s annual profit was required to be transferred to a fund constituted under the WPPF Act, which was managed by a board of trustees representing workers and management of a company.

The complications in implementation of the WPPF law first started due to some amendments made in the WPPF Act through money bills-the Finance Act, 2006, 2007 and 2008-which were challenged before various courts. It was eventually struck down by the Honourable Supreme Court of Pakistan in the Worker’s Welfare Funds and others versus East Pakistan Chrome Tannery (Pvt) Ltd and others [PLD 2017 Supreme Court 28] for being unconstitutional. It was argued before the court and held by the Honourable Supreme Court that legislative amendments introduced in a non-finance related statute, such as the WPPF Act for raising compensation/contribution, through various finance acts (money bills) is unconstitutional since the special legislative procedure for the passage of ‘money-bills under the Article 73 of the Constitution of the Islamic Republic of Pakistan, 1973 is only applicable to enact legislative amendments in statutes that constitute money-bills i.e. which relate to subject matter that falls within the purview of the Article 73(2)(a) to (g) of the Constitution. Amendments to non-finance related statutes have to be enacted by way of regular legislative procedure as prescribed under the Article 70 of the Constitution, which requires the assent of both houses of parliament.

As the result of the aforesaid judgment of the Honourable Supreme Court of Pakistan, the WPPF Act was restored to its shape as persisted before the Finance Act, 2006, where definition of ‘worker’ as set out in Section 2(f) read with Paragraph 4(a) of the Scheme was as follows:

“2(f). ‘Worker’ in relation to a company means an employee of the company whose average monthly emoluments computed in the manner set forth in the scheme do not exceed five thousand rupees per month, and who has been in the employment of the company for a period of not less than six months.”

The Companies Profits (Workers’ Participation) Act, 1968 is one of those laws where the government and the opposition could and should forget about their differences and legislate as soon as possible

This means that no worker could become eligible, as Rs 5,000 was way less than the minimum wage, Rs 15,000, for an unskilled worker in 2017. Moreover, to date, no proper legislation in this regard is in place to amend the aforesaid provision of the WPPF Act. Hence, the aforesaid judgement of the Supreme Court, on the one hand, rightly struck down the unconstitutional Finance Acts, and on the other, left a serious issue for government to resolve immediately-properly legislate to amend categories of eligible workers. The government, unfortunately, has not done that to date. This, in effect, has created a legal vacuum, which needs serious and instant attention of the federal and provincial legislatures to protect the valuable rights of the poor and hardworking workers living in Pakistan.

The second complication, which although arose in 2010 but was not realised by any province other than Sindh and that too in 2015, is passing of the Constitution (18th Amendment) Act, 2010, and its effect of on the WPPF law. Under the 18th Amendment to the Constitution, the Concurrent Legislative List, which included entry 26 regarding welfare of labour, has been abolished and the power to legislate on entries thereof now vest with the province.

As a consequence, only Sindh has so far taken measures to implement the WPPF law by enacting the Sindh Companies Profits (Workers’ Participation) Act of 2015. The remaining three provinces appear to be least interested to implement the law, including Punjab that took a temporary measure by applying a ‘quick-patch’ in shape of promulgating the Companies Profits (Workers’ Participation) (Amendment) Ordinance 2018 (the Punjab WPPF Ordinance) on June 1, 2018, which lapsed after 90 days.

A bare perusal of the Punjab WPPF Ordinance makes it abundantly clear that little to no importance was given to its text or to make it a permanent legislation. It also appears from the text that the government had no intention to make it a successive legislation, therefore, it only made some cosmetic amendments to the WPPF Act instead of drafting a dedicated legislation on the subject as done by Sindh. So much so, the Punjab WPPF Ordinance was laid before the Provincial Assembly on October 25, 2018; however, it was neither extended nor approved by the Punjab Assembly.

There is no doubt that the Workers’ Profit Participation is an essential piece of legislation for the welfare of poor workers of various companies, and federal and provincial legislatures must immediately enact valid legislations to ensure implementation of the WPPF law in letter and spirit. Although under the 18th Amendment of the Constitution, in absence of a provincial law, the federal law is applicable; however, it is the paramount duty of the provinces to realise its significance and pass valid legislation to secure rights of workers living in the respective province. After the 18th Amendment, the federal legislature may only legislate law for the Islamabad Federal Capital Territory, and the provincial legislatures may legislate for their respective provinces.

The federal legislature has, apparently, not enacted amendments until now to fill the gap created due to striking down of the Finance Acts by the Honourable Supreme Court, and is still unclear as to its position on the subject post-18th Amendment. In absence of a proper law, the industry is also confused due to the aforesaid complications and ambiguities on the implementation of the WPPF law. Managements of companies are uncertain as to which law to follow-the industry federal law that has already become ineffective after the 18th Amendment, or the provincial one, which in majority of provinces is not yet in place or has lapsed.

In addition to these problems, companies have been issued notices by the Federal Workers’ Welfare Board to transfer the leftover money after distribution among workers when there is no clarity as to who is eligible for the profit participation schemes. These issues collectively have resulted in putting a suspension on disbursement of the respective funds to hardworking workers of hundreds of companies across Pakistan.

In view of the aforesaid, the federal and provincial legislatures are under a legal and constitutional obligation to take remedial measures by passing valid legislations for workers and for companies who have a strong will to impart benefit of the fund to their workers. The legislation should also address the issue of pending disbursements that were not made to otherwise eligible workers due to the aforementioned legal vacuum from the date of its inception to the effective date of the legislation.

Additionally, as an instant, efficacious and interim relief, the Honourable Supreme Court of Pakistan may move its own motion in exercise of its Constitutional Jurisdiction, or while deciding a matter pending before it. For example, Civil Petitions No. 1604, 1612, 1715 and 1826 of 2018, filed against the judgment of the Honourable Supreme Court of Pakistan, in the case of Shafiquddin Moinee v. Federation of Pakistan [2018 CLD 1088], provide guidance and clarity to resolve the persisting confusion and legal void created after its judgement ibid reported in PLD 2017 Supreme Court 28. The Honourable Court may pass appropriate orders to deal with the issue of impending disbursements until a valid legislation is passed by the legislature, and it may also issue directions to the governments to pass valid legislation at the earliest.