LABOUR DISPUTES AND THE INVESTMENT CLIMATE IN BANGLADESH: POLICY DIRECTIONS FOR REFORM

Maruf sarkar:

Recent evidence confirms that the backlog and delays in Bangladesh’s labour courts remain severe, creating significant challenges for both workers and employers. These delays stand in direct tension with the statutory timeline under the Bangladesh Labour Act (2006), which envisages swift disposal of cases, yet in practice, many disputes take far longer to resolve. The labour-court backlog must also be viewed in the context of the wider judicial system, which faces chronic congestion and millions of pending cases. Structural pressures, combined with under-resourced legal aid for workers and occasional misuse of labour dispute processes, mean that many workers do not receive timely relief, while employers, particularly foreign investors—bear substantial legal and operational risks. The system urgently requires reforms to accelerate dispute resolution, balance interests, and restore confidence in labour justice.

One of the most pressing challenges facing Bangladesh’s labour courts is the chronic backlog of cases. As of 2025, nearly 22,000 cases remain pending, with more than half exceeding six months, despite the Bangladesh Labour Act (2006) setting a maximum statutory timeframe of 150 days for resolution (The New Age, 2025). This delay is largely attributable to structural constraints: too few labour courts and judges relative to demand, inadequate resources, and weak enforcement of statutory timelines. The result is that workers seeking redress for wage arrears, reinstatement, or compensation often endure years of uncertainty. These delays undermine the remedial purpose of labour law, which was designed to provide swift justice in disputes where livelihoods are at stake.

Even when workers obtain decisions from the labour courts, many are unable to pursue appeals to the Labour Appellate Tribunal, High Court Division, or Appellate Division due to prohibitive costs. Direct expenses such as lawyer’s fees and travel, combined with indirect costs such as lost wages during hearings, create formidable barriers. While Bangladesh has both government-run and NGO-supported legal aid mechanisms, coverage remains limited and quality inconsistent (The Daily Star, 2025). This patchy access to appellate review forces many litigants to either accept sub-optimal outcomes or abandon claims mid-stream. In practice, this means that the theoretical protections of appellate oversight exist only for a minority of better-resourced workers, leaving the most vulnerable segments with reduced access to justice.

From the perspective of employers and foreign investors, labour law enforcement in Bangladesh can often appear onerous. Commentators in the business press argue that certain provisions are heavily weighted toward workers, leading to procedural burdens and operational risks for employers. Reports have noted instances where foreign investors have become entangled in protracted local litigation, sometimes involving criminal or administrative filings linked to labour disputes, which has delayed projects or disrupted operations (The Business Standard, 2024–2025). For investors, such litigation risk creates a perception of harassment and unpredictability, which may dissuade new investment or encourage capital flight to jurisdictions perceived as more stable and balanced in their approach to labour relations.

The challenge is compounded by occasional misuse of legal processes by both employers and workers. Civil society and media reports have documented cases where broad or imprecise criminal charges were filed against groups of workers in the aftermath of strikes, suggesting an employer-led misuse of the system. Conversely, there are also reports of workers or local actors using litigation or complaints strategically, including claims that appear politically or commercially motivated, which can complicate industrial relations or pressure foreign employers (Business & Human Rights Resource Centre, 2024). While systematic fabrication of cases by employees specifically to target foreign investors is not strongly evidenced in academic literature, the perception persists within the business community. Policymakers must therefore design reforms that discourage abuse on both sides, preventing employers from using the courts to suppress legitimate labour actions, while also safeguarding employers and investors against vexatious or politically motivated claims.

Workers

The prolonged backlog of labour cases in Bangladesh has severe implications for workers who rely on timely legal remedies for their livelihoods. For many workers, these delays translate into the non-payment or partial payment of wages, delayed compensation for workplace injuries, or the non-enforcement of reinstatement orders. In practice, the inability to sustain long litigation given that most workers come from low-income backgrounds, forces some to abandon their claims entirely, effectively denying them justice. Furthermore, the cost of pursuing appeals at the High Court Division or Appellate Division remains prohibitive, which means that workers often cannot access higher judicial scrutiny even when labour court decisions are unfavorable. This lack of appellate access reduces the overall protection of labour rights and leaves vulnerable workers at a disadvantage compared to employers who are better resourced.

For employers and foreign investors, the current labour court inefficiencies create a climate of uncertainty and risk. Disputes that drag on for years disrupt operations, tie up resources, and generate reputational costs regardless of the outcome. Even when employers ultimately prevail, the prolonged litigation process entails significant legal fees and managerial time, creating a high cost of doing business. Additionally, foreign investors often perceive Bangladesh’s labour laws as disproportionately favorable to employees while being harsh toward employers, leading to allegations that some workers exploit the system by filing false or exaggerated claims to pressure investors into settlements. Reports in the financial press have warned that these dynamics increase the perception of regulatory risk and may dissuade prospective foreign direct investment (FDI), diverting capital to other jurisdictions with more predictable dispute resolution mechanisms (The Daily Star, 2025; Dhaka Tribune, 2024). This tension between worker protection objectives and the need for a stable, investor-friendly legal framework underscores the importance of reform.

At a systemic level, the persistent backlog undermines the credibility of Bangladesh’s labour justice system. When statutory timelines are routinely missed, confidence in the rule of law erodes. Prolonged disputes also strain labour relations, often spilling over into informal mechanisms such as strikes, absenteeism, or employer-imposed settlements outside court oversight, outcomes that further destabilize the industrial environment. The lack of efficiency also feeds into the broader national judicial backlog, which stood at over 4.5 million cases across all courts in early 2025 (The Daily Star, 2025). This entrenched congestion diminishes institutional trust in the judiciary, particularly in sensitive areas like labour disputes, where the stakes include not only individual livelihoods but also industrial peace and the country’s international reputation as a reliable investment destination. Unless addressed, the imbalance risks perpetuating both social injustice and economic inefficiency.

A key reason for the persistent labour court backlog in Bangladesh is the shortage of judicial resources. The number of labour courts and judges is too small relative to the volume of disputes being filed each year. Vacancies in judicial benches, coupled with limited specialised training in labour jurisprudence, further reduce the courts’ capacity to handle cases efficiently (The Daily Star, 2025). This mismatch between caseloads and institutional capacity directly fuels long delays and denies litigants the timely remedies envisaged in law.

Equally important is the weak enforcement of statutory deadlines. The absence of a robust monitoring and accountability mechanism means courts face little pressure to comply with the statutory target, and delays are often tolerated as systemic norms rather than exceptions (The New Age, 2025).

Another major factor is the inadequacy of legal aid and procedural support. Although both government and NGO programs provide some assistance, coverage is limited and the quality uneven. Low-income workers, who constitute the majority of labour litigants, often cannot afford the cumulative costs of appeals, including lawyer fees, travel, and lost earnings. This financial barrier prevents many from pursuing cases beyond the first instance and contributes to widespread case abandonment (The Daily Star, 2025).

Finally, the under-utilisation of alternative dispute resolution (ADR) mechanisms exacerbates the problem. Mediation and conciliation are legally available and, when properly applied, can significantly reduce the time and cost of settling disputes. However, their use remains inconsistent and largely ad hoc across sectors. Where ADR processes are institutionalised, resolution times are shortened and outcomes are more durable, yet such practices have not been mainstreamed in the broader labour dispute system. The absence of a systematic ADR culture leaves most disputes funneled into already overburdened courts, worsening the backlog.

In light of the latest data and persistent backlogs, a series of targeted reforms are needed to restore balance, efficiency, and credibility in Bangladesh’s labour justice system.

First, fast-track labour benches should be introduced in the highest-volume jurisdictions such as Dhaka, Chittagong, and Gazipur. These benches would prioritise wage arrears, wrongful termination, and reinstatement claims, the most time-sensitive disputes for workers, while their performance should be monitored through published disposal timelines to ensure accountability.

Second, strengthening legal aid for labour claimants is essential to overcome the widespread affordability barrier. Expanded government funding, streamlined disbursement, and structured partnerships with labour rights NGOs and bar associations could ensure broader coverage. A dedicated “filtering fund” for meritorious appeals would help workers with strong cases pursue higher-level review without prohibitive financial risk, thereby enhancing the quality of appellate jurisprudence.

Third, institutionalising alternative dispute resolution (ADR) could significantly reduce caseload pressure. Pre-filing mediation could be made mandatory, except for wage claims, with strict time limits. Courts should also automatically refer pending cases to conciliation units before trial, with settlements being issued as enforceable judicial certificates. To ensure quality outcomes, mediators and conciliators should receive specialised training in labour law and industrial relations.

Fourth, courts must adopt gatekeeping mechanisms to prevent frivolous claims. Early screening of cases by judges or registrars would help identify claims without prima facie merit. Where litigants pursue demonstrably vexatious actions, cost sanctions or penalties could be applied, though safeguards must be in place to protect genuine claimants. Courts should also have authority to summarily dismiss wholly fabricated claims with minimal hearings, subject to appeal rights.

Fifth, sustained capacity building and digitisation is required. This includes increasing the number of labour courts and specialist judges, and deploying digital innovations such as e-filing, case management systems, electronic summons, and video hearings for non-critical matters. Judicial officers, clerks, and conciliators should be trained in active case management to reduce adjournments and enforce statutory timelines.

Sixth, reforms should enhance data transparency and performance monitoring. Labour courts should publish quarterly and annual statistics on pending cases, including case type, backlog growth or shrinkage, and appeal outcomes. Multi-stakeholder oversight forums, bringing together government agencies, trade unions, business associations, and international partners such as the ILO, could review progress and propose corrective measures based on these metrics.

Finally, investor-specific dispute amelioration pathways should be considered to address the concerns of foreign investors operating in Export Processing Zones (EPZs) and Special Economic Zones (SEZs). A dedicated liaison office or rapid dispute desk could intervene before matters escalate into full litigation. In more complex disputes, a labour investment arbitration cell or special bench with accelerated timelines and binding mediation or arbitration options could be established. At the same time, clear guidelines should prohibit the misuse of labour complaints or criminal filings as leverage in purely commercial disputes.

Bangladesh’s labour court system is falling short of its statutory expectations, and both workers and employers are paying the price. The backlog mirrors the wider strain on the judiciary, with prolonged case resolution leaving vulnerable workers without timely access to wages, reinstatement, or compensation, while employers and foreign investors face costly, drawn-out disputes that undermine confidence in the business environment.

Timely intervention is critical. The solution is not to favour one side over the other, but to recalibrate the system so it is faster, fairer, and more predictable. Targeted reforms, such as designating fast-track labour benches in high-volume jurisdictions, expanding and streamlining legal aid, institutionalising mediation and conciliation, improving judicial screening to weed out frivolous claims, and digitising case management, would bring practice closer to statutory intent. These measures must be paired with transparency, including regular publication of disposal metrics, and safeguards to protect both workers and employers from misuse of the process.

If implemented decisively, these reforms would restore faith in labour justice, ensure timely relief for workers, and protect employers and investors from drawn-out or abusive litigation. A balanced, efficient labour dispute system is not only a matter of social justice but also essential for sustainable industrial relations and continued investment in Bangladesh.

Barrister Shahedul Azam

Advocate, Supreme Court of Bangladesh

Partner, Credence LP

Organizing Secretary, Nationalist Democratic Movement (NDM)

&

Barrister Mohaimiul Hoque

Advocate

Senior Associate, Credence LP