Labour Codes: Industrial Relations Code 2020

[Ed Note: On 23rd September 2020, the Parliament passed the new labour codes namely, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020, and the Code of Social Security, 2020. In 2019, the Ministry on Labour and Employment introduced these codes along with the Code on Wages to codify 29 central labour laws. The three codes subsequently received the Presidential assent on 29th September 2020. In the coming days, we will be publishing explainers on each of these three labour codes. In this post, our reporter, Chitranksha Kumari will look at the first of these Bills – The Industrial Relations Code.]

According to the 2002 Report submitted by the Second National Labour Commission, which was constituted to suggest rationalization of the labour laws and recommend an umbrella legislation for the protection of workers, the existing labour laws were complex and inconsistent. Therefore, it recommended the consolidation of central labor laws into broad categories to ensure uniformity and easy compliance. Here we focus on the Industrial Relations (IR) Code which endeavors to overcome the constraints of the earlier labour laws. It aims at stimulating economic activities and providing flexibility in the recruitment process and thereby making retrenchment easier. The Code combines the features of the 1947 Industrial Disputes Act, the Industrial Employment (Standing Orders) Act of 1946, and the Trade Unions Act, 1926 and thereby replaces these legislations.

Before discussing the IR Code in further detail, here are some key changes that were made to the 2019 Bills and are now introduced in the 2020 Labour Codes are:

  • While the 2019 Labour Bills simply state that central government would be the appropriate government for central public sector undertakings (PSUs), the 2020 bills add that even if the central government loses more than 50% of the holdings in a PSU after the commencement of the bills, it would continue to be the appropriate government.
  • The 2020 Codes insert that in case of any ‘Controlled Industry’ (an industry under the control of the Union according to a central legislation), the appropriate government would also be the Central government, whereas the 2019 Bills only specify the central government to act as appropriate government for certain industries.
  • Under the 2020 Labour Codes, offences that are punishable with imprisonment up to a year or with fine will be compoundable. While for offences punishable with fine, compounding is allowed for 50% of the maximum fine, it is a sum of 75% in case of offences with imprisonment. The 2019 Bills allowed compounding of offences that were not punishable by imprisonment, or imprisonment with fine, up to the sum of 50% of the maximum fine.

Notable Features of the Industrial Relations Code, 2020

Through the IR Code, 2020, the central government has introduced changes in the provisions dealing with the workers’ right to strike, the requirement of standing orders, the procedure in hiring and firing by employers, etc. The Code revises the term ‘industry’ and  defines ‘worker’ to include any person working in any industry to do any manual, skilled or unskilled, technical, operational, clerical or supervisory work, with wages not exceeding ₹18,000. It also introduces the term ‘fixed term employment’, which allows employers to hire workers for a fixed period based on written agreements. Under this provision, the workers are entitled to the same statutory benefits available to permanent workers doing similar work proportionate to their service period. They would also be qualified for gratuity in case their services are rendered for a period of one year, and their termination after the expiry of the contract would not be considered as retrenchment under the Code.

The scope of the IR Code has been expanded to cover all employees from supervisory and managerial to the administrative department that were previously not included under the Industrial Disputes Act. The Code has increased the threshold for the requirement of applying standing orders in industrial establishments from one hundred employees to three hundred employees or more. Similarly, the threshold for seeking prior governmental approval by industrial enterprises for lay-offs, retrenchment, and closure has also been increased. Provisions for the exemptions of any new industrial establishment or a class of such establishment by the appropriate government for a specific period in public interest are also provided under the Code.

TRADE UNIONS

The IR Code provides recognition to trade unions and councils that are registered by the industrial establishments for the purpose of negotiations. In case there are more than one registered trade unions, the union with the membership of 51% or more workers would be considered as the sole negotiating union for that particular establishment. Thus, the Code has reduced the earlier threshold of 75%.  For a trade union to get recognition, it must have the support of at least 10% of the workers or 100 workers that are employed by the industrial establishment. When there is no single union that fulfils the 51% membership criterion, the employer is empowered to constitute a negotiating council consisting of representatives from registered trade unions with the support of a minimum of 20% workers. To avoid political interests taking over the trade unions, the IR Code also requires that in trade unions from unorganized sectors at least half of the office bearers must be actually be employed at the industrial establishment.

RIGHT TO STRIKE

While extending the restrictions on going on strikes from public utility services to all the industrial establishments, the Code introduces new conditions on workers’ right to go on a legal strike. It forbids the exercise of the right to strike without the workers providing prior notice and puts a similar restriction on the employers in all industrial establishments from announcing lock-outs. The Code requires a person to serve a notice within 60 days  before conducting strike or lock-out to the other party and does not allow strikes or lock-outs within 14 days of such notice or before the expiry of the date specified in the notice. Moreover, it states that no strike could take place either during conciliation proceedings or arbitration proceedings or 60 days after the conclusion of such proceedings. It has been argued that by implementing these restrictions, the IR Code makes the participation of workers in legal strikes very difficult and has become a major concern for workers as these provisions are inconsistent with the principles of freedom of association.

SPECIAL PROVISIONS ON LAY-OFFS, RETRENCHMENT, AND CLOSURE

The required threshold for obtaining prior approval from the government in cases of lay-offs, retrenchment, or closure in an industrial establishment has been increased from one hundred workers to three hundred workers under the provisions of the IR Code. It also allows discretion to the government of increasing this limit through proper notification. Furthermore, the Code does not provide for a corresponding increase in the amount of compensation payable to the workers in case of retrenchment or closure. However, this measure of enhancing the threshold number exposes the workers employed in small scale organizations to the risk of loss of livelihood by the arbitrary actions of employers.

MECHANISM FOR INDUSTRIAL DISPUTE RESOLUTION

The IR Code has made certain changes in the provisions for dispute resolution mechanism and the procedure to be followed in cases of industrial disputes. While addressing concerns over individual disputes, the Code requires industrial establishments employing twenty workers or more to constitute Grievance Redressal Committees with equal representatives from both workers and employers. Under the Industrial Disputes Act, only six members were allowed to be a part of such a committee, however, the recent legislation increases this number to ten. The Code also requires the committees to have an adequate representation for women. These individual disputes related to dismissal, retrenchment, or termination of services have to be adjudicated by the Industrial Tribunal 45 days after the application for conciliation has been made by the worker involved. A Conciliation Officer is required to produce a report on the disputed matter within 45 days from the commencement of the proceedings, when no decision can be reached in the proceedings within 90 days from the time of receiving the report from the conciliation officer, the case can be brought into the Industrial Tribunal. Additionally, the Code mandates the establishment of National Industrial Tribunals to decide on disputes that are deemed to be of national importance. The provisions of the Code also introduce Alternate Dispute Resolution by the way of voluntary reference of disputes to arbitration and recognizes settlements taking place both within or outside the conciliation proceedings.

Conclusion

The Industrial Relations Code has introduced many new provisions with the aim to reform and rationalize the labour laws, however at the same time, the legislation raised many concerns over provisions dealing with issues such as carrying out legal strikes, the implications of increasing the threshold for standing orders, and the rules on hiring and firing and as such it has encountered resistance from various stakeholders. Moreover, the Code has also been criticized for introducing various provisions that are favorable to employers but reduce the protection provided to workers in an industrial environment.

Further Readings:

  1. Venkataramanan, The Hindu Explains | What does the new Industrial Relations Code say, and how does it affect the right to strike?, The Hindu (September 27, 2020).
  2. New Labour Codes and Their Loopholes, Economic and Political Weekly (October 3, 2020).
  3. The Industrial Relations Code, 2020, PRS Legislative Research.
  4. Ramapriya Gopalakrishnan, The Industrial Relations Code, 2020: Implications For Workers’ Rights, Livelaw (October 24, 2020).
  5. Aditya Gaggar, Decoding the Industrial Relations Code, 2020, SCC Online (October 25, 2020).
  6. Somesh Jha, Govt plans to implement labour codes on April 1, starts shaping rules, Business Standard (October 15, 2020).
Chitranksha Kumari

Chitranksha is a third-year student at NALSAR University of Law, Hyderabad. Her areas of interest include Human Rights Law and Criminological Psychology, and she aspires to work in these fields in the future. She also has a keen interest in reading and painting.

image sources

  • Labour Laws: Bar and Bench
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