Amendment of Labour Laws in India: The Industrial Relations Code, 2020

On September 28, 2020, three new labour law codes namely, the Industrial Relations Code, 2020, the Occupational Safety, Health and Working Conditions Code, 2020 and the Code on Social Security, 2020 (“Codes“), received the President’s assent. The Government of India is yet to notify the effective date of the Codes. Further, the rules with regards to the Codes are yet to be published. The Codes together with the Code on Wages, 2019 that was passed by the Parliament last year, form part of the Government’s reforms in labour laws in India. This article aims to summarize some of the salient features of and important amendments brought about by the Industrial Relations Code, 2020 (“IR Code“).

The IR Code subsumes and amends the following acts:

• The Industrial Disputes Act, 1947 (“ID Act“);
• The Trade Unions Act, 1926; and
• The Industrial Employment (Standing Orders) Act, 1946.

1. Amendments to the Definitions.

1.1 Definition of “Worker” 1

The definition of a ” worker” has been expanded to include within its ambit working journalists as defined in Section 2(f) of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined Section 2(d) of the Sales Promotion Employees (Conditions of Service) Act, 1976. Further, persons employed in a supervisory capacity and earning less than Rupees Eighteen Thousand Only (Rs. 18,000/-) per month (or any amount as notified by the Central Government) have been brought under the definition.

1.2 Definition of “Industry” 2

Under the IR Code the definition of ” industry” specifically excludes the following:

• institutions owned or managed by organisations wholly or substantially engaged in any charitable, social or philanthropic service; or
• any activity of the appropriate Government relatable to the sovereign functions of the appropriate Government including all the activities carried on by the departments of the Central Government dealing with defence research, atomic energy and space; or
• any domestic service; or
• any other activity as may be notified by the Central Government.

Under the ID Act, several other establishments such as hospitals, educational, scientific institutions etc. which were earlier excluded, have now been withdrawn from this list of exceptions under the definition.

1.3 Definition of “Industrial Dispute” 3

This definition has been expanded to include any dispute or difference between an individual worker and employer connected with, or arising out of any discharge, dismissal, retrenchment or termination of such worker within its ambit.

1.4 Definition of “Strike” 4

This definition has been expanded to include within its ambit, the concerted casual leave on a given day by fifty per cent or more workers employed in an industry.

1.5 Definition of “Employer” 5

The definition of “employer” has been expanded to include:

• in relation to an establishment which is a factory, the occupier of the factory as defined in section 2(n) of the Factories Act, 1948 and, where a person has been named as a manager of the factory under section 7(1)(f) of such act, the person so named;
• in relation to any other establishment, the person who, or the authority which has ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager or managing director, such manager or managing director;
• contractor; and
• legal representative of a deceased employer.

1.6 Definition for “Fixed Term Employment” 6

The IR Code introduces a new provision for “fixed term employment” which means and refers to the engagement of a worker on the basis of a written contract of employment for a fixed period provided that:

• his/her hours of work, wages, allowances and other benefits shall not be less than that of a permanent worker doing the same work or work of similar nature;
• he/she shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him/her even if his/her period of employment does not extend to the qualifying period of employment required in the statute; and
• he/she shall be eligible for gratuity if he/she renders service under the contract for a period of one year.

1. Standing Orders

• The IR Code provides that the provisions with respect to the standing orders shall apply to all industrial establishments with three hundred workers 7 . The employers of such establishments are required to prepare standing orders on the matters listed out in the first schedule to the IR Code (“Schedule“) 8 . The matter listed in the Schedule are given hereinbelow 9 :

• Classification of workers, whether permanent, temporary, apprentices, probationers, badlis or fixed term employment.
• Manner of intimating to workers periods and hours of work, holidays, pay-days and wage rates.
• Shift working.
• Attendance and late coming.
• Conditions of, procedure in applying for, and the authority which may grant leave and holidays.
• Requirement to enter premises by certain gates, and liability to search.
• Closing and reporting of sections of the industrial establishment, temporary stoppages of work and the rights and liabilities of the employer and workers arising therefrom.
• Termination of employment, and the notice thereof to be given by employer and workers.
• Suspension or dismissal for misconduct, and acts or omissions which constitute misconduct.
• Means of redress for workers against unfair treatment or wrongful exactions by the employer or his agents or servants.
• Any other matter which may be specified by the appropriate Government by notification.

• The Central Government is required to make model standing orders relating to conditions of service and other matters incidental thereto or connected therewith 10 . Where an employer adopts a model standing order of the Central Government with respect to matters relevant to the employer’s industrial establishment or undertaking, then such model standing order shall be deemed to have been certified and the employer shall forward the information in this regard to the concerned certifying officer in the manner as may be prescribed 11 .

1. Grievance Redressal Committee 12

The IR Code provides that every establishment employing twenty or more workers is to have one or more grievance redressal committees for resolution of disputes and such committee is to consist of equal number of members representing the employer and the workers chosen in a manner as may be prescribed. Further, the total number of members in such committee shall not exceed ten and there shall be equal representation of women workers in the committee and such representation shall not be less than the proportion of women workers to the total workers in an establishment. The erstwhile law provided for grievance settlement authorities to bet set up in establishments employing a minimum of fifty workers. Further, it did not provide for equal representation of women as specified under the IR Code.

The IR Code provides for the constitution of one or more industrial tribunals and a National Industrial Tribunal to decide industrial disputes. The industrial tribunals shall be set up in place of the existing multiple adjudicating bodies under the ID Act such as the court of inquiry, board of conciliation, labour courts. Every industrial tribunal shall consist of two members to be appointed by the appropriate Government out of whom one shall be a judicial member and the other, an administrative member in place of only one judicial member presently. Further, the Central Government may by notification, constitute one or more National Industrial Tribunals 14 for the adjudication of industrial disputes which, in the opinion of the Central Government, involve questions of national importance or are of such a nature that industrial establishments situated in more than one State are likely to be interested in, or affected by, such disputes 15 . The National Industrial Tribunal shall also consist of two members to be appointed by the Central Government.

No worker can go on a strike without giving notice to the employer within a period of sixty days before striking; or within fourteen days of giving such notice; or before the expiry of the date of strike specified in such notice; or during the pendency of conciliation proceedings; or seven days after the conclusion of conciliation proceedings; or during the pendency of arbitration proceedings; or sixty days after the conclusion of arbitration proceedings; or during any period in which a settlement or award is in operation in respect of any matters covered by the settlement or award 16 . Similarly, no employer of an industrial establishment shall lock-out any of his/her workers unless the conditions mentioned above are met 17 . While the ID Act contained similar provisions in relation to prior notice of strike and lock-out, however, such provisions were only applicable to public utility services.

Under the ID Act, industrial establishments with more than a hundred workers employed were required to obtain prior permission from the appropriate Government to lay-off/retrench workers as well as in cases of closure of an industrial undertaking. The IR Code has waived off this requirement for industrial establishments such as mines, factories and plantations employing not less than three hundred workers or such higher number as may be notified by the Government 18 . However, it is not necessary to obtain prior permission in cases wherein such lay-off is due to shortage of power, natural calamity, and in the case of a mine, such lay-off is due to fire, flood, excess of inflammable gas or explosion 19 . In the event the Government does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted as applied for on the expiration of sixty days and the application shall be deemed to have been disposed off 20 .

1. Appointment of a Negotiating Union/Council 21

The IR Code provides for a single negotiating union/council in an industrial establishment having a registered trade union for negotiating on such matters as may be prescribed. Where only one trade union of workers registered is functioning, then, the employer of such establishment shall, subject to such criteria as may be prescribed, recognise such trade union as the sole negotiating union of the workers. If more than one trade union is functioning, then, the union having fifty-one per cent or more workers shall be recognised as the sole negotiating union of the workers. Further, if more than one trade union of workers are functioning in an industrial establishment, and no such trade union has fifty-one per cent or more of workers, then, a negotiating council having not less than twenty per cent of the total workers of that industrial establishment shall be constituted by the employer.

The IR Code introduces provisions for re-skilling of workers for the first time for those workers who have been laid-off so that they are able to secure employment again. The IR Code states that the fund shall consist of the following:

• The contribution of the employer of an industrial establishment of an amount equal to fifteen days wages last drawn by the worker immediately before the retrenchment, or such other number of days as may be notified by the Central Government, for every retrenched worker in the case of retrenchment only; and

• The contribution from such other sources as may be prescribed by the appropriate Government.

The fund shall be utilised by crediting fifteen days wages last drawn by the retrenched worker to his account, within forty-five days of retrenchment in the manner as may be prescribed.

The Codes will replace various existing labour laws in India. The IR Code appears to be a step in the right direction in terms of providing a more simplified mechanism for dispute resolution. The introduction of a negotiating union/council shall also assist in reaching amicable settlements between employers and workers more rapidly. By increasing the threshold for industries requiring prior permissions under the IR Code, more businesses will have freedom in relation to retrenchment of workers and closure of establishments. However, what remains to be seen is the effect of the IR Code on the workers’ right to strike.

CONCLUSION

To facilitate and amplifythe ease of doing business in India, the Indian Government has taken the initiative to merge about 29 existing labour laws in India and segregate them into four comprehensive categories – wages, social security, occupational safety and health and industrial relations.

The amalgamated Industrial Relations Code, which is one of the new labour codes, subsumes the Industrial Disputes Act, 1947, the Industrial Employment (Standing Orders) Act, 1846, and the Trade Unions Act, 1926. The objective behind the IR Code was to simplify the labour laws in the country and consolidate the same so that foreign investors and the private sector are able to easily comply with the mandatory laws.

The rationale behind the IR Code is to offer a level playing ground to both, employers as well as employees. The IR Code has ensured the setting up of a business-friendly ecosystem where employers have enhanced flexibility for operational decision-making. The IR Code incorporated revised definition for workers to include working journalists and persons involved in supervisory roles earning less than Rs. 18,000/ per month. The definitions of Industry, industrial dispute, strike, employer, and fixed-term employment have been modified to make them more pertinent in the present times.

One of the pivotal focus areas of the new labour laws in India is to streamline the industrial dispute resolution process. For example, with a single negotiating body, multiple stakeholders can be prevented from meditating and intervening in the mediation process to procure their vested interest. Additionally, fixed-term employees or contractual workers have been extended protection under the new laws.

The amended Labour Laws of India have been re-aligned to initiate a re-skill fund for retrenched workers, while the Government has expressed its keenness to ensure that large industrial establishments implement standing orders. Another noticeable shift is that non-compliance will be dealt with strictness with more stringent penalties in place.

The need to reform the Labour Laws has been felt for a long time now. Amidst increasing demands from industry stakeholders clamouring for a change, and given the opening up of the economy, these measures were long-awaited.

In order to ensure compliance with the new labour codes, it is always advisable to contact professional experts on labour laws in the country prior to exploring the avenues of setting up a business venture in India. Obhan & Associates can help you traverse the labour ecosystem with their subject-matter expertise and insight on the same.

1 Section 2(zr) of the IR Code

2 Section 2(p) of the IR Code

3 Section 2(q) of the IR Code

4 Section 2(zk) of the IR Code

5 Section 2(m) of the IR Code

6 Section 2(o) of the IR Code

7 Section 28(1) of the IR Code

8 Section 30(1) of the IR Code

9 First Schedule to the IR Code

10 Section 29(1) of the IR Code

11 Section 30(3) of the IR Code

12 Section 4 of the IR Code

13 Section 44 of the IR Code

14 Section 46 of the IR Code

15 Section 54(1) of the IR Code

16 Section 62 of the IR Code

17 Section 63 of the IR Code

18 Section 77 of the IR Code

19 Section 78(1) of the IR Code

20 Section 78(5) of the IR Code

21 Section 14 of the IR Code

22 Section 83 of the IR Code