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Industrial Relations Code: A Step In The Right Direction?

The Government recently notified the Industrial Relations Code, 2020 (code) which seeks to consolidate the Industrial Disputes Act, 1947 (IDA), Trade Unions Act, 1926 (TUA) and Industrial Employment (Standing Orders) Act, 1946 (IEA) respectively. The Code will not only ensure that there is no ambiguity in the interpretation of multiple definitions which existed under the previous regime but will also ease the compliance requirements for businesses. With this background, this article aims to shed light on the impact of the new reforms provided for under the code.

Expanding the scope of certain definitions

The IDA had defined industrial dispute as:
any dispute or difference between employers and employees or between employers and workmen, or between workmen and workmen, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person.

However, this definition has been expanded under the Code to include disputes which may arise out of discharge, dismissal, retrenchment or termination of workers as well. This can be considered a welcome move for the increased protection of workers, thereby imposing checks and balances on the employer in case they resort to arbitrary actions towards the workers.

The term worker has been used to substitute workman which was used under the IDA and has also brought in certain changes such as excluding an apprentice from the definition of worker, but including sales promotion employees and working journalists under its ambit. While the inclusion of sales promotion employees and working journalists was much needed, apprentices have been excluded from the code since they are governed under a separate legislation i.e., Apprentices Act, 1961.

The Code has defined an employee, which was absent in the IDA. It has been defined to include persons doing managerial, clerical, supervisory and technical work, thereby covering a larger pool of persons engaged by industrial establishments. Broadening the said term indicates the intent of the government to protect workers involved in these areas as well.

The definition of Industry has not categorically excluded hospitals, agricultural operations, educational institutions and even those places run by clubs, individuals or body of individuals, employing less than 10 people, unlike the IDA. Therefore, one might assume that they are deemed to be included and it is to be seen how this would pan out in the near future. The authors contend that cases of litigation may arise since there is no express inclusion or exclusion of such bodies under the definition of Industry.

The definition of wages has been restricted to basic pay, dearness allowance and retaining allowance, if any, and excludes value of house accommodation, travelling allowance and value of house accommodation, among others. However, given the amount of migration within the country in pursuance of employment opportunities, value of house accommodation and travelling allowance must also be taken into account.

Hence, exclusion of value of house accommodation and travel allowance is disadvantageous to various inter-state migrants and even employees in formal establishments. However, there is a caveat to this. If any of the various cash flows from the employer to employee such as house rent allowance, travel allowance etc, exceeds more than half the remuneration, then it would fall under the purview of wages as provided for under the Code.

Social security benefits

The Code requires the workers in the unorganized sector to give their Aadhaar number in order to derive social security benefits or to avail services from a career centre. However, the Supreme Court in the case of Justice K.S. Puttaswamy (Retd) v Union of India, had ruled that Aadhaar number is mandatory only for the expenditures on services incurred from the Consolidated Fund of India. While the said mandate goes against this judgement, it is pertinent to note that the absence of such a requirement can lead to the misuse of this provision. The mandate of providing Aadhaar number is necessary to verify the eligibility of the workers in accordance with the said provision and extend the social security benefits to them accordingly.

Standing Orders

Standing orders have been made mandatory only for industrial establishments with 300 or more workers under the code, as opposed to the 100 or more workers provided for in the Industrial Relations Bill, 2019 (2019 bill) and the Industrial Employment (Standing Orders) Act, 1946. Further, the 2019 bill provided for a clause wherein the Central Government could make standing orders for industrial establishments with less than 100 workers. However, such a provision is absent in the code. Thus, empowering the Central Government in this regard would be ideal in order to avoid arbitrary 'hire and fire' practices by industrial establishments.

Constitution of Tribunals

The code provides for the constitution of Industrial Tribunals and a National Industrial Tribunal to adjudicate disputes which may arise in the labour industry. While Section 55 of the Code empowers the tribunal to pass an award enforceable after 30 days, it also provides the central government (CG) to defer the enforcement of an award on the grounds of being against national economy or social justice.

While it can be contended that the said provision flouts the principle of separation of powers, it is essential to understand that this enables the CG only to intervene under certain circumstances as prescribed by the code. Hence, such a provision will not affect the judicial authority of the tribunals in resolving other important disputes that may arise. Further, if a worker is aggrieved by the order of the CG, he can challenge the said order before the Supreme Court or the High Court through the means of a writ petition as provided for under the Constitution of India.

Negotiating Union and Council

As per this code, when there is more than one trade union in the establishment, the Trade Union with 51% of the workers as its members will be recognized as the sole negotiation union. This Union shall be authorized solely to bargain with the employer and reach an agreement. In cases where none of the trade unions have 51% membership of the workers, then a Negotiating Council shall be set up by the employer.

Such a council should have at least 20% workers as its members and 1 representative for such 20% worker membership. However, since the Negotiating Council would be constituted by the Employer, this entails a conflict of interest as the Council is then supposed to negotiate with the employer himself. This provision must be tweaked by the government to avoid any discrepancies during the negotiation process.

Grievance Redressal Committee and Works Committee
While a Grievance Redressal Committee (GRC) is constituted for an establishment with 20 or more workers, a Works Committee (WC) is envisioned for an establishment with 100 or more workers. While they are broadly similar, they differ in certain aspects. One such aspect is that there is a compulsory and proportional representation of women envisioned in the GRC, which is absent in a WC. The authors contend that proportional representation of women must be made compulsory in WC as well in order to avoid gender inequality and to address the issues faced by woman workers at establishments in an efficient manner.

Provisions relating to strike

The code mandates the workers of all establishments to give a prior notice of 60 days to the employers before going on a strike. Further, the workers are prohibited from striking within fourteen days of such notice. The code also prohibits them from going on a strike upto a period of seven days even after the conciliation proceeding is concluded. Further, it has prohibited strikes during and upto the period of 60 days after the proceedings are concluded before the tribunal.

The same mandates have been imposed on the employers with respect to declaration of lockouts as well. While such mandates ensure that the proceedings are conducted in a hassle free manner, clarifications regarding the prohibition of strikes or lockouts even after the conclusion of the proceedings must be provided by the government.

Protectionist measures for workers

Under the IDA, the maximum penalties pertaining to unfair labour practices committed by workers, employers, and trade unions were a term of imprisonment which may extend to six months or fines which may extend to INR 5,000 or both. However, under the Code, if any employer commits any of the unfair labour practices specified in schedule 2 of the code, then he shall be punishable with a fine of INR 10,000 which may extend to INR 2,00,000.

The code has imposed high penalties for other contraventions as well. For instance, if the employer contravenes the provisions of section 67, Section 70, section 73 or section 75, then, he shall be punishable with a fine of INR 50,000 which may extend to INR 2,00,000. The inclusion of such provisions in the code signifies the intent of the government to keep the interests of the workers at the helm of the code. In light of the same, the penalties have been increased substantially to protect the interests of workers. However, whether this would serve as a deterrent against unfair labour practices is yet to be seen.

While India's aspiration to rank higher in the ease of doing business is genuine, the Code has taken necessary steps in this regard with respect to certain issues which existed under the previous regime. However, the Code has taken a back seat in relation to certain reforms which need to be extensively deliberated upon by the government. Hence, whether this code will achieve what India has hoped for in terms of ease of doing business and providing a better work environment for labourers remains to be seen.

Written By:
  1. Eshvar Girish and
  2. Chandan B R Reddy

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