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.
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,
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 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
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
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
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.
- Eshvar Girish and
- Chandan B R Reddy