Code on Industrial Relations, 2020

On September 23, 2020, the Parliament of India Passed 3 long awaited labour codes, namely:

A. The Industrial Relations Code Bill, 2020

B. The code on Social Security Bill, 2020

C. The Occupational Safety, Health and Working Conditions Code Bill, 2020

The labour code subsequently received the Presidential Assent on September 29, 2020, making a major milestone in ushering reforms in the labour sector.

Salient features of the Labour Code on Industrial Relations

The Labour Code on Industrial Relations contains One Hundred Seven Clauses and Three Schedules.

The One Hundred Seven Clauses are divided into thirteen chapters.

They are as follows:

The Chapter one of the Code talks about the name and the extent of the code. It also explains the definitions used in the code.

Chapter two is called the bi-partite forums. It talks about establishment of Works Committee consisting of representatives of employer and workers engaged in the establishment, maintaining good relations between the employer and workers, forming a grievance redressal committee and its duties,

Chapter three deals with registration of trade unions. It talks about the requirements for registration, the application of registration, registrar of trade unions, Power to call for further information or alternation of name, Provisions to be contained in the Constitution and Rules of the Trade Union, Registration of a Trade Union, Deemed Registration in Certain Cases, Cancellation of Registration, Appeal against Non-Registration or Cancellation of Registration, Registered Office of the Trade Union, Change in Address and other Particulars of the Trade Union, Incorporation of a Registered Trade Union, Certain Acts not to Apply to Registered Trade unions, Objects on Which General Funds of a Trade Union may be spent, Constitution of a separate fund for political purposes, Immunity from Civil Suit in Certain Cases, Criminal Conspiracy in Industrial Disputes, Enforceability of Agreements, Right to Inspect Books of Trade Union, Rights of Minor to Membership of Trade Union, Membership Fee and Mode of Its Collection, Disqualification of Office Bearers of Trade Unions, Adjudication of Disputes of Trade Unions, Proportion of Office Bearers not engaged in the Establishment or Industry, Change of Name, Amalgamation of Trade Unions, Notice of Change of Name or Amalgamation, Effects of Change of Name and of Amalgamation, Dissolution and Annual Returns.

Chapter four talks about standing orders. It includes the circumstances of Non-application of this Chapter in Certain Circumstances. The main constituents of the chapter are about Making of Rules and Model Standing Orders by the Central Government, Preparation of Draft Standing Orders by the Employer and Procedure for Certification, Appeals, Date of operation of standing orders, Register of standing orders, Posting of standing orders, Duration and modification of standing orders, non-admissibility of Oral evidence in contradiction of standing orders, Temporary application of model standing orders, Interpretation, etc. of Standing Orders, the Time Limit for Completing Disciplinary Proceedings and Liability to Pay Subsistence Allowance and the Power to exempt.

Chapter five includes the notice of change to be given to the employees. It talks about the Notice of change, Terms of Employment, etc. to remain unchanged under Certain Circumstances and the Power of Government to exempt.

Chapter six is based on the voluntary reference of disputes to arbitration. It talks about in detail about how to use arbitration as a means to solve disputes.

Chapter seven deals with procedures, powers and duties of authorities. It contains sections about Conciliation officers, Tribunal, Application to the Tribunal, National Tribunals, Disqualifications for the Presiding Officers of Tribunal and National Tribunals, Filling of vacancies, Procedure and Powers of Conciliation Officers, Tribunal and National Tribunals , Powers of Tribunal and National Tribunal to give appropriate relief in case of discharge or dismissal of worker, Duties of conciliation officers, Duties of National Tribunals, Form of report or award, Publication of reports and awards, Commencement of the award, Payment of full wages to worker pending proceedings in higher courts, Persons on whom settlements and awards are binding, Period of operation of settlements and awards, Persons on Whom Awards are Binding, Recovery of Money under an Award, Commencement and conclusion of proceedings and about Certain matters to be kept confidential.

Chapter eight talks about strikes and lockouts. It contains provisions about Prohibition of Strikes and Lockouts, Illegal Strikes and Lockouts and about Prohibition of financial aid to illegal strikes or lock outs.

Chapter nine talks about lay off, retrenchment and closure. It contains Application of the Chapter, Definition of Continuous Service, Rights of Workers Laid off for Compensation etc., Duty of an employer to maintain muster rolls of workers, Workers not entitled for compensation in certain cases, Conditions precedent to retrenchment of workers, Procedure for Retrenchment, Re-employment of Retrenched Worker, Compensation to Workers in Case of Transfer of Establishment, Sixty days’ notice to be given of intention to close down any undertaking and the Compensation to workers in case of closing down of undertakings.

Chapter ten contains special provisions relating to lay off, retrenchment and closure in certain establishments. It talks about Application of this Chapter, Prohibition of lay-off, Conditions precedent to retrenchment of workers and the Procedure for closing down an undertaking.

Chapter eleven talks about the miscellaneous provisions. They are Prohibition of unfair labour practice, Conditions of service, etc., to remain unchanged under certain circumstances during pendency of proceedings, Special provision for adjudication as to whether conditions of service, etc., changed during pendency of proceedings, Power to transfer certain proceedings, Recovery of money due from an employer, Protection of persons, Representation of parties, Power to remove difficulties, Power to exempt, Protection of action taken under the Code, Power to make rules, Power to make regulations, Delegation of powers and the Power to amend Schedules.

Chapter twelve talks about the penalties included in the code. They are explained under section 103. Also included is compounding of offences, Offences by companies and Cognizance of offences.

Chapter thirteen talks about the repeals and savings owing to this code.

Factory-definition:

The 2020 bills raise several thresholds.

The Factories Act, 1948 defines any manufacturing unit as a factory if it employs 10 workers (with use of power) or 20 workers (without use of power)

These thresholds are being raised to 20 and 40 workers, respectively.

The definition of worker will be based on the basis of wages being drawn by him and Worker  or Employees with salary up to Rs 18,000 will fall under the category of worker. Individuals employed in a supervisory capacity drawing less than Rs. 18,000/- per month are brought under the definition of worker.

The definition of worker has been expanded to include working journalists and other Newspaper Employees and sales promotion employees.

Establishment with less 300 workmen can lay-off, retrenched, closed without government approval, earlier this limit was 100 employees. The Appropriate Government has power to exempt any industrial establishment or class thereof from all or any of the provisions under the code.

Definition of “Employee” has been added in the code and the term 'employee' has been used invariably with the term worker. viz. 'employee/worker' or 'employee and worker' with a view to ensure that there is no discrimination in the applicability of labour laws to the employee/worker "employee’’

Definition of “ Employer” has been completely modified under section 2 (m) and as per the new definition employer means :

1. Head of the department

2. Occupier of the factory

3. Manager of the factory under clause (f) of sub-section (1) of sec 7 of the Factories Act.

4. 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;

4. Contractor; and

5. legal representative of a deceased employer;

Definition of “Appropriate Government” has been modified by including the establishments of the contractors, thus appropriate government shall be of the establishment where the contract labour has been deployed.

Definition of wages has been revised:

1. First part includes all salary components express in terms of money are capable of being so expressed like basic salary, all reimbursements, all allowances, all benefits.

2. Second part of the definition provide specific exclusion like:- Bonus payable under any law, Conveyance allowance, House rent allowance, Overtime Allowance, House Accommodation, Supply of light water medical attendance, other amenities/ service excluded by a General or special order of the appropriate government, Commission, contribution to provident fund/pension, Any sum paid to defray special expenses, Gratuity, Retrenchment Compensation, Remuneration payable under any award or settlement between the parties.

3. The Third part of the definition provides that the total excluded components should not exceed 50% of the total remuneration. The third part of the definition provide limit as the definition very clearly specifies the list of exclusions so anything which is paid to the employees other than the exclusion would be covered and within this specific exclusion the limit cannot be more than 50%.

The appropriate government shall set up an reskilling fund and the fund shall consist of contribution by an employer equal to fifteen days wages last drawn by the worker immediately before the Retrenchment. The fund shall be utilised by crediting fifteen days wages last drawn by the worker to his account who is retrenched, within forty-five days of such retrenchment, in such manner as may be prescribed.

Trade union have to give notice of 14 days before going on strike.

The number of members in the Grievance Redressal Committee has been increased from 6 to 10.

Fixed Term Employment:

Now employer can keep Fixed Term Employees (FTE) for specific duration and retrenchment compensation not to be paid. These FTE will be entitled same salary or social security as regular Employee.

Fixed term employees are eligible to receive gratuity on a pro-rata basis if they render service for a period of one year under their respective contract of employment.

They are given parity with permanent employees with respect to working conditions, wages, allowances and other benefits.

Fixed Term Employment has been incorporated, which is major change introduced in the code:

The code provides that the fixed term employee will get all statutory benefits like ESI, EPF, bonus, wages, etc. at par with regular employees who are doing work of same or similar nature.

The termination of the service of a worker as a result of completion of tenure of fixed term employment would not be a retrenchment.

The employee would be eligible for gratuity if he renders service under the contract for a period of one year.

The definition of “industry” has been modified and provides that any systematic activity carried on by cooperation between employer and his workers, whether such workers are employed by such employer directly or by or through any agency including a contractor. The definition has specifically excluded institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic services; sovereign functions; domestic services.

Definition of Industrial Dispute has been modified to include the dispute arising out of discharge, dismissal, retrenchment or termination of such worker.

Metro railway has been included in the definition of railways.

Maximum number of members in the Grievance Redressal Committee has been increased from 6 to 10 in an industrial establishment employing 20 or more workers.

Negotiating union or negotiating council" been inserted in the definition.

A new feature of “Recognition of Negotiating Union” has been introduced. The Code provides for a negotiation union in an industrial establishment, having registered trade unions, for negotiating with the employer.

If there is only one trade union in an industrial establishment, the employer is required to recognise such trade union as the sole negotiating union of the workers.

In case of multiple trade unions, the trade union with support of at least 51% of workers on the muster roll of that establishment will be recognised as the sole negotiating union by the employer.

With regards to the law on trade unions, the code mandates that where there is more than one trade union in an establishment, the status of sole negotiating union will be given to one that has 51% of the employees as its members.

There is also a provision made for the establishment for the constitution of a negotiating council where there is no single union that meets the 51% threshold. In such cases, the council is constituted of representatives from the various unions provided they have at least 20% of employees as its members.

The "Trade Union dispute" has been added, which provides dispute relating to Trade Union arising between two or more Trade Unions or between the members of a Trade Union inter se;

The provisions of Standing Orders on Industrial establishments will be applicable having 300 or more than 300 workers as notified by the appropriate Government. The code provides that provisions of standing orders will apply to establishments with at least 300 workers.

The Code prohibits strikes or lock-outs in any establishment unless a prior notice of 14 days is provided. Similar provisions existed in the Industrial Disputes Act, 1947 for public utility services (such as, railways and airlines). The Code expands these provisions to apply to all industrial establishments. This will impact the ability of workers to strike and employers to lock-out.

An industrial dispute can be voluntarily referred to arbitration by the employer as well as the workers. The parties to the dispute are required to execute a written agreement referring the dispute to an arbitrator.

The worker may approach the Industrial Tribunal for adjudication of the dispute related to dismissal, retrenchment or termination within 45 days after the application for the conciliation of the dispute was made.

Employers of industrial establishments such as mines, factories and plantations with at least 300 workers are mandatorily required to take prior permission of the Central or State Government before lay-off, retrenchment or closure. A fine of INR 1,00,000, which may extend up to INR 10,00,000, is leviable on any person who contravenes this provision.

In case any worker is suspended by the employer pending investigation or inquiry. The amount of subsistence allowance payable at 50% of the wages for the first 90 days of suspension; and at the rate of 75% of such wages for the remaining period of suspension.