The Industrial Relations Code, 2020

Introduction

The Industrial Relations Code, 2020 is one of four Labour Codes included in the Central Government’s largest reform scheme in decades. It incorporates three major Central laws pertaining to industrial dispute resolution and collective bargaining arrangements, namely:

1. The Industrial Disputes Act, 1947
2. The Trade Unions Act, 1926
3. Industrial Employment (Standing Orders) Act, 1946

The Industrial Disputes Act, 1947 aimed to provide workers with a mechanism that gives them relief against layoffs, retrenchment, and wrongful dismissal that is against the letter of the law. It also aimed to promote good labor relations by limiting the scope for illegal strikes and lockouts and penalizing unfair labor practices. As a result, it included a dispute resolution mechanism as well as restrictions on layoffs, retrenchment, and lockouts to ensure that collective bargaining could take place in a friendly environment.

The Trade Unions Act, 1926 aimed to provide workers with better working conditions, higher wages, protection from predatory employment, and a fair share of the company’s profits, and to that end, it granted workers the right to form an association and bargain collectively.

The Industrial Employment (Standing Orders) Act, 1946 aimed at providing standardized terms and conditions of work to all workmen in a particular establishment. As a result, the practice of having discriminatory employment contracts was abolished, and employees were made aware of their rights. It promoted industrial peace and harmony by ensuring fair labor practices for employers.

Scope and Applicability of the Code

The Industrial Relations Code, 2020 is intended to consolidate and amend the laws governing Trade Unions, working conditions in Industrial Establishments, and the swift resolution of industrial disputes.

The code regulates the subsequent areas:

1. Registration of Trade Union
2. Cancellation of Trade Union
3. Alteration in Name of Trade Union
4. Formation of Work Committee
5. Incorporation of a Registered Trade Union
6. Recognition of Negotiating Union
7. Preparation of Standing Order
8. Register of Standing Order
9. Constitution of Industrial Tribunal
10. Illegal Strikes and Lock-outs
11. Procedure for Retrenchment and Re-employment of Retrenched Worker
12. Compensation to Workers in case of Transfer of Establishment
13. Prohibition of Lay-off
14. Closure of an Industrial Establishment

Importance

1. The Code is intended to protect employers’ and employees’ rights by facilitating simple labor reforms and making doing business easier.
2. The object of the Code is to realize industrial peace and harmony as the ultimate pursuit in resolving industrial disputes as well as to advance industry progress by fostering harmony and cordial relationships between employers and workers.

Analysis

1. The definition of worker has been expanded as it now includes Working Journalists {defined in Section-2(f) of the Working Journalists and other Newspaper Employees and Miscellaneous Provisions Act, 1955} and Sales Promotion Employees {defined Section-2(d) of the Sales Promotion Employees Act, 1976}. Furthermore, individuals employed in a supervisory capacity and earning less than Rs. 18,000 per month (or any amount as notified by the Central Government) are classified as “worker”.
2. In contrast to the current scheme, fixed-term employment is provided on a statutory basis. Fixed-term employees are eligible for pro-rata gratuity if they provide service for a year under their respective contract of employment. They are treated the same as permanent employees in terms of working conditions, wages, allowances, and other benefits.
3. Section-77 under Chapter-X applies to industrial establishments in which not less than 300 workers or such a higher number of workers as may be specified by the appropriate Government, were employed on average per working day in the preceding 12 months. As a result, establishments covered by this provision must obtain prior permission from the government before laying off, retrenching, or closing.

Comparative Analysis {Old vs. New (Amended) Provisions}

Impact on Labor Industry

Following are some of the positive impacts that happened after the enactment of the Industrial Relations Code, 2020:

1. Enhanced Wage Ceiling: The threshold for classifying supervisory employees as “workers” has been raised from INR 10,000 to INR 18,000. “Thus, in the future, supervisory employees earning between INR 10,000 and INR 18,000 per month will be classified as “workers,” and their employers may, among other things, be required to comply with the retrenchment requirements to terminate their services.
2. Strengthening the Grievance Redressal Machinery: Under the Code, a maximum of 10 members is required to constitute a grievance redressal committee (“GRC“) as against the maximum of 6 members required under the existing law. The GRC also needs to have adequate representation of women workers. A one-year limitation period has now been established for filing grievances with the GRC. Furthermore, if a grievance is not resolved by the GRC, or if a worker is dissatisfied with the GRC’s decision, the process is no longer internal to the industrial establishment, as the worker can seek conciliation. Since non-constitution of a GRC is punishable with a fine of up to INR 100,000, the employers will need to take serious note of such compliance.
3. Time Limit of Disciplinary Proceedings for Misconduct by Workers: The Code establishes a 90-day deadline for the completion of an investigation or inquiry into any misconduct by a worker that results in his suspension by the employer. This will protect the interest of workers.

Conclusion

The general provisions for continuous service, lay-offs, retrenchment, and notice before business closure remain largely unchanged in the new Code from the Industrial Disputes Act of 1947. The new Code, on the other hand, is a game-changer in that it allows employers more flexibility in hiring and firing by appointing fixed-term workers. At the same time, the new Code attempts to balance the scales by extending all statutory benefits, including gratuity, to fixed-term employees who work for more than a year.

Another much-needed initiative in the new Code is the establishment of a worker’s reskilling fund for retrenched workers, with contributions from both employers and the appropriate government.

While the new Code gives businesses a breather by raising the threshold for Standing Orders and taking some commendable initiatives on the dispute resolution front, the major provisions pertaining to layoffs, lockouts, and retrenchment (outside of fixed-term workers) remain largely unchanged and thus continue to be heavily regulated. Given the largely bleak outlook for the economy in the near future and the recent loss of several large investment opportunities, I fear that this may not be enough and that more sacrifices may be required for the revival of the badly hit Indian industry and to ensure that it can compete competitively with more favorably placed economies for a larger piece of the global trade pie.