Definition of Factory under the OSHWC Code, 2020

 

Madhu Damodaran

Simpliance COE

Biography

Animay Singh

Simpliance COE

Biography

Introduction

The Code on Occupational Safety, Health and Working Conditions, 2020 subsumes thirteen major central labour enactments. The Factories Act, 1948 is one of the thirteen laws being codified and is currently applicable to factories depending on thresholds set in the corresponding State rule.  Factories are generally divided into those operating with the aid of power and those operating without the aid of power, and it is on that basis that the threshold of number of employees is set.

Definition of Factory

Under the OSHWC Code, 2020, factory means any premises including the precincts thereof-

(i) Where twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on

(ii) Whereon forty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on

The language employed in the clause above is an example of the similarities between the definitions under the Act and the Code, in that it adopts the same condition to create a distinction within the scope of the term factories i.e. the use of power. However, the threshold under the Code has been increased in terms of the number of personnel employed, from ten and twenty for powered and unpowered factories to twenty and forty, respectively.

The definition also clearly states that the above does not include a mobile unit belonging to the armed forces of the Union, railways, running shed, hotel or restaurant. The proviso to the definition states that where any law in force in a State specifies a threshold more or less than that specified in (i) and (ii) as seen above, the same shall prevail until it is amended by the competent legislature.

The explanation under the definition of appropriate Government under Section-2(d) also clearly states that the State Government shall be the appropriate Government in respect of occupational safety, health and working conditions in a factory situated in that State. This indicates that the framework of laws relating to factories will remain similar in terms of Central legislation operating in tandem with rules framed by State Governments.

Similarly, the terms employer and establishment defined under Section-2(u) and Section-2(v) respectively include factories within their scope. With respect to the definition of employer, the first clause States that an employer in relation to an establishment which is a factory means the occupier of the factory. Whereas the definition of establishment includes factories in which ten or more workers are employed notwithstanding the threshold of workers provided elsewhere, for the purpose of Chapter-II under the Act.

Chapter-II of the Act relates to registration; thus, the definition of establishment includes factories only to the extent of provisions relating to registration. This is also why the non obstante clause has been included to override the threshold of employees provided under the definition of factory as registration provisions need to apply regardless of whether a factory operates using power or not.

An analysis of the definition of factory would be incomplete without an understanding of the term occupier. An occupier is defined under Section-2(zs) of the Code as the person who has ultimate control over the affairs of the factory. A proviso follows which deems certain persons as occupiers, for example, in the case of a firm or other association of individuals, any one of the partners or members thereof shall be considered the occupier. Thus, they are automatically considered employers as well due to the aforementioned first clause under the definition of employer under the Code which is similar to the framework provided under the Factories Act, 1948. A significant change brought in is the exclusion of independent directors from the scope of occupier. This is a welcome move as this led to regulatory hassle for independent directors who as a result became wary of joining companies where factories were involved.

The Code has also provided clarity on who shall be considered the principal employer where contract labour is engaged in a factory. Section-2(zz)(ii) makes it clear that the owner or occupier of the factory shall be considered principal employer, and where a person has been named the manager of the factory, they shall also be included. This definition has been adopted from the current Contract Labour (Regulation & Abolition) Act, 1970 and is applicable to the entire OSHWC Code.

Conclusion

From the above it is evident that the codification exercise has made understanding the provisions applicable to factories easier. Moreover, the definitional framework is largely similar to that under the Factories Act, 1948. However, some incremental changes have been brought in to ensure that the definition operates as part of an overarching Code as opposed to a single enactment. For example, the inclusion of factories under the definition of establishment.

Do you think the definition of factory under the Act sufficiently covers establishments where manufacturing processes are carried on? Is there a need for some establishments to be included and others to be excluded from the scope of the definition?

Drop your thoughts in the comments below.