Labour Codes Passed by Parliament: What is Next for Companies?

 

Animay Singh
Simpliance COE

Biography

Madhu Damodaran
Simpliance COE

Biography

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Labour Codes

Introduction

The Parliament pushed through its long-standing reform initiative on Wednesday, with the three Codes- the Code on Social Security, 2020, the Occupational Safety, Health and Working Conditions Code, 2020 and the Industrial Relations Code, 2020 being passed by both houses. Since then, Simpliance has received numerous queries regarding the date when these Codes come into effect, whether the Codes are already law and can be enforced and questions pertaining to the changes that have to be made to their compliance processes.

This Article aims to provide the reader with clarity on the above questions and seeks to address some of the confusion surrounding the same.

Do the Codes have the force of law?

There are four distinct steps for a bill to obtain the force of law, they are as follows:-

      i.  It must be passed by the Lok Sabha

     ii.  It must be passed by the Rajya Sabha

    iii.  It must receive Presidential Assent

    iv.   The law must be brought in force in case it contains an enabling provision

While the first two steps have been complied with, the latter two remain with regards to the three remaining labour codes. While Presidential Assent is a given, with little to no chance of the President rejecting the Bills, each of the three Codes contain enabling provisions that must be complied with.

An enabling provision or clause is one that empowers a particular authority to bring a statute into force. The enabling clauses under the labour codes read as follows:-

“It shall come into force on such date as the Central Government may, by notification appoint; and different dates may be appointed for different provisions of this Code and any reference in any such provision to the commencement of this Code shall be construed as a reference to the coming into force of that provision”

The clause makes it clear that the Central Government must bring about a notification to put the respective Codes into effect. It also states that the Government is empowered to bring in provisions of the Code in parts, meaning that individual provisions can also be brought into force without the entirety of the Code being applicable.

Therefore, as of now the Codes are law from a theoretical perspective as soon as they receive Presidential assent, however, for all practical purposes they only have the force of law from the date specified by the Central Government in a notification that brings the law into effect.

Possible Date of Introduction?

Several questions revolve around when the Government plans to bring these laws into effect. The Code on Wages, 2019 that was passed in August last year still hasn’t been brought into effect, with news reports suggesting that the Government seeks to bring the four Codes into effect simultaneously. The Draft Code on Wages (Central) Rules, 2020 were released on July 10th, 2020 for a period of 45 days to allow for public consultation and opinions. The final Central rules for the Code on Wages have not been released yet, however the period for gathering inputs from stakeholders has lapsed.

A similar procedure is likely to be followed in case of the three other Codes as well, this is because the provisions therein leave a lot of scope for executive rulemaking, without which, compliance and enforcement are difficult. Therefore, any prediction with regards to when the Codes might be brought in must take into account the above requirements with regards to the Rules while ascertaining a tentative date.

Compliance Changes

The major compliance changes that have been brought through the Codes can be summarized as follows:

Code on Social Security

While the provisions relating to the chapters on EPFO, ESIC and Gratuity remain similar for the most part, the biggest change coming through this Code would be the inclusion of gig/platform workers. The Central Government is empowered to enact social security schemes for individuals who fall under the category of gig/platform workers, thus it is important for HR professionals and compliance experts to keep an eye out for the same. Apart from this, the ESI Scheme will apply to certain establishments with 10 or more employees, and to all establishments which carry out hazardous or life-threatening work as notified by the Central Government.

Code on Industrial Relations

The threshold for applicability for factories previously covered by Chapter-VB of The Industrial Disputes Act, 1947 has been increased to establishments employing 300 or more workers. Similarly, the threshold for applicability for establishments previously covered under the Industrial Employment (Standing Orders) Act, 1946 has been increased to establishments employing 300 or more workers.

Code on Occupational Safety, Health and Working Conditions

The most significant change brought in through this Code is the provision for a national license for contract labour. This means that organizations having establishments across different States do not have to obtain multiple licenses, a single all-India license with a period of validity for five years has been introduced. Another major change brought in is the threshold of applicability for contract labour, the provisions under the Code only apply to establishments employing 50 or more contract labour.

Another significant change brought in is the inclusion of inter-state migrant workers under the definition of contract labour, effectively giving them access to the same working conditions and benefits under the Code. The provisions of the Code relating to inter-state migrant workers are applicable to establishments employing 10 or more of such workers.

Other changes under the Code include provision of free annual health check-ups by employers, permission for women to work beyond 7PM and before 6AM and an increase in the threshold of applicability for factories.

Conclusion

The Labour Codes offer significant benefits in terms of ease of doing business and reduction of compliance burden, especially for MSMEs and establishments employing a small number of individuals. However, to provide a clear picture of the compliance requirements under them we would have to analyze the Codes with their corresponding rules. We have already done the same for the Code on Wages in our blog titled ‘Code on Wages: Changes in Compliance and Expected Impact’.

Stay tuned to our blog as we will be providing similar updates for the other three labour codes as well. In the meantime, let us know your thoughts on the three labour codes passed by Parliament, is the scope of delegated legislation under them too broad? What provisions would you like to see incorporated in the Codes or their corresponding rules?

Drop your thoughts in the comments below.

Disclaimer: This blog is meant for informational purposes and discussion only. It contains only general information about legal matters. The information provided is not legal advice and should not be acted upon without seeking proper legal advice from a practicing attorney.
Simpliance makes no representations or warranties in relation to the information on this article.

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6 thoughts on “Labour Codes Passed by Parliament: What is Next for Companies?”

  1. Summary is very helpful . It portrays the gist of the labour reforms aptly
    My only suggestion if you can create blog or separate article for major impact on IT/ITES industry especially retrenchment, lay off and hiring contract labour

  2. What is the further procedure after release of Central Rules?
    State Governments would also be releasing their Rules?

    1. After release of Central Rules, the State Governments can either adopt the Rules in their entirety or modify the same and release it as State Rules.

      Regards
      Animay

  3. What is the impact on the establishment/Factory after release of Central Rules?
    State Governments would also be releasing their Rules?

    1. After release of Central Rules, the State Governments can either adopt the Rules in their entirety or modify the same and release it as State Rules. Until the same is done, it is difficult to predict the exact changes to compliance and their impact on various establishments.

      Regards
      Animay

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