The Industrial Relations Code, 2020: An Analysis

 

Madhu Damodaran
Simpliance COE

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Animay Singh
Simpliance COE

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Industrial Relation Code 2020

Introduction

The Industrial Relations Code, 2020 is one of four Labour Codes that forms a part of the Central Government’s largest reform scheme in decades. It subsumes three major Central laws that relate to industrial dispute settlement and collective bargaining arrangements, namely:-

a.     The Industrial Disputes Act, 1947

b.     The Trade Unions Act, 1926

c.     Industrial Employment (Standing Orders) Act, 1946

The above-mentioned laws were passed with differing aims and objectives; however, their broad area of concern is similar. 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 sought to foster healthy industrial relations by minimizing the scope for illegal strikes and lockouts and by penalizing unfair labour practices. Thus, it provided for a dispute settlement mechanism as well as curbs on layoffs, retrenchment, and lockouts to ensure collective bargaining can take place in a congenial environment.

The Trade Unions Act, 1926 aimed to provide workers with better working conditions, better wages, protection from predatory employment, a fair share of the company’s profits and to this end, allowed workers to realize their right to form an association as well as to collectively bargain. It facilitated the organization of workers’ unions and allowed for greater participation of the workforce in the management of an establishment.

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

The objects of these Acts have been retained for the most part with the Industrial Relations Code, 2020 merely consolidating the laws for ease of compliance into a single document. However, certain changes have been brought in with a view to promote ease of doing business, reducing compliance burdens, and modernizing the legal framework surrounding the regulation of industrial relations in India.

Salient Features of the Industrial Relations Code, 2020

The key changes brought in by the Industrial Relations Code, 2020 can be summed up as follows:-

  • The definition of worker has been expanded to include working journalists as defined in Section-2(f) of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined Section-2(d) of the Sales Promotion Employees (Conditions of Service) Act, 1976. Individuals employed in a supervisory capacity drawing less than Rs. 18,000 per month (or any amount as notified by the Central Government) are brought under the definition of ‘worker’.

  • Fixed term employment is given statutory basis as opposed to the current scheme wherein it was introduced vide notifications by multiple State Governments. It allows employers greater flexibility in hiring in consonance with supply and demand. 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.

  • The threshold for applicability of the Industrial Disputes (Standing Orders) Act, 1946 under the 2019 Industrial Relations Bill had been set at establishments employing 100 or more employees. However, the Industrial Relations Code, 2020 has raised this threshold to 300 and has granted the ‘appropriate Government’ power to exempt any industrial establishment or class thereof from all or any of the provisions under the Code.

  • 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 the one that has 51% of the employees as its members. This threshold is marked decrease from the 75% threshold that was set in the 2019 Bill.

  • 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 as mentioned above. In such cases, the council is constituted of representatives from the various unions provided they have at least 20% of employees as its members

  • With regards to layoffs and retrenchment, Section-65 applies to industrial establishments that do not come under Chapter-X of the Code which is essentially Chapter-VB of the Industrial Disputes Act, 1947. It applies to industrial establishments in which more than fifty workers have been employed on average per working day in the preceding calendar year.

  • Section-77 under Chapter-X applies to industrial establishments in which not less than 300 workers or such higher number of workers as may be specified by the appropriate Government, were employed on average per working day in the preceding 12 months. Thus, establishments falling under this provision are required to obtain prior permission of the Government for lay-off, retrenchment and closure.

  • The Code imposes a blanket prohibition on strikes and lock-outs in all industrial establishments without notice and thus no unit can go on strike in breach of contract without giving notice 60 days before the strike or within 14 days of giving such a notice, or before the expiry of any date given in the notice for the strike. Strikes are also prohibited during the pendency of conciliation proceedings as well as within 7 days of the conclusion of such proceedings. Similarly, strikes during the pendency of proceedings before an industrial tribunal or 60 days after their conclusion are prohibited. The Industrial Disputes Act, 1947 contained similar provisions, however they were applicable only to public utility services.

Compliance Requirements

Short TitleThreshold for ApplicabilityRequirement
Works Committee100 or more workersConstitution of Works Committee consisting of representatives of employer and workers
Grievance Redressal
Committee
20 or more workersConstitution of Grievance Redressal Committees for consisting of equal number of members representing employer and workers
Preparation of draft
Standing Orders by
Employer
300 or more workersEmployer must prepare draft Standing Orders within a period of six months from the date of commencement of this Code
Notice of change in
Conditions of Service
300 or more workersEmployers who propose to effect any change in conditions of service applicable to any worker in respect of any matter under the Third Schedule shall affect such change by giving 21 days’ notice to workers
Duty of an employer
to maintain muster rolls
of workers
50 or more workersIt shall be the duty of every employer for the purposes of this Chapter to maintain a muster roll and to provide for making of entries therein by workers who present themselves for work
Contribution to Worker Re-Skilling Fund Contribution of the em-
ployer of an industrial establishment that is equal to fifteen days wages last drawn by the work-er immediately before
retrenchment

Grievance Redressal Mechanisms Under the Code

Conclusion

The introduction of curbs on strikes during the pendency of litigation and alternative dispute resolution mechanisms will definitely ensure industries continue functioning without repeated stoppage of work. Similarly, the introduction of sole negotiating union and negotiating council shall reduce the amount of time taken in reaching amicable settlements with employees. This is because it is very often the case that multiple unions approach employers with different and distinct demands. Thus, leading to negotiations on multiple fronts with stakeholders having diverse interests.

The effect of the Industrial Relations Code, 2020 on the workers’ right to strike remains to be seen. However, it does provide for a more streamlined approach to dispute settlement.  This can be seen in the scheme of authorities set up under the Act, while the bi-partite fora are internal dispute resolution mechanisms, the Conciliation Officers and Industrial Tribunals are external forums.

The Conciliation Officers are given 45 days to resolve a dispute by sending a report and a memorandum of settlement signed by the parties to the appropriate Government. This is subject to the limitation that no conciliation proceedings can be instituted after two years from the date on which the industrial dispute arose. In case any matters are not settled by the Conciliation Officer, an aggrieved party can make an application to the Industrial Tribunal within 90 days from the date of submission of report by the Officer.

The National Industrial Tribunal is the final authority on industrial disputes and the Central Government is thus empowered to refer any dispute to it if the Government is of the opinion that the dispute involves a question of national importance or if it is of such a nature that industrial establishments situated in more than one State are likely to be affected by the dispute.

This simplified scheme of resolution of disputes coupled with the mandatory reference to conciliation will ensure that disputes are settled expeditiously with reduced scope for repeated appeals. Do you think the Industrial Disputes Code, 2020 is a step in the right direction? Is the simplified scheme of dispute resolution under the Act necessary in light of the already overburdened judicial system?

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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1 thought on “The Industrial Relations Code, 2020: An Analysis”

  1. This code is as said at the beginning itself to achieve “ease of doing business” but not “easing of friction between employer and employee/union”.
    1. raised threshold to 300 is going to act against the interests of the working class. Most of the medium and small industries in India employs 50 to 100 or 200 but not 300 and above. Hence, all those employees who are 80% of the organised work force will be left without any statutory protection with this Industrial relations code, 2020. Thereby increase in unemployment, fall of standard of living etc. Hence, the threshold shall be at least 50 if not 20.
    2. sole negotiating union: Targeted 51% of membership leads to repeated number of union elections to elect the Sole Negotiating Union and thereby industrial unrest will prevail.Union which obtains Majority votes in verification elections shall be recognized as sole negotiating union.
    3. negotiating council : Giving an opportunity to participate in negotiation to a union having 20% members will lead to unending and counter demands thereby employer will take advantage of multiplicity of demands against one point. Hence, I propose to limit the number of unions to negotiating council to TWO unions i.e., Sole negotiating union and the next union which have support of employees next to the Sole Negotiating Union. This will give some positive result in establishing the best industrial relations.

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