October 16, 2021

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Industrial Relations Code 2020 : an overview

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This article is written by Udita Prakash, from UPES, Dehradun. This article talks about the changes made in the labour laws through the new industrial code and the reasons behind making them. 

Table of Contents

The Industrial Relations Code, 2020 is one of the four major Labour Codes that is part of the largest reform scheme of the Central Government in decades. It includes three main core laws that relate to the settlement of labour disputes and collective bargaining agreements, namely:

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

The aforementioned laws were passed for different purposes and objectives; however, their broad area of ​​concern is similar. The Industrial Dispute Act of 1947 was intended to provide workers with a mechanism that would provide relief against layoffs, downsizing and wrongful termination that is against the letter of the law. It also sought to foster healthy labour relations by minimizing the scope for illegal strikes and lockouts and penalizing unfair labour practices. Therefore, it provided a dispute resolution mechanism, as well as restrictions on layoffs, downsizing and lockouts to ensure that collective bargaining can take place in a pleasant environment.

The Trade Unions Act of 1926 aimed to provide workers with better working conditions, better wages, protection against abusive employment, a fair share of company profits, and to this end, allowed workers to realize their right to form an association, as well as collective negotiation. It facilitated the organization of workers unions and allowed greater participation of the workforce in the management of an establishment. The purpose of the Industrial Employment (standing order) Act,1946, is to have it at the plant level and other commercial establishments, to regulate industrial relations. This regulates the conditions of employment, grievances, misconduct etc. of the workers employed in the Industry. 

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

  1. The definition of worker has been broadened and now includes working journalists as defined in Section 2(f) of the Working Journalists and Other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act of 1955 and employees of Sales promotion as defined in Section 2(d) of the Sales Promotion Employees (Terms of Service) Act 1976. Persons employed in a supervisory capacity earning less than Rs. 18,000 per month (or any amount notified by the Central Government) is included in the definition of “worker”.
  2. Fixed-term employment has a legal basis, unlike the current scheme in which video notifications from various state governments were introduced. It allows employers greater flexibility to hire in line with supply and demand. Fixed-term employees are eligible to receive tips on a pro-rata basis if they serve for one year under their respective employment contracts. They are given equality with permanent employees concerning working conditions, wages, allowances, and other benefits.
  3. The applicability threshold of the Labour Disputes (Regulation) Act 1947 under the Labour Relations Bill 2019 had been established in establishments employing 100 or more employees. However, the 2020 Industrial Relations Code has raised this threshold to 300 and has given the “appropriate government” the power to exempt any industrial establishment or class thereof from all or some of the provisions of the Code.
  4. Regarding trade union law, the Code establishes that when there is more than one union in an establishment, the status of the only bargaining union will be granted to the one with 51% of the employees as members. This threshold is a marked decrease from the 75% threshold that was established in the 2019 bill.
  5. There is also a provision for the establishment of the constitution of a bargaining council where there is not a single union that meets the 51% threshold as mentioned above. In such cases, the council is made up of representatives of the various unions as long as they have at least 20% of employees as members.
  6. Concerning layoffs and reductions in personnel, Section 65 applies to industrial establishments that are not included in Chapter X of the Code, which is essentially Chapter VB of the Industrial Dispute Act of 1947. It applies to industrial establishments in which more than fifty workers are working on average per working day during the previous calendar year.
  7. Section 77 of Chapter X applies to industrial establishments in which no less than 300 workers or a greater number of workers than may be specified by the corresponding government, were employed on average per working day in the previous 12 months. Therefore, the establishments included in this provision must obtain prior permission from the Government for layoffs, staff reductions and closure.
  8. The Code forbids strikes and immediate lockouts in all companies and therefore no company can strike contrary to the contract 60 days before the strike or the expiry of a date specified in the strike notification. Strikes are also prohibited while mediation is in progress and within 7 days of the conclusion of such a process. Strikes are also prohibited while proceedings are pending before a labour court or 60 days after they are concluded. The Industrial Disputes Act of 1947 contained similar provisions, but only applied to public utilities.

Trade Union: negotiating union & negotiating council

The Industrial Relations Code 2020 provides a new concept for negotiating trade unions or negotiating councils in an industrial company. According to the stated provision:

  1. In the case of a single union in an industrial company, the employer recognizes that union as the sole bargaining union of the workers.
  2. If there are several unions, the union is recognized by the employer as a bargaining union with 51% of the employees in the industrial company’s model directory.
  3. In the case of several trade unions, none of which fulfil the above-mentioned 51% membership criteria, the employer forms a negotiating council made up of representatives of these registered trade unions, who are supported by at least 20% of the total workforce of the industrial company (1 representative for every 20 %).
  4. Industrial Relations Code 2020 also provides that if the central / state government believes that there is a need for a union or confederation to be recognized as a central / state union, that government may recognize the trade unions alike.

Strikes and lockouts 

  1. Industrial Relations Code 2020 defines “strike” as including the concerted casual vacation on a given day of fifty percent or more of the workers in an industry.
  2. No employee can strike without reporting a strike to the employer 14 days in advance. This notification is valid for a maximum of 60 days.
  3. Likewise, no employer can lockout one of its employees without giving 14 days notice of the lockout. This notification is valid for a maximum of 60 days.
  4. In addition, Industrial Relations Code 2020 prohibits strikes and lockouts: 

(i) during and up to seven days after arbitration; and 

(ii) during and up to sixty days after or before trial in a court or arbitrator 

(iii) during any period in which a settlement or arbitration award is in effect.

  1. Employers are required to report to the relevant government and arbitration officer within five days of receiving/announcing a strike/lockout.
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Standing orders 

  1. Industrial Relations Code 2020 states that the provisions regarding standing orders will apply to the establishments that have had three hundred or more employees on any day in the preceding twelve months or a year.
  2. An employer will be required to prepare a draft of standing orders, based on the Central Government model standing order, within 6 months from the code start date, in consultation with recognized bargaining unions or members of the negotiating council concerning the same and it must be certified by the certifying officer.

Re-skilling funds

Industrial Relations Code 2020 provides for the creation of a “reskilling fund” for employees laid off from the industrial establishment by the employer. The fund will be made up of the following amounts:

  1. Employer contribution, equivalent to 15 days of salary as the last retirement of the worker immediately before being fired.
  2. Contributions from other sources as prescribed.

The fund must be used to pay the last 15 days of salary extracted by the worker, to his account, within 45 days after the worker’s dismissal.

Layoff and retrenchment 

  1. Industrial Relations Code 2020 defines lay-off as the inability of an employer, due to shortage of coal, or power, material or breakdown of machinery, accumulation of material or natural calamity from giving employment to a worker whose name is on the muster roll and has not been retrenched.
  2. Retrenchment refers to the termination of service of a workman for any reason other than disciplinary action. It does not include retirement, non-renewal of contract, or completion of tenure of fixed-term employment or termination on the ground of continued ill-health.
  3. The provisions on lay-off and retrenchment under Industrial Relations Code 2020 do not apply to industrial establishments with less than 50 workers on an average per working day or seasonal industrial establishments.
  4. Employers are required to give to every worker who has completed at least one year of continuous service: 

(i) 50% of basic wages and dearness allowance if he is laid off, and 

(ii) one month’s notice (or equivalent wages) and 15 days’ wages for every year of continuous service for such a period to a worker who has been retrenched.

  1. Further, factories, mines and plantations, which have three hundred or more workers must take prior permission of the appropriate Government before lay-off, retrenchment and closure.

Power of government to reject or modify the tribunal award

  1. Industrial Relations Code 2020 provides that the government may, in certain circumstances, postpone enforcement of arbitral awards made by the tribunals for public reasons that threaten the national economy or social justice.
  2. The Industrial Dispute Act,1947 contained similar provisions. In 2011, the Madras High Court (confirming a 1997 ruling by the Andhra Pradesh High Court) overturned these provisions on constitutional grounds, ruling that the power of the executive branch to refuse or change the execution of an arbitral award ruled it to be the executive branch makes it possible to appeal the decision of the tribunal and thus violates the separation of powers between the executive and judiciary, which is part of the basic structure of the constitution.

Grievance Redressal Mechanism

  1. Industrial Relations Code 2020 states that any industrial establishment employing more than 20 employees must have one or more complaint redressal committees for the resolution of disputes arising from individual complaints.
  2. The committee should be made up of an equal number of members representing employers and workers, and the chair should be elected, alternately, from among employees and workers, on a rotating basis each year.
  3. The number of grievance redress committees cannot exceed 10 and there must be adequate representation of female workers on the committee and must not be less than the proportion of women employed in the industrial establishment.

An industry can grow only when there is peace and harmony in the industrial environment and it is only possible when there is a union in an industry. Having a union in the workplace or any industry is very important. An industry needs to keep its work going so that the needs of the nation can be met and the economy can thrive. If there is no coordination between the employees and the employers, or if there is some conflict between them, this can also affect the economy of the nation. Therefore, it is important to have a union in all workplaces. The union helps to have effective communication between workers and management. They provide special support to workers in a small platform to hold their opinion and raise the issue they face in the workplace. It also ensures that the workers, both men and women who work there, are protected and do not face any kind of malicious or unpleasant activity.

Concluding this, my opinion is that having a Labour Relations Code is important to protect the interest of the worker so that they do not feel neglected and do not have to worry about the workload or the disqualification of their place with another person. Labour law was always important legislation that was not recognized for a long time, although there are laws, they are not enough to protect the interests of workers and employers. Therefore, having a new 2020 Labour Relations Code has helped workers secure their rights and maintain peace in the workplace.

  1. https://www.aparajitha.com/blog/highlights-the-industrial-relations-code-2020/ 
  2. https://www.simpliance.in/blog/the-industrial-relations-code-2020-an-analysis/ 
  3. https://www.simpliance.in/blog/the-industrial-relations-code-2020-an-analysis/ 

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