As a part of the labour reform initiative, the labour ministry has decided to amalgamate 44 labour laws into four codes: (i) code on wages, (ii) code on industrial relations, (iii) code on social security and safety, and (iv) code on health and working conditions.
The Code on Industrial Relations Bill, 2019 (IR Code), which aims to streamline industrial relations and help India improve its ease of doing business index, was introduced in the Lok Sabha by the Minister of Labour and Employment, Mr. Santosh Kumar Gangwar, on November 28, 2019. The Union Cabinet chaired by the Prime Minister, Mr. Narendra Modi, has given its approval for the introduction of the IR Code in the Parliament. The IR Code is the third of four labour codes to receive the approval from the Cabinet. It was subsequently referred to the Standing Committee on December 23, 2019. The report by the Standing Committee is due in three months from the date of referral i.e., by March 2020.
The IR Code seeks to amalgamate, simplify and rationalize the provisions of 3 central enactments relating to industrial relations: (i) the Trade Union Act of 1926; (ii) the Industrial Disputes Act of 1947; and (iii) the Industrial Employment (Standing Orders) Act of 1946 (collectively, the "Enactments"). The Statement of objects and reasons of the IR Code states that amalgamation of the three Enactments would "facilitate the implementation and also remove the multiplicity of definitions and authorities without compromising on the basic concepts of welfare and benefits to workers".
Key Features and Analysis
Under the IR Code, a trade union can be registered if seven or more members of a trade union apply for registration. Trade unions having a membership of at least 10% of the workers or 100 workers, whichever is less, will be registered. The central or state governments are accorded the discretion to recognize a trade union or a federation of trade unions as Central or State Trade Unions respectively.
The IR Code also provides for a negotiation union in an industrial establishment, for carrying out negotiations with the employer. In the event an industrial establishment has only one trade union, the employer is mandated to recognize such trade union as the sole negotiating union of the workers. Where multiple trade unions exist, the trade union with the support of at least 75% of the workers will be recognized as the negotiating union by the central or state government.
The IR Code prohibits employers, workers and trade unions from committing any unfair labour practices, as more particularly set out in Schedule 2 of the IR Code. This Schedule 2, inter alia, includes: (a) restricting workers from forming trade unions, (b) establishing employer sponsored trade union of workers, (c) coercing workers to join trade unions, etc. Further, the definition of "strike" has been amended under the IR Code to include "mass casual leave" within its ambit, and a requirement of providing a 14 days' notice for strikes and lockouts in any establishment has been inserted.
The IR Code mandates every industrial establishment with a minimum of 100 workers to prepare standing orders on certain matters, as more particularly set out in Schedule 1 of the IR Code. The central government is given the onus to prepare model standing orders on such matters basis which, every industrial establishment is required to prepare standing orders for their respective establishment. These matters, inter alia, relate to: (a) classification of workers, (b) manner of providing information to the workers regarding working hours, holidays, pay days and wage rates, (c) termination of employment, (d) suspension for misconduct, (e) grievance redressal mechanism for workers, etc.
Under the IR Code, lay-off is defined as the inability of an employer, due to shortage of coal, power, or breakdown of machinery, from giving employment to a worker. It also provides for the employers to terminate the services of a worker i.e., retrenchment. Employers of industrial establishments such as mines, factories and plantations with at least 100 workers are mandatorily required to take prior permission of the central or state government before lay-off, retrenchment or closure. The central or state government, via issue of a notification, can modify the abovementioned threshold of 100 workers. A fine of INR 1,00,000, which may extend up to INR 10,00,000, is leviable on any person who contravenes this provision.
It has been further clarified that termination of services of a workman on completion of his tenure, in a fixed-term employment, will not be considered as retrenchment. Fixed-term employment is defined to mean engagement of a worker on the basis of a written contract for a fixed period. Such fixed-term employees are entitled to receive all statutory benefits like social security, wages, etc., at par with the regular employees who are engaged in the same or similar nature of work.
Mandatory compensation provisions have also been inserted in the IR Code upon lay-off and/or retrenchment of workers. Every industrial establishment employing 50 to 100 workers is required to: (a) pay 50% of the basic wages and dearness allowance to a worker who has been laid-off; and (b) give one months' notice and wages for such period to a worker who has been retrenched. Any person who contravenes this provision is punishable with a fine of INR 50,000, which may extend up to INR 2,00,000.
Additionally, an employer is required to set up a re-skilling fund for training of retrenched employees. Every employer is required to contribute 15 days of wages, or such other days that may be notified by the central government, to the fund. Further, the retrenched employee is entitled to be paid 15 days' wages from the fund within 45 days of his retrenchment.
The IR Code paves a path for industrial disputes to be voluntarily referred to arbitration by the employer as well as the workers. The parties to the dispute are required to execute a written agreement referring the dispute to an arbitrator. Pursuant to investigations by the arbitrator, the arbitration award is to be submitted by the arbitrator to the government.
Over and above the provisions on referring an industrial dispute for voluntary arbitration, the central or state governments, at their sole discretion, may also appoint conciliation officers to mediate and promote amicable settlement of industrial disputes. The role of these officers is to investigate the dispute and hold conciliation proceedings to arrive at a fair and harmonious settlement of the dispute. In the event the parties are unable to arrive at an acceptable settlement, any party to the dispute can make an application before the Industrial Tribunal.
The IR Code provides for the constitution of Industrial Tribunals for the settlement of industrial disputes. The Industrial Tribunal will comprise of two members: (a) a Judicial Member, who is a High Court Judge or has served as a District Judge or an Additional District Judge for a minimum of 3 years; and (b) an Administrative Member, who has over 20 years of experience in the fields of economics, business, law, and labour relations.
The central government is also empowered to constitute National Industrial Tribunals for settlement of industrial disputes. These National Industrial Tribunals are specifically set up for investigating industrial disputes which: (a) involve questions of national importance; and/or (b) could impact industrial establishments situated in more than one state. Members of the National Industrial Tribunal will include: (a) a Judicial Member, who has been a High Court Judge; and (b) an Administrative Member, who has been a Secretary in the central government.
While the IR Code addresses industry concerns and has been widely welcomed by corporate India, there has also been strong opposition of the IR Code from trade unions and economists cutting across ideological lines.
"Trade Unions believe that the codes are part of the government's move towards massive privatization and flawed economic policies that have already resulted in severe slowdown in the economy."1
The trade unions nationwide have opposed and are still opposing the IR Code primarily because even though the IR Code provides for employers of industrial establishments with at least 100 workers to mandatorily take the prior permission of the central or state government before lay-off, retrenchment or closure, the central or state government have the power to modify the abovementioned threshold of 100 workers by issuing a notification.
The government had earlier proposed to increase the threshold from 100 workers to 300 workers.2 This was shot down vehemently as a result of which, the proposed IR Code includes the provision of amendment of the threshold via a notification. The trade unions fear that the governments can very easily issue a notification reducing the threshold, thereby taking away the rights of workers by disguising it as simplification of labour laws.
The trade unions further say that the bill is 'anti-worker' as it allows employers to hire and fire workers more easily, has no safeguards for workers, makes it harder for workers to negotiate better terms and wages with employers, and makes strike actions more difficult.3
However, statistically, the Indian economy grew at 4.5% in the second quarter of 2019-20, as compared to 7% in the corresponding period of 2018-194. The ease of compliance of labour laws is anticipated to promote setting up of more enterprises, thus acting as a catalyst for creating further employment opportunities in the country.
1. Natasha Nadkar "Trade unions oppose Industrial Relations Code", Centre for Monitoring Indian Economy (November 2019). Available at: https://www.cmie.com/kommon/bin/sr.php?kall=warticle&dt=2019-11-22%2012:45:17&msec=426 [Last accessed on 04-02-2020].
2. Sunil Kumar, "Rising Tide of Labour Reforms in India" [Article], Manupatra (October 2015). Available at: https://www.manupatrafast.com/NewsletterArchives/listing/ILU%20RSP/2015/Oct/Rising%20tide%20of%20Labour%20Reforms%20in%20India.pdf [Last accessed on: 04-02-2020].
3. IndustriALL Global Union, "Indian unions hold nationwide protest against anti-worker labour law reforms" [Article] (August 2019). Available at: http://www.industriall-union.org/indian-unions-hold-nationwide-protest-against-anti-worker-labour-law-reforms [Last accessed on: 04-02-2020].
4. Monthly Economic Report (November 2019), Reference No. 4(8)/Ec. Dn. /2017, Economic Division, Department of Economic Affairs, Ministry of Finance. Available at: https://dea.gov.in/sites/default/files/November_2019_0.pdf [Last accessed on: 23-01-2020].
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