The Central Government amalgamated the existing labour laws, namely, the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946 ("SO Act"), and the Industrial Disputes Act, 1947 ("ID Act"), under a new legislation enacted as 'the Industrial Relations Code, 2020' ("Code") on September 29, 2020. This Code will come into effect from a date to be notified by the Central Government.
Broadly speaking, the Code seeks to benefit both employers and their workers. It streamlines the dispute resolution mechanism, protects fixed-term workers, requires all large industrial establishments to implement standing orders, creates a re-skilling fund for retrenched workers, and enhances penalties to deter non-compliance. It adopts a business-friendly approach to promote industrial harmony through the prescription of a single negotiating body and greater flexibility to employers to take operational decisions.
This article provides an overview of the key changes introduced by the Code.
New Definition of 'Industry'
Under the Code, 'industry' means any systemic activity between employer and workers for the production, supply, or distribution of goods or services with a view to satisfy human wants or wishes that are not merely spiritual or religious, irrespective of whether the activity is pursued with a profit motive or has capital investment. Institutions run by organizations engaged in charitable, social, or philanthropic service, and sovereign activities of the government and domestic service have been specifically excluded from the definition. Further, the Central Government has been empowered to exclude any other activity from the ambit of 'industry'.
Enhanced Wage Ceiling for Coverage of Supervisory Employees under Workers
The threshold for including supervisory employees within the ambit of "workers" has been enhanced from INR 10,000 to INR 18,000. Thus, going forward, supervisory employees earning monthly wages between INR 10,000 and INR 18,000 will qualify as "workers", and their employers may, amongst others, need to follow the retrenchment requirements to terminate their services.
Strengthening the Grievance Redressal Machinery
Under the Code, a maximum of 10 members is required to constitute a grievance redressal committee ("GRC") as against the maximum of 6 members required under the existing law. The GRC also needs to have adequate representation of women workers. Now, a limitation period of 1 year has been prescribed for presenting grievances to the GRC. Further, if a grievance remains unresolved by the GRC, or a worker is aggrieved by the GRC's decision, the process no longer remains internal to the industrial establishment, as the worker has recourse to conciliation proceedings. Since non-constitution of a GRC is punishable with a fine of up to INR 100,000, the employers will need to take serious note of such compliance.
Increase in Threshold for Standing Orders
Only the industrial establishments defined under the SO Act needed to formulate standing orders and get them certified ("CSO") if they had 100 or more workers. Certain States had reduced this applicability threshold to 50 workers. The Code provides a broader definition of 'industrial establishment' and increases the applicability threshold for CSO to 300 or more workers. This will bring uniformity and remove the CSO requirement for new smaller industrial establishments. However, industrial establishments that have CSO will continue to be governed by the same insofar as the provisions thereof are not inconsistent with the Code. Hence, unless specific or conditional exemption is granted under the Code, Information Technology (IT)/Information Technology-enabled Services (ITeS) units will need to have CSO. Further, commercial establishments, such as offices that do not fall within the purview of 'industrial establishment' for purposes of the SO Act, may get covered by the wide definition of 'industrial establishment' under the Code and need to have CSO in place.
Benefits of Permanent Employees Extended to More Fixed-Term Workers
Currently, only industrial establishments that have, or need to have, CSO are required to provide their fixed-term workers certain benefits available to permanent employees doing same/similar work. Under the Code, fixed-term workers of commercial establishments that need to have CSO, become eligible to fixed-term worker benefits, including gratuity, if they render service for a period of 1 year. Thus, employers engaging fixed-term employees may need to shoulder an additional financial burden going forward.
Deterrence of Arbitrary Strikes and Lock-outs
Currently, only workers of public utility services may go on strike after the 14th day of their 42 days' advance notice of strike. The Code, however, requires workers of all industrial establishments to give 60 days' advance notice of strike and does not permit them to proceed on strike within 14 days of such notice. Similar requirements have been prescribed for employers in relation to lock-outs. Further, the Code expands the definition of "strike" to include concerted or mass casual leave by 50% or more workers on a given day. Thus, by expanding the scope of strikes and imposing a prior notice requirement, the Code seeks to deter workers and employers from indulging in arbitrary strikes and lock-outs, balancing the interests of all parties affected by such strikes and lock-outs.
Single Body to Negotiate with Management
The Code provides for the recognition of a negotiating union/council as the sole negotiating body for negotiating with the employer of the industrial establishment on matters to be prescribed. A registered trade union that is the only trade union in an establishment, or has a membership of a minimum 51% workers, will be recognized as the sole negotiating body of such establishment. However, where there are multiple trade unions and no single trade union commands such majority, a negotiating council needs to be constituted by the representatives of all major trade unions having at least 20% workers as members to function as the sole negotiating body.
Time Limit of Disciplinary Proceedings for Misconduct by Workers
The Code introduces a time limit of 90 days for the completion of an investigation or inquiry into any misconduct by a worker that involves his suspension by the employer. This will protect the interest of workers.
Increase in Threshold for Closure, Lay-off and Retrenchment in Certain Establishments
Under the Code, industrial establishments operating as factories, mines, and plantations need appropriate Government permission for closure of their establishments or lay-off/ retrenchment of their workers only if they, in the previous year, employed 300 or more workers on an average per working day. Further, the appropriate Government is empowered to increase this threshold. Under the existing law, this threshold is 100 workers, and certain States have increased it to 300 workers. This change will not only bring uniformity across all the States but also give greater operational independence to employers, which, in turn, encourages them to hire more workers.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.