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    Industrial Relations Code, 2020: A Quick Overview

    December 29, 2022

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    An overview of the Industrial Relations Code of the New Labor Codes in India

    The Government of India is set to implement a set of four labor codes aimed at streamlining and simplifying the labor regulations in the country. This article explores one of the codes, the Industrial Relations Code, and its underlying provisions.   

    What is the Industrial Relations Code of 2020? 

    The Government of India has put together a plan to combine India's 44 labor laws into four codes. The intention is to make India's labor laws easier to understand and facilitate ease of doing business. To streamline and rationalize the existing laws, the Central Government has combined them under four Codes. Four Labor Codes now exist as a codification of the labor Laws. These have been categorized as follows: 

    • The Code on Wages, 2019    
    • The Industrial Relations Code, 2020    
    • The Occupational Safety, Health and Working Conditions Code, 2020    
    • The Code on Social Security, 2020.  

    The Industrial Relations Code, 2020, offers a comprehensive framework to safeguard employees' rights to form unions, reduce hostility between employers and employees, and establish rules for resolving labor disputes. The purpose of the Code is to protect the rights of employers and employees.  

    Collectively, these laws represent a significant overhaul of India's labor laws and are intended to provide greater protection and security to workers, while also promoting the growth and development of the country's economy. 

    Which Laws Will Be Subsumed Under the Industrial Relations Code of 2020? 

    On Nov. 28, 2019, Mr. Santosh Kumar Gangwar, Minister of Labour and Employment, introduced the Industrial Relations Code, 2019, in the Lok Sabha. On Dec. 23, 2019, it was sent to the Standing Committee on Labor.  

     The Code replaces three existing laws:  

    • The Industrial Disputes Act, 1947 
    • The Trade Unions Act, 1926 
    • The Industrial Employment (Standing Orders) Act, 1946

    What Is the Applicability of the Industrial Relations Code of 2020? 

    The Industrial Relations Code is applicable to the organized sector of the economy in India, which includes industries such as manufacturing, mining, electricity, and transportation. It applies to both private and public sector enterprises, as well as to any other establishments or organizations that employ a certain number of workers. The Code is not applicable to the unorganized sector, which includes small businesses and informal sector enterprises that do not have a fixed place of work and do not employ a large number of workers.  

    When Will the Industrial Relations Code Come Into Effect? 

    The Central Government will announce the date that the Code will go into effect and be operational in the Official Gazette. A single date may be set to make the entire Code operative, or various dates may be earmarked for implementing multiple provisions. State Labor Departments have started issuing draft rules concerning the Industrial Relations Code, 2020, passed by the Central Government and will shortly be put into effect. 26 states and Union Territories have so far released proposed regulations on the subject. The Code is intended to update and consolidate the laws governing labor unions, working conditions in industrial establishments, and the speedy resolution of labor disputes.  

    What Are the Key Provisions of the Industrial Relations Code of 2020? 

    The Industrial Relations Code of 2020 is a comprehensive set of laws that covers a wide range of provisions related to the rights and responsibilities of employers and workers. Some of the key provisions covered under the Code on Wages include: 

    1. Definition of “Workers” 

    The term "worker" has been expanded to include employees of sales promotion, working journalists, and other newspaper employees. The term "worker" now includes individuals engaged in supervisory roles who make less than Rs. 18,000 per month (or any sum announced by the Central Government). Their employers may, among other parties, be required to terminate their employment in accordance with the retrenchment rules. 

    2. Definition of “Industry” 

    Regardless of whether an activity is pursued with a profit motive or involves capital investment, the Code defines "industry" as any systemic activity between an employer and employees for the production, supply, or distribution of goods or services with the goal of satisfying human wants or wishes that are not merely spiritual or religious. Organizations that provide charitable, social, or philanthropic services as well as sovereign government functions and domestic service are expressly excluded from the term. Additionally, the Central Government has the authority to exclude any other activity from falling under the definition of "industry." 

    3. Benefits of permanent employees for fixed-term employees 

    Fixed-term employment will have a legal basis, unlike the current system, which depends on notifications from different state governments. It gives employers more freedom to hire people based on supply and demand. Fixed-term employees can get benefits on a pro-rata basis if they have worked for their company for a full year as stated in their contracts. They have the same working conditions, pay, allowances, and other benefits as permanent employees. 

    4. Strikes and lockouts 

    With the existing laws, only employees who work for public utilities can go on strike after the 14th day of their 42-day notice. The Code, on the other hand, says that workers at all industrial establishments must give 60 days' notice before going on strike, and they can't go on strike until 14 days after giving notice. When it comes to lockouts, the same rules have been put in place for employers. Also, the Code expands the definition of "strike" to include a day when 50% or more of the workers take off without notice. In this way, the Code tries to stop workers and employers from going on arbitrary strikes and lockouts by expanding the scope of strikes and requiring advance notice. This is done to make sure that the interests of everyone affected by strikes and lockouts are taken into account. “Strike” has been defined as a concerted casual vacation of more than or equal to 50% of the workers in an industry.   

    Industrial Relations Code 2020 prohibits strikes and lockouts:    

    • During and up to seven days after arbitration   
    • During and up to 60 days after or before trial in a court or arbitrator   
    • During any period in which a settlement or arbitration award is in effect.    

    Employers must report to the relevant government and arbitration officer within five days of receiving/announcing a strike/lockout. 

    5. Grievance Addressal Committee

    Under the Code, a Grievance Redressal Committee (GRC) can have up to 10 members instead of the maximum of 6 members required by the law that is already in place. The GRC also needs to have a good number of women working for it. The time limit for bringing complaints to the GRC has been set at one year. Also, if a grievance isn't resolved by the GRC or a worker is unhappy with the GRC's decision, the process no longer stays within the industrial establishment because the worker can redirect to conciliation procedures. Since a fine of up to INR 100,000 can be given for not following a GRC, employers will need to pay close attention to this. 

    6. Standing Orders 

    Only factories that had 100 or more employees and were covered by the Standing Orders (SO) Act had to make standing orders and get them certified (CSO). Some states had lowered the number of workers needed for this rule to apply to 50. The Code gives a broader definition of what an "industrial establishment" is and raises the number of workers needed for a CSO to apply to at least 300 or more. This will promote uniformity and get rid of the need for a CSO for new, smaller industrial establishments. But industrial establishments that already have CSO will still be governed by it as long as its rules don't contradict the Code. So, Information Technology (IT)/Information Technology-enabled Services (ITeS) units will need CSO unless the Code gives them a specific or conditional exemption. Also, commercial places like offices that are not considered "industrial establishments" by the SO Act may be covered by the Code's broad definition of "industrial establishment" and need to have CSO in place. 

    7. Negotiating Union/Council 

    The Code says that a negotiating union or council is the only group that can talk to the employer of an industrial establishment on matters to be prescribed. A registered trade union that is the only trade union in a workplace or has at least 51% of workers as members will be recognized as the only negotiating body for that workplace. But if there is more than one trade union and no single trade union has such a majority, a negotiating council with at least 20% of workers as members must be made up of representatives from all major trade unions. This council will be the only group that can negotiate. 

    8. Time limit for disciplinary action 

    The Code says that an investigation or inquiry into a worker's wrongdoing that leads to his suspension from work must be finished within 90 days. This will help protect workers' rights.

    9. Closure, lay-off, and retrenchment 

    Under the Code, industrial establishments like factories, mines, and plantations only need permission from the government to close or lay off/retrench their workers if they had 300 or more workers on average per working day in the previous year. Also, the appropriate government has the power to make this limit higher. The current law sets this number at 100 workers, but some states have raised it to 300 workers. This change will not only make the threshold uniform for all the states, but it will also give employers more freedom to run their businesses. 

    10. Reskilling Funds (For Laid-off Employees) 

    The Industrial Relations Code 2020 says that an employer who fires an employee must set up a "reskilling fund" to help the employee learn new skills. The following amounts will go into the fund:  

    a) employer’s contribution which will be an amount equal to 15 days of the laid-off worker’s salary and 

    b) contributions from other sources.  

    This amount shall be paid to the worker’s account within 45 days of the worker’s termination. 

    Summing Up

    The Industrial Relations Code is a significant piece of legislation in India that aims to regulate the relationship between employers and workers in the organized sector of the economy. It covers a wide range of issues, including collective bargaining, the formation and recognition of trade unions, and the settlement of disputes. The provisions of the Code are expected to have a significant impact on the rights and responsibilities of employers and workers, and on the overall functioning of the organized sector of the economy. It is important for all stakeholders to be aware of the provisions of the Code and to comply with them in order to foster a healthy and productive industrial relations environment. 

    The Way Forward for Organizations  

    The New Labor Codes in India represent a significant reform of the country's labor laws. Businesses in India are expected to benefit from the disentanglement of labor regulations and compliances. The four labor codes have been enacted with the aim of consolidating and simplifying the existing labor laws and making them more relevant and effective in the contemporary economic and social context. Once the codes are enacted, organizations will need to ensure they are in compliance with the new laws. It will be crucial to closely monitor the implementation of the codes and that any issues or challenges that arise are addressed in a timely and effective manner. HR leaders in organizations will be expected to spearhead this implementation and while it may seem challenging, staying on top of these reforms doesn’t have to be a hassle for your organization. 

    To learn more about the labor law reforms in India, get insights into their impact on businesses, and explore how Darwinbox can help you implement them seamlessly in your organization, download this comprehensive guide. 

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