This article is authored by Akash Krishnan, a law student from ICFAI Law School, Hyderabad. It discusses in detail the provisions of the four new labour codes and the issues thereunder.
The Indian labour law system has been identified as one of the most complex labour systems in the world because it is overflooded with numerous regulations and compliances. This complex system includes more than 100 state laws and 40 central laws which have several additional regulations and compliances annexed to it.
To tackle this issue and form a uniform labour law regime, the Central Government enacted four new labour codes in 2019 and 2020. The enactment of these labour codes will thereby simplify and modernise the existing labour law regime in the country. These labour codes intend to consolidate 29 existing labour law legislations in India and regulate four main areas of the labour law regime, i.e., wages, industrial relations, social security and occupational health, safety and working conditions.
Four Modern labour codes
The Central Government in 2019 and 2020, enacted four new labour codes. These labour codes have been discussed in brief below:
The Code on Wages, 2019
The Code on Wages, 2019 was the first code that was enacted by the Labour Ministry and this marked the emergence of the modern-day labour reforms in India. The Code has compiled provisions regarding minimum wages, payment of wages, payment of bonus, payment of dues etc.
The Industrial Relation Code, 2020
The Industrial Relations Code, 2020 contains provisions regarding the regulation of trade unions, passing of standing orders and provides for a mechanism for settlement of disputes arising at the industrial establishments.
The Occupational Safety, Health, and Working Conditions Code, 2020
The Occupational Safety, Health and Working Conditions Code, 2020 contains provisions regarding registration of certain establishments, maintenance of health, safety and proper working conditions at the establishment, hours of work, leaves etc.
The Code on Social Security, 2020
The Code on Social Security, 2020 contains provisions regarding social security organisation, employees provident fund, employees state insurance corporation, gratuity, maternity benefits etc.
Issues with new labour codes
Common issues in the four labour codes
Definition of ‘appropriate government’
The new Labour Codes do not provide clarity over the jurisdiction of the appropriate government. The definitions vary from Code to Code. Some codes state that the ‘appropriate government’ will be the Central Government for public sector undertakings (PSU) only if the Central Government has 50% or more shareholding in the PSU. On the other hand, under some codes, the Central Government will still be the appropriate government if it’s holding in PSU is less than 50%. The issue herein is that how can the Central Government be empowered to take decisions by acting as the ‘appropriate government’ if it does not have the controlling and managing power over a PSU, i.e., a stake of less than 50%.
Government Intervention in allowing exemptions to establishments
The Industrial Relation Code allows for the exemption of new industrial establishments or any class of establishments from any or all of its provisions if the same is deemed necessary by the State or Central Government in the public interest. Thus, giving such a wide power to the State and Central Government can result in a heavy intervention of government authorities in the functioning of an industrial establishment and thereby may affect the work culture and output percentage of that establishment.
Labour Code does not cover all types of workers
The application of the new labour codes is not at par with the previous labour codes. The new labour codes fail to cover certain employers. The Industrial Relation Code applies to the establishment with a different threshold for lay-off, retrenchment, and other standing orders, whereas the Occupational Safety Code covers an establishment that has 10-20 employed workers. Also, both codes allow the government to exempt certain establishments which brings forth the issue as to which establishment is covered and up to what extent. When a threshold is mentioned to recognise an industrial establishment, several establishments try to avoid maintaining the threshold to escape labour compliances. It has been argued that the application of labour laws based on the number of employees is desirable to reduce the compliance burden on infant industries and to promote their economic growth.
Key issues under the Code on Wages
Division according to areas
The Code on Wages empowers the Central Government to divide the workforce into three different categories, i.e, metropolitan, semi- metropolitan, and rural. This will result in confusion and will complicate the process of classification as previously available data is categorised in two parts only, i.e., urban and rural areas.
Unwanted technical committee
The Code on Wages empowers the Central Government to categorise employees into 4 categories, i.e., unskilled, semi-skilled, skilled, and highly skilled. This categorisation is to be made on the recommendation of the technical committee. However, the provisions of the Code already define the essential qualification required for the classification as unskilled, semi-skilled, skilled, and highly skilled. Thus, the role of the technical committee in ascertaining something that is pre-determined can be termed as unsound and illogical.
Increase in work Hours
The Code on Wages has significantly increased the number of working hours from 8 hours to 12 hours. This provision of the Code is against the standard practice of 8 hours and therefore is a complete violation of the rules laid down by the International Labour Organisation under the Hours of Work (Industry) Convention, 1919. This Convention limits working hours to 48 hours per week and 8 hours per day. This provision can easily be exploited by the employers and they can increase the work timings and the work shifts.
Key issues under the Industrial Relations Code, 2020
Process of strike and lock-outs
The Industrial Relation Code, 2020 has complicated the process to perform strikes and lock-outs. The IRC 2020 has mandated a 60-days prior notice to the performance of a strike or a lockout. In other words, no strike or lockout can be performed without giving 60 days of prior notice. In case conciliation proceedings regarding the dispute are pending before the proceedings, a 14-days prior notice is to be given. Therefore, this complicated and time-consuming process can directly affect the credibility and effectiveness of strikes or lock-outs because, by the time the employees can perform a strike, the essence/reason behind it is lost. Also, the employer may take measures to ensure the failure of such strikes or lock-outs.
Award of the Tribunal
The IRC 2020 empowers the Central Government to defer from the award given by the tribunal on the grounds of public interest, impact on the nation’s economy and social justice. This provision can be misused by the Government in cases wherein the Government itself is a party to the dispute. This also raises the concern over the separation of power between the executive and judiciary.
Restricting the formation of Negotiation Council
The IRC 2020, introduced the ‘Sole Negotiating Union’ which allows only those trade unions to negotiate with the employer that has more than 51% of the employees of the establishment as its members. In case registered trade unions are unable to fulfil these criteria then a negotiation council needs to be formed by a trade union that has more than 20% of the employees of the establishment as its members. The issue herein is that the Code does not allow employees to form their own negotiation councils irrespective of whether they are part of a trade union or not. Also, it fails to consider situations wherein multiple trade unions could have the jurisdiction to form negotiation councils due to being represented by 20% or more of the workforce of the same establishment.
The exploitation of fixed-term employment
The IRC 2020 introduced provisions for fixed-term employment, i.e., contractual relationships between the employer and the employee, for employing a worker for a fixed duration. The main issue that arises here is that an employee who is not a permanent employee may face the challenge of job insecurity as the power to renew the contract is with the employer. So, to continue with the contract, an employee will be hesitant in raising issues related to working conditions and unfair work practices by the employer because their future in the establishment depends on the whim and fancy of the employer.
Key issues with the Code on Social Security, 2020
Recommendations of the 2nd National Commission on Labour, 2002
The main purpose of the Code on Social Security is to simplify and consolidate the existing laws in line with the Recommendations of the 2nd National Commission on Labour. However, it is pertinent to note that the new Code was reluctant in implementing these recommendations.
The NCL recommendations state that the social security system should apply to all establishments irrespective of size but the new Code has introduced thresholds for the applicability of social security schemes based on the size of the establishment. The Code makes the benefits of pension and gratuity mandatory for those establishments that have a specific threshold of 10-20 employees. The Code overlooked those establishments that have less than 10 employees or employees associated with the unorganized sector. The Periodic Labour Force Survey Report (2018-19) indicates that 70% of the regular wage/salaried employees in the non-agricultural sector did not have a written contract, and 52% did not have any social security benefit.
The NCL recommendations also included the removal of the wage ceiling limit. But the Code has failed to do so. It continues to differentiate employees based on the different wages paid to different categories of employees within the same establishment.
Schemes for ‘gig workers’ and ‘platform workers’
The Social Security Code introduces the definition of ‘gig worker’ and ‘platform worker’. The Code differentiated various kinds of workers including gig workers, platform workers, unorganized workers, and self-employed workers. The Code lays down different schemes for different kinds of workers but has failed to provide specific schemes for these kinds of workers.
Gratuity for fixed-term employees
The Code provides for the payment of gratuity to the employees who have been employed for a continuous period of five years or more. However, this period will not apply if the contract term of a fixed-term worker expires. However, the Industrial Relation Code provides that an employee is eligible for gratuity if he has completed one year of employment with the employer. It can be seen that both the Codes have different eligibility criteria for gratuity. Therefore, gratuity for a fixed-term worker is not clear and there is a need for uniform rules to be in place.
Issues with the Code on Occupational Safety, Health and Working Conditions, 2020
Special provisions for specific establishments
Provisions for regulating and maintaining the specific establishments are absent in the Code. The health and safety measures should be made applicable to all establishments. But there are certain categories of hazardous establishments to which the health and safety measures under the Code are not extended to. The Code needs to include special provisions for such establishments so as to improve the efficiency of the Code in the long run.
Bar on the jurisdiction of civil courts
The Code bars employers and employees from exercising the jurisdiction of civil courts for settlement of disputes. In case of a dispute, the parties have to present their case before the Inspector. If the party is aggrieved by the decision of the Inspector, then they have the right to appeal directly to the High Court and ultimately to the Supreme Court. This will increase the burden of High Courts and the Supreme Court which are already flooded with writ petitions and appeals.
The new labour codes can be termed as the much-needed improvements to the current labour regime in the country. The new labour reforms finally overtake the redundant existing labour law regime in terms of simplifying and modernising the labour system. But it is pertinent to note that these labour reforms are more employer-friendly. It lays down certain provisions by which an employer can exploit the rights of the workers. Although the new reforms have simplified various compliances, they have also created several confusions by not defining key terms in the codes. Only time will tell how effective these Codes will be in the long run.
LawSikho has created a telegram group for exchanging legal knowledge, referrals, and various opportunities. You can click on this link and join:
Follow us on Instagram and subscribe to our YouTube channel for more amazing legal content.