This article is written by Asgar Ali, pursuing a Diploma in Industrial and Labour Laws from LawSikho.com. Here he discusses “Key Changes Introduced by the Code on Industrial Relations Bill 2019”.

Introduction

On 28th November 2019, with an aim to codify 44 central labour laws into four broad codes as well as to increase India’s appearance over Ease of doing business, the Labour and Employment Minister, Shri Santosh Kumar Gangwar introduced the Labour Code on Industrial Relations 2019 in the Lower House of Parliament. This code will be combining three major acts i.e. The Trade Unions Act, 1926, The Industrial Disputes Act, 1947, and The Industrial Employment (Standing Orders) Act, 1946.   

Codifying 44 central labour laws is a big reform in labour law statutes because once it has happened then Labour laws shall be simplified and easy to comply. In fact, by amalgamating these total 44 labour laws in four major codes, the Central government is moving towards improving Social security aspects and accepting the recommendations of 2nd National Commission of labour. 

 There shall be the following arrangement of amalgamating existing labour laws:  

Sr. No.	New Labour Code	Existing labour laws to be subsumed
1	The Code on Social Security, 2019	Laws related to social security, i.e. the Employees’ Provident Fund and Miscellaneous Provisions Act, the Employees’ State Insurance Corporation Act, the Employees’ Compensation Act, the Building and Other Construction Workers Act and the Maternity Benefits Act etc.
2	The Labour Code on Occupational Safety, Health and Working Conditions	Several industrial safety and welfare laws i.e. the Factories Act, the Dock Workers (Safety, Health and Welfare) Act and the Mines Act etc.
3	The Code on Wages, 2019	The Minimum Wages Act, the Equal Remuneration Act, the Payment of Wages Act and the Payment of Bonus Act etc.
4	The Labour Code on Industrial Relations, 2019	The Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946 shall be combined

 

In this article, the focus has been given to major changes as introduced in the Labour Code on Industrial Relations, 2019 and its importance. The details of these changes are mentioned as follow: 

Change no. 1 – Introduction of fixed-term contract:  

The 1st major change is the provision of allowing companies to hire workers on fixed-term contract up to any duration. The explanation of fixed-term contract is that a worker can be hired for any of duration which may be of three months / six months / twelve months (one year) depending on the seasonal requirements or availability of orders with that company. 

Necessity of this change:  

1. For the Benefits of Industries

 

 

1. The provision of hiring workers on fixed- terms basis shall boost the growth of manufacturing and service sector especially to leather industries, food industries, Sugar and beverage factories, textile market, entertainment industries etc. Such sectors cannot run smoothly throughout the years due to their unstable working nature and survival of such industries usually depend upon public demand, timely Supply of goods/ services, market condition and most importantly, the availability of resources on time. 
2. Now, the companies can achieve their short term targets due to easy availability of fixed term employees without the fear of any legal obligation such as giving notice period to such employees or any extra money in lieu of retrenchment compensation. Under such provisions, now the expiry of any labour employment contract due to the expiry of fixed term contract shall not be understood retrenchment.    
3. The ease of doing business campaign shall be successful because now employer has the choice to hire talented manpower for a specific required time period. Now, the planning of budget, resources management i.e. procurement of talented manpower, raw material, appropriate equipment, power, land, infrastructure shall be easier for an employer which shall uplift the manufacturing sector and shall be profitable for both supplier and customer. 

2. For the Benefits of Workers:

 

 

1. In Fixed-term employment, there shall be a direct contract between employee and employer, So the involvement of contractor as Middleman or commission agent shall be disappeared. This provision shall be helpful for a worker enabling him to get his hard earned money full ( i.e. without any commission charge of Contractor or Middleman) 
2. The fixed-term worker/employees shall get all statutory and licit benefits on a par with the regular workers/ employees who are already doing work of similar nature

My Viewpoint 

1. In India, there are 40 crore labourers who are working in the unorganised sector while the number of labourers in the organised sector is only five-six crore. In the present time, there is an urgent need to promote labour reforms by introducing provisions like fixed-term employment because such provisions shall be helpful to increase the flow of talented workforce from unorganised sector to organised sector and the difference shall be minimised.
2. A talented worker (in true sense, a “work-doer”), whether he works in an organised sector or unorganised sector whether he is a blue-collar worker or a white-collar worker, he does not want to keep himself locked for a long period with his existing employer due to his high professional skill set. Today, every talented work-doer wants the best remuneration and the concept of fixed-term contract shall provide him with a platform to evaluate himself in terms of money earning in lieu of his services offered. This concept shall trigger him to learn new and to keep him updated as per his job requirements. Every high talented Work- Doer whether he is a fitter, a designer, a welder, a painter, a moulder, an engineer, a doctor, an actor, an artist, a teacher, a pleader, a writer, a player, a driver, an operator, a clerk, a consultant or a work-doer of any profession wants growth in his career based upon “More Learning – More Earning”. This is the ground reality and in today’s market, there is a need for fixed-term service contracts. 

Change no. 2 – The Concept of the Adjudicating Authority and Industrial Tribunal have been redefined:

Now, The Code has redefined the constitution of Industrial Tribunals for the settlement of industrial disputes and speedy disposal of labour-related cases. Here and now, in place of one member, there shall be a provision of setting up of two members’ tribunal. These two members shall be as follow:

1. A Judicial Member:  the person who has served as High Court Judge of any state or a District Judge or an Additional District Judge for a minimum duration of three years. 
2. An Administrative Member, who has more than 20 years of professional experience in the fields of labour laws, business laws, economics, public affairs, finance, commerce or labour relations etc. 

Change no. 3:

The third major change is the provision of “recognition of negotiating trade union” under which there is a requirement of 75 % those workers’ support that shall be on the muster rolls of that establishment for making a trade union and negotiating with the employer in that establishment. 

Earlier there was no such law at national level for recognition of trade union, though some states like Maharashtra (Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971), West Bengal (West Bengal Trade Unions Rules, 1998), Orissa (Orissa verification of Membership and Recognition of Trade Union Rules, 1994 ) and Kerala (Kerala Recognition of Trade Unions Act, 2010 ) have ratified the legal provisions for the recognition of trade unions in the territory of their respective states. But, now this principle is applicable throughout India. 

Under this provision, In case there are more than one Trade Unions of workers in any industrial establishment then only one Trade Union shall be designated as a sole negotiating union which keeps support of 75 % or more workers on the muster roll in that establishment and in case, no any Trade Union has such support strength on the muster roll of that establishment then a negotiating council shall be constituted for negotiation.

The employer cannot show partiality or favours to anyone or any specific trade union among many trade unions registered within that organisation. Such behaviour of an employer shall be understood as unfair labour practice. The new Code proscribes owners, labours and trade unions from committing any unfair labour practices listed in the Second Schedule of the Code.

Trade unions: Under the provisions of this new Code, any seven or more than seven members of a trade union are eligible to apply for registration by subscribing their names. On the date of filing application for registration of such trade union, at least 10% of the workers or 100 workers whichever is less shall be registered.  Additionally, for a registered trade union, there must be a member of a minimum seven workers who are employed in the industry or connected thereto. The Concerned State government or central Government may recognise that trade union. 

Change no. 4 – Provisions related lay off and retrenchment:

This labour code has retained the threshold on the worker count at 100 for prior government approval before Retrenchment, but it has a provision for changing ‘such number of employees’ through notification

The new Code describes the term “lay-off” as the powerlessness of an employer by reason of unavailability of coal/oil / Power or any such equipment failure/ breakdown which affects normal employment work of a worker.  This shortage/ no availability is also considered the major cause of no work and provides a ground to terminate the services of a worker by the employer which is said as “retrenchment”. Industrial establishments i.e. mines, plantations or factories where at least hundred (100) workers are required to take prior approval of concerned state or central government before such closure i.e. lay-off/retrenchment etc. The Union Cabinet has accepted the demands of various trade unions and worker bodies to keep this threshold numbers as 100 workers instead of 300. Though, the central or state government holds the right to modify this threshold number of workers by gazette notification any time.  There is a provision of the penalty of Rupees one up to ten lakh who contravenes this provision. 

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There are some mandatory provisions related to retrenchment or layoff that any Industrial establishments wherever 50 to 100 workers are working or get employed, it shall be mandatory to the employer to :

1. Such workers shall be given at least one month’s notice in writing mentioning the reason for retrenchment;
2. Payment of fifteen days salary i.e. 50% of basic wages plus applicable dearness allowance to such a worker who has been retrenched /laid off from his employment;
3. The retrenched person shall be given preference over another person in case new vacancies of same nature get arise in that factory/establishment or organisation.

Change no. 5:

The fifth major change is the provision of setting up of a “re-skilling fund” for the training of retrenched workers/employees. The retrenched employee would be paid 15 days’ wages from the re-skilling fund within 45 days of the date of retrenchment.

However, in this bill, the provisions regarding “retrenchment” is not clear which always has created the industrial disputes between employer and workers. Such unclear provisions related to retrenchment may affect the execution by central and state government.                

Change no. 6 – Modification in Concepts of Strikes and Lock-outs

The definitions of Strikes and Lock-outs have been redefined. In strikes, the concept of Public Utility Services has been removed. Now the code has made mandatory to serve a notice of 14 days for strikes by trade unions and lockouts by the employer in any Industrial establishment. Under the provisions of this new code, now mass casual leaves has also been taken within the ambit of the strike. Here, an employer is also bound to serve a notice to his workers before 14 days of lockout. The purpose of redefining this clause is to forbid strikes and lockouts in any factory, company or industrial establishment without giving prior notice of at least fourteen days and also during that time when the conciliation proceedings are pending. 

Benefits of these changes to Industries and Workers

Strikes and lock-outs are far beyond to the personal growth of a common person who is fighting for his/her survival and it is the violation of his/ her “Right to Work”.  It gives a negative effect on those workers and employers who do not want to stop their routine work. Since a long time, strikes and lock-outs are seen as unfair labour practices. As the new code is discouraging such activities so hopefully the industrial relations shall be improved and we shall be able to improve our ranking in World Bank’s Ease of Doing Business Index. 

Change no. 7 – Provisions of empowering government officers to settle Industrial Disputes:

The government officers have been empowered to adjudicate the disputes related to employers and trade unions and they have the authority to impose a penalty as fines. By adding this provision, the work burden over the tribunal handling such matters shall get reduced up to a maximum extent.

Benefits of these changes to Industries and Workers: 

The new code on Industrial relations elaborates that the central or state governments have the authority to appoint conciliation officers in order to mediate and promote settlement of various industrial disputes running between employer and workers.  The appointed officers can investigate the dispute and hold conciliation proceedings so that both parties may be agreed and arrive at a fair and amicable settlement of the matter of dispute.  In case, if there is no settlement possible, then any party can make an application to the Industrial Tribunal or National Tribunal related to the nature of the dispute. 

Change no. 8 – Provisions of Voluntary Arbitration for Settlement of Industrial Disputes:

This new Code allows for amicable settlement of industrial disputes raised between the employer and the workers through voluntary arbitration.  Both parties (i.e. the employer and the workers) are required to sign a written agreement of voluntary arbitration in case of dispute arise and in such conditions, such disputes are referred to arbitrator(s).  The arbitrator(s) shall investigate the dispute and submit the arbitration award to the appropriate government.

Change no. 9 – Concept of Standing Order into New Industrial Relation Code: 

All industrial establishments with at least 100 or more workers shall have to prepare a standing order on matters listed in First Schedule of this new Code.  Instead Appropriate Government, now the central government will be preparing model standing orders on matters listed in First Schedule of this new Code, based on which all industrial establishments are required to prepare their own standing orders.  These matters are related to the classification of workers, the manners of apprising workers about hours of work, holidays, paydays, and wage rates in the language understood by majority of workers, Manners of termination of employment, Suspension for misconduct, grievance redressal mechanisms for workers, Mechanism of redress for workers against their discriminating treatment or any unlawful exactions by his company,  manager, agent, servant or employer, And any such matter which may be indicated by the appropriate Government by gazette notification.

Change no. 10 – Concept of Notice of Change: 

Company or Employers who recommend necessary changes in the  Service conditions of their workers including their wages, contribution amount, and leave related matters etc. are obliged to inform workers through serving notice as listed in the Third Schedule of the Code.  

Other Changes: 

 

• The members of the Grievance Redressal Committee has been increased from 06 to 10

• The definitions of Worker, Industry, Strike, Appropriate Government, Lay-off, Lock-out, Tribunal, Unfair Labour Practice, Unorganised Sector, wages, fixed-term employment etc. have been specified keeping in view the present labour reform framework

 

Conclusion

The central government has tried her best to simplify this code so that friction between employer and trade union can be minimised and the labour of organised as well as an unorganised sector can be benefitted with the new provisions introduced. 

At present, there is an acute need of amalgamating all older labour laws as these laws are hardly implemented and its adverse effect is being realized in our trifling performance in Ease of Doing Business Index. By simplifying labour codes, the government is trying to bring in maximum governance with minimum laws which is being welcomed by both employers and labour bodies.   

Mahatma Gandhi Ji once said that employers are the trustees of workers’ interests and they must safeguard their welfare, wellbeing and right of work. 

Keeping in view, the above-mentioned statement of the father of our nation and also keeping in view in today’s competitive business trend, it is important that employer too needs supports so that he may run his business without unforeseen difficulties and safeguard “the Dignity of Labour” in his business context.

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