Industrial Relations Code, 2019

Reading time: 8-10 minutes.

The Industrial Relations Code, 2019 was introduced in Lok Sabha by the Minister of Labor and Employment, Mr. Santosh Kumar Gangwar, on November 28, 2019. After a well-versed parliamentary discourse, a committee was set up to review this particular bill on December 23, 2019. The Standing Committee on Labour, chaired by Mr. Bhartruhari Mahtab, submitted its report on the Industrial Relations Code, 2019 on April 23, 2020. The committee recommended some changes on the given bill and suggested changes to the same in order to make it more efficient and beneficial.

In India, the labor-related laws fall under the Concurrent List of the Constitution. Currently, there are over 100 state and 40 central laws regulating various aspects of labor such as industrial disputes, working conditions, social security and wages. Some of the associated constitutional provisions are Article 23 which forbids forced labor, Article 24 which prohibits child labor and Article 43A, inserted through the 42nd Amendment Act of 1976, dealing with participation of workers in management of industries.

Industrial Relations Code was also introduced previously in the Lok Sabha in 2017 but was stalled after protests of the various trade unions across the country. Considering the preexisting laws on industrial relations, the Second National Commission on Labour had recommended the consolidation of existing labor laws into two laws; one which would apply to establishments employing 20 or more workers, and another law which would apply to establishments employing 19 or lesser workers. With these recommendations taken into consideration, the Industrial Relations Code came into being.

Significance of the code

India is a country with a massive population and the need to earn livelihood is of paramount importance for every household in the country. In order to cater to the aforementioned requisite, every household requires at least one working member. The working members generally hold positions of two major kinds: Employer or Employee. The employees, in legal parlance, are also termed as ‘workers.’ Every establishment or organization tends to have people of both the statures. The employer tends to allot work and the employee is supposed to reach the target. Upon completion, the employer is ethically bound to pay the employees with their respective salaries.

Amidst such working framework, there have been deviants. Many employers, in several reported instances, have been involved in unfair trade practices and have eaten out on the respective salaries of the employees. These practices have subsequently compromised the basic rights of the employees or workers. In order to curb these unprincipled practices, the Indian legislature enunciated and passed statutes which would deal with the aforementioned goal. These are colloquially termed as ‘Labour Laws’.

The Industrial Relations Code 2019 is the third code which has been framed in a series of four labor laws, the other three being Social Security Code, Industrial Safety and Welfare Code and Code on Wages. The Industrial Relations Code aims to amalgamate, simplify and rationalize the provisions of the three previously existing central enactments relating to industrial relations, namely Industrial Disputes Act of 1947, Trade Union Act of 1926 and Industrial Employment (Standing Orders) Act of 1946. These legislations give workers the right to form trade unions, pull out strikes in order to get their demands taken into administrative consideration, issue standing orders or employ legal aid in order to resolve any industrial dispute.

However, the major significance of this code is the rationale of drafting it in favor of employees who often become prey to the unfair maneuvers and unjust practices rampant in the organizations due to the trade unions. While companies view the trade unions as threats and it is cumbersome to negotiate with them, the bill also aims to resolve such problems for the organizations while smoothening the industrial relations along with promoting ease of doing business.

Salient features of the code

The key takeaways from the Industrial Relations Code, 2019 are as follows:

  1. Ease in the hire and fire process

The Industrial Relations Code eases the process of hire and fire for the employers as it gives them the power to hire employees and let them go on the basis of the needs and requirements of the market.

  • Fixed-term employment as a benefit to the employees

This Code promotes fixed-term employment across all working sectors along with statutory benefits with regards to minimum wages, provident funds and medical benefits amongst the various others.

  • Provisions related to lay-off and retrenchment

Under this Code, the government has the authority to reduce or increase the threshold of employees through official notification; this means that an employer cannot lay off more than 100 employees without approval. Keeping in mind the increase in the number of lay-offs of employees by the employers, this bill also provides for a provision for re-skilling funds to suit the best interest of the employees. With regards to the lay-off, this code states that the it is due to the inability of the employer which may include reasons such as – shortage of coal, power, breakdown of machinery etc., due to which he is unable to provide employment to a worker. Along with this, it also lays down certain rules in respect of termination regulations which states that in industries which work in the field of mines or plantation, they need a prior permission from the state or central government before laying-off. It also requires these industries to pay 50% of the basic wages to the employees that they have laid off, along with a notice of one month to the employees who have been removed from services.

  • Negotiations in trade unions

Under this Code, the trade unions are also provided with a status of sole negotiating union if there is more than 75% of workforce support. This feature is called the ‘recognition of negotiating union’.

  • Strict measures against unfair trade practices

This Code further helps in stringing the propagation of any unfair labor practices as enlisted in the Bill. This implies than no one can spread and impose restrictions against forming trade unions, establishing employer sponsored trade unions, etc.

  • Voluntary Arbitration for settlement of dispute

Further, this Code allows for arbitration of the industrial disputes. However, for the employers and the workers to go into the process of arbitration, there has to be a written agreement which has to be signed including the clause regarding referring of the dispute to an arbitrator.

  • Provision to empower the government officers to settle disputes

The Code also suggests the Central Government to consider National Industrial Tribunals for settlement of industrial disputes concerning the disputes which involve questions of national importance. The government herein would appoint a conciliation officer who would investigate the dispute and assist the parties arrive at an amicable settlement. However, if the settlement is not possible, the parties are free to approach the Industrial Tribunal or National Tribunal.

  • Standing order

This provision states that every industrial establishment with a minimum count of 100 labors would need to prepare a standing order on the matters enlisted in First and Second Schedule of the new Code. The said matters are related to the classifications of workers, the manners of apprising workers about work hours, off days, etc. and should be indicated by the appropriate government by gazette notification.

Purpose and objective of the code

One of the primary purposes and objectives of the Code lies in the need for codification. It has time and again been observed that it is highly difficult to reconcile up to 44 labor laws which only causes hardships to the employers. “The Second National Commission on Labour (2002)” reported that the existing labour laws: were complex, had provisions which were archaic and had definitions that were inconsistent. The major objective of this bill was to consolidate the existing labour laws into broader groups like: Industrial relations, Wages, Social security, Safety and Welfare and working conditions.

With these various labor-related laws getting standardized by the help of codification, it is expected to lessen the disputes and further lessen several associated hardships. Codification under the statute would also ease the process of registration along with compliance of laws. While the preexisting laws multiply disputes and result in aggressive labor, thus creating a hindrance to expanding private and foreign investment, this step by the government to bring maximum governance through minimum laws by means of codification would help in bringing the disputes to a considerable halt.

Disapprobation of the code

Similar to the code presented in 2017, this code has also provoked widespread disapproval for some of its enshrined key, particularly from its major stakeholder, the trade unions. These are enlisted below:

  1. Restrictions

This code is replete with restrictions which means that there has to be a prior permission before formation of trade unions, calling a strike and for seeking legal redressal.

  • Right to Strike

Under this code, a proposal has been made to ban strikes for a period of two months once the compulsory 14 days’ notice period is exhausted. It also comes with a heavy fine of up to Rs. 50,000 or a jail term. Further, in the view of Prof. KR Shyam Sundar, Labor Economist at XLRI’s Xavier School of Management, Jamshedpur, the legal strikes have now been made virtually impossible as the industrial disputes would now undergo either of the resolution processes (by an arbitration tribunal or by a conciliation officer) and that the option of approaching the tribunal for bringing the dispute to a resolution process is now open to anyone.

  • Disallowing of Outsiders

It curbs the participation of outsiders in labor organizations by saying that the unauthorized trade unions require at least 50% of the office bearers who are employees. This particular provision is worrisome as the unorganized sectors require the participation of outsiders for a better labor movement. It also means that the workers of unorganized sector are more vulnerable to vindictive actions now that there would be an absence of outsiders. 

Probable way forward

On examining and analyzing the provisions of the Code, it is pertinent to note that the benefits of the preexisting laws on labor relations serve the purpose for which they were designed. While the code comes as a step to simplify and consolidate the existing laws, the key issue of job creation along with it should also be dealt with for better efficiency of the code. For a better acceptance of the law and its efficient functioning, it is necessary for the government to build a broader consensus on the major changes which the laws would undergo owing to their codification. With the collation of labor laws coming into being, it is necessary to take into consideration the glaring instances wherein there has been a failure to support the labor standards with a floor wage of Rs. 178 with a vague criterion of estimation of this minimum floor wage which puts emphasis on the fact that a cross-state analysis of labor movement should provide for a clearer picture on how these rules would impact the labor class.

As far as the legislative pathway is concerned, the bill seems to have a very affirmative sense of approach by the members of Parliament. The bill undoubtedly has some shortcomings as pointed out by the Standing Committee on Labour. After making the suggested changes, the bill is hopeful to get its due assent from the Rajya Sabha and from the Honourable President of India thus making a huge change in the labour laws of India.

Conclusion

Mahatma Gandhi said, “Employers are the trustees of the workers’ interests and they must safeguard their welfare, wellbeing, and right of work.” It is imperative that in this competitive business trend that we live and function in, the employers too need a strong support to run the business effectively without any unforeseen difficulties which would also safeguard the dignity of the labors.

The Industrial Relations Code of 2019 can be seen as a best attempted step on the part of the Central Government to minimize the friction between the employer and trade unions and bestowing benefits to the labor classes of both organized and unorganized sectors through the provisions of this newly drafted code.

With the current situation of workers in the country, it is highly important and stands as the need of the hour to ensure amalgamating all the previously made labor laws as it has been observed that these laws have not been implemented to the fullest and their adverse effects overweigh their benefits which also results in a trifling performance in ease of doing business.

Authors: Yashassvi Periwal from Symbiosis Law School, NOIDA and Kalhan Safay from Hidayatullah National Law University, Atal Nagar, Naya Raipur.

Editor: Dhawal Srivastava from Rajiv Gandhi National University of Law, Patiala.

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