Critical Overview Of The New Industrial Relations Code

Avinash K. Jalisatgi, Advocate
9-B, 1st Floor, Islam Building, 46, Veer Nariman Road, Fort, Mumbai

Date : 19/03/2024 Location : Siddhartha Apartment, "B" Wing, 2nd Floor, Swami Vivekanand Road, Near Malhar Cinema, Thane (West)
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Critical Overview Of The New Industrial Relations Code

1. Introduction:

•The 2nd National Commission on Labour (2002) found existing Labour legislation to be complex, with archaic provisions and inconsistent definitions. To improve ease of compliance and ensure uniformity in Labour Laws, it recommended the consolidation of the Central Labour Laws into broader groups such as i) Industrial Relations ii) Wages iii) Social Security iv) Safety & v) Welfare in working conditions.

•In 2019, the ministry of Labour and Employment introduced 4 Bills to consolidate 29 Central Laws. The four bills were

a. The Industrial Relations Code, 2020

b. Code on Wages, 2019

c. Code on social Security, 2020

d. Occupational Safety, Health and Working Conditions Code, 2020.

•This article deals only with Industrial Relations Code, 2020. The Industrial Relations Code, 2020 is an Act to consolidate and amend the laws relating to trade unions, conditions of employment in industrial establishments or undertaking, investigations and settlement of Industrial disputes for matters connected therewith or incidental thereto.

2. The Industrial Relations Code, 2020:

The Industrial Relations Code, 2020 consolidates three labour legislations. The Industrial Relations Code, 2020 has received assent of President of India on 28-9-2020 and was gazetted on 29-9-2020. The Industrial Relations Code, 2020 consolidates following three labour legislations:

a) Trade Unions Act, 1926

b) Industrial Employment (Standing Orders) Act, 1946

c) Industrial Disputes Act, 1947

3. Key Highlights Of Industrial Relations Code, 2020:

3.1 This Code consolidates 3 existing enactments mentioned hereinabove. Therefore the definition of all the terms are now uniform. There are some terms newly introduced and defined in the code such as Fixed Term Employment, Metro Railway, Negotiating Union or Negotiating Council, etc. Whereas definitions of certain term such as Industry, Employer have been changed and the term workman has been replaced by term "Worker" with certain changes. I will now discus the changes brought about by the Code in relevant fields occupied by I.D. Act, etc.

3.2 Fixed Term Employment: This term is defined in Section 2 (o) of the Industrial Relations Code as under:

(o) "fixed term employment" means the engagement of a worker on the basis of a written contract of employment for a fixed period: Provided that-

(a) his hours of work, wages, allowances and other benefits shall not be less than that of a permanent worker doing the same work or work of similar nature;

(b) he shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute; and

(c) he shall be eligible for gratuity if he renders service under the contract for a period of one year;

Though this term is first time introduced in the Code, the concept is not new. The genesis of this concept can be found in Section 2 (oo) (bb) (i.e. definition of retrenchment) of the Industrial Disputes Act. Sub clause (bb) was inserted in the Industrial Dispute Act by way amendment vide the Industrial Disputes (Amendment) Act 1984 with effect from 18th August, 1984. Prior thereto the termination of services of any workman who has worked for 240 days or more in a period of 12 calendar months immediately preceding his termination. (Except those terminations expressly mentioned in said definition) was considered as retrenchment. Therefore, termination of employment for fixed term too was covered by said definition of retrenchment. This was creating difficulties for the employers. The Industrial Disputes Act has provided for certain procedure to be followed while effecting retrenchment and any contravention thereof had the effect of rendering even a genuine retrenchment as illegal. By inserting clause (bb) in the said definition, it was provided that if a workman is employed for a fixed term and his contract of employment is terminated under a stipulation contained in such contract of employment then such a termination would not amount to retrenchment. Because of introduction of Sub-clause (bb) in Section 2(oo) the concept of fixed term employment came into existence. As per this provision, if the employment was genuinely for a fixed term, then termination of such an employee did not attract the provisions relating to retrenchment.

The Code has now codified this concept by defining the term "Fixed Term Employment" in section 2 (o) which has already been reproduced hereinabove.

The relevance, importance and main advantage of Fixed Term Employment is that termination of his employment on the expiry of the term will not amount to retrenchment. Similarly, if the services of Fixed Term Employment is terminated under a stipulation in the contract of employment, it also will not fall within the definition of the retrenchment. As already mentioned hereinabove the provisions in relation to the procedure for retrenchment are very stringent (see section 25F, 25G, 25H and 25N of the Industrial Disputes Act or how sections 70, 71 and 79 of the Code). Failure to comply with these provisions would render the termination illegal and void ab-initio. If the retrenchment is held to be illegal then Courts generally direct reinstatement of such an employee.

But now an employer who is in need of an employee on fixed term basis can employ such an employee on Fixed Term basis and can terminate such an employee on expiry of his term, even without complying with the provisions relating to retrenchment. However, there are certain riders attached to Fixed Term Employment. The work itself should not be of a permanent nature. An employer cannot engage an employee on Fixed Term basis when the work or requirement is of a permanent nature. The work on/for which such a fixed term employment was employed must also cease at the time of his termination. Otherwise it will constitute unfair labour practice under item 10 of Second Schedule of the Code. Therefore, such a Fixed Term Employment should be a bonafide one i.e where the work on/for which such an employee is engaged must be of such a nature that it is available only for a temporary or fixed period. e.g. employment in connection with a project or when there is temporary increase in work load, etc. There are many judgements on the point that an employer cannot employ a person on Fixed Term Employment when the work is of a permanent nature. [Please see Bombay High Court judgement in Dilip H. Shirke v. Zilla Parishad, Yavatmal (1989 Mh.L.J. 794)]

Secondly, provisos to clause 2 (o) of the Code further stipulate that there cannot be any unfair discrimination between the employee engaged on Fixed Term Employment and the permanent employee doing same or similar work, in the matters of hours of work, wages, allowances and other benefits. Such an employee is also eligible for all statutory benefits available to a permanent employee. Furthermore such a permanent employee is also entitled to gravity if he has rendered the minimum service of one year. With these precautions one can engage an employee on Fixed Term Employment.

3.3 Grievance Redressal Committee - Another major change introduced by the code is in respect of "Grievance Redressal Committee" (Sec 4). This section corresponds to Section 9-C of the Industrial Disputes Act. Sub-section 4 of Sec 4 of the Code provides that the number of members of the Grievance Redress Committee shall not exceed 10. It further provides that the women workers shall have adequate representation on the said Committee and such representation shall not be less than the proportion of women workers to the total workers employed in the establishment. As per Sub-sec (s), the aggrieved worker must approach the Grievance Redressal Committee within a period of 1 year from the date of accrual of the dispute. Thereafter the Grievance Redressal Committee has to complete the proceedings within a period of 30 days.

The decision of the Grievance Redressal Committee shall be based on majority view, provided that more than half of the members representing workers have agreed to the said decision, otherwise it will be treated as no decision by the committee.

A worker who is aggrieved by the said decision or whose grievance could not be resolved by the said committee can approach the conciliation officer through his trade union within 60 days thereafter.

Any worker who has approached the Grievance Redressal Committee can approach the Industrial Tribunal directly for adjudication of his dispute after expiry of 45 days (Sub-section (10) of section 4).

Sub-section 11 has introduced a new feature, in that a period of limitation of 2 years is laid down for such a worker to approach the Industrial Tribunal from the date of his discharge, dismissal, retrenchment or otherwise termination.

Provisions of GRC are applicable to every establishment in which twenty or more employees are employed. Section 4 does not distinguish between Industrial Establishment and other establishments.

3.4 Employer: The definition of "employer" is substantially changed Sub-section 2 (m) of the Code which defines said term is reproduced herein below:

(m) "employer" means a person who employs, whether directly or through any person, or on his behalf or on behalf of any person, one or more employee or worker in his establishment and where the establishment is carried on by any department of the Central Government or the State Government, the authority specified by the head of the department in this behalf or where no authority is so specified, the head of the department, and in relation to an establishment carried on by a local authority, the chief executive of that authority, and includes,- (i) in relation to an establishment which is a factory, the occupier of the factory as defined in clause (n) of section 2 of the Factories Act, 1948 and, where a person has been named as a manager of the factory under clause (f) of sub-section (1) of section 7 of the said Act, the person so named; (ii) in relation to any other establishment, the person who, or the authority which has ultimate control over the affairs of the establishment and where the said affairs are entrusted to a manager or managing director, such manager or managing director; (iii) contractor; and (iv) legal representative of a deceased employer;

As per the above definition in respect of the direct or indirect (contract labour) workers, the principal employer who has employed them shall be employer. In relation to a factory, the occupier of the factory or a person who has been named as Factory Manager shall also be an employer vis a vis such indirect workers. Therefore now even the workers employed through a contractor may be treated as the worker of the employer for the purposes of Industrial Relations Code.

3.5 Industry: The definition of "Industry" has been totally amended and brought in line with the judgement of Hon'ble Supreme Court of India in the matter of Bangalore Water Works and Sewerage Board v. A. Rajappa (AIR 1978 SC 548). In the said judgement the Supreme Court had laid down what is popularly known as "Triple Tests" to decide whether an activity is an industry or not. Those tests have now been incorporated in this definition. What was implicit earlier is now made explicit. Now any activity carried on by a) co-operation between employer and workers whether directly or through any agency/contractor, b) for the production, supply or distribution of goods or services and c) with a view to satisfy human wants or wishes (not being merely spiritual or religious in nature) will fall within the meaning of "Industry", irrespective of whether there is any profit motive. From this definition certain activities are expressly excluded which can be seen from the definition.

3.6 Worker: It is defined in Section 2(zr) of the code as under:

(zr) "worker" means any person (except an apprentice as defined under clause (aa) of section 2 of the Apprentices Act, 1961) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous Provisions Act, 1955 and sales promotion employees as defined in clause (d) of section 2 of the Sales Promotion Employees (Conditions of Service) Act, 1976, and for the purposes of any proceeding under this Code in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched or otherwise terminated in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person- (i) who is subject to the Air Force Act, 1950, or the Army Act, 1950, or the Navy Act, 1957; or (ii) who is employed in the police service or as an officer or other employee of a prison; or (iii) who is employed mainly in a managerial or administrative capacity; or (iv) who is employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time:

Even though this definition to a great extent adopts the definition of "workman" is section 2(s) of the I.D. Act, it has expanded the scope of said term. The working journalists (as defined under Working Journalists and Other Newspaper Employees Act and the Sales Promotion Employees as defined in Sales Promotion Employees Act are now included in the definition. Similarly for the purpose of Chapter III of the Code all the persons employed in the industrial establishment are treated as workers. This chapter III deals with Trade Unions. Therefore the purpose of recognition of trade union as a negotiating union even those persons employed in the industrial establishment who otherwise fall outside the definition of worker are also included. This aspect may have a major impact on the industrial relations.

3.7 Recognition of Negotiating Union or Negotiating Council - Another major change introduced by the Code is introduction of the concept of "Recognition of Negotiating Union" or "Negotiating Council". In the Industrial Disputes Act and the Trade Unions Act, there was no such provision regarding recognition of a trade union, although such a provision is already existing in the Maharashtra Recognition of Trade Union and Prevention of Unfair Labour Practices Act, 1971 as also Maharashtra Industrial Relations Act, 1946. Section 14 of the Code stipulates that there shall be a negotiating union or council in every industrial establishment having a registered trade union. Where only one trade union is functioning in an industrial establishment then the employer shall subject to such criteria as may be prescribed by the Rules recognise that union as the sole negotiating union (Sub-section 2).

When more than one trade union are functioning in an industrial establishment, then the union having 51% or more workers supporting it shall be recognised as the sole negotiating union of the workers (Sub-section 3).

If no union is having 51% membership in an industrial establishment, then the employer shall constitute a negotiating council consisting of the representatives of such registered trade union which have minimum 20% membership among the total workers. Any recognition made as a negotiating union or negotiating council, shall be valid for three years or five years, in case it is mutually agreed by the employer and the trade union.

Regarding the resolution of industrial disputes, the Industrial Disputes Act had provided multiple authorities/Courts; vis. i) Conciliation Officer, ii) Board of Conciliation, iii) Court of Enquiry, iv) Labour Court, v) Industrial Tribunal and vi) National Industrial Tribunal.

However, the Code has done away with the Board of Conciliation, Court of Enquiry and Labour Court. It now provides only three authorities i.e. Conciliation Officer, Industrial Tribunal and National Industrial Tribunal. (Sections/Chapter)

3.16 Another significant change brought about by the Code is in respect of the composition of Industrial Tribunal and the National Industrial Tribunal. Earlier both these tribunals used to consist of only one judicial member whereas now it will comprise two members, viz. one judicial Member and one Administrative member. (Sections/Chapter)

3.17 Furthermore, in respect of the provisions in relation to procedure for retrenchment to be followed, there is no change except that the threshold for applicability of special provisions has been increased from 100 workers to 300 workers. Earlier under the I.D. Act, the employer who was employing 100 or more workers was required to take prior permission of the appropriate Government before effecting the lay-off, retrenchment or closure (Chapter V-B of the I.D. Act). Now the said limit has been increased to 300 workers (Chapter X of the Code).

3.18 Furthermore Section 83 of this Code has provided "Worker Reskilling Fund". For that purpose the appropriate Government shall by notifications set up such a fund. The purpose of this fund to provide for the re-skilling of a retrenched employee. The fund shall consist of employer's contribution equivalent to 15 days wages last drawn by the retrenched worker or such other number of days as may be notified by the Central Government. The employer is required to make such a contribution only in case of retrenchment only.

3.19 Another change introduced by the Code was in respect of strike. In the I.D. Act, there was no provision for giving notice of strike or lockout (except in case of public utility services). Now as per section 62 of the Code no person employed in an industrial establishment shall go on strike, inter-alia without giving minimum 14 days notice to the employer and similarly in case of the lockout the employer is required to give 14 days notice to the workers.

3.20 Standing Orders: Chapter IV

As per section 28 of the Code, the provisions of this chapter shall apply to those industrial establishments employing 300 or more workers. (Earlier in Maharashtra the threshold was 50 or more workers).

Earlier the Model Standing Orders were made by the Appropriate Government i.e Central Government or the State Government as the case may be. Now only the Central Government is empowered to make the Model Standing Orders.

3.22 However if there are already existing Standing Orders qua an industrial establishment then the same shall continue to apply, so long as they are not inconsistent with the Code.

I may hasten to clarify here that better comments can be made on the Standing Orders only after the Model Standing Orders are actually published by the Central Government.

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