Report on The Industrial Relations Code, 2020

(As Published in the Gazette of India, Extraordinary, Part II—Section 1, Dated September 29, 2020)

I. Executive Summary

The Industrial Relations Code, 2020 (No. 35 of 2020) is a legislative instrument enacted by the Parliament of India and assented to by the President on September 28, 2020. It represents a significant consolidation of India’s pre-existing labor laws governing trade unions, industrial employment conditions, and dispute resolution mechanisms. The Code repeals and subsumes three major statutes:

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

This report provides a comprehensive, objective, and legally grounded analysis of the Code’s structure, substantive provisions, procedural mechanisms, and implications, adhering strictly to the text of the published Gazette notification.

II. Legislative Context and Scope

A. Objective and Purpose

As stated in its preamble, the Code aims to:

“consolidate and amend the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, investigation and settlement of industrial disputes and for matters connected therewith or incidental thereto.”

This reflects a legislative intent to simplify, rationalize, and modernize India’s industrial relations framework.

III. Key Definitions and Interpretive Framework

The Code’s Chapter I (Preliminary) contains 53 definitions (Section 2), which are critical to its application. Notable definitions include:

These definitions aim to reduce ambiguity but also introduce complex income thresholds and conditional inclusions that may require judicial interpretation.

IV. Institutional and Procedural Framework

A. Bi-Partite Forums (Chapter II)

• Works Committees: Mandatory in establishments with 100+ workers (Section 3). Aimed at promoting amity; worker representation must be equal or greater than employer representation.
• Grievance Redressal Committees (GRCs): Required in establishments with 20+ workers (Section 4).
  • Equal employer-worker membership, with rotational chairpersonship.
  • Women’s representation must reflect their proportion in the workforce.
  • Timeline: GRC must decide within 30 days; aggrieved worker may appeal to conciliation officer within 60 days.
  • Critically, individual termination disputes are deemed industrial disputes, enabling access to adjudication.

B. Trade Unions (Chapter III)

• Registration: Requires 7+ members, but 10% of workforce or 100 workers (whichever is less) for worker unions (Section 6). Existing unions under the 1926 Act are deemed registered (Section 9(4)).
• Recognition:
  • Sole Negotiating Union: If one union has 51%+ support (Section 14(3)).
  • Negotiating Council: If no union has 51%+, includes unions with 20%+ support (Section 14(4)).
• Governance:
  • Office-bearers in the unorganised sector must be 50%+ workers from the industry (Section 23).
  • Immunities: Registered unions enjoy immunity from civil suits for acts in furtherance of industrial disputes (Section 16) and from criminal conspiracy charges for lawful union objectives (Section 17).
• Dispute Adjudication: Tribunal has exclusive jurisdiction over internal union disputes (Section 22), barring civil courts.

C. Standing Orders (Chapter IV)

• Applies to establishments with 300+ workers (Section 28), reduced from prior thresholds.
• Model Standing Orders issued by Central Government serve as interim orders until certified (Section 29).
• Certification Process: Employer drafts orders based on model; certifying officer must decide within 60 days, else deemed certified (Section 30(5)).
• Modification: Requires 6-month cooling period post-certification (Section 35).
• Legal Effect: Oral evidence cannot contradict certified standing orders (Section 36).

V. Dispute Resolution Mechanisms

A. Voluntary Arbitration (Chapter VI)

• Parties may refer disputes to arbitration by written agreement (Section 42).
• Binding on non-signatories if government issues a notification, ensuring broader applicability (Section 42(5)).

B. Statutory Adjudication (Chapter VII)

• Conciliation Officers: Mediate disputes; must file report within 45 days (Section 53(5)).
• Industrial Tribunals (ITs):
  • Composed of Judicial and Administrative Members (Section 44).
  • Specialized Benches: Two-member benches handle discharge, retrenchment, strikes, etc. (Section 44(7)).
• National Industrial Tribunals (NITs): For disputes of national importance or multi-state impact (Section 46).
  • Judicial Member must be a former High Court Judge; Administrative Member must be a Secretary-level officer.
• Interim Relief: Tribunals may grant interim relief to wrongfully dismissed workers (Section 50(2)).
• Enforcement: Awards are executable as civil court decrees (Section 49(9)).

VI. Regulation of Industrial Actions

A. Strikes and Lock-outs (Chapter VIII)

• Mandatory Notice: 60 days’ notice required, with a 14-day cooling period (Section 62).
• Prohibited During:
  • Conciliation (and 7 days after)
  • Tribunal/NIT proceedings (and 60 days after)
  • Arbitration (if notified)
  • Operation of settlements/awards
• Illegality: Violations render strikes/lock-outs illegal (Section 63).
• Penalties: Workers face fines (₹1,000–10,000) or 1-month imprisonment; employers face higher fines (Section 86).

VII. Lay-off, Retrenchment, and Closure

A. General Provisions (Chapter IX)

• Lay-off Compensation: 50% of basic + DA for laid-off workers with 1+ year service, capped at 45 days/year (Section 67).
• Retrenchment: Requires 1 month’s notice or pay in lieu, plus 15 days’ average pay per year of service (Section 70).
• Closure: Requires 60 days’ notice to government (Section 74); compensation as for retrenchment (Section 75).

B. Special Provisions for Large Establishments (Chapter X)

• Applies to establishments with 300+ workers (Section 77).
• Prior Government Permission required for lay-off (Section 78), retrenchment (Section 79), and closure (Section 80).
  • Applications deemed approved if no response within 60 days.
  • Stricter Notice for Retrenchment: 3 months (vs. 1 month in Chapter IX).
• Illegal Actions: If permission denied or not sought, actions are deemed illegal, entitling workers to full remedies.

C. Worker Re-skilling Fund (Chapter XI)

• Employers must contribute 15 days’ wages per retrenched worker to a government-managed fund (Section 83).
• Amount credited to worker’s account within 45 days.

VIII. Unfair Labour Practices and Penalties

A. Prohibited Practices (Chapter XII)

• Schedule II lists 16 employer and 8 worker/union unfair practices, including:
  • Interference with union formation
  • Victimisation/dismissal without due process
  • Refusal to bargain in good faith
  • Illegal strikes, gherao, go-slow

B. Offences and Penalties (Chapter XIII)

• Strict Liability: Fines ranging from ₹1,000 to ₹20 lakh, with enhanced penalties for repeat offences.
• Employer-Specific Penalties:
  • ₹1–10 lakh for violating Chapter X (lay-off/retrenchment/closure without permission).
  • ₹50,000–2 lakh for violating compensation provisions (Section 86(3)).
• Cognizance: Only on government complaint; tried by Judicial/Metropolitan Magistrate (Section 87).
• Compounding: Allows settlement of offences (except repeat offences) by payment to the Social Security Fund (Section 89).

IX. Miscellaneous and Transitional Provisions

• Civil Court Jurisdiction Barred: Exclusive jurisdiction vested in Tribunals (Section 97).
• Protection for Good Faith Actions: Immunity for officials acting under the Code (Section 98).
• Repeal of Prior Laws: The three repealed Acts cease to apply from the Code’s notified commencement date, but prior actions remain valid (Section 104).
• Rule-Making Power: Both Central and State Governments may make rules, subject to legislative oversight (Section 99).

X. Critical Observations

Strengths

• Consolidation: Reduces complexity by merging three statutes.
• Clarity in Definitions: Explicit inclusion of fixed-term employment and individual disputes.
• Efficiency Measures: Deemed certification/approval timelines reduce bureaucratic delays.
• Balanced Immunities: Protects legitimate union activities while penalizing abuse.

Concerns

• Threshold Increases: Higher worker thresholds (300 for standing orders, 300 for Chapter X) may exclude medium enterprises from key protections.
• Executive Discretion: “Appropriate Government” has wide powers to exempt establishments (Sections 39, 96), risking uneven application.
• Complex Wage Calculation: The 50% deeming clause for wages may lead to litigation over remuneration components.

XI. Conclusion

The Industrial Relations Code, 2020 is a comprehensive legislative overhaul designed to modernize India’s industrial relations architecture. It enhances procedural clarity, introduces efficiency mechanisms, and maintains core worker protections while accommodating employer concerns. Its success will depend on transparent rule-making, consistent enforcement, and judicial interpretation of its nuanced provisions. The Code, as published, adheres to constitutional and legislative standards, providing a lawful framework for industrial harmony in contemporary India.

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