Law Insider India

Legal News, Current Trends and Legal Insight | Supreme Court of India and High Courts

New Labour Codes of 2020: A Critical Study

13 min read

By Harshpreet Kaur

Published On: October 20, 2021 at 13:28 IST

Introduction

Article 246 of Constitution of India gives power to Parliament and State legislature to legislate on any subject matter enumerated in Lists of Schedule VII of Constitution of India.

Schedule VII contains 3 lists namely, Union list, State list and Concurrent List. Labour is the subject matter of Concurrent list, which means both Center and State has power to make laws on matters related to labour. Due to which many labour laws was enacted, according to the data, provided by the central government, currently, there are around 40 central statutes and 100 state statutes governing the various labour laws in India.

Thus attempts had been made to simplify and codify all the laws into one uniform code to ease trade and improve trade and commerce in nation. In 2002, Second National Commission on Labour recommended to consolidate 29 labour laws and on its recommendation Ministry of Labour and Employment in 2019 introduced 4 bills in Lok Sabha. These Codes regulate:

  • Wages,
  • Industrial Relations,
  • Social Security and
  • Occupational Safety, Health and Working Conditions.

Only Code on Wages, 2019 was able to pass while others were referred to standing committee for further discussions. Standing Committee submitted its report on 19th September 2020 which replaced all the three bills into new ones and on 22th September 2020, Lok Sabha passed all the three new labour bills namely,

  • The Industrial Relations Code Bill, 2020;
  • Code on Social Security Bill, 2020 and the Occupational Safety, Health and Working Conditions Code Bill, 2020.

On 23rd September 2020 all the three bills were passed by Rajya Sabha, on 28th September,2020 bills got assented by President and on 29th September, 2020 it was published in e- Gazette and became enactments. Let’s go through each Act now.

Why do we need all the 3 Codes?

  • The codes were introduced to codify and simply various labour laws which was creating a complex environment for employers as well as workers.
  • These codes were introduced to safeguard the rights of employers and workers by providing simplified labour reforms to facilitate ease of doing business and trade
  • The codes also been made with an object not only to solve industrial dispute and bring industrial peace and harmony but also to ensure social security to all types of workers which were missed out on the previous labour laws.
  • These codes also bring with them consolidated procedures and data collection such as Single Registrations, Licenses, Consolidated Returns lessening the burdens of employers.
  • Various Boards and Committees have been set up under the codes to supervise the safety and welfare of workers.
  • Stringent penalties with the comparatively high monetary amount and imprisonment period have been made under the code for following the provisions strictly.

Industrial Relations Code, 2020

The Industrial Relations Code, 2020, is formed after amalgamating, repealing three central enactments to simplify compliance burden to facilitate ease of doing business namely:

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

Key Changes made in the new provisions

  • Definitions:

New definition of ‘employee’ and ‘fix term employment’ were added which are as follows:

Section 2(l) states the definition of Employee as “any person (other than an apprentice engaged under the Apprentices Act, 1961) employed by an industrial establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union;”

Section 2(o) states the definition of Fixed Term Employment as “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;”

Strike definition has got some additions which are as follows:

BeforeUnderSection 2 (q) of Industrial Disputes Act, 1947 “strike” means a cessation of work by a body of persons employed in any industry acting in combination or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment;

But now in Industrial Relation code the definition of Strike has included “the concerted casual leave on a given day by fifty per cent or more workers employed in an industry”. [i]

While ‘workman’ definition got replaced and renamed as ‘worker’

And now includes “working journalists as defined in clause (f) of section 2 of the Working Journalists and other Newspaper Employees (Conditions of Service) and Miscellaneous 52 of 1961. 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”

  • Grievance Redressal:

Before the code a workman can directly move to conciliation officer under Section 9C of the Industrial Dispute Act, 1947 for any grievances but now it is mandatory to approach the grievance redressal committee.

  • Standing Order:

Before the code standing order was applicable to 100 or more workers as per the Industrial Establishment Standing Order Act, 1946 which is now increased to 300 or more workers.

  • Time limitation for disciplinary proceeding:

Before the code there was no time limitation for disciplinary proceeding against a workman now an inquiry along with its investigation is introduced which needs to be completed within a time period of 90 days from worker’s suspension.

  • Trade Union:

Before the code there was no recognition of negotiating union but now the code has introduced ‘sole negotiating union’ in establishments to negotiate with the employer, and mandate that every industrial establishment shall have one sole negotiating union and where there are already a registered trade union it will be recognised as negotiating union but if there are more than one registered trade union then the trade union having more than 51% of workers will be recognised as sole negotiating union.

  • Industrial Tribunal:

Before the code there was only 1 member to resolve the industrial dispute but now the member has increased to 2 out of which one should be judicial member and the other should be administrative member.

  • Notice for Strike:

Before the code the workers of public utility service were required to give prior notice of 14 days before going on strike but now the code has mandated workers of all establishments to give prior notice of 14 days before going on strike.

Code on Social Security, 2020

The code on Social Security was introduced to provide social security to all employees & workers either in organized, unorganized, or any other sector by simplifying and consolidating various enactments of labour laws such as:

  • The Employees’ Compensation Act, 1923
  • The Employees’ State Insurance Act, 1948
  • The Employees’ Provident Funds and Miscellaneous Provisions Act, 1952
  • The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
  • The Maternity Benefit Act, 1961
  • The Cine Workers Welfare Fund Act, 1961
  • The Payment of Gratuity Act, 1972
  • The Building and Other Construction Workers Welfare Cess Act, 1996
  • The Unorganized Workers’ Social Security Act, 2008

Key changes made in the new provisions:

  • Definition:

New definition of, ‘Fixed term employment’, ‘Home based worker’, ‘Self-employed worker’, ‘Career Centre’, ‘Unorganised Workers’, ‘Gig Worker’ & ‘Platform Workers’ is introduced which are as follows:

Section 2(9) states the definition of Career Centreas “any office (including employment exchange, place or portal) established and maintained in the manner prescribed by the Central Government for providing such career services (including registration, collection and furnishing of information, either by the keeping of registers or otherwise, manually, digitally, virtually or through any other mode) as may be prescribed by the Central Government, which may, inter alia, relate generally or specifically to— (i) persons who seek to employ employees; (ii) persons who seek employment; (iii) occurrence of vacancies; and (iv) persons who seek vocational guidance and career counselling or guidance to start self-employment;”

Section 2(34) states the definition of Fixed Term Employmentas “the engagement of an employee 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 employee doing the same work or work of a similar nature; and (b) he shall be eligible for all benefits, under any law for the time being in force, available to a permanent employee proportionately according to the period of service rendered by him even if his period of employment does not extend to the required qualifying period of employment;”

Section 2(35) states the definition of Gig Worker as “a person who performs work or participates in a work arrangement and earns from such activities outside of traditional employer-employee relationship;”

Section 2(36) states the definition of Home-Based Worker as “a person engaged in, the production of goods or services for an employer in his home or other premises of his choice other than the workplace of the employer, for remuneration, irrespective of whether or not the employer provides the equipment, materials or other inputs;”

Section 2(61) states the definition of Platform Workeras “a person engaged in or undertaking platform work;”

Section 2(75) states the definition ofSelf-Employed Worker as “any person who is not employed by an employer, but engages himself in any occupation in the unorganised sector subject to a monthly earning of an amount as may be notified by the Central Government or the State Government, as the case may be, from time to time or holds cultivable land subject to such ceiling as may be notified by the State Government;”

Section 2(86) states the definition of Unorganised Worker as “a home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by the Industrial Disputes Act, 1947 or Chapters III to VII of this Code;”

  • Registration:

Before the code Registration was required by all establishments but now if an establishment is registered under any existing Central Labour Laws, it is not required to obtain registration under Section 3 of the Code of Social Security.

  • Social Security Organization:

Before the code there was no such organisation was made but now several bodies are formed under Section 4 of the code[ii] for administering the provident fund schemes, pension fund schemes and insurance schemes especially for gig workers, platform workers and unorganized workers and other workers.

  • Appellate Tribunal:

Before the code no appeal by employer was entertained by the Tribunal unless it has deposited a Demand Draft payable in the Fund and bearing 75% of the amount due from him but now the deposit has reduced to 25%.

  • Sickness Benefit:

Before the code the workers was not entitled to any sickness benefits but now the code provides extra expenditure as sickness benefit for insanitary working conditions in the factory or in the accommodations due to the neglect of the owner.

  • Determination of Wages:

Before the code in case of any dispute or proceedings for determination of dues from the employer no limitation period was fixed but now it is fixed to five years.

  • Payment of Gratuity:

Before the code payment of gratuity term for a working journalist was for 5 years but now it is reduced to 3 years.

  • Welfare Scheme:

Before the code welfare schemes were not framed for unorganized workers, gig workers and platform workers but now welfare schemes for these workers at Central and State level on matters related to the protection of life, health, accident, education, skill up gradation, provision of old age home are introduced.

Code on Occupational Safety, Health and Working Conditions, 2020

The Code subsumes 633 provisions of 13 major labour laws into one single Code with 143 provisions with an aim of providing health and safety to the workers employed in different sectors such as industry, trade, business etc. it was focuses on worker’s safety engaged in hazardous works. Certain classes of establishments such as mines, factories, dock workers, construction workers are subject to different provisions for a license, safety regulations and duties of employers. The laws that are subsumed are

  • The Factories Act, 1948
  • The Plantations Labour Act, 1951
  • The Mines Act, 1952
  • The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955
  • The Working Journalist (Fixation of rates of wages) Act, 1958
  • The Motor Transport Workers Act, 1961
  • The Beedi and Cigar Workers (Conditions of Employment) Act, 1966
  • The Contract Labour (Regulation and Abolition) Act, 1970
  • The Sales Promotion Employees (Conditions of Service) Act, 1976
  • The Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service) Act, 1979
  • The Cine Workers and Cinema Theatre Workers Act, 1981
  • The Dock Workers (Safety, Health and Welfare) Act, 1986
  • The Building & Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996

Key changes in new provisions

  • Definition:

Definition of employee and employer were introduced as before the code these terminologies were different and inconsistent in various acts now due to a consolidated act a single definition is adopted for various laws subsumed.

While definition of establishment has widened the scope

Before Various acts defined establishment differently but now not only establishment is well defined for all the acts but it is now including factory, newspaper establishment and plantation in which more than ten workers are employed.

  • Registration:

Before the code registration was required separately under all the previous labour laws but now establishment is required only one electronic registration.

  • Returns:

Before the code establishments had to file various returns under different acts but now only one consolidated return is required to be filed under the code.

  • Occupational Safety and Health Advisory Board:

Central Government and State Government shall constitute a National Occupational Safety and Health Advisory Board and State Occupational Safety and Health Advisory Board respectively to discharge the functions and at the same time advise the Government on the matters relating to standards, rules and regulation to be framed under this Code.

  • Weekly-off:

Code introduced the provision for weekly offs in a new manner now the workers cannot be required to work for more than 6 days/week and will be entitled to one day off for every 20 days of work & one day off every week. [iii]

  • Threshold for Facility:
    • Canteen – Reduced from 250 workers to 100 workers
    • Crèche – Increased from 30 female workers to 50 female workers
    • Welfare Officer – Reduced from 500 workers in Factory to 250 workers in Factory, Mine & Plantation
    • Safety Committee and Safety Officer – Reduced from 1000 workers to 500 workers in Factory, 250 workers in a building and other construction, 250 workers in a hazardous process and 100 workers in a mine.

Criticism

The three labour codes are being criticized on various grounds such as:

  • It has very heavy delegated legislation, The Labour Codes delegate various essential aspects of the laws which includes:
    • Increasing the threshold for lay-offs, retrenchment, and closure,
    • Setting thresholds for applicability of different social security schemes to establishments,
    • Specifying safety standards and working conditions to be provided and maintained by establishments, and
    • Deciding the norms for fixation of minimum wages. 
  • XLRI professor and labour economist KR Shyam Sundar, said that:

The increase in the threshold for standing orders from the existing 100 to 300 is uncalled for and shows the government is very keen to give tremendous amounts of flexibility to the employers in terms of hiring and firing…dismissal for alleged misconduct and retrenchment for economic reasons will be completely possible for all the industrial establishments employing less than 300 workers. This is complete demolition of employment security”. [iv]

Which means, due to extend of scope of standing orders, the employers who now have less than 300 employees are now more empowered and can easily fire employees thus heading to place where employees are more unsecure.

  • Previously a person employed in a public utility service cannot go on strike without giving notice for a strike within six weeks before going on strike or within fourteen days of giving such notice, which the new Industrial Relation Code, made this provision applicable to all the establishments, which means employees of a non-public utility service are also restricted to go on a strike before giving a prior notice, which OfCourse hamper their right to strike.

Conclusion

The 3 labour codes where, need of the hour and much awaited labour codes because of the complexities faced by various establishments due to the bulkiness of various enactments made by far, which caused multiplicity of definitions, overlapping of authorities, various compliances and thus, the codification and consolidation of such laws has not only removed such lacunas but also let to expansion of the ambit and applicability of the laws, ease of compliance etc.

The codes have introduced various new provisions to ensure better regulations of industries and also aim at ensuring ease of doing business at the same time the code focuses on the social welfare and security of the workers as well. Various threshold limits has been reduced to increase the benefits given to the workers, and not only that but the government has now focused on the workers of Unorganized sectors as well including ‘Home based worker’, ‘Self-employed worker’, ‘Gig Worker’ & ‘Platform Workers’ which were left out in previous labour laws.

The codes will empower the relationship between the employers and the workers and due to its Stringent penalties and imprisonment will be strictly adhered by both bring a long-term positive impact on industries.

ABOUT THE AUTHOR 

Harshpreet Kaur is a final year student of LL.B. at Lloyd Law College. She has completed CS Executive and has won 1st Prize in Tax Quiz as well as Company Law Quiz. She is a very creative, responsible, self-motivated and practical person. She chose law as a career because she believes law is very interesting and she is working in this field to make the law interesting for others as well using platforms like YouTube on hp tales and Instagram on hp.tales.

Edited by: Aashima Kakkar, Associate Editor, Law Insider

References 


[i]  Industrial Relation Code, 2020, (Act 35 of 2020), s.2(zk)

[ii] Code on Social Security, 2020, (Act 36 of 2020), s.4

[iii] Code on Occupational safety, health and working condition, 2020, (Act 37 of 2020), s.25

[iv] Aanchal Magazine,Explained: In the three new labour codes, what changes for workers & hirers? (Last visited on 20 October, 2021)