A Critical Analysis of the Three Labour Bills, 2020

The Lok Sabha, on 22nd September 2020, passed three new labour bills – The Industrial Relations Code Bill, 2020; Code on Social Security Bill, 2020 and the Occupational Safety, Health and Working Conditions Code Bill, 2020. These three labour bill, are part of the government’s reform formulated in order to simplify India's labour legislation and improve the ease of trade and commerce in the nation.

Labour falls under the Concurrent List of the Indian Constitution, which means Parliament as well as the State Legislatures can make laws regulating labour. According to the central government, there are over 100 state and 40 central laws regulating various aspects of labour. In 2002, the Second National Commission on Labour on finding that the existing legislation to be complex, it recommended the consolidation of central labour laws into broader groups such as industrial relations, wages, social security, safety and welfare and working conditions, to improve ease of compliance and ensure consistency in labour laws.

In 2019, to consolidate 29 central laws, the Ministry of Labour and Employment introduced four Bills. These Codes included Wages, Industrial Relations, Social Security, and Occupational Safety, Health and Working Conditions. The Code on Wages was passed by the Parliament in 2019, but the Bills on the other three areas were referred to the Standing Committee on Labour. The Standing Committee submitted its report on all three Bills and the government replaced these Bills with new ones on September 19, 2020.

Where there exists more than one trade union in an establishment, the sole negotiating union status will be given to the one that has 51% of the employees as its members. The 2020 Bill provides that a negotiating council will be formed consisting of representatives of unions that have at least 20% of the workers as members, in case no trade union is eligible as sole negotiating union.

The provisions are such that it requires the prior permission of the government for lay-off, retrenchment and closure are made applicable to only establishments that had employed 300 or more workers on an average per working day in the preceding 12 months. The Code even permits the government to raise this threshold by notification. A lay-off would be declared illegal if it is affected without permission or is done despite the refusal of permission, but it will not be so if the employee had been offered other employment that does not require any special skill or cause unwarranted hardship. The Code prescribes notice period, or payment instead of notice period, and prior government permission before retrenchment of anyone who has been in continuous service for a year or more. Such a prior permission requirement is also required for closure of a unit, with the application to be filed 90 days prior to the intended closure.

The Code prohibits strikes and lock-outs in all industrial establishments without notice. Therefore, no unit shall go on strike in breach of contract without giving notice 60 days before the strike, or within 14 days of giving such a notice, or before the expiry of any date given in the notice for the strike. Further, there should be no strike during any conciliation proceedings or within seven days of the conclusion of such proceedings; or during proceedings before an industrial tribunal or 60 days after their conclusion or during arbitration proceedings. Parallel restrictions have been given on the employer from announcing a lock-out. The Industrial Disputes Act, 1947, had placed such restrictions on announcing strikes only in respect of public utility services. But the present Code extends to all establishments. Even the Standing Committee on Labour had preferred and supported limiting these provisions to public utilities.

The Code on Social Security states that the central government may, by notification, apply to any Social security entitlements such as the size of the establishment and income ceilings.

• Under the 2020 Bill, the government makes the few changes for unorganized sector workers (such as home-based and self-employed workers), gig workers, and platform workers. The changes are as follows:


• The 2020 Bill lays that the central government will set up funds for unorganized workers, gig workers and platform workers. The State governments will also set up and administer separate social security funds for unorganized workers. The Bill even makes provisions for registration of all three categories of workers namely: unorganized workers, gig workers and platform workers.


• According to the 2020 Bill, the National Social Security Board will act as the Board for the purposes of the welfare of gig workers and platform workers and can recommend as well as monitor schemes for gig workers and platform workers. In such cases, the Board will comprise of a different set of members including (i) five representatives of aggregators, nominated by the central government, (ii) five representatives of gig workers and platform workers, nominated by the central government, (iii) Director-General of the ESIC, and (iv) five representatives of state governments


• The 2020 Bill clarifies that schemes for gig workers and platform workers may be funded through a combination of contributions from the central government, state governments, and aggregators. For this purpose, a list of aggregators is specified in Schedule 7. These nine categories include ride-sharing services, food and grocery delivery services, content and media services, and e-marketplaces. Any contribution from such an aggregator may be at a rate notified by the government falling between 1-2% of the annual turnover of the aggregators. But, this contribution cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.


• Changes in the definition of certain terms-The 2020 Bill changes the definitions of certain terms in the Code. These include: (i) expanding the definition of ‘employees’ to include workers employed through contractors, (ii) expanding the definition of “inter-state migrant workers” to include self-employed workers from another state, (iii) expanding the definition of “platform worker” to additional categories of services or activities as may be notified by the government, (iv) expanding the definition of audio-visual productions to include films, web-based serials, talk shows, reality shows and sports shows, and (v), exempting construction works from the ambit of “building or other construction work” if the total cost of construction work exceeds Rs 50 lakhs (and if they employ more than a certain notified number of workers). The 2020 Bill reduces the gratuity period from five years to three years for working journalists.