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 bills 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.
Changes in 2020 Labour Bills
- According to the 2019 labour bill, the central government was authorized to act as the appropriate government for any central public sector undertaking (PSUs). The 2020 Bills lay down that the central government will continue to be the appropriate government for a central PSU even if the holding of the central government in the PSU becomes less than 50% after the commencement of the Bills.
- It was specifically mentioned in the 2019 Bills that the central government would be the appropriate government for industries such as railways, mines, telecom and banking, whereas, the 2020 Bills lay down that the central government will also be the suitable government for any "Controlled Industry".
- The 2019 Bills permitted settling of offenses which were not punishable with imprisonment, or with imprisonment and fine, subject to certain conditions. Compounding or settling of offenses was allowed for a sum of 50% of the maximum fine. According to the 2020 Bills compounding is allowed for a sum of 50% of the maximum fine for offenses with fine and offenses with imprisonment compounding is allowed for a sum of 75%, whereas in the Bill on Occupational Safety, 50% can be compounded where a 'penalty' is imposed for non-maintenance of registers and 75% for 'offenses' for falsification of records.
Code on Industrial Relations, 2020
The Industrial Relation Code Bill is formulated with the main motive to energize the industry and economic activity and free employees from the constraints of earlier labour laws.
The Industrial Relations Code amalgamates the features of three laws namely: the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947.
According to the Code on Industrial Relations the term 'workers' consists of all persons beside employed in a skilled or unskilled, manual, technical, operational and clerical capacity, supervisory staff drawing up to ₹18,000 a month as salary. It presents 'fixed-term employment', which aims to give employers the flexibility to hire workers based on requirements through a written contract. Fixed-term employees should be treated on a par with permanent workers in terms of hours of work, wages, allowances and other benefits, including statutory benefits such as gratuity.
The new Code states, any establishment that employs 300 or more workers must prepare standing orders relating to categories of workers, manner of allotting them time slots and hours of work, holidays, paydays, etc., shifts, attendance, conditions for leave, termination of employment, or suspension, besides the means available for the redress of grievances. Earlier, the 2019 Bill applied this to units with 100 employees or more, which now has been raised to 300 in the 2020 Code.
What does the Code on Industrial Relations say on trade unions?
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.
What are the provisions on lay-off and closure?
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.
How does the new Code affect the right to strike?
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.
Code on Social Security, 2020
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 be established to recommend social security schemes for unorganized workers, gig workers and platform workers.
