The Industrial Relations Code (IR Code) was passed last year and received the President’s assent on September 28. However, the effective date of commencement is still pending as the government is working to finalize implementing rules for the Code and there needs to be agreement among the states.
Labor is a concurrent subject under the Indian constitution, meaning it can be legislated on by both federal and state governments.
On September 29, the government amalgamated the following existing legislative Acts under the IR Code:
The IR Code is one of four new labor codes introduced for the purpose of simplifying and consolidating the country’s matrix of labor laws, which in turn will make it easier to comply with for foreign investors and the private sector.
Altogether, the four codes look at introducing uniformity in rules and regulations relating to wages, industrial relations, social security, and occupational safety and health to be in line with international best practices.
The main purpose of the IR Code is to benefit, both, employers and employees by:
Reforming India’s labor law has long been felt necessary by multiple stakeholders – to be updated to the current needs of the labor market and support a friendly business environment.
In recent years, as India has aggressively pitched its economy to foreign investors to set up here, many have pointed to the country’s labor and employment laws as limiting – erecting several compliance and regulatory barriers.
Under the IR Code, definitions of the terms – industry, worker, employer, industrial dispute, and fixed-term employment have been updated.
An industry refers to any systemic activity between employers and workers for the purpose of production, supply, or distribution of goods and services, regardless of whether or not this activity is pursued with the motive of profit or capital investment. Hospitals, educational, and scientific institutions now come under industry as per the new definition.
Specifically, an industry is not:
The following are now included within the new definition of worker:
The following are now included within the new definition of employer:
This definition is expanded to include any dispute or difference arising between an individual worker and employer that relates to discharge, dismissal, retrenchment, or termination of such worker within the ambit of the Code.
The provisions of a fixed-term worker have been extended to include the following:
The IR Code stipulates that for each establishment that employs more than 20 employees, a grievance redressal committee of maximum 10 members must be set up, that will be responsible for overseeing and resolving disputes. There should be equality in the number of members representing the employers, employees, as well as women employees. Representation of women workers in the committee should not be less than the proportion of women workers to the total workers in an establishment. Establishments that do not comply with the setting up of a GRC can be fined up to INR 100,000 (US$1,371).
The committee has been permitted one year to hear a party’s grievances. However, if there is any grievance that remains unresolved or if the committee declares an employee as aggrieved, the matter will no longer be limited to the jurisdiction of that establishment, and the employee has the right to seek conciliation proceedings.
All establishments with a registered trade union must set up a single negotiating union or council that will be responsible for handling all matters as prescribed by the IR Code.
Establishments that have only one functioning registered trade union will recognize that trade union to be the sole negotiating union of its employees, and this union will be subjected to certain criteria as prescribed by the Code.
For those establishments that have more than one functioning registered trade union, the union that is made up of 51 percent or more employees will be recognized as the sole negotiation union of its employees.
In establishments with multiple functioning registered trade unions – where none constitute 51 percent or more employees – the negotiation council that is set up should be made up of not less than 20 percent of the total number of employees who are employed in such an establishment.
A strike refers a concerted or mass causal leave by 50 percent or more employees of an establishment, on any working day.
The IR Code prescribes that only public utility (supply of water, electricity, gas) workers may go on a strike on the 14 th day of their in-advance 42-day notice of strike.
All other workers belonging to any industrial establishment – may not go on a strike either:
If the above conditions are met, no employer will be allowed to lock-out (be allowed to deny employment to) any of their employees.
By expanding the definition of a strike and imposing clear conditions of being able to strike, the IR Code intends to stop employees from going on strike arbitrarily and seeks to protect the interests of all parties affected.
The IR Code has pushed for the setting up of the National Industrial Tribunal and the constitution of either one or more industrial tribunals to begin handling industrial disputes. These tribunals will replace the existing labor courts, the court of inquiry, and the board of conciliation that had been set up under the jurisdiction of the existing Industrial Disputes Act.
Each tribunal will consist of:
The federal government may also notify the constitution of another or more National Industrial Tribunals as the adjudication of industrial disputes is a matter of national importance. Industrial establishments located in one or more states may need to approach the national-level tribunal to seek resolution to disputes.
A supervisory employee refers to an employee who has the power to hire, promote, award, transfer, recall, lay-off, suspend, and discipline other employees.
Under the IR Code, all supervisory employees who earn from between INR 10,000-18,000 (US$137-US$246) qualify as working employees, and employers can fulfil the same retrenchment requirements to terminate their services as they would any other of their employees.
Under the Industrial Disputes Act, industrial establishments of over 100 employees were required to seek permission from the appropriate government body to lay-off or retrench their employees when it came to closing industrial undertakings.
Under the Industrial Relations Code, this requirement has been waived off for industrial establishments, such as mines, factories, and plantations that require permission from the government to retrench their employees – if they hired not less than 300 employees on an average working day in the previous year.
The raising of the threshold (that is, the number of employees) will bring uniformity across all the states. It also provides employers with operational independence and encourages them to hire more employees.
In case of power shortage or natural calamities and during fires, flooding, explosions, or excessive inflammable gas in mines – employers do not require government approval. However, in case the government does not properly communicate to an employer the order of permission within a period of 60 days since the filing of the application, then it is deemed that permission has been granted for these 60 days and the application is disposed of.
The IR Code allows only those industrial establishments that have been defined by The Industrial Employment (Standing Orders) Act, 1946 and have 100 or more employees to formulate standing orders and have them certified (CSO).
Currently, some states have allowed their establishments to have as few as 50 employees while others have raised the applicability for CSO to 300 or more employees.
Thus, by removing the CSO requirement for new/ smaller industrial establishments, the IR Code establishes regulatory uniformity – making compliance easier for establishments with operations in multiple state jurisdictions.
Existing industrial establishments that already have CSO will continue to be governed by the same – if the provisions are consistent with the IR Code.
Unless specific or conditional exemption is granted under the IR Code, information technology (IT) and information technology-enabled services (ITeS) units will need to have CSO.
Further, commercial establishments, such as offices, that previously did not come within the purview of ‘industrial establishment’ under The Industrial Employment (Standing Orders) Act may get covered by the wider definition of industrial establishment under the IR Code, and need to have certified standing orders in place.
Establishments having 300 employees must prepare standing orders on the following matters:
The federal government is required to make model standing orders relating to conditions of service and other related matters. Where an employer adopts a model standing order of the federal government with respect to matters relevant to the employer’s industrial establishment or undertaking, then such model standing order shall be deemed to have been certified; the employer can forward this information to the concerned certifying officer as prescribed by the law / state authority.
Under the IR Code, fixed-term workers of those commercial establishments that need CSO are eligible to obtain the benefits of permanent employees, including gratuity, if they provide their services for a period of one year.
An employee re-skill fund will provide laid-off employees with opportunities to learn new skills and be able to secure new employment for themselves. This fund will be made use of by crediting the bank accounts of laid-off employees with wages worth 15 days of work within 45 days of their retrenchment.
According to the IR Code, the fund shall consist of the following:
The IR Code has set a limit of 90 days to investigate the misconduct of any employee suspended by their employers. This feature has been added under the IR Code to protect the interests of all employees and to ensure that they are treated fairly.
For specialist advice regarding doing business in India and/or training to ensure your organization is compliant under the upcoming labor codes, please feel free to contact our professional service advisors at india@dezshira.com.
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