Labour Codes 2020 – An Appraisal

On 23rd September 2020, the Rajya Sabha passed three labour codes viz, The Industrial Relations Code, The Social Security Code and the Occupational Safety, Health and Working Conditions Code. This was in furtherance of the objective to streamline the multiple labour laws. These three Codes along with the Code of Wages passed in 2019 have together consolidated 29 different labour laws into 4 comprehensive Codes.

The Industrial Relations Code, 2020

The Industrial Relations Code 2020 ( IR Code , 2020 ) is an amalgamation of 3 Acts , Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946. The aim here is to facilitate a better relationship between employer and employee by introducing simpler adjudication mechanisms.

The foremost change has been made to the definition of “industry”. The earlier ambiguous definition has been replaced with a comprehensive one. The current definition of “industry” complies with the triple test consisting of (i) systematic activity , (ii) organized by cooperation between employer and employee consisting of a direct and substantial relationship between them and (iii) for production and distribution of goods and services calculated to satisfy human wants and wishes. The definition further specifically excludes religious and charitable institutions.
Additionally the definition of Appropriate Government has been expanded to include establishments of contractors under in its ambit. With regard to “employees” , the IR Code provides a definition for “employees” and an attempt has been made to use both terms almost interchangeability to ensure that both are benefitted by the provisions of the act.
Strike

While the updated definition may help resolve many interpretational issues,
the provisions regarding strikes present a challenge. At the outset, the definition of strike under the Industrial Disputes Act 1947 has been modified to also include within it “ concerted casual leave”. But real contention lies with the increase in notice period. Originally, the Industrial Disputes Act 1947, differentiated between public utility services and non public utility services with regard to the right to strike. Due to the essential nature of public utility services, a maximum 6 weeks and minimum 14 days’ notice before striking was a mandatory requirement.

The IR Code provides no such differentiation. Here the notice period has been extended to a maximum of 60 days and a minimum of 14 days. This has been made applicable to all industrial establishments irrespective of the fact if they are a public utility service or not. Further , under S.60 a conciliation proceeding automatically commences as soon as a notice of strike or lockout is given and S 62(d) prohibits a strike or lockout during the pendency of conciliation proceedings. Should conciliation proceedings fail, any party is permitted to make an application to the Tribunal. S 62(e) prohibits a strike or lockout during the pendency of proceedings before the Tribunal and after 60 days after conclusion of proceedings.

Thus, the time taken to resolve the issues via the mechanism established can realistically exceed the 60 day notice period, making it very difficult for employees or employers to conduct a meaningful strike or lockout. It is clear that the intention here is to resolve points of contention between employers and employees before a strike is conducted but the excessive notice periods in palace defeat the purpose of strike or a lockout.

Tribunals

The multiple labour laws also came with their own enforcement mechanisms. The IR Code 2020 has successfully streamlined the formal procedures by establishing one Industrial Tribunal with two members, one judicial and one administrative to be appointed by the Central Government.
The earlier Industrial Disputes Act 1947 had a dual court system. A Labour Court that adjudicated upon issues listed in the Second Schedule and an Industrial Tribunal which adjudicated upon matters listed in the Second Schedule or the Third Schedule. Streamlining of the adjudication process will reduce the confusion in the system and facilitate efficient dispute resolution.

There has also been a shift in perspective from collective dispute resolution to solving individual issues as well. This is evident from the upgraded definition of “industrial dispute”. The Industrial Dispute Act 1947 emphasized on dispute resolution with respect to workmen and employers in general. But under the Code “industrial dispute” has been expanded to also include dispute or difference between an individual worker and an employer connected with, or arising out of discharge, dismissal, retrenchment or termination of such worker.

However, the new Code under S 55 (3) gives the appropriate government and the Central government to modify or completely reject the award of the Tribunal on public grounds affecting national economy or social justice. This provision is reminiscent of S. 17A the Industrial Disputes Act, 1947. In 2010 the constitutionality of the section was challenged on the ground of hampering the independence of the judiciary in the Madras High Court. The section was held to be unconstitutional “ By conferring such power on the executive under Section 17-A of the Act, the Parliament, has in essence, caused a severe jolt to the independence of the judiciary. Apart from that, the celebrated concept of separation of powers as ordained in the Constitution is also infringed by the impugned provision. Thus, the impugned provision is a serious threat to the basic structure and if allowed to remain in operation, it will undoubtedly shake the foundation upon which our democracy rests.” The section is a clear violation of the principle of separation and powers and it should, in accordance with the Madras High Court judgement, be withdrawn.

Applicability of Standing Orders

The IR Code of 2020 also changed the minimum threshold of workers required for Standing Orders to be applicable. Standing Orders are essentially rules governing the conduct of workmen. They are framed for issues like working hours, attendance, holidays, termination etc. They have to be certified by the Certifying Officer appointed by the government under the Code, before being implemented in the industrial establishment.

The Code has increased the threshold of minimum requirement of workers for applicability of standing orders from 100 to 300 workmen. Similarly, under Chapter X of the IR Code, 2020, establishments with 300 or more workers cannot lay off or retrench workers without prior permission of the appropriate government. The old limit for this was 100 workers.

It is argued that the increase in the minimum threshold of workers, gives employers unfettered powers to govern the conduct of employees in establishments with less than 300 people. A fine of Rs 1,00 000 extendable to Rs 10,00,000 can be levied upon contravention of this provision. It is argued that this will allow employers to hire and fire at their whim, thus threatening job security. However the government contends that the older threshold forced establishments to keep less than 100 workers to escape the provisions. The changes will encourage employers to hire more people thus increasing employment. The actual effect of this provision will only come to light when it is implemented.

Fixed -Term Employee

A new class of employees identified as “fixed -term employee” has been included in the code. This refers to an employee who works on the basis of a contract of employment for a fixed period of time. Under the Code, such an employee has been given statutory benefits that are at par with a permanent worker. Further, if such a worker works under a contract for a period of one year, then he/she becomes eligible for payment of gratuity. In furtherance of this, the definition of retrenchment has been improved to specifically exclude the situation of compilation of tenure under a contract.

This enables employers to hire workers on a contract for specific assignments or for a limited tenure which is extremely beneficial for seasonal industries. The provision statutory benefits also caters to the interest of the employees, especially those who work for a longer period . The drawback here is that this might encourage employers to hire fixed term employees for jobs reserved for permanent employees. Since this is not an organized class, they have little bargaining power to demand better wages, working conditions, renewal of contract etc, and thus might be exploited.

“Fixed term employment” was introduced for all sectors by the Ministry of Labour and Employment vide notification 16th March 2018 which amended the Industrial Employment (Standing Orders) Central Rules, 1946.
Negotiating Unions

The IR Code has initiated “ Negotiating Unions” under Section 14, where an industrial establishment recognizes one trade union as a negotiating union. This will help workers attain a better bargaining position providing a level playing field for effective negotiation.

Where a single trade union is operational, it is automatically recognized as the negotiating union.. However, where there is more than one trade union, the trade union with 51% or more workers on the muster roll of that industrial establishment will be recognized as the negotiating union. Where there is no single trade union with 51% of the workers, a “Negotiating Council” has to be created. This will consist of representatives of such registered Trade Unions which have the support of not less than twenty per cent. of the total workers on the muster roll of that industrial establishment. It is possible that a situation may arise where there are multiple trade unions with less than 20% of the total workers.

Re-Skilling

A much needed provision for improving employment prospects in a fast paced market , “ Re- Skilling” will help employees upgrade their skills as per the market demands. To facilitate this, the Code envisages a “Re-skilling Fund”. This fund under S 83 is aimed to be utilized for the training of retrenched workers. Industrial establishments are required to make a contribution of an amount equivalent to 15 days wages last drawn by the worker immediately before retrenchment, to be credited within 45 days of retrenchment.

Code on Social Security

The Code on Social Security consolidates nine laws including the Employees’ Provident Fund Act, 1952; the Maternity Benefit Act, 1961; and the Unorganized Workers’ Social Security Act, 2008, essentially establishing a complete social security framework.

This will be applicable to establishments above a certain specified size or a certain income level. The same will be notified. The key feature of this code is that it aims to develop regulations with respect to the workers of the unorganized sector which remains largely unregulated. It defines an unorganized worker as “ home-based worker, self-employed worker or a wage worker in the unorganized sector and includes a worker in the organized sector who is not covered by the Industrial Disputes Act, 1947 or Chapters III to VII of this Code”

Social Security Schemes

Under S.114 of the Code, the Central Government is empowered to frame social security schemes for gig workers and platform workers with regard to several issues like health and maternity benefits, accident insurance, creche facilities etc. A separate Social Security Fund shall also be created for the social security and welfare of the unorganized workers, gig workers and platform workers. These schemes include Employees’ Provident Fund Scheme , Employees’ Pension Scheme , Employees’ Deposit Linked Insurance Scheme. To administer the schemes it establishes several boards like a Board of Trustees of the Employees’ Provident Fund, and a National Social Security Board for unorganized workers. However, these schemes are not universally applicable. The Employee State Insurance Coverage is extended to all establishments employing 10 or more persons and Employee Provident Fund Coverage to all establishments where 20 or more people are employed.

An important element of this Code is the inclusion of aggregators. Services like Ola. Uber, Swiggy, Zomato and the likes dominate today’s market. The core of their functioning is dependent on countless delivery boys and drivers who reach the consumers doorstep. This Code includes this entire class of people who are hired on a contractual basis rendering them ineligible for statutory benefits. This Code not only changes that and also makes aggregators a part of the solution. The National Social Security Board created under S 6 when works for the welfare of the gig/platform workers, is constituted in such a way that it includes representatives of aggregators, gig workers and platform workers among others, nominated by the Central Government.

Additionally, the Code also puts responsibility on the aggregators for funding of the various schemes. These include ride sharing services, food and grocery delivery services, e – marketplaces etc. The contribution by an aggregator will range around 1-2% of their annual turn over and it cannot exceed 5% of the amount paid or payable by an aggregator to gig workers and platform workers.

In the context of gig and platform workers, one might notice that their definitions present a conflict. A gig worker is one who earns from activities that lie outside the traditional employee- employer relationship. A platform worker, on the other hand is also defined as lying outside a traditional employer – employee relationship where employees access organizations or individuals via an online platform. Practically, this might create a conflict. In the situation of a taxi aggregator, there is no formal employer- employee relationship. Drivers use their own vehicle , accept rides and even have freedom to work for the competitor simultaneously. This would typically fall under the definition of a gig worker. But at the same time, the driver is using an online platform to get access to rides which also satisfies the definition of a platform worker. There is a need to make one or both definitions specific to avoid conflict.

For women, maternity bonus up to Rs 3500 or an amount notified by the Central Government, has been provided for where the employer does not provide for pre-natal confinement and post- natal care free of charge.

Gratuity

The Code provides payment of gratuity upon completion of 5 years of service. In case of working journalists, the time period has been reduced from 5 years to 3 years. Further, the time limit is not applicable when there is fixed term employment. Further the proviso to S53(2) lays down that in case of fixed term employment, gratuity is given at a pro rata basis. This implies that gratuity can be made payable even if the fixed term contract is less than one year long. This is in direct contradiction of the payment of gratuity under the IR Code, where a fixed term employee becomes eligible for gratuity upon one year of completion of contract. There is a need to reconcile the difference between the two Codes.

Registration

To avail of the benefits under the Code, unorganized workers are required to register themselves. Under S113, successful registration of any unorganized worker, gig worker or platform worker requires that the person be at least 16 years of age and submit a self-declaration in the prescribed format. Submission of Aadhaar number is mandatory under this section which might affect accessibility of the provisions of the Code since every unorganized worker may not possess an Aadhaar card. The reason behind the requirement for Aadhaar for registration as an unorganized worker has not been justified.

Apart from this, the mandatory requirement of providing Aadhaar card goes directly against the recent Supreme Court judgement in Justice K.S. Puttaswamy Vs. Union of India which laid down that Aadhaar linkage can be made mandatory for subsidies or benefits incurred from the Consolidated Fund of India. The provisions of the Act clearly do not satisfy the criteria of the judgement.

The Occupational Safety, Health and Working Conditions Code.

This code has consolidated thirteen labour enactments ranging from factories, dock workers, building , inter-state migrant workers to working journalists and other newspaper employees, motor transport workers, sales promotion employees, beedi and cigar workers, cine workers, cinema theatre workers.

Key Features

1. Single Registration : This Code provides for compulsory registration of establishments within 60 days of the commencement of the Code. It introduces a single streamlined registration process which will enhance the ease of doing business. At the conclusion of the registration process, every establishment will be given a unique identification number which will be stored in a centralized database. This number will be used for all official purposes.

2. Formal appointment letter : The Code has also made issuing a formal appointment letter compulsory. This acts as proof of the existence of an employer – employee relationship and will help prevent exploitation of workers.

3. Workday and Leave : It provides for a 8 hour workday for adults with a maximum 6 day work week. It allows women to work in establishments and do all types of work. Further, women can also work before 6am and after 7pm with their consent. In case of hazardous work, the appropriate government can require establishments to provide adequate safeguards for employment of women. The Code further lays down that workers must receive paid annual leave for at least one in 20 days of the period spent on duty. Also, wherein, sales promotional employees are there in an establishment, medical leaves must be provided for at least one-eighteenth of the period of service. During medical leaves, workers must be paid half of their daily wages.

4. Rights and Duties: In addition to the rights and duties of employers, the Code also includes rights and duties of employees. Employees should care for their own health, follow safety standards , promptly report unsafe conditions to the inspector. This fosters the idea that the maintenance of health and safety in the workplace required initiative from both the interested parties.

5. Audio visual production : The Code for the first time, also incorporates audio – visual workers including actor, musician, singer, anchor, news reader, dancer, dubbing artist or stunt person or to do any work, skilled, unskilled, manual, supervisory, technical, artistic etc. It also provides for a wide definition for audio- visual production including features films, non-feature films, television, web- based serials, talk shows, reality shows and sport shows.

Contract Labour

This includes a labour hired by a contractor with or without the knowledge of the employer and also includes a migrant worker. The Code introduces special provisions for contractual labour applicable to establishments employing 50 or more contractual labourers in a year. The responsibility of providing contractual labour with basic amenities and ensuring the welfare of the contractual labour, as well as payment of timely wages, has been cast upon the principal employer.

The Code under S57 prohibits employment of contractual labour in core activities except when :(a) the normal functioning of the establishment is such that the activity is ordinarily done through contractor; or (b) the activities are such that they do not require full time workers for the major portion of the working hours in a day or for longer periods, as the case may be; (c) any sudden increase of volume of work in the core activity which needs to be accomplished in a specified time. This has been introduced to discourage hiring of contractual labour for core work which is usually performed by permanent employees.

Provisions for Migrant Labourers

The Code has also taken into consideration the difficulties faced by migrant – workers and thus includes special provisions for them. The appropriate government here is required to develop schemes to allow a migrant worker to avail of the Public Distribution System either in the native state or in the destination state. A helpline also has to be established by the appropriate government for easy access to accurate information. Additionally, the employer has also been entrusted with the responsibility of giving a lump sum as fare for journey to and from the native place.

Inspector Cum Facilitator

For the purpose of conducting timely inspections, the act provides for the appropriate Government to appoint “ Inspector – Cum Facilitators”. The method of inspection has also been revamped with provision for web based inspection and electronic submission of reports. The establishment to be inspected is also chosen randomly to prevent any bias in the process. The surprise element in the inspection process will help break the nexus between employers and inspectors.

Conclusion

Introduction of the labour codes to streamline the multiple labour laws is a very good initiative. The Codes clearly define the rights and liabilities of employers and employees and lay down proper dispute resolution mechanisms. The Social Security Code has taken an innovative step by including aggregators within its ambit. The Codes will certainly help organize the labour laws, it suffers from some conflicts, contradictions and loopholes, which should be reconciled before its enforcement to prevent future legal conflicts.


ABOUT THE AUTHOR

Saanchi Wadhwa

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Saanchi is a final-year student at Amity Law School, Delhi. She has an appetite for exploring contemporary legal issues and has an avid interest in constitutional law, technology law and arbitration. She can be reached at wadhwasaanchi@gmail.com.

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