Website: civilstap22@gmail.

com Contact us: 7889296332

INDUSTRIAL RELATIONS CODE, 2020

Website: civilstap22@gmail.com Contact us: 7889296332

Introduction to the Code on Industrial Relations, 2020

• As part of the labour reform schemes, the Ministry of Labour and Employment is aiming to simplify the
compliance landscape by introducing 4 new codes that consolidate 29 labour laws. Out of the 29 existing
laws, the Industrial Relations Code, IRC 2020 is replacing 3 regulations: the Trade Unions Act, 1926; the
Industrial Employment (Standing Orders) Act, 1946; and the Industrial Disputes Act, 1947.
• The Industrial Dispute Act of 1947 was intended to provide workers with a mechanism that would provide
relief against layoffs, downsizing and wrongful termination that is against the letter of the law. It also sought
to foster healthy labour relations by minimizing the scope for illegal strikes and lockouts and penalizing
unfair labour practices. Therefore, it provided a dispute resolution mechanism, as well as restrictions on
layoffs, downsizing and lockouts to ensure that collective bargaining can take place in a pleasant
environment.

• The Trade Unions Act of 1926 aimed to provide workers with better working conditions, better wages,
protection against abusive employment, a fair share of company profits, and to this end, allowed workers
to realize their right to form an association, as well as collective negotiation. It facilitated the organization
of workers unions and allowed greater participation of the workforce in the management of an
establishment.

• The purpose of the Industrial Employment (standing order) Act,1946, is to have it at the plant level and
other commercial establishments, to regulate industrial relations. This regulates the conditions of
employment, grievances, misconduct etc. of the workers employed in the Industry.
• The code streamlines the laws related to trade unions, employment conditions for industries, and a
comprehensive handling of industrial disputes. There is also a higher emphasis on building a strong
employer-employee relationship, creating better working conditions, collective bargaining, and re-skilling
employees.

Key definitions under the Code on Industrial Relations

Definition of workers
• The definition of workers has been expanded further to include journalists, sales promotion employees, and
employees who are working as supervisors but are earning less than Rs. 18,000 per month.
• An individual can be excluded from the definition of worker if either of the below conditions are satisfied:
• The person is employed mainly in a managerial or administrative capacity; or
• The person is employed in a supervisory capacity drawing wage exceeding Rs.18,000 per month or an
amount as may be notified by the Central Government from time to time;

Definition of industries
The definition of industries has been amended, to exclude the following categories of workplaces:
o Organisations offering charity, social, or philanthropic service
o Organisations that are under the control of the Government specifically dealing with defence research,
atomic energy, and space exploration
o Organisations specifically excluded by the central government, if any

Definition of industrial dispute

1. Any differences of opinion between employees and employers because of employee retrenchment,
dismissal, or termination.
2. The worker can appeal this with the governing body (also called the industrial tribunal) within 45 days from
the date of retrenchment or termination.

Definition of fixed term employment

Any form of employment with a written contract for a specific duration is considered fixed term employment.
The new definition proposes social security benefits for fixed term employees, including:
Website: civilstap22@gmail.com Contact us: 7889296332

1. The working hours, salary or wage, benefits and allowances should be the same for fixed term employees
as for the other full-time workers of the organisation.
2. The fixed term employees are also eligible for all the statutory benefits enjoyed by the regular employees,
even if the duration of employment is less than the recommended duration to be eligible for statutory
benefits.
3. The fixed term employees will also be eligible for gratuity if the length of the contract extends to a year.

Key provisions of the Code on Industrial Relations

Standing orders
Applicability
1. Industrial Relations Code 2020 states that the provisions regarding standing orders will apply to the
establishments that have had three hundred or more employees on any day in the preceding twelve months
or a year.
2. For all organisations employing a minimum of 300 employees, standing orders should be passed during the
following topics:
o How the workers are classified according to employment type (permanent, fixed term, contractors,
temporary workers, and apprentices).
o The process that the organisation is going to follow to communicate changes to the employees
including work period, hours of work, pay days and wage rates, shifts, attendance, and rules for late
coming.
o Conditions, rules, and approving authorities for leaves and holidays.
o Rules for termination of employment, and communication of the news to employees, extending to
suspensions of work because of misconduct.
o Remedy measures for employees against unfair treatment and exactions by the employer.
Where an employer adopts a model standing order of the Central 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 and the employer shall forward the information in this regard to the concerned certifying
officer in the manner as may be prescribed

Grievance handling committee

• Any employer with 20 or more employees has to have one or more grievance handling committees. The IRC
has incorporated new regulations that the previous regulation did not address. The panel cannot be more
than 10 people, and should have equal and fair representation from employers, employees, and women
employees.

Power of government to reject or modify the tribunal award

• Industrial Relations Code 2020 provides that the government may, in certain circumstances, postpone
enforcement of arbitral awards made by the tribunals for public reasons that threaten the national economy
or social justice.
• The Industrial Dispute Act,1947 contained similar provisions. In 2011, the Madras High Court (confirming a
1997 ruling by the Andhra Pradesh High Court) overturned these provisions on constitutional
grounds, ruling that the power of the executive branch to refuse or change the execution of an arbitral
award ruled it to be the executive branch makes it possible to appeal the decision of the tribunal and thus
violates the separation of powers between the executive and judiciary, which is part of the basic structure
of the constitution.

Strikes and lockouts

• No employee can strike without reporting a strike to the employer 14 days in advance. This notification is
valid for a maximum of 60 days.
• Likewise, no employer can lockout one of its employees without giving 14 days notice of the lockout. This
notification is valid for a maximum of 60 days.
• In addition, Industrial Relations Code 2020 prohibits strikes and lockouts:
Website: civilstap22@gmail.com Contact us: 7889296332

(i) during and up to seven days after arbitration; and

(ii) during and up to sixty days after or before trial in a court or arbitrator
(iii) during any period in which a settlement or arbitration award is in effect.
Employers are required to report to the relevant government and arbitration officer within five days of
receiving/announcing a strike/lockout.

Employee layoffs and retrenchment

1. The code defines layoffs as the inability of an employer to continue giving employment—due to shortage of
resources, materials or power, breakdown of machinery or natural calamities—for employees in their
payroll.
2. The code defines retrenchment as the employer deciding to terminate the services of the employee for any
reason excluding disciplinary action. Both layoff rules and retrenchment rules do not apply to organisations
with fewer than 50 employees.
3. The code has also taken a stricter stand on the severance wages for employees laid off or retrenched. If an
employee has completed one year of continuous service with the organisation, 50% of basic wages and
dearness allowance has to be paid if the employee is laid off. For retrenchment, the employee should be
given a one-month notice period, or paid an equivalent pay for the same period along with 15 days of wages
for every year of continuous service.

• For the benefit of the employers, the regulations around layoffs and retrenchment have been simplified.
Earlier, employers with more than 100 employees had to seek permission from the appropriate government
to lay off or retrench employees, and now the threshold has been increased to 300 employees.
• Notice For Retrenchment: In previous Act, One month’s notice was required (industry employing less than
50 workers), 3 Months’ notice (Industry employing not less than 100 workers) in writing indicating the
reasons for retrenchment.
In new code One month’s notice is required (or equivalent wages) and 15 days’ wages for every year of
continuous service.

Employee reskilling
• To support the retrenched employees, the industrial relations code has allocated funds for employees to
upskill themselves. Employees can get wages equivalent to 15 days of their last drawn salary. Employers
should transfer the funds to the employees within 45 days from employee retrenchment.
• Trade Union: negotiating union & negotiating council
• The Industrial Relations Code 2020 provides a new concept for negotiating trade unions or negotiating
councils in an industrial company. According to the stated provision:
• In the case of a single union in an industrial company, the employer recognizes that union as the sole
bargaining union of the workers.
• If there are several unions, the union is recognized by the employer as a bargaining union with 51% of the
employees in the industrial company’s model directory.
• In the case of several trade unions, none of which fulfil the above-mentioned 51% membership criteria, the
employer forms a negotiating council made up of representatives of these registered trade unions, who are
supported by at least 20% of the total workforce of the industrial company .
• Industrial Relations Code 2020 also provides that if the central / state government believes that there is a
need for a union or confederation to be recognized as a central / state union, that government may
recognize the trade unions alike.

SUMMARY: KEY HIGHLIGHTS OF THE CHANGES MADE

INDUSTRIAL DISPUTES
1. 1. The definition of the term “industry is modified in line with the Apex court verdict in
Bangalore Water Supply and Sewage Board Case.
2. Domestic services and the Institutions engaged in charitable social or philanthropic service are excluded
from the term “industry".
Website: civilstap22@gmail.com Contact us: 7889296332

3. Termination of the service of a worker as a result of completion of tenure of fixed term employment is now
not included under retrenchment.
4. Concerted mass casual leave by 50% or more workers be construed as strike.
5. The total number of members of the Grievance Redressal Committee increased from six to ten.
6. Notice shall not be required for effecting change in case of emergent situation requiring change of shift or
shift working otherwise than (except in accordance with standing orders in consultation with Grievance
Redressal Committee).
7. Prohibits strikes and lockouts in any industrial establishment without giving notice of 14 days.
8. Notice of strike or lockout validity is amended from 6 weeks to 60 days.
9. Wilful go slow shall be construed as unfair labour practice on the part of worker.
10. Time period for filing a grievance application is reduced from three years to one year.
11. Time period for raising industrial dispute before the conciliation officer is reduced to 2 years from 3 years.
12. Factories mines or plantations shall obtain permission from the appropriate Govt. , for retrenchment or lay
off if 300 or more workers.
13. Only tribunal has the power to entertain any suit in relation to dispute concerning trade unions and the
members
14. The employer shall contribute an amount equivalent to 15 days wages for every retrenched worker towards
the workers reskilling fund.

TRADE UNION
1. Special provision introduced for recognition of trade union.
2. If more than one trade unions are functioning the trade union having 51% or more workers support shall be
recognized as sole negotiating union.
3. If more than one trade unions are functioning and if no trade union is having 51% or more workers support
negotiating council to be formed(i.e., 1 representative for each 20% members.
4. Only one third of the total number of office bearers of the union or five office bearers whichever is lower
can be from outside the industry with which the union is connected.
STANDING ORDERS
1. Chapter IV concerning the Standing orders shall apply to the industrial establishment
in which 300 or more workers are employed (currently it is 100 or more)
2. Central Government shall draft model standing orders (currently both central and state Govt., has this
power).
3. The central Govt., would be the appropriate Govt., for telecommunication insurance and banking
companies.
4. Employers shall consult the trade unions or negotiating union council before submitting the draft standing
orders to the certifying officer.
5. Certifying officer to look in to the fairness or reasonableness of the provisions of any standing orders.
6. Certifying officer shall certify the standing orders within 60 days and in case of failure to certify within the
time limit then it will be deemed to have been approved.
7. Standing orders already certified shall continue to be in force.

OTHER CHANGES
1. Empowers the app Govt., to appoint officers for holding enquiry and impose penalty in certain
contraventions punishable with fine up to Rs. 50000.
2. Central Govt., would be the appropriate Govt., for metro railways.
3. The Central Government will be the appropriate Govt., for the establishment of contractors serving to
the establishment undertakings etc., of Central Govt.,
4. Constitution of Industrial Tribunal: Two members consisting of one judicial member and one member
from the administrative side.
5. There is an increase in Penalty in case of violation of the provisions of this code.
Website: civilstap22@gmail.com Contact us: 7889296332

6. Provision for compounding of offence is introduced. 50% of the maximum fine in case of offences
punishable only with fine and 75% of the maximum fine in case of the offences punishable with fine or
imprisonment up to one year;.

KEY IMPORTANT CHANGES:

Earlier Regulations New Regulations
No definitions were provided for fixed term All forms of employment with a written contract
employment. for a specific timeframe are classified as fixed term
Workforce were largely referred to as workmen in The employment.
Industrial Dispute Act, 1947. The term, 'workmen' is now renamed as 'worker'.
Organisations with more than 100 employees had to Establishments with less than 300 employees can
seek approval from the government to lay off or lay-off/ retrench/ close without the government's
retrench their employees. approval.
Employer is liable to pay an amount equivalent of
No concept of worker re-skill funds was introduced. 15 days of last drawn wages to retrenched
employees.
Impact of non-compliance
Offence Penalty
For first time defaulters, it is a fine of up to Rs.10 lakhs.
Violation of provisions under lay-off,
In case of subsequent offences, it will attract a fine up to 20
retrenchment, closure of establishment.
lakhs or imprisonment up to 6 months or both.

Short Title
Works Committee
Grievance
Redressal Committee
Preparation of draft Standing
300 or more workers period of six months from the date of commencement
Orders by Employer
Notice of change in Conditions
of Service
Threshold for
Requirement
Applicability
Constitution of Works Committee consisting of
100 or more workers
representatives of employer and workers
Constitution of Grievance Redressal Committees for
20 or more workers consisting of equal number of members representing
employer and workers
Employer must prepare draft Standing Orders within a
of this Code
Employers who propose to effect any change in
conditions of service applicable to any worker in respect
300 or more workers
of any matter under the Third Schedule shall affect such
change by giving 21 days’ notice to workers

It shall be the duty of every employer for the purposes

Duty of an employer to
of this Chapter to maintain a muster roll and to provide
maintain muster rolls of 50 or more workers
for making of entries therein by workers who present
workers
themselves for work

Contribution of the employer of an industrial

Contribution to Worker Re- establishment that is equal to fifteen days wages last
Skilling Fund drawn by the worker immediately before
retrenchment
Website: civilstap22@gmail.com Contact us: 7889296332