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What Companies Need to Know About the New 'Industrial Relations' Code!

The new Industrial Relations Code 2020 (IR Code 2020) was passed in both houses of the Parliament of India and received Presidential assent in September 2020. The code has been prepared by modifying, repealing, and combining the three Acts currently in existence, The Trade Unions Act of 1926, The Industrial Employment (Standing Order) Act of 1946, and The Industrial Disputes Act of 1947.

What do Companies Need to Know About the New IR Code 2020?

The objective of the code is to bring ease of doing business while safeguarding the rights of employees and employers through the implementation of progressive labour reforms. It aims to bring harmony and progress through fair dispute resolution practices in the industry.

The tenets of the code which directly impact organisations primarily cover the areas of:

  • Laws regarding Trade Unions

  • Conditions regarding employment in an Industrial Establishment

  • Settlement of Industrial Disputes

  • Definition of Unfair Labour Practices

  • On the part of Employers and Trade Unions of Employers
  • On the part of Workers and Trade unions of workers

Some Key Provisions in the IR Code 2020 and its Effect on Companies:

  • The definitions of “Employee” and “fixed-term employment” are redefined in the IR Code 2020. Now “Employee” means any person (other than an apprentice engaged under the Apprentices Act, 1961) employed by an industrial establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work for hire or reward, whether the terms of employment be express or implied, and also includes a person declared to be an employee by the appropriate Government, but does not include any member of the Armed Forces of the Union. “Fixed-term employment” means the engagement of a worker based on a written contract of employment for a fixed period. These definitions give clarity and additional safety to the worker and employer for any future disputes or regular compliance.
  • The Workman is now renamed as a worker in the new IR Code 2020. Organisations can now use a gender-neutral reference for all persons employed in the industry.
  • The IR Code 2020 gives a clear definition of Strike or Industrial Dispute. Now “Strike”” means a cessation of work by 50% of the body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal, under a common understanding. This is critical for the industry, as some disputes which end in strikes called by a few dissatisfied employees can result in process disruption causing loss of raw material, and goods, and loss of wages for workers.
  • The IR Code 2020 states that any industrial establishment where a minimum of one hundred or more workers are employed or have been employed on any day in the preceding twelve months shall have a Works Committee. The Works committee must promote cordial relations between employee and employer thus handling issues and providing solutions.
  • As per the IR Code 2020, every industrial establishment employing twenty or more workers shall have one or more Grievance Redressal Committees for the resolution of disputes arising out of individual grievances. Now the worker can raise his grievances to the Committee instead of going to a conciliation officer.
  • Provision is made in the IR Code 2020 for a negotiating union or a negotiating council, in an industrial establishment having a registered Trade Union. Organisations will welcome this move as the long pending legal disparity to recognise trade unions centrally has been closed.
  • The IR Code 2020 enforces that every industrial establishment wherein three hundred or more than three hundred workers, are employed or were employed on any day of the preceding twelve months must formulate and comply with certified standing orders. Smaller organisations get respite from standing orders as previously the threshold for applicability was more than a hundred employees. The IR Code 2020 now states that failure to certify, modify or comply with the finally certified standing orders will attract penalties not less than fifty thousand rupees, which may extend to two lakh rupees, the continuing offence will incur an additional fine of Rs.2000 per day; on subsequent contravention of the finally certified standing orders, a fine up to Rs.4,00,000 and imprisonment for a term up to 3 months, or both applies. With the escalation of penalties, organisations must be extra cautious about compliance with standing orders.
  • The IR Code 2020 provides for a time limit of ninety days from the date of suspension, to complete any investigation or inquiry if any worker is suspended by the employer pending investigation or inquiry into complaints or charges of misconduct against him. This time limit creates a framework for speedy dispute resolution for employees and employers.
  • As per the IR Code 2020, the Industrial Tribunal will now consist of two members, of which, one shall be a judicial member and the other will be an administrative member. Industrial dispute resolution will now be a more just and fairer practice as this was earlier conducted by a one-member tribunal.
  • The IR Code 2020 states that the appropriate Government must set up a fund called the worker re-skilling fund with the contribution of the employer of an industrial establishment of an amount equal to fifteen days of wages last drawn by the worker immediately before the retrenchment. The provision is a boon for the workers facing retrenchment, as now they have options to retrain themselves unlike earlier when there was no worker re-skilling provision.
  • The IR Code 2020 has the provision of prior notice for strikes, where no person employed in any industrial establishment shall go on strike, in breach of contract, without giving to the employer notice of strike, within sixty days before striking: or within fourteen days of giving such notice. This protects organisations against sudden unforeseen losses and brings structure to industrial functioning which was earlier only applicable to public utility service industries.
  • The IR Code 2020 code also creates provisions for central or state governments to exempt any new or class of new establishment from all or any provisions of the Code in the interest of the public. This flexibility of the Code is welcomed by organisations that survive on seasonal cycles or are affected by local situations.

The Industrial Relations Code 2020 will be effective in the entire Republic of India and the actual date of its coming into force is yet to be notified. The IR Code 2020 being a consolidation of the other existent Acts removes any contradictions or redundancies and brings clarity to the roles of the employer and employee. At Core Integra, we are committed to leveraging our expertise and knowledge to provide precautionary, effective, and value -based advice to our clients on industrial provisions and legally correct practices.