​The Labour law of India underwent a landmark overhaul in September 2020, with the promulgation of four national “Labour Codes”. These Labour Codes revise and codify the otherwise 29 scattered national labour laws into four broad heads,

1. Industrial relations 
2. Wages
3. Social security
4. Occupational health and safety, and working conditions.

The term “industrial relations” has been defined by the International Labour Organization as “the individual and collective relations between workers or representatives of workers and employees, arising out of the work situation.” The IRC Code marks a significant shift in the way industrial relations are regulated in India by consolidating three major legislations into a single framework. It aims to streamline dispute resolution, introduce greater flexibility for employers, and redefine the roles of trade unions and standing orders ultimately seeking to balance ease of doing business with workers’ rights. The codes subsume the following 3 acts: 

1. The Trade Unions Act 1926
2. The Industrial Employment (Standing Orders) Act 1946
3. The Industrial Disputes Act 1947

Let us now delve into the key provisions of the Industrial Relations Code, 2020:

Definition of Worker

• Under the existing labour law, the definitions of 'worker', 'employee', and 'employer' varied across different labour laws, leading to inconsistencies and confusion. The code brings uniformity by clearly distinguishing between 'worker' and 'employee'.
• Previously, ‘worker’ did not include working journalists or sales promotion employees under all laws, and there was ambiguity regarding supervisory roles. The IRC 2020 expands the definition of ‘worker’ to explicitly include working journalists and sales promotion employees, while excluding apprentices. It also clarifies that individuals employed in a supervisory capacity earning less than INR 18,000 per month (or such amount as notified by the Central Government) will be considered ‘workers’.
• Similarly, the definition of ‘employer’ has been broadened. Earlier, contractors and legal representatives of deceased employers were not uniformly recognized. The new Code includes both these categories within the definition, thereby ensuring wider accountability and coverage under labour laws.
  

Negotiating unions

• Earlier the provision of negotiating unions did not exist. The code introduces the concept of “Negotiating Unions'' that have been conferred with the authority to formally negotiate with the employers on behalf of the workers.
• Under Section 14, where an industrial establishment consists of multiple Trade Unions, the Trade Union having more than half of the workers shall be considered as the Negotiating Union. Further, where none of the multiple Trade Unions have more than half of the workers as specified in the muster roll of the industrial establishment, a Negotiating Council is to be constituted by the employer which will include the representatives only of the Trade Unions that have more than 20% of the workers in the establishment.

Fixed-term employment

• The code also introduces the concept of fixed term contracts wherein a worker need not be employed on a permanent basis and can work for a fixed period of time provided in a written contract. The same did not exist in the previous laws.
• Fixed term employment will be eligible to all statutory benefits including gratuity which will be available to him even for serving for one year.
• However, the benefits, wages, and hours of work of a fixed term employee have been prescribed to be the same as that of a permanent worker. That being said, retrenchment compensation is not provided to fixed term employees as the definition of retrenchment excludes any termination of the worker due to the completion of a fixed tenure.

Notice Period for strikes and lockouts

• The IRC 2020 provides for a requirement of a notice period of 14 days for strikes and lockouts in any establishment. This criterion, at present, is only for public utility services.
• As per Section 60 after receiving the notice of dispute, it shall be deemed that conciliation proceedings have been commenced from the date of the first meeting held by the conciliation officer. Furthermore, under Section 62, workers are not permitted to go on strike when conciliation proceedings are pending. Lastly, any strike held in contravention of Section 62 is to be rendered illegal. ​

Worker Re-skilling Fund

• The Industrial Relations Code, 2020 introduces a Re-skilling Fund, which did not exist earlier, aimed at supporting retrenched workers through training. The fund will comprise:
  • A contribution from the employer equal to 15 days’ last drawn wages of the retrenched worker (or any other number of days as may be notified), and
  • Additional contributions from other sources as prescribed by the appropriate government.
• The retrenched worker will receive the payout within 45 days of retrenchment. This amount is over and above the statutory retrenchment compensation.

Prior permission for Layoff and retrenchment

• Employers of industrial establishments such as mines, factories, and plantations employing at least 300 people are required to obtain prior approval from the state or national government prior to laying off, retrenchment, or closure. Earlier, it applied for industrial establishments where 100 or more workers are employed.

Power to Exempt

• The code empowers the Central or State Government to exempt any new establishment or category of new establishments from any or all provisions of the Code, if deemed necessary in the public interest. Earlier, the provision did not exist except partially under Industrial Employment (Standing Orders) Act, 1946.

Compounding offences

• Earlier central labour laws did not provide a uniform provision for compounding of offences, except through certain state amendments. The IRC 2020 introduces a centralized mechanism for compounding allowing offences punishable with fines to be settled by paying 50% of the maximum fine, and those involving imprisonment up to one year or fine, by paying 75%. The collected amounts will be credited to the Social Security Fund under the Code on Social Security, 2020

From the above analysis, it appears that a lot of flexibility has indeed been accorded to employers to ensure that labour laws do not encumber the ease of doing business. This, in turn, is bound to attract further investors and thus may have a positive impact on the economy in that regard. However, the workers themselves are just as important to the Indian economy. Thus, a balancing act between commercial interests and labour rights is required to be undertaken by the Government. The implementation of and aftermaths of the concepts introduced by IRC are yet to be seen as the codes have not been implemented yet. Meanwhile, there is scope for further clarity on certain provisions, such as the formation of Negotiating Councils and the framework governing fixed-term employment. Striking a balanced approach between commercial imperatives and labour rights will be key to the long-term success of these reforms.

Disclaimer

The information provided herein is intended solely for general knowledge and informational purposes. It does not constitute legal advice or a substitute for professional consultation. While efforts have been made to ensure the accuracy of the content, users are advised to refer to the original Acts, rules, notifications, or consult with a qualified legal professional for interpretation or application. This content should not be relied upon for any legal or financial decisions.

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