Industrial Relations Code Bill 2019 – Assessing need for labour law reforms

Last Updated at: December 04, 2019
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Industrial Relations Code Bill 2019 - Assessing need for labour law reforms

The nature of employment in the Indian economy has undergone several transformative changes owing to technology, foreign investments, increasing global trade and socio-welfare reforms initiated by the government. In the last session of parliament, several labour law reforms have been introduced – namely, the Occupational Safety, Health and Working Conditions Bill, The Code on Wages and the Code on Social Security, which is currently in the pre-legislative stage. The draft Code on Industrial Relations has been prepared after amalgamating, simplifying and rationalising relevant provisions of three Central Labour Acts – the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. In this backdrop, we assess the salient features of the Industrial Relations Code Bill 2019, need for such reforms and also highlight why workers groups such as the Bhartiya Mazdoor Sangh, Centre of Indian Trade Unions (CITU) etc are opposing it.

Antecedents to Industrial Relations Code Bill 2019

The preamble to the Industrial Relations Code Bill 2019 mentions it as an act to consolidate and amend the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, investigation and settlement of industrial disputes and for matters connected therewith or incidental thereto.

In the recent few years, data has shown that unemployment has reached an all-time high of 45 years. As more people became available for the job market, companies were often seen to resort unfair tactics and exercise power over workers. Car manufacturing company GM Motors is battling one of the worst global workers strike so far, losing almost $90 million every day. The management of many companies also views trade unions as a threat and often set up ineffective committees to negotiate with management. With three different central laws and many state laws governing this complexity of the relationship between management and workers, the idea of a consolidated Industrial Relations Code Bill was mooted.

Ramifications of the Industrial Relations Code for employers

  • The Bill has kept the previous threshold of 100 employees wherein companies can lay off employees within this number without any approval. While some states have already increased this number to 300, most haven’t. However, the government has been given the power to do so without parliamentary approval, making the process of retrenchment slightly easier. The threshold still remains low, as companies become larger and operate at much bigger levels than the act envisages.
  • Establishment of a retrenchment fund and providing for a reskilling fund for laid-off workers to enable them to take up another job is an additional cost for employers, albeit with social benefits.
  • It allows companies to hire workers on a fixed-term contract of any duration, and notice requirements etc would not be required, making the process of task-based recruitment, short term recruitment and contractual services easier. It would also enable startups and early-stage companies to survive on a staple of fixed-term employees without attracting stringent labour law regulations.

What does the Industrial Relations Code mean for workers?

  • Equal treatment of fixed-term workers – While workers can be hired seasonally for six months or a year, all workers will be treated at par with regular workers for benefits. The fixed-term employees will get all statutory benefits on a par with the regular employees who do work of the same or similar nature.
  • Retrenchment provisions will not be attracted at the end of the termination of a fixed-term contract, thereby precluding retrenchment benefits from such workers.
  • A retrenched employee would also be paid 15 days’ wages from the fund within 45 days of retrenchment.
  • It also bans strikes and lockouts without giving 14 days notice, a provision that was so far applicable only in case of essential services such as railways, electricity, press etc.

Administrative changes

  • A two-member tribunal has been set up for important cases that need to be adjudicated jointly and the rest by a single member, resulting in speedier disposal of cases, and hopefully, easier and efficient resolution process for both workers and employers. The Bill also provides for vesting of powers with government officers for adjudication of disputes involving penalty as fines thereby lessening the burden on the tribunal.

Why are trade unions protesting against the Industrial Relations Code?

Other than the provisions on strikes, lockouts, the Industrial Relations Code Bill makes a significant departure from the existing labour laws and introduces a provision for “sole negotiating union” for negotiations with 75% or more representation of workers in a trade union. It is noteworthy that the trend in India has been for trade unions to join together in a cause, and it is virtually impossible for a trade union to claim representation of 75% of workers or more.

Significance of the Code in the current economic situation

While the Code is being met with criticism for giving legislative nod to fixed-term contracts as opposed to job security, there is no denying that the Indian economy is growing at 5%, a six-year low, while the country’s factory output shrank for the second straight month at 4.3%, and a deceleration in core industries is seen. The ease of compliance of labour laws through consolidated acts such as the Industrial Relations Code Bill 2019 is likely to promote the setting up of more enterprises, thus catalysing the creation of employment opportunities in the country and boosting possibilities on inward investment.

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    Avani Mishra is a graduate in law from the National Law Institute University, Bhopal. She qualified the Company Secretary course with an All India Rank 1 and is a recipient of the President’s Gold Medal for her academic distinctions. She also holds a B.Com degree with a specialization in Corporate Affairs and Administration.