Overview
The Industrial Relations Code, 2020 is part of India’s major labor law reforms, consolidating and updating three earlier laws governing trade unions, employment terms, and dispute resolution. It subsumes the Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946. The objective of the Industrial Relations (IR) Code is to modernize the legal framework for industrial relations, making it more flexible for employers to manage their workforce while aiming to protect workers’ rights to organize, negotiate, and seek redress for grievances. Enacted in September 2020, the IR Code is awaiting implementation (dependent on finalization of rules by the central and state governments). It introduces changes in areas like how trade unions are recognized, thresholds for when standing orders (workplace rules) are needed, conditions for strikes/lockouts, and mechanisms for dispute resolution, thereby significantly impacting HR and employment relations once in effect.
Trade Unions and Collective Bargaining
Under the IR Code, the formation and recognition of trade unions are addressed with more clarity:
• It retains the right of workers to form unions and for unions to get registered (with the Registrar of Trade Unions). The registration process remains similar to the old Trade Unions Act, but the Code introduces the concept of a “negotiating union” or “negotiating council” in an establishment. If there are multiple unions in an establishment, the one with the support of 51% or more workers will be recognized as the sole negotiating union. If no single union has 51% support, then a negotiating council can be formed with representatives from various unions (proportionate to their membership). This is intended to streamline collective bargaining by identifying clear counterparties.
• The Code provides certain rights to registered trade unions, including the ability to negotiate with employers, represent workers in disputes, etc. It also continues provisions regarding the immunity of union office bearers from certain civil or criminal liabilities for actions done in furtherance of a trade dispute (as long as peaceful, etc.). Trade union leaders who are employees are protected from being easily terminated for union activities (unfair labor practice provisions cover victimization for union involvement).
• The IR Code also enumerates Unfair Labor Practices by employers and unions (largely carried from old laws). For employers, these include things like interfering with union formation, discriminating against employees for being union members, or refusing collective bargaining in good faith. For unions, unfair practices include coercing employees to join or continue membership, or acts of violence. These provisions mean that HR and management must be cautious to respect employees’ rights to unionize and not indulge in union-busting tactics that could be legally challenged.
Standing Orders and Conditions of Service
The component from the Industrial Employment (Standing Orders) Act is integrated into the IR Code, setting requirements for standing orders (i.e., formalized employment rules) for certain establishments:
• Previously, any establishment with 100 or more workmen was required to have certified standing orders defining conditions of work (like classification of workers, work hours, leave, misconduct and disciplinary procedures, termination processes, etc.). The IR Code has raised this threshold to 300 or more workers. This means smaller firms (with less than 300 workers) will not be mandated to have standing orders, which the government believes will give them flexibility. However, the government can reduce that threshold by notification for specific industries or the state can, so one must check applicable rules.
• For those large employers covered, the process remains that draft standing orders (aligned with model standing orders provided by law) must be prepared in consultation with workers (or their union) and submitted for certification by the certifying officer. If a union exists, they will negotiate the content. The Code provides model standing orders which automatically apply if an employer doesn’t have its own certified version in place. These standing orders cover crucial matters like how dismissals for misconduct should be handled, what constitutes misconduct, leave policy, attendance rules, etc., giving both workers and management a clear framework. Under the Code, once you reach 300 employees, having these in place will be a compliance requirement and also a good practice to maintain industrial harmony.
• Another change is that the IR Code allows fixed-term employment across all sectors. Fixed-term employees (those on a contract for a fixed duration) are to get the same benefits as permanent employees (pro-rata) and are also entitled to gratuity if they’ve worked for over a year (note, the Social Security Code also dealt with gratuity for fixed-term). This change allows employers flexibility to hire for specific periods while ensuring those workers aren’t denied statutory benefits.
Strikes, Lockouts, and Dispute Resolution
The IR Code consolidates the dispute resolution processes and alters the rules for strikes and lockouts:
• Strikes/Lockouts: The Code mandates that in all establishments (not just public utilities as was earlier), workers have to provide a 60-day notice before going on strike, if they are in a dispute situation. After giving notice, they cannot strike for 60 days, or if the dispute is referred to a tribunal or arbitration, until 60 days after those proceedings. Similarly, employers must give notice of lockout. This is a significant change – earlier, the notice requirement was only for public utility services; now it covers all. The aim is to encourage resolution or intervention before work stoppages occur. Wildcat strikes (sudden strikes without notice) would thus be illegal across the board under the Code.
• Conciliation and Adjudication: The machinery remains: conciliation officers will attempt to reconcile disputes. However, the Code allows certain disputes (like those concerning termination of an individual worker, called “industrial disputes” in case of individual grievance also if it’s raised) to go to a new body called a Industrial Tribunal (which now combines the earlier separate Labor Court and Tribunal functions) without needing a government reference. In other words, a worker who is aggrieved by, say, dismissal can directly apply to the Tribunal after conciliation failure, rather than waiting for a governmental reference (which was a big bottleneck in the old regime). The tribunals will consist of two members (one judicial, one administrative) for certain cases, or a single member for others, making them a bit different from the old ones. Awards given by Industrial Tribunals are binding, subject to any appeal. The IR Code also provides for a slight change in the appellate mechanism by establishing a Industrial Relations Court possibly (need to confirm specifics, but there might be a provision to appeal certain tribunal awards).
• Grievance Redressal and Disciplinary Proceedings: The Code requires establishments with 20 or more workers to have an Internal Grievance Redressal Committee to address individual grievances. This encourages resolution of issues internally. Also, for any disciplinary action like suspension or dismissal for misconduct, the standing orders (if applicable) need to be followed and usually require a proper inquiry. These processes remain crucial because wrongful termination disputes can be taken up under industrial dispute even by a single workman.
Implications for Employers and HR
If an organization falls under the ambit of the IR Code (which most medium to large companies will in some form):
• They will have to review their policies on managing industrial relations. For instance, if the workforce is nearing 300, planning to implement standing orders proactively could be wise for consistency in managing employees. Even if below 300, having clear HR policies akin to standing orders is a good practice to avoid ambiguity and conflict.
• HR should ensure compliance with the new strike notice rules: all levels of management need to know that any strike without the mandated notice period would be illegal, and similarly they can’t arbitrarily declare lockouts. During the notice period, efforts should be made to negotiate and resolve the matter, possibly involving labor authorities.
• The changes in retrenchment/layoff permission threshold (the government signaled in the IR Code that states can allow up to 300 employees without prior government approval for retrenchment; many states have amended their laws already to 300 under the old Act or will follow suit under the Code). This means mid-size factories have more freedom to downsize without government nod, but they still must pay proper compensation and follow procedure. HR should ensure any such actions are done strictly according to law (notice to workers, last-in-first-out principle, compensation, notice to government of retrenchment even if permission not needed, etc., as the code will outline).
• For trade unions: management should prepare for potentially dealing with a “negotiating union.” If multiple unions exist, they should know which one has majority and will be the main bargaining agent. This could simplify negotiations but also means that union must have majority support. Maintaining good communication with employee representatives and addressing issues before they escalate will remain crucial.
• Unfair labor practice provisions mean actions like spying on union meetings, bribes to workers to not join unions, or terminating an active union worker without strong cause could lead to legal trouble. HR must train managers to handle union matters lawfully.
While the Industrial Relations Code makes some things easier for employers (like higher thresholds for standing orders and layoffs permissions), it also ensures workers’ voices via unions and grievance committees are part of the process. Companies with no unions might not feel much change except the strike notice rule and grievance committees requirement. Companies with unions will likely see a push towards more formal bargaining frameworks. The Code’s success will depend on how both employers and workers adapt to its provisions. In any case, being well-versed with the IR Code is essential for compliance and maintaining industrial harmony going forward. Once the Code is enforced, non-compliance (like not recognizing a negotiating union or violating strike rules) can lead to penalties, so legal and HR teams should update their practices in line with the new law.
