New Labour Law Codes Passed to Cover Migrants and Daily Wagers

The Second National Commission on Labour recommended the amalgamation and simplification of 29 Labour Acts into four Codes. This marked the beginning of the Central Government’s attempt to consolidate the overlapping definitions and authorities under various central labour laws in India into 4 Labour Law Codes. The first of these, the Code on Wages, received the assent of the President in August 2019. The other three, i.e. codes on industrial relations, occupational safety and social security, received assent in September 2020.

The implementation and enforcement of these new laws by employers and state governments will be critical to resolving the current crisis and socio-economic vulnerability being faced by India’s informal sector workers that comprise 90% of the country’s total workforce today.

Ira Mahajan discusses the key benefits and modifications introduced under each of the three acts below:

INDUSTRIAL RELATIONS CODE

The Industrial Relations Code, 2020 (“IR Code”) received the assent of the President on the 28th of September, 2020. As per the report of the Eighth Report of the Standing Committee on Labour (“Standing Committee”) .

The IR Code consolidates and amends the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, and the investigation and settlement of industrial disputes. To this end, it subsumes the Trade Unions Act, 1962, the Industrial Employment (Standing Orders) Act, 1946 and the Industrial Disputes Act, 1947.

The salient features and amendments brought about through the IR Code are as follows:

1. Definition of Worker

The IR Code amends the definition of a worker in Section 2(zr) to include persons in supervisory capacities getting salaries upto INR 15,000 per month or an amount as may be notified by the Center from time to time. This is a revision from the previous cap of INR 10,000.

2. Definition of Industry

The definition of industry has been amended to exclude institutions owned or managed by organizations wholly or substantially engaged in any charitable, social or philanthropic services; sovereign functions; domestic services; and any other activity as may be notified by the Central Government. Therefore, as per the new section 2(m), an industry is defined as any systematic activity carried on by cooperation between employer and his workers (whether such workers are employed by such employer directly or by or through any agency including a contractor) for the production, supply or distribution of goods or services with a view to satisfy human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature). This change reflects the 1982 definition passed by Parliament, which did not come into force.

3. Definition of Appropriate Government

As per Section 2(b) of the IR Code, the Central Government has been defined as the appropriate government for all controlled industries specified, authorities established by a Central Act, a central public undertaking, and subsidiaries of companies owned or controlled by the Central Government. This includes not only those companies in which 51% of the paid up share capital is held by the government, but also those undertakings in which the holding of the Central government reduces to less than 50% after the commencement of the IR Code.

Therefore, even if the Central government sells part or whole of its majority share capital in a particular entity, it will continue to operate as the appropriate government.

4. Central government’s power to exempt

The Central Government has been given wide powers to exempt, conditionally or unconditionally, any establishment or undertaking from various provisions of the IR Code, including the requirements in Chapter IV, on Standing Orders, Chapter V on Notice of Change in Conditions of Service. Section 96 in particular, allows the appropriate government, if satisfied that any establishment or undertaking or class thereof, there exist adequate provisions to fulfil the objectives of the IR Code, it may, through notification, exempt it from the provisions of the IR Code. This gives the appropriate governments vast discretion in the exercise of the power of exemptions.

5. Standing Orders

Chapter IV, which deals with provisions pertaining to Standing Orders, are applicable to every industrial establishment where three hundred or more workers are employed. This is a change from the previous position, where the regulations on standing orders applied to every establishment where a hundred or more workers were employed. This expands the discretion of smaller industries in setting conditions of service, a move that has been criticized by various labour law experts as one that will allow the introduction of arbitrary service conditions (see for instance, here or here).

6. Industrial Tribunals

Industrial Tribunals replace the multiple adjudicatory bodies, such as the Court of Inquiry and Labour Codes as the sole appellate body to decide appeals against the decision of the conciliation officer.

7. Awards

Section 58 of the IR Code provides that awards made under the IR Code shall become enforceable 30 days from their date of communication. The section, under sub-section 3 also gives the appropriate government (or the Central government, where the award has been given by the National Industrial Tribunal) the power to declare that the award is not enforceable, under the grounds of national economy or social justice. This allows the appropriate government or the central government to then make an order rejecting or modifying the award, and requires that the award be laid before the State Legislature or Parliament as appropriate. This, as discussed by PRS here, may fall afoul the requirements of separation of powers under the Constitution of India. The Standing Committee Report also notes that the Government, even as a party, can override decisions of the Industrial Tribunals.

8. Notice for Strikes/Lock-out

Section 62 of the IR Code introduces a requirement of a 14-day notice period for strikes and lockouts in any establishments. This is a revision to the law in the IDA, where this notice period exists only for public utility services. The requirement of notice for PSUs has been recognized as important as PSUs often provide essential services to a large number of people. No rationale has been provided for the extension of this requirement to all industries. The term “strike” has also been defined to include “concerted casual leave on a given day by 50% or more of the workers” as per Section 2(zk) of the IR Code.

9. Negotiations Union

The IR Code introduces a new feature of a “Recognition of Negotiations Union” through Section 14 of the Code. The IR Code recognizes any trade union as the sole “negotiating union” if supported by 51% or more workers on the muster roll. Where no such union has 51% of the workers on the muster roll, employers shall constitute a negotiating council, consisting of those unions with the support of a minimum of 20% of the workers.

10. Fixed Term Employment

The IR Code defines “fixed term employment” and includes it in the category of workers for Standing Order matters. Section 2(o) defines fixed term employment as the engagement of workers on the basis of a written contract of employment for a fixed period. The definition also requires that the hours of wage, allowances, statutory benefits available to permanent workers shall be proportionately available to the worker. If service under the contract is rendered for a period of one year, the worker shall also be eligible for gratuity.

11. Re-skilling Fund

Appropriate governments are now required to set up funds for the reskilling of retrenched workers. The fund shall consist of the employer contribution equal to 15-days of wage last drawn by the worker before retrenchment, or any such number of days as notified by the Central Government, and contributions from other sources as determined by the appropriate government. The funds will be utilized by crediting fifteen days wages last drawn by the worker within forty five days from retrenchment.

2. OCCUPATIONAL SAFETY, HEALTH & WORKING CONDITIONS CODE, 2020

The Occupational Safety, Health and Working Conditions Code (“Occupational Safety Code”) received the assent of the President on the 28th of September 2020. As per the Fourth Report of the Standing Committee on Labour, it incorporates the salient features of 13 enactments:

(i) The Factories Act, 1948;

(ii) The Mines Act, 1952;

(iii) The Dock Workers (Safety, Health and Welfare) Act, 1986;

(iv) The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996;

(v) The Plantations Labour Act, 1951;

(vi) The Contract Labour (Regulation and Abolition) Act, 1970;

(vii) The Inter-State Migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979;

(viii) The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955;

(ix) The Working Journalist (Fixation of Rates of Wages) Act, 1958;

(x) The Motor Transport Workers Act, 1961;

(xi) The Sales Promotion Employees (Conditions of Service) Act, 1976;

(xii) The Beedi and Cigar Workers (Conditions of Employment) Act, 1966; and

(xiii) The Cine Workers and Cinema Theatre Workers Act, 1981.

Accordingly, the Occupational Safety Code aims to establish occupational safety standards and health and working conditions across sectors. It includes in its purview the hours of work, leaves, welfare provisions, registrations and licensing for select workers and industries. The features of the Occupational Safety Code and amendments brought about are discussed below.

1. Applicability

The Occupational Safety Code applies to all establishments employing 10 or more workers except mine and dock where it is applicable on even 1 worker, barring the offices of the Central and State Governments. It has been criticized, for instance see here, for placing this minimum threshold, as applicability of the Act to all establishments would have promoted basic labour rights such as health and standards at the place of work.

2. Single Registration

As the Occupational Safety Code replaces 13 enactments, it also sets up a process for the single registration of an establishment, instead of multiple registrations under Chapter II. As the Standing Committee noted, 6 labour acts in force prior to the introduction of the Occupational Safety Code required separate registration. Under the new system of registration, all employers must make electronic applications for the registration of their establishments within 60 days from the date of applicability of the code.

3. Inter-State Migrant Worker: Amendment of Definition

Section 2(zf) defines an inter-state migrant worker as “one one employed in an establishment and who

(i) has been recruited directly by the employer or indirectly through contractor in one State for employment in such establishment situated in another State; or

(ii) has come on his own from one State and obtained employment in an establishment of another State (hereinafter called destination State) or has subsequently changed the establishment within the destination State,

under an agreement or other arrangement for such employment and draws wages not exceeding the amount of rupees eighteen thousand per month or such higher amount as may be notified by the Central Government from time to time”

This reflects a shift, covering migrant workers who were previously left out of this definition due to their direct employment by a contractor.

4. Duties of Employer and Employees

Chapter III of the Occupational Safety Code focuses on the duties of the employer and employees. This includes:

Employers are to provide free annual health checks through prescribed tests for employees above a certain age (to be prescribed)
Employers are now to mandatorily provide appointment letters to all employees upon the appointment in the establishment. This includes such a provision of an appointment letter to all employees appointed before the commencement of the code within three months of the commencement.
Employers are to ensure that no charge is levied upon employees for maintenance of safety and health at the workplace

This chapter also includes specific provisions and arrangements to ensure safety of work at factories, mines, docks, buildings or other construction work or plantation work specifically.

National Occupational Safety and Health Advisory Board set up, to now substitute the multiple committees under the erstwhile various labour acts. The Board, under Chapter IV is tasked with advising the Central Government on matter pertaining to the code, policies for occupational safety which may be referred to it and any other function it is tasked with by the Central Government.
Enabling provisions for the constitution of bi-partite safety committees by the appropriate government to promote safe working conditions
Penalties for the failure to fulfill duties to ensure safety provisions resulting in an accident to now be divided by the court, so as to direct a minimum of 50% of such a fine to constitute compensation for the victim or the legal heirs of the victim.
Uniformity in thresholds for applicability of welfare provisions under Chapter VI, which are as follows:

Threshold (No. of Workers) Welfare Provision

Canteen 100

Creche 50

First Aid All

Welfare officer for factories/mines/plantation 240

6. Aside from this, general welfare provisions are also provided for, and the Central Government is empowered, under Section 24(2) to provide specific prescriptions concerning ambulance rooms, medical facilities, welfare officers, etc. at specific classes of establishments.

Rule allowing women to consensually work beyond 7PM to 6PM subject to safety, holidays, hourly and other conditions.
Single 5 Year License for contract labour as under Section 47, as opposed to multiple licenses required under erstwhile laws. These licenses may be electronically renewable under a period to be prescribed by the Central government. This includes provisions for licenses for more than one state or the whole of India.

3. SOCIAL SECURITY CODE, 2020

The Code on Social Security, 2020 received the assent of the President on the 28th of September, 2020. The Ninth Report of the Standing Committee on Labour links the need for the introduction of a code to provide social security cover to the Constitution of India, including provisions on equal pay for equal work, the right to work, the right to education and public assistance in cases of unemployment, old age etc., and other such responsibilities born by the State to ensure just conditions of work and a decent standard of living. The Committee also traces these State obligations back to various international conventions, including the Universal Declaration of Human Rights, 1948 and the various International Labour Organization Conventions.

The Code on Social Security, as per the Report, subsumes the following Central Labour Acts:

(i) The Employees’ Compensation Act, 1923;

(ii) The Employees’ State Insurance Act, 1948;

(iii) The Employees Provident Fund and Miscellaneous Provisions Act, 1952;

(iv) The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959;

(v) The Maternity Benefit Act, 1961;

(vi) The Payment of Gratuity Act, 1972;

(vii) The Cine Workers Welfare Fund Act, 1981;

(viii) The Building and Other Construction Workers Welfare Cess Act, 1996; and

(ix) The Unorganised Workers’ Social Security Act, 2008.

It also introduces various changes, which are discussed below.

1. Definition of a Worker

The Code on Social Security adds, to the definition of workers, two additional categories, (1) “gig” workers ; and (2) “platform” workers.

Section 2(35) defines a gig worker as a “person who performs work or participates in a work arrangement and earns from such activities outside of a traditional employer-employee relationship.” Section 2(61) defines a platform worker as one “engaged in or undertaking platform work.” Platform work is defined in section 2(60) to be “a work arrangement outside of a traditional employer employee relationship in which organisations or individuals use an online platform to access other organisations or individuals to solve specific problems or to provide specific services or any such other activities which may be notified by the Central Government, in exchange for payment. “

Section 2(86) also defines an “unorganized worker” as a “home-based worker, self-employed worker or a wage worker in the unorganised sector and includes a worker in the organised sector who is not covered by the Industrial Disputes Act, 1947 or Chapters III to VII of this Code.”

Chapter IX deals specifically with the question of social security for workers that fall within the definitions of “unorganized”, “ gig” or “platform” workers. The Chapter enables both the Central and State Governments to frame schemes for their benefit including social security funds,, and requires mandatory self-registration for the purposes of the Chapter, in order to avail the benefits of any scheme framed. The schemes for gig workers and platform workers may be funded through a combination of contributions from the central and state governments and aggregators. The contribution of the aggregator is to be at a rate notified by the government, which may not exceed 5% of the amount paid or payable by the aggregator to the said workers.

2. Powers of Exemption

The Code on Social Security also grants the appropriate governments the power to grant exemptions to an establishment of a class of establishments from any or all provisions of this Code. In certain provisions, this power to exempt is within specified bounds. For example, in the power to exempt from the payment of cess as notified by the Central government, the exemption may only be granted if the cess is payable or has been levied by a corresponding State act in force. Similar delineations exist on the power to exempt in respect of Provident Fund Schemes, State Employee Insurance Schemes, Pension Schemes, etc. However, section 143 does provide a wide discretionary power of exemption from any or all provisions of this Code to the appropriate government.

3. Coverage of Social Security Benefits

The Code on Social Security, in the First Schedule, sets the following thresholds to trigger the mandatory coverage of social security benefits.

Employee’s Provident Fund

20+ employees
Aadhar based registration
five year limitation period of the initiation and two year period for conclusion of enquiries.
Chapter XII, under section 133, increases in penalties for deduction of employer contribution from salary and non-depositing from INR 10,000 to INR 1,00,000
Proviso to section 134 provides for enhanced punishments after previous conviction, where a subsequent offense may attract imprisonment of a minimum of two years, which may be extended to three years and may also attract a fine of INR 3,00,000.

Employees’ State Insurance Corporation

10+ employees other than seasonal factories
Every establishment carrying on hazardous or life-threatening occupation irrespective of employee size
Voluntary registration through mutual consent between employer and majority employees to trigger applicability
Upon failure of employer to register employee, failure to pay contribution, the Employees State Insurance Contribution will now be mandated to release the benefits to the workers, which will then be recovered from the employer

Gratuity

Every factory, mine, oilfield, plantation, port and railway company
Every shop or establishment with 10+ employees on any day of the preceding twelve months.
Employees will be eligible for gratuity after continuous service of five years
This time period does not extend to situations where a contract term of a fixed term worker expires. For fixed term workers, gratuity is to be paid on a pro rata basis, even where the period of the contract is less than five years. This may be read with the IR Code, which provides for eligibility for payment of gratuity to fixed term workers upon completion of one year of service.

Maternity Benefit

Every factory, mine, plantation, including those establishments belonging to the Government
Every shop or establishment with 10+ employees on any day of the preceding twelve months.

Employee’s Compensation

Subject to the provisions of the second schedule, to all employers and employees not covered by Chapter IV, which pertains to the Employees State Insurance Corporation

Social Security and Cess in respect of Building and other construction workers

Every establishment falling under the category of building and other construction work

Employment Information and Monitoring

Career centers, vacancies, persons seeking services of career centres and employers

4. Enhanced powers of Inspector

Section 122, under Chapter XI of the Code on Social Security renames the designation of “Inspector” to now stand as “Inspector-cum-Facilitator.” This includes an enhance of the powers of this position to supply information, and give advice relating to compliance with the Code, in addition to the powers of inspection of establishments assigned, and other such inspection powers.