Industrial Relations Code, 2020 Explained

Industrial Relations Code, 2020 Explained

By – Shreya Dubey, Neha Das

The Industrial Relations Code, 2020 (“IR Code”) is a significant reform in India’s labor law landscape, consolidating and replacing three key enactments:

These pre-independence laws governed various aspects of industrial relations, dispute resolution, and trade union regulations. However, with evolving economic conditions, the need for a streamlined and modernized approach to industrial governance became evident. The Industrial Relations Code now serves as a comprehensive framework covering trade unions, employment conditions in industrial establishments, and mechanisms for industrial dispute resolution.

This article explores the salient features, key reforms, and implications of the IR Code 2020, offering an in-depth understanding of its significance in modern labor governance.

Progressive Reforms in the Industrial Relations Code, 2020

The Industrial Relations Code 2020 aims to balance the rights of workers and employers while ensuring efficiency in labor dispute resolution in India. The changes introduced seek to enhance employment flexibility, simplify dispute resolution, and strengthen the framework for trade unions.

1. Introduction of Inclusive Definitions

One of the key updates in the IR Code 2020 is the redefinition of “workman” to “worker,” ensuring a more inclusive and modern terminology.

  • The term “worker” now excludes managerial positions but includes supervisory roles, expanding coverage to include:
  • Working journalists as per the Working Journalists and Other Newspaper Employees (Conditions of Service) Act, 1955.
  • Sales promotion employees as defined under the Sales Promotion Employees (Conditions of Service) Act, 1976.

This change is particularly significant in the era of the gig economy, where journalism and sales sectors have traditionally suffered from lack of legal protections.

During the COVID-19 pandemic, many employees in these sectors faced job insecurity and lack of accountability from employers. By explicitly covering these workers, the Industrial Relations Code ensures greater protection and formal recognition.

2. Recognition of Fixed-Term Employment

The IR Code 2020 has formally introduced fixed-term employment as a legal category. This provision:

  • Ensures parity between fixed-term and permanent employees in terms of:
  • Working hours, wages, and benefits.
  • Eligibility for gratuity, provided they have worked for one year under a contract.

This reform empowers employers to hire workers on a need-based, fixed-term basis without restrictions on specific industries.

This move enhances labor market flexibility, allowing companies to adjust workforce requirements dynamically while ensuring worker rights remain protected.

3. Establishment of a Grievance Redressal Committee

The Grievance Redressal Committee (GRC), earlier introduced in the Industrial Disputes Act, has been retained and strengthened under the Industrial Relations Code.

  • Under the IR Code, workers must first approach the GRC for dispute resolution before filing a case in the Labor Court.
  • Exception: In cases of discharge, dismissal, retrenchment, or termination, workers may directly approach the Industrial Tribunal.

By mandating conciliation at the initial stage, the Industrial Relations Code 2020 promotes amicable dispute resolution and reduces unnecessary litigation.

This is a significant step toward faster resolution of industrial disputes in India and reduces backlog in labor courts.

4. Strengthening of Trade Union Laws and Collective Bargaining

The IR Code 2020 preserves the core framework of trade union registration from the Trade Unions Act, 1926, while introducing new concepts such as:

Negotiating Trade Union & Negotiating Council

  • A single “Negotiating Trade Union” will represent workers if it has 51% or more membership.
  • If no union has 51% representation, a Negotiating Council will be formed, consisting of trade unions with at least 20% support.

This reform streamlines communication and bargaining, ensuring that management does not have to negotiate with multiple unions.

By simplifying the collective bargaining process, the IR Code 2020 reduces conflicts and promotes efficient decision-making in industrial establishments.

5. Standing Orders and Employment Conditions

The Industrial Relations Code 2020 has revised the applicability of standing orders, which define the terms of employment in an establishment.

  • Previously, any establishment with 100 or more workers was required to frame standing orders.
  • Now, this threshold has been raised to 300 workers, reducing the compliance burden on smaller enterprises.

Employers must also consult the trade union/negotiating council before submitting standing orders for certification.

While this change benefits businesses, it may also dilute workers’ rights in smaller establishments.

6. Resolution of Industrial Disputes in India

The Industrial Relations Code retains much of the dispute resolution framework from the Industrial Disputes Act, 1947, but introduces structural improvements:

  • Complex cases (e.g., disputes on standing orders, retrenchment, strikes, and lockouts) will be handled by a two-member tribunal.
  • Other disputes can be resolved by a single-member tribunal, ensuring faster adjudication.

The IR Code 2020 also introduces arbitration as a recommended dispute resolution mechanism.

This step encourages faster and less adversarial resolution of labor disputes in India.

7. Right to Strike and Employer Lockouts

The IR Code 2020 modifies the conditions under which workers can go on strike:

  • Mandatory 60-day notice before going on strike.
  • Strikes are prohibited during tribunal proceedings.
  • Employers also need to give a 60-day notice before initiating a lockout.

Additionally, the definition of “strike” now includes “concerted casual leave by 50% or more workers on a given day.”

This ensures strikes remain well-regulated while preventing sudden industrial shutdowns.

8. Introduction of a Re-skilling Fund

A notable feature of the IR Code 2020 is the introduction of the Re-skilling Fund:

  • Employers must contribute to a fund used to provide retrenched workers with 15 days of last drawn wages.
  • The purpose, management, and liability of this fund remain unclear.

While this provision aims to help retrenched workers, further clarity is needed on its implementation.

9. Enhanced Penalties for Non-Compliance

The Industrial Relations Code 2020 introduces stricter penalties for violations:

  • First-time offense: Fine up to ₹10 lakh.
  • Repeated offenses: Fine up to ₹20 lakh or imprisonment up to six months.

This creates stronger deterrence for non-compliance with industrial relations laws in India.

Conclusion: A New Era for Industrial Relations in India

The Industrial Relations Code, 2020 is a significant reform aimed at balancing worker rights with employer flexibility while modernizing labor dispute resolution in India. By consolidating multiple labor laws, the IR Code 2020 creates a more structured approach to employment conditions, trade unions, and collective bargaining.

The introduction of grievance redressal mechanisms, negotiating trade unions, and arbitration options ensures industrial disputes are resolved more efficiently, reducing litigation and fostering a more cooperative work environment. Additionally, the stricter regulations on strikes and lockouts, along with the recognition of fixed-term employment, provide greater clarity for both employers and employees.

While the IR Code 2020 brings positive reforms, certain areas, such as the Re-skilling Fund and increased threshold for standing orders, require more clarity. The success of these provisions will depend on effective implementation.

Overall, the Industrial Relations Code 2020 is a progressive step in India’s labor law landscape. Its impact will depend on how well it is enforced and adapted to the evolving industrial environment.

FAQs

  1. What is the Industrial Relations Code, 2020?

    The Industrial Relations Code, 2020 (IR Code) is one of the four labor codes introduced to consolidate and streamline labor laws in India. It replaces three major legislations: the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. The purpose of this consolidation is to simplify compliance for employers while ensuring worker protections. The IR Code provides a structured framework for trade union recognition, employment conditions, dispute resolution, and industrial relations, aiming to modernize labor regulations to suit the evolving economic landscape.

  2. What are the main objectives of the Industrial Relations Code, 2020?

    The primary objectives of the IR Code include ensuring worker protection while granting industries flexibility in their operations. It seeks to promote industrial harmony through structured mechanisms for dispute resolution, trade union recognition, and collective bargaining. The IR Code also aims to simplify the legal landscape by merging multiple labor laws into a single, comprehensive framework that balances the rights of employees and employers. Another key objective is to bring clarity to processes related to strikes, layoffs, retrenchment, and grievance redressal, thus reducing the scope for industrial disputes.

  3. When was the IR Code notified, and what is its present status?

    The Industrial Relations Code, 2020, was notified on September 28, 2020. However, it has not yet been brought into force. The Central Government will determine the date of implementation, and different provisions of the Code may come into effect at different times as per government notifications.

  4. What is the status of the enactments covered by the IR Code?

    Once the IR Code comes into force, the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947, will be repealed. However, any actions taken under these legislations before the enforcement of the IR Code will remain valid, provided they do not contradict the new Code. Additionally, rules such as the Industrial Tribunal (Procedure) Rules, 1949, the Industrial Disputes (Central) Rules, 1957, and the Industrial Employment (Standing Orders) Central Rules, 1946, will also be repealed once the IR Code is implemented.

  5. Who is covered under the Industrial Relations Code?

    The IR Code applies to all industrial establishments, trade unions, and workers across different sectors. However, the State Government has the authority to exempt specific industrial establishments or undertakings from certain provisions of the IR Code if it deems that adequate alternative provisions exist to fulfill the objectives of the Code. Such exemptions may be conditional or unconditional, based on the circumstances of the establishment.

  6. How does the IR Code impact trade unions?

    The IR Code simplifies the process of trade union registration and recognition. A single trade union with at least 51% of worker support will be recognized as the sole negotiating body for collective bargaining. In cases where no union meets this requirement, a negotiating council comprising representatives from unions with at least 20% worker support will be formed. The Code also introduces requirements for trade unions to maintain proper financial records, conduct annual audits, and ensure compliance with defined rules for member subscriptions and donations. These changes aim to bring more structure and transparency to trade union operations.

  7. What is the procedure for resolving industrial disputes under the IR Code?

    The IR Code provides a structured dispute resolution mechanism. Initially, conciliation officers are responsible for mediating disputes between workers and employers to reach an amicable settlement. If conciliation fails, the dispute is escalated to an Industrial Tribunal. Cases related to retrenchment, strikes, lockouts, and unfair labor practices are adjudicated by a two-member tribunal, while all other disputes are heard by a single-member tribunal. Arbitration is also encouraged as an alternative method of dispute resolution, provided both parties agree to it in writing.

  8. What role do conciliation officers play under the Industrial Relations Code?

    Conciliation officers serve as mediators in industrial disputes, working to prevent conflicts from escalating to tribunals. Their role includes facilitating negotiations between employers and workers, encouraging amicable settlements, and ensuring adherence to grievance redressal mechanisms. By fostering a cooperative environment for dispute resolution, conciliation officers play a critical role in maintaining industrial peace.

  9. What are the provisions related to strikes and lockouts in the IR Code?

    The IR Code imposes stringent conditions on strikes and lockouts to minimize industrial disruptions. Workers must provide a mandatory 60-day notice before initiating a strike, and strikes are prohibited while tribunal proceedings are pending. Employers are also required to give prior notice before imposing a lockout. Additionally, the definition of a strike has been expanded to include instances where 50% or more workers take coordinated casual leave on a given day, ensuring stricter regulation of labor actions.

  10. How does the IR Code streamline labor dispute resolution mechanisms?

    The IR Code aims to reduce delays in labor dispute resolution by requiring disputes to go through conciliation before reaching the tribunal stage. The establishment of structured Industrial Tribunals with clear jurisdiction further ensures efficient adjudication. Arbitration is promoted as a faster alternative to litigation, allowing disputes to be settled outside of the traditional judicial process. These measures are intended to expedite dispute resolution and improve industrial stability.

  11. How are standing orders regulated under the Industrial Relations Code?

    Under the IR Code, establishments with 300 or more workers must frame certified standing orders that outline employment conditions. Employers are required to consult with trade unions or negotiating councils before submitting standing orders for certification. This regulation ensures that workers’ rights and employment conditions are clearly defined and legally enforceable.

  12. What are the penalties for non-compliance with the Industrial Relations Code?

    Non-compliance with the IR Code attracts significant penalties. Section 86 of the Code prescribes fines ranging from ₹50,000 to ₹2,00,000 for violations related to layoff provisions, retrenchment procedures, and unfair labor practices. Repeat offenses may lead to imprisonment, demonstrating the government’s intent to enforce strict compliance with labor regulations.

  13. What is the process for registering trade unions under the Industrial Relations Code?

    Trade unions must submit an application for registration, including details of membership, financial records, and office bearers. The registration authority verifies these details before issuing a certificate of registration. This process is designed to ensure transparency and accountability within trade unions.

  14. How does the Industrial Relations Code impact fixed-term employment contracts?

    Fixed-term employees are entitled to the same wages, benefits, and working conditions as permanent employees. The IR Code also makes them eligible for gratuity if they complete one year of continuous service. These provisions offer security and benefits to fixed-term workers while allowing employers greater flexibility in workforce management.

  15. What are the provisions for worker retrenchment and layoffs in the IR Code?

    Employers must provide adequate notice and compensation before retrenching workers. For establishments with more than 300 workers, government approval is required before initiating layoffs. The IR Code also establishes a Re-skilling Fund, which provides 15 days’ wages to retrenched workers to support their transition to new employment opportunities.

References

Ministry of Labour and Employment – https://labour.gov.in/labour-codes

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