Labour Laws in India Reformed with Introduction of Three New Labour Codes

Three new labour codes, namely - The Code on Social Security, 2020; Industrial Relations Code, 2020; and Occupational Safety, Health and Working Conditions Code, 2020 were passed by both Houses of the Parliament and received the Presidential assent on September 28, 2020. The Codes have been individually explained below.

The Code on Social Security 2020

The Code on Social Security, 2020 replaced nine laws related to social security, the most prominent ones being the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952; the Payment of Gratuity Act, 1972; Employees’ Compensation Act, 1923; Maternity Benefit Act, 1961 and Employees’ State Insurance Act, 1948. The key highlights are:

§ Organisations for Administration – The Code provides for the establishment of several bodies to administer the social security schemes. These include:

(i) A Central Board of Trustees, headed by the Central Provident Fund Commissioner, to administer the EPF, EPS and EDLI Schemes,

(ii) An Employees State Insurance Corporation, headed by a Chairperson appointed by the central government, to administer the ESI Scheme,

(iii) National and State Social Security Boards, headed by the central and state Ministers for Labour and Employment, respectively, to administer schemes for unorganised workers (with the National Board also responsible for gig and platform workers), and

(iv) State-level Building Workers’ Welfare Boards, headed by a Chairperson nominated by the state government, to administer schemes for building workers.

§ Simplifying complexities – By subsuming nine pre-existing laws, the Code has simplified the laws and ensured a one-stop legislation related to social security matters in the country. This also helps in reducing the overlaps of definitions and provisions in similar laws that existed previously.

§ Inclusiveness of the Code – The Code is far more inclusive than its predecessors as it covers those working in the unorganised sector as well such as migrant workers, gig workers and platform workers. It also includes agricultural workers. This extension of inclusion means that these workers shall also be eligible for benefits such as maternity benefits, disability coverage, pension etc. A novel mention is of ‘aggregators’ which refers to digital intermediaries or a market place for buyers or users of a service to connect with the seller or the service provider.

§ Layoff and retrenchment – Previously, employers in certain businesses with at least 100 workers needed prior government approval to carry out layoffs and retrenchment. This limit has now been extended to 300.

§ Establishment of career centre – This refers to any office (including employment exchange, place or portal) which is established and maintained in the manner prescribed by the Central Government for providing career services including registration, collection and furnishing of information, either by the keeping of registers or otherwise, manually, digitally, virtually or through any other mode as prescribed by the Central Government. Employers have to report vacancies to career centres before filling up the same.

§ Coverage and registration: The Code specifies different applicability thresholds for the schemes. For example, the Employees’ Provident Fund Scheme will apply to establishments with 20 or more employees. The Employees’ State Insurance Scheme will apply to certain establishments with 10 or more employees, and to all establishments which carry out hazardous or life-threatening work notified by the central government. All eligible establishments are required to register under the Code, unless they are already registered under any other labour law.

§ Inspections and appeals: The appropriate government may appoint Inspector-cum-facilitators to inspect establishments covered by the Code, and advise employers and employees on compliance with the Code. Administrative authorities may be appointed under the various schemes to hear appeals under the Code.

§ Offences and penalties: The Code specifies penalties for various offences, such as the failure to pay gratuity, which may be punished with imprisonment of one year. Some offences may also be compounded (settled).

§ Gratuity – It is payable to an employee on termination of employment after continuous service of 5 years. However, for a working journalist, gratuity is payable on termination of employment after continuous service of 3 years. The completion of continuous service of 5 years shall not be essential where the termination of employment of any employee is due a death or disablement or expiration of fixed term employment or happening of any such event as notified by the Central Government. Gratuity at the rate of 15 days wages or such number of days as may be notified by the Central Government, based on the rate of wages last drawn by the employee shall be payable for every completed year of service or part thereof in excess of 6 months.

§ Maternity – The woman shall not work in any establishment during the six weeks immediately following the day of her delivery, miscarriage or medical termination of pregnancy. She shall be entitled to the payment of maternity benefit at the rate of the average daily wage for the period in absentia. She shall be entitled to maternity benefit of maximum 26 weeks of which not more than 8 weeks shall precede the expected day of delivery. Most importantly, the establishment in which 50 employees or as prescribed by the Central Government, are employed shall have the facility of creche within such distance as may be prescribed by the Central Government, either separately or along with common facilities.

Industrial Relations Code 2020

It combines the three previously existing acts – Trade Unions Act, 1926, Industrial Employment (Standing Orders) Act, 1946 and Industrial Disputes Act, 1947. The key highlights are:

· Definition of ‘Worker’ - The term ‘worker’ includes person employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and includes working journalists. A person who is employed in a supervisory capacity drawing wage exceeding INR 18000 (USD 245) per month.

· Introduction of Fixed-term employment – it refers to the engagement of a worker on the basis of a written contract of employment for a fixed period. However, his hours of work, wages, allowances and other benefits shall not be less than that of a permanent worker doing the same work of similar nature; he shall be eligible for all statutory benefits available to a permanent worker proportionately according to the period of service rendered by him even if his period of employment does not extend to the qualifying period of employment required in the statute; he shall be eligible for gratuity if he renders service under the contract for a period of one year.

· Standing Orders – An establishment with more than 300 employees must prepare standing orders. These include - classification of workers, (ii) manner of informing workers about hours of work, holidays, paydays, and wage rates, (iii) termination of employment, (iv) suspension for misconduct, and (v) grievance redressal mechanisms for workers. The central government will prepare model standing orders, based on which the industrial establishments will prepare their standing orders.

· Lay-off and Retrenchment – Non-seasonal industrial establishments with at least 300 workers must take prior permission of the central or state government before lay-off, retrenchment or closure. Such establishments must pat fifty per cent of basic wages and dearness allowance to a worker who has been laid off. While in the case of retrenchment, the employer must either give three months’ notice or pay the retrenched worker for the notice period. Violation of this provision will be punishable with a fine between INR one lakh (USD 1365) and INR ten lakh (USD 13653).

· Trade union and Negotiating Council/Union – Trade Unions that have a membership of at least 10% of the workers or 100 workers (whichever is less) will be registered. The Code further provides for a Negotiating Union for negotiating with the employer. If there is only one trade union in an industrial establishment, the employer is required to recognise such trade union as the sole negotiating union of the workers. In case of multiple trade unions, the trade union with support of at least 51% of workers on the muster roll of that establishment will be recognised as the sole negotiating union by the employer.

· Prohibits strikes/lockouts without notice – Strike is defined as casual leave taken by more than fifty per cent of the employees on a given day. The Trade Union have to give notice of 14 days before going on strike. No person can go on strike without giving such notice. The notice shall be valid for 60 days. It prohibits strikes and lock-outs i. during and up to seven days after a conciliation proceeding, ii. During and up to sixty days after proceedings before a tribunal or an arbitrator, iii during any period in which a settlement or an award is in operation. Employers are required to report to the appropriate government and conciliation officer within five days from receiving notice of a strike or lock-out. No person shall knowingly spend or apply any money in direct furtherance or support of any illegal strike or lock-out.

· Exemptions – it provides that the central and state government may exempt any establishment or a class of new establishment from all or any provisions of the Code in public interest.

· Voluntary arbitration: The Code lays down that with the help of a written agreement between the employer and workers, industrial disputes are to be solved through voluntary arbitration. After investigating the dispute, the arbitrator will submit the arbitration award to the government.

· Resolution of industrial disputes: The central or state governments may appoint conciliation officers to mediate and promote settlement of industrial disputes. These officers will investigate the dispute and hold conciliation proceedings to arrive at a fair and amicable settlement of the dispute. If no settlement is arrived at, either party to the dispute can make an application to the Industrial Tribunal, constituted under the Code. The central government may also constitute National Industrial Tribunals for settlement of industrial disputes which: (i) involve questions of national importance, or (ii) could impact industrial establishments situated in more than one state. The tribunals will have two members each, one judicial member and one administrative member with the specified qualifications.

· Unfair labour practices: The Code prohibits employers, workers, and trade unions from committing any unfair labour practices listed in a Schedule to the Code. Any person who commits unfair labour practices is punishable with a fine between ten thousand rupees and two lakh rupees. These include:

- (i) restricting workers from forming trade unions,

- (ii) establishing employer sponsored trade union of workers,

- (iii) coercing workers to join trade unions or preventing them from attending work

- (iv) damage to employer’s property.

· Notice of change: Employers must not change the conditions of service in certain matters without giving notice of the proposed changes to the workers being affected, or within 21 days of giving such notice. These matters include wages, contribution, allowances, working hours, and leave.

Occupational Safety, Health and Working Conditions Code, 2020

The Code was passed subsuming 13 existing Acts which regulated health, safety and working conditions. Some of the prominent ones include the Factories Act, 1948, the Mines Act, 1952 and the Contract Labour (Regulation and Abolition) Act, 1970. The key highlights are:

· Registration - Establishments covered by the Code (employing at least 10 employees) are required to register within 60 days with registering offices, appointed by the central or state government. Factories may be required to obtain a license to operate.

· Definition of ‘Factory’ – it refers to any premises wherein 20 or more workers are working, or were working on any day of the preceding 12 months in any part of which a manufacturing process is being carried on with the aid power, or is ordinarily so carried on; or 40 workers or more without the aid of such power.

· Work hours – Workers will be allowed to work for 8 hours a day, and they will be paid twice the rate of daily wages for any overtime work. Consent for such overtime work is required. They cannot be required to work beyond six days a week.

· Working conditions – In addition to notifications from the central government, the conditions may include hygienic work environment, clean drinking water, toilets, ventilation and adequate lighting.

· Duties of employers:

- Ensure the workplace is hazard-free

- Provide free of costs annual health examinations or tests

- Ensure a safe and risk-free working environment

- Ensure disposal of hazardous and toxic waste including disposal of e-waste

- Informing relevant authorities in case any accident at the workplace leads to death or serious bodily injury to any employee.

· Duties of employees:

- Take responsible care for health and safety of oneself and others who are vulnerable to his actions

- Co-operate with employer in meeting the statutory obligations of the employer

- Report any unsafe or unhealthy situation in the workplace

· Schedules – The Code contains three schedules containing lists of

- 29 diseases that the employer is required to notify the authorities of, in case a worker contact them;

- 73 safety matters that the government may regulate;

- 40 industries involving hazardous processes.

· Inspection – An inspection can be conducted by the government’s inspectors to look into accidents. They have certain additional powers in case of factories, mines, docks, and building and construction works, including – reducing the number of employees working in sections of the establishment, prohibiting work in dangerous situations.

· Advisory Boards – Occupational Safety and Health Advisory Boards will be set up at the national and state levels by the central and respective state governments. Their duty is to advise governments on the standards, rules and regulations to be framed under the Code.

· Safety committees: The government may require certain establishments to constitute safety committees in case of a certain class of workers. The committees will be composed of representatives of the employer and workers and will function as a liaison between them. The number of representatives of workers in the committee must not be less than that of the employer.

· Inter-state Migrants – The definition of contract labor includes inter-state migrant workers who this way acquire parity with contract laborer as far as statutory rights and benefits are concerned. It shall be the complete responsibility of the employer to pay yearly journey allowances to every inter-state migrant worker a lump-sum amount of fare for to and fro journey to his native place from the place of his employment, in the manner taking into account the minimum service for entitlement, periodicity and class of travel.

· Women at work – Women may be employed in all establishments for all types of work. They can also work at night, beyond 7 in the evening and before 6 in the morning subject to the conditions relating to safety, holiday, working hours and their consent. The minimum limit of female workers for the purposes of creating a creche facility for the children below 6 years of age is 50 workers.

· Offences and Penalties –

- Obstructing discharge of duties of Inspector will amount to imprisonment up to 3 months and fine up to INR 1 lakh (USD 1365).

- An offence that leads to the death of an employee will be punishable with imprisonment of up to two years, or fine up to INR 5 lakhs (USD 6826), or both.

- In case of an unspecified penalty, the employer will be punished with a fine between INR 2 - 3 lakhs (USD 2730-4095).

- A fine of up to INR 10,000 (USD 13653) in case an employee violates provisions of the Code.

- If an offence is committed by a Company, every person who at the time the offence was committed, was in charge of, and was responsible to, the company for the conduct of the business of the company shall be deemed to be guilty of the offence and shall be liable to be proceeded against and punished.

Conclusion

These labour codes are set to bring a reform in the labour laws that have so far existed and operated in the country. It is a step to lessen the burden of the employer while also establishing safeguards to protect the workers. It shall improve the ease of doing business, make hiring and firing more convenient, channelise trade unions with the help of negotiations and prevent surprise strikes. The Codes have been drafted keeping the welfare of all the stakeholders involved. They cover a larger scope of workers in their network especially in light of the workers who did not get representation in the earlier legislations. Most importantly, together, they have subsumed over twenty Acts between themselves which will help in smoother governance as there shall be less overlap and of provisions or definitions and thus less ambiguity.