All About Industrial Relations Code

All About Industrial Relations Code

Updated on 21 November, 2019

Target 2020 GS3 Economy
industrial-relations-codes

The Union Cabinet has given its approval for introduction of the Industrial Relations Code, 2019, in Parliament, which is the third code under labour reforms. The labour ministry has decided to amalgamate 44 labour laws into four codes - One code deals with wage rates, another relates to social security, the third relates to industrial security and labour welfare, and the fourth relates to industrial relations.

  • While the Code on Wages has already been approved by Parliament, the Labour ministry will push the Code on Occupational Safety, Health and Working Conditions Bill in the Budget session. The Code on Social Security is in the pre-legislative stage.

Background

Constitutional Provisions

  • Article 23 forbids forced labour, Article 24 forbids child labour (in factories, mines and other hazardous occupations) below the age of 14 years. 
  • Article 43A inserted by 42nd amendment – directing the state to take steps to ensure worker’s participation in the management of industries. (Gandhiji said that employers are trustees of interests of workers and they must ensure their welfare.)
  • Labour laws are under concurrent list

The 2nd National Commission of labour had recommended simplification, amalgamation and rationalisation of Central Labour Laws. 

As a part of its Ease of Doing Business initiative, the government will be subsuming a total of 44 labour laws into four codes — on wages, social security, industrial safety and welfare and industrial relations.

The Four codes of Labour laws are:

  1. Social security law or code: Laws related to social security, including the Employees' Provident Fund and Miscellaneous Provisions Act, Employees' State Insurance Corporation Act, Maternity Benefits Act, Building and Other Construction Workers Act and the Employees' Compensation Act will be merged.
  2. Industrial safety and welfare code :Several industrial safety and welfare laws such as the Factories Act, the Mines Act and the Dock Workers (Safety, Health and Welfare) Act, will be merged.
  3. Code on Wages: The Minimum Wages Act, the Payment of Wages Act, the Payment of Bonus Act, the Equal Remuneration Act are merged.
  4. The Labour Code on Industrial Relations will combine Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946.

Labour scenario in India

  • India has a 50-crore workforce. In the unorganised sector, there are about 42 crore workers. 90% of the workforce in the country is in the informal sector is characterised by low productivity, low quality and decent work deficit.
  • The Periodic Labour Force Survey pointed out that the proportion of workers in regular employment has increased, unemployment has reached a 45-year high. 
  • The worker participation rate has also declined between surveys held in 2011-12 and 2017-18.

Need for codification

  • It is difficult to reconcile 44 labor laws, therefore they cause hardships to employers, and given an opportunity, they try to avoid employing labour. 
  • With various labour-related definitions getting standardised, it is expected that there shall be less disputes.
  • This will ensure that process of registration and filing of returns will get standardised and streamlined. 
  • It will facilitate compliance with the laws and help improve the ease of doing business, so that employment can be increased.
  • The perception is that these laws multiply disputes, make labour aggressive, and therefore, are a hindrance to expanding private and foreign investment.
  • The government intends to bring in maximum governance with minimum laws by amalgamating all labour laws into four broad Codes,
  • Labour being a concurrent subject, states have legislated various levels of minimum wages, some of which are quite poor and discriminatory.
  • Current labor laws are hardly implemented and state governments provide very little machinery to monitor and penalise defaulting employers.
  • The Economic Survey highlighted the effect of labour reforms in Rajasthan, suggesting that the growth rates of firms employing more than 100 workers increased at a higher rate than the rest of the country after labour reforms. 

Salient features of the draft code on Industrial Relations:

It has been prepared after amalgamating, simplifying and rationalizing the 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.

What happened in the past?

  • Earlier, the government approved an amendment to the Trade Unions Act, 1926 to make provisions regarding recognition of trade unions.
  • The recognition is necessary because recognised trade union of an industry or establishment gets bargaining or negotiating rights with the employer.
  • It allows companies to hire workers on fixed-term contract of any duration
  • The code has retained the threshold on the worker count at 100 for prior government approval before retrenchment, but it has a provision for changing 'such number of employees' through notification. 

What happened in the past?

  • Industrial Relations Code, 2017 introduced in the last Lok Sabha too, was stalled after protests of the trade unions.
  • One of the more unpopular proposals was that government permission for lay-offs, retrenchment or closure will be required only in establishments employing 300 or more employees. 
  • This would have watered down the current provision in the Industrial Disputes Act, 1947, which makes permission mandatory for all establishments with 100 or more workers.
  • It provides setting up of a two-member tribunal (in place of one member) wherein important cases will be adjudicated jointly and the rest by a single member, resulting speedier disposal of cases.
  • Besides, it has vested powers with the government officers for adjudication of disputes involving penalty as fines, thereby lessening the burden on tribunal. 
  • It also said the re-skilling fund is to be utilised for crediting to workers in a manner to be prescribed. 
  • The bill also provides for definition of Fixed Term Employment and that it would not lead to any notice period and payment of compensation on retrenchment excluded.

Fixed-term employment means a worker can be hired for any duration, three months or six months or a year depending on season and orders. While this means workers can be hired seasonally for six months or a year it also means that all workers will be treated at par with regular workers for benefits.

Concerns with the Industrial Relations Code:  

  • Restrictions: The code on industrial relations too is replete with restrictions, on forming or registering unions, calling a strike (which would entail prior permissions and notices) and seeking legal redressal for workers.
  • Right to strike: The Code proposes to ban strikes for a period of two months after the mandatory 14-day notice period is over by triggering a mandatory conciliation process. Stiff fines for violations of up to `50,000 fine and/or a jail term have also been proposed. Labour organisations believe that through this, workers’ right to strike is being tweaked.

Are labor strikes impeding productivity? What the data says?

  • In the three years from 2015 to 2017, the number of strikes across industrial units fell from 97 to 80; and the number of lockouts from 22 to 11. 
  • Similarly, the number of man-days lost on account of these labour disputes sharply fell from 29.8 lakh to just 13.5 lakh in 2017.
  • Improved industrial relations are also reflected in World Bank's Ease of Doing Business Index in which India’s ranking jumped to 63, among countries surveyed.

 

  • Outsiders disallowed: The participation of outsiders in labour organisations is being eliminated. Labour organisations argue that outsiders’ role in the labour movement is crucial.
  • Roll back of recognition to industry-specific workers: These include legislations like the Beedi and Cigar Workers Act, 1966; the Plantation Labour Act, 1951 and the Mines Act, 1952. Similarly, contract workers require specific protection under the Contract Labour (Regulation & Abolition) Act.

Way forward

  • While examining the provisions, some thinking must also go into ensuring that benefits of the existing laws trickle down to those they were designed for.
  • Simplification and consolidation of labour laws apart, the government must focus on the key issue of job creation. 
  • The government should be better off building a broader consensus on any major rule changes to existing worker rights rather than rushing through them for the sake of simplification. 
  • The most glaring instance of the government’s failure to support labour standards is the Ministry of Labour’s proposal to fix the national minimum floor wage at ₹178, without any defined criteria or method of estimation. Clearly, a cross-State analysis of labour movement and increase in employment should give a better picture of the impact of these rules.

 


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