The Industrial Relations Code, 2020, is an Act passed by the Parliament of India to combine and update the laws governing Trade Unions, working conditions, and the resolution of industrial disputes. This guide breaks down the legal jargon into simple, practical terms.
CHAPTER I: PRELIMINARY
Section 1: Short title, extent and commencement
This section simply establishes the name of the new law and its area of effect.
Sub-Section (1): Title of the Act
- Legal Text: “This Act may be called the Industrial Relations Code, 2020.”
- Simple English: The official name of this new law is the Industrial Relations Code, 2020.
- Example: A law firm needs to reference the correct statute in a court filing. They must call it the “Industrial Relations Code, 2020,” and not an older law like the Industrial Disputes Act, 1947.
Sub-Section (2): Extent of the Act
- Legal Text: “It shall extend to the whole of India.”
- Simple English: This law applies everywhere within India, including all states and union territories.
- Example: Whether a manufacturing plant is in Gujarat or a software company is in Karnataka, both must follow the same provisions of this Code.
Sub-Section (3): Commencement (When it takes effect)
- Legal Text: “It shall come into force on such date as the Central Government may, by notification in the Official Gazette appoint; and different dates may be appointed for different provisions of this Code…”
- Simple English: The Central Government decides when this law, or any specific part of it, officially begins to apply by announcing the date in the government’s official publication (the Gazette).
- Example: The government might decide that the rules for forming Trade Unions (Chapter III) start on January 1, 2025, but the rules for handling lay-offs (Chapter IX) might start later, on April 1, 2025.
Section 2: Definitions
This is one of the most important sections, as it defines the precise meaning of key terms used throughout the entire Code.
(a) “appellate authority”
- Simple English: This is an official body appointed by the government to review and overturn (or uphold) decisions made by lower-level authorities under this Code.
- Example: If an employer disagrees with the decision of a Certifying Officer regarding Standing Orders, they would appeal the decision to the designated Appellate Authority.
(b) “appropriate Government”
- Simple English: This defines which government—Central or State—has the power to enforce this law for a particular organization.
- Clause (i) (Central Government Control): This applies to organizations run directly by the Central Government, like Railways, Metro Railways, Mines, Major Ports, Air Transport, Telecom, Banking, Insurance, or any company where the Central Government owns at least $51\%$ of the shares (or used to, even if it’s now less).
- Example: For workers in the Indian Railways, the Central Government is the “appropriate Government.”
- Clause (ii) (State Government Control): This applies to all other businesses, including companies run by the State Government.
- Example: For employees working in a privately-owned textile factory or a State Public Sector Bus Corporation, the State Government is the “appropriate Government.”
- Proviso (Contract Labor): If there is a dispute involving contract workers and their direct contractor, the appropriate Government is whichever government (Central or State) controls the main industrial establishment where the work is taking place.
- Example: A contract worker at a Central Government-controlled airport has a dispute with their contract cleaning company. Even though the cleaning company is private, the Central Government is the authority because it controls the airport.
(c) “arbitrator”
- Simple English: A neutral person or panel (including an umpire in case of a tie) chosen by the employer and workers to settle a dispute outside of court.
- Example: A company and its workers agree to have a retired judge act as an arbitrator to resolve a dispute over bonus payments.
(d) “average pay”
- Simple English: The method for calculating a worker’s typical wages over a fixed period to determine compensation for things like lay-off or retrenchment.
- Monthly Paid: Average of the wages from the three full calendar months before the payment date.
- Weekly Paid: Average of the wages from the four full weeks before the payment date.
- Daily Paid: Average of the wages from the twelve full working days before the payment date.
- Example: A monthly-paid worker is retrenched on May 15. Her average pay would be calculated based on the total wages she earned in the full calendar months of February, March, and April.
(e) “award”
- Simple English: The final, binding decision or order given by an Industrial Tribunal or National Industrial Tribunal (or an Arbitrator) after hearing an industrial dispute.
- Example: After a hearing, the Tribunal issues an “award” ordering a company to reinstate a wrongfully dismissed worker and pay him six months of back wages.
(h) “closure”
- Simple English: The permanent shutdown of a business establishment or a section of it.
- Example: A car manufacturing company permanently shuts down its entire engine assembly plant and fires all the staff working there. This is a closure.
(i) “conciliation officer”
- Simple English: A government-appointed officer whose duty is to mediate and try to help the employer and workers reach a friendly, mutual agreement (settlement) when a dispute arises.
- Example: Two weeks before a planned strike, the Conciliation Officer calls both the union leaders and the management team into a meeting to negotiate a compromise on wages.
(j) “conciliation proceeding”
- Simple English: The formal process of meeting and negotiation facilitated by a Conciliation Officer.
- Example: The meetings, information sharing, and discussions held under the guidance of the Conciliation Officer to prevent a lock-out constitute a conciliation proceeding.
(k) “controlled industry”
- Simple English: An industry that the Central Government has declared, through a separate law, that it needs to control for the public good.
- Example: The defense production industry, where a specific Act of Parliament states that the central government has special control over its operations and labor relations.
(l) “employee”
- Simple English: Any person (excluding apprentices and armed forces members) hired by an industrial establishment to perform any kind of work (skilled, unskilled, manual, supervisory, managerial, or clerical) for pay.
- Example: The CEO’s administrative assistant, the factory manager, and the software developer are all considered ’employees’ under this broad definition, but a worker undergoing training under the Apprentices Act is not.
(m) “employer”
- Simple English: The person who hires one or more workers, either directly or through a contractor. This includes the factory occupier or manager, the chief executive of a local authority, and a deceased employer’s legal representative.
- Example: Mr. Sharma, the owner of a small logistics company, is the employer. If he uses a third-party agency to hire truck drivers, he is still considered the employer, along with the head of the third-party agency (the contractor).
(o) “fixed term employment”
- Simple English: A worker hired under a written contract for a specific, set period of time. Importantly, this worker must receive the same pay and benefits as a permanent worker doing the same job, and is eligible for proportional statutory benefits and gratuity if they serve for one year.
- Example: A company hires Ms. Reena for 18 months to complete a specific project. She is entitled to the same salary, allowances, and annual leave (calculated proportionally) as a permanent employee in the same role. If the 18 months finish, her service termination is not considered retrenchment.
(p) “industry”
- Simple English: Any organized, regular activity between an employer and workers to produce or supply goods or services aimed at meeting human needs (excluding spiritual/religious needs, sovereign government functions like defense/space, and domestic service). It doesn’t matter if the goal is profit or if capital has been invested.
- Example: A hospital that charges for its services is an industry. A university is an industry. A non-profit orphanage run by a completely charitable organization is not an industry under this Code.
(q) “industrial dispute”
- Simple English: A disagreement between employers, or between employers and workers, or among workers themselves, about hiring/firing, employment terms, or working conditions. It specifically includes disputes about a single worker’s discharge, dismissal, or retrenchment.
- Example: The Trade Union demands a $10\%$ wage hike (dispute over terms of employment). Alternatively, a single worker claims he was dismissed without proper cause (dispute over discharge/dismissal). Both are industrial disputes.
(t) “lay-off”
- Simple English: The employer’s failure, refusal, or inability to provide work to a worker whose name is on the company’s official rolls, due to reasons like power shortage, lack of raw materials, machinery breakdown, or natural disaster.
- Example: Due to a failure in the local electricity grid, a factory cannot run its assembly line for a week. The 50 workers whose names are on the muster roll and who report to work are told there is no work. This is a lay-off.
(u) “lock-out”
- Simple English: The employer’s temporary shutdown of the workplace, suspension of work, or refusal to continue employing a number of people.
- Example: Management, in response to a workers’ protest, decides to temporarily close the factory gates, announcing that no one will be working or paid until conditions are met. This is a lock-out.
(zh) “retrenchment”
- Simple English: The termination of a worker’s service by the employer for any reason, other than disciplinary action. It specifically does not include: voluntary retirement, reaching the retirement age, non-renewal of a fixed-term contract upon expiry, or termination due to continued ill-health.
- Example: A company restructures and eliminates 50 positions to save costs. The termination of these 50 workers is retrenchment. However, if a worker resigns to join a new company, that is not retrenchment.
(zr) “worker”
- Simple English: Any person (except an apprentice, manager, or administrator) hired in any industry to do manual, unskilled, skilled, technical, operational, clerical, or supervisory work for pay. This includes working journalists and sales promotion employees. Crucially, a worker who was fired or laid off due to an industrial dispute is still counted as a ‘worker’ for the purpose of the dispute proceedings.
- Exclusions: It does not include: military/air/navy personnel, police/prison staff, those employed mainly in a managerial or administrative capacity, or supervisory staff earning more than Rs. 18,000 per month (or a higher amount as notified by the government).
- Example: The foreman supervising the loading dock is a ‘worker’ if his salary is Rs. 15,000 per month, but the General Manager who controls the entire logistics division is not.
