Industrial Relations Code, 2020: LKS Compliance Checklist

Definition of “Worker” under the Industrial Relations Code, 2020

• →The IR Code adopts a broader and more inclusive definition of “worker”. It covers persons engaged in skilled, unskilled, technical, operational, supervisory, clerical, or manual work for hire or reward.
• →The scope of coverage has been expanded to specifically include working journalists and sales promotion employees.
• →Under the IR Code, employees performing mainly supervisory functions and earning up to ₹18,000 per month are also treated as workers, thereby increasing the categories of employees entitled to labour law protections under the IR Code.
• →Employers should therefore review employment categories, designation structures and salary thresholds to ensure proper compliance with labour law obligations.

Grievance Redressal Committee

• →Industrial establishments employing 20 or more workers are required to establish a Grievance Redressal Committee (“Committee”) for handling individual employee grievances.
• →The Committee must consist of equal employer and worker representation, while also ensuring adequate participation of women employees, subject to a maximum strength of 10 members.
• →Although the concept existed earlier under the ID Act, the IR Code removes the earlier relaxation available to establishments already having an alternate internal grievance mechanism.
• →Another notable change is that aggrieved workers may now directly approach the conciliation officer against the Committee’s decision, thereby broadening the role of conciliation authorities in resolving individual workplace disputes.

Works Committee

• →The IR Code, 2020 continues the concept of a Works Committee, originally introduced under the ID Act, to promote harmonious relations between employers and workers and address day-to-day workplace issues.
• →The appropriate Government may direct industrial establishments employing 100 or more workers to constitute a Works Committee. Therefore, this is mandatory only in establishments having a specific order from the appropriate Government.
• →The Committee must consist of representatives of employers and workers, with worker representatives not being fewer than employer representatives.
• →The role of the Committee is consultative in nature and focuses on preserving industrial harmony and resolving matters of common interest through dialogue.
• →However, with the introduction of negotiating unions and negotiating councils under the IR Code, the practical significance of Works Committees may reduce in unionised establishments.

Trade Unions, Negotiation Mechanism and Strikes

• →The IR Code formally recognises the concept of a “negotiating union” and “negotiating council”, introducing a structured collective bargaining mechanism for the first time. Under the earlier regime, there was no statutory requirement on the employer to recognise a trade union.
• →Where only one registered trade union exists in an establishment, it must be recognised as the sole negotiating union.
• →In establishments with multiple recognised trade unions, the union enjoying support of at least 51% of workers on the muster roll will become the recognised negotiating union.
• →If no union satisfies the 51% requirement, a negotiating council must be constituted with representation from unions having at least 20% worker support.

Notice Requirement in case of Strikes / Lock-outs

• →The IR Code significantly changes the law relating to strikes and lock-outs. Unlike the earlier ID Act, prior notice requirements are now applicable across all industrial establishments and not merely establishments engaged in public utility services.
• →Workers cannot commence a strike, and employers cannot declare a lock-out:

• (a) without giving prior notice within 60 days;
• (b) within 14 days of issuing such notice;
• (c) before the date specified in the notice;
• (d) during conciliation proceedings and 7 days thereafter;
• (e) during arbitration or tribunal proceedings and for 60 days after their conclusion; or
• (f) during the operation of a settlement or award concerning the relevant dispute.

Standing Orders

• →The applicability threshold for standing orders has now been standardised at 300 or more workers for all industrial establishments, including commercial establishments. The earlier applicability threshold was 100 or more workers.
• →Existing certified standing orders will continue to remain valid so far as they are consistent with the provisions of the IR Code.
• →Employers are also permitted to directly adopt the model standing orders by merely notifying the certifying officer, thereby reducing procedural formalities.
• →This change aims to simplify compliance procedures and encourage greater uniformity in employment conditions across establishments.

Notice of Change

• →Employers intending to make changes in service conditions relating to matters specified in the Third Schedule of the IR Code must provide a notice of change in Form IV to the affected workers.
• →The notice must be given at least 21 days before implementing the proposed change.
• →Matters generally include changes relating to wages, allowances, working hours, shift arrangements, leave, disciplinary rules, rationalisation and other conditions of service.
• →The notice shall be displayed conspicuously by the employer on the notice board or on the electronic notice board at the main entrance of the industrial establishment.
• →No notice is required where the change is affected pursuant to a settlement or award, or in situations specifically exempted under the IR Code.
• →Before introducing any change in employment terms or workplace policies, employers should assess whether it falls within the Third Schedule and triggers the notice requirement.
• →Employers should maintain records of notices issued and ensure proper communication with workers and trade unions to minimise disputes arising from unilateral changes in service conditions.

Retrenchment, Layoff and Closure

• →The concept of retrenchment continues to remain similar to the earlier ID Act framework. However, termination due to expiry of a fixed-term employment contract has now been expressly excluded from the scope of retrenchment.
• →Rules governing lay-off, retrenchment and closure largely follow the earlier regime, but the appropriate Government has now been empowered to prescribe compensation higher than the existing benchmark of 15 days’ average wages for every completed year of service.
• →The threshold requiring prior appropriate Government approval for retrenchment, lay-off or closure has been revised from 100 workers to 300 workers for factories, mines and plantations. State Governments may, however, further modify this threshold.
• →This increase in threshold provides greater operational flexibility to medium-sized establishments and reduces regulatory intervention for businesses employing fewer than 300 workers.

Contribution to Workers Re-Skilling Fund

• →A new Worker Re-Skilling Fund (“Fund”) has been introduced to financially support retrenched workers by facilitating their training and skill development.
• →Employers must contribute an amount equivalent to 15 days’ last drawn wages of each retrenched worker, or such amount as may later be notified, to this Fund within 10 days from the date of retrenchment.
• →This obligation exists in addition to retrenchment compensation and other terminal dues, thereby increasing the financial burden on employers during retrenchment exercises.
• →The provision reflects a policy shift towards balancing employer flexibility with social security measures for displaced workers.