Industrial Relations Code 2019: Balance tilts in favour of industry; makes trade unions jittery

Trade unions have raised several serious objections in the bill: from discretionary power of the executive to raising the threshold for lay-offs to making it virtually impossible to strike legally, restricting outsiders in the unorganised sector and extending fix term employment to the entire industry

The Industrial Relations Code 2019 (IR Code) is the third bill in a series of four being framed to amalgamate and rationalise more than 40 central laws governing labour affairs. It was introduced in the Lok Sabha on Thursday. Two other bills - (a) Code on Wages 2019 was introduced and passed by the Parliament in the previous session and (b) Occupational Safety, Health and Working Conditions Code 2019, which was introduced in the previous session, is now pending with a standing committee for deliberations.

The IR Code seeks to amalgamate, simplify and rationalise provisions of three central enactments relating to industrial relations -Trade Union Act of 1926, Industrial Disputes Act of 1947 and Industrial Employment (Standing Orders) Act of 1946.

Also Read: Cabinet approves Industrial Relations Code Bill

While the Code addresses the concerns of industry and has been welcomed, it faces strong opposition from trade unions cutting across the ideological line and disapproval of economists for undermining labour rights and welfare. It is a repeat of the 2017 IR Code, which was withheld following strong protests, except for three significant departures - (a) retains threshold for prior permission for lay-offs and retrenchment at 100 workers or more by withdrawing 300 workers or more than the 2017 Code proposed while allowing it to be revised upwards with executive orders, (b) providing for "sole negotiating unions" with 75% or more presentation of workers and (c) introduction of fix-term employment.

What the 2019 Code provides:

The Statement of objects and reasons says amalgamation of the three earlier enactments mentioned earlier would "facilitate implementation and also remove the multiplicity of definitions and authorities without compromising on the basic concepts of welfare and benefits to workers".

Some of the salient features are listed below:

1.    Define "fixed-term employment" to mean engagement of a worker on the basis of a written contract for a fix period with all statutory benefits like social security, wages etc. on par with the regular employee doing similar work, thereby extending it to the entire industry (until now, it is restricted to the textile and garment sector)

2.    Define "strike" to include mass casual leave

3.    Define "worker" to include persons in supervisory capacity getting Rs 15,000 a month- up from Rs 10,000

4.    Retaining the obligation to seek prior permission for industrial establishments with 100 or more workers before lay-off, retrenchment or closure with a proviso that "appropriate government" - central and state governments - would be "empowered" to modify this threshold "by notification"

5.    Set up a re-skilling fund for training of retrenched employees to which employers would contribute 15 days of wages or such other days that may be notified by the central government

6.    Provide for "sole negotiating union" for negotiations with 75% or more representation of workers in a trade union, in absence of which a "negotiating council" would be constituted for the purpose

7.    Provide for an industrial tribunal as adjudicating body to replace court of inquiry, board of conciliation and labour courts and decide appeals against the decision of conciliating officer;

8.    Provide that reference (of disputes) by the government would not be required for Industrial Tribunal, except the National Industrial Tribunal, meaning thereby that anyone can approach Industrial Tribunal and

9.    Prohibit strikes and lockouts (a) without giving 14 days' notice and going for it "within 60 days" (b) "also during the pendency of conciliation proceedings" before a conciliation officer and continues through the proceedings in tribunal, (c) "during" the pendency of arbitration or settlement or award is in operation etc., besides providing stiff punishment for violations (fine up to Rs 10,000 and a month's imprisonment.)

Disapprobation of the Code

Just like its previous version, this Code too has provoked widespread disapproval of all its key provisions from the trade unions with both the right and left ideological leanings and economists. Here are some of the key ones.  

(i) Legal strike virtually banned, diluting rights and bargaining power of workers

CK Sajinarayanan, president of the RSS-affiliated Bharatiya Mazdoor Sangh (BMS) says he "strongly opposes" the attempt to suppress strike and dismisses it as "impractical". He says: "Such a provision was made for the public utility services earlier and did not work as most strikes happened violating it. The 14-day notice becomes meaningless, given the restrictions, and will create a fresh battleground, badly affecting industrial peace".

Tapan Sen, general secretary of the Left-leaning Centre of Indian Trade Unions (CITU) says the Code "bans strike altogether", subverting workers' rights to resort to legal strikes.

Labour economist Prof KR Shyam Sundar of XLRI's Xavier School of Management, Jamshedpur, says legal strike has been made virtually impossible because now (a) industrial disputes would come under one resolution process or the other during the timeframe fixed for strike (before a conciliation officer, tribunal or arbitration and award processes) and (b) throwing open the option of approaching the tribunal to anyone to bring it under the resolution process. He points out that redefining strike to include mass casual leave would make even coincidental leaves vulnerable to stiff penalties.

(ii) Dilution of threshold for lay-offs, retrenchment and closure

In view of persistent opposition from trade unions, the 2019 Code marks a departure from the 2017 one which had sought to increase the threshold for seeking prior permission for lay-offs, retrenchment and closure from industrial establishments with 100 workers or more to "not less than 300". The new code goes back to the older threshold (of 100 or more) but allows it to be increased through an executive order.

Sen says this is "subversion" of the process as it allows executives to change the threshold at will, rendering the entire legislative processes meaningless. Echoing similar sentiments, Sajinarayanan says this discretionary power (to central and state governments) should go. He says the BMS has been demanding to lower the threshold for long since mechanisation has enabled lesser number of workers to achieve productivity levels comparable with that of a higher number of workers in the past.

Prof Sunder explains that the discretionary provision has two serious consequences. It (a) allows differential labour structures in states and (b) more crucially, law-making is taken out of the legislature's domain to that of the executive, "which is very bad in law".

(iii) From permanent to fix term employment

Sajinarayanan says the BMS would "oppose it tooth and nail" because it enters into the domain of permanency of workers and extends the provision to the entire industry. He says it would create a new category of workers as permanent jobs would be converted to fix term jobs with social security and wages at par with the former but "no job security or permanency".

He further says: "This provision was introduced in the textile and garments industry in 2016. Three years later, this industry has gone down with units shifting to Bangladesh. It has had only a negative impact."

Prof Sundar says this change would have two consequences: (a) conversion of future permanent vacancy to fix term ones with tremendous flexibility as it is not regulated except for wages and social security and (b) job permanency would be totally diluted.

(iv) Outsiders restricted in unorganised sector-trade unions

The Code says that the unorganised sector-trade unions would need to have 50% of office bearers who are employees. This is not acceptable to trade unions. Sajinarayanan says: "From Mahatma Gandhi and Nehru onwards, many outsiders have led trade union movements and it is because of them that the trade union movement has retained its quality. We are not in favour of this."

In Sen's view this is particularly worrisome because it is meant for the unorganised sector where workers are more vulnerable to vindictive actions in the absence of outsiders' support even for demanding legitimate rights. Prof Sundar says this is "not a good labour policy as it discourages empowerment of unorganised sector workers".

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(v) 75% threshold for "sole negotiating union"

This is another departure from the 2017 Code. Sajinarayanan says it is "not needed" and "not practical" because in Indian conditions no trade union can claim representation of 75% of workers or more. In India, he says, the tradition has been for all unions to join hands in negotiations.

Prof Sundar says no trade union in the world would fulfil this condition. This is self-defeating as it undermines collective bargaining and encourages a crowded negotiating council that would follow (if no union qualifies to be "sole negotiating union"). "Such a rather stiff benchmark would not help the purpose for which the law is made", he adds.

In the meanwhile, the BMS has rejected the Code completely after a prolonged deliberation in New Delhi on Friday. Sajinarayanan says the BMS is seeking withdrawal of the Code or it be sent to a Parliamentary panel for full debate before being drawn up again.