Industrial Relations Code, 2020 received Presidential Assent on 28-09-2020.

Industrial Relations Code has been introduced for amalgamating, simplifying and rationalising the relevant provisions of :

(a) the Trade Unions Act, 1926;

(b) the Industrial Employment (Standing Orders) Act, 1946; and

(c) the Industrial Disputes Act, 1947.

Purpose and Objective:

The said legislation provides a broader framework to protect the rights of workers to form unions, to minimise the friction between the employers and workers and to provide provisions for investigation and settlement of industrial disputes.

The object of the proposed legislation is to achieve industrial peace and harmony as the ultimate pursuit in resolving industrial disputes and to advance the progress of the industry by bringing about the existence of harmony and cordial relationship between the employers and workers.

Salient Features:

Trade unions: 

Under the Code, seven or more members of a trade union can apply to register it.  Trade unions that have a membership of at least 10% of the workers or 100 workers, whichever is less, will be registered.  The central or state government may recognise a trade union or a federation of trade unions as Central or State Trade Unions, respectively.   

Negotiating unions:

The Code provides for a negotiation union in an industrial establishment, having registered trade unions, 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.

Unfair labour practices:

The Code prohibits employers, workers, and trade unions from committing any unfair labour practices listed in a Schedule to the Code.  These include: (i) restricting workers from forming trade unions, (ii) establishing employer sponsored trade union of workers, (iii) coercing workers to join trade unions, (iv) damage to employer’s property, and (v) preventing any worker from attending work.  Any person who commits unfair labour practices is punishable with a fine between ten thousand rupees and two lakh rupees.

Standing orders:

All industrial establishments with at least 300 workers must prepare standing orders on certain matters.  These include:

(i) 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.

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.

Lay-off and retrenchment:

Employers of non-seasonal industrial establishments such as mines, factories, and plantations with 50 to 300 workers must (i) pay 50% of basic wages and dearness allowance to a worker who has been laid off, and (ii) give one month’s notice or wages for the notice period to the retrenched worker.  Lay-off is the inability of an employer from giving employment to a worker due to reasons such as shortage of coal, power, or breakdown of machinery.  Retrenchment means termination of services of a worker for reasons other than disciplinary action.  Any person who contravenes these provisions is punishable with a fine between fifty thousand rupees and two lakh rupees.

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.  The central or state government may increase this threshold by notification.  Such establishments must pay 50% of basic wages and dearness allowance to a worker who has been laid off.  In case of retrenchment, the employer must either give three months’ notice or pay the retrenched worker for the notice period.   Any employer who violates these provisions will be punishable with a fine between one lakh rupees and ten lakh rupees.  

Within one year of retrenchment of workers, if an employer seeks to re-employ a person, he must prefer retrenched workers over other persons.

Voluntary arbitration:

The Code allows for industrial disputes to be voluntarily referred to arbitration by the employer and workers through a written agreement.  After investigating the dispute, the arbitrator will submit the arbitration award to the government.  Industrial disputes include disputes related to terms of employment, non-employment and dismissal, retrenchment, or termination of workers.

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.  

Exemptions from the Code: 

The 2020 code provides that the central or state government may exempt any new establishment or a class of new establishment from all or any provisions of the Code in public interest.

(i) to define “workers” which includes the persons in supervisory capacity getting wages up to eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time;

Fixed-Term Employment:

(ii) to provide for fixed-term employment with the objective that the employee gets all the benefits like that of a permanent worker (including gratuity), except for notice period after the conclusion of a fixed period, and retrenchment compensation. The employer has been provided with the flexibility to employ workers on a fixed-term basis on the basis of requirement and without restriction on any sector;

Definition of “Industry” Revised:

(iii) to revise the definition of “industry” that any systematic activity carried on by co-operation between the employer and workers for the production, supply or distribution of goods or services with a view to satisfying human wants or wishes (not being wants or wishes which are merely spiritual or religious in nature) with certain exceptions;

Concerted Casual Leave under “STRIKE”

(iv) to bring concerted casual leave within the ambit of the definition of strike;

Adequate Representation of Women Workers:

(v) to provide the maximum number of members in the Grievance Redressal Committee up to ten in an industrial establishment employing twenty or more workers. There shall be an adequate representation of the women workers therein in the proportion of the women workers to the total workers employed in the industrial establishment;

Negotiating Union:

(vi) to provide for a new feature of recognition of negotiating union and negotiating council in an industrial establishment by an employer for the purpose of negotiations. The criterion for recognition of negotiating union has been fixed at fifty-one per cent. or more workers on a muster roll of that industrial establishment. As regards the negotiating council, a Trade Union having support every twenty percent. of workers will get one seat in the negotiating council and the fraction above twenty per cent. shall be disregarded;

Appeal for Cancellation of Trade Union:

(vii) to provide for an appeal against non-registration or cancellation of registration of Trade Union before the Industrial Tribunal;

Recognition of Trade Union:

(viii) to empower the Central Government and the State Governments to recognise a Trade Union or a federation of Trade Unions as the Central Trade Union or State Trade Unions, respectively;

Standing Order:

(ix) to provide for the applicability of threshold of three hundred or more workers for an industrial establishment to obtain certification of standing orders, if the standing order differ from the model standing order made by the Central Government;

(x) to provide that if the employer prepares and adopts a model standing order of the Central Government with respect to the matters relevant to the employer’s industrial establishment, then the model standing order would be deemed to be certified. Otherwise, the industrial establishment may seek certification of only those clauses which are different from the model standing orders;

Industrial Tribunal:

(xi) to set up an Industrial Tribunal consisting of a Judicial Member and an Administrative Member, in place of only Judicial Member who presently presides the Tribunal. For certain specified cases, the matters will be decided by the two-member Tribunal and the remaining shall be decided by a single-member Tribunal as may be provided for in the rules;

(xii) to set up Industrial Tribunals in the place of existing multiple adjudicating bodies like the Court of Inquiry, Board of Conciliation and Labour Courts;

(xiii) to remove the reference system for adjudication of Industrial Disputes, except the reference to the National Industrial Tribunal for adjudication;

Conciliation Proceedings:

(xiv) to provide that the commencement of conciliation proceedings shall be deemed to have commenced on the date of the first meeting held by the conciliation officer in an industrial dispute after the receipt of the notice of strike or lock-out by the conciliation officer;

Strikes & Lock-Outs | 14 days notice required:

(xv) to prohibit strikes and lock-outs in all industrial establishments without giving notice of fourteen days;

Industrial Establishments Obligation

(xvi) to provide for the obligation on the part of industrial establishments pertaining to mine, factories and plantation having three hundred or more workers to take prior permission of the appropriate Government before lay-off, retrenchment and closure with flexibility to the appropriate Government to increase the threshold to higher numbers, by notification;

Re-skilling fund | Retrenched Workers:

(xvii) to set up a re-skilling fund for training of retrenched workers. The fund shall, inter alia, consist of the contribution of the employer of an amount equal to fifteen days wages last drawn by the worker immediately before the retrenchment or such other number of days, as may be notified by the Central Government, in case of retrenchment only. The fund shall be utilised by crediting fifteen days wages last drawn by the worker to his account who is retrenched, within forty-five days of the retrenchment as may be provided by rules;

Compounding Offences:

(xviii) to provide for compounding of offences by a Gazetted Officer, as the appropriate Government may, by notification, specify, for a sum of fifty per cent. of the maximum fine provided for such offence punishable with fine only and for a sum of seventy-five per cent. provided for such offence punishable with imprisonment for a term which is not more than one year, or with fine;


(xix) to provide for penalties for different types of violations to rationalise with such offences and commensurate with the gravity of the violations;

(xx) to empower the appropriate Government to exempt any industrial establishment from any of the provisions of the Code in the public interest for the specified period.

Compliance Requirements:

Short TitleThreshold for ApplicabilityRequirement
Works Committee100 or more workersConstitution of Works Committee consisting of representatives of employer and workers
Grievance Redressal
20 or more workersConstitution of Grievance Redressal Committees for consisting of equal number of members representing employer and workers
Preparation of draft
Standing Orders by
300 or more workersEmployer must prepare draft Standing Orders within a period of six months from the date of commencement of this Code
Notice of change in
Conditions of Service
300 or more workersEmployers who propose to effect any change in conditions of service applicable to any worker in respect of any matter under the Third Schedule shall affect such change by giving 21 days’ notice to workers
Duty of an employer
to maintain muster rolls
of workers
50 or more workersIt shall be the duty of every employer for the purposes of this Chapter to maintain a muster roll and to provide for making of entries therein by workers who present themselves for work
Contribution to Worker Re-Skilling Fund Contribution of the em-
ployer of an industrial establishment that is equal to fifteen days wages last drawn by the work-er immediately before


Twitter Delicious Facebook Digg Stumbleupon Favorites linkedin More