General Impact of the New Labour Codes

Posted On February 28, 2022

Written By: 
Vasudevan V.
Head, Labour Advisory Cell, EFI
General Counsel & ICC Member for Smollan-HUL JV, Certified Corporate Governance Professional & Member of Core Advocacy Committee – Retailers’ Association of India (RAI)

The Codes:

The new labour codes, viz., Code on Wages 2019, Code on Social Security 2020, Industrial Relations Code 2020, and the Occupational Safety, Health and Working Conditions Code 2020 consolidate 29 Central Labour Laws, into 4 sets of codes.

The key objectives of the consolidation is to simplify, amalgamate and rationalize the relevant provisions of the existing Central Labour Laws.

Code on Wages, 2019 –	Payment of Wages Act, 1936 Minimum Wages Act, 1948 Payment of Bonus Act, 1965 Equal Remuneration Act, 1976
Industrial Relations Code	Industrial Disputes Act, 1947 Trade Unions Act, 1926 Standing Orders Act, 1946
Code on Social Security, 2020–	The Employees’ Compensation Act 1923 The Employees’ State Insurance Act 1948 The Employees’ Provident Fund and Miscellaneous Provisions Act 1952 The Employees Exchange (Compulsory Notification of Vacancies) Act, 1959 The Maternity Benefit Act 1961 The Payment of Gratuity Act 1972 The Cine Workers Welfare Fund Act 1981 The Building and Other Construction Workers Cess Act 1996 The Unorganized Workers Social Security Act 2008
Occupational Safety, Health and Working Conditions Code, 2020	The Factories Act, 1948 The Plantations Labour Act, 1951  The Mines Act, 1952 The Working Journalist and other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act, 1955  The Working Journalist (Fixation of rates of wages) Act, 1958 The Motor Transport Workers Act, 1961 The Beedi and Cigar Workers (Conditions of Employment) Act, 1966  The Contract Labour (Regulation and Abolition) Act, 1970 The Sales Promotion Employees (Conditions of Service) Act, 1976 The Inter – State Migrant workmen (Regulation of Employment and Conditions of Service) Act, 1979 Cine-Workers and Cinema Theatre Workers (Regulation of Entertainment Act), 1981 The Dock Workers (Safety, Health and Welfare) Act, 1986 Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1986

Highlights

1. Common Features of all Codes:

Wages:

To ensure consistency, codes have a common definition, which includes all remuneration including HRA, conveyance and other allowances capable of being expressed in monetary terms. The exempted components are capped at 50 per cent of the gross wages/salary.

Inspector-cum Facilitator

This role of the Inspector is enlarged to encompass inspection and advise the employers and workers on various compliances. The scheme (Central Government), includes web based schedule.

Compounding First Offence:

The 1^st offence can be compounded by 50% fine payment. For recurrence within 5 years, no option providing for compounding and prosecution shall be initiated.

2. Code on Wages:                      
The Code on Wages is a well-rounded legislation that seeks to balance the interests of the employer and the employee. It aims to remove the ambiguity in the existing labour laws by having a common definition of ‘wage’. This is likely to have a significant impact on the net payable salary of the employees. The Code will further aid in ease of doing business by replacing obsolete provisions and streamlining the laws.

• Covers all employees in organized/unorganized sector
• Floor Wages for determination of the Minimum Wages Act by Central, basis States/Regions
• All employees are protected without wage limit – includes supervisors & managers
• Uniform accounting year – April to March mandated
• Prohibits gender discrimination in wages/recruitment, transfers/promotions
• Territorial jurisdiction for Inspector/Facilitator not provided for
• Only two registers & one return vs 10 registers and 4 returns.

Concept of Floor Wages

The term ‘floor wage’ has been introduced under Section 9 which mandates that the Central Government shall fix floor wage considering minimum living standards of a worker in a prescribed manner. The minimum floor wage shall not be less than the floor wage fixed by the Central Government.

Settlement of Wages

Section 17 stipulates that in the event of removal, dismissal of an employee from service, retrenchment, or resignation from service by the employee, the wages shall be paid to the employee within two working days of his removal, dismissal, retrenchment or resignation, as the case may be.

Disqualification for Bonus

Section 29 lays down that an employee shall be disqualified from receiving bonus under the Code is he is dismissed from service for fraud; or riotous or violent behaviour while on the premises of the establishment; or theft, misappropriation or sabotage of any property of the establishment or conviction for sexual harassment

• Industrial Relations Code

The Industrial Relations Code is enacted to amalgamate, simplify and rationalise the relevant provisions of the existing laws relating to Industrial Disputes Act, 1947, Trade Unions Act, 1926 And Industrial Employment (Standing Orders) Act, 1946

Object: to achieve Industrial peace & harmony, progress of industry and cordial relationship between the employer and the employees

Salient Provisions:

• Bipartite Forums: 
• Constitution of Works Committee & Grievance Redressal Committee
• Registrar of Trade Unions, criteria, constitution and procedure
• Standing Orders: 
• Applicability, Model Standing Orders, and procedure
• Notice of Change – Power to exempt.
• Voluntary reference of disputes to arbitration
• Mechanism for Resolution of Industrial disputes
• Strikes & Lock-outs, Lay-off, Retrenchment & Closure
• Worker Reskilling fund
• Prohibition of unfair labour practice 
• Fixed Term Employment – all statutory benefits including gratuity as a result
  of completion of tenure
• Defines Employee (earlier workman) wide category including managerial
  administrative, technical,
• Defines Employee including working journalists and sales promotion employees
• New set of provisions for Trade Unions (Negotiating Union/Council)
• Flash Strike completely prohibited
• Prior permission for lay off, retrenchment and closure of Industrial Establishment
• Composition of offences
• The threshold for applicability of the Standing Orders has been raised to 300 from the earlier set limit of 100.
• The Code has also decreased its threshold for a trade union to have the status of a sole negotiating union from 75% set in the 2019 Bill to the one that has 51% of the employees as its members.
• Further, to constitute a negotiating council, where no single union meets the 51% threshold, the council can be constituted with representatives from various unions provided they have at least 20% of employees as its members.
• The Code prohibits strikes and lockouts in all establishments without i) giving a 14 days’ notice, ii) during pendency of the proceedings before a conciliation officer iii) during pendency of proceedings before the tribunal or, iv) during pendency of arbitration or settlement or while an award is in operation.
• The Code ensures that industries continue to work smoothly, avoiding repeated disruptions in work by imposing curbs on strikes during pendency of litigation. Introduction of the sole negotiating union will help reduce the time taken in reaching amicable settlements with employer.

1. Social Security Code:
   
   
2. No separate registration required
3. Constitution of National Social Security Board & State Unorganised Workers’ Board
4. Presumption as to accident arising in course of employment
5. ESI’s rights to protect employee, if employer fails to register
6. Schemes for unorganized/GIG & Plantation workers
7. Helpline/Facilitation Centre for above workers

• Section 3 of the Code stipulates that all covered establishments are required to be registered under the Code unless they are already registered under other labour laws.
• It has introduced the term ‘Career Centre’ meaning any office (including employment exchange, place or portal) established as prescribed by the Central Govt. for providing career services.
• The Code allows for an establishment to voluntarily opt in or out of coverage of Employees’ Provident Fund (Chapter III) and Employees’ State Insurance Scheme (Chapter IV), even if the number of employees is less than the specified threshold. This provision has been inserted as an afterthought in the context of the pandemic.
• Section 53(2) of the Code provides that in case of fixed term employees, gratuity shall be paid on pro- rata basis and not on continuous service of five years.
• The Code empowers the Central Government to frame social security schemes for unorganized workers, gig workers, and platform workers as well as members of their families with respect to providing benefits under the Employees’ State Insurance Corporation (ESIC).
• The Code also lays down penalties and offences. Highlights are- Section 134 which talks about penalties for repeated offenders and Section 137 which allows the employer an opportunity to correct a non- compliance for any offence under the Act prior to initiation of prosecution or proceedings.
• A provision has been made under Section 144 wherein employers’ or employees’ contribution may be deferred or reduced for a period of three months in the event of pandemic, endemic or national disaster.

The goal of this Code is to extend social security to all employees and workers either in the organized, unorganized sector or any other sectors. It also includes gig workers (persons who perform work or participate in a work arrangement and earn from such activities outside of traditional employer-employee relationship) and platform workers (a work arrangement where workers or individuals/ organizations use online platform to solve specific problems or to provide specific services or any other such activity in exchange of payment). Hence, the SS Code has not only extended the social security coverage to more employees but has also enhanced the coverage.

• Occupational Safety, Health and Working Conditions Code (OSHWCC)
• Mandatory registration by electronic means
• Appointment letter compulsory for all employees
• Employees’ right to obtain from employer information on his health and
  safety and report to safety committee also
• National OS & H advisory Board
• Welfare Officer for every 250 workers (factory/mine/plantation)
• Safety Committee & Officer, Welfare facility, etc.,

Highlights

Contract Labour

License for engagement can be obtained for working in more than one State or for
whole of India (through Central Government) valid for 3 years. Contract Labour in core activity permitted with certain condition. Contractors are also covered by the term ‘employers’ under the Code.

The Code has included fixed term employees, platform workers, gig workers, inter-state workers etc., in its ambit.

• This Code applies to all establishments employing 10 workers or more, except mines and docks where the Code would be applicable even with 1 worker.
• It stipulates that there shall be registration for all establishments having 10 or more workers.
• It has enhanced safety compliance by mandating safety requirement for all establishments.
• Section 57 of the Code prohibits employment of contract labour for core activities.
• The Code clarifies that a contractor who deploys his own employees and provides statutory benefits is not contractor and the employees, not contract labourers.
• Section 55 of the Code stipulates that the contractor shall pay salary via bank transfer only. Where the contractor fails to pay wages, the principal employer shall be liable to pay.
• Section 48 lays down that only one license for pan India deployment for a contractor needs to be obtained which shall be valid for 5 years.
• Section 32 talks about leave encashment and stipulates that where the total quantum of leave exceeds 30 days, a worker shall be entitled to encash such excess leave. Workers are entitled to encash the remainder of leaves that is not carried forward.
• Through the draft rules, the Code sets the overtime threshold at 125 hours per quarter.
• Section 2(1)(zf) lays down that the definition of ‘interstate migrant worker’ in the Code includes individual traveling to another state for work, provided the wages are below Rs.18,000/- per month.
• Section 61 further lays down that the interstate migrant worker is entitled to yearly journey allowance.

The OSHWC Code has come at a critical juncture where the rights of the workers have been in debate and their conditions have been brought to the fore owing to the pandemic. The Code clearly addresses issues like that of the migrant workers that needed much attention. Further, it simplifies compliance for employers in the industry by introducing the provision of a single license pan India.

Implementation of Labour Codes:

Implementation: Implementation of the Labour Codes has been deferred due to constraints and delay in enactment of corresponding rules by the State Governments. Most of the States have now published the draft rules and are in the process of final notification. It is expected that the Codes are implemented in phased manner during the FY 2022-23.

Status of New Labour Code Rules – state wise till February 2022