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The Bill replaces three labour laws related to trade unions and industrial disputes. The Bill provides for registration of trade unions, institutes a notice period for strikes and lockouts and constitutes Industrial Tribunals and National Industrial Tribunals for the settlement of industrial disputes


  • 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. Further, a registered trade union must always have at least seven workers who are employed in the establishment or the connected industry, as its members. 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 for negotiating with the employer. If there is only one trade union in an industrial establishment, then 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 75% of workers will be recognised as the negotiating union by the central or state government.
  • 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:
    • restricting workers from forming trade unions,
    • establishing employer sponsored trade union of workers,
    • coercing workers to join trade unions.
  • Standing orders: All industrial establishments with at least 100 workers must prepare standing orders on matters listed in a Schedule to the Code. The central government will prepare model standing orders on such matters, based on which industrial establishments are required to prepare their standing orders. These matters relate to: (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.
  • Notice of change: Employers who propose changes in the conditions of service are required to give a notice to the workers. The conditions of service for which a notice is required to be given are listed in a Schedule to the Code and include wages, contribution, and leave.
  • Lay-off and retrenchment: The Code defines lay-off as the inability of an employer, due to shortage of coal, power, or breakdown of machinery, from giving employment to a worker. It also provides for employers to terminate the services of a worker, i.e., retrenchment. Employers of industrial establishments such as mines, factories and plantations with at least 100 workers are required to take prior permission of the central or state government before lay-off, retrenchment or closure. The central or state government can modify this threshold number of workers by notification. Any person who contravenes this provision is punishable with a fine between one lakh rupees and Rs 10 lakh.
  • Industrial establishments in which 50 to 100 workers are employed, are required to:
    • pay 50% of basic wages and dearness allowance to a worker who has been laid off,
    • give one month’s notice and wages for such period to a worker who has been retrenched. Any person who contravenes this provision is punishable with a fine between Rs 50,000 and two lakh rupees. Further, if an employer proposes to re-employ retrenched workers, such workers will have preference over other persons.
  • Voluntary arbitration: The Code allows for industrial disputes to be voluntarily referred to arbitration by the employer and workers. The parties to the dispute must sign a written agreement referring the dispute to an arbitrator. After investigating the dispute, the arbitrator will submit the arbitration award to the government.
  • 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, then any party to the dispute can make an application to the Industrial Tribunal.
  • Industrial Tribunals: The Code provides for the constitution of Industrial Tribunals for the settlement of industrial disputes. An Industrial Tribunal will consist of two members: (i) a Judicial Member, who is a High Court Judge or has served as a District Judge or an Additional District Judge for a minimum of three years; and (ii) an Administrative Member, who has over 20 years of experience in the fields of economics, business, law, and labour relations.
  • 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. Members of the National Industrial Tribunal will include: (i) a Judicial Member, who has been a High Court Judge, and (ii) an Administrative Member, who has been a Secretary in the central government.

Provisions in our constitution:

  • Article 23 forbids forced labour
  • Article 24 forbids child labour (in factories, mines and other hazardous occupations) below the age of 14 years.
  • Article 43A inserted by 42nd amendment – directing the state to take steps to ensure worker’s participation in the management of industries. (Gandhiji said that employers are trustees of interests of workers and they must ensure their welfare.)
  • Labour laws are under concurrent list.


  • The Indian economy grew at 4.7% in this quarter, while the country’s factory output shrank for the second straight month at 4.3% in September, recording its worst show since the present series was launched in April 2012.
  • The ease of compliance of labour laws will promote the setting up of more enterprises, thus catalysing the creation of employment opportunities in the country.

Importance of the bill:

  • The most important aspect of the Bill is that it presents the legal framework for ushering in the concept of ‘fixed-term employment’ through contract workers on a Pan-India basis.
  • It offers some degree of flexibility on government permissions for retrenchment.
  • With the introduction of fixed-term employment, they will be able to hire workers directly under a fixed-term contract, with the flexibility to tweak the length of the contract based on the seasonality of industry. These workers will be treated on a par with regular workers during the tenure of the contract.
  • The move to include it in a central law will help in wider reach, and states are expected to follow similar applicability. The Bill now ensures a pan-India impact of this move.

Changes made to the bill:

  • The government had previously included the category of ‘Fixed Term Employment Workman’ for all sectors in the Industrial Employment (Standing Orders) Act, 1946. This was only applicable to ‘central sphere’ establishments, and the states did not follow suit.
  • The threshold required for government permission for retrenchment has been kept unchanged at 100 employees, as against the proposal for 300 employees in an earlier draft of the Bill, which was opposed by trade unions.
  • Instead, the government has now provided flexibility for changing the threshold through notification.
  • The rigidity of labour laws about laying off labour has often been cited by industry as the main reason limiting scalability and employment generation.
  • At present, any company having 100 workers or more has to seek government approval for retrenchment.
  • The provision of fixed-term employment, which helps in the flow of social security benefits to all workers along with making it easier for companies to hire and fire, in The Industrial Relations Code Bill.


  • Some critics have the concern that the unclear provision regarding retrenchment would lead to uncertainty, and discretionary behaviour during implementation by the central or state government.
  • The moment the law will provide flexibility for the applicability, it leaves the matter to the discretion to the appropriate government (states or Centre). Then the clause can be misused.
  • Any discretion in law leads to uncertainty, lack of clarity, discriminatory implementation, and provides scope for unnecessary usage.
  • Fixed-term employment needs to be introduced with adequate safeguards, otherwise it runs the risk of encouraging conversion of permanent employment into fixed-term employment.