Comprehensive Study Material on the Industrial Relations Code, 2020

Introduction

The Industrial Relations Code, 2020 (IRC 2020) is a pivotal piece of legislation in India’s labour law reforms, enacted as part of a broader initiative to consolidate and modernize outdated labour laws. Introduced in Parliament on September 19, 2020, and passed amidst significant debate, it amalgamates three key pre-existing central laws: the Trade Unions Act, 1926; the Industrial Employment (Standing Orders) Act, 1946; and the Industrial Disputes Act, 1947. These laws collectively addressed trade union formation, employment conditions, industrial disputes, strikes, lock-outs, lay-offs, retrenchment, and closures. The IRC 2020 simplifies these into a single framework to reduce complexity, enhance ease of compliance, promote industrial harmony, and balance the interests of workers and employers in a rapidly evolving economy.

The background stems from the Second National Commission on Labour (2002), which highlighted the archaic, inconsistent, and overlapping nature of India’s labour laws—over 40 central and 100 state laws. To address this, the government proposed consolidating them into four codes: on Wages, Industrial Relations, Social Security, and Occupational Safety, Health, and Working Conditions. The IRC 2020 specifically focuses on industrial relations, aiming to foster amicable employer-worker relationships, minimize frictions, and provide efficient mechanisms for dispute resolution. It extends coverage to new categories like gig and platform workers, introduces fixed-term employment, and raises thresholds for certain provisions to ease burdens on smaller establishments. However, it has been criticized for tilting the balance toward employers, potentially weakening worker protections.

Objectives

The primary objectives of the IRC 2020 are multifaceted, designed to reform India’s labour landscape for better efficiency and equity:

• Consolidation and Simplification: To merge and amend laws relating to trade unions, employment conditions in industrial establishments, and the investigation and settlement of industrial disputes, reducing redundancy and improving uniformity.
• Promotion of Industrial Peace: By establishing mechanisms to maintain harmonious relations between employers and workers, minimizing conflicts that could harm productivity and the national economy.
• Worker Protection and Rights: Safeguard workers’ rights through provisions on trade unions, grievance redressal, and fair dispute resolution, while extending benefits to emerging worker categories like gig and platform workers.
• Employer Flexibility: Enhance ease of doing business by raising thresholds for compliance (e.g., standing orders), introducing fixed-term employment, and streamlining processes for lay-offs, retrenchment, and closures.
• Dispute Resolution Efficiency: Provide structured forums like conciliation, arbitration, tribunals, and grievance committees to resolve disputes swiftly and fairly.
• Skill Development and Support: Establish a Worker Re-skilling Fund to aid retrenched workers, ensuring they receive support for transitioning to new opportunities.
• Uniformity and Compliance: Align with international standards (e.g., ILO conventions) while allowing central and state governments flexibility in implementation.

These objectives reflect a shift toward a more flexible labour market, but critics argue they prioritize economic growth over worker welfare.

Key Definitions

Understanding the IRC 2020 requires familiarity with its core definitions, which have been expanded or refined from previous laws:

• Industry: Any systematic activity involving employers and workers for the production, supply, or distribution of goods or services (with or without profit motive), excluding institutions for religious or spiritual purposes. This broadens the scope to include more modern economic activities.
• Worker: Any person employed in an industry for hire or reward, including skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work. Excludes those in managerial/administrative/supervisory roles earning over Rs. 18,000 per month (or as notified). Newly includes working journalists, sales promotion employees, and supervisory staff below the wage threshold.
• Fixed-Term Employment: Employment for a specified period under a written contract, entitling workers to the same wages, allowances, and benefits as permanent employees doing similar work, including pro-rata gratuity after one year.
• Industrial Dispute: Any dispute or difference between employers and workers, or among workers/unions, concerning employment, non-employment, terms of employment, or conditions of labour. Now explicitly includes individual termination disputes.
• Strike: Concerted cessation of work by a group of workers, including mass casual leave by 50% or more workers in an establishment on a given day.
• Lock-out: Temporary closure of a workplace or suspension of work by the employer due to an industrial dispute.
• Gig Worker: A person who performs work or participates in a work arrangement outside the traditional employer-employee relationship, earning from such activities.
• Platform Worker: A person engaged in providing specific services through an online platform.
• Negotiating Union/Council: The sole union for collective bargaining if it has over 51% membership; otherwise, a council with representatives from unions having at least 20% membership.

These definitions aim to cover contemporary work forms but exclude apprentices and certain informal workers, drawing criticism for incompleteness.

Structure of the Code

The IRC 2020 is organized into 14 chapters, 104 sections, and 3 schedules, providing a logical flow from definitions to enforcement:

• Chapter I: Preliminary – Definitions, applicability, and exemptions.
• Chapter II: Bi-partite Forums – Works committees and grievance redressal committees.
• Chapter III: Trade Unions – Registration, recognition, and rights.
• Chapter IV: Standing Orders – Preparation, certification, and matters covered.
• Chapter V: Notice of Change – Requirements for altering service conditions.
• Chapter VI: Voluntary Reference of Disputes to Arbitration – Arbitration agreements and processes.
• Chapter VII: Mechanism for Resolution of Industrial Disputes – Conciliation officers, tribunals, and national tribunals.
• Chapter VIII: Strikes and Lock-outs – Conditions, prohibitions, and illegality.
• Chapter IX: Lay-off and Retrenchment – Procedures, compensation, and funds.
• Chapter X: Special Provisions Relating to Lay-off, Retrenchment, and Closure in Certain Establishments – Permissions for larger establishments.
• Chapter XI: Worker Re-skilling Fund – Establishment and contributions.
• Chapter XII: Offences and Penalties – Violations, compounding, and punishments.
• Chapter XIII: Miscellaneous – Powers of government, exemptions, and transitions.
• Chapter XIV: Repeal and Savings – Repeal of old acts and savings clauses.

Schedules:

• First Schedule: Matters to be included in standing orders (e.g., worker classification, holidays, terminations).
• Second Schedule: Unfair labour practices (prohibited for employers, workers, and unions).
• Third Schedule: Matters requiring notice for changes in service conditions.

This structure ensures comprehensive coverage while allowing for staggered implementation via notifications.

Key Provisions

The IRC 2020 introduces several innovative and reformed provisions:

Trade Unions and Collective Bargaining

• Trade unions can register with at least 10% of workers or 100 members (whichever is less), up from 7 members in the 1926 Act.
• Sole negotiating union if >51% membership; otherwise, a council with reps from unions >20% membership.
• Central/State governments can recognize unions as central/state-level bodies.
• Bans on outsiders in executive positions limit external expertise.

Standing Orders

• Applicable to establishments with ≥300 workers (raised from 100).
• Employers draft based on model orders, consult unions, and certify within 60 days.
• Covers worker classification, hours, holidays, terminations, etc.; continues even if workforce drops below threshold.

Bi-partite Forums

• Works Committee: For ≥100 workers; promotes harmony with equal reps.
• Grievance Redressal Committee: For ≥20 workers; handles individual grievances within 30 days, with appeals; ensures women’s representation.

Strikes and Lock-outs

• 14-day notice required, valid for 60 days; prohibited during conciliation (and 7 days after), tribunal proceedings (and 60 days after), or under settlements.
• Applies to all establishments, not just public utilities; mass casual leave by ≥50% workers counts as a strike.
• Illegal if contravened; employers report within 5 days.

Lay-off, Retrenchment, and Closure

• Lay-off: 50% compensation for workers after 1 year; no prior permission for <300 workers.
• Retrenchment: 1-month notice or pay, 15 days’ average pay per year; last-in-first-out; re-employment priority.
• Closure: 60-day notice; compensation as retrenchment.
• Prior government permission for ≥300 workers; exemptions for small/seasonal units.
• Worker Re-skilling Fund: Employer contributes 15 days’ wages per retrenched worker; paid to worker within 45 days.

Dispute Resolution

• Conciliation Officers: Mediate disputes.
• Industrial Tribunals: Adjudicate on dismissals, strikes, etc.; awards enforceable after 30 days.
• National Industrial Tribunal: For national/multi-state disputes.
• Individual termination disputes now industrial disputes; apply to tribunal within 45 days post-conciliation.

Fixed-Term Employment and Other Provisions

• Equal benefits to permanent workers; pro-rata gratuity.
• Exemptions for new establishments in public interest.
• Compounding of offences: 50-75% of fine for settlement.
• Appropriate Government: Central for PSUs (even <50% stake), railways, etc.

Unfair Labour Practices

Prohibits practices like interfering in union activities, discriminatory treatment, or malicious lock-outs (detailed in Second Schedule).

Changes from Previous Laws

The IRC 2020 introduces significant reforms compared to the consolidated acts. Below is a comparative table:

Aspect	Previous Laws (e.g., ID Act 1947, TU Act 1926, IESO Act 1946)	IRC 2020 Changes
Applicability Threshold	Standing orders: ≥100 workers; Permission for lay-off/retrenchment/closure: ≥100 workers.	Raised to ≥300 workers for both; government can only increase (not decrease). Provisions continue if workforce drops below threshold.
Worker Definition	Narrower; excluded supervisory roles above certain wages.	Expanded to include journalists, sales employees, supervisory staff <Rs. 18,000/month; gig/platform workers mentioned but not fully covered.
Fixed-Term Employment	Not explicitly provided; relied on state notifications.	Legalized with equal benefits and pro-rata gratuity.
Negotiating Union	No specific threshold for sole union.	>51% for sole union (down from 75% in 2019 Bill); council for >20% (up from 10%).
Strikes/Lock-outs	Notice/prohibitions limited to public utilities.	Extended to all establishments; mass casual leave as strike.
Individual Disputes	Not always classified as industrial disputes.	Explicitly included; direct tribunal access post-conciliation.
Re-skilling Fund	No such provision.	New fund for retrenched workers’ support.
Compounding Offences	Limited; more imprisonment-focused.	Expanded to offences up to 1 year; fines preferred.
Government Powers	State-centric for many aspects.	Centralizes for PSUs, controlled industries; exemptions for new establishments.

These changes aim for flexibility but reduce protections for smaller establishments.

Impacts and Implications

• On Workers: Enhanced grievance mechanisms and inclusion of new worker types promote rights, but higher thresholds exempt many from protections, weakening job security. Fixed-term contracts may increase contractualization, reducing permanent jobs and bargaining power. Curtailed strike rights limit collective action, potentially leading to exploitation in informal sectors (90% of workforce). The Re-skilling Fund offers support, but exclusions in wage definitions reduce overall benefits.
• On Employers: Reduced compliance burdens, easier hiring/firing, and exemptions boost investment and growth. Streamlined disputes and compounding lower legal risks, improving ease of doing business (India’s ranking improved post-reforms). However, weakened unions may strain relations, affecting productivity.
• Broader Economy: Aims to attract FDI by addressing “labour rigidity,” but lacks evidence linking flexibility to growth. May institutionalize informality without universal coverage, impacting social justice and federalism.

Criticisms by some

The IRC 2020 has faced backlash for its “imbalancing act,” favoring employers over workers:

• Weakening Worker Protections: Higher thresholds exclude 80-90% of establishments; fixed-term employment accelerates job insecurity without retrenchment benefits.
• Curtailment of Rights: Strike bans violate constitutional freedoms; sole union mandates sideline minorities, promoting management-sponsored unions.
• Inadequate Coverage: Outdated definitions ignore gig/informal workers; exclusions from ‘worker’ status erode dignity.
• Undemocratic Process: Passed hastily without tripartite consultations (violating ILO Convention 144); centralization undermines federalism.
• Lack of Evidence: Reforms based on unproven claims of rigidity hindering growth; penalties favor fines over deterrence.
• Judicial Concerns: Government power to defer tribunal awards may breach separation of powers, as ruled in past cases.

Critics argue it prioritizes capital over labour, potentially harming long-term harmony.

Conclusion

The Industrial Relations Code, 2020, represents a bold step toward modernizing India’s labour laws, consolidating archaic provisions into a cohesive framework that promotes flexibility and efficiency. While it introduces progressive elements like fixed-term employment, re-skilling funds, and expanded definitions, it also raises concerns about diluting worker safeguards in pursuit of economic reforms. For students, understanding this code involves analyzing its balance between growth and equity, its alignment with constitutional principles, and its real-world implementation. As of 2025, parts may be notified, so monitor updates via official sources for amendments or state variations. This material provides a foundation for exam preparation, emphasizing critical analysis alongside factual recall.