Industrial Code 2020: Parliament should fill the gaps, else courts will have to

The Industrial Relations Code 2020 is being promoted by the government as a bill that will energise India’s industry and revitalise its economic growth while at the same time freeing employees from the chains of the three earlier labour laws, namely the Trade Unions Act, 1926; The Industrial Employment (Standing Orders) Act, 1946, and The Industrial Disputes Act, 1947. However, the bill has substantive issues in it, from violation of the principle of separation of powers to making it difficult for employees to strike, and even certain undefined terms. These are the some of the issues that the government needs to consider before going ahead with it.

At the outset, a new industrial law is long due. The 6th Economic Census (2013-14) reported that 59 million establishments employ 131 million people in India. Of these, 28% hired only one worker. Thus, the challenge for government was to regulate a diverse set of workers while keeping in mind their rights. It envisages to do so through this code.

This code provides for registration of trade unions if they have 10% of the workers or 100 workers with them, whichever is less. The code also provides for a negotiating union to negotiate with the administration of the factory. The negotiating union can be the sole union or, where there are multiple unions, then a union with 51% workers on muster roll. The code also provides for other modifications, such as on lay-off and retrenchment. Some of these reforms need to be looked at in the light of the separation of powers conundrum that this code creates.

The basic flaw in the code is that it fails to define certain essential terms. The code defines a ‘worker’ as any person who works for hire or reward. It excludes persons employed in a managerial or administrative capacity or in a supervisory capacity with wages exceeding Rs 18,000 per month. However, it does not define the terms ‘manager’ or ‘supervisor’ in this context. These terms are used in the remaining two labour codes tabled parallel to this code, i.e., Occupational Safety and Health (OSH) Code and the Wages and Social Security Code. The Standing Committee, which examined the OSH Code, recommended that the terms ‘supervisor’ and ‘manager’ be clearly defined in the code as it determines the categories of persons who would be excluded from the definition of ‘workers’.

Further, the code uses the term ‘contractor’ while defining certain terms. For example, ‘employer’ is defined to include a ‘contractor’. However, the code does not define ‘contractor’. Hence, it defines an unknown term with another unknown term. Not defining an important term such as ‘contractor’ will emanate further legislation on it in the future. Hence, it would be best to define these terms in the definition clause of the code.

The code requires all persons to give a prior notice of 14 days before a strike or lockout. This has to be shared with the conciliation officer within five days, after which conciliation proceedings will start immediately. Strikes and lockouts are prohibited during these conciliation proceedings and even seven days after conciliation proceedings end. Further, if this conciliation is not successful and as a result an application by either of the parties is filed before the tribunal, then there is a prohibition on strikes and lockouts during the proceedings and even 60 days after them. Now, given the slow speed of conciliation and proceedings in India, it is fairly evident, the code will effectively bar protests and lockouts, albeit indirectly.

The code also provides for the constitution of Industrial Tribunals and a National Industrial Tribunal to decide disputes. It states that the awards passed by a tribunal will be enforceable on the expiry of 30 days. Under the code, the government can defer the enforcement of the award in certain circumstances, namely public policy affecting national economy or social justice. These circumstances are when: (i) the central or state government is a party to the dispute in appeal, or (ii) the award has been given by a National Tribunal. The appropriate government can also make an order rejecting or modifying the award under the above provided conditions. The notification and the order will be tabled in the legislature. However, this will not be of much effect when the legislature is controlled by only one political party.

The question is whether such a provision would violate the principle of separation of powers between the executive and the judiciary, since it empowers the government to change the decision of the tribunal through executive action. Further, it raises the question of whether there is a conflict of interest, as the government may modify an award made by the tribunal in a dispute in which it is a party.

The Industrial Disputes Act, 1947 had similar provisions. In 2011, the Madras High Court (affirming a 1997 Andhra Pradesh High Court judgement) struck down these provisions on constitutional grounds and held that the power of the executive to decline enforcing an award or to modify it allows the executive to sit in judgement over the decision of the tribunal, and therefore violates the separation of powers between the executive and the judiciary, which forms a part of the basic structure of the Constitution. Yet, this provision has been replicated in the code. The Standing Committee on Labour Law, while examining an identical provision in the 2019 bill, had recommended removing this provision in view of these judgements. Evidently, however, it has still made its way into this code.

It can thus be seen that certain basic terms need to be defined in the code, provisions that indirectly disallow protest as well as those that conflict with the separation of powers need to be amended. It is best that these changes are made by the legislature, rather than allowing a pile up of cases in court.