Labour Reformation 2020

New Labour Codes 2020 passed by the Parliament and assented by the Hon’ble President of India. The article contains few important highlights of the four new labor codes and it gives a gist about how the new labor codes will revamp the existing labor laws and their benefits to the working-class population of the country.

Introduction:

Indian Labour Laws refer to laws regulating Labour in India. The Constitution of India gives a series of fundamental rights particularly Equality at work and decent working conditions.

Migrant workers wait for transportation to return to their home state ( News 18)

No doubt that many labor laws are 50-70 years old and need to be overhauled in light of socio-economic and technological advancements and also to fulfill the long-pending recommendation of the second labor commission but unfortunately the focus of the codes is on bucketing existing legislations together and promoting cohesion between various laws. Besides, they fail to adequately address the problems with implementing the existing laws. Some trade unions and labor jurists have a fear that these codes may tilt the scales towards employers instead of those safeguarding labor interests, especially migrants and unorganized workers.

Labour Laws is a concurrent subject thus both Central and States frame laws. At present, there are approx 40 Central laws and approx 200 State laws. There is a long pending demand and recommendations for the second labor commission of the labor reforms to bring uniformity under various labor laws and halt the oppression and mismanagement of the working sector.

One of the objects behind the reformation and rationalization of the Labour Laws by the BJP laid Government is to ease the way of doing business, to revamp the existing labor laws practices by removing Inspector Raj to enable employers to focus on the business activity rather than to get entangled in cumbersome inspection and assessment procedures.

The Code on Wages Act, 2019 was reintroduced in the Lok Sabha on July 23, 2019, and gained presidential assent on August 08, 2019, and on 28th September 2020, the Hon’ble President of India gave assent to three Labour Codes viz The Code on Social Security 2020, The Industrial Relations Code 2020 and The Occupational Safety, Health and Working Conditions Code, 2020 which subsumes the existing 29 central laws.

Highlights:

˃ The  Code on Wages, 2019 notified on August 8, 2019, which seeks to amend and consolidate the laws relating to wages and bonus and matters connected therewith or incidental thereto, and subsumes the provisions of the Payment of Wages Act, 1936 (“Payment of Wages Act“), the Minimum Wages Act, 1948 (“Minimum Wages Act“), the Payment of Bonus Act, 1965 (“Payment of Bonus Act“) and the Equal Remuneration Act, 1976 (“Equal Remuneration Act“).

˃  the Code envisages uniform applicability of the provisions of timely payment of wages and minimum wages to all employees irrespective of the wage ceiling and sector. (sec-2(k), sec.17, sec.55, rule 57).

˃ It is relevant to note that as per the Code, any action taken under the repealed enactments including any notification, nomination, appointment, order or direction made thereunder or any amount of wages paid shall be deemed to have been done or taken or provided for such purpose under the corresponding provisions of the Code to the extent that they are not contrary to the provisions of the Code and until such time that they are repealed under the corresponding provisions of the Code or by the notification to that effect by the Central Government.1

Definition of wages under the Code:

As per the Code – (i) basic pay, (ii) dearness allowance and (iii) retaining allowance have been included as components of ‘wages’.(sec.2y)

Further, the Code excludes the following components from the definition of wages: (a) bonus payments;

(b) value of the house-accommodation, supply of light, water, medical attendance or other amenity or of any service excluded from the computation of wages by an order of the appropriate Government;

Factory workers at work

(c) employer contributions to any pension or provident fund;

(d) conveyance allowances;

(e) sums paid to the employee to defray special expenses on him by the nature of his employment;

(f) house rent allowance;

(g) remuneration payable under award or settlement between the parties or order of court or tribunal;

(h) overtime allowance;

(i) commission payable to employee;

(j) gratuity payments; and,

(k) retrenchment compensation or other retirement benefits payable to the employee or any ex-gratia payment made to the employee on the termination of his employment.

  ˃ It is to be noted that for the purpose of equal wages to all genders and for the purpose of payment of wages, the emoluments specified in clauses (d), (f), (g) and (h) (specified above), should also be considered for computation of wages.

˃ The Code prescribes that if the sum-total of the excluded components (apart from gratuity and retrenchment compensation) exceeds 50% (Fifty Percentage) (or such other percentage notified by the Central Government) of the total remuneration, then that portion of the amount exceeding 50% (Fifty percentage) (or such other percentage notified by the Central Government) is also to be calculated as ‘wages’ under the Code. Employers should be particularly wary of such a stipulation in devising salary structures for their employees.

˃ Separate definitions of ‘worker’ and ’employee’

˃ The Code provides for separate definitions of ‘worker’ and ’employee’. The definition of ’employee’ is broader than that of ‘worker’ as it includes persons carrying out managerial and administrative work. The definition of ‘worker,’ however, expressly includes working journalists and sales, promotion employees.( sec.2(z)(in the worker definition  threshold of Rs.15,000=00 has fixed )sec.2(k)

˃ Equal Remuneration

˃ Consistent with the Equal Remuneration Act, the Code, inter-alia, includes provisions prohibiting discrimination on grounds of gender (i) with respect to wages by employers, with respect to same work or work of a similar nature done by employees and (ii) with respect to recruitment of employees for same work or work of a similar nature  (Sec.3 and 4).

˃ Further, it is relevant to note that under the Equal Remuneration Act, the definition of remuneration was vague, and included basic wage or salary and any additional emoluments whatsoever payable in cash or kind to a person employed in respect of employment or work is done. However, as per the Code, the components that will constitute wages for the purpose of payment of equal remuneration irrespective of gender, leaving little room for confusion in this regard.

˃ Changes with respect to minimum wages

˃ The procedure for the determination of minimum wages by the appropriate Government is in line with the provisions of the Minimum Wages Act. However, the Code introduces the concept of a floor wage, which is to be determined by the Central Government after taking into account the minimum living standards of workers in a manner to be prescribed, which may be different for different geographical areas. The appropriate Government can, under no circumstance, fix a minimum wage rate that is lower than the floor rate determined by the Central Government. However, if the existing minimum wages fixed by the appropriate Government is higher than the floor wage, they cannot reduce the minimum wages. Further, the Code prescribes that the minimum rate of wages are to be reviewed and revised by the appropriate Government in intervals not exceeding five years. ( Sec.3 and Rule.11)

˃ The Code provides that in case an employee works on any day in excess of the number of hours constituting a normal working day, the employer is to pay him for every hour or for part of an hour so worked in excess, at the overtime rate which should not be less than twice the normal rate of wages. ( Sec.-14)

˃ Removal of threshold limit for triggering the application of payment of wages provisions

˃ Previously, the Payment of Wages Act read with Notification No. S.O. 2806 (E) dated August 29, 2017, issued by the Ministry of Labour and Employment, was applicable only to employees drawing wages below INR 24,000/- (Indian Rupees Twenty-Four Thousand only) per month. However, the Code makes no mention of any such threshold and it appears that the payment of wages provisions in the Code will be applicable to all employees across the board.

˃ The Code is applicable to all employees across the board. Accordingly, the Code has raised the responsibility of an employer to ensure proper wage structuring and timely payment of such wages to all its employees (section 43)

˃ Definitions of ‘contractor’ and ‘contract labor’

˃ Clause 2(f) of the Code defines ‘contractor’, along the lines of the Contract Labour (Regulation and Abolition) Act, 1970. The Code has also defined ‘contract labor’. Workers (other than part-time employees) who are regularly employed by the contractor for any activity of his establishment, where their employment is governed by mutually accepted standards of the conditions of employment and who get periodical increment in the pay, social security coverage, and other welfare benefits as per the law would not be considered as contract labor. Interestingly, despite the definition, the Code does not contain any references to ‘contract labor’ in Code.

˃ Provisions relating to period and payment of wages

˃ The Code has provided express provisions for the employer to fix the wage period for the employees on a daily, weekly, fortnightly or monthly basis, and stipulates the time limits for payments by the employer under each of such wage periods. In this era of the gig-economy where monthly basis payments are less relevant and increasingly more number of employees are migrating out of the formal sector, this is a welcome inclusion. This scheme departs from the one under the Payment of Wages Act which merely mentions that a wage period shall not exceed one month, and prescribes two different time limits for payment of wages based on the number of employees in an establishment. ( Sec.17 and Rule-55)

˃ Changes with respect to payment of bonus

˃ While the threshold to determine the payment of bonus to employees is required to be notified by the appropriate government, it is to be noted that the provisions relating to the computation of bonus are consistent with the terms of the Payment of Bonus Act.

˃ The Code lists disqualifications for receiving bonus along the lines of the Payment of Bonus Act. However, it is to be noted that the Code additionally provides that dismissal from service due to a conviction for sexual harassment would also be considered as a ground for disqualification for receipt of bonus under the Code.

˃ Increase in a period of limitation for filing claims and filing of claims by trade unions

˃ The Code prescribes a limitation period of three years (calculated from the date on which claims arose) for filing of claims by an employee as against the existing time period varying from six months to two years, to provide a worker more time to settle his claims. The Code now allows the trade union of which the employee is a member to file claims. Additionally, the Code places the burden of proof on an employer to prove that the amounts claimed by the employee have been paid. (sec.45(6),sec. 59(burden of proof)

˃ Provision for inspectors-cum-facilitators

˃ The Code provides for the appointment of inspectors-cum-facilitators and their powers. These authorities would have a dual function – providing compliance advisory to employers and workers and conducting inspections. Further, as per the Code, the appropriate Government may lay down an inspection scheme, which may also contain web-based inspection processes. (sec.51)

˃ Revamped provisions for offenses and penalties

˃ The Code has provided an impetus for trade unionism by allowing a registered trade union to make complaints about offenses under the Code. The Code provides for a graded penalty system for contraventions under the provisions of the Code. Unlike the provisions under the Minimum Wages Act and the Payment of Bonus Act which provide for the punishment of imprisonment up to six months, the penal consequences under the Code are relatively lenient and only entail punishment with a fine. However, the Code penalizes a second conviction within a span of five years from the first conviction with imprisonment. The quantum of fines for contraventions under the Code has seen a significant increase. Additionally, it is to be noted that the offenses of non-maintenance or improper maintenance of records and registers in the establishment are punishable only with a fine. (sec.52 and sec.54).

˃ Under the Code, the inspector-cum-facilitator is required to afford an opportunity to the employer before initiating prosecution proceedings in cases of first contraventions. This window will benefit contraventions that are non-intentional or due to a genuine lack of information on the part of the employer. Exhaustive procedures in relation to the compounding of offenses have been provided under the Code. (sec. 54)

Analysis

˃ The provision of separate definitions for ‘worker’ and ’employee’ and their usage within the Code leaves room for confusion. Further, the Code seeks to change the ‘Inspector Raj’ perception in relation to the Government’s regulation of labor by introducing inspectors-cum-facilitators instead of merely inspectors.

˃ The Code has created a pivotal transformation with respect to offenses and penalties. Substantial rationalization and proportionality, with an intent to support rather than hamper the conduct of business, are evident from the penal provisions. The Code encourages technology adoption in matters such as mode of payment of wages, inspection procedures, which are aimed at achieving its digitalization goals in governance.

The Code on Social Security 2020;

  1. The Code on Social Security amends and consolidates the existing labor laws with the goal to extend social security to all employees and workers either in the organized or unorganized or any other sectors and for matters connected or incidental thereto.
  2. The biggest highlight of the Social Security Code claimed by the government is that it has expanded the benefits of social security to unorganized workers, Fixed-term employees, Inter-state migrant workers, Film Industry workers, Construction workers, Gig workers, and Platform workers.
  3. Constitution of State Unorganized Workers Board and Building Workers Board to frame, monitor, and review the welfare schemes for unorganized and building workers and to advise central government on matters arising out of the administration of this code and incidental thereto.
  4. The definition of Contract Labour includes Inter-state migrant workers. The inter-state migrant workers mean the person recruited directly or indirectly and will include the person recruited in one state for employment in such establishment situated in another state or the person has come from one state and obtained employment in another state.
  5. The applicability of the Employees State Insurance Act expanded to cover every establishment in which ten or more persons are employed other than a seasonal factory. Also, the act will be applicable to establishments carrying hazardous or life-threatening occupation as notified by the Central Government in which even a single employee is employed.
  6. Voluntary ESIC coverage made available to establishments having less than 10 employees.
  7. Gratuity period for workers journalists as defined under Working Journalists and Other Newspaper Employees (Condition of Service) and Miscellaneous Provision Act 1955 reduced from FIVE years to THREE years. For fixed-term employees, the period will be ONE year.
  8. A minimum of 1% and a maximum of 2% cess shall be levied and collected for the purpose of social security and the welfare of building workers.
  9. Corporate Social Responsibility Fund within the meaning of the companies Act 2013to be utilized for social security of unorganized workers, gig workers, and platform workers.
  10. The Government will set up a helpline facilitation center for unorganized workers, gig workers, and platform workers.
  11. Every unorganized worker, gig worker, and platform worker who have completed the age of sixteen years shall be required to be registered with the Government and such worker will be assigned a distinguishable number.
  12. A 1% – 2% less or a maximum of 5% of the amount payable to unorganized workers shall be levied and collected for the purpose of social security and welfare of unorganized workers, gig workers, and platform workers.
  13. The Government will appoint Inspector cum Facilitators who shall discharge duties in accordance with the inspection scheme. This means the present government officials assigned as inspectors will now also undertake the role of facilitators and guide and assist the stakeholders to manage their compliances.
  14. The Government under its digitalization program will allow stakeholders to maintain electronic records and may provide for web-based inspections under the employees Provident Fund Act (EPF)and the Employees State Insurance Act (ESIC).
  15. The Central Government may defer or reduce the employer’s or employee’s contribution payable under EPF and ESIC for a period up to three months at a time for the whole of India or part thereof in the event of pandemic, endemic or national disaster.
  16. The Government will set up career centers in which the employer of any class of establishment shall report or cause to report about the vacancies in the establishment, however, the employer will not be under obligation to recruit any person through the career center.
  17. A huge penalty of Rs. 3,00,000/- and imprisonment of three years for repeat offenders.

The Code on Social Security 2020 subsumes the following existing acts,

  1. The Employees Provident Fund and Miscellaneous Provisions Act 1952
  2. The Employees State Insurance Act 1948
  3. The Payment of Gratuity Act 1972
  4. The Maternity Benefit Act 1961
  5. The Workmen’s Compensation Act 1923
  6. The Building and Other Construction Act of 1996
  7. The Cine Workers Welfare Fund Act 1981
  8. The Unorganised Workers Social Security Act 2008
  9. The Employees Exchange (Compulsory Notification of Vacancies) Act 1959

Occupational Safety, Health and Working Conditions Code 2020;

  1. The Occupational Safety, Health, and Working Conditions Code 2020 amends the laws regulating the occupational safety, health, and working conditions of the persons employed in an establishment and for matters connected thereto or incidental thereto.
  2. The code applies to establishments employing a minimum of 10 workers and to all mines and docks. All eligible establishments should get registered under the code within 60 days from the date of applicability of the code. The employer at the time of registration should provide the information of inter-state migrant workers. The existing registered establishments will be deemed to be registered under the code.
  1. Definition of Contract labor widens to include inter-state migrant workers.
  2. The Central Government will constitute the National Occupational Safety and Health Advisory Board which will advise the Government on matters related to policies, schemes, provisions, rules, and regulations under the Code.
  3. The State Government will constitute the State advisory Board to advise the State Government on matters related to the administration of the Code.
  4. The Central Government will maintain an electronic database of inter-state migrant workers. The inter-state migrant workers may register themselves with the Government. The workers who have migrated from one state to any other state and are self-employed in that other state may also register themselves.
  5. Maximum working hours fixed to 8 hours a day. Prior consent of workers is required for overtime work. Workers should get one day’s leave for every 20 days of work per year.
  6. The Code is made applicable to establishments engaged in hazardous activities having less than 10 employees.
  7. Applicability of Contract Labour Act for Central revised to 50 employees. Contractors may obtain a license for 5 years.
  8. Journey allowance for to and fro journey to a native place to inter-state workers every year.
  9. An inter-state migrant worker can avail benefits of public distribution system either in his native place or in the destination state where he is employed.
  10. Women shall be entitled to be employed in all establishments for all types of work under this code and they may also be employed with their consent before 06.00 AM and beyond 07.00 PM subject to conditions relating to safety, holidays, and working hours to be observed by the employer.
  11. The Code includes three schedules containing lists of: (i) 29 diseases that the employer is required to notify the authorities of, in case a worker contracts them, (ii) 78 safety matters that the government may regulate, and (iii) 29 industries involving hazardous processes. The lists may be amended by the central government.

The Occupational Safety, Health and Working Conditions Code 2020 subsumes the following existing acts,

  1. The Contract Labour (Regulation and Abolition) Act 1970
  2. The Factories Act 1948
  3. The Mines Act 1952
  4. The Dock Workers (Safety, Health, and Welfare) Act 1986
  5. The Inter-State Migrant Workmen Act of 1979
  6. The Motor Transport Workers Act 1961
  7. The Plantations Labour Act 1951
  8. The beedi and Cigar Workers (Condition of Employment) Act 1966
  9. The Working Journalists and Other Newspaper Employees (Condition of Service) and Miscellaneous Provision Act 1955
  10. The Building and Other Construction Workers (Regulation of Employment and Conditions)Act,1996
  11. The Working Journalists (Fixation of Wages) Act,1958

12.The Sales Promotion  Employees (Conditions of Service)Act,1976

13.The Cine-Workers and Cinema Theatre Workers (Regulation of Employment )Act,1981

The Industrial Relations Code 2020;

  1. The Industrial Relations Code 2020 amends the laws regulating the Trade Unions, conditions of employment in industrial establishment or undertaking, investigation, and settlement of industrial disputes and for matters connected thereto or incidental thereto.
  2. Every industrial establishment in which one hundred (100) or more workers are employed should constitute a works committee consisting of representatives of employers and workers engaged in the establishment.
  3. Every industrial establishment employing 20 or more workers shall have one or more Grievance Redressal Committees for resolution of disputes.
  4. Standing Orders will now be applicable to establishments having 300 or more employees instead of the existing limit of 100 employees.
  5. Employees should give 60 days’ notice to the employer before going on strike.
  6. Employers should give 60 days’ notice to the employees before lock-out.
  7. One month’s notice to be given to employees before their retrenchment.
  8. Provisions of Lay Off, Retrenchment, and Closure will not be applicable for industrial establishments having less than 50 workers.
  9. Prior permission of the government before closure, lay-off, and retrenchment mandatory for establishments having 300 or more employees instead of the existing limit of 100 employees.
  10. The threshold for negotiating council of trade unions has been fixed 20% and for recognition 51% membership in an Industrial establishment (sec.14).
  11. Workers may apply to the Industrial Tribunal in case of dispute – 45 days after the application.

The Industrial Relations Code 2020 subsumes the following existing acts,

  1. The Industrial Disputes Act of 1947
  2. The Trade Unions Act 1926
  3. The Industrial Employment (Standing Orders) Act 1946

Overall Benefits to Workers;

  1. Rights to minimum wages and timely payment of wages to all workers including unorganized workers – presently minimum wages applicable to only scheduled employment.
  2. Statutory concept of National Floor Wage introduced to reduce regional disparity in minimum wages.
  3. Less number of rates of minimum wages.
  4. Issuing appointment letters made mandatory to promote formalization.
  5. A threshold of Rs.18,000/ fixed in the definition of the migrant workers.
  6. Annual Health check-up for employees.
  7. Occupational Safety & Health Code made applicable to establishments engaged in hazardous activities having less than 10 employees.
  8. Welfare benefits to migrant workers.
  9. Extension of ESIC coverage to all districts and all establishments employing 10 or more employees.
  10. Voluntary ESIC coverage made available to establishments having less than 10 employees.
  11. ESIC act applicable to establishments carrying hazardous or life-threatening occupation as notified by the Central Government in which even a single employee is employed.
  12. Social Security Scheme extended to Gig workers, Unorganised workers, and Platform workers.
  13. Re-skilling fund introduced for retrenched employees.
  14. All occupations opened for workers and permitted to work at night with safeguards.
  15. Gratuity period for workers journalists as defined under Working Journalists and Other Newspaper Employees (Condition of Service) and Miscellaneous Provision Act 1955 reduced from FIVE years to THREE years. For fixed-term employees, the period will be ONE year.
  16. Definition of Inter-state migrant workers expanded to include migrant workers employed directly or indirectly through a contractor and also workers directly coming to destination state on their own.

Conclusion:

There may be some loopholes in the new labor codes as well which may arise when they get implemented.

The Labour reforms 2020 can be a game-changer as it will benefit in uplifting the working population of the country.

As hinted by the Ministry of Labour, all the new labor codes will be implemented in one go from April 2021 and the rules for the same will be rolled out by November-December 2020.

Note: Efforts have been taken to simplify the article as much as possible. Due to the vast coverage of the codes, there may be some points missed out in the article. Ambiguities if any will be cleared once the rules of the Codes are rolled out by the Central and State Governments.

Author:  C.P Audichya