The Four Labour Codes
Attack on rights of workers
1. The Modi Govt. has used the situation of the pandemic and the consequently truncated
monsoon session of parliament to push through its pro-corporate, anti-worker, anti-peasant
agenda. Three farm bills and three labour codes were hastily passed and have also received the
sanction of the president. The fourth labour code (code on wages) had already been passed last
year. Before we examine what these new Labour Codes are, let us first understand the purpose
of labour laws in general.
2. Labour laws are supposed to protect workers from various forms of insecurities,
adversities like job insecurity, retrenchments and wage insecurity. They are supposed to create
provisions for safe and good working conditions in factories and other establishments. In a word,
labour laws are made to protect the rights of the workers. In a socio-economic situation in which
the class of workers sells labour power to a class of employers, the former is placed in a
disadvantageous position while the latter is advantaged to impose its will and domination. Hence
the purpose of labour laws has to be premised upon the principle of protecting the workers from
the various insecurities they face. In our country consequent upon the innumerable struggles of
workers several labour laws were enacted containing certain such protections. It is well-known
that the enforcement of these laws has been poor with employers flouting them with impunity.
Capital on the other hand has been demanding the dismantling of these protections and therefore
changes in the existing labour laws to realize what is called as labour market flexibility. Changes
in labour laws have been a longstanding demand of Indian and foreign corporate particularly
since the introduction of the new economic policies in 1992. During the Vajpayee regime in
2002 the process was started with the report of the 2nd National Commission on Labour. Changes
in labour laws proposed in its recommendations were strongly opposed by the trade union
movement and the Coalition governments at the centre in the next ten years were not in a
position to implement this agenda of the corporate. However the objective of decreasing labour
costs for capitalists was achieved to some extent by permitting large scale outsourcing and
contractualization in disregard of the laws and this was condoned by the judiciary.
3. The Narendra Modi led RSS-BJP central govt. after coming to power in 2014 moved to
restructure 29 existing labour laws into four labour codes – Code on Wages, Code on
Occupational Safety, Health & Working Conditions (OSHWC), Code on Social Security and
Industrial Relations Code in which it has finally succeeded. It only remains for the Govt. to
formulate and publish the rules for these codes after which they will become the new labour
laws. Rules for Wage Code are already framed.
4. Before going into important specific changes in the laws, we should understand the
general pattern of the new codes. The Govt. had been justifying creation of these 4 codes as a
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process of simplifying, rationalizing and consolidating the multiple labour laws. The truth is that
there has been no simplification or rationalization.
5. The various acts have been pooled together to form a code with the different old acts
becoming different chapters in the new code. The sections of the various acts have been copied
verbatim in most cases like a cut-paste job. For example the Industrial relations code replaces the
Industrial Disputes Act,1947, The Trade Unions Act, 1926 and the Industrial Employment
(Standing Orders Act), 1946. The old Trade Unions Act has been copied as Chapter III and the
old Standing Orders Act has been copied as Chapter IV and the old Industrial Disputes Act has
become Chapters II, V, VI, VII, VIII, IX, X, XII, XIII and IV and similarly in the other three
codes also. At the same time certain Acts like the BOC Act,1996 are not copied over in the Code
on Occupational Safety,Health and Working Conditions. The specific anti-worker changes which
have been made we will discuss in detail later.
6. In the old Acts details as to applicability of social security benefits, health, safety and
welfare measures, etc. and other matters were specifically written clearly. In the new codes
matters have been left vague and the govt. has been given the power to decide these while
framing the rules for implementing the codes. For example in the old Factories Act health and
safety measures were given in detail regarding space between machines, protective equipment to
prevent accidents, ventilation, etc. and welfare measures like toilets, cold drinking water,
canteen, rest room, washing facility, crèche, etc were specified in the Act itself. Same was the
case with mines. Now the health, safety and welfare measures will be formulated by the govt.
For example while in the Factories Act crèche facility, rest room, etc. were compulsory now
Section 24 (3) of the OSHWC code says that, ”the Central Govt. may make rules for the facility
of crèche….” In essence what should have been decided by the legislature is now to be decided
by the govt. and the govt. can make changes or even withdraw safety and welfare measures or
grant exemptions from laws to employers if and when it wants.
7. Wherever there was a minimum threshold of number of workers 10, 20, 100 etc for being
covered under provisions of the old labour laws, in the new codes these thresholds have been
increased by double or more. As a result a large no of workers will get excluded from the
purview of these laws and will no longer enjoy the protection of these laws. Furthermore power
to increase this threshold in some laws has been given to the govt.
8. The Labour Departments of the Central and State Govts were the agency for
implementation of the multiple old labour laws. The Inspectors had the powers to carry out
surprise inspections, to inspect records, to impose fines and to initiate criminal prosecution of
employers for violation of labour laws although they rarely used these powers for the benefit of
workers. However the force of the workers movement could compel them to use these powers to
pressurize the employers to settle with the workers. The new codes have greatly limited their
powers and the labour department’s function will now be that of facilitators who will convince
and help the employers to implement the laws with no coercion involved. The employers are
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expected to voluntarily implement the laws and their self-certification of implementation through
affidavit will be sufficient. There will remain virtually no scope of any inspection on a complaint
of a union or workers regarding non-implementation of labour laws.
9. In the old laws for some violations there was provision for punishment of imprisonment
although rarely if ever were employers sent to jail. Now this leniency has been formalized by
introducing the facility of compounding offences. An employer who may be liable to undergo
imprisonment for violation of labour laws can now get away with paying a monetary penalty
instead of imprisonment.
10. We will now discuss some of the important specific changes made through the new
codes.
Industrial Relations Code, 2020
11. This code replaces the old Standing Orders Act, The Trade Unions Act and the Industrial
Disputes Act. The changes made in the old laws through this code are the most dangerous for
workers as they amount to attacks on the right to organize into a union of the workers choice and
the right to strike among other things. Furthermore in Sec.2, the definition of industry has been
changed to exclude “any other activity as may be notified by the Central Government”. The Govt
will therefore have the power to declare any industry to be not an industry. The “institutions
owned or managed by organizations wholly or substantially engaged in any charitable, social or
philanthropic service” have also been specifically excluded in this code.
12. In the old central law there was no provision for recognition of unions by the
management (A few states had a separate law for this). All registered unions had the right to
raise demands and even go on strike for the demands and compel the management to negotiate
with it. In fact even without a union, five worker representatives authorized by workers in a
meeting had the right to raise demands and give a strike notice and negotiate and sign a
settlement.
13. Now a registered union having 51% or more workers of the establishment as their
members will be recognized as the negotiating union. If no union has 51% membership then all
the unions who have more than 20% of workers as members will form a negotiating council.
How this membership will be checked has not been specified and will be decided by the Govt.
The management will have the right to refuse to negotiate with any other union.
14. When workers of an industry who are unorganized begin to get organized into a union, it
will be legally easy for the management to get pliant workers to form another union and give it
recognition as a negotiating union. Once recognition has been given to a union favourable to the
management, it will be extremely difficult for any new union to establish itself and get
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recognition because of having limited possibility of legally agitating on workers’ demands. The
code will ensure pro-management unions or nominal unions in most establishments.
15. Apart from the above major change regarding recognition, other provisions of the old
trade union act are mainly unchanged.
16. The provision in Section 62(1) of this code amounts to complete denial of the right to
strike. In the old Industrial Disputes Act Sec.22 applied to public utility services only and 14 day
notice of strike was necessary. Section 23 was for all other industries where no notice was
required and only restriction was that of no strike during pendency of proceedings before court,
tribunal, etc. In the new code the old sections 22 and 23 have been combined into new section
62(1) and made applicable to all establishments. Section 22(1) of the ID Act states, “No person
employed in a public utility service shall go on strike in breach of contract, (a) without giving to
the employer notice of strike..with six weeks before striking…” But Section 62(1) of the Code
says, “No person employed in an industrial unit shall go on strike in breach of contract,(a)
without giving to the employer notice of strike within sixty days before striking…” (italics ours)
So now what will happen is that first 14 days notice of strike will be given before which no
strike. Then after receiving notice conciliation officer will start conciliation proceedings and
while these are going on no strike. After negotiations fail, conciliation officer will send failure
report to govt. who will refer it to a tribunal and as long as matter is in tribunal no strike. On the
other hand after failure of conciliation proceedings, under the new law, management can also
directly take the matter to tribunal [Sec 53(6)] and so no strike possible. In effect every strike can
be declared an illegal strike. Furthermore mass casual leave has also been included in the
definition of strike.
17. Chapter VB of the old industrial disputes Act has become chapter X in this new code.
Chapter VB covered lay-off, retrenchment and closure in establishments having more than 100
workers. In such establishments the management had to secure permission of the govt. for layoff, retrenchment or closure. Often it was not politically expedient for governments to give the
permissions. This gave rise to the phenomenon of voluntary retirement schemes (VRS) wherein
the workers were given a larger financial package to get them to accept VRS and achieve the
management objective of closure/retrenchment.
18. In the new code this threshold has been increased to 300 workers. As a result a large
number of workers employed in medium size establishments having 100 to 300 workers will be
deprived of the protection they earlier had. Furthermore the govt. can increase this threshold
whenever it wants and for this provision has been made in Section 77(1) of the code, “…not less
than three hundred workers or such higher number of workers as may be notified by the
govt…..” Furthermore, the govt. has also been given the power to alter the rate of retrenchment
compensation from the standard 15 days per year of service via section 79(9), “…compensation
which shall be equivalent to fifteen days average pay, or average pay of such days as may be
notified by the appropriate government,…” Decreasing the rate may not be politically or legally
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feasible for a government but it could be increased to tempt the workers to accept the
retrenchment somewhat like VRS.
19. Earlier after retrenchment, the retrenched workers had a right of preference in reemployment whenever vacancies arose without any time limit (old Section 25H). In the new
code Section 72, this right has been curtailed to only one year from the date of retrenchment.
Therefore after one year has passed since any mass retrenchment/closure, the employer is freed
of any obligation to re-employ retrenched workmen.
20. The old standing orders act has been mainly retained as Chapter IV. However the major
change has been that the threshold for application of provision of standing orders has been
increased from 100 to 300 workers. As a result a large number of workers of medium size
establishments will be deprived of the right of having their working conditions and other rights
clearly defined in standing orders. Furthermore Section 39 empowers the govt. to exempt any
establishment from the provisions of standing orders. This would result in free play of the policy
of hire and fire.
21. One very significant change first introduced in the standing orders and now part of this
code is the new category of fixed term employment which fulfils the demand of employers for
freedom to hire and fire. Fixed term workers will be those who will have agreed to accept
employment for a fixed period and at the end of the period their employment will automatically
end and they will have no right to raise any dispute. They will also not get any retrenchment
compensation but will get an equivalent amount as gratuity if they have worked for more than
one year. Fixed term employees will always be facing the threat that their contract will not be
renewed. Obviously employers will prefer fixed term to permanent employees and workers in
this category are bound to keep increasing especially among skilled workers. The old Act Sec.9
specifically provided for displaying of certified standing orders by the management at the
entrance in the language understood by workers. In the new code this provision is not there and it
has been left vaguely in Sec33(2) for the govt to prescribe how workers are to be informed.
22. Under this code there will be no labour courts, only industrial tribunals for an area or
national tribunals. Under the old ID Act, labour courts and industrial tribunals were presided by
judicial officers. In a radical change the new Industrial tribunals will have 2 members- one
judicial and one administrative. On some issues they may individually hear and decide matters
i.e. the administrative member may alone decide on issues of workers. The constitutional concept
of separation of judiciary and executive has been abandoned.
23. Finally Section 96(2) gives the appropriate govt. the power to exempt any new
establishment form any or all of the provisions of this code for a period decided by the govt. in
public interest.
Occupational Safety, Health and Working Conditions (OSHWC) code, 2020
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24. This code subsumes thirteen old laws – Factories Act, 1948, Mines Act, 1952, Dock
Workers (Safety, Health and Welfare) Act, 1986, Building and other construction workers
(Regulation of employment and conditions of service) Act, 1996, Plantations Labour Act, 1951,
Contract Labour (Regulation and Abolition) Act, 1970 (CLARA),Inter-State Migrant Workers
Act, 1979, Working Journalist and other newspaper employees Act, 1955, Working Journalist
Act, 1958, Motor Transport Workers Act,1961, Sales Promotion Employees Act,1976, Beedi and
Cigar Workers Act,1966, Cine-workers and cinema theatre workers Act, 1981.
25. This code being a combination of so many diverse laws, different sections have different
applicability. An establishment is one in which 10 or more workers are employed. The definition
of factory has been changed and the minimum number of workers has been doubled from 10 to
20 where power is used and from 20 to 40 where power is not used. Thereby a large no. of small
industrial establishments will now no longer be considered factories and the workers will be
denied the protection of the health, safety and welfare provisions of the chapter on factories in
this code. We have discussed earlier that despite the name of this code, the working conditions,
safety and welfare facilities have not been specified in the code and are to be decided and
declared by the Govt. later in the rules in respect of factories, mines and other establishments.
There is a provision for annual medical check-up of workers in the code which is of particular
importance in the matter of occupational diseases but it is not clarified as to how this will be
done.
26. Working conditions, safety, welfare, etc. of mine workers is not specified in the code and
will be decided and notified by the govt. later in the rules. Building and other construction
workers (BOC) Act has been subsumed in this code but the various specific provisions for BOC
workers in the old Act like conditions of service, safety and welfare measures like drinking
water, latrines and urinals, accommodation (which is the first requirement), first-aid, canteens,
crèches find no specific mention in the code and they will depend on what rules the govt. makes.
In fact the requirements of occupational safety, health and working conditions are so greatly
different in factories, mines, building and construction works, motor transport, beedi and cigar
workers,etc. that putting them all under one law is totally misconceived. The end result is that the
rights of workers in all these matters instead of being well defined in Acts of parliament will be
decided by the govt. as it pleases. The Govt. has been claiming that it is bringing more
unorganized workers under the purview of law through the code but many sectors of economic
activity in the unorganized sector like domestic workers, scheme workers, hotel workers,
digiplatform and gig workers, etc. have been left out of the code.
27. The provisions of Contract Labour (Abolition & Regulation) Act-CLARA have been
compressed and included in this code as Chapter XI Part I. As with other laws here also the
threshold for application of the provisions of this law have been increased from the earlier 20
workers to 50 workers now (Section 45(1) of the code). Under CLARA an establishment had to
be registered for employing contract labour whereas in the new code the principal employer has
been relieved of this responsibility. So now only the contractor has to get a license which will be
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valid for 5 years.. Even this provision can be relaxed through Section 47(2) of the code which
brings in a new type of licence called a “work specific licence”. “where the contractor does not
fulfill the requisite qualifications or criteria referred to in sub-section(1), the licensing officer
may issue him a “work specific licence” renewable within such period….”
28. Under CLARA, the principal employer had the responsibility to maintain registers and
records and his representative was supposed to be present at the time of payment of wages and to
certify the payment. All this has been done away with and the only responsibility left with the
principal employer is that of paying wages if the contractor fails to do so. One change that could
benefit workers is that the responsibility of providing restrooms, canteens, etc. will now be of the
principal employer not the contractor. Finally the declared objective of abolition of contract
labour has now been quietly given up.
29. In this code also Section 127 gives the govt. the power to exempt any establishment from
any or all of the provisions of the code in general and also specifically to exempt any new
establishment or class of establishments from the code in public interest for creating more
economic activities and employment opportunities.
The Code on Social Security, 2020
30. This code incorporates 9 old Acts – Employees’ Provident Funds and Miscellaneous
Provisions Act, 1952; Employees’ State Insurance Act, 1948; Employees’ Compensation Act,
1923; Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959; Maternity
Benefit Act, 1961; Payment of Gratuity Act, 1972; Cine-workers Welfare Fund Act, 1981;
Building and Other Construction Workers’ Welfare Cess Act, 1996; and Unorganised Workers
Social Security Act, 2008. There are no major changes in the provisions of the laws and the basic
question that social security must be seen as a right and must be universal has not been
addressed. These separate acts have only become different chapters of one code. For BOC
workers who are migrants they will have portability of benefits i.e. the option of availing benefits
in their home state or in the state where they are working. How this will be implemented in
practice will have to be seen. In the definition of building and construction work a provision has
been added that….” where such works related to own residential purposes of an individual or
group of individuals for their own residence and the cost of such work does not exceed fifty
lakhs or such higher amount and employing more than such number of workers as may be
notified by the appropriate govt.” will not be included in building and construction works. This
permits the govt. to change the definition of BOC worker and deprive a section of workers of the
welfare benefits.
31. Some misconception has been created that the requirement of 5 years of service for
getting gratuity has been removed. This is not so and the requirement remains. Only in the case
of fixed term employment workers this requirement has been reduced to one year. In this code
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also inspectors have been made facilitators and the facility of compounding of offences has been
given to employers.
The Code on Wages, 2019 and draft Rules
32. This code was passed by parliament in 2019 and incorporates four old Acts – Payment of
Wages Act, 1936, Minimum Wages Act, 1948, Payment of Bonus Act, 1965 and Equal
Remuneration Act, 1976, which form different chapters in the Code.The draft rules for the wage
code have also been published and when officially notified will become law. A new concept of a
‘floor wage’ to be decided by the Central Govt. has been introduced and the State Govts are to
fix the minimum wages which must be above this floor wage. It is most likely that the floor wage
will in practice become the minimum wage fixed by the states. The matter is further complicated
by the provision in Sec.9(1) that different floor wage may be fixed for different geographical
areas with the result that workers working in different units of an industrial establishment in
different geographical areas may be paid different rates of minimum wages. In addition in the
draft rules, different rates of minimum wages are to be fixed for metropolitan, non-metropolitan
and rural areas. With so many different minimum wage rates, implementation will become very
difficult and employers will always try to pay lowest rates of wages. MNREGA wages have
been specifically excluded from this code thereby ensuring that MNREGA work will be paid at
less than minimum wage.
33. In the Rules Chapter II, Rule 3, the manner of calculating the minimum wages has been
described laying down 6 criteria to be considered. These criteria are claimed to be based on the
recommendations of 15th Indian labour conference and the judgement of the Supreme Court in
Retakos Brett case in 1992 updating these criteria. These criteria have been law for last 28 years
but were not implemented and it is unlikely they will be implemented in future also. The criteria
for housing rent expenditure has been fixed at 10% of food and clothing expenditure which is
extremely low and should be at least 25% considering the high cost of rented accommodation
and the fact that the original criterion laid down by the Labour conference was the rent for size of
accommodation allotted to Class IV Govt. employees.
34. In the old bonus Act, the union and/or workers had the right to demand from the
management and inspect the accounts of the establishment for calculating the profit and
accordingly the rate of bonus due to workers. In this code sec. 31(3) states that “where there is a
dispute regarding quantum of bonus, the authority notified by the appropriate Government
having jurisdiction may call upon the employer to produce
the balance sheet before it, but the authority shall not disclose any information contained
in the balance sheet unless agreed to by the employer. Obviously no employer will agree to give
information to the union and the union will be unable to legally prove the justification of its
demand for bonus.
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35. Inspectors under this code also will be facilitators and the facility to compound offences
is provided for in this code too.
36. The old labour laws were not gifts from rulers but were the product of determine
struggles waged and innumerable sacrifices made by the ancestors of today’s working class.
Under the guise of simplification, rationalization and consolidation these laws have been reorganized into the four labour codes and in that process attacks have been made on many hard
won rights of workers, particularly the right to organize and the right to struggle. The aim of the
Govt. is to lower the labour costs for the Indian and foreign corporate. The drastic decrease in
permanent jobs and the increasing outsourcing and contractualization has already decreased the
average wages. The amendments regarding working conditions, safety and welfare will ensure
that expenditure of employers in this regard will greatly decrease. The lack of effective
implementation machinery with Inspectors becoming facilitators will mean that the already poor
implementation of labour laws will become worse.
37. These changes in labour laws pose a serious challenge before the working class. A broad
based, determined and protracted struggle of workers is the need of the hour to fight back this
attack. IFTU calls upon all sections of workers to come forward unitedly for such a militant
struggle.
National Committee
Indian Federation of Trade Unions (IFTU)

October, 2020