By Suraj Nangia,Partner and Sandeep Jhunjhunwala, Partner, Nangia Andersen LLP

In the seven-decade era of independent country, India housed a complex regime of labour laws affecting every person in India working for their livelihood, right from the white-collar employees to those in organised sectors, and addressing complex issues for every employer in the country. With the Government taking heed of several committees working on these labour laws and recommending simplifications, four labour codes replacing a mammoth legal web of 44 central laws in the country were introduced as bills. Industrial relations, occupational safety, health and working conditions, social security and wages are the major concerns the new labour codes address. Approving the code on wages in the previous year, the other bills were pushed to a standing committee for their deliberations. After paying much consideration to the reports of the standing committee, the Government revised the three bills which received Presidential Assent in late September 2020, thus becoming law of the land. The new regulations reflect a significant transference for the working population of the country and the economy at large.

Amongst numerous amendments introduced by the Government, four structural changes have the greatest impact on employees, employers and their relationship. The first major amendment is the provision of special powers to Central and State Government to exempt any establishments or organisations from applicability of any or all of the provisions of these Codes. While the Code on Occupational Safety, Health and Working Conditions replacing a total of 13 Acts including the Factories Act, deals with health and safety standards, leaves, working hours and welfare measures for the work force, the code permits State Government to exempt new factory from the provisions of this code with the objective of employment creation. Similarly, the Code on Industrial Relations which deals with regulations concerning with trade unions, working conditions, retrenchment and layoffs, and dispute resolution grants power to Central Government to exempt new establishments from the provisions of this code. This would benefit the new organisations establish their foot in the competitive market by seeking exemption from the Government from certain stringent and penal provisions of the codes. On the flipside, any exemption relating to safety standards and working conditions may be hazardous for the workers of the industrial units. Hence, a deep level of scrutiny would need to be exercised while granting any exemptions from applicability of the codes.

Second major amendment via these codes attracting small and mid-sized business houses of the country is the significant increment in several thresholds. Starting with the raise in threshold, from 100 workers to 300 workers under the Industrial Disputes Act, 1947 for seeking prior permission of the Government before any retrenchment. While this move would enable small and mid-sized companies to formally introduce arbitrary service conditions for such workers, the same would dilute the labour rights for the work force in such organisations even affecting employment security for millions in the unorganised sector. However, an increase in such threshold may be a result of observations of the Standing Committee from the policies of the state of Rajasthan, where such raise increased employment opportunities and reduced lay-offs state-wide. Further, the number of workers has also been raised from 10 to 20 in case of use of electric power and from 20 to 40 in case of otherwise for defining any manufacturing unit as a factory under the Factories Act, 1948. Along with these, the threshold under the Industrial Employment (Standing Orders) Act, 1946 requiring employers to formally define conditions of employment if they have employed at least 100 workers is increased to 300 workers. This amendment aims to reduce the compliance for the relatively smaller organisations thereby providing them a breather from compliance along with opportunity to grow at a rapid pace and also likely to generate employment opportunities especially in the pandemic ridden economy.

The third major amendment brings in two changes for the contract labour atmosphere. The new code not just prohibits the employment of contract labours in core activities but explicitly allows the employment in a specified list of non-core activities including security, canteen, sanitation services and others. On the other hand, new codes introduced in 2020 are applicable to contractors providing at least 50 workers or to establishments employing at least 50 contract labours while the erstwhile 2019 bill retained the thresholds to 20 contract labours.

The fourth major amendment is focused on women empowerment and equality as the Code on Occupational Safety allows the employment of women in operational activities that are considered dangerous and permits the Government to oversee the additional requirement of adequate safeguards. Establishments would need to carry out an extensive cost-benefit analysis as creating the atmosphere of equality is a good way of building morale among the workforce and might solve the problem of lacking skilled labour but this would also result in additional cost in terms of providing adequate safeguards. Apart from these major changes, the codes also bring in speedier resolution of disputes. Further, flash strikes, and lockouts are barred as labour unions cannot go on strike without furnishing 60 days advance notice or within 14 days of giving such a notice and the same is now applicable for all industrial establishments. Noteworthy, Code on Social Security promises universal social security regulations, for everyone including informal and gig work force. However, the contributions to PF are set at 10 percent under the Code with the power entrusted to Government to raise it to 12 percent. 10 percent contribution would not just solve the cash crunch crisis for the employers but also enable them to release extra wages during the much-needed time of the economy facing effects of the deadly pandemic.

The 44 Central Acts that had 1,458 sections, requiring 937 compliances and 135 filings in a year, have been subsumed into four codes with just 480 sections reflecting unfathomed approach to simplifying the labour laws of the country. Yet many of the indispensable features of the erstwhile law are no longer part of these codes but have been delegated to be announced via rules by the Government. Issues such as specific safety standards, working conditions, threshold for application of social security schemes, maximum cap on the gratuity amount and such others would be amended through rules from time to time. These empowers the Government to keep the labour law regulations updated for decades to come.

Rationalisation of labour laws has now decreased the burden of compliances for the employers of the country to a greater extent. The Code of Wages requires the maintenance of just 2 registers instead of 10 and now just one return to be filed for wages, bonus and other related payments instead of 4 forms. However, records of payment have to be preserved by the employer for 3 years. With the advent of technology and modernisation, the laws governing an integral leg of the economy also need an update and there could be no perfect timing for the introduction of these codes than now as the wheels of economy have started churning again.