New Labour Codes dilute workers rights, collective bargaining

In this Monsoon Session, the Parliament passed three critical pieces of legislation amidst a walkout by the opposition. The Acts have undone years of jurisprudential developments in workers rights, in the unequal relationship between employers and employees, write advocates Jane Cox and Sanjay Singhvi.

Recently, the Lok Sabha & Rajya Sabha passed three Labour Codes which have, in one foul swoop, changed the face of labour legislation as we know it. 

Last year, the Government had decided to compress 29 existing Labour Acts into four Codes:

  1. The Industrial Relations Code (replacing 3 Acts) 

  2. The Occupational Safety, Health & Working Conditions Code (replacing a colossal 13 Acts)

  3. The Social Security Code (replacing 9 Acts)

  4. The Wages Code (replacing 4 Acts)

The Wages Code, 2019, was passed last year and published in the Gazette of India on August 8, 2019. While the Central Government is yet to notify it, the rules were framed a couple of weeks ago. The other 3 Codes were all passed together in the Lok Sabha & Rajya Sabha & are now awaiting Presidential assent. 

The Industrial Relations Code replaces the real “mothers” of Indian industrial legislation – the Industrial Disputes Act, 1947, Trade Unions Act, 1926, & the Industrial Employment (Standing Orders) Act, 1946. These three Acts lay down the overall substantive rights of workers and trade unions in India. The Industrial Relations Code hits a severe blow to labour rights and transforms the basis of industrial jurisprudence. 

The Codes herald a whole new era of labour relations and marks a U-turn in the underlying concepts of industrial jurisprudence.  

Collective Bargaining and Unequal Bargaining Partners

At the heart of labour law is the concept of unequal bargaining partners, that results from the class relationship between employers & employees. Hence, unlike other private contractual relations, the parties cannot be left to their own devices. A contract of employment therefore stands on an entirely different footing from  other contracts. Justice Dinsha Pirosha Madon expressly recognised this principle in Central Inland Water Transport Corporation v. Brojo Nath. 

Courts have routinely struck down unfair, unreasonable and unconscionable terms of an employment contract. However, regardless of what is or isn’t written, provisions of labour and industrial law are read into both oral and written contracts. This itself is a U-turn in contract law. In case of any conflict, the provisions of labour law, including Industrial Employment Standing Orders Act, 1946 will prevail- as was held in Bajaj Auto Ltd vs Bhojane Gopinath D. & Ors (2004 9 SCC 488). 

Trade unions play a central role through collective bargaining in the unequal relationship, where workers are at a constant risk of unemployment especially when employers are large corporations. Hence all labour laws are postulated on the premise that only contracts negotiated through collective bargaining are binding and that the law will prevail in spite of individual contracts.

Legal Recognition of Fixed Term Contracts

A fixed-term contract means a contract entered into by the employer with each individual employee for a fixed period. Usually, the terms & conditions of service are determined unilaterally by the employer instead of being as per the prevailing settlement for all employees signed with the trade union in the establishment.

The earlier labour law, through the Industrial Employment (Standing Orders) Act, 1946, recognised only five tenures of employment – permanent, temporary, casual, badli and probationer. “Fixed-term” was never a tenure of service and was only an exception to the payment of retrenchment compensation under the Industrial Disputes Act, 1947The Industrial Employment (Standing Orders) Amendment (Rules) 2018, had already introduced a “fixed term contract” as a tenure. Now, with the Industrial Relations Code it has been made a part of the Act itself. 

It is common knowledge that workers, under threat of unemployment, are forced to enter into contracts for a “fixed term”. In 1977, Maharashtra implemented changes requiring all workers with 240 days of continuous service to be made permanent. But now a fixed term contract has statutory recognition.

Individual Settlements to Replace Collective Bargaining

The Industrial Relations Code lays down that the employer cannot differentiate between fixed term and permanent employees. The working hours, wages, allowances and other benefits of a fixed-term employee cannot be less than that of a permanent worker doing the same or similar work. Further, a fixed term employee is eligible for all statutory benefits available to a permanent worker, even if his or her employment period does not extend to the qualifying period of employment required in the statute. 

However, with the recognition of fixed-term contracts and individual settlements, the service conditions of even permanent workers will be fixed individually. The role of trade unions in fixing wages and service conditions through collective bargaining will evaporate in effect.

The definition of “settlement” under the code now includes individual settlements, which goes against the very concept of collective bargaining. The ILO convention on tripartite consultation is binding. 

Under the extant Industrial Disputes Act, 1947 , a settlement is necessarily between a union or group of employees and employer, not between an individual employee and employer. In Hindustan Lever v. Hindustan Lever Employees Union, the Bombay High Court held “individual settlements” as inconsistent with not only the concept of collective bargaining, but to the very basis of the Industrial Disputes Act, 1947, itself. 

Diluting Collective Bargaining Power of Unions

The Code places the power to negotiate with a statutorily recognised Union or a Negotiating Council. However, the recognised union or negotiating council will only have the right to negotiate with the employer on such matters “as may be prescribed”. 

Moreover, if the establishment has only one trade union then that shall be recognised or else the Union with 51% membership will be. If no Trade Union meets the 51% membership threshold, then the employer must constitute a negotiating council with representatives from all registered Trade Unions that receive support of at least 20% of the total workers. The code does not mention the process of verification of membership and if it is to be “as may be prescribed”. 

Trade unions and employees in public utility services were required to give a 14 day notice before going on strike under the Industrial Dispute Act. Now all unions and employees in all undertakings must serve this prior notice. 

While this appears to be an innocuous provision, it is not. 

As per the other provisions in the code, that have carried over from the Act, the Labour Commissioner must admit the dispute into conciliation upon receiving the notice of strike and no strike can commence once it is admitted into conciliation. The new provisions are thus in effect prohibiting strikes in all establishments.

New Limitation of 2 Years to Raise a Dispute

The Industrial Dispute Act, 1947 puts no limitation on raising a dispute, although case law provides that the appropriate Government can refuse to refer the matter to a Tribunal or Court if the matter is “stale” and the same is to be decided in the facts of each case. The new Code prescribes a limitation of 2 years for the Conciliation Officer for taking an industrial dispute matter into conciliation. 

This is unreal. 

In many cases, poor workers are not even able to unionise so as to know their rights. With over 50% of the workers being illiterate, a tiny proportion being unionised and with law books being in English language, such a provision is only a way of defeating the legitimate rights of workers. Workers may not raise a certain dispute in certain circumstances, like not being made permanent or not getting minimum wages, through either ignorance of the law or fear of termination if they do raise it. 

They may want to raise the dispute once they attain permanency or minimum wages. 

Preventing this would be unfair and unjust. In many cases of sham and bogus contracts or of enforced casualness, workers have only organised and attained their rights after several years or even decades.

The new Code has also very significantly diluted Section 33 (1) of the Industrial Dispute Act. It gave total protection against any unilateral change by the employer while the proceedings are pending. It now gives further concession to employers to make changes in any matter connected with the dispute, while the dispute is still pending. They may discharge or dismiss any worker for any misconduct connected with the dispute. It is left to the workers to challenge it in Court and bear the circumstances till the outcome of the Court.

This will render the protection against action taken to punish workers for litigating for their rights totally toothless. 

Grievance Redressal Committee & Individual Workers

In industrial establishments employing more than 20 workmen, an individual worker can raise an “individual grievance” in matters other than those relating to termination of services. But the worker cannot directly approach the Conciliation Officer and must first go through an in-house “Grievance Redressal Committee”.  

This Committee will consist of equal numbers of employers & employees. It must have adequate representation of women workers. The moot question here is also how the representatives of workers are to be chosen and the same is yet to be specified by the rules to be framed under the act. 

The Committee “may” give its decision within 30 days. No provision has been made to enforce the decision of this Committee, which has not even been made binding on the employer. “Individual grievance” has not been defined. 

This goes against the very concept of collective bargaining which the law has so far stood by. Moreover, the act does not mention anything about establishing internal committees to hear complaints of sexual harassment. 

The new Industrial Relations Code turns collective bargaining and labour rights principles on its head and reverts to the position of classic contract law. 

First published on October 1, 2020, in The Leaflet.
Jane Cox and Sanjay Singhvi are Advocates at Bombay High Court. Views are personal.