India’s New Labour Codes – Changing Landscape of Employment Litigation

Background

For an empowered, affluent, and Aatmanirbhar India, workers must have more influence. Even after 73 years of independence, 90% of employees are still employed in the unorganized sector, where they are not eligible for all social security benefits. Over 50 crores of people are employed in both the formal and unorganized sectors combined. For the first time, a government is taking care of employees and their families in both the organized and unorganized sectors. India, a country where employment is not at will, has seen its fair share of job-related lawsuits, many of which involved allegations of unfair labour practices and wrongful termination. Although mainly restricted to the industrial sectors, labour unions have continued to be active throughout the nation. The new labour laws in India have not yet gone into force. 29 federal labour statutes are replaced by the four labour codes. Once put into effect, it will significantly alter our labour law system.

Defining Labour Laws in India

Labour law, often known as employment law, is the set of laws, administrative judgements, and precedents that address the legal rights and constraints of workers and their organizations. As a result, it mediates a number of relationship-related issues between trade unions, both employers and workers. In other words, labour law outlines the duties and responsibilities of employees, union members, and employers. In general, labour law addresses:

• Industrial relations include union certification, labour-management interactions, collective bargaining, and unfair labour practices.
• Occupational health and safety;
• Employment requirements, such as severance compensation, minimum salary, layoff processes, general holidays, yearly leave, and working hours.

In the past, the Indian government at the federal and state levels strove to guarantee that employees had a high level of protection, but in reality, this has changed because of the structure of government and since labour is a topic on the concurrent list of the Indian Constitution. The Minimum Wages Act of 1948 mandates that businesses pay the government-set minimum wage and cap workweeks at 40 hours (9 hours a day including an hour of break). Since the reward for overtime is 100% of the overall salary, it is strongly discouraged. The Payment of Wages Act of 1936 requires that wages be paid promptly by bank transfer or postal service on the last working day of each month.

The Payment of Wages Act of 1936 requires that wages be paid promptly by bank transfer or postal service on the last working day of each month. Each employee is required to take 15 working days of fully paid vacation time each year, in addition to an extra 7 completely paid sick days, under the Factories Act of 1948 and the Shops and Establishments Act of 1960. Every company’s female employees are now entitled to 6 months of fully compensated maternity leave thanks to the Maternity Benefit (Amendment) Act of 2017. Additionally, it offers 6 weeks of paid time off in the event of a miscarriage or medical termination of pregnancy.

Workers can access the essential social security for retirement benefits, medical care, and unemployment benefits through the Employees’ Provident Fund Organization and the Employees’ State Insurance, all of which are controlled by statutes. Employees who qualify for Employees’ State Insurance coverage (those making less than Rs. 21000/month) are also eligible for 90 days of paid medical leave. It is always possible to include more rights in an employment contract than the bare minimum required by law. Four labour regulations were adopted by the Indian parliament in the 2019 and 2020 sessions. The Industrial Relations Code 2020, The Code on Social Security 2020, The Occupational Safety, Health and Working Conditions Code 2020, and The Code on Wages 2019 will combine 44 current labour laws.

History of Labour laws

The need for improved working conditions, the right to organize, and employer demands to limit employee rights in numerous groups and keep labour costs down led to the development of labour law. Therefore, the situation of labour legislation at any one moment is both a result of and an element of conflicts between various interests in society.

One of the earliest organizations to address labour concerns was the International Labour Organization (ILO). Following the signing of the Treaty of Versailles, which brought an end to World War I, the League of Nations formed the ILO as an agency. During and soon after the war, several countries focused on post-war rebuilding and the preservation of labour unions. Workers who wanted improved working conditions, as well as trade unions that objected by going on strike, were routinely and violently suppressed. Following the achievement of independence in 1947, a number of fundamental labour rights—including the ability to join and participate in unions, the idea of workplace equality, and the desire to establish a living wage and respectable working conditions—were incorporated into the Indian Constitution of 1950.

Constitutional Provisions under Labour laws

Articles 14–16, 19(1)(c), 23–24, 38, and 41–43A of the 1950 Indian Constitution specifically address labour rights. Everyone shall be treated equally under the law, according to article 14, and discrimination against citizens is prohibited under article 15. Article 16 also grants the right to “equality of opportunity” for employment or other state-related appointments. Everyone has the special right “to organize groups or unions,” according to Article 19(1)(c). Articles 23 and 24 forbid child labour under the age of 14 in factories, mines, or “any other dangerous occupation,” respectively. Article 23 also outlaws all forms of trafficking and forced labour. According to the Indian Constitution, labour is a concurrent topic, meaning that both the Union and the state governments have the authority to enact and enforce labour laws. The majority of significant pieces of legislation have been passed by the Parliament.

The following categories apply to the laws:

1) Central Government-enacted labour legislation, whose exclusive enforcement rests with the Central Government.

2) Central government-enacted labour rules that are upheld by both the federal and state governments.

3) State governments implement federal labour rules that the federal government enacts.

4) The different State Governments have passed and are enforcing labour regulations that are applicable to their respective States.

Indian Labour Policy

India’s labour strategy has evolved in response to the country’s unique circumstances in order to meet the demands of social justice and planned economic growth. Its dual goals are to preserve industrial peace and advance worker welfare.

Workplace reforms implemented since 2014

The use of IT-enabled systems for inspection has been made required for openness and accountability.

• The maximum allowable gratuity has risen as of March 29, 2018, from Rs. 10 Lakhs to Rs. 20 Lakhs.
• On 16.02.2017, the Payment of Wages Act became effective. Salary distribution to workers by check or giving it to their bank account for credit.
• The 2017 Maternity Benefit Amendment Act went into effect on April 1, 2017, and raised the 12 to 26 weeks of paid maternity leave weeks.

The 4 Labour Codes of India

2019 Code of Wages

The Code on Wages aims to control salary and bonus payments in all work situations involving any type of manufacture, trade, or industry. It combines four pieces of legislation: the Equal Remuneration Act, the Payment of Bonus Act of 1965, the Minimum Wage Act, and the Payment of Wages Act.

The Code’s primary characteristics are:

1. The State or Central Government may not revise the minimum wage more frequently than every five years.
2. Any person who directly or indirectly employs one or more people at an institution is considered an employer for purposes of this term.
3. The Payment of Salaries Act only applies to workers making less than Rs. 24,000 per month in wages. The Code on Wages has now eliminated this upper restriction. Therefore, regardless of monthly earnings, the Code should be applicable to all employees.
4. In contrast to the many definitions provided in the Payment of Wages Act, 1936, the Minimum Wages Act, 1948 (Minimum Wages Act, 1948), and the Payment of Bonus Act, 1965, the Code offers a uniform definition of the term “Wages.”
5. Employers are required to provide salaries equal to at least 50% of total compensation under the conditions outlined in the Code. Basic pay, dearness allowance, and retention allowance are included in the calculation of earnings; home rent allowance, conveyance, statutory bonus, overtime allowance, and commissions are not. Basic wage and dearness allowance must make up at least 50% of the cost to the company.
6. Employers are not allowed to pay employees less than the minimum wage. The Central or State Governments, depending on the situation, are obligated to notify minimum salaries based on I the time or quantity produced, (ii) the employees’ skill, and (iii) the complexity of the task.
7. According to the requirements of the Code, the Central and State Governments should establish Advisory Boards. Members of the Central Advisory Board must represent both businesses and employees, as well as five state government representatives and independents. The State Advisory Board must include an independent member as well as representatives from companies and employees.
8. State Advisory Boards will be made up of independent individuals, employers, and workers. Additionally, women will make up one-third of the total members of the central and state boards. The Boards will provide guidance to the national governments on a variety of topics, such as setting minimum salaries and (ii) expanding possibilities for women in the workforce.

2020 Social Security Code

The Code on Social Security aims to update and codify the social security laws to cover all employees and workers, whether they are employed in the organized, unorganized, or any other sector.

Employees’ Compensation Act of 1923, Employees’ State Insurance Act of 1948, Employees’ Provident Funds and Miscellaneous Provisions Act of 1952, Employment Exchanges (Compulsory Notice of Vacancies) Act of 1959, Maternity Benefit Act of 1961, Payment of Gratuity Act of 1972, Cine Workers Welfare Fund Act of 1981, Building and Other Construction Workers Welfare Cess Act of 1996, and Unorganized Workers’ Social Security Act of 2008.

The Code’s primary characteristics are:

1. Fixed-term employment, home-based workers, independent contractors, platform workers, and gig workers have all been defined.
2. The term “employee” was added and is now used consistently across the whole Code.
3. According to Section 3 of the Code, if an industry establishment is already registered under another Central labour regulation, registration is not required.
4. The enforceability of social security organizations and their bylaws is provided in Section 4 of the Code. It is necessary for the administration of funds for various personnel.
5. A fixed limitation period of 5 years will be established under Section 125 of the Code, including actions and enquiries to determine an employee’s financial obligations.
6. Aggregators are described in the Code as a digital middleman or marketplace that connects a service’s user or buyer with its supplier or provider. The list of aggregators must pay between 1% and 2% of their yearly revenue to the social security fund, as stated in Schedule 7 of the Code.
7. Employers are required to pay gratuities to fixed-term employees on a pro-rata basis. For working journalists, the gratuity term has been lowered from five years to three.

2020 Industrial Relation Code

The Code on Industrial Relations aims to make compliance easier to achieve and encourages convenience for customers and employees. The Industrial Disputes Act of 1947, the Industrial Employment (Standing Orders) Act of 1946, and the Trade Unions Act of 1926 are all included in this law.

The appropriate government may require the employer of an industrial business where 100 or more workers are engaged or have been employed on any day over the previous 12 months to form a works committee.

Industrial establishments with 20 or more employees must have a grievance redressal committee or committees to handle individual grievance problems.

Any trade union with seven or more members may register online or in another manner under the Code.

Every industrial enterprise where 300 or more employees are engaged or were employed on any day during the previous year is subject to the Standing Orders.

The Code’s primary characteristics are:

1. Defines “employee” and “fixed-term employment” in the introduction.
2. In the Code, the phrase “workmen” has been changed to “worker.”
3. Today, more than 50% of employees define a “strike” as “mass casual leave” on any given day.
4. Any grievance must now be filed with the grievance redressal committee in accordance with the Code, and an inquiry and its investigation must be finished within 90 days. The time frame begins on the day the employee was suspended.
5. According to the Industrial Establishment Standing Order Act of 1946, standing orders were only applicable to workplaces with 100 or more employees. Standing order requirements have now been raised from 100 to 300 employees.
6. In establishments with several trade unions, the Code has established a “single negotiating union.” According to Section 14 of the Code, this only negotiating union must have 51% or more workers as members. Terms with the employer may only be discussed by one negotiating union. In the absence of a qualifying exclusive bargaining union, a bargaining council made up of at least 20% of the workforce shall be established.
7. After being laid off, people might find employment thanks to provisions in the Code. An initial fund made up of payments from the employer and the appropriate government must be established.
8. The Central Government shall establish a national industrial tribunal and one or more industrial tribunals as the framework for resolving labour disputes.

Occupational Safety, Health, and Working Conditions Code of 2020

The Code on Occupational Safety, Health, and Working Conditions aim to control workplace health and safety conditions for employees in all mines and docks as well as companies with 10 or more employees.

It incorporates thirteen pieces of legislation, including the Factories Act of 1948, the Mines Act of 1952, the Dock Workers Act of 1986, the Contract Labor Act of 1970, the Inter-State Migrant Workers Act of 1979, the Plantations Labor Act of 1951, the Working Journalist and Other News Paper Employees (Conditions of Service and Miscellaneous Provision) Act of 1955, the Working Journalist (Fixation of Rates of Wages) Act of 1958, the Motor Transport Workers Act of 1961, The Sales Promotion Employees (Conditions of Service) Act, 1976 and The Beedi and Cigar Workers (Conditions of Employment) Act, 1966.

The Code’s primary characteristics are:

1. For those working in transportation, media, and sales, specific clauses outline leave policies and working hours.
2. Section 32 of the Code lays forth the rules for leave encashment at the moment of discharge/dismissal, death, or superannuation while employed. At the conclusion of the calendar year, provisions pertaining to leave encashment are available. Most importantly, the Code allows for leave carryover in the event that a worker does not use all of the leave that is granted to him in a given calendar year. However, the maximum number of days of unpaid leave that may be carried forward is 30, and any unpaid leave that has been denied can be carried forward indefinitely.
3. All businesses are required to provide bathrooms, showers, and locker rooms for employees who identify as male, female, or transgender.
4. There is now a clause that allows the employee to provide permission for the employer to work overtime. It will also be applicable to small businesses with up to 10 employees. The workers will also be paid twice as much for any overtime they put in.
5. Employers are expected to arrange for the employee’s yearly health exams at their own expense.

Conclusion

The Minimum Wages Act of 1948 mandates that businesses pay the government-set minimum wage and cap workweeks at 40 hours (9 hours a day including an hour of break). Since the reward for overtime is 100% of the overall salary, it is strongly discouraged. Each employee is required to take 15 working days of fully paid vacation time each year, in addition to an extra 7 completely paid sick days. Every company’s female employees are now entitled to 6 months of fully compensated maternity leave. Four labour regulations were adopted by the Indian parliament in the 2019 and 2020 sessions.

The need for improved working conditions, the right to organize, and employer demands to limit employee rights led to the development of labour law. Following the achievement of independence in 1947, a number of fundamental labour rights were incorporated into the Indian Constitution. India’s labour strategy has evolved to meet the demands of social justice and planned economic growth. The use of IT-enabled systems for inspection has been made required for openness and accountability. The Code on Wages aims to control salary and bonus payments in all work situations involving any type of manufacture, trade, or industry.

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References

1. New Labour Code for India
2. Minimum Wages Act, 1948
3. The Payment of Wages Act, 1936
4. The Factories Act, 1948)

This article is written by Puneet Kaur, a second-year student.