Background
The Industrial Relations Code, 2020 is one of the four labour codes introduced by the Government of India with the intent to simplify, consolidate, and modernize the country’s complex labour law framework. Prior to its enactment, the field of industrial relations was governed by three major legislations —
These laws were formulated in a post-independence industrial climate, designed to safeguard workers’ rights at a time when industrialization was still nascent and employer-employee relationships were heavily unbalanced. Over the decades, India’s economy and employment structure underwent a significant transformation. The rise of services, automation, contractual employment, and start-up ecosystems created a pressing need for a flexible yet fair labour framework.
However, the older Acts became outdated and fragmented, often leading to procedural rigidity, interpretational conflicts, and high compliance costs. The Industrial Relations Code, 2020 was therefore introduced as a unifying legislation to replace these multiple Acts and to strike a balance between industrial growth and labour welfare.
Objectives and Scope of the Code
The Industrial Relations Code aims to:
The Code applies to all industrial establishments, whether in manufacturing or services, and covers the entire relationship between employers, workers, and trade unions.
Major Reforms
The Industrial Relations Code, 2020 introduces several structural and conceptual reforms that mark a departure from the older regime.
The most significant change is the consolidation of the three central Acts into one comprehensive Code. This eliminates overlapping provisions and ensures that all aspects of industrial relations from trade union registration to dispute settlement are governed under a single legal instrument.
Employee [Section 2(l)]: An employee means any person (other than an apprentice under the Apprentices Act, 1961) employed in an industrial establishment to perform skilled, semi-skilled, or unskilled manual, operational, supervisory, managerial, administrative, technical, or clerical work for hire or reward—whether employment terms are express or implied.
It also includes any person declared an employee by the appropriate government but excludes members of the Armed Forces of the Union.
Employer [Section 2(m)]: An employer is any person who employs one or more employees or workers—directly, indirectly, or through any agency—on his behalf or on behalf of another. It includes:
Industry [Section 2(p)]: An industry means any systematic activity carried out through cooperation between an employer and worker (directly or through a contractor) for producing, supplying, or distributing goods or services to satisfy human wants or wishes (other than spiritual or religious ones).
This definition applies whether or not:
However, “industry” does not include:
Retrenchment [Section 2(zh)]: Retrenchment means termination of a worker’s service by the employer for any reason other than disciplinary action. It does not include:
Standing Orders [Section 2(zj)]: Standing orders are written rules or orders relating to matters specified in the First Schedule of the Code, governing conditions of employment in an industrial establishment.
Trade Union [Section 2(zl)]: A Trade Union is any combination (temporary or permanent) formed primarily to regulate relations between workers and employers, or among workers or employers themselves, or to impose restrictive conditions on trade or business.
It includes federations of two or more Trade Unions.
The Code, however, does not affect:
Worker [Section 2(zr)]
A worker (other than an apprentice under the Apprentices Act, 1961) means a person employed in any industry to perform manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward—whether terms are express or implied. It includes working journalists and sales promotion employees, and for dispute proceedings, includes those dismissed, discharged, or retrenched in connection with an industrial dispute.
It excludes:
Proviso: For Chapter III (Trade Unions), “worker” includes all persons employed in trade or industry and those defined as workers under the Unorganised Workers’ Social Security Act, 2008.
3.Registration of Trade Unions
The Code retains the fundamental right of workers to form and register trade unions but introduces procedural uniformity and accountability.
Any seven or more members of a trade union may apply for registration by subscribing their names to its rules and submitting an application to the Registrar of Trade Unions. However, at least ten percent of the workers or one hundred workers, whichever is less, engaged or employed in the establishment or industry concerned, must be members of the union at the time of application.
After registration, the trade union must maintain a minimum membership of ten percent or one hundred workers, as applicable, and must have at least seven members employed in the relevant establishment or industry at all times.
The Registrar is empowered to examine the application, verify compliance with statutory requirements, and issue a certificate of registration which serves as conclusive evidence of legal recognition. This mechanism ensures organisational legitimacy, continuity of membership, and adherence to democratic principles within trade unions.
Under the Trade Unions Act, 1926, there was no legal framework for recognizing a trade union as the sole representative body.
The Code fills this gap by introducing the concept of a “Negotiating Union” — the trade union that commands at least 51% of workers’ support — or a “Negotiating Council” where no single union meets this threshold. This reform brings order to collective bargaining and minimizes inter-union conflicts.
The Code subsumes the provisions of the Industrial Employment (Standing Orders) Act, 1946 and prescribes that every industrial establishment employing three hundred or more workers shall be required to prepare and certify standing orders relating to classification of workers, working hours, holidays, wage rates, termination, suspension, and misconduct procedures.
The employer shall draft the standing orders in conformity with the Model Standing Orders prescribed by the appropriate government and submit them for certification to the Certifying Officer within six months of the Code’s commencement.
This enhancement of the applicability threshold from one hundred to three hundred workers is a deliberate measure to encourage small and medium enterprises to expand without facing disproportionate regulatory burdens, while maintaining formal codification of service conditions in larger establishments.
In a significant reform, the Code raises the threshold for prior government approval for lay-off, retrenchment, or closure from one hundred to three hundred workers. Industrial establishments employing three hundred or more workers are required to seek prior permission of the appropriate government before effecting any such measures.
Section 70 of the Code mandates that every worker who has been in continuous service for not less than one year and is retrenched shall be entitled to compensation equivalent to fifteen days’ average pay for every completed year of service or part thereof exceeding six months and such other conditions as specified under this provision.
In case of closure, employers are required to give sixty days’ notice to the appropriate government.
This reform aligns India’s labour law framework with contemporary economic realities, providing flexibility to enterprises while preserving job-security guarantees through fair compensation and procedural oversight.
The Code introduces uniform procedures governing strikes and lock-outs. Section 62 provides that no person employed in an industrial establishment shall go on strike without giving to the employer a notice of sixty days in the prescribed manner, and no strike shall be commenced within fourteen days of giving such notice.
Similarly, employers are prohibited from declaring a lock-out without adhering to the same notice requirement. Strikes and lock-outs are expressly barred during pendency of conciliation or adjudication proceedings and for a specified period after their conclusion.
These provisions are intended to promote industrial peace while protecting the legitimate right to collective protest.
8. Works Committee
The Code provides for the constitution of Works Committees to promote cooperation and understanding between employers and workers at the establishment level.
Where any industrial establishment employs one hundred or more workers, the appropriate Government may direct the employer to constitute a Works Committee consisting of representatives of both the employer and the workers. The number of representatives of workers shall not be less than that of the employer’s representatives, and such representatives must be chosen in consultation with the recognised trade union, where one exists.
9.Grievance Redressal Committee
The Code mandates the establishment of a Grievance Redressal Committee in every industrial establishment employing twenty or more workers.
The Committee must comprise equal representation from employer and employee sides, with the total number of members not exceeding ten.
Any worker aggrieved by an action of the employer may file an application before the Committee. The Committee must endeavour to dispose of the grievance within thirty days from the date of receipt of the application.
If the worker is not satisfied with the decision or if no decision is made within the prescribed period, the worker may escalate the matter to the Conciliation Officer through the registered trade union of which he or she is a member within the time limits specified.
This framework enables the resolution of individual disputes at the establishment level, ensuring efficiency, fairness, and avoidance of unnecessary litigation.
10.Conditions of Service and Change Thereof
The Code preserves and updates the principles relating to conditions of service applicable to industrial establishments.
It provides that no employer shall, without giving prior notice to the affected workers, alter any condition of service connected with wages, allowances, working hours, classification, rules of discipline, or introduction of new shifts that are likely to adversely affect the employees. Similarly, changes involving rationalisation, standardisation, or improvement of plant or technique that may lead to retrenchment must also be preceded by due notice.
This requirement of prior notice seeks to protect workers from arbitrary changes while enabling employers to implement reasonable alterations necessitated by technological or organisational developments.
11. Re-Skilling Fund and Welfare Measures
An innovative feature introduced by the Code is the establishment of a Re-Skilling Fund for retrenched workers. Employers are required to contribute an amount equivalent to fifteen days’ last drawn wages for every retrenched worker. This fund shall be utilised to provide training and re-employment opportunities, thereby aligning labour welfare with employability enhancement.
12. Dispute Prevention and Settlement Mechanisms
The Code rationalises the system of industrial dispute resolution. It continues the role of Conciliation Officers and introduces a restructured hierarchy of Industrial Tribunals and National Industrial Tribunals for adjudication.
Conciliation Officers are tasked with mediating industrial disputes and promoting amicable settlements. Where conciliation fails, reference may be made to the Tribunal for adjudication.
Industrial Tribunals, consisting of a judicial and an administrative member, have jurisdiction to decide disputes relating to discharge, dismissal, retrenchment, or service conditions. Awards of the Tribunal are binding and enforceable, ensuring finality and industrial stability.
Penalties for non-compliance have been revised to ensure deterrence while encouraging voluntary compliance. Certain offences can now be compounded, allowing employers to correct violations without lengthy litigation.
Conclusion
The Industrial Relations Code, 2020 marks a transformative change in India’s labour landscape. It replaces outdated and fragmented laws with a unified statute designed for the realities of a dynamic, globalized economy. By harmonizing the interests of employers and employees, simplifying procedures, and introducing innovative mechanisms like the Re-Skilling Fund and Negotiating Union, the Code strikes a pragmatic balance between efficiency and equity.
Its early implementation will be crucial in shaping an environment that encourages enterprise, safeguards workers’ rights, and sustains industrial peace all of which are essential for India’s long-term economic resilience and inclusive growth.
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