This issue of LexCognito, which in Latin means 'awareness about law', seeks to provide you an insight into significant legal and regulatory developments that have taken place very recently in India.
Date: 26 September 2020
Codification of Labour Laws: Parliament passes three historic, path breaking Labour Codes
In order to make India a manufacturing hub globally, there was an urgent need to consolidate and codify old and archaic labour laws to attract more foreign investment and augment domestic capital. To achieve this, the Government of India has pledged to rationalize 44 Labour laws by framing 4 labour codes viz. Code on Wages, Code on Industrial Relations, Code on Social Security and Code on Occupational Safety, Health and Working Conditions. Hitherto, only the Code on Wages, 2019 which clubs together laws relating to payment of wages, minimum wages, bonus and equal remuneration has become law on 8 August, 2019 although it is yet to be enforced.
On 23 September 2020, the Parliament has approved remaining 3 historic and path-breaking labour codes, i.e. Code on Industrial Relations, Code on Social Security and Code on Occupational Safety, Health and Working Conditions, which were earlier approved by the Cabinet on 8 September 2020. They will now go to the President for his assent before it can be notified and implemented.
Snapshot of the 3 codes is as under:
Code on Industrial Relations
It will consolidate 3 labour laws relating to industrial disputes, trade unions and industrial employment.
It will require industrial establishments with 300 or more workers to prepare standing orders.
It will allow establishments employing up to 300 workers to hire and fire without prior approval.
It imposes more conditions for the workers to strike.
Discharge, dismissal, retrenchment, or otherwise termination of services of an individual worker will qualify as an industrial dispute.
Security provisions have also been introduced for women working in industrial clusters such as increase in maternity leave period to 26 weeks, allowing women to work in mines sector and pension scheme for small traders, etc.
Code on Social Security
It consolidates laws relating to social security and aims at increasing coverage and extending benefits to formal as well as informal sector workers. It will cover and benefit contract, temporary, migratory, contract and casual workers. It will also include freelancers known as gig workers, and platform workers who provide services using online platforms.
Central Government may by notification apply the Code to any establishment (subject to size-threshold as may be notified).
If any establishment is already registered under any other enactments then Central Government will allot same registration number to that establishment without requiring them to obtain registration again.
New clauses have also been inserted which may become applicable during an epidemic such as Central Government may defer or reduce the employer’s or employee’s contributions (under PF and ESI) for a period of up to 3 months in the case of a pandemic, endemic, or national disaster.
Since all social security schemes such as ESI, PF, and pension will have to be managed by establishments in accordance with a single umbrella code, the compliance hassles are expected to be far less compared to the existing regime. This will help in attracting investors and creating jobs.
Code on Occupational Safety, Health and Working Conditions
It will consolidate 13 labour laws in relation to safety, health standards, working conditions, welfare provisions, leaves and working hours for the employees.
It defines establishments as a place where any hazardous activity is carried out regardless of the number of workers, therefore, widening the applicability of health and welfare provisions.
It applies to establishments with at least 10 workers as well as mines and docks.
It provides for establishment of an Occupational Safety and Health Advisory Board at both national and state levels.
It provides for only one registration instead of multiple registrations required under existing regime. It introduces concept of one license and one return.
It makes mandatory for employers to issue appointment letters in order to encourage formal employment and protection of employees from exploitation.
Benefits to inter-state migrant workers and establishment of Social Security Fund for welfare of unorganized workers have been introduced.
The simplification of the existing plethora of laws is a reform in itself and all these codes are expected to bring about sweeping changes in the way the Trade & Industry function making it to work at its full throttle. Amongst other benefits, it will remove multiplicity of inconsistent definitions and authorities and will make it easier for employers to understand concepts and thereby easily comply with mandatory statutory compliance requirements. Further, these labour codes will allow states to introduce significant changes to their labour laws framework, such as rules for retrenchment, through notifications.
Once the labour codes gets notified and comes into force, various organizations would be required to adapt its policies and procedures with the new law to be legally compliant.
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