Employment Laws In India: Changes Brought About By The New Labour Codes – Employment and HR

Employment Laws in India have traditionally been governed by
contract as well as multifarious and fragmented legislations, both
at the central and state level. With a view to harmonising and
consolidating the various legislations pertaining to employment,
social security, wages, industrial disputes and other relevant
labour/employment related matters, the Ministry of Labour and
Employment (“Ministry“) introduced
four bills in 2019 to amalgamate 29 central laws related to labour
laws. These bills have been codified and enacted as:

• The Code of Wages, 2019;




• The Industrial Relation Code, 2020;




• The Occupational Safety, Health and Working Conditions Code,
  2020; and




• The Code on Social Security, 2020.

We have below summarised the essence of each code with a
viewpoint of highlighting the changes one can anticipate once the 4
codes and rules thereunder are in effect.

• The Code of Wages, 2019
  (“Wage Code“)

The Wage Code has unified and subsumed four different acts,
namely the Payment of Wages Act, 1936, the Minimum Wages Act, 1948,
the Payment of Bonus Act, 1965 and the Equal Remuneration Act,
1976. The implementation of the Wage Code is expected to have wide
ranging implications for a majority of industries and it is
therefore crucial to understand the key aspects of the Wage Code
and how they differ from the previous regulations.

The Wage Code has modified the definition of
“employee” from the extant definition as contained under
the Minimum Wages Act, 1948. Under the Minimum Wages Act, 1948,
“employees” were restricted to workers in certain
specified categories of scheduled employment which under the Wage
Code has been extended to all types of establishment, irrespective
of whether it falls under the organised or the unorganised sector.
This implies that the benefits under the Wage Code with respect to
payment of wages and minimum wages to all employees, including
those engaged in skilled, semi-skilled or unskilled, manual,
operational, supervisory, managerial, administrative, technical or
clerical work, and irrespective of whether the terms of employment
have been expressly conveyed or merely implied, therefore widening
the ambit considerably. This development is especially beneficial
to the large number of workers in India’s unorganised sector,
who often do not have written contracts to rely on.

Furthermore, “wages” have also now been given a
unified structure as opposed to the varying definitions stipulated
before. The definition of “wages” under the Wage Code
encompass (i) basic pay; (ii) dearness allowance; and (iii)
retaining allowance and categorically excludes components such as
statutory bonus, value of house accommodation, overtime, gratuity,
etc, unless such exclusions exceed more than 50% (fifty percent) of
all remuneration, in which case the amount which exceeds 50% (fifty
percent) shall be considered as remuneration and be added to the
wages thereof^[3]. The Wage Code has also introduced the
concept of “floor wages” which will be fixed basis the
minimum living standards of a worker within the relevant
geographical area, and where the minimum rate of wages fixed by the
respective State Government is higher than the floor wage, then the
former shall be retained.

• The Industrial Relation Code, 2020 (“IR
  Code”)

The IR Code subsumes and amends the following acts (i) The
Industrial Disputes Act, 1947, (ii) The Trade Unions Act, 1926; and
(iii) The Industrial Employment (Standing Orders) Act, 1946.

The IR Code has introduced a ‘sole negotiating
union’ in establishments where there are more than one trade
union. Such sole negotiating union is required to have 51% or more
workers as members. Only the sole negotiating union shall be
permitted to negotiate terms with the employer. The IR Code
provides provisions for workers to secure their employment after
being laid off. It further sets forth a mechanism for resolution of
industrial disputes which shall be constituted by the central
government comprising of a national industrial tribunal and one or
more industrial tribunal. It also mandates that a workman is
required to approach the grievance redressal committee.

The IR Code also sets forth the notice periods that are to
required to be provided by a workman prior to going on any strike
and lock-out in breach of contract. The IR Code provides that the
provisions with respect to the standing orders shall apply to all
industrial establishments with three hundred (300) workers in
comparison to the earlier one hundred (100) workers. The IR Code
includes other provisions that touch upon matters related to
retrenchment, layoffs, closure of an establishment, industrial
tribunes etc.

• The Occupational Safety, Health and Working Conditions
  Code, 2020 (“OSH Code”)

The OSH Code has subsumed several key pieces of legislation on
the working conditions of labour and consolidated it into one
comprehensive act, including, inter alia, the Contract Labour
(Regulation and Abolition) Act, 1970, the Factories Act, 1948, etc.
Some of the important definitions that the OSH Code has amended are
Contract Labour, Employee, Employer, Establishment, Principal
Employer, Wages and Workers.

The OSH Code has modified the number of minimum contract labour
to fifty (50) from twenty (20) for the OSH Code to apply. Welfare
facilities as specified under the OSH Code are to be provided by
the principal employer of the establishment to the contract labour
employed in such establishment. The OSH Code has also safeguarded
the rights of the Inter-State Migrant Workers by ensuring that the
contractor extends all benefits as are available to a worker under
the various labour laws to inter-state migrant workers as well.
Furthermore, the employer of every applicable establishment is
required to pay to every inter-state migrant worker, a lump sum
fare for to and fro journey to his native place from the place of
his employment.

• The Social Security Code, 2020 (“SS
  Code”)

The SS Code has been enacted to amend and consolidate the laws
relating to social security with the goal to extend social security
to all employees and workers either in the organised or unorganised
or any other sectors. The SS Code has subsumed several key pieces
of legislation such as The Employees’ Compensation Act, 1923,
The Employees’ Provident Funds and Miscellaneous Provisions
Act, 1952, The Payment of Gratuity Act, 1972, The Maternity Benefit
Act, 1961 etc. The SS Code introduces new definitions in this
context which are as follows:

• “Aggregator” has been defined as a digital
  intermediary or a marketplace for a buyer or user of a service to
  connect with the seller or the service provider.




• “Gig Worker” under the SS Code has been
  defined as a person who performs work or participates in a work
  arrangement and earns from such activities outside of traditional
  employer-employee relationship.




• “Platform work” has been defined as a work
  arrangement outside of a traditional employer employee relationship
  in which organisations or individuals use an online platform to
  access other organisations or individuals to solve specific
  problems or to provide specific services or any such other
  activities which may be notified by the Central Government, in
  exchange for payment and a “platform worker” has
  been defined as a person engaged in or undertaking Platform
  Work.




• “SocialSecurity” under the SS Code
  means the measures of protection afforded to employees, unorganised
  workers, gig workers and platform workers to ensure access to
  health care and to provide income security, particularly in cases
  of old age, unemployment, sickness, invalidity, work injury,
  maternity or loss of a breadwinner by means of rights conferred on
  them and schemes framed, under the SS Code.




• “Unorganised Sector” means an enterprise
  owned by individuals or self-employed workers and engaged in the
  production or sale of goods or providing service of any kind
  whatsoever, and where the enterprise employs workers, the number of
  such workers is less than ten (10).




• “Unorganised Worker” means a home-based
  worker, self-employed worker or a wage worker in the Unorganised
  Sector.

One prominent change that the SS Code brings about it is to
include within its ambit benefits to Platform Workers and Gig
Workers. While the SS Code currently does not provide for any
specific social security to be provided to Gig Workers and Platform
Workers, however it provides the right to the Central Government
and State Government to notify schemes for such workers related to
life and disability cover, health and maternity, provident fund,
employment injury benefit, housing etc. The SS Code mandates that
the schemes may be funded through a combination of contributions
from the central government, state governments, and Aggregators.
The SS Code also mandates that every Unorganised Worker, Gig Worker
or Platform Worker is required to be registered. Every eligible
Unorganised Worker, Gig Worker or Platform Worker is to make an
application for registration along with prescribed documents
including Aadhaar number and such worker shall be assigned a
distinguishable number to his application. Whether such schemes
would be applicable to all Unorganised Workers, Gig Workers and
Platform Workers irrespective of the quantum of salary earned by
them, will depend on the final form of the schemes introduced by
the State or Central Government. The SS Code has also ushered a
host of other changes to provident fund benefits, gratuity benefits
and other social security measures currently in place.

Given the above changes that the new labour codes have brought
to the existing Employment Laws in India, it will be important for
establishments to assess the implications and revisit the
compliance requirements under each Code, once it is brought into
effect along with the final rules and state amendments.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.