Analyses of Industrial Relations Code, 2020

Posted On - 7 April, 2023 • By - King Stubb & Kasiva

Parliament and State Legislatures in India have the authority to enact laws pertaining to labour. However, despite multiple attempts at drafting legislation, the current labour laws in India are a complex web of over 38 outdated statutes, compounded by state labour laws that apply due to labour being a concurrent issue in Parliament.[1]

The motive behind forming the Whitley Labour Commission had been to improve upon the labour regulations in India, similarly, after a gap of 72 years, the Second Labour Commission was formed with the same objectives in the year 2002. The important suggestion of the Commission was grouping of existing labour laws into 4 to 5 distinct broad categories:

  1. Industrial Relations
  2. Wages
  3. Social Security
  4. Safety
  5. Welfare and Working Conditions.

Now in line with such recommendations after 17 years of gap, in 2019 and 2020, the Ministry of Labour and Employment introduced four bills to consolidate 29 legislations in place. This was done in light of the pandemic wherein; we saw the need to revive the businesses and economy. The four categories under which consolidation had been done are Wages, Industrial Relations, Social Security and Occupational Safety, Health & Working Conditions. One of the newly implemented codes, is The Industrial Relations Code 2020. Earlier, the industrial relations in India were governed by The Industrial Relations Code 2020[2].

Scope of the Industrial Relations Code 2020

The preamble of The Industrial Relations Code 2020 is as follows:

“An Act to consolidate and amend the laws relating to Trade Unions, conditions of employment in industrial establishment or undertaking, investigation and settlement of industrial disputes and for matters connected therewith or incidental thereto.”

Section 2 (p) of The Industrial Relations Code 2020 defines ‘industry’ as any systematic activity that is carried on with the cooperation between an employer and worker, regardless of whether such worker is employed by that employer directly or by or through any agency including a contractor, for the production, supply or distribution of goods or any kind of services with the very view of satisfying the human wants as well as wishes.

The definition of “industries” in The Industrial Relations Code 2020 has been amended to exclude the following categories (in contrast with the Bill);

  1. Organizations that offer charity, social as well as philanthropic services;
  2. Organizations that are under the government and deal with defense research, atomic energy, and space exploration;
  3. Organizations that the central government may exclude, if any. (Arbitrary discretion)

Earlier in Industrial Disputes Act[3], there was no clarity regarding whether charitable institutes will be excluded or included in the term ‘industry’.

In the case of Bangalore Water Supply and Sewerage Board vs. A Rajappa & Ors., (AIR 1978 SC 548); the Supreme Court held that in case an institution works based on cooperation between employers and the employees, to produce and/or to supply goods or services or goods and services, then in that case, it will fall under the definition of the term ‘industry’.

On the other hand, in the very case of Tirumala Tirupati Devasthanam vs. Commissioner of Labour (1979 ILLJ 448 AP), it was held that, in case the crucial, substantial as well as substantive aspects of institutional life, as well as the nature of the relationship between the participants, is simply non-industrial, then in that case, the institution cannot be held to be an ‘industry’. Now, the IR Code tries to bring clarity and exempt institutions that are either wholly or substantially involved in any charitable, social, or philanthropic service from the purview of the term ‘industry’.

The “Industrial Dispute” that Industrial Relations Code will be dealing with, can be between employers-and-employers as well as between workers-and-workers and not only between employer and worker. These can also be termed as forms of industrial relations that the code applies to.

When it comes to layoffs and reductions in personnel[4], Section 65 applies only to industrial establishments that are not included in Chapter X of the Industrial Relations Code, which is essentially Chapter V B of the ID Act.[5]But it applies to all forms of industrial relations aforementioned.

Why is Industrial Peace Necessary?

Sanjay Gandhi played a crucial role in establishing Maruti Suzuki during the Permit Raj era, providing India with an alternative to the ubiquitous Ambassador car. However, in 2012, failure to maintain industrial peace and good industrial relations at the Manesar Plant of Maruti Udyog Ltd. resulted in significant losses for Maruti Suzuki. Additionally, the incident led to the murder of a senior HR executive and extensive damage to property, attributable to militant trade unionism. While the management could have acted more swiftly to address the workers’ legitimate demands, the situation ultimately escalated beyond control.

The crux of the matter lay in the pre-existing MUKU Union at Maruti, which was deemed inadequate in addressing the workers’ concerns regarding wages and regularization of fixed-term employees. Consequently, the Manesar plant sought to establish an independent union, which Maruti did not permit. The absence of provisions in Haryana or Central law for the Recognition of Trade Unions, where only one union is granted collective bargaining representation out of all existing unions, exacerbated this issue. Had such provisions been in place, this conflict could have been avoided.

In the case of All India Bank Employees vs. National Industrial Tribunal 1962 AIR 1756, the Supreme Court of India recognized that trade unionism and collective bargaining are integral aspects of the fundamental right to freedom of speech guaranteed under Article 19 of the Constitution. The court further expanded on this principle in subsequent rulings. Therefore, it is well-established that India possesses a wealth of jurisprudence on trade union rights. However, in the case of B Srinivasa Reddy v. Karnataka Urban Water Supply and Drainage Board Employees ASSN and Ors. CA Appeal No. 3719 of 2006, the court held that unregistered trade unions are not entitled to any rights.

Analyses of Important Provisions of IR Code 2020

The Code places a significant emphasis on fostering a positive employer-employee relationship, promoting favorable working conditions, and enhancing the skills of workers. This was exemplified in the Balmer Lawrie Workers’ Union v. Balmer Lawrie and Co. Ltd. And Ors 1985 AIR 31112 case, where the Supreme Court recognized the importance of trade unions in facilitating effective bargaining.[6]

Previously, the notion of recognizing trade unions was first implemented by certain states such as Maharashtra through the enactment of the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act 1971. This Act applies to industries in the State of Maharashtra that fall under The Bombay Industrial Act 1946 or to any industry defined under Section 2(j) of the Industrial Disputes Act 1947. Such provisions, which aim to effectively manage industrial relations, have led to a disparity between states with favorable industrial relations and those without, ultimately leading to the growth of industries and economy in the former and the decline of industries in the latter.

  • According to Section 147 of the Code, in establishments where there are multiple unions representing workers, only the union with the support of more than 51% of workers on the muster roll will be granted the status of bargaining union. This provision emphasizes the importance of having a single bargaining union for effective negotiation of workers’ demands.
  • The 2019 bill had set the threshold for receiving standing orders at 100 employees, but the revised bill has increased it to 300 employees. However, this increased threshold may not be beneficial for protecting labor rights in the broader context of natural justice and industrial relations in India. The Code also makes it compulsory to give a notice of 14 days in advance to the employer before any strike, which is a significant provision.

In the previous bill, standing orders had to be followed even if the employee strength fell below 100. However, this requirement has been removed in the revised bill, though the government still holds the authority to exempt certain industries or classes of industries from this requirement. This grants the government arbitrary power, which is not desirable in a welfare state.

Under the new threshold, standing orders must be applicable to all organizations that employ more than 300 employees for the following matters:

  • The Industrial Relations Code 2020 provides for the classification of workers based on their employment type, including but not limited to permanent, fixed-term, contractors, temporary workers, and apprentices.
  • The code also includes measures to provide remedies to employees against unfair treatment and exactions by employers.
  • The grievance redressal committee shall not have more than ten members and must have adequate representation of women. The representation of women on the committee must be proportionate to their number compared to the total workers in the establishment.
  • The Industrial Disputes Act of 1947 had complex and overlapping powers with multiple adjudicating authorities. The Industrial Relations Code 2020 attempts to simplify the dispute resolution process and eliminate these complexities.


The Industrial Disputes Act previously had provisions that were detrimental to foreign direct investment (FDI), as manufacturing units with more than 100 workers were required to seek government approval before dismissing employees. As a socialist state, it is important to balance the interests of workers and employers. The Industrial Relations Code aims to establish a formal and conducive system that eliminates ambiguities, promotes economic progress, employment generation, and labour welfare.

However, the central government’s discretionary power to exclude industries from the application of standing orders must be removed, as it can lead to corruption and lobbying and be detrimental to the basic rights of labourers. The government’s power to exclude any activity from the definition of “industry” should also be limited. The definition of ‘industry’ must be revised to ensure that the government cannot exclude any activity or organization from its ambit. The exclusion of charitable institutions must be based on the number of people and workers employed under them.

It is crucial to understand that labour rights are human rights, and while ensuring that employers benefit, the code must address loopholes that are harmful to the rights of labourers. Positive reforms in the labour regime must be appreciated, and periodic reforms are necessary to keep up with changing times. Digitization, the pandemic, and the gig economy have transformed the face of labour legislation, which highlights the need to change legislation when the ecosystem undergoes significant changes.


What was the reason behind legislating Industrial Relations Code 2020?

The primary goal of the Industrial Relations Code 2020 is to streamline the existing industrial relations legislations, which had been recommended for rationalization since 2002 by the National Commission on Labour. The code aims to codify the current laws, including those related to trade unions and working conditions, and provide a framework for resolving industrial disputes to maintain industrial peace by fostering harmonious relations between employers and workers. Despite amending several existing provisions and introducing new ones, the code had to replace the previous labor legislations, which were obsolete and needed to be modernized in response to rapid technological advancements, globalization trends, and contemporary transformations in the world of work. It is widely believed that the inflexible labor laws had been a significant obstacle to employment growth in India.

What will be the impact of Industrial Relations Code 2020 on the Gig Economy

The Industrial Relations Code 2020 has incorporated a new definition for two types of workers – the ‘gig worker’ and the ‘platform worker’. The term ‘gig worker’ refers to those who provide services in return for payment, but do not have a traditional employer-employee relationship with individuals or organizations. Additionally, the code includes provisions for unorganized workers who were not previously defined or covered under the Industrial Disputes Act 1947 or other provisions of the previous legislations. This category encompasses self-employed workers as well. The inclusion of these provisions ensures that such workers receive benefits that were previously only available to traditional employees in the organized sector.

What is the definition of an unorganized worker under the Industrial Relations Code 2020?

An unorganized worker is a worker who is not covered by the Industrial Disputes Act 1947 or other provisions related to previous labor legislation, and includes self-employed workers.

[1]Rao, E. M. “The Rise and Fall of Indian Trade Unions: A Legislative and Judicial Perspective.” vol. 42, no. 4, ILJR, pp. 678–95, (2007)

[2]Industrial Relations Code, 2020, No. 35, Acts of Parliament, 2020 (India)

[3]Industrial Disputes Act, 1947, No. 14, Acts of Parliament, 1947 (India)

[4]India and ILO- India Decent Work Country Report 2013-17, –asia/—ro-bangkok/—sro-new_delhi/documents/genericdocument/wcms_232655.pdf

[5]International Labour Organization, “The future of work: Trade Unions in transformation”, Volume9, Issue 1- 2, IJLR, (2019)

[6]P J Secki; Seismic Shifts in Indian Labour Laws; 40, EPW; (2015)

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