Analysis of the Labour Code on Industrial Relations Bill – Part III (Definitions, Conditions of Service & Compounding of Offences)

(Editor’s Note: This is third in a series of blog posts on the Labour Code on Industrial Relations Bill. Part I and II are here and here. This post is written by Ayani Srivastava and Arpita Sengupta, and deals with definitions, change in conditions of service and compounding of offences)

I. Definitions

Appropriate Government

While the definition of “appropriate government” under S. 2(1)(a) of the Draft Code has largely been retained from the IDA, the new definition clarifies that where the entire business of an establishment is confined to the territories of a state, the government of that state shall be the appropriate government. However, this definition is silent on cases where an employer has establishments in more than one state.

The Supreme Court has suggested that two state governments may indeed have concurrent jurisdiction. However, we believe that such an interpretation is fraught with further confusion and duplication of authority. Allowing concurrent jurisdiction for two state governments would mean that there would be two authorities operating in the same field at the same level leading to avoidable conflict and confusion. Further, this would also encourage forum-shopping on part of employers and workmen for the purpose of pursuing remedies under Chapter VII and statutory approvals under Chapter X of the Draft Code. Therefore, it is advisable that the principle of concurrent jurisdictions for more than one state governments be dispensed with.

For the aforesaid reasons, we recommend that the Draft Code have an additional clause in S. 2 (a) for the purpose of clarifying that where an employer has establishments in more than one state, there shall be only one appropriate government that shall be determined on the basis of the situs of employment.

Industrial Disputes

The first part of the definition of “industrial disputes” in the Draft Code corresponds to the definition contained in S. 2(k) of the IDA. However, the Draft Code makes an addition and broadens the scope of the provision. It states that “in the case of termination of individual worker by way of discharge, dismissal, retrenchment will also be termed as industrial dispute”.

The import of this addition is presumably to retain the scheme of the current IDA wherein a purely individual dispute cannot be termed an industrial dispute if it does not relate to termination of employment. However, this would contradict the scheme provided in S. 53 of the Draft Code, which allows any person aggrieved, even an individual, to file an application before the Tribunal having jurisdiction. If the Draft Code intends to retain the scheme of the IDA of allowing collective disputes in general, this should be indicated in the definition.


The ambit of “industry” under the Draft Code has not been substantially altered. The Draft Code incorporates the Bangalore Water Supply definition of industry. While this goes against the Supreme Court’s opinion in Coir Board, Ernakulam v. Indira Devi and State of U.P. v. Jaibir Singh, we believe the widening of industry under the Draft Code is apt to protect workers excluded by a narrower definition till the time such alternative statutory regimes are created.


The Draft Code states that wages are payable to “a person employed in respect of his employment or of work done in such employment”. The IDA on the other hand specified that wages are payable to a workman. Thus, the Draft Code broadens the scope of whom wages may be paid to.

Further, while value of house accommodation, supply of light, water, medical attendance and travelling concessions were included in the definition of wages under IDA, the Draft Code specifically excludes them. The Draft Code states that wages specifically includes remuneration payable under any award or settlement, overtime wages, additional remuneration payable under terms of employment, sum payable on termination of employment and sum to which employee is entitled under any scheme framed.

We recommend that the Draft Code incorporate the recommendation of the Second National Labour Commission that ‘wages’ and ‘remuneration’ be separately defined, the former to include only basic wages and dearness allowance, and the latter to include other allowances, overtime payment, bonus, gratuity and social security contributions along with wages. This may make the process of calculating additional payments such as bonuses less problematic.


The new definition broadly follows the current definition of workmen under S. 2 (s) of IDA. One significant expressive shift lies however in the substitution of the term “workman” with the term “worker” reflects the incorporation of the Second National Labour Commission’s suggestion, as the latter is a gender neutral expression.

Further, while the definition of workmen under IDA specified that “workmen” does not include those who employed in a supervisory capacity, draw wages exceeding ten thousand rupees per mensem, the Draft Code removes the specified amount to wages as notified by the central government from time to time. This may be viewed in relation to the Second National Commission on Labour’s suggestion that “highly paid jobs” should be excluded from the purview of laws relating to workmen, and included in a proposed law for the protection of non-workmen. As an alternative, the Commission recommended that the Government may fix a sufficiently high cut-off limit of remuneration, beyond which employees would not be treated on the same footing as ordinary workmen. However, the Draft Code only creates this condition for employees employed in a supervisory capacity. For highly paid employees in non-supervisory positions, no specific exclusion has been enacted. The Commission had recommended that supervisory personnel should be excluded from the purview of labour laws meant for workers, irrespective of quantum of salary. This recommendation has not been incorporated.

The new definition of worker leaves certain questions about the nature of some professions ambiguous. In ESIC Medical Officers’ Association v. ESIC, the Supreme Court held that medical doctors cannot be considered workmen under the IDA, as medicine is a noble profession. The distinction between occupation and profession was reiterated. In Bharat Bhawan Trust, the Supreme Court held that artists employed by a theatre company engaged in the production of theatre do not indulge in manual, unskilled labour. Thus, they are not workmen under IDA. We submit that this interpretation is erroneous and does not find any support in the scheme or the text of the IDA. Nobility of work or extent of training and knowledge by themselves do not merit an exclusion from the protective cover of labour laws.

Therefore, we recommend that the Draft Code should explicitly clarify that the mere fact that a person is a professional shall not exclude him from the definition of worker. He shall be considered a worker as long as all the express elements of S. 2(zf) are fulfilled.

II. Change in Conditions of Service

Dismissal of Workers During Pendency of Proceedings

Currently, S. 33(2)(b) of the IDA requires approval for any dismissal of a worker during pendency of proceedings. There remains ambiguity however regarding the status of employment of a worker if the approval is not granted, i.e., whether the order of dismissal becomes ineffective from the date it was passed or from the date of non-approval of the order of dismissal. Further, the consequences of failure to make application under S. 33(2)(b) are still unclear. Some cases have declared that this would render the order of dismissal inoperative, whereas some other cases have ruled that non-compliance with S. 33(3)(b) will only render the employer liable to punishment under S. 31 of the IDA and the remedy of the employee is either by way of a complaint under S. 33A or by way of a reference under S. 10(1)(d) of the IDA. In Jaipur Zila Sahakari Bhoomi Vikas Bank Ltd v. Ram Gopal Sharma and Ors, the Court stated that “It is clear from the proviso to S. 33(2)(b) that the employer may pass an order of dismissal or discharge and at the same time make an application for approval of the action taken by him”. Yet, the issue has remain mired in confusion.

Unfortunately, the Draft Code does not do enough to dispel this confusion. It may be said that with addition of the words “and such application is approved” in the proviso to the corresponding provision in the Draft Code, employers would have to wait for the approval of the application before dismissal can be operative. However, even now the Draft Code does not specify whether the worker stands suspended in the interim period. Therefore, it would be advisable for the Draft Code to explicitly clarify the consequence of non-compliance with S. 48.

 Subsistence Allowance During Pendency of Proceedings

The confusion on non-compliance of S. 48 is further compounded by the removal of the time limit of three months placed on the authority to decide on such an application for approval. Additionally, judgements such as The Management, Hotel Imperial, New Delhi and Ors. v. Hotel Workers Union and Ram Lakhan, Etc. Etc. v. Presiding Officer &Ors have revealed a multiplicity of judicial views on payment of subsistence allowance to the employee pending approval under S. 33 (2) of the Act. There are opposing views on this matter; the right of the employer as a master to terminate the services of the worker against the principles of natural justice which should not allow for a worker to wait for six-seven years for the adjudication of the dispute without any payment. In light of this ambiguity, it would be prudent for the drafters to clarify in the Draft Code itself whether subsistence allowance is to be paid to the worker in the interim period.

III. Compounding of Offences

S. 104 provides that all offences under this Draft Code may be compounded before trial, or pending trial; compoundability is not allowed for a second offence. In other words, if a person has been convicted of an offence, the second time that she is accused of the same offence, it is not compoundable.

While this provision would contribute significantly on reduction of caseload of the Tribunals and Courts, its operation would lead to compromising justice for efficiency. Imprisonment is a greater incentive than fines for compliance to labour laws by large employers. By making offences under this Draft Code compoundable, the deterrent of imprisonment is effectively removed. The Supreme Court has concurred with the underlying rationale stating- “The business-man culprit, confronted by a sure prospect of the agony and ignominy of tenancy of a being a plea of guilt, coupled with a promise of ‘no jail’.” This rationale may be extended to affluent employers too. We recommend that this provision be deleted from the Draft Code.

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