Analysis of the Labour Code on Industrial Relations Bill – Part IV

(Editor’s Note: This is fourth and final in a series of blog posts on the Labour Code on Industrial Relations Bill. Part I, II and II are herehere and here respectively. This post is a continuation of Part III, by Ayani Srivastava and Arpita Sengupta)


We comment on matters relating to voluntary reference of disputes to arbitration, procedures and powers of authorities, strikes and lockouts, lay off, retrenchment and closure and the miscellaneous provisions in Chapters VI to IX of the Labour Code on Industrial Relations Bill, 2015 (‘Draft Code’).

I. Voluntary Reference of Disputes to Arbitration

Change in Time Frame for Reference to Arbitration

The provision on Voluntary Reference of Disputes to Arbitration (S. 50 of the Draft Code) states that parties to the dispute can refer it for arbitration at any time, even after the dispute has been referred to a Tribunal. This is a major change from S. 10A of the IDA. As per the existing act, in case a party decides to refer a dispute for arbitration, S. 10A of the IDA mandates such reference to be made before the dispute has been referred to a Labour Court/Tribunal/National Tribunal. This was also reiterated by the Supreme Court in Karnal Leather Karmachari Sangathan v. Liberty Footwear Company.

The increase in time frame for reference will mean that more and more disputes will be referred to for arbitration at any time. Such a provision can have a damaging effect. Referral of a dispute for arbitration at a late stage of proceedings before the Tribunal would waste the time and energy of the Tribunal. Also, the intention of the legislature to include arbitration was to introduce an alternate remedy to adjudication. The Draft Code tries to do away with this fact. There would be no bar against adjudication even after a reference has been made. This would essentially mean the movement of a case between multiple judicial forums thereby resulting in judicial inefficiency and inexpediency.

There should be a limit in the time frame for reference of a dispute by retaining the provision that a dispute could be referred to for arbitration only before the Tribunal/National Tribunal has taken it up.

II. Procedure, Powers and Duties of Authorities

Removal of Court of Enquiry, Labour Court and Board of Conciliation

The Draft Code removes the Court of Inquiry, Labour Court and the Board of Conciliation (S. 5, 6 and 7 of the IDA). This is a welcome change given that the multiplicity of forums and difference in disputes that could be referred to each forum made it difficult for the parties to resolve disputes in an expeditious manner.

Application to the Tribunal

The Draft Code has done away with the reference of any industrial dispute by the Appropriate Government (S. 10 of the IDA). Under the IDA, adjudication of disputes can start, apart from a narrow set of exceptional cases, only after reference by the Appropriate Government. This scheme vests inordinate power in hands of the political executive and this has smothered the autonomy of trade unions. Now, the aggrieved person can file a suit directly before the Tribunal/National Tribunal. This is a welcome move given that it would free the remedy of adjudication from being hostage to executive discretion. Such a change also furthers the principles laid down in a series of judicial decisions from Ram Avtar Sharma v. State of Haryana, Telco Convoy Drivers Mazdoor Sangh v. State of Bihar to Sarva Shramik Sangh v. Indian Oil Corporation Ltd. & Others.

Time frame for Application to the Tribunal

Currently, an Industrial Dispute can be referred to a Tribunal/National Tribunal only after a reference of the dispute to the Tribunal/National Tribunal by the Appropriate Government (S. 10 of the IDA). But there is no formal limitation period within which the government has to refer a dispute. This has resulted in a confounding set of judicial precedents[1]. However, S. 53 of the Draft Code now imposes a formal time frame of 3 years within which any industrial dispute has to be brought up before the Tribunal. Such a time frame would actually provide quicker remedies by eliminating a large number of cases on archaic matters.

Execution of an award of a Tribunal/National Tribunal by a Civil Court

S. 57(10) of the Draft Code is a new provision, which allows the execution of the award of a Tribunal/National Tribunal by a Civil Court within 6 months from the date when it receives the order, award or settlement. Such a provision necessitates that the government should also include a provision making it mandatory for the Tribunal to send the award within a specified time period so as to ensure the timely performance of such award, order or settlement.

Commencement of awards

With regard to the commencement of awards (S. 63 of the Draft Code and S. 17A of IDA), the Andhra Pradesh HC had said that the provision is unconstitutional in Telegunado Work-charged Employees State Federation v. Government of India. The right that this provision (S. 63 of the Draft Code) gives to the executive to sit on a judicial order or modify/reject it was stated to be unconstitutional. It has also been held that the provision creates an irrational distinction between difference in the commencement of awards between public and private sector undertakings. The judicial pronouncement does have merit and the government should make necessary modifications so as to avoid any confusion about the constitutionality of this provision.

III. Strikes and Lockouts

Removal of distinction between Public Utility Services and other Industries

S. 71(1) of the Draft Code seeks to eliminate the distinction between public utility services and other industries by imposing uniform restrictions. It makes submission of prior notice for strikes and lock-outs mandatory for all industries and not just public utility services. Such universalisation would reduce the impact of disruption caused by coercive actions since the concerned parties would have the time to prepare and adapt. The Second National Commission on Labour and the International Labour Organisation for the Committee on Freedom of Association advocated the requirement of prior notice. Also, as has been held in Vidyasagar Institute of Mental Health Neuro Sciences v. Vidyasagar Hospital Employees Union, a strike should not be done by causing disadvantage to the people who are not willing to get involved in it. Hence the inclusion of industrial establishments as a whole under the provisions of S. 71 is a desirable move.

Definition of Strike

The definition of strike corresponds to the previous definition contained in S. 2(q) of the IDA, except for one addition. The Draft Code adds that strike includes “the casual leave on a given day by the fifty per cent or more workers employed in an industry”. This is an improvement for the new definition embraces cases where the substance of strike is present though the form may be different.

Notice period for a strike

S. 71 (1)(a) and (b) of the Draft Code, needs to be clarified. There is confusion as to whether a strike cannot commence within 6 weeks of the notice or within 14 days. Even though Essorpe Mills Ltd. v. Presiding Officer, Labour Court has held that both these clauses need to be read together, the applicability of the two different time periods need to be clarified. Clause (d), (e) and (f) of 71(1) and (2) prohibits strikes and lock-outs irrespective of the subject matter of the dispute pending. This is uncalled for given that it restricts the right to strike in an unrelated matter, which is the major weapon for collective bargaining. The provision allows complete subversion of the statutory freedom to strike through filing of applications that may have no nexus with the subject-matter of strike. Therefore, we recommend that the provision should prohibit a strike only on matters connected with the subject-matter.      

Coercive and wilful go-slow and gherao and prohibition of strikes in breach of a contract

The Draft Code has added two new clauses under S. 71. While clause 8, which prohibits a coercive and wilful go-slow and gherao during conciliation proceedings and arbitration proceedings, is commendable, clause 7 really seems to be redundant. Clause 8 supports the holding of Jay Engineering Works v. State of West Bengal, which had explicitly stated that a gherao couldn’t go to the extent of being violent and coercive. Clause 7 provides blanket ban on strikes in breach of contract. This seems to be contradictory to this entire section. Does this mean that an employer can impose a complete prohibition on strikes if the contract of service, which is usually a standard form of contract with the employees at a lesser bargaining power, states so? The entire aim of the Draft Code is to bring about industrial harmony and not to encourage such subordination. Hence keeping such a provision would be against the aim of the act.

IV. Lay Off, Retrenchment and Closure

Applicability of the Chapter

This Chapter broadly corresponds to Chapter V-A of the IDA but its application goes beyond mines, factories and plantations as defined under the Factories Act, 1948, Mines Act, 1952 and the Plantations Labour Act, 1951 respectively.

Continuous Service – Burden of Proof

S. 75 of the Draft Code, which corresponds to S. 25B of the IDA, define continuous service. The provision suffers from certain ambiguities. One such issue pertains to the burden of proving continuous service. In a long series of judicial pronouncements, the burden of proving continuous service has been put on the worker, such as Range Forest Officer v. S T Hadimani and Surendranagar District Panchayat v. Gangaben Laljibhai. Although this follows the fundamental rule of evidence in that the one making the positive assertion is expected to prove the same, it is our view that in light of the far greater difficulty of the worker in asserting his attendance as opposed to the employer who keeps a record of the same, the burden of proof should be shifted from the worker to the employer.

V. Special Provisions Relating to Lay Off, Retrenchment and Closure in Certain Establishments

Increased Applicability of the Chapter

Chapter X of the Draft Code corresponds to Chapter V-B of the IDA. The applicability of Chapter V-B in the existing statute is limited to a factory, mine or plantation. No such limitation has been imposed under the Draft Code, which is a welcome development.

Definition of Lay Off

The provision on lay-off in the Draft Code corresponds to the first part of S. 2(kkk) of the IDA. However, the Draft Code omits the “Explanation” and “Proviso” which were present in the Act.

Due to these omissions, S. 2(1)(n) of the Draft Code leaves certain contingencies ambiguous. At what point of a working day can a worker said to be “laid-off”? How many hours should lapse from the time the worker presents himself at work? What happens if the worker is made to work only one shift in a day? What happens if the worker is not given employment even after being asked to present himself during the second half of the shift for the day? The IDA mandated that the workman be paid full basic wages and dearness allowance for that part of the day. With the omission of this guarantee, workmen’s rights may be diluted. These issues should be clarified.

Change in Threshold and Compensation

This Chapter imposes a requirement of prior governmental approval for any lay-off, retrenchment and closure for establishments covered by it. The current law specifies the threshold limit for the number of workers under this Chapter as 100. It has been argued that the stringent requirements have throttled the expansion of labour-intensive manufacturing sector. As a result, there have been various proposals for changing this number.

The contention of the central trade unions[2] has been that with increased mechanisation of work, a greater number of workplaces hire fewer workers, and hence the threshold should be lowered. In contrast, there has been overwhelming pressure from business associations to increase the threshold in the interest of better functioning of medium enterprises because higher thresholds increase flexibility in hiring of labour to match the fluctuation in demand. Analysts respond to such concerns of trade unions with the claim that short-term job losses are offset by long term increase in employment. The Report of the Second National Labour Commission also recommended restoration of the original limit of 300. We welcome the increment.

However, we would like to mention a few caveats. Inter-sectorial mobility is low in India and therefore, the claim that loss of jobs in one sector would be set off by creation of jobs in another may not be empirically grounded. Secondly, long-term benefits cannot as a matter of policy offset the very real impacts of short run losses of livelihood. Thirdly, to leave workers with absolutely no claims post dismissal would discourage any investment in firm-specific skills and eventually hamper the competitiveness of firms. In any case, constitutional principles of security of employment and right to livelihood must remain paramount in our legislative design and cannot be compromised for the sake of economic efficiency.

VI. Miscellaneous Provisions

Unfair Labour Practices

There have been numerous conflicting cases regarding the status of continued casualisation of service of worker as an unfair labour practice. This confusion has largely been restricted to public sector establishments, bound by Article 12 of the Constitution of India. The Constitution Bench in Secretary, State of Karnataka and Ors. v. Uma Devi has laid down that courts should not issue directions of absorption, regularisation or permanent continuance of temporary, contractual, casual, daily wage or ad hoc employees unless the recruitment itself was made regularly in terms of the constitutional scheme. Some cases have interpreted Umadevi’s case as not overriding the powers of Industrial and Labour Courts in passing appropriate order, once unfair labour practice on the part of employer is established. However, an ambiguity in this regard persists especially since Umadevi was a Constitution Bench judgement. We recommend that the status of continued casualisation of service of workers as an unfair labour practice be explicitly clarified in the Draft Code.

Recovery of money

S. 93 lays down the procedure for recovery of money from an employer. This section of the Draft Code is an exact reproduction of the corresponding provision of the IDA (S. 33C). There appears to be ambiguity with respect to whether a claim under S. 33C should already have been adjudicated. We recommend that the Draft Code clarify the same. In order to discourage the filing of fictitious claims, there must be an imposition of time limit. However, condonation of delay, as envisaged by the Limitation Act, must remain so as to avoid excessive stringency.


[1]See Nedungadi Bank Ltd v. K.P. Madhavankutty And Ors, (2000) 2 SCC 455; Sapan Kumar Panditv.U.P. State Electricity Board and Others, (2001) 6 SCC 222; Haryana State Co-operation Land Development Bank v. Neelam, (2005) 5 SCC 91; and S. M. Nilajkar and Others vs. Telecom District Manager, Karnataka, (2003) 4 SCC 27.

[2]  The contention was before the Ministry of Labour and Employment as recorded in the Report Of The Working Group On “Labour Laws & Other Regulations” for the Twelfth Five Year Plan (2012-2017).

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