The Industrial Relations Code 2020: Complete Section-Wise Guide, Key Provisions & Applicability

1. Introduction

The Industrial Relations Code, 2020 (IR Code) is one of the four major labour codes enacted by the Government of India to consolidate and modernise existing labour laws. The IR Code seeks to streamline industrial relations by combining the laws relating to:

1. Trade Unions
2. Conditions for employment
3. Dispute resolution

The objective of the Code is to promote industrial harmony, ensure ease of doing business, and protect workers’ rights through a clear and simplified legal framework.

2. Repeal of existing legislations

The Industrial Relations Code has repealed the following three Central labour laws:

• The Trade Unions Act, 1926
• The Industrial Employment (Standing Orders) Act, 1946
• The Industrial Disputes Act, 1947

These laws, which were previously separate, are now unified under the IR Code, streamlining processes and facilitating a more cohesive regulatory environment.

3. Key Definitions

Important definitions introduced in Section 2 include:

3.1 Industrial Establishment — Section 2(r)

An establishment or undertaking in which any industry is carried on. If an establishment runs multiple activities, only those units or parts of the establishment carrying on an “industry” qualify as separate industrial establishments.

Where the predominant activity in an establishment is an “industry” and other activities are incidental, the entire establishment is deemed an industrial establishment.

The Code does not restrict industrial establishments only to “factories, mines or plantations”. It extends to any establishment where the defined “industry” is carried out (subject to the exclusions under “industry”).

3.2 Worker — Section 2(zr)

A person employed in any industry to do manual, unskilled, skilled, technical, operational, clerical or supervisory work but does not include any such person—

(i) who is employed mainly in a managerial or administrative capacity; or

(ii) who is employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees per month or an amount as may be notified by the Central Government from time to time.

3.3 Employee — Section 2(l)

Any person employed by an industrial establishment to do any skilled, semi-skilled or unskilled, manual, operational, supervisory, managerial, administrative, technical or clerical work.

3.4 Employer — Section 2(m)

A person who employs one or more employees or workers in his establishment. Includes owners, occupiers, managers, or managing directors, contractors, and legal representatives of a deceased employer.

3.5 Industry — Section 2(p)

Under the Code, “industry” means:

Any systematic activity carried on by cooperation between employer and worker (whether employed directly or through any agency, including a contractor) for production, supply or distribution of goods or services—with a view to satisfy human wants or wishes (not merely spiritual or religious).

The definition of “industry” under the Code also excludes certain activities/undertakings, such as:

• Activities carried out by institutions wholly or substantially engaged in charitable, social or philanthropic service;
• Activities of the Government relating to sovereign functions (defence research, atomic energy, space, etc.);
• Domestic services;
• Any other activity notified by the Central Government as excluded.

4. Trade Unions

The Code simplifies registration, recognition, and governance of trade unions, enhancing industrial democracy and labor representation.

4.1 Registration of Trade Union

• No Trade Union can be registered unless at least 10% of workers or 100 workers, whichever is less, are members of such Trade Union. Any 7 or more members can apply for registration (Section 6).
• Certificate of registration issued under Section 9 helps formalize the Union's status.

4.2 Recognition of Negotiating Union or Negotiating Council — Section 14

If a single union has 51% or more workers as members → Recognised negotiating union. Where no union meets 51%, a negotiating council is formed.

5. Standing Orders

5.1 Applicability — Section 28

"Standing Orders" means orders relating to matters set out in the First Schedule. Standing Orders apply to industrial establishments with 300 or more workers.

5.2 Model Standing Orders — Section 29

Central Government may issue Model Standing Orders, which apply unless modified by the employer and certified.

5.3 Certification — Sections 30 to 34

Procedures for submitting draft orders and certification by the Certifying Officer are outlined, ensuring a regulatory framework for efficient HR management.

5.4 Subjects covered — Section 28

Standing orders must cover:

• Classification of workers
• Manner of informing workers about work hours
• Attendance and Late coming
• Holidays and Leave
• Conditions for termination, suspension or dismissal for misconduct
• Grievance redressal mechanism

6. Industrial Disputes

6.1 Works Committee — Section 3

Mandatory for establishments with 100 or more workers, promoting amicable employer-employee relations, vital for comprehensive HR services.

6.2 Grievance Redressal Committee — Section 4

• Required in establishments employing 20 or more workers.
• Ensures timely internal dispute resolution, which is crucial for maintaining industrial harmony.

6.3 Conciliation, Tribunals, and Arbitration

Conciliation Officer — Section 45:

Facilitates settlement of industrial disputes, emphasizing a preference for negotiation and peaceful resolution of conflicts.

Industrial Tribunal — Sections 45:

Worker may make an application to Tribunal after the expiry of forty-five days from the date he has made the application to the conciliation officer, for adjudicating disputes.

Voluntary Arbitration — Section 42:

Parties may voluntarily refer disputes for arbitration, highlighting alternative dispute resolution mechanisms.

7. Notice of Change — Section 40

Employers must give 21 days’ notice before changing service conditions related to:

• Wages
• Work hours
• Allowances
• Leave rules
• Disciplinary matters

Notice requirements ensure transparent communication and mitigate industrial conflicts.

8. Strikes and Lockouts

8.1 Prior Notice Requirement — Section 62

No person shall go on Strike:

• Without giving to the employer notice of strike within sixty days before striking
• Within fourteen days of giving such notice
• During conciliation proceedings
• During tribunal proceedings

8.2 Lockout Provisions — Section 62

Parallel restrictions apply to employers declaring lockouts to ensure fair industrial practices and prevent arbitrary actions.

9. Lay-Off, Retrenchment and Closure

9.1 Lay-Off — Sections 67

• Lay-off compensation = 50% of basic wages + dearness allowance

9.2 Retrenchment — Sections 70

• Requires one month’s notice or wages in lieu of the same
• Compensation = 15 days’ wages for every completed year of service

9.3 Closure — Sections 74 & 75

• 60 days prior notice on the appropriate government
• For establishments with ≥ 300 workers, prior government approval required.
• Notice and Compensation to employee as applicable to Retrenchment

9.4 Special provisions

Special provisions apply to industrial establishments with 300 or more workers were employed, which underline the enhanced regulatory oversight for larger employers.

10. Provisions for Fixed Term Employees - Section 2(O)

Fixed Term Employees:

• Receive same benefits as permanent workers.
• Eligible for gratuity on a pro-rata basis if they render service under the contract for a period of one year.

This provision is an important step towards providing equality and security for fixed-term employees.

11. Worker Re-skilling Fund — Section 83

A new Worker Re-skilling Fund shall be set up to support retrenched workers, enhancing their employability in the evolving industrial landscape.

Funding source:

• Employer contribution: 15 days’ wages of each retrenched worker
• Other sources prescribed by the government

12. Offences and Penalties — Section 86

• Penalty for illegal strikes/lockouts
• Penalty for failure to maintain registers or provide information
• Enhanced penalties for repeat offences

These measures reinforce compliance and aim to deter infractions within industrial environments, aligning with global labor standards.

13. Practical Implications

13.1 For Employers

• Higher threshold of 300 workers reduces need for prior approval for layoffs and closures, fostering business efficiency.
• Mandatory Negotiating union simplifies collective bargaining.
• Standing Orders applicable only for establishments with 300+ workers.

13.2 For Employees

• Fixed-term workers receive more statutory protection, enhancing job security.
• Mechanisms for grievance redressal strengthened, ensuring prompt resolution of workplace issues.
• Clear rules on strikes, retrenchment, and compensation facilitate fair treatment.

13.3 For Unions

• Recognition framework rationalised, promoting effective representation and collective negotiation.
• Increased formalisation of negotiation procedures enhances legitimacy and efficacy of labor actions.

14. Conclusion

The Industrial Relations Code, 2020 marks a major structural reform in India’s labour regulatory framework. By merging three significant pieces of labour legislation and introducing clarity on standing orders, collective bargaining, dispute resolution, lay-offs, and fixed-term employment, the Code strengthens both industrial stability and ease of doing business.

The Code aims to bring predictability, transparency, and fairness to employer–worker relations and aligns India’s labour system with global best practices, setting a new standard for industrial relations in India.