IndiaFilings » Learn » Industrial Relations Code 2019

Industrial Relations Code 2019

Industrial Relations Code 2019

Industrial Relations Code 2019

The Industrial Relations Code is a law which lays down the procedure for the settlement of industrial disputes. It grants the power to conduct industrial investigations to a designated officer of the Central Government, who is known as the Conciliation Officer (CO). The Code lays down the law relating to strikes, lockouts, layoffs and retrenchments. It also mentions the method of calculating the compensation which should be paid to employees who are laid off or retrenched.

As a result of disputes between management and labour, the business may lose productive man-hours. Disputes also lead to loss of employment opportunities for the employees. The Government of India has introduced the Code to address these concerns. The Code is expected to enhance the ease of doing business in India significantly. On 28th November 2019, the Industrial Relations Code, 2019 was introduced in the Lok Sabha.


The Industrial Relations Code Bill, 2019 is applicable in the following circumstances:

  • If the assessee is engaged in a business that is mentioned as part of Schedule I of the Industries Development and Regulation Act, 1951
  • If the assessee is carrying on business in a factory (according to Section 3(c) of the Industries Development and Regulation Act, 1951)
  • If the assessee is in the business of production, processing, supply or distribution of products or services intended for sale
  • If the business of the assessee involves the development and extraction of mineral resources, or the provision of mineral-extraction as a service

Powers of the Conciliation Officer

The Conciliation Officer (CO) has the following powers:

  • Entering and searching the premises of the business
  • Demanding to meet any employee
  • Asking questions to the employees
  • Demanding to see documents and data stored in computers
  • Examining additional witnesses who are not employees of the company

Process of Investigation

  • An investigation conducted by the CO is regarded as a judicial proceeding (according to Sections 193 and 228 of the Indian Penal Code).
  • In case the CO feels that the dismissal of an employee was not justified, the CO may direct the company to reinstate the employee. The CO may also order the company to pay compensation to the employee.
  • When an employee’s misbehaviour has caused loss to the company, the CO may order the company to recover the loss from the employee’s salary.
  • After an employee is dismissed, it may take a significant time before the investigation is completed and the employee is reinstated. The CO may direct that the employee should receive ‘interim relief’ for this period.
  • The maximum time limit for starting an investigation is three years from the date of the dispute. Within forty-five days of starting the investigation, the CO should send a report to the company stating the findings and conclusions made. The report should also be forwarded to the National Investigation Tribunal (NIT).
  • On receiving the report, the NIT may pass a final order within 90 days. The NIT will pass an order if it determines that the settlement suggested by the CO is not satisfactory. The order should be communicated to the company. The company should implement the order within 30 days.
  • After perusing the order, the Central Government may determine that the order adversely affects the national economy or social justice. In such cases, the Central Government has the power to issue a notification stating that the order will not apply. The Central Government may also permit the order to be implemented partially.
  • The Central Government may determine that the order is of national importance. In such cases, the order should be placed before parliament for perusal. It should also be placed before the legislative assembly of the relevant state. When an order is placed before parliament, it will take effect after 15 days.
  • A company may challenge the order in a high court or the supreme court. Till the case is finally settled, the company should pay full wages to the employee. There will be no requirement to pay wages if the employee is employed elsewhere while the case is pending in the court.
  • While giving evidence before the CO, an employee may request that the information should be treated confidentially. The request should be made in writing. When the CO receives such a request, the CO should not include the confidential information in the report. The CO may feel that without disclosing this information, the report would be incomplete. In these cases, the CO can include the information. However, the CO should obtain written permission from the board of the company and the secretaries of the trade unions.

Strike – Conditions to be Followed

The following conditions should be followed by employees who are going on strike:

  • Notice of strike should be given 60 days before the strike.
  • A strike is allowed after 14 days from the date of giving notice.
  • A strike should not be performed when conciliation is in progress.
  • The strike is not allowed if the company is in the process of making a settlement to the employees as per an order passed by the NIT.
  • The strike should be approved by a majority of the trade unions of the company.
  • A letter of authorisation should be available from the secretaries of the trade unions. The letter should approve the strike. It should also mention the reason for the strike and the duration of the strike.
  • Any notice of strike received by the company should be reported to the office of the Chief Labour Commissioner within 2 days.

Also, the conditions mentioned above will apply if the company declares a lockout.

Lay Off and Retrenchment – Conditions to be Followed

  • A company may inform the employees not to report to work for a specified period. This arrangement is called a layoff.
  • Retrenchment is an intimation from the company that it no longer wishes to retain some of its employees. It involves the dismissal of a section of the employees of a company, usually because of the availability of excess staff. The Code permits retrenchment if the employees have been given a notice in writing one month in advance. In the case of public sector undertakings, the time allowed is three months.
  • After retrenchment, the company may advertise vacancies for the same post. When the vacancy arises, the retrenched employees should have the opportunity to re-offer themselves for employment.
  • When a company intends to go into liquidation, a notice should be served on all the employees. The notice should be delivered at least sixty days before the commencement of winding-up proceedings. The requirement to serve a notice and pay compensation will not apply in the following circumstances:
    • When the number of employees employed in the past twelve months was less than fifty
    • When the employees are engaged in building bridges, roads, canals, dams, railway lines and other infrastructure projects that are scheduled to be finished within two years
  • In the case of the following companies, lay off and retrenchment are allowed only after obtaining prior permission from the Central Government:
    • Mines and plantations
    • Public sector undertakings and institutions in which the Central Government holds more than 51% of the paid-up capital
    • Companies manufacturing electronics, aerospace and defence equipment
    • Companies which produce items related to the production or use of atomic energy as per the Atomic Energy Act, 1962
    • Companies employing more than a hundred employees per day (on an average) during the past twelve months

If the permission is not granted or refused within sixty days, the company can assume that it has been granted.

Compensation for Lay Off and Retrenchment

  • A company calling for a lay off should pay Lay Off Compensation (LOC) to employees. LOC is payable to those employees whose name is in the rolls for more than one year.
  • LOC is payable under the following conditions:
    • All days of the lay off other than weekly holidays
    • It is calculated as 50% of basic wages and DA
    • LOC is applicable for a maximum of forty-five days
  • LOC will not be payable under the following circumstances:
    • When the employee is not interested in accepting alternative employment in a different department of the same company
    • When the employee is asked to report to work in different premises located within eight kilometres but does not comply
    • When the employee does not present in-person at the usual reporting time
    • When the employee is participating in a strike
    • When the employee is purposely slowing down the production in the factory
  • Retrenchment compensation is payable when a business is closing down its operations. Retrenchment compensation is payable for employees who have been in the rolls of the company for more than one year. The compensation payable is fifteen days’ salary for every completed year of service.

To know more about labour welfare legislations in India, click here.