Industrial Relations Code, 2020

The Industrial Relations Code amends and consolidates India’s laws on trade unions, employment conditions in industrial establishments, and the investigation and settlement of industrial disputes.

Key Objectives

The Code reforms the existing framework for trade union recognition, worker protections, employment conditions in industrial establishments, employer-worker relations, and industrial dispute resolution.

Spread across 14 chapters, 104 sections, and 3 schedules, it integrates and simplifies three existing Acts:

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

Highlights of the IR Code

Introduces “Industrial Relations” as a broader framework to protect worker rights, reduce employer-worker friction, and resolve disputes.
Establishes Fixed Term Employment, giving these workers the same statutory benefits as permanent workers — ESI, PF, bonus, wages, and gratuity — though without notice periods after a fixed term ends, and without retrenchment compensation.
Redefines “Industry” as any systematic activity carried out cooperatively between employer and worker (whether direct, agency, or contractor-based) to produce, supply, or distribute goods or services satisfying human wants — excluding purely religious or spiritual wants — regardless of capital investment or profit motive. This excludes charitable/philanthropic institutions, sovereign government functions, and domestic service.
Defines “Strike” to include a concerted casual leave taken by 51% or more of an industry’s workforce, and extends the mandatory 14-day strike notice to all establishments, not just public utility services.
Broadens the definition of “worker” to include those earning up to ₹18,000.
Establishes a negotiating union — drawn from registered trade unions — to negotiate with the employer on behalf of an industrial establishment’s workforce.
Raises the Standing Orders threshold from 100 to 300 workers, requiring covered establishments to formalize rules on worker classification, communicating working hours/holidays/paydays/wage rates, suspension for misconduct, termination, and grievance redressal.
Introduces a Reskilling Fund to train retrenched workers.
Requires prior government approval for lay-offs, retrenchment, or closure at non-seasonal mines, factories, and plantations with 300 or more workers.
Sharpens penalties for violations of lay-off, retrenchment, and closure provisions: ₹1 lakh to ₹10 lakh for a first offence, rising to ₹5 lakh to ₹20 lakh and/or up to 6 months’ imprisonment for repeat offences.

Applicability

Applies across all of India.
The Central Government will notify, in the Official Gazette, when the Code takes effect — either as a single date for the whole Code, or different dates for different provisions.

Bi-Partite Forums

Works Committee

The appropriate government can order an employer with 100 or more workers (currently or in the preceding 12 months) to form a Works Committee, with equal representation from employer and workers. Its job is to promote a harmonious working relationship between the two sides.

Grievance Redressal Committee

Establishments with 20 or more workers must set up one or more Grievance Redressal Committees to resolve individual disputes.

Must include adequate representation of women workers, capped at 10 members total, with equal employer and worker representation.
The chairperson alternates annually between employer- and worker-side representatives.
A worker can file a grievance within 1 year of it arising; the Committee must resolve it within 30 days.
If unresolved or the worker disagrees with the outcome, they can escalate to a conciliation officer through their trade union, within 60 days of the Committee’s decision (or the 30-day deadline lapsing).

Trade Unions

Any trade union with 7 or more members can register electronically or otherwise.
At registration, the union needs at least 10% of the relevant industry’s workforce, or 100 workers — whichever is fewer — as members.
The Code allows a registered trade union to be recognized as the negotiating union or council for an establishment, on matters the government prescribes.

Standing Orders

Apply to every industrial establishment with 300 or more workers (currently or in the preceding 12 months), excluding those already governed by specific civil service or railway service rules.
The Central Government issues model standing orders covering service conditions and related matters.
Employers have 6 months from the Code’s effective date to draft standing orders based on the model, covering the First Schedule’s requirements and any additional matters relevant to their operations — consulting the recognized trade union or negotiating council, then submitting the draft to a Certifying Officer.
A standing order that adopts the Central Government’s model without changes is automatically deemed certified once the employer notifies the Certifying Officer.
The Certifying Officer notifies the relevant union for comments, then must certify the draft (or modifications) within 60 days of the process starting, sending copies to both employer and union within 7 days. If this deadline passes, the draft is deemed certified automatically.
Existing standing orders that already meet the Code’s requirements are automatically deemed certified.

Notice of Change

Employers can’t change service conditions covered under the Third Schedule without giving workers reasonable notice, and can’t implement the change within 21 days of that notice.
No notice is required when: the change follows a settlement or award; affected workers are covered by specific civil service or railway rules; an emergency requires a shift change made in consultation with the Grievance Redressal Committee; or the change follows a government order, settlement, or award.

Dispute Resolution

Employers and workers are encouraged to refer disputes to arbitration through a written agreement specifying the arbitrator(s) and terms, copied to the government and Conciliation Officer.
If the government is satisfied the parties represent the majority on each side, it can issue a notification allowing non-party employers/workers affected by the dispute to present their case to the arbitrator.
For disputes other than individual termination cases, workers are represented by the negotiating union/council, or (absent one) the trade union, or (absent that) elected representatives.
For individual termination disputes, the worker represents themselves or through an authorized representative.
Once arbitration is notified, the government can prohibit any ongoing strike or lock-out connected to that dispute.

Mechanism for Industrial Disputes Resolution

Conciliation Officers

Appointed by the government to mediate and promote settlement of industrial disputes — for a specific area, industry, or combination, permanently or for a limited period.

Industrial Tribunal

Constituted by the government to adjudicate industrial disputes, also exercising the powers of a Tribunal under the Employees’ Provident Funds and Miscellaneous Provisions Act, 1952.
Handles cases involving: standing order interpretation, worker discharge/dismissal/reinstatement, strike/lockout legality, retrenchment and closure, and trade union disputes.
Other cases go to a Tribunal bench.

National Industrial Tribunal

The Central Government can constitute one or more of these for disputes of national importance or ones affecting establishments across multiple states.

Strikes and Lock-Outs

Strikes are prohibited:

Without 60 days’ prior notice
Within 14 days of giving notice
Before the notice’s specified strike date
During conciliation proceedings and 7 days after
During Tribunal/National Industrial Tribunal proceedings and 60 days after
During notified arbitration proceedings and 60 days after
While a relevant settlement or award is in effect

Lock-outs face the same restrictions, mirrored for employers.

If a strike or lock-out is already underway, formal notice isn’t required, but the employer must inform the designated authority the same day it’s declared.
All such notices must be reported to the government (or its designated authority) and the conciliation officer within 5 days.
A strike or lock-out is illegal if it’s declared in violation of the notice rules, or continues despite a government order prohibiting it during arbitration.
A strike or lock-out already underway when a dispute reaches the Tribunal or arbitrator isn’t automatically illegal, provided it wasn’t illegal at the start and wasn’t later prohibited.
A lock-out in response to an illegal strike (or vice versa) isn’t itself illegal.
Knowingly funding an illegal strike or lock-out is prohibited.

Lay-off, Retrenchment, and Closure

Lay-off

Applies to workers (excluding badli/casual workers) on the muster rolls with at least 1 year of continuous service.
Laid-off workers get 50% of basic wages plus dearness allowance for each lay-off day (excluding weekly holidays).
If lay-off exceeds 45 days in any 12-month period, compensation for days beyond 45 can be waived by agreement between worker and employer.
After 45 days of lay-off under such an agreement, the employer can retrench the worker instead, offsetting any lay-off compensation already paid against retrenchment compensation.
A “badli” worker is someone employed as a substitute for another worker on the muster rolls, until they complete 1 year of continuous service themselves.
Employers must maintain a muster roll and record workers who show up during normal working hours, even during lay-offs.

Employers don’t have to pay a laid-off worker if:

The worker refuses reasonable alternative employment (same skill level, same wage, within 8 km or the same establishment/employer)
The worker doesn’t show up at least once a day during normal working hours
The lay-off results from a strike or slowdown elsewhere in the establishment

These lay-off provisions don’t apply to:

Establishments covered under Chapter X
Establishments averaging fewer than 50 workers per working day in the preceding month
Seasonal or intermittent-work establishments (with the government having final say on what counts as seasonal/intermittent)

“Industrial establishment” here means a factory (Factories Act, 1948), mine (Mines Act, 1952), or plantation (Plantations Labour Act, 1951).

Retrenchment

Before retrenching a worker with at least 1 year of continuous service, the employer must:

Give 1 month’s written notice (or pay wages in lieu)
Pay compensation equal to 15 days’ average pay (or a notified equivalent) per completed year of service beyond 6 months
Notify the appropriate government or designated authority

Other rules:

Absent an agreement otherwise, retrenchment within a worker category should follow last-in-first-out, unless the employer records specific reasons for deviating.
Retrenched Indian citizen workers get preference for re-employment if the employer hires for the same role within 1 year.
If ownership or management transfers to a new employer, workers with 1+ year of continuous service are entitled to retrenchment-equivalent notice and compensation — unless service continues uninterrupted, terms remain equal or better, and the new employer is legally liable for compensation as if service had been continuous.

Continuous Service

Service interruptions due to sickness, authorized leave, accident, a legal strike, a lock-out, or a no-fault work stoppage don’t break continuity.

Workers who don’t otherwise qualify as continuously employed are still deemed so if they worked:

At least 190 days (underground mine work) or 240 days (other work) in the preceding 12 months, for annual continuity
At least 95 days (underground mine work) or 120 days (other work) in the preceding 6 months, for half-yearly continuity

Days actually worked include days laid off under an agreement or applicable law, days on full-wage earned leave, days absent due to a work-related temporary disablement, and (for female workers) maternity leave up to the limit set under the Maternity Benefit Act, 1961.

Closure

Employers must give at least 60 days’ notice before closing an undertaking, stating the reasons.
Doesn’t apply to establishments with fewer than 50 workers, or construction-project undertakings (buildings, bridges, roads, canals, dams).
The government can suspend these closure requirements temporarily for exceptional circumstances — accidents, the employer’s death, natural calamities, and similar events.
Workers with 1+ year of continuous service get retrenchment-equivalent notice and compensation on closure. If closure is due to unavoidable circumstances beyond the employer’s control, compensation is capped at 3 months’ average pay.

Not considered “unavoidable circumstances”:

Financial difficulties or losses
Accumulated unsold stock
Lease/license expiry
Mineral exhaustion in mining operations

Exception for mining closures due to mineral exhaustion: no notice/compensation is owed if the employer offers equivalent alternative employment within 20 km, on the same terms, with continuous service preserved and retrenchment compensation guaranteed if that alternative job later ends.

Construction projects: no compensation is owed if the project completes within 2 years of starting. If it takes longer, workers get standard notice and compensation per completed year of service beyond 6 months.

Worker Re-Skilling Fund

Set up by the appropriate government, funded by:

Employer contributions of 15 days’ wages (or a notified equivalent) per retrenched worker
Other government-prescribed sources

The fund credits 15 days’ wages to each retrenched worker’s account within 45 days of retrenchment.

Unfair Labour Practices

The Code prohibits employers, workers, and trade unions (registered or not) from engaging in unfair trade practices listed in the Second Schedule.

Offences and Penalties

Violations of lay-off compensation, retrenchment conditions, transfer compensation, or closure compensation rules: ₹50,000–₹2 lakh fine.
More serious violations of the same provisions: ₹1 lakh–₹5 lakh fine and/or up to 6 months’ imprisonment.
Lay-off, retrenchment, or closure violations: ₹1 lakh–₹10 lakh fine; repeat offences after conviction rise to ₹5 lakh–₹20 lakh and/or up to 6 months’ imprisonment.
Unfair labour practices: ₹10,000–₹2 lakh fine; repeat offences after conviction rise to ₹50,000–₹5 lakh and/or up to 3 months’ imprisonment.

Draft Rules on Industrial Relations Code

The Central Government has notified the Draft Industrial Relations (Central) Rules, 2020, effective from final Gazette publication alongside the Code. Once effective, these rules will replace:

Industrial Tribunal (Procedure) Rules, 1949
Industrial Tribunal (Central Procedure) Rules, 1954
Industrial Disputes (Central) Rules, 1957
Industrial Employment (Standing Orders) Central Rules, 1946

Key Definitions

Average pay — the average wage over the 3 preceding calendar months (monthly-paid workers), 4 weeks (weekly-paid), or 12 working days (daily-paid); if that period can’t be calculated, it’s averaged over the period actually worked.

Employee — anyone employed by an industrial establishment for skilled, semi-skilled, unskilled, manual, operational, supervisory, managerial, administrative, technical, or clerical work, including anyone the government declares an employee. Excludes Armed Forces members and Apprentices Act apprentices.

Employer — anyone employing people directly or indirectly (through a contractor), including factory occupiers/managers, establishment controllers or their managers/directors, contractors, and legal representatives of deceased employers.

Fixed Term Employment — engagement under a written, time-bound contract, with pay, hours, and benefits equal to a comparable permanent worker; proportional statutory benefit eligibility regardless of qualifying period; and gratuity eligibility after 1 year of service under the contract.

Industry — any systematic, cooperative activity (direct, agency, or contractor-based) producing or distributing goods/services to meet human wants (excluding purely spiritual/religious ones), regardless of capital or profit motive. Excludes charitable/philanthropic institutions, sovereign government functions (including defence research, atomic energy, and space), domestic service, and other Central Government–notified exclusions.

Industrial Dispute — any dispute between employers, or between employers and workers, or among workers, connected to employment, non-employment, employment terms, or working conditions — including individual disputes over discharge, dismissal, retrenchment, or termination.

Lay-off — an employer’s failure or inability to provide work due to shortages (coal, power, raw materials), stock accumulation, machinery breakdown, natural calamity, or similar reasons, to a worker on the muster rolls who hasn’t been retrenched. A worker who shows up for work and isn’t employed within 2 hours is deemed laid off for that day (or half-day, under specific shift circumstances).

Lock-Out — an employer temporarily closing a workplace, suspending work, or refusing to continue employing workers.

Retrenchment — an employer terminating a worker’s service for any reason other than disciplinary punishment. Excludes voluntary retirement, superannuation, non-renewal or expiry of a fixed-term contract, and termination due to continued ill health.

Settlement — an agreement reached during conciliation, or a separate written agreement between employer and worker, signed and copied to the designated government officer and conciliation officer.

Strike — a coordinated work stoppage or refusal to work by a group of employed persons, including a concerted casual leave taken by 50% or more of an industry’s workforce on a given day.

Trade Union — any combination (temporary or permanent) formed to regulate relations between workers and employers, workers and workers, or employers and employers, or to restrict how a trade or business is conducted — including federations of unions. Excludes partnership agreements, individual employment agreements, and agreements tied to selling business goodwill or professional instruction.

Trade Union Dispute — a dispute between two or more trade unions, or among members within a single union.

Wages — total remuneration (basic pay, dearness allowance, retaining allowance) payable for employment, excluding statutory bonuses outside contract terms, housing/utility/medical amenities, employer pension/PF contributions and interest, conveyance allowance, special expense reimbursements, house rent allowance, award/settlement remuneration, overtime, commission, gratuity, and retrenchment/retirement compensation — with the same 50%-cap and 15%-in-kind rules as under the Code on Wages.

Worker — anyone (except an Apprentices Act apprentice) doing manual, unskilled, skilled, technical, operational, clerical, or supervisory work in an industry, including working journalists and sales promotion employees, and (in dispute proceedings) anyone terminated in connection with that dispute. Excludes Armed Forces personnel, police/prison staff, managerial/administrative staff, and supervisory staff earning above ₹18,000/month. For Trade Union purposes specifically, “worker” covers all persons employed in trade or industry, including those covered under the Unorganised Workers’ Social Security Act, 2008.