A Critique of Model Standing Orders Under the Industrial Relations Code

In bits and pieces, the central government has released the Rules related to the Industrial Relations Code (IRC), 2020. State governments are also expected to release their Rules. Earlier, KR SHYAM SUNDAR had assessed the draft rules of the central government under the code. Now he touches on two major aspects the Centre has left out—Rules relating to trade unions and the Model Standing Orders (MSOs). 

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ON October 29, 2020, the central government released the Draft Rules under the Industrial Relations Code, 2020 (IRC). This document did not contain the draft Model Standing Orders or MSOs which were supposed to be in it. Instead, after protests from stakeholders, it released three MSOs as a separate document to address "sector-specific" issues for the services, manufacturing and mining sectors.

Also read: Shortcomings in the Draft Industrial Relations Rules [Part II]

PROVISIONS IN IRC FOR MSOs AND STANDING ORDERS

Standing Orders (SOs) are regulations that relate to the 11 matters set out in the First Schedule of the IRC. They apply to industrial establishments which employ 300 or more workers. Section 29(1) of IRC empowers the Centre to frame MSOs relating to conditions of service.

The 11 matters mentioned in the first schedule of the IRC are exactly the same as in the Industrial Employment (Standing Orders) Act, 1946, or IESOA. The only change is that "fixed term employment" has been added to Item 1 of the First Schedule of the IRC.

Yet, while the matters mentioned are mostly the same, the central government has made a significant departure from the IESOA in terms of who can frame the MSOs. In the IESOA, the central government issued MSOs for three sectors—industrial establishments (except coal mines), industrial establishments (in coal mines) and all establishments in the central sector. For all other kinds of establishments which states are administratively responsible for, the state governments would issue the MSOs under the IESOA (see: Uttar Pradesh, Gujarat, Tamil Nadu).

Now, the Centre has departed from the IESOA, though the system under it had been backed by judicial rulings as well. The changes provide "flexibility" in labour laws to employers, whereas the earlier arrangement provided flexibility to governments at the Centre or states who were administratively in charge of different kinds of establishments.

The result of the changes under the IRC is that only the central government can make MSOs for establishments across the country. Section 2 of the service sector MSO stipulates that it extends to industrial establishments employing 300 or more workers in "all States and Union Territories". [Establishments engaged in service sector which are covered by the Occupational Safety, Health and Working Conditions Code, 2020 and its rules made by the central or state governments.] The MSO for the industrial sector contains the same provision.

In today's globalized era, state governments not only compete for capital coming from overseas but also among each other. The ruling government says "competitive federalism" is its mantra. And labour is a Concurrent subject in the Constitution. For all these reasons, it is rather shocking that the Centre has imposed its regulations on states.

Also Read: Industrial Relations Code and Standing Orders Act: A Deregulation that Spells Chaos and Hurts Workers

According to Section 101(1), the central government can make changes to the first, second or third schedules of the IRC. This amounts to centralisation of powers under the code. Section 15(2)(a) of the IESOA had given both the central or state governments powers to amend the schedules. In November 1985, the Uttar Pradesh government included "recruitment", "abandonment of employment", "censure and warning notice", "fine" and "stoppage of annual increment" and several other items including conditions for promotion, gratuity and pension in its schedule. State governments would no longer have this flexibility.

According to Section 30(1) of the IRC, the employer "shall prepare the draft standing orders… based on the model standing orders" related to the First Schedule and "on any other matter considered necessary by him" after "considering the nature of activity in his establishment", so long as the SOs are not inconsistent with the IRC and cover every matter in the First Schedule.

In addition, Section 30(6) and (7) of the IRC strictly requires the certifying officers (CO) and Appellate Authority to certify the draft SO (or modifications requested by parties) so long as the SO contains regulations on every matter in the First Schedule, conforms to the IRC and is "fair and reasonable".

The Supreme Court made it clear in Rohtak Hisar District vs State of Uttar Pradesh and others that employers cannot impose regulations on matters not specified in the Schedule. It also held that employers cannot use any pretext include matters that are not in the Schedule. Plus, only the appropriate government has powers to add items related to conditions of employment to the Schedule.

Now, Sections 30(1), (6) and (7) would create confusion among employers and trade unions. Earlier, things were simple and clear: SOs must contain regulations concerning ONLY matters included in the Schedule by the appropriate government, which meant the Centre or states in their own domains. Now employers may deem that matter X, which is not provided in the First Schedule or MSO is "necessary" for the sake of ease of doing business, include it in the SO and seek certification for it.

What can the CO or AA do in these circumstances? Earlier, they could simply reject inclusion. Now there is a paradox: Matter X is not in the First Schedule but deemed necessary by the employer considering the nature of activity in his establishment (Section 30(1)). If such matters get certified, trade unions might object, and there would be more industrial disputes.

EXISTING MSOs RELEASED BY THE CENTRE

The central government had notified Rules under the IESOA in 1946 and introduced "additional" matters in the Schedule for "coal" and "non-coal mines" sectors. Items like service record, change of address of workers, record of age, confirmation, retirement age, transfers, medical aid in case of accidents, secrecy, exclusive service and so on were included in the case of the non-coal mine sector.

Also Read: Reforming the Settlement of Industrial Disputes Mechanisms in the Industrial Relations Code [Part 1]

MSOs for all industries contained and added regulations on these items too. The simple question arises when these items had existed for so long, why did the Centre not add them in the First Schedule instead of reproducing them as eleven items? This is important because, under Section 101(1), the central government alone has the powers to amend the First Schedule.

WORK FROM HOME

The Centre has included a new item, "Work from Home" or WFH to facilitate arrangements arising out of or becoming more widespread due to the COVID-19 pandemic. The WFH facility has been extended only to the service and not the manufacturing sector, which is questionable, as an employers' representative has said. It would be ideal to introduce WFH or the "hybrid model" as a part of the SOs after framing regulations on it under the tripartite process and following ILO conventions on hours of work.

It is unhealthy to leave WFH arrangements to individual bargaining, as it could result in extremely opportunistic outcomes: self-exploitation by employees or their exploitation by management. Further, when this new arrangement is being debated and variations in the model are emerging, why should the government be in a hurry to legalise WFH in the MSO?

PRIVACY CONCERNS IN THE SERVICE SECTOR MSO

The MSO rightly recognises that employment relationships, and commercial relationships within them, are subject to concerns of privacy and secrecy. Accordingly, "involvement in unauthorised access of any IT system, computer network of the employer/customer/client" is misconduct in the MSO for the services sector.

On the other hand, in its reckless pursuit of modernity, the government is "legalising" social media communications through its MSO. Consider regulation number 14, which relates to how workers will be intimated of the payment of their wages. The MSO includes SMS, e-mail, social media communication such as WhatsApp or issuing a slip.

Considering how often individual or group accounts on social media or even platforms themselves have been hacked, this move seems unwelcome, even dangerous. The inadvertent or casual supply of data by people and employees will abet the malfeasant motives of finance-capital. Many social media platforms, such as Facebook and WhatsApp, are inter-connected and such rules would lead to data-sharing on a grand scale. Organisations must promote and protect privacy and cybersecurity experts have correctly sounded alarm bells over this move.

MSO ON DOMESTIC INQUIRY

The MSO ably details aspects of domestic inquiry, and includes failure or refusal to wear protective gear as "misconduct", but there are some issues. The IRC says an inquiry must "ordinarily" be completed within 90 days, which provides for welcome flexibility. Rule 25 of the MSO repeats this faithfully. Yet, the question arises as to the method by which the process is to extend beyond 90 days, an event that is most likely to occur frequently.

MSO AND MISCONDUCT

While misconduct is generally an individual-centric act, it could be collective too, as in the case of violence, sabotage and so on. Yet the law, rather strangely, includes mass casual leave by more than 50% of workers on a given day as misconduct (Item 25(3)(r)). It defines this misconduct as "going on an illegal strike either singly or with other workers without giving 14 days previous notice."

Strikes, by definition, are a "collective action". Section 2( zk) of the IRC defines strikes as a "cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal, under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment and includes the concerted casual leave on a given day by fifty percent or more workers employed in an industry."

It defeats commonsense as to how employers will single out a worker to charge for misconduct while leaving out others involved in the same act. Even assuming that an "individual worker" can be seen to have gone on an illegal strike in this neoliberal area, the IRC already contemplates penal provisions in Chapter XIII for it.

How can the same worker be penalised for the same act in two ways, with a fine and or imprisonment and a domestic inquiry?

Alarmingly, the inquiry might lead to termination of employment, and employers could use this mechanism to get rid of dissenting workers. Further, "legal strikes" under the IRC dispensation are well-nigh impossible. This, then, is a perfect recipe for undesirable and unfair action by employers and probably the state.

Further, regional laws on recognition of unions contemplate their de-recognition in case they organise an illegal strike. Unions with a record of illegal strikes can also be denied recognition. Strikes are collective in nature. Therefore, a combined reading of the parent law and the MSO leave an impression that workers' dissent in any form will most likely be stifled.

If dissent is stifled, conflicts in industrial establishments would manifest in unhealthy ways, as we have seen over the last two decades.

Also Read: Why Labour Law Reforms Must Focus on Efficient Justice Delivery Mechanisms for Ease of Doing Business

Again, if strikes equal lockouts, then the law must recognise even employers going on "illegal lockouts", even though the employers' guilt cannot be individual, as "employer" is an ill-defined category. To be sure, that is why Marxist theories do not endorse this imbalanced equality, as there is no parity of weapons and power.

"Refusal to accept any charge-sheet or order or notice communicated in writing" is also misconduct. However, there is no law that makes employers liable to receive written submissions from employees. Therefore, this rule violates the norm of pluralistic industrial relations. It would be a double whammy for workers, who would invite punitive action on workers for this misconduct in addition to the actual possible misconduct for which they are being served.

To be sure, this provision may have been included to resolve the attempts of employers attempting to serve charge-sheets to delinquent workers, which can take time and involve considerable transaction costs. Yet, seeing employer-employees relationship from a strategic point of view, dodging the employer is an important part of the meagre armour available to an employee.

In a sense, it imparts a sense of parity between the employer and employed, for the former have a veritable list of options and coercive institutions at their disposal while the employed do not.

Besides, the rule creates a paradox: how does one take action against workers who refuse to accept a charge-sheet related to alleged misconduct? The judiciary has suggested several alternatives in this regard, and so this refusal must not be construed as "misconduct". Further, a multiplication of charge-sheets would further vitiate employee-employer relations.

To conclude, the government should be complimented for extensively thought-out MSOs for all three sectors, but one hopes that the consultation process would lead to more rational, sensible and sensitive MSOs.

The government must seriously consider the following:

1. Clarify the ambiguity created by Section 30(1)

2. Give state governments the flexibility to add items to First Schedule.

3. Drop penal action for those misconducts that are covered elsewhere.

4. Frame regulations on emerging work arrangements including WFH and "hybrid" solutions. It is high time India frames regulations consistent with ILO's Home Work Convention, 1996.

5. SOs should be applicable to any industry as per the definition in the IRC, except those excluded. This means they should include industries and occupations such as journalism, medical and legal practices, bidi workers, construction workers and so on.

It makes economic sense to apply these regulations to workplaces that employing at least 50 workers or more rather than excluding them.  Aggressive human resource management practices in the absence of trade unions provoke spontaneous and disorganised behaviour. We have seen rioting, and worse, at Wistron and Maruti Suzuki, for example. For this reason, too, the IRC, MSOs, and other regulations must include more than they exclude.

(Dr. K R Shyam Sundar is professor, XLRI, Xavier School of Management, Jamshedpur. The views are personal.)