Not being an at-will jurisdiction, India has had its fair share of employment litigation with many claims relating to unlawful termination and unfair labor practices. Labor unions have also remained active in the country, though largely confined to the industrial sectors. India’s new labor codes are still awaiting their effective date. The four labor codes replace 29 federal-level labor laws. Once implemented, it will be by far the biggest change to our labor law system. 

Current System of Employment Litigation in India 

One of the critical set of changes that will be introduced by the Industrial Relations Code, 2020 (“IRC”) relates to the system of employment litigation. Currently, the Industrial Disputes Act, 1947 (“IDA”) envisages the following forums: 

1. Board of Conciliation, to encourage the settling of an industrial dispute. 

2. Court of Inquiry, to inquire about any dispute looking to be related to employment law.

3. Labor Courts, to settle employment litigation judicially. They can interpret standing orders and adjudicate on violation of standing orders along with deciding the legality of discharge or dismissal of a worker. They can rescind any customary privilege or concessions and invalidate a lock-out or strike apart from other disputes not in the jurisdiction of a tribunal. 

4. Industrial Tribunals, to adjudicate disputes of wages like period, payment mode, allowances including compensatory allowances, leave, working hours, rest intervals, provident fund, bonus, profit sharing, disciplinary rules, and retrenchment of the workers. There are special tribunals to deal with specific issues like provident fund (social security) and employees' state insurance. 

5. National Tribunals, to deal with cases involving questions of national importance.

Proposed Changes to the Employment Litigation System

The labor courts have been scrapped by the IRC. Accordingly, only the Industrial Tribunals and the National Industrial Tribunal will exist as judicial forums to adjudicate labor litigation, besides of course the High Courts and Supreme Court. The IRC has retained only the tribunals - Industrial Tribunals and National Industrial Tribunal. There are no references in the IRC to the Conciliation Board, Court of Inquiry, or Labor Court. 

The IRC authorizes the federal government to constitute one or more National Industrial Tribunals. The primary function of such tribunals would be to adjudicate upon matters involving issues of national importance or affecting the interest of two or more States. Though it is like the national tribunal under the IDA, it has added an administrative member to the bench making the total strength of the bench to be two while earlier only one judicial member presided over this bench under the IDA. 

Cases that were referred to labor courts will be referred to the Industrial Tribunals under the IRC. A bench of two members at the Industrial Tribunal will adjudicate on matters relating to standing orders, trade union disputes, the legality of strikes, and wrongful terminations, akin to those adjudicated by the labor courts. Cases involving wages, allowances, hours of work, bonuses, etc. will be decided by a Single Member Bench of the Industrial Tribunal.
 

Conciliation and Settlement of Industrial Disputes

Like the IDA, the IRC provides for conciliation of industrial dispute. When in the case where an ‘industrial dispute’ exists or is apprehended to exist, then the conciliation officer can hold the proceedings. A conciliation officer mediates the settlement. The main purpose of conciliation is to come to a fair and amicable settlement on behalf of both the parties and the dispute settlement. 

A conciliation proceeding is deemed to have commenced on the date on which the first meeting is held by the conciliation officer after the receipt of the notice of strike or lock-out by the conciliation officer. Such a proceeding is deemed to be concluded when a settlement is arrived at or when failure of conciliation is recorded by the conciliation officer in case no settlement is arrived at or when a reference is made to the National Industrial Tribunal during the pendency of conciliation proceedings.     

As per the IRC, settlements arrived at in a dispute are binding on all parties to the dispute. If the party is an employer, then it would include his heirs, assigns, and successors. If the party is a worker, it would include all persons employed in the establishment and all persons who subsequently become employed in the establishment.

A settlement comes into effect as agreed mutually by the parties else from the date of signing of the memorandum of the settlement. The settlement remains binding on the parties for the period agreed by them. If no period is decided by the parties then it remains binding for a period of six months from the signing of the memorandum. It ceases within 60 days after either party issues notice to terminate the settlement. 

Arbitration of the Industrial Disputes

The IRC aims to aid in the alternative resolution of industrial disputes amicably through voluntary reference and redressal of the disputes to arbitration. Like the IDA and by virtue of a written agreement, the parties can refer the industrial dispute for arbitration under the IRC. Through the arbitration agreement, the employer and worker can specify the arbitrator(s). 

As per the IRC, the Arbitration and Conciliation Act, 1996 does not apply to arbitrations under the IRC. Like the conciliation officer, the arbitrator has been given leeway to follow his own procedure. Every arbitration award must be according to the procedure posited to execute decree and orders of civil court under Order XXI of the Code of Civil Procedure. 

An arbitration award remains in operation for a year from the time it gets enforceable. Appropriate government can reduce the period of operation of an award if it deems fit. Before expiry of the award, government can even extend it for a year however, an award cannot be extended beyond three years from the time it becomes enforceable. An arbitration proceeding commences from the date of filing of the application and ends when the award becomes enforceable. 

An arbitration award is binding to all parties that referred the industrial dispute for arbitration. Amidst arbitration proceedings and 60 days after the conclusion of the arbitration proceedings, the workers are not allowed by the IRC to go on a strike or lock-out. While the arbitration is pending, the employer can only alter conditions of service that are not connected to the dispute apropos the workers.

Impact on Employment Litigation

Legislature has made the National Industrial Tribunal a robust tribunal. It gives power to an officer appointed by a tribunal to enter any premises for the purpose of inquiry. It posits a list of specific subject matter to be heard and decided by a bench consisting of a judicial and administrative members of tribunals is mentioned for quick disposal of cases. It gives all tribunals the status of civil court. 

The IRC stipulates that only Industrial Tribunal will have jurisdiction over any sort of disputes concerning trade unions. Thus, the civil courts may no longer have jurisdiction over such disputes once the IRC comes into force. It helps avoid multiplicity of litigations as litigants tend to move to different tribunals and courts for getting a favorable relief, eventually leading to clash between courts and tribunals, paving way for appellate courts to settle the dispute once and for all.

Appeals by the Worker 

The IRC states that in the event that the National Industrial Tribunal directs reinstatement of a worker, and the employer appeals such a decision before an appellate court, then the worker shall be paid full wages during such pendency unless the High Court or Supreme Court is of the opinion that the worker had already been receiving adequate remuneration during such pendency.

Transfer of cases

From the date of commencement of the IRC, all pending cases at the Labor Courts under the IDA shall be transferred to the Industrial Tribunal or the National Industrial Tribunal, as the case may be. The presiding officers under the IDA at the Labor Court or Tribunal and National Tribunal holding office immediately before the commencement of the IRC shall be reinstated as Judicial Members at the Industrial Tribunals and the National Industrial Tribunal respectively. 

Conclusion

Employment litigation in India can be challenging and sometimes never-ending. It takes several years for a party to get relief from the courts. At times, the judgment comes after the worker has retired, in which case the relief can be limited to monetary damages and not reinstatement. 

One of the purposes to enact the new labor codes was to simplify the Indian employment litigation system. It however remains unclear whether the new labor codes in India will reduce the backlog of labor cases that are pending at various tribunals and courts. The Industrial Relation (Central) Rules, 2020 reduce procedural complexities only in a way by consolidating the relevant regulations from (i) the Industrial Tribunal (Procedure) Rules, 1949; (ii) the Industrial Tribunal (Central Procedure) Rules, 1954; (iii) the Industrial Disputes (Central) Rules, 1957; and (iv) the Industrial Employment (Standing Orders) Central Rules,1946. 

It must be noted that the IRC applies only to workers.¹ For non-workers, there is no relief available under the IRC and accordingly, they have no choice but to use the other mechanisms to litigate or resolve their disputes.  

It also remains to be seen if as a result of the new labor codes, alternate forms of dispute resolution will be promoted. There are also concerns in situations where only the administrative member hears the cases at the Industrial Tribunal. That can be a threat to the justice system as administrative members are not independent as much as judicial members. It could impact trust of litigants. Article 50 of the Constitution of India deals with the independence of the judiciary and asks the state to make efforts to separate the judiciary from any interference by the state. 

The authors acknowledge the assistance provided by Vol. Interns of Nishith Desai Associates.

¹India’s New Labor Codes: Comparison of Employee v. Worker, The National Law Review, (last visited Jun 6, 2022)