Code on The Occupational Safety, Health and Working Conditions, 2020: Where wellbeing is paramount

author Sheena Ogra

calender February 16, 2023

Code on The Occupational Safety, Health and Working Conditions, 2020: Where wellbeing is paramount

The Occupational Safety, Health, and Working Conditions Code, 2020 (“Code”) a legislation framed to regulate the safety, health and working conditions of the workers employed in various establishments. The Code simplifies, subsumes, and transforms the provisions of the provisions of 13 existing central labour legislations, including, inter alia, the (i) Factories Act, 1948 (“Factories Act”), (ii) The Contract Labour (Regulation and Abolition) Act, 1970 (“CLRA”) (iii) The Motor Transport Workers Act, 1961 etc. (collectively, "Current Laws").

This article provides a comparative analysis of the key changes introduced under the Code with the Current Laws framework and its impact on the employment ecosystem of India. 

Additional Resource: The Code on Wages

Additional Resource: The Code on Industrial Relations

Contrast between the Extant Framework and the Prospective Framework

1. Definition of Establishment

  • Extant Framework: Currently, the definition of the establishment is not consistent under the Current Laws.
  • Prospective Framework: Under the Code the definition of the establishment  has been streamlined and means a place where any industry, trade, business, manufacturing or occupation is carried on in which 10 (ten) or more workers are employed, or ii) a motor transport undertaking, newspaper establishment, audio-video production, building, and other construction work or plantation, in which 10 (ten) or more workers are employed; or iii) a factory in which 10 (ten) or more workers are employed; or iv) a mine or port or vicinity of the port where dock work is carried out (collectively “Establishments”).

2. Registration of Establishment

  • Extant Framework: At present, the Current Laws stipulates separate registration of the Establishment in line with the business operations of the enterprise. 
  • Prospective Framework: Establishments that are already registered under Current Laws at the time of commencement of the Code are exempted from procuring a fresh registration provided that, an update of the registration particulars is required on the Shram Suvidha Portal, within 6 (six) months from the date on which the Code comes into force. 

3. Inspector-Cum- Facilitator

  • Extant Framework: The Current Laws framework grant certain powers to officers and inspectors to undertake cognizance in the of matters of any non- compliances on the part of the employers and pass necessary orders, as it may deem fit.
  • Prospective Framework: It is noteworthy to see that the Code has adopted a neutral approach in respect of streamlining the processes of compliances to be undertaken by employers. The introduction of the concept of Inspector cum Facilitator has been predicted to play a very progressive role to change the dynamics of the labour laws in India. The role of the Inspector cum Facilitator is not limited to carry out search and seizures, inspection of the records, but shall also to act as a facilitator by rendering advice to the employers and workers in relation to compliances of the Code. The Code has also, recognised the significance of the principles of natural justice wherein prior to initiating a prosecution, the Inspector-cum-Facilitator must give an opportunity to the employer to comply with the provisions of the Code through a written direction. The employer is required to comply with the directions within the stipulated time period in order to avoid any prosecution. However, the opportunity to rectify the breach will not be provided to an employer in case such employer is found to be a repeated offender of a violation being committed within a span of 5 (five) years from the date of first offence.  Additionally, the Code also allows inspection electronically and calling of information relating to inspection through web-based platform. 

4. Issuance of Appointment Letter

  • Extant Framework: Typically, the issuance of the appointment letters while hiring the employees is considered a norm in the service industry, however in the manufacturing industry and other unorganized industry, issuing appointment letter that broadly captures the terms and conditions of the employment is seldom observed thereby leaving the unorganized workforce unacquainted with their rights and benefits embedded under the Current Laws framework. 
  • Prospective Framework: Under the Code, issuance of the appointment letter to the employees engaged in the Establishment is a legal requirement which the employers need to take into account. Further, if no appointment letter is issued at the time of the hiring of the employee/worker, the same has to be issued within 3 (three) months of the commencement of the Code.

5. Provision for Creche Facility

  • Extant Framework: Under the Factories Act, wherein 30 (thirty) or more women workers are ordinarily employed, are to be equipped with creche facilities/nurseries for children under the age of 6 (six) years of such women. 
  • Prospective Framework: Under the Code, a creche facility is now required to be provided by all Establishments (including factories) where more than 50 (fifty) workers are ordinarily employed.

6. Annual Leave Entitlement

  • Extant Framework: Under the Factories Act, every worker shall be entitled to 1 (one) day of leave for every 20 (twenty) days of his work, provided that the worker has worked for 240 (two hundred and forty) days in the relevant calendar year. 
  • Prospective Framework: Under the Code, every worker is now be entitled to 1 (one) day of leave for every 20 (twenty) days of his work, provided that the worker has worked for 180 (one hundred and eighty) days or more in the relevant calendar year. 

7. Provision for Women Employees

  • Extant Framework: Under the Factories Act, no woman will be required to work or allowed to work in any factory between the hours of 6 A.M and 7 P.M.
  • Prospective Framework: Under the Code, consenting women are allowed to work in all Establishments before 6 A.M and beyond 7 P.M. However, due consideration must be laid down to the fact that that safety and wellbeing of the woman is paramount, therefore, adequate transportation facilities, basic amenities in terms of the toilets, washrooms, drinking water, entry and exit of the woman employee with adequate lights should be taken into account by the employer in light of the woman safety. 

8. Overtime

  • Extant Framework: Under the Current Laws, where a worker works for more than 9 (Nine) hours in a day and 48 (Forty-Eight) hours in a week, the worker in respect of that overtime work be entitled to wages at the rate of twice the ordinary rate of wages. This is a standard practice which is being continuing since ages to balance out the interest of the worker concerned as a way to reward the worker’s effort by the employer. 
  • Prospective Framework: Under the Code, this practice of undertaking working beyond the routine working hours in the event of business exigencies is well taken into account with the same overtime wages entitlement as enshrined under the Current Laws. However, an important aspect with regards to the requirement of obtaining prior written consent of the worker before requiring him / her to work overtime has been introduced. 

9. Common Facilities

  • Existing Framework: As per the Factories Act, where, in any premises, separate buildings are leased to different occupiers for use as separate factories, the owner of the premises shall be responsible for the provision and maintenance of common facilities and services therein.
  • Prospective Framework: The Code, on the other hand, imposes a joint and several liability on the owner of the premises and the occupiers of the factories utilizing the common facilities.

10. Provision for Contract Labour

  • Extant Framework: Currently, the CLRA is another major legislation that pertains to regulating contract labour in India. The manager or occupier of the establishment is the principal employer. Under the CLRA, every principal employer is required to make an application in the prescribed form, for the registration of the establishment with the labour authorities. Every contractor under the CLRA Act must also be licensed and should undertake work through contract labour only in accordance with such license. The contractor is required to pay wages and provide facilities for the welfare and health of the contract labour, which includes providing rest rooms, canteens, wholesome drinking water, toilets, washing facilities, and first aid facilities in every establishment. The above compliances vary depending on the number of contract labour engaged in an establishment. It is important to note that as per the CLRA, in case the contractor fails to pay wages to the contract labour, the principal employer will be responsible for the same. 
  • Prospective Framework: Under the Code, a contractor is required to obtain license before supplying or engaging contract labour in an establishment or undertaking or executing any work through contract labour. However, if the event if the contractor has not fulfilled the qualifying criteria for a contract labour license, the Code permits a contractor to obtain a work-specific license for a work order. The Code has made significant changes with respect to a principal employer. The principal employer has been made primarily responsible for providing the prescribed welfare facilities and meeting the prescribed standards for occupational health and safety for the contract labourers at their establishment. Further, the Code does not provide for recovery of costs incurred by the principal employer on account of providing amenities. This is unlike the previous position under the CLRA, which specifically allowed a principal employer to recover sums from the contractor either as deduction for any amount payable or as debt payable by the contractor for the expenses incurred in providing amenities. Contractors are required to intimate the Government whenever a work order is received by them from an establishment either to supply contract labour in the establishment or to execute the contract through contract labour. The Code has also removed the requirement under the CLRA for a representative of the principal employer to be present while the contractor pays the wages of the contract labourer. In addition, every contractor shall upon the demand of the contract labour issue an experience certificate encircling the work performed by the concerned contract labour. Moreover, if a principal employer engages any contract labour through an unlicensed contractor, then such contract labour shall be deemed employees of the principal employer.

11. Social Security Fund

The Code also provides for setting-up of a social security fund for the welfare of unorganized workers, which will be credited with the amount received from composition of certain offences committed under the Code. 

12. Penalties

If there is any contravention of the provisions of the Code or Rules, or bye-laws or any of standards, made thereunder by the establishment, the employer or the principal employer of the establishment, shall be liable to a penalty which shall not be less than INR 2,00,000 but which may extend up to INR 3,00,000, and if the contravention continues after the conviction, then, with a further penalty which may extend to INR 2,000 for each day till such contravention continues.

A&A Analysis

The Code appears to be a positive step towards ensuring occupational safety and health and better working conditions of workers. The employment of women in night shifts is a positive step towards ensuring gender equality. From the perspective of the employers, while most of the provisions remain intact. Most importantly, the provision relating to deemed registration of establishments may take care of prolonged delays in administrative process.

Further, the issuance of the appointment letter by the employers is indeed a very progressive step especially for the un-organized workforce who are unaware of their rights which are embedded in the Current Laws framework, and it is very common in the industry vis-à-vis un-organized workforce.  

The Code has also given much impetus to the Inspector-cum-facilitator who has been entrusted with the responsibility of ensuring compliance as well as facilitating business to meet the compliance framework. The facilitator is a new element and there is a likelihood that this role could clash with the traditional responsibilities of an inspector.

Undoubtedly with the reduction in period for the annual leave entitlements significantly reflects the aim of the Code which will be beneficial to the workers while availing the annual leaves. Further, principal employer needs to apply a cautious and pragmatic approach for sourcing the contract labours from unregistered contractors. Therefore, adequate due diligence checks should be implemented in such arrangements.

Certainly, the Code marks a progressive step to streamline and reform India’s archaic labour laws and bring them in sync with modern business requirements. Likewise, the impetus given to the recognition of rights of the contract labour is also a welcoming. 

Lastly, the enactment of the Code coupled with other labour codes will certainly a remarkable move by the Government of India and this will give the employer and the industry a much-needed push to calibrate with the revised framework wherein it not only updating employment ecosystem to match modern-day employee welfare practices, but also easing compliance burden on businesses and boosting ease of doing business in the country.

Nevertheless, for an efficient and timely execution, the State and Central Governments (as applicable) would need to frame and notify standards, rules and regulations, post notification of the Code, to prevent further delay and uncertainty for businesses. Employers will also need to keep in mind mandatory registration requirements and stronger obligations with respect to the contract labor. It is imperative for the business houses to take appropriate steps well in advance to align with the Code.    

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