Anand Teltumbde: How India’s new labour codes dismantle worker protections

When the Modi government implemented four new labour codes on November 21, it claimed to be delivering “one of the most comprehensive and progressive labour-oriented reforms since Independence”. The prime minister himself celebrated the moment with his characteristic triumphalism, declaring that the codes “greatly empower our workers” while simplifying compliance for businesses.

The Joint Platform of Central Trade Unions comprising ten major trade unions saw it differently. In a scathing statement, they condemned the implementation as a “deceptive fraud” against India’s working people and burned copies of the codes in street protests.

The Communist Party of India (Marxist) charged that the reforms “dismantle 29 hard-won labour laws” and “shift the balance sharply in favour of employers”. Even the Association of Indian Entrepreneurs, hardly a bastion of worker advocacy, expressed concern about significantly increased operating costs.

Who is right? Is this historic reform or historic betrayal? The answer lies in the details – in comparing specific provisions of the old laws with their equivalents in the new codes. When we examine these comparisons systematically, a clear pattern emerges: beneath the rhetoric of modernisation and expanded coverage, the new codes systematically weaken protections, intensify precarity and shift power dramatically from workers to employers.

The retrenchment revolution

Perhaps the most consequential change concerns retrenchment – the permanent termination of workers’ employment. This provision reveals the codes’ essential logic with stark clarity.

Under the Industrial Disputes Act, 1947, factories, mines, or plantations employing 100 or more workers were required to obtain permission from the central or state government before laying off, retrenching, or closing down operations. These three sectors did not comprise more than one-third of the organised sector.

Under the Industrial Relations Code, 2020, that became effective last month, the threshold has been tripled to 300 workers and it is made applicable to the entire organised sector. It provides for the increase of this threshold by a notification of the government. Companies with up to 300 employees can now retrench staff without any approval.

Thus, employers at establishments with 100-299 workers – the vast swath of Indian industry, in excess of 87% – can now fire workers at will without government oversight, without demonstrating cause, and without facing consequences for arbitrary dismissals.

The real effect is to create a massive class of workers who live in constant fear of arbitrary termination. An employer dissatisfied with a worker’s union activity, caste background or personal demeanour can simply fire them – no questions asked, no appeals allowed. This is not flexibility. It is tyranny.

Strangling the strike

The right to strike is fundamental to workers’ collective power. It is the ultimate leverage workers possess against exploitative employers – the ability to withdraw their labour and halt production. The new codes systematically strangulate this right.

Under the Industrial Disputes Act, 1947, workers in “public utility services” – railways, ports, sanitation, and similar essential services – were prohibited from striking without notice. Other workers faced fewer restrictions.

Under the new Industrial Relations Code, 2020, workers in any establishment cannot go on strike unless they give notice within 60 days before striking and within 14 days of giving such notice.

Strikes are prohibited during the pendency of conciliation proceedings (and seven days after), during tribunal or arbitration proceedings (and 60 days after) and during any period when a settlement or award is in operation.

If over 50% of a company’s workers take concerted casual leave, it will be treated as a strike – meaning that even coordinated absence becomes illegal without prior notice.

These procedural requirements make spontaneous strikes – often the most effective kind – virtually impossible. Workers must intimate their intentions weeks in advance, giving employers ample time to prepare strikebreakers, intimidate organisers or preemptively fire troublemakers.

More devastatingly, conciliation proceedings might go on for years and workers will not be able to agitate no matter how long the delay in justice. Since employers can easily drag out conciliation or tribunal proceedings, they can effectively keep workers from striking indefinitely.

As the All India Central Council of Trade Unions points out, these provisions violate International Labour Organisation principles, which state that obligations to give prior notice are acceptable only “where this does not cause the strike to become very difficult or even impossible in practice”. The Indian codes cross precisely this line – making strikes so difficult and so risky that they become practically impossible for most workers.

Permanent precarity

The introduction of broad fixed-term employment provisions perhaps represents the codes’ most insidious innovation – creating a legal framework for permanent job insecurity.

Under previous laws. fixed-term employment existed in limited forms, but most regular work was governed by permanent employment norms with significant job security protections.

Under the Industrial Relations Code, 2020, fixed-term employment is introduced across all sectors, and such workers can be fired without notice, will not be eligible for retrenchment compensation and shall be barred from participating in strikes called by other workers.

The codes claim that fixed-term employees receive “benefits on par with permanent workers”, but this is deceptive. Given that the threshold for standing orders has been elevated to 300 workers, employers can hire as many fixed-term employees as they wish instead of permanent workers, for work of regular nature as well.

Employers can now staff their entire operation with fixed-term workers whose contracts expire regularly. These workers theoretically get equal pay and some benefits, but they live under the constant threat that their contract will not be renewed.

The constant fear of non-renewal of their fixed-term contracts and not being granted permanent status will discourage them from exercising their freedom of association.

A fixed-term worker who joins a union, demands better conditions, or refuses exploitative overtime knows that when their six-month or one-year contract expires, the employer can simply not renew it – no explanation required, no appeal possible. This creates a workforce that is legally employed but permanently insecure.

Threshold raised

Standing orders are the written rules governing employment conditions – working hours, leave policies, disciplinary procedures, grounds for dismissal. They provide transparency and limit arbitrary employer action.

Under the Industrial Employment (Standing Orders) Act, 1946, industrial establishments employing 100 or more workers were required to prepare formal standing orders and have them certified. Under the Industrial Relations Code, 2020, the threshold has been raised to 300 workers.

What this means in practice is that establishments employing 100-299 workers – again, a vast category – need not maintain formal written rules governing employment. Employers can change conditions arbitrarily, implement disciplinary procedures capriciously and alter leave policies without notice or consultation.

This might seem like mere paperwork reduction, but standing orders serve a crucial function: they prevent arbitrary management action by establishing clear rules that apply to everyone. Without them, workers have no recourse when employers suddenly change shift timings, reduce break periods, or impose new attendance requirements. Management’s word becomes law, with no written standard to appeal to.

Trade union recognition

The codes introduce a new system for recognising trade unions that appears neutral but functions to fragment and weaken union power.

Under the Trade Unions Act, 1926, multiple unions could exist in an establishment, and settlements made with any registered union were binding on its members. There was no concept of a single “negotiating union”.

Under the Industrial Relations Code, 2020, a trade union with at least 51% (lowered from the 75% in the 2019 bill) of workers as members will be the sole negotiating union. In practice, the 51% threshold is nearly impossible to achieve in most establishments, particularly large ones. This weakens collective bargaining by requiring super-majoritarian union membership before workers can negotiate as a unified force.

More insidiously, it incentivises employers to create or support several small unions to prevent any single union from reaching the threshold – a classic divide-and-rule strategy.

Where several small unions exist, the negotiating council mechanism sounds democratic but actually weakens worker power. Employers can play unions against each other, reaching agreements with more compliant unions while ignoring militant ones. The fragmentation of worker representation serves employer interests perfectly.

Definition of wages

The codes introduce a uniform definition of “wages” that sounds technical but has significant implications for workers’ monthly income.

Under previous laws, the definition of wages varied across different acts, and many employers structured compensation to minimise the “basic pay” component by loading up allowances – housing allowance, transport allowance, special allowance and the like.

Under the Code on Wages, 2019, the new definition standardises the pay structure, requiring basic pay to form at least 50% of total remuneration, with allowances capped at 50%.

What this means in practice: while take-home pay may fall slightly, retirement benefits will grow because Provident Fund and gratuity contributions are calculated on basic pay. This sounds like a reasonable trade-off – slightly less money now for greater retirement security.

But here is the problem: workers, especially young workers, need money now to survive – to pay rent, buy food, support families. Reducing take-home pay while increasing retirement contributions five decades hence is cold comfort to someone struggling to make ends meet today.

Moreover, it assumes workers will remain employed long enough to collect those retirement benefits – an increasingly dubious prospect, given the other provisions that make employment more precarious.

The provision also significantly increases employer costs, which employers will resist by hiring fewer workers or pushing more employment into the unorganised sector where these rules don’t effectively apply.

The overtime illusion

The provisions of the codes on working hours reveal how ostensible protections can mask intensified exploitation.

Under the Factories Act, 1948, workers could not be required to work more than nine hours per day or 48 hours per week without overtime compensation.

Under the Occupational Safety, Health and Working Conditions Code, 2020, the codes introduce a standardised 48-hour weekly work limit, with clearer rules on overtime. However, critics point out provisions that effectively allow 12-hour workdays.

While the codes formally maintain the 48-hour weekly limit, they permit employers to stretch daily working hours significantly beyond traditional limits through flexible rostering and overtime provisions. A 12-hour workday, even if compensated with overtime, is physically and mentally exhausting in ways that undermine workers’ health, family life, and human dignity.

The codes present this as flexibility benefiting both employers and workers – employers can adjust to production demands, workers can earn overtime pay. But in practice, employers will pressure workers to accept extended hours, particularly fixed-term and contract workers desperate to have their contracts renewed. The “choice” to work 12-hour days becomes no choice at all.

Permanent insecurity

The treatment of contract labour reveals the codes’ fundamental orientation toward employer interests.

Under the Contract Labour (Regulation and Abolition) Act, 1970, contract labour was supposed to be regulated, with provisions for abolition in certain circumstances and requirements that contractors be licensed.

Under the Occupational Safety, Health and Working Conditions Code, 2020, the code provides for automatic absorption of contract workers into the establishment of the principal employer where they are engaged through an unlicensed contractor. Contract workers are supposed to receive equal benefits as permanent staff.

The automatic absorption provision sounds protective, but it only applies to unlicensed contractors – giving employers every incentive to ensure contractors are properly licensed. The promise of equal benefits rings hollow when contract workers can be terminated at any time by simply ending the contract with the contractor who employs them.

The result is a multi-tiered workforce within single establishments: a small core of permanent workers with job security, a larger group of fixed-term workers with temporary security, and a massive base of contract workers with no security at all. All three groups do similar work, but face radically different conditions. This fragmentation prevents worker solidarity and ensures a race to the bottom in working conditions.

Recognition without protection

The treatment under the coes of gig and platform workers exemplifies the gap between rhetorical inclusion and substantive protection.

Under previous laws, gig and platform workers – delivery riders, cab drivers and the like – were classified as independent contractors with essentially no labour law protections. Under the Code on Social Security, 2020, Gig and platform workers receive legal recognition, with aggregators required to contribute 1%-2% of annual turnover to a social security fund.

Recognition is better than invisibility, but it is inadequate. Gig workers remain classified as contractors rather than employees, meaning they lack job security, minimum wage guarantees, working hour protections and collective bargaining rights. The social security fund is a token gesture – 1%-2% of turnover is minimal given platforms’ business models.

Critics note that workers in the gig economy are typically classified as independent contractors and thus are not provided the protection of various labour laws. The codes formally acknowledge gig workers exist but refuse to grant them full employee status with commensurate protections. This legitimises the platform economy’s exploitation model while creating the appearance of progressive reform.

Enforcement exemptions

Many code provisions apply only to establishments above certain size thresholds, effectively excluding the vast unorganised sector where most Indian workers labour.

The Occupational Safety, Health and Working Conditions Code exempts units with fewer than 20 or 40 workers, depending on power use, from several requirements, including factory registration.

Linking social benefits to establishment size leaves out millions of informal workers who work in small units or perform home-based work.

India’s labour force is overwhelmingly employed in small establishments and the unorganised sector. By exempting small establishments from many requirements, the codes effectively exclude most workers from their protections. The organised sector provisions, however weakened, apply to perhaps 10% of workers. The remaining 90% face even fewer protections than before.

This creates perverse incentives for employers to remain small or fragment operations into multiple small units to avoid regulation. It also means that the codes’ ballyhooed expansions of coverage are largely illusory – the workers who most need protection are systematically excluded.

A deceptive fraud

The trade unions are right to call the labour codes a deceptive fraud. The deception lies in the gap between rhetoric and reality – between claims of worker empowerment and the systematic weakening of every provision that protected workers. The fraud lies in presenting employer enrichment as worker welfare, precarity as flexibility, and disempowerment as modernization.

When the Communist Party of India (Marxist) argues that the codes “dismantle 29 hard-won labour laws” and “shift the balance sharply in favour of employers”, while the government claims they “empower workers”, these are not merely different political perspectives. They are incompatible descriptions of reality. The evidence – provision by provision, comparison by comparison – validates the unions’ assessment.

India’s workers deserved genuine reform: enforcement of existing protections, expansion of coverage to the unorganized sector, democratisation of workplace governance, and meaningful penalties for employer violations. Instead, they received codes that legalise their exploitation, formalise their precarity and celebrate their subordination as liberation.

This is not reform. This is betrayal. And workers burning copies of the codes in the streets understand this better than all the government’s triumphalist rhetoric can obscure.

Writer and civil rights activist Anand Teltumbde is a former CEO, Petronet India Limited and a professor at IIT Kharagpur and the Goa Institute of Management. He is the author most recently of The Cell and the Soul: A Prison Memoir.