Industrial Relations Code, 2020 is the second of India's four Labour Codes, consolidating and replacing three existing statutes: the Industrial Disputes Act, 1947; the Trade Unions Act, 1926; and the Industrial Employment (Standing Orders) Act, 1946. Under Indian law, the Code was passed by Parliament in September 2020 and received Presidential assent, but as of March 2026, it has not been notified for implementation — the three existing Acts continue to govern industrial relations.
Legal definition
The Industrial Relations Code, 2020 restructures the framework for employer-worker relations:
Section 2(p): "Industrial dispute" means any dispute or difference between employers and employers, or between employers and workers, or between workers and workers, which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person.
Key structural changes from existing law:
| Feature | Industrial Disputes Act, 1947 | Industrial Relations Code, 2020 |
|---|---|---|
| Prior permission for retrenchment/closure | Establishments with 100+ workers | Establishments with 300+ workers (Section 77) |
| Fixed-term employment | No statutory framework | Recognised — Section 2(o); same benefits as permanent workers |
| Trade union recognition | No statutory procedure | Statutory recognition for negotiating unions — Section 14 |
| Strike/lock-out notice | 14 days in public utilities only | 14 days for all industrial establishments — Section 62 |
| Re-skilling fund | No provision | Worker Re-Skilling Fund — Section 83 |
| Grievance redressal | No statutory committee | Grievance Redressal Committee mandatory for 20+ workers — Section 4 |
| Standing orders | Industrial Employment (Standing Orders) Act | Integrated into the Code — Chapter III |
Section 77 — Prior permission for lay-off, retrenchment, and closure:
Every employer of an industrial establishment in which three hundred or more workers are employed shall not lay off, retrench, or close down the establishment without obtaining prior permission of the appropriate Government.
This is the most debated provision — raising the threshold from 100 to 300 workers. Establishments with fewer than 300 workers can retrench workers or close without government permission, subject only to notice and compensation requirements.
Fixed-term employment (Section 2(o)): A worker employed for a fixed period — entitled to the same wages, allowances, and benefits as permanent workers doing similar work, including proportionate gratuity if the fixed term is less than 5 years.
How courts have interpreted this term
Excel Wear v. Union of India [(1979) 1 SCC 450]
The Supreme Court, interpreting the Industrial Disputes Act (predecessor to the Code), held that the requirement of government permission for closure under Section 25-O was constitutionally valid as a reasonable restriction on the right to carry on business under Article 19(1)(g). The Court held that while no employer can be compelled to run a business at a loss, the procedure of seeking permission protects workers' livelihoods and allows orderly transition. This principle informs the Code's retention of the prior permission requirement, albeit at a higher threshold.
Workmen of Meenakshi Mills v. Meenakshi Mills [(1992) 3 SCC 336]
The Supreme Court held that retrenchment must follow the "last in, first out" principle — the workman who was last hired in a particular category must be the first to be retrenched, unless the employer demonstrates reasons for departing from this principle. This rule is preserved in Section 70(1)(b) of the Industrial Relations Code.
T.K. Rangarajan v. State of Tamil Nadu [(2003) 6 SCC 581]
The Supreme Court held that government employees do not have a fundamental right to strike, and that even in the private sector, strikes must comply with statutory notice requirements and must not be undertaken during the pendency of conciliation or adjudication proceedings. The Industrial Relations Code extends the 14-day strike notice requirement to all industrial establishments, not just public utilities as under the Industrial Disputes Act.
Why this matters
The Industrial Relations Code represents the most significant reform of India's industrial relations framework in over seven decades. The increase of the prior permission threshold from 100 to 300 workers is the most impactful change — it means that approximately 70-80% of Indian manufacturing establishments (those employing between 100 and 300 workers) would no longer need government permission to retrench workers or close down, significantly enhancing labour market flexibility.
For employers, the statutory recognition of fixed-term employment addresses a major gap. Under the Industrial Disputes Act, there was no explicit provision for fixed-term employment, leading to disputes about whether fixed-term workers could claim permanency. The Code resolves this by recognising fixed-term employment while ensuring equal treatment — fixed-term workers get the same wages and benefits as permanent workers.
For trade unions, the Code introduces statutory recognition of negotiating unions — a union with 51% or more membership of workers in an establishment becomes the sole negotiating union, while establishments with multiple unions where none has 51% must form a negotiating council. This replaces the current fragmented approach where multiple unions claim representational rights without a clear legal framework.
Practitioners must note: as of March 2026, the Industrial Relations Code has not come into force. The Industrial Disputes Act, 1947, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946 continue to apply. The delay in implementation is attributed to the states not finalising their rules and the politically sensitive nature of raising the retrenchment threshold.
Related terms
Subsumed concepts:
Sibling codes:
Frequently asked questions
Is the Industrial Relations Code in force?
No. As of March 2026, the Industrial Relations Code, 2020 has not been notified for implementation by the Central Government. The three existing Acts it consolidates — Industrial Disputes Act, 1947; Trade Unions Act, 1926; and Industrial Employment (Standing Orders) Act, 1946 — continue to apply. Several states have published draft rules, but full implementation awaits central notification.
What changes for establishments with 100-300 workers?
Under the current Industrial Disputes Act, establishments with 100 or more workers must obtain government permission before retrenchment or closure. Under the Code, this threshold rises to 300 workers. Establishments with 100-300 workers would only need to provide 1-3 months' notice and pay retrenchment compensation (15 days' wages per year of service), without requiring government permission.
What is fixed-term employment under the Code?
Fixed-term employment is a statutory category under Section 2(o) — a worker engaged for a specific period that is fixed in advance. The key protection is that fixed-term workers are entitled to the same wages, hours of work, allowances, and other benefits as permanent workers performing similar work. They also receive proportionate gratuity if the fixed term is less than the 5-year gratuity eligibility period.
This entry is part of the Veritect Indian Legal Glossary, a comprehensive reference of Indian legal terminology grounded in statutory text and judicial interpretation.
Last updated: 2026-03-27. Veritect provides this content for informational purposes and does not constitute legal advice.