Industrial Relations Code, 2020 – Do's & Don'ts for Employers: A Complete Compliance Guide

The Industrial Relations Code, 2020 is one of the four Labour Codes introduced by the Government of India to modernize and simplify industrial relations laws. It consolidates three major labour legislations into a single framework governing trade unions, employment conditions, industrial disputes, lay-offs, retrenchment, closures, and collective bargaining.

For employers, compliance with the Industrial Relations Code, 2020 is essential for maintaining harmonious employer-employee relationships, reducing legal disputes, and ensuring smooth business operations. Failure to comply may result in penalties, litigation, industrial unrest, and reputational risks.

This guide outlines the key Do's and Don'ts under the Industrial Relations Code, 2020 that every employer should follow to remain legally compliant and foster a productive workplace.

What is the Industrial Relations Code, 2020?

The Industrial Relations Code, 2020 consolidates the following three labour laws into a single framework:

• Industrial Disputes Act, 1947
• Trade Unions Act, 1926
• Industrial Employment (Standing Orders) Act, 1946

The Code establishes a unified legal framework governing employer-employee relations, recognition of trade unions, grievance redressal, disciplinary procedures, standing orders, and industrial dispute resolution. Its primary objective is to balance workers' rights with business efficiency while promoting industrial peace.

Objectives of the Industrial Relations Code, 2020

Promote Harmonious Industrial Relations
Encourage cooperation between employers, employees, and trade unions to maintain industrial peace.

Simplify Labour Law Compliance
Replace multiple legislations with one comprehensive Code to reduce compliance complexity.

Strengthen Collective Bargaining
Recognize negotiating unions and councils to facilitate structured dialogue between employers and workers.

Improve Dispute Resolution
Promote conciliation, arbitration, and tribunal mechanisms for timely settlement of industrial disputes.

Enhance Transparency
Introduce standardized procedures for employment conditions, disciplinary actions, and industrial relations.

Do's under the Industrial Relations Code, 2020

1. Ensure Trade Union Compliance
Employers should respect the rights of registered trade unions and comply with statutory recognition requirements. Recognize the Negotiating Union if it enjoys support from 51% or more workers, constitute a Negotiating Council where no single union has majority support, cooperate with registered trade unions for collective bargaining, and allow lawful trade union activities in accordance with the Code. A collaborative approach strengthens employer-employee relations.

2. Establish a Grievance Redressal Committee (GRC)
Every establishment employing 20 or more workers must constitute a Grievance Redressal Committee. Ensure fair representation of employees, provide adequate representation for women workers, resolve grievances within the prescribed timelines, and maintain records of complaints and resolutions. An effective grievance mechanism helps prevent disputes from escalating.

3. Constitute a Works Committee
Where directed by the appropriate Government, establishments employing 100 or more workers should constitute a Works Committee to promote harmonious industrial relations, encourage cooperation between management and workers, and discuss workplace welfare and operational issues.

4. Prepare and Implement Standing Orders
Employers with 300 or more workers should prepare and certify Standing Orders. Draft Standing Orders covering employment conditions, display certified Standing Orders prominently, and follow the Model Standing Orders until certification is completed. Standing Orders provide clarity regarding service conditions and workplace discipline.

5. Conduct Fair Disciplinary Proceedings
Disciplinary action should always follow the principles of natural justice. Complete suspension-related inquiries preferably within 90 days, pay statutory subsistence allowance during suspension, provide employees an opportunity to be heard, and maintain proper inquiry records. Fair disciplinary procedures reduce legal challenges.

6. Notify Changes in Service Conditions
Before changing service conditions relating to wages, working hours, shift timings, leave policies, or job assignments, employers must provide 21 days' prior notice. Consult employees or trade unions where required.

7. Follow Proper Procedures for Retrenchment, Lay-off, and Closure
Before retrenching employees or closing an establishment, ensure notice requirements are fulfilled, compensation is paid, required approvals are obtained wherever applicable, and proper documentation is maintained. Compliance minimizes legal disputes.

8. Promote Industrial Dispute Resolution
Employers should encourage amicable settlement of disputes through conciliation, voluntary arbitration, and Industrial Tribunals. Implement settlements and awards promptly.

9. Maintain Accurate Documentation
Maintain comprehensive records relating to employment, disciplinary proceedings, notices, settlements, agreements, and industrial disputes. Accurate documentation supports compliance during inspections and legal proceedings.

10. Follow Fair Labour Practices
Treat workers fairly, respect statutory rights, ensure equal opportunity, and follow lawful employment practices. A fair workplace strengthens employee trust and organizational reputation.

Don'ts under the Industrial Relations Code, 2020

1. Don't Interfere with Trade Unions
Avoid preventing employees from forming trade unions, interfering with union activities, refusing recognition where legal conditions are satisfied, or discriminating against union members. Freedom of association is protected under the Code.

2. Don't Ignore Employee Grievances
Failure to address grievances promptly can lead to industrial disputes and reduced employee morale. Employers should establish a transparent grievance handling process.

3. Don't Violate Standing Orders
Employers should not operate contrary to certified Standing Orders, introduce arbitrary service rules, or ignore statutory procedures. Standing Orders are legally binding once certified.

4. Don't Take Disciplinary Action Without Due Process
Avoid dismissing employees without inquiry, indefinite suspension, withholding statutory subsistence allowance, or ignoring principles of natural justice. Improper disciplinary action may result in legal challenges.

5. Don't Alter Service Conditions Without Notice
Employers should not change wages, shift schedules, working hours, leave rules, or other employment conditions without providing the mandatory 21-day notice under the Code.

6. Don't Ignore Retrenchment and Closure Procedures
Do not retrench workers without notice, fail to pay statutory compensation, or close establishments without complying with legal requirements. Proper compliance protects employers from litigation.

7. Don't Engage in Unfair Labour Practices
Avoid victimizing employees, discriminating against workers involved in legitimate industrial disputes, or ignoring settlements or tribunal awards. Unfair labour practices can lead to severe legal consequences.

8. Don't Maintain Incomplete Records
Failure to maintain employment and disciplinary records may result in penalties during inspections. Ensure all statutory records remain updated and accurate.

9. Don't Take Retaliatory Action During Conciliation
During conciliation proceedings, employers should not change service conditions connected with the dispute, take retaliatory action against concerned workers, or influence dispute resolution unfairly. Respecting legal procedures helps maintain industrial peace.

10. Don't Violate Statutory Rights
Avoid violating provisions relating to collective bargaining, worker representation, industrial dispute resolution, trade union recognition, and statutory employment rights. Compliance strengthens long-term employer-employee relationships.

Employer Compliance Checklist

Employers should regularly verify that they:

• Recognize eligible trade unions
• Constitute a Grievance Redressal Committee where applicable
• Prepare and display Standing Orders
• Conduct disciplinary proceedings fairly
• Provide statutory notices before changing service conditions
• Follow legal procedures for retrenchment and closure
• Maintain accurate employment records
• Cooperate with Conciliation Officers and Industrial Tribunals
• Implement settlements and awards promptly
• Promote lawful and fair labour practices

Regular compliance reviews reduce legal exposure and operational disruptions.

Why Compliance with the Industrial Relations Code, 2020 Matters

A robust compliance framework offers several advantages:

• Reduced industrial disputes
• Improved employee engagement
• Better workplace harmony
• Enhanced legal compliance
• Stronger organizational reputation
• Lower litigation risks
• Greater operational stability

Organizations that prioritize industrial relations compliance are better positioned for sustainable growth.

Conclusion

The Industrial Relations Code, 2020 is a major reform that streamlines India's industrial relations framework by integrating laws relating to trade unions, standing orders, and industrial disputes into a single legislation. It encourages transparency, structured collective bargaining, and fair employment practices while simplifying employer compliance.

For employers, adhering to the Code is more than a statutory obligation — it is a strategic approach to building trust, preventing workplace disputes, and maintaining a productive work environment. By recognizing trade unions, establishing grievance mechanisms, following fair disciplinary procedures, maintaining proper records, and complying with retrenchment and closure provisions, organizations can significantly reduce legal risks and foster long-term industrial harmony.

At Pragnaa, we help organizations navigate labour law compliance with confidence. From industrial relations audits and policy development to documentation, standing orders, and dispute resolution support, our experts ensure your business remains compliant, audit-ready, and future-ready.

Need expert assistance with the Industrial Relations Code, 2020? Contact Pragnaa today for comprehensive labour law compliance solutions tailored to your organization's needs.