Model Standing Orders under Labour Codes: Accepting the changed dynamics

First published on Mondaq – June 2021

Introduction

With the consolidation of several labour legislations into codes, the Industrial Employment (Standing Orders) Act, 1946 got subsumed into the Industrial Relations Code, 2020 (“IR Code”) with two other legislations. IR Code, under Section 29, confers powers on the Central Government to make Model Standing Orders (“MSO”) relating to conditions of service and other incidental matters. MSO shall be applicable to all industrial establishments employing 300 or more workers and who are covered under the Occupational Safety, Health and Working Conditions Code, 2020 (“OSHWC Code”). Establishment, as per the OSHWC Code, includes a place where any industry, trade, business, manufacturing, or occupation is carried on and where 10 or more workers are employed[1].

It has also been specified that if the employer adopts the MSO, then such MSO shall be deemed to be certified[2]. This is a simpler route for certification of the Standing Order which the employer can opt for. Presumably, the longer route of certification of the Standing Order can be avoided by adopting MSO.

With the intention to pave the way for industry harmony and to formalise service-related matters, on 31st December, 2020 the Ministry of Labour and Employment published the draft MSO for manufacturing sector, service sector and mining sector (“Draft MSO”) inviting objections and suggestions on the same[3]. Draft MSO for service sector has been introduced for the very first time covering specific requirements of this sector. Consequently, the concept of “work from home” has seen the light of the day and may soon be formalised.   

The three Draft MSOs maintain certain level of uniformity pertaining to several common aspects and at the same time the sector-specific flexibility is also apparent[4]. In this day and age of digitisation, the Draft MSO encourages usage of electronic mode to notify or communicate the workers in relation to holidays, pay days, wage rates, notice of wage period, work timings, notice of change in shift working, etc.

Highlights of the Draft MSO

Following are the highlights under Draft MSO and deviation of the provisions from the current position in law:

Payment of subsistence allowance:

Under the current MSO, subsistence allowance, in the event of pending investigation for misconduct of a worker, is subject to the worker not taking any employment elsewhere during such suspension. However, under Draft MSO the amount of subsistence allowance payable to a worker (who has been suspended by the employer pending investigation or enquiry into complaints or charges of misconduct against him) shall be at the rate of 50% of wages which the worker is entitled to immediately preceding the date of suspension, for the first 90 days of suspension. If there is any delay in completing the investigation, the subsistence allowance shall be at the rate of 75% of the wages for the remaining period of suspension. This provision brings clarity with respect to subsistence allowance and will prevent exploitation of the worker by the employer.

The Draft MSO classifies workers in the following six categories for the purpose of standing orders:

Types of Workers under MSO

Probationary period for permanent workers has been increased from 3 months to 6 months and thus it encompasses a worker who has been engaged on a permanent basis in an industrial establishment and has satisfactorily completed a probationary period of six months.

Moreover, in case of a probationary worker, he must be employed to fill a permanent vacancy and must not have completed six months of service. This probationary period can be extended to another three months. However, under the existing law, the probationary period is of three months.

Fixed term employees are eligible for gratuity if they render services as per the contract for 12 months, which is not the position in the current law. This increase in probationary period seems to be favourable for the establishment and the employer.

“Habitual” defined:

The term “habitual” has been defined in relation to indiscipline and misconduct. When a worker is found guilty of any misconduct three or more times in preceding 12 months, he shall be considered as habitual. This definition provides a set timeline for determining misconduct in the event of any disciplinary action a worker.

Service Sector

The aforesaid changes and highlights are common to the Draft MSO for all three sectors. However, keeping the requirements of service sector in mind, two additional provisions are inculcated in its Draft MSO.

Work From Home:

As mentioned, Draft MSO for service sector has been issued for the first time in order to cater to the specific needs of this sector. One of the most needed insertion is recognition of “work from home” (“WFH”). Draft MSO states that subject to conditions of appointment or agreement between employer and workers, employer may allow a worker to work from home for such period or periods as may be determined by the employer. This arrangement seems to be included as a result of the pandemic which has forced most part of this sector to work remotely. The recognition of WFH thus becomes a necessary element for this sector. It is pertinent to note that this provision of WFH has been extended only to the service sector.

The provision of WFH under this Draft MSO has been kept open ended. It empowers the employers to formulate conditions and period for WFH. This autonomy is given to the employer maybe because this arrangement of work is relatively new, and it may not be possible to formulate general rules for the entire sector. However, leaving the arrangement to employee entirely may also result in exploitation of the human resource.

IT Sector:

Another sector specific item is pertaining to IT sector. Working hours for IT sector will be as per the agreement or conditions of appointment between the employer and workers. Keeping in mind the recent development in the IT sector, involvement in unauthorized access of any IT system, computer network of the employer, client or customer has now been recognized as misconduct which shall attract disciplinary action.

These two specific insertions for service sectors seems to be a step for protection of IT sector and also recognition of several practices (like WFH) which has now become the new normal.

Other common highlights

  • For the purpose of publication of working timings, holidays, pay days, wage rates, notice of change in shift working usage of electronic mode has been introduced. Service records can also be maintained electronically. For payment of wages, crediting the payment in bank account of the worker can be done through digital or electronic modes. Subsequent intimation of such payment can now be made using social media communication such as WhatsApp apart from SMS or email.
  • Currently, there is only a liability on the employer for proper observance of the Standing Order. However, under Draft MSO, the workers are also bound to observe such Standing Orders faithfully. This brings into to light that an establishment cannot be run just by the employer. Equal support is required from the workers.  
  • The tickets provided under the existing laws will be replaced with proper non-transferable identity badges or cards which shall be issued by the employer.
  • In Draft MSO, with prior permission of the employer, the worker can take up additional job or assignment. Such permission may be with or without conditions depending on the discretion of the employer. This can be viewed as a departure from exclusive service provisions under the current MSO and seems like a move in favour of the employee. However, the discretionary powers of the employer are vague and there is no mechanism to ensure that such permissions are not unreasonably withheld.
  • Presently, only under the MSO applicable to coal mines, the complaint against any wrongdoing of the employer is to be submitted with 7 days of such cause. However, under the Draft MSO, no such time limit for submission of complaint against the employer has been prescribed, making it more open ended and to an extent ambiguous.
  • The MSO in the current regime seeks observance of the guidelines given by the Supreme Court in Vishaka v. State of Rajasthan[5]. However, with the promulgation of Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (“POSH Act”), Draft MSO seeks the compliance of the provisions of POSH Act and report to the appropriate Government on such compliance.
  • Under Draft MSO, when a worker has contracted any disease which is contagious or infectious, he will have to notify the employer. Such a worker shall remain away of work until permitted to return on work by the manager concerned and during such period, the worker shall be treated on leave to the extent of days he has leave with wages to his credit. Further, if the worker deliberately suppresses such information from the manager /employer, then it shall be considered as misconduct. This seems to be a very relevant addition in present time of pandemic.
  • Draft MSO for mines will extend the railway travel facilities to every worker who has completed a continuous service for 12 months during which he worked for 240 days or more.
  • Transfer policy of an industrial establishment must be known to the workers and should be available on the online HR portal of the establishment.
  • Secrecy should be maintained for any and all property, be it in physical form or electronic form. This is an important addition considering various property of the establishment are now available in electronic form and the same should be protected.

Conclusion

It is known that these Draft MSOs are still in their nascent stage, but the fact that the changed dynamics in the labour field is being considered comes as a big relief. The recognition of work from home seems to be the first step towards regularisation of the same. There are certain reasonable obligations on the workers too thereby indicating that running any establishment cannot be the sole responsibility of the employer. Increasing the applicability of Standing Orders from 100 to 300 workers can raise concerns among the workers[6]. The move pertaining to increasing the period of probation seems to be an employer friendly move. While the employer can continue to employ a worker on probation for 6 months, the employees will have to wait a little longer to get confirmed as a permanent worker.  

The Minister of Labour and Employment believes that “these Model Standing Orders will pave the way for the industry harmony in the country as it aims to formalize the service-related matters in an amicable manner[7]. How far will this first attempt of providing different MSOs for service sectors be accepted by the industry, only time will tell.

– Archana Balasubramanian (Partner); Avantika Singh (Associate Trainee)


[1] Section 2(1)(v) of the Occupational Safety, Health and Working Conditions Code, 2020. Available at https://labour.gov.in/sites/default/files/OSH_Gazette.pdf

[2] Section 30(3) of the Industrial Relations Code, 2020. Available at http://egazette.nic.in/WriteReadData/2020/222118.pdf

[3] “Govt to frame sector-specific model employment contracts for industries”. Available at https://www.business-standard.com/article/economy-policy/govt-to-frame-sector-specific-model-employment-contracts-for-industries-120110100388_1.html

[4] Press release by Ministry of Labour and Employment, dated 2 January 2021. Available at https://pib.gov.in/PressReleasePage.aspx?PRID=1685527

[5] (1997) 6 SCC 241

[6] Model Standing Orders for Service Sector. Available at  https://www.mondaq.com/india/employee-rights-labour-relations/1031442/model-standing-orders-for-services-sector

[7] Press release by Ministry of Labour and Employment, dated 2 January 2021. Available at https://pib.gov.in/PressReleasePage.aspx?PRID=1685527

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