Background & Objective

Pursuant to the Report of the Second National Commission on Labour on the 'Occupational Safety, Health and Working Conditions of the Workers', the Ministry of Labour and Employment ("Ministry") has introduced the 'Occupational Safety, Health and Working Conditions Code, 2019' ("Code") in the Lok Sabha on July 23, 2019.

The Code simplifies, subsumes and transforms 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, (iii) The Building and Other Construction Workers (Regulation of Employment and Conditions of Service) Act, 1996, and (iv) The Cine Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981, etc. (collectively, "Current Laws").

Below are the key highlights of the Code: –

1. Increase in Scope:

  • The Code is applicable to:
    1. all establishments where any industry, trade, business, manufacture or occupation is carried on in which ten or more workers are employed; or
    2. a factory, motor transport undertaking, newspaper establishment, audio-video production, building and other construction work or plantation in which ten or more workers are employed; or
    3. a mine or dock work (collectively "Establishments").
  • Therefore, services sector, manufacturing and any other business or trading activity will all be regulated under one common Code.

2. Common & Mandatory Registration | Notice of closure:

  • The Code provides for a common registration for an Establishment instead of separate registrations under the Current Laws.
  • An employer is not permitted to engage employees if its Establishment is unregistered, or its registration has been cancelled.
  • An employer can apply for a common license for operating a factory and for engaging contract labour.
  • Employer should notify the registering officers of closure of their Establishment and certify payment of dues to all employed workers.

3. Authorities | Advisory Boards:

  • In addition to registering officers with whom the Establishments need to register, the Code also provides for appointment of Inspector-cum-Facilitators ("Inspectors"), Medical Officers, safety committee etc., for effective enforcement of the Code. In addition to the powers relating to inspection, search, inquiry, seizure etc., Inspectors are also empowered to supply information and sensitize employers and workers on provisions of the Code.
  • The Code has empowered the Inspectors to conduct web-based inspections. They will be authorized to impose search and seizure warrants upon employers.
  • The Code has also allowed the Central and the State Government to constitute the National and State Occupational Safety and Health Advisory Boards at their respective levels, for, inter alia, advising the relevant Government on matters related to health and safety.

4. Duties of Employers/Employees:

  • The Code has imposed certain responsibilities on employers, for instance, providing a safe and healthy working environment free from hazards, compliance with health and safety standards to be prescribed, provision of free annual health examinations, disposal of e-waste, compulsory reporting of accidents and diseases, etc.
  • Employees are also required under the Code to cooperate with their employers in meeting the provisions of the Code and to report any unhealthy or unsafe working situation to the employer.
  • Certain additional requirements have been prescribed by the Code specifically for persons engaged in manufacturing, import or supply or installation of articles used in Establishments. No untested articles are permitted to be deployed in Establishments, whether imported or manufactured in India. Providers can rely on importing country standards, if available, prior to providing articles for use and deployment in Establishments.
  • The Code makes it mandatory for all employees to be given appointment letters.

5. Welfare Facilities to be provided by employers:

  • Additionally, the Code requires employers to provide facilities such as ventilation, temperature, humidification, potable drinking water, adequate lighting, creche, washing facilities, bathing places and locker rooms, shelter rooms, separate facilities for latrines and urinals for men, women and transgender employees, medical facilities including first-aid and ambulance, sitting arrangements, canteens, treatment of wastes, as per the rules prescribed by the Government.
  • Employers are also required to comply with the requirements pertaining to working hours, annual leave, night shifts, etc., as applicable, which were earlier captured only under certain specific Current Laws.

6. Special Provisions for Factories:

  • Government can declare any place wherein manufacturing process is being carried out as a factory, and for any persons working at such premises to be classified as workers.
  • The Code allows maintenance of registers, and the filing of returns under the Code, in an electronic form.
  • As opposed to the earlier threshold of 30 women workers prescribed under the Factories Act, a creche facility is now required to be provided by all Establishments (including factories) where more than 50 workers are ordinarily employed.

7. Special Provisions for Women Employees:

  • The Code enables consenting women to work beyond 7 PM and before 6 AM subject to the employer's compliance with the conditions relating to safety, holidays and working hours to be prescribed by the Government.
  • Government can prohibit employment of women in some operations that are dangerous for their health and safety.

8. Special Provisions for Contract Labour:

  • The Code has introduced the concept of 'work specific license' for contractors, if they do not meet the criteria to be prescribed by the Government for grant of license for supply of contract labour or for execution of work through contract labour. This work specific license will serve the needs of project – specific contract labour deployment.
  • Contractors will be required to submit work order information to the Government, prior to supplying contract labour or executing contract labour arrangements with principal employers.
  • The contractor or principal employer has to submit an experience certificate to each contract labour on an annual basis, specifying details of work done.
  • If a principal employer engages any contract labour through an unlicensed contractor, then such contract labour shall be deemed employees of the principal employer.
  • The Government is entitled to notify certain operations for which contract labour cannot be deployed, and some factors that could influence this determination include whether or not it would be sufficient to employ considerable number of whole-time workers, or whether similar work is done by regular workers of the Establishment, etc.

9. Penalties | Remedies:

  • To act as a deterrent against non-compliance the Code, more stringent penal provisions have been introduced. For instance, monetary penalty of up to INR 20 lacs is applicable if an employer breaches any provisions of the Code, which is not otherwise subject to a specific penalty.
  • Specific penalties for varied offences have been given under the Code. For example, if a person fails to comply with the Code and such failure results in an accident causing death or serious bodily injury to a person, the offender is punishable with imprisonment up to 2 years, along with monetary fine.
  • In case of any accident or serious bodily injury, courts have been empowered to grant a portion of fine (not less than 50%) to the victim or his/her legal heirs.
  • Further, other offences such as an attempt to willfully prevent an Inspector from discharging his duties under the Code or failure to produce documents or failure to comply with any requisition or order issued, can be punishable with imprisonment which may extend to 3 months, fine of INR 1 lac, or both. Similarly, a failure to prepare registers or to submit them, is punishable with fine up to INR 1 lac for the first offence and up to INR 2 lacs for the second offence. The Code also has provisions making a Company liable for offences committed by it, along with its officers who were in-charge of and were responsible for the conduct of its business.
  • Exemption from liability is available for persons in-charge if they are able to prove that due diligence was exercised by them, or that the offence was committed without their knowledge, consent or connivance.
  • Compounding option is available to employers for offences that are punishable only with fine, for a sum of up to 50% of the maximum fine so prescribed.

10. Concluding Remarks:

  • Besides factories and other specific Establishments discussed in the Code, the Code has incremental compliance requirements for commercial establishments (having 10 or more employees) which are presently governed under local shops and establishment legislations, as the Code does not replace such laws. Therefore, entities operating commercial establishments other than factories will particularly need to take cognizance of the health and occupational safety related requirements specified in the Code.
  • The Code specifically reserves authority of the Central and State Government to frame rules on areas within their respective domain, as given under the Code. Therefore, while some of the aforesaid incremental compliances for commercial establishments have been outlined above, others will be introduced through rules and health & safety standards to be notified separately by the Government.
  • Various service-oriented and trading companies are likely to be impacted by the mandatory registration and register-maintaining requirements of the Code, in addition to existing registration requirements under the local shops and establishment legislations. Other compliance requirements may be applicable depending on the nature of activities carried on by the Establishment, for instance, whether any hazardous or safety-sensitive activities are proposed to be carried out at the Establishment.
  • The Code allows consolidation of activities commonly carried out prior to and during the operation of factories, such as building, construction or expansion of factories, etc., which is expected to help manufacturing companies as they can obtain a common registration and comply with the safety and welfare requirements of the Code, as opposed to duplicity of provisions under the Current Laws.
  • More stringent obligations are imposed on principal employers for sourcing contract labour from unregistered contractors, hence, adequate due diligence checks should be implemented in such arrangements.
  • Companies are encouraged to ensure that appropriate due diligence measures are implemented in their manufacturing or service operations, as existence of such measures can help employers avail exemption from statutory liability.

Certain exemptions from the Code are available for public institutions engaged in purposes related to education, research and training.

Date: September 5, 2019

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.