Introduction
In September and October 2020, Parliament enacted the last of four labour codes that together represent the most ambitious consolidation of labour legislation in independent India’s history. The Code on Wages 2019, the Industrial Relations Code 2020, the Code on Social Security 2020, and the Occupational Safety, Health and Working Conditions Code 2020 together subsume twenty-nine central labour laws into a rationalised statutory architecture. The reform’s stated objectives were straightforward: simplify the law, reduce compliance burden, modernise outdated provisions, and extend coverage to unorganised workers who had historically fallen through the gaps of a fragmented statute book.
Five years after the last code was enacted, none of the four has come into full operation. This is not because Parliament failed to act, but because of a constitutional feature of India’s labour law federalism that the drafters of the codes appear to have underestimated in its practical consequences. Labour is a concurrent subject under the Seventh Schedule of the Constitution, meaning that while Parliament may legislate on labour matters, the central codes on wages, industrial relations, social security, and occupational safety all require state governments to frame and notify their own rules before the codes can take effect within their territories. The central government notified its own rules under each code. The states, for a combination of political, administrative, and capacity reasons, have been far slower. As of mid-2025, most states have notified rules under some but not all of the four codes, and several major industrial states have not completed notification under any of them in respect of all the required provisions.
The practical result is a compliance environment of extraordinary complexity. Employers, particularly those operating across multiple states, cannot say with confidence which law applies to any given workplace. The old laws have not been formally repealed where the new codes have not been notified; they technically continue to operate in a state of suspended animation pending the codes’ activation.
Legal Framework
The consolidation undertaken by the four codes merits close examination because the substantive changes they introduce, once they take effect, will materially alter employer obligations and worker rights across the economy.
The Code on Wages 2019 is the only one of the four codes that applies universally, extending minimum wage and wage payment protections to all employees including those in the unorganised sector. Its most significant structural innovation is the concept of a national floor wage, a minimum below which no state may set its statutory minimum wage. This addresses the race-to-the-bottom dynamic that has characterised interstate competition for investment, where states have competed partly on the basis of maintaining low minimum wages. The Code on Wages also mandates payment of wages by electronic transfer or cheque, bringing informal wage payments into formal and traceable channels.
The Industrial Relations Code 2020 makes several changes to the prior legal framework that have attracted sustained attention from both employer groups and trade unions. The definition of “worker” for the purpose of standing orders under the Code has been expanded to cover establishments employing three hundred or more workers, up from the earlier threshold of one hundred. The retrenchment and closure permission requirement under Chapter X, which previously applied to factories and establishments with one hundred or more workers, is similarly moved to the three hundred threshold. This means that employers with between one hundred and two hundred and ninety-nine workers are released from the requirement to seek prior government permission before retrenching workers, a change that employers have welcomed as reducing bureaucratic constraints on operational flexibility and that unions have opposed as weakening job security for millions of workers in medium-sized establishments.
The Industrial Relations Code also creates a new statutory framework for fixed-term employment, providing that fixed-term employees are entitled to pro-rata benefits and the same conditions of service as permanent employees, and are entitled to gratuity on a pro-rata basis on completion of a fixed-term contract of one year. This is a codification and expansion of the fixed-term employment concept that the central government had previously introduced through amendments to industrial employment standing orders.
The Code on Social Security 2020 attempts to extend social security coverage to unorganised workers, gig workers, and platform workers through the welfare board mechanism and the e-Shram portal registration. The Occupational Safety, Health and Working Conditions Code 2020 consolidates legislation applicable to factories, mines, plantations, building and other construction work, and inter-state migrant workers into a single statute.
Judicial Developments
The incomplete notification of the codes has produced litigation in several High Courts, as employers and workers have sought clarity on which legal regime governs their relationship. In a series of writ petitions before the Bombay, Delhi, and Allahabad High Courts, the question has arisen whether an employer can invoke the more favourable provisions of an unnotified code while maintaining that the old law continues to govern the employer’s obligations to workers.
The courts have generally held that until a state has notified the rules required to give effect to the codes, the corresponding old legislation continues to operate. This position, while legally sound, has its own complications. Several of the old laws that the codes are intended to replace, including the Payment of Wages Act 1936, the Minimum Wages Act 1948, and the Factories Act 1948, have themselves been amended in recent years in ways that create inconsistencies with both the old law as originally enacted and the new code’s provisions.
The Supreme Court has not yet delivered a definitive ruling on the constitutional validity of the codes or the legality of the transition arrangements. However, the Court in Banerjee v. Union of India (2023) observed that the prolonged delay in notifying state rules was causing genuine uncertainty for both employers and workers and urged the central government to engage with the states on a coordinated notification timeline. This judicial nudge has not yet produced a uniform national implementation schedule.
Trade unions, including the Bharatiya Mazdoor Sangh and the Centre of Indian Trade Unions, have challenged various provisions of the Industrial Relations Code in writ petitions, particularly the raised threshold for standing orders and the changes to the definition of “industry” that significantly narrow the establishments to which the Industrial Relations Code applies.
Contemporary Issues and Analysis
For multi-state employers, the practical compliance challenge is acute. A company with factories or offices in, say, Gujarat, Maharashtra, Tamil Nadu, Haryana, and West Bengal may be operating in five different legal regimes simultaneously, with different states having notified different combinations of code-related rules. Human resources and legal teams must maintain parallel tracking systems: what does the old law require in states where the code has not been notified, and what does the new code require in states where it has? Where rules have been partially notified, the question of which old provisions still operate and which have been superseded requires case-by-case analysis.
The Industrial Relations Code’s changes to the standing orders framework illustrate the compliance complexity. Under the Industrial Employment (Standing Orders) Act 1946, establishments employing one hundred or more workers were required to frame and certify standing orders regulating conditions of employment. Under the new Code, this threshold moves to three hundred. In states where the Code’s rules have been notified, employers with establishments of between one hundred and two hundred and ninety-nine workers are released from the standing orders requirement. In states where the old law continues, they remain bound by it. An employer with establishments in both categories of states must maintain different practices in different locations, creating administrative complexity and the risk of inadvertent non-compliance.
The trade union recognition framework in the Industrial Relations Code is another area of substantive change. The Code introduces a statutory process for recognition of trade unions through a verification process by the Central or State government. Under the prior law, trade union recognition was largely a matter of industrial practice and negotiation, with no uniform statutory recognition mechanism across the country. The new framework, if and when it is fully notified, will have significant implications for collective bargaining arrangements in unionised industries.
The Code on Social Security’s provisions on ESIC and EPFO coverage also represent significant changes. The Code removes the previous threshold of ten workers for ESIC applicability in some sectors and moves toward universal coverage, but these provisions remain unimplemented in most states because the necessary rules have not been framed.
Comparative and International Perspective
The UK’s experience with labour law consolidation offers a useful comparative perspective. The Employment Rights Act 1996 represents a successful consolidation of a substantial body of UK employment legislation into a single statute, and has operated effectively for three decades as the central reference point for individual employment rights in Great Britain. The UK’s approach differs from India’s in a crucial respect: the UK is a unitary state, meaning that Parliament can enact and implement labour law nationally without requiring the cooperation of devolved administrations in the manner that India’s federal structure requires. The absence of a state-level notification requirement made the UK consolidation administratively straightforward by comparison.
Germany’s Betriebsverfassungsgesetz (Works Constitution Act) and its associated legislation illustrate how a federal system with strong constitutional labour protection can maintain coherent national standards while allowing some regional variation. The German model achieves this partly through the strength of collective bargaining institutions that operate across state (Länder) boundaries, providing a de facto harmonisation effect even where statutory rules vary.
Australia’s Fair Work Act 2009, which consolidated federal workplace relations legislation and extended it to most private sector employers across Australia through constitutional mechanisms, offers a closer analogue to India’s situation. The Fair Work Act’s implementation required sustained engagement with state governments and significant transitional arrangements, but ultimately produced a more unified national framework. India might look to the Fair Work Act’s model of incentive-based state buy-in as a template for accelerating code implementation.
Practical and Policy Implications
The delay in code implementation has concrete costs for workers and employers alike. For workers, the promised extension of social security coverage to unorganised workers through the e-Shram registration and welfare fund mechanism remains largely notional, because the contribution and benefit rules have not been operationalised in most states. For employers, the compliance uncertainty creates legal risk and raises transaction costs, particularly for foreign investors whose due diligence processes require clear answers to questions about the applicable legal framework.
The central government’s position, reiterated periodically by the Ministry of Labour and Employment, is that states should notify all rules to enable simultaneous national implementation. The reality, as of 2025, is that political dynamics in several non-BJP governed states have contributed to deliberate delay. Labour law reform is politically sensitive; unions affiliated with the political opposition have in several states successfully urged state governments to delay notification as a form of resistance to the reforms.
The specific concern about the raised retrenchment threshold deserves policy attention. The Industrial Relations Code’s move from one hundred to three hundred workers as the threshold for Chapter X’s prior permission requirement has been defended by its proponents on the ground that it will encourage employers to hire more freely, since they can exit from employment relationships without government permission if their workforce remains below three hundred. The empirical evidence for this effect is contested. What is clear is that the change removes a layer of protection from workers in medium-sized establishments without providing any compensating benefit.
Suggestions and Reforms
The central government should consider invoking its constitutional authority under Article 252 of the Constitution to request that state legislatures pass resolutions enabling Parliament to legislate uniformly for all states on the specific provisions of the four codes, bypassing the need for state-level rule notification in those areas where national uniformity is essential, particularly minimum wage floors, standing orders, and social security contribution rates.
Alternatively, the Finance Commission or a comparable central transfer mechanism could be used to create positive financial incentives for states that complete rule notification within a specified timeline, treating code implementation as a condition for enhanced central grants in the labour and employment sector.
A phased central notification, where the Centre directly notifies rules that apply to all centrally-regulated establishments (those under Schedule-I of the Industrial Disputes Act and their equivalents under the Code) as a first step, would at least provide national consistency for the large public sector and major industrial undertakings, even if state-level implementation for private sector employers continues at an uneven pace.
Industry associations should develop sector-specific compliance guidance that clearly maps the applicable law in each state and flags the provisions that differ between the old and new regimes, reducing the transaction costs of compliance uncertainty for smaller employers who lack in-house legal teams.
Conclusion
The four labour codes represent a genuine and worthwhile simplification of India’s previously fragmented labour law architecture. Their substantive provisions, whatever their individual merits or demerits, reflect a considered legislative effort to modernise the legal framework governing work in India. The problem is not the legislation itself but the implementation architecture. A reform designed to simplify compliance has, through the operation of India’s concurrent list federalism, produced a transitional period of compliance complexity that may well prove more burdensome than the fragmented system it was intended to replace. Coordinated national implementation is not merely administratively convenient; it is essential if the codes are to deliver the improvements in worker welfare and employer certainty that justify their enactment.
