Academic Session (2022-2023)

DHARMASHASTRA NATIONAL LAW UNIVERSITY

Jabalpur (M.P.) 482001

Economics -III

“Critical Appraisal of the 4 Labour Codes “

Submitted by: Submitted to:

Aryan Sonwani Dr. Isha Wadhwa

5th semester

BALLB/25/21 Economics-II

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 Acknowledgement
I have taken efforts in this project. However it would not have been possible
without the kind support and help of many individuals and organization. I
would like to thank our Vice Chancellor, Prof. (Dr.) V. Nagaraj Sir for
awarding us this great opportunity to conduct a research on a topic that has
laid by the foundation for a highly enriching experience. I would like to extend
my sincere thanks to all of them.

I am very much thankful to Dr. Isha Wadhwa Mam for their guidance and
Constant supervision for providing necessary information regarding the
project and also for their support in completing the project.

I would like to thanks and appreciate my family and my colleague for their
kind co-operation and encouragement in developing the project which help
me in completion of this project and people who have willingly helped me out
with their abilities.

Thanking You

Aryan Sonwani

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 Abstract
The four labour codes — the Code on Wages, Industrial Relations Code, Social
Security Code and the Occupational Safety, Health and Working Conditions
Code — are set to replace 29 labour laws. Over 90% of India’s 50 crore
workers are in the unorganised sector. And through these codes the
government wants to ensure that all of them enjoy the benefits of labour laws
related to minimum wages and social security.

The four new labour codes – Code on Social Security 2020, Occupational
Safety, Health and Working Conditions Code 2020, Industrial Relations Code
2020, and Code on Wages 2019 – will subsume the existing 29 central labour
and industrial laws and aim to avoid multiplicity of laws. Why does the
government want to enact the codes? – The government wants to facilitate
ease of compliance and achieve equity for all. The new codes will ensure
better use of technology for various compliances and effective enforcement.
The new labour codes also raise concerns whether they shall apply only to
blue collar employees or would they apply to all employees in general? It is
clearly mentioned in the new labour codes that the codes will apply to all
employees of an organization irrespective of their role/level/nature of
duties/salary (with minimal exceptions).

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 Table of Contents
 CHAPTER 01
 Introduction

 What are the four labor codes in India?

 Key Proposals

 CHAPTER 02

 New definition of wages

 Impact of new definition of wages

 New norms to be highlighted

 CHAPTER 03

 The Basic Hurdle

 The Codes in Detail

 Benefits of New Codes

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 CHAPTER 04

 Major Criticism

 Labour Reforms Background

 Code on Wages, 2019

 Wages Code Concerns

 Industrial Relations Code, 2020

 Industrial Relations Code Concerns

 Code on Social Security, 2020

 Code on Occupational Safety, Health and Working Conditions,

2020

 CHAPTER 05

 Conclusion

 References

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 CHAPTER 01

Introduction
Labor law is also known as employment law is the body of laws,
administrative rulings, and precedents which address the legal rights of, and
restrictions on, working people and their organizations. As such, it mediates
many aspects of the relationship between trade unions, employers, and
employees. In other words, Labor law defines the rights and obligations of
workers, union members, and employers in the workplace. Generally, labor
laws cover aspects of industrial relations including certification of unions,
labor-management relations, collective bargaining and unfair labor practices,
workplace health and safety, employment standards, including general
holidays, annual leave, working hours, unfair dismissals, minimum wage,
layoff procedures, and severance pay.
Labor laws are broadly divided into two categories, one which discusses the
relationship between employer, employee, and union and the other one which
mainly focuses on individual labor law rights, employees’ rights at work, and
through the contract of work.  The labor movement has been instrumental in
the instituting of laws securing work rights in the nineteenth and twentieth
century. Work rights have been fundamental to the social and financial
advancement since the industrial revolution.

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What are the four labor codes in India?
As mentioned earlier, labor comes under the concurrent list in the
Constitution of India which gives equal power to legislate labor laws in India.
According to the survey released by the central government, there are about
100 state laws and 40 central laws controlling various aspects of labor like
industrial disputes, wages, health and working conditions, social security, etc.
The second national commission on labor suggested that the existing labor
laws are complex with outdated provisions and inconsistent definitions. In
order to ensure uniformity of labor laws the National commission on labor
recommended the consolidation of the existing 29 central labor laws into four
broad categories such as:

 Industrial relations
 Wages
 Social security
 Safety and welfare and working conditions

In 2019, the Ministry of Labor and Employment introduced four Bills on labor
codes to consolidate 29 central laws.  These Codes regulate: (i) Wages, (ii)
Industrial Relations, (iii) Social Security, and (iv) Occupational Safety, Health,
and Working Conditions.  While the Code on Wages, 2019 has been passed by
Parliament, Bills on the other three areas were referred to the Standing
Committee on Labor.  The Standing Committee submitted its reports on all
three Bills. The government has replaced these Bills with new ones in
September 2020.
The main finding of the National Commission on labor was that there are too
many central and state legislation relating to labor and these have made labor
laws in India too complicated and are mutually inconsistent with a lot of
outdated provisions and varying definitions. The Commission underlined the
need to disentangle and merge labor laws for straightforwardness, and
consistency in definitions and approach. Since different work laws apply to
various classes of representatives and across different edges, their
solidification would likewise take into account more prominent inclusion of
work. Following the proposals of NCL, the four Codes on wages, industrial
relations, social security, and occupational safety were presented in
Parliament.

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Key Proposals
In the Industrial Relations Code Bill, 2020, the government has proposed to
present more conditions limiting the privileges of the laborer’s to strike, close
by an expansion in the edge identifying with cutbacks and conservation in
industrial establishments having 300 workers from 100 workers or more as
of now — steps that are probably going to give greater adaptability to
employers to recruiting and terminating laborers without government
authorization.
The Industrial Relations Code has raised the limit for the prerequisite of a
standing order — rules of lead for laborers utilized in mechanical foundations
— to more than 300 specialists. This suggests modern foundations with up to
300 specialists won’t be needed to outfit a standing order, a move which
workers express would empower organizations to present discretionary
assistance conditions for laborers. In any case, in the event that we break
down this proposition in the bill, we could state that expanding the limit from
100 to 300 was superfluous since that will give a huge measure of adaptability
to the business as far as employing and terminating. The Industrial Relations
Code likewise presents new conditions for doing a legitimate strike. The time-
frame for arbitration procedures has been remembered for the conditions for
laborers before going on a legitimate strike as against just the ideal
opportunity for conciliation as of now.
Another code has provided for the expansion of social security and the
inclusion of inter-state migrants in the definition of workers. The Social
Security Code proposes a National Social Security Board which will prescribe
to the focal government for detailing appropriate plans for various segments
of unorganized laborers, gig laborers, and platform laborers. Additionally,
aggregators utilizing gig laborers should contribute 1-2 percent of their yearly
turnover for social security, with the complete contribution not surpassing 5
percent of the sum payable by the aggregator to gig and stage laborers.
The Occupational Safety, Health and Working Conditions Code has
characterized inter-state workers as the worker who has gone ahead of his
own from one state and got work in another state, acquiring up to Rs 18,000
per month. The proposed definition makes a qualification from the current
meaning of just contractual employment. The Code, notwithstanding, has
dropped the prior arrangement for impermanent convenience for laborers
close the worksites. It has however proposed a journey recompense — a

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singular amount measure of admission to be paid by the employer for to and
return excursion of the laborer to his/her local spot from the spot of his/her
work.
The Code on Social Security introduces definitions for ‘gig worker’ and
‘platform worker’.  Gig workers refer to workers outside the “traditional
employer-employee relationship”.  Platform workers are those who are
outside the “traditional employer-employee relationship” and access
organizations or individuals through an online platform and provide services. 
The Code also defines unorganized workers which include self-employed
persons.  The Code creates provisions for different schemes for all these
categories of workers (and defines the role that aggregators may be expected
to play in some of these schemes).  However, there may be some overlap
between these three definitions which may result in a lack of clarity on the
applicability of social security schemes to these different categories of
workers.

 CHAPTER 02

New definition of wages

One of the major changes that has taken place is the change in the definition
of wages. The government has made attempt to bring simplicity in the new
common definition of wages across all the four codes. The new definition of
wages covers all salary components expressed in terms of money or capable
of being so expressed. The new definition also has specific exclusions such as
statutory bonus, house rent allowance, conveyance allowance, commission
etc. However, these exclusions are limited to 50 percent of the total
remuneration (except gratuity and retrenchment compensation). With this
change in the definition of wages and its common applicability, there will be
an impact on the employees' benefits and employers' cost.

Impact of new definition of wages

The new definition of wages will specifically impact gratuity cost. For all the
current and future employees, gratuity will now be payable under the new
definition of wages. The other major change is regarding the period

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considered for eligibility to gratuity. For fixed term employees, the earlier
criteria of minimum five years of service has now been reduced to one year.

This means that now fixed term employees will be eligible for gratuity just
after one year of serving an organization. However, the same does not apply
for permanent employees who are not employed for fixed period. Permanent
employees will continue to be eligible for gratuity after five years of service.

It can further be noted that any worker under the labour codes can now
demand leave encashment at the end of each calendar year. Such leave
encashment is calculated on 'wages' defined under the Labour Codes.

New norms to be highlighted

It can be seen that the look and feel of the codes may appear more as an act of
consolidation rather than reform. However, the codes introduce several
changes that employers in almost all industry sectors, location and size will
need to closely understand and implement the new codes.

 Employer-centric approach under labour code

Single registration and licensing provision

o
o Legality of engaging contract workers in core activities in certain
cases
o Increasing threshold for applicability of certain laws for factories
and engaging contract workers
o Increasing worker threshold for applicability of standing orders
and government approval for retrenchment (termination) of
workers
o Allowing maintenance of registers in electronic form
o Providing limitation period for provident fund non-compliances.
o Transferring labour courts into industrial tribunals and
introducing inspector-cumfacilitator concept.
o It is expected that it will have long-term positive impact on the
industry and should contribute towards ease of doing business.
 Employee-centric approach under labour code

o Revised definition of wages leading to higher minimum wages,

statutory bonus, provident fund, retrenchment compensation and
gratuity.

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 o Reduction in daily working hour limit in certain cases.
o Grant of general permission for engaging women with employee
consent between 7pm-6am.
o Need for consent to work overtime.
o Provision for leave encashment on annual basis.
o Mandatory provision of same employee benefits and pro-rata
gratuity payments to fixed term employees.
o Payment of wages by the end of next day in case of employee
resignation.

The government seems to have made a conscious effort towards balancing the
rights of employees vis-à -vis those of employers.

 CHAPTER 03

The Basic Hurdle

Since labour is a concurrent subject, both the Centre and states have to frame
the rules. Although the Centre notified the codes in September 2020, no state
has notified the requisite rules under these codes. Just 12 states have
published the draft rules so far. So once all the states are on-board, the codes
will be implemented.

The Codes in Detail:

The Code on Wages, notified in August 2019, subsumes the provisions of four
laws — Payment of Wages Act, the Minimum Wages Act, the Payment of
Bonus Act, 1965 and the Equal Remuneration Act. It applies to all
establishments and to all employees in both organised and unorganised
sectors.

This code envisages uniform applicability of the provisions of timely payment

of wages and minimum wages to all employees. It introduces the concept of a
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floor wage, which is to be determined by the Centre after taking into account
the minimum living standards of workers which may be different for different
geographical areas.

The state government can, under no circumstance, fix a minimum wage rate
which is lower than the floor rate determined by the Centre. The code also
prohibits discrimination between wages payable to a male and a female for
the same work done.

The Code on Social Security subsumes nine laws and empowers the Centre to
notify various social security schemes like the EPF, EPS and ESI for the benefit
of workers in all sectors. It also empowers the Centre to frame any other
schemes for the self-employed, unorganised workers, gig workers and
platform workers and the members of their families.

Firms employing more than 20 workers have to mandatorily report vacancies

online under this code. The Code has provision for the creation of a social
security fund for workers in the unorganized sector. According to some
reports, employees may be able to enjoy a four-day workweek provided the
total working hours in the entire week is not less than 48 hours.

The Code on Industrial Relations amalgamates three existing laws and

expands the definition of worker to include persons employed in a skilled or
unskilled, manual, technical, operational and clerical capacity. Besides,
persons employed in a supervisory capacity and earning less than Rs. 18,000
per month have been brought under the definition.

The code introduces a new provision for fixed term employment, giving
employers flexibility to engage a worker on the basis of a written contract.
Fixed term employees will get the same benefits as the permanent employees.

Benefits of New Codes:

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The new industrial relation code would also improve ease of doing business
by allowing firms with up to 300 workers to go ahead for lay-offs,
retrenchment and closure without government permission. At present all
firms with up to 100 employees are exempted from government permission
for lay-off, retrenchment and closure.

The Occupational Safety, Health and Working Conditions (OSH) Code

amalgamates 13 existing labour laws and applies to factories having at least
20 workers if the manufacturing process is being carried on with the aid of
power and 40 if the manufacturing process is being done without power.

Employers are required to ensure that the workplace is free from hazards
which cause injury or occupational disease to the employees, provide free
annual health examination or test, free of costs to certain classes of
employees.

A provision has been made for employers to provide travelling allowance

annually to an inter-state migrant worker for undertaking a to-and-fro
journey to his native place. Further, providing appointment letters to the
workers has been made mandatory.

 CHAPTER 04

Major Criticism
Some provisions of these codes have also invited criticism, including the one
which allows firms with up to 300 workers to go ahead with retrenchment
and closure without the government permission.

Labour Reforms Background

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In India, labour is a subject in the Concurrent List. 

 Since it is in the Concurrent List, both the Parliament and the state
legislatures can enact laws on it.
 As per the Central Government, before the new labour codes were
passed, there were more than 40 central laws and more than 100 state
laws on labour and related matters.
 The Second National Commission on Labour (2002) recommended that
the central labour laws should be integrated into groups like:

Industrial relations


 Wages

 Social security

 Safety

 Welfare and working conditions

This was recommended by the Commission because the existing labour

laws were archaic, complex and had inconsistent definitions. The
Commission suggested simplification of the labour codes for the sake of
transparency and uniformity.
In 2019, the Central Government introduced four bills on labour codes to
consolidate 29 central laws. These are:

1. Code on Wages
2. Industrial Relations Code
3. Social Security Code
4. Occupational Safety, Health and Working Conditions Code

While the Wages Code was passed in 2019, the other three bills were referred
to a Standing Committee on Labour. As per the recommendations of the
Committee, the government replaced these bills with new ones in September
2020, and these were passed in the same month.
The Rules for all the four labour code bills would be notified in one go
according to the Labour Ministry. Hence, even though the draft Rules for the
Wages Code had been circulated in 2019 itself, the Ministry withheld its
finalisation and implementation.

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Code on Wages, 2019
The Code on Wages Bill was passed by the Parliament in 2019.

 The Wages Code seeks to regulate wage and bonus payments in all
employments where any industry, business, trade or manufacture is
carried out.
 This code replaces the following laws:

Minimum Wages Act, 1948



 Payment of Wages Act, 1936

 Payment of Bonus Act, 1965

 Equal Remuneration Act, 1976

Coverage of the Code on Wages:

 The code will apply to all employees.

 The Central Government will take decisions on wages for

employments in mines, railways, oil fields, etc.
 For all other types, the state governments will make the decisions.

Wages include salary, allowance or any other monetary component. It does

not include bonuses and travelling allowances.
Floor wage
 As per the code, the Central Government will fix the floor wages
considering the workers’ living standards.
 The floor wage may vary depending on the geographical location.

The minimum wages decided by the central or state governments should

be above the floor wages. In case the existing minimum wages are
higher than the floor wages, the central or state governments cannot
reduce the minimum wages.
While fixing the minimum wages, the government should take into account
the difficulty level of the work, and the workers’ skill levels also.
Also, the minimum wage fixed will be reviewed by the government at least
every five years.
Employers cannot employ people on less than the minimum wage.
The number of working hours will be fixed by the central or state
governments. In the case of overtime work, the worker is entitled to

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 overtime compensation which should be at least twice the normal
wages.
The employer can fix the wage period as either daily, weekly, fortnightly, or
monthly.
The employer can deduct wages for the following. However, the deductions
should not exceed 50% of the worker’s wages.
 Fines

 Absence from duty

 Accommodation given by the employer

 Advances given to the employee

All employees whose wages do not exceed a specific monthly amount will
be entitled to an annual bonus.
The Code prohibits gender discrimination in wages and recruitment of
people for the same work or work of similar nature.
 Work of a similar nature is defined as work for which the skill,
effort, experience, and responsibility required are the same. 
Advisory boards
 Advisory boards will be set up by the central and state
governments. These boards will consist of an equal number of
employees and employers, state government representatives and
independent persons. 
 One-third of the boards will be women members.

 These boards will advise the governments on minimum wage

fixing and increasing the employment opportunities for women.
The Code specifies penalties for offences committed by an employer.
 Contravention of any provision of the Code

 Paying less than the minimum wage

 The maximum punishment is three-month imprisonment along

with a fine of Rs. 1 lakh

Wages Code Concerns

There have been concerns expressed about the new Wages Code. Some of
them are discussed below:

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 1. There is no clarity on the formula for fixing the minimum wage and also
on the particular authority designated for setting the minimum wages.
2. The fixing of minimum wages on the basis on geography, skill and
difficulty levels of the work, etc. might bring in a lot of discretionary
power to the hands of the administrators since many of these factors are
not easy to measure. This might lead to adverse effects like lobbying.
3. The clause for the deduction of wages seems arbitrary and it might
prevent workers from unionising in fear of a deduction in wages.
4. The Code omits the principal employer’s liability to pay wages if the
labour contractor had failed to do so. The principal employer is defined
broadly in the Code making it difficult to pinpoint responsibility for
payment of wages. This is a major issue since, in India, a majority of the
workers are contract labourers.
5. The Code also takes away the jurisdiction of courts in providing justice
to workers who have faced violations with respect to their wages. This
means that workers can no longer access courts to contest the wages
paid to them by their employers, but can only approach the quasi-
judicial body and appellate authority set up under the provisions of the
Wage Code.

To know more about the Labour Sector in India visit the linked article

Industrial Relations Code, 2020

Some of the provisions of the Industrial Relations Code, 2020 are mentioned
below.

 The Industrial Employment (Standing Orders) Act, 1946 had made it

mandatory for employers of industrial establishments with 100 or more
workers to define the conditions of employment and rules of conduct
for workmen, by way of standing orders/services rules and to inform
the workers of the same clearly.

 However, under the new Code, the minimum number of workers

employed for an establishment to have standing orders has been
raised to 300.
 With the increased threshold, it becomes more flexible and easier
to hire and fire thus leading to increased employment according
to the government.

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 Prior permission of the government is mandated before closure,

lay-off, or retrenchment of employees in establishments having
more than 300 workers.
The Code also introduces new conditions for conducting a legal strike.
 Employees are prohibited from going on strike without giving a
60-day notice.
 Employees are also prohibited from going on strike during the
pendency of proceedings before a Tribunal or a National
Industrial Tribunal.
 They should also not go on strike before 60 days are completed
after the tribunal’s proceedings.
The new Code also proposes the setting up of a re-skilling fund for training
retrenched workers with contribution from the employer, of an amount
equal to 15 days last drawn by the worker.

Industrial Relations Code Concerns

Some of the concerns expressed by people about the new Code are discussed
below.

1. It can dilute the rights of workers working in industrial establishments

with under 300 workers.
2. In such smaller establishments, employers have been given complete
flexibility in terms of hiring and firing the services of workers.
3. The condition for legal strikes has been made more stringent in that the
time frame for the notice to be given by workers to go on legal strikes
has been increased, making it almost impossible to call a strike legally.
4. The reskilling fund seems to be arbitrarily framed and there is no clarity
on where the whole funds would come from.

To know How a Bill is Passed in India, visit the linked article.

Code on Social Security, 2020

Some of the key provisions of the Social Security Code, 2020 are discussed
below.

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  The definition of employees has been widened to include inter-state
migrant workers, construction workers, film industry workers and
platform workers.
 The gratuity period for working journalists has been reduced from 5
years to 3 years.
 The Code talks about setting up social security funds for unorganized
workers, platform workers, and gig workers.
 There is a provision for the central government to decrease or defer the
employer’s or employee’s contribution towards the PF or ESI for up to 3
months in the event of a pandemic, national disaster or an epidemic.
 The Code proposes the establishment of a National Social Security
Board for recommending to the central government the formulation of
schemes for the various sections of unorganised, gig and platform
workers.

Code on Occupational Safety, Health and Working Conditions,

2020
The major provisions of the Occupational Safety, Health and Working
Conditions Code are mentioned below.

 The Code expands the definition of a factory as a premise where at least

20 workers work for a process with power and 40 workers for a process
without power.
 The Code removes the manpower limit on hazardous working
conditions and makes the application of the Code obligatory for
contractors recruiting 50 or more workers (earlier it was 20).
 The Code fixes the daily work hour limit to a maximum of eight hours.
 The Code empowers women to be employed in all kinds of
establishments and at night (between 7 PM and 6 AM) subject to their
consent and safety.
 To encourage formalisation in employment, the employer is required to
issue an appointment letter.
 The Code defines an inter-state migrant worker as someone who has
come on his/her own from one state and received employment in
another state and earns up to Rs.18000 per month.

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  Portability benefits for inter-state migrant workers: They can avail
benefits in the destination state as regards ration and benefits of
building and other construction worker cess.
 However, the Code has dropped the earlier provision for temporary
accommodation for workers near worksites. 
 The Code also proposes a Journey Allowance – this is a lump sum fare
amount to be paid by the employer for the journey of the worker from
his/her native state to the place of employment.

 CHAPTER 05

Conclusion

When we analyze the four labor codes that have been passed we could see
that the new labor code gives industries flexibility in hiring and firing
employees. This will expand the social security net for formal and informal
sectors and would make industrial strikes for workers more difficult. Also,
according to the new labor code companies can shut down plants without
prior approval employing 300 or below 300 workers. This is because the new
labor code increased the threshold from 100 to 300. Earlier it requires
companies to give 30 to 90 days of prior notice before firing the workers and
shutting down the plant. Also trade unions are supposed to give 60 days prior
notice before going on a strike. Strikes without prior notice are outlawed with
the new labor codes. The maximum daily limit for work has been set to 8
hours and women can be employed in all establishments of work. A universal
social security has been guaranteed for organized as well as informal workers.
Government can from time to time recommend welfare schemes for the
upliftment of laborers if it feels necessary. The main challenge ahead for this
labor code is how far will it be able to achieve its main objective of unification
of labor laws in India and bringing about a standard labor law throughout the
country.

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References

[1] (n.d.). National Crime Investigation Bureau’s.

https://ncib.in/pdf/ncib_pdf/Labour%20Act.pdf
[2] List of major labour laws in India: A brief introduction. (2020, May 8).
Jagranjosh.com. https://www.jagranjosh.com/general-knowledge/list-of-
major-labour-laws-in-india-1588921260-1
[3] List of Central Labour Laws under Ministry of Labour and Employment,
Ministry of Labour and Employment.
[4] Report of the National Commission on Labour, Ministry of Labour and
Employment, 2002,
http://www.prsindia.org/uploads/media/1237548159/NLCII-report.pdf.  
[5]  ”Report No. 4: Occupational Safety, Health and Working Conditions Code,
2019”, Standing Committee on Labour, Lok Sabha, February 11, 2020; Report
No. 8: “Industrial Relations Code, 2019”, Standing Committee on Labour, Lok
Sabha, April 23, 2020; Report No. 9: “Code on Social Security, 2019”, Standing
Committee on Labour, Lok Sabha, July 31, 2020
[6] Overview of labour law reforms. (2020, September 22). PRS India.
https://www.prsindia.org/billtrack/overview-labour-law-reforms#_edn3
[7] Magazine, A. (2020, September 27). Explained: In the three New Labour
codes, what changes for workers & hirers? The Indian Express.
https://indianexpress.com/article/explained/govts-new-versions-of-labour-
codes-key-proposals-and-concerns-6603354/
[8] Overview of labour law reforms. (2020, September 22). PRS India.
https://www.prsindia.org/billtrack/overview-labour-law-reforms#_edn3

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