Standing Orders Under Industrial Relations Code 2020: Applicability Threshold Raised to 300 Workers

Introduction

The introduction of the Industrial Relations Code, 2020, which came into effect on November 21, 2025, marks a watershed moment in Indian labour law reform through its significant increase in the standing orders applicability threshold from 100 workers to 300 workers. This modification represents a fundamental shift in how industrial establishments regulate employment conditions and reflects the government’s objective to reduce compliance burdens on smaller enterprises while maintaining worker protections for larger organizations.

Understanding Standing Orders in Indian Labour Law

Standing orders are formally defined rules that govern the terms and conditions of employment in industrial establishments. These rules cover various aspects of the employment relationship, including classification of workers, work hours, holidays, wages, disciplinary procedures, termination processes, and grievance redressal mechanisms. The concept was first introduced through the Industrial Employment (Standing Orders) Act, 1946, which mandated that employers in industrial establishments clearly define and communicate employment conditions to their workers[1].

The primary purpose of standing orders is to bring clarity and consistency to employment relationships. They serve to eliminate ambiguity regarding employment terms, reduce disputes between employers and workers, and establish a transparent framework for workplace governance. Once certified by the appropriate authority, standing orders become legally binding on both employers and workers, creating statutory terms of employment that govern the day-to-day affairs of the industrial establishment.

Legislative Framework Prior to the Industrial Relations Code

Under the Industrial Employment (Standing Orders) Act, 1946, the legislation applied to every industrial establishment employing 100 or more workers at any time during the preceding twelve months. However, this threshold varied across different states, with some jurisdictions like Delhi and Karnataka reducing it to 50 workers through state amendments[2]. The Act required employers to submit draft standing orders to a certifying officer within six months of the Act becoming applicable to their establishment. These draft orders had to cover all matters specified in the Schedule to the Act and conform substantially to any model standing orders prescribed by the appropriate government.

The certifying officer, typically a Labour Commissioner or Regional Labour Commissioner, would examine the draft standing orders after hearing both the employer and worker representatives. The officer had the authority to modify provisions to ensure fairness and reasonableness. Once certified, the standing orders would come into operation thirty days after authenticated copies were dispatched, unless an appeal was filed. The certified standing orders could only be modified with mutual agreement or after six months from their certification, following the same certification procedure.

The Industrial Relations Code, 2020: A Paradigm Shift

The Industrial Relations Code, 2020 consolidates three major labour legislations: the Trade Unions Act, 1926, the Industrial Employment (Standing Orders) Act, 1946, and the Industrial Disputes Act, 1947. Parliament passed this Code in September 2020, receiving presidential assent on September 28, 2020. After nearly five years of preparation and rule-making by states, the Central Government notified its commencement on November 21, 2025, bringing it into force nationwide[3].

Raising the Threshold to 300 Workers

The most consequential change regarding standing orders is the increase in the applicability threshold from 100 workers to 300 workers. This means that only industrial establishments employing 300 or more workers are now required to frame and certify standing orders. This modification reduces the number of establishments subject to this compliance requirement significantly, particularly benefiting small and medium enterprises that employ between 100 and 299 workers. The rationale behind this change is to ease the compliance burden on smaller industries while focusing regulatory oversight on larger establishments where formalized employment conditions are more critical due to the scale of operations.

The Industrial Relations Code, 2020 provides that employers of establishments with at least 300 workers must prepare standing orders covering matters such as classification of workers, methods of informing workers about work hours and wages, termination procedures, suspension for misconduct, and grievance redressal mechanisms. The Central Government is empowered to prescribe model standing orders, which serve as templates for employers in drafting their establishment-specific standing orders[4].

Consultation Requirements with Trade Unions

The Industrial Relations Code introduces an important procedural requirement that did not exist explicitly in the previous legislation. Employers must now consult with the trade union or negotiating council before submitting standing orders for certification. This consultation mechanism ensures that worker representatives have meaningful input in framing the conditions of employment, thereby promoting industrial democracy and reducing the likelihood of disputes arising from unilaterally imposed conditions.

Legal Nature and Binding Effect of Standing Orders

The legal nature of standing orders has been the subject of extensive judicial interpretation. Courts have consistently held that certified standing orders possess statutory force and create binding obligations on both employers and workers. This principle was firmly established in the landmark judgment of Bagalkot Cement Company Ltd. v. Pathan, where the Supreme Court held that certified standing orders have statutory force and constitute the statutory terms of employment between the industrial establishment and its employees[5].

The Supreme Court further elaborated on this principle in subsequent cases, clarifying that once standing orders are certified, they cannot be overridden by private agreements or contracts between employers and workers. In the case of Union of India v. K. Suri Babu, the Court reiterated that standing orders, being special laws, override general contractual provisions, and service conditions are regulated by standing orders insofar as disciplinary actions are concerned. This jurisprudence establishes that certified standing orders operate at a level higher than ordinary contracts, deriving their authority from the statutory framework rather than from consensual agreement alone.

Relationship with Other Employment Terms

An important question that has arisen in industrial jurisprudence concerns the relationship between certified standing orders and other terms of employment, whether contractual or statutory. The Supreme Court addressed this issue comprehensively in Western Indian Match Co. v. Workmen, where it held that the terms of employment specified in standing orders prevail over corresponding terms in the contract of service existing at the time of enforcement of the standing orders. This means that once standing orders are certified and come into operation, they supersede any conflicting provisions in individual employment contracts[6].

However, standing orders can be overridden by specific statutory provisions enacted after their certification. General rules and regulations must yield to certified standing orders unless a later statute explicitly provides otherwise. This hierarchy ensures that standing orders serve their intended purpose of providing stable, predictable employment conditions while remaining subject to legislative changes that reflect evolving policy priorities.

Certification Process and Regulatory Framework

The certification process under the Industrial Relations Code retains the essential features of the previous regime while introducing certain procedural enhancements. Within six months of the Code becoming applicable to an industrial establishment, employers must submit five copies of their proposed draft standing orders to the certifying officer. These drafts must comprehensively address all matters specified in the Schedule to the Code and should align substantially with model standing orders prescribed by the government.

Role of the Certifying Officer

The certifying officer plays a crucial gatekeeping role in ensuring that standing orders are fair, reasonable, and compliant with statutory requirements. Upon receiving the draft standing orders, the certifying officer must provide an opportunity for both the employer and worker representatives to be heard. The officer examines each provision to assess its fairness and reasonableness, considering factors such as prevailing industry practices, worker welfare, and operational requirements of the establishment. The certifying officer possesses the authority to modify or supplement the draft orders to ensure they meet statutory standards and protect worker interests while remaining practical for implementation.

Once the certifying officer certifies the standing orders, copies are communicated to the employer and relevant trade unions or worker representatives. The certified standing orders then become effective after the prescribed period, subject to any appeals filed by aggrieved parties. This process ensures that standing orders result from a tripartite consideration involving the employer, worker representatives, and the certifying authority, thereby promoting legitimacy and acceptance.

Modification of Certified Standing Orders

The Industrial Relations Code, 2020 maintains restrictions on modifying certified standing orders to ensure stability in employment conditions. Once certified, standing orders can only be modified through mutual agreement between employers and workers or their representatives. Additionally, no modifications can be made within six months of the standing orders coming into effect or their last modification. This cooling-off period prevents frequent changes that could destabilize employment relationships and create uncertainty for workers.

When modifications are proposed, they must follow the same certification procedure as the original standing orders, including submission to the certifying officer and providing opportunities for hearing all parties. This requirement ensures that modifications receive the same level of scrutiny and consensus-building as the original standing orders, maintaining the integrity of the employment regulation framework.

Implications of the Raised Threshold

The increase in the applicability threshold from 100 to 300 workers carries significant implications for various stakeholders in the industrial ecosystem. For employers, particularly those in the small and medium enterprise sector, this change represents substantial regulatory relief. Establishments employing between 100 and 299 workers are no longer required to undergo the time-consuming and resource-intensive process of drafting, consulting, and certifying standing orders. This allows them to adopt more flexible approaches to managing employment conditions while focusing resources on business growth rather than compliance procedures[7].

Impact on Worker Protections

From the perspective of worker welfare, the raised threshold presents a more complex picture. Workers in establishments employing fewer than 300 workers no longer have the benefit of statutorily certified standing orders that clearly define their employment conditions and provide recourse mechanisms. This could potentially lead to greater informality in employment relationships and reduce worker protections in smaller establishments. However, these workers remain covered by other labour laws, including provisions related to wages, social security, and working conditions under the respective codes. The absence of certified standing orders does not mean an absence of employment terms; rather, it shifts the basis of these terms from statutory certification to contractual agreements and general labour law protections.

For workers in larger establishments that continue to be covered by the standing orders requirement, the benefits remain substantial. They have clearly defined rights and obligations, transparent disciplinary procedures, and statutory backing for their employment conditions. The requirement for employer consultation with trade unions before submitting standing orders for certification strengthens worker participation in determining these conditions.

Administrative and Compliance Considerations

The raised threshold significantly reduces the administrative burden on labour departments and certifying authorities. With fewer establishments requiring certification, these authorities can focus their resources on ensuring thorough scrutiny of standing orders for larger establishments, where the impact on workers is more extensive due to the scale of employment. This could potentially lead to improved quality of certification and more effective enforcement of standing order provisions where they apply.

For establishments that previously had certified standing orders but now employ fewer than 300 workers due to business changes, an interesting legal question arises regarding the continued applicability of their existing certified standing orders. While the Industrial Relations Code does not explicitly address this transition, general principles of labour law suggest that existing certified standing orders would likely continue to govern employment relationships unless formally modified or terminated through appropriate procedures.

Exemptions and Special Provisions

The Industrial Relations Code grants the appropriate government power to exempt new establishments or classes of establishments from provisions of the Code, including standing order requirements, if it determines that adequate alternative provisions exist to fulfill the Code’s objectives. This flexibility allows governments to respond to sector-specific needs and promote particular industries while maintaining overall worker protection standards[8].

Sector-Specific Exemptions

Several states have utilized exemption powers to promote specific sectors, particularly information technology and IT-enabled services. For instance, Karnataka has repeatedly exempted IT and ITeS establishments, startups, animation, gaming, and knowledge-based industries from standing order requirements, most recently extending this exemption until June 9, 2029. These exemptions reflect recognition of the distinct nature of employment in technology sectors, where traditional industrial employment models may not align with the flexible, project-based work arrangements common in these industries. However, such exemptions remain subject to conditions requiring employers to maintain fair employment practices and provide equivalent protections through alternative mechanisms.

Penalties for Non-Compliance

The Industrial Relations Code, 2020 prescribes significant penalties for violations of standing order provisions to ensure compliance and protect worker interests. Employers who fail to submit draft standing orders within the prescribed timeframe or make unauthorized modifications to certified standing orders may face penalties. The Code establishes a structured penalty regime with fines ranging from fifty thousand rupees to two lakh rupees for various violations related to employment conditions, retrenchment procedures, and unfair labour practices. Repeat offenses can lead to imprisonment, demonstrating the government’s commitment to strict enforcement of labour regulations[9].

For contraventions of certified standing orders, the Code provides that no prosecution can be initiated without prior sanction from the appropriate government. This requirement serves dual purposes: it prevents frivolous or motivated prosecutions while ensuring that enforcement actions are undertaken with proper governmental oversight. The Code also introduces a compounding mechanism, allowing certain offenses to be settled through payment of compounding amounts, which provides a pathway for resolution without lengthy legal proceedings while still ensuring accountability.

Comparative Analysis with Previous Regime

Comparing the Industrial Relations Code, 2020 provisions on standing orders with the previous Industrial Employment (Standing Orders) Act, 1946, reveals both continuities and significant departures. The fundamental purpose of standing orders remains unchanged: to provide clear, enforceable employment conditions in industrial establishments. However, the tripling of the applicability threshold from 100 to 300 workers represents a philosophical shift toward lighter regulation of smaller enterprises.

The introduction of mandatory consultation with trade unions before submission of standing orders for certification marks an important procedural enhancement that was not explicitly required under the 1946 Act, though good industrial relations practice often included such consultations. This statutory requirement elevates worker participation from a desirable practice to a legal obligation, strengthening collective bargaining and industrial democracy.

The Industrial Relations Code also modernizes various aspects of the standing orders framework to align with contemporary employment realities. Model standing orders now explicitly accommodate work-from-home arrangements, recognizing the evolving nature of work and the increasing prevalence of remote and flexible work arrangements, particularly in service sectors. This adaptation ensures that the standing orders framework remains relevant to modern employment relationships rather than being confined to traditional industrial settings.

Future Outlook and Recommendations

The implementation of the Industrial Relations Code, 2020, with its raised threshold for standing orders applicability, represents a balancing act between reducing compliance burdens and maintaining worker protections. As this new regime takes effect, several areas merit continued attention from policymakers, employers, and worker representatives.

First, monitoring the impact on workers in establishments employing between 100 and 299 workers will be essential to ensure that the absence of certified standing orders does not lead to deterioration in employment conditions or increased industrial disputes. If negative trends emerge, targeted interventions such as model employment contracts or sector-specific guidelines may be necessary to fill the regulatory gap.

Second, the discretionary exemption power granted to governments requires careful exercise to ensure that exemptions serve legitimate policy objectives without undermining worker protections. Transparency in granting exemptions and regular review of their necessity and conditions will help maintain public confidence in the labour regulation system.

Third, capacity building for certifying officers and labour department personnel will be crucial to ensure effective implementation of the standing orders regime for covered establishments. With fewer establishments requiring certification, authorities have an opportunity to provide more thorough and meaningful scrutiny of standing orders, but this requires adequate training and resources.

Finally, employers and worker representatives should view the standing orders process not merely as a compliance obligation but as an opportunity for collaborative development of fair and effective employment governance systems. Standing orders that result from genuine consultation and reflect the interests of both parties are more likely to be respected and effectively implemented, contributing to industrial peace and organizational success.

References

[1] Chief Labour Commissioner. (n.d.). The Industrial Employment (Standing Orders) Act, 1946. Government of India. https://clc.gov.in/clc/acts-rules/industrial-employment-standing-orders-act-1946

[2] Labour Department, Government of NCT of Delhi. (n.d.). The Industrial Employment (Standing Order) Act 1946. https://labour.delhi.gov.in/labour/industrial-employment-standing-orderact-1946

[3] LiveLaw News Network. (2025, November 22). Centre Brings Four Labour Codes Into Operation With Effect From November 21. LiveLaw. https://www.livelaw.in/top-stories/centre-brings-four-labour-codes-into-operation-with-effect-from-november-21-310772

[4] PRS Legislative Research. (2020). The Industrial Relations Code, 2020. https://prsindia.org/billtrack/prs-products/prs-bill-summary-3571

[5] Bagalkot Cement Company Ltd. v. R.K. Pathan & Ors., AIR 1962 SC 474. Available at: https://indiankanoon.org/doc/1002896/

[6] Western Indian Match Co. v. Workmen, AIR 1964 SC 1458.

[7] AZB & Partners. (2025, November 25). Decoding the Labour Codes: What it means for India Inc. Lexology. https://www.lexology.com/library/detail.aspx?g=672b59ea-ae5c-4617-93ea-d73618eca398

[8] JSA. (2024, June). Karnataka Exempts IT/ITeS Establishments from Standing Orders Act. JSA Prism – Employment Law. https://www.jsalaw.com/wp-content/uploads/2024/06/JSA-Prism-Employment-June-2024-Standing-Orders.Final0137.pdf

[9] Neeti Niyaman. (2025, June 27). Industrial Relations Code, 2020 Explained. https://neetiniyaman.com/industrial-relations-code-2020/

Published and Authorized by Vishal Davda