India’s new Labour Codes: recognition of trade unions

Vikram Shroff

AZB & Partners, Mumbai

vikram.shroff@azbpartners.com

Ananya Gandhi

AZB & Partners, Mumbai

ananya.gandhi@azbpartners.com

The Indian government has implemented four new Labour Codes, which came into effect on 21 November 2025. The new Codes apply to all employers in India, regardless of size, sector or location. Of particular relevance in respect of trade union provisions is the Industrial Relations Code, 2020 (IR Code) which is incorporated in the Trade Unions Act, 1926.

Trade unions: a fundamental right

Article 19(1)(c) of the Constitution of India, 1950 envisages the fundamental right to ‘freedom of speech and expression’ and guarantees the right ‘to form associations or unions’. Consequently, all employees have a right to form unions.

Registration of trade union

According to the IR Code, a trade union may be registered with an employer where at least ten per cent of workers or 100 workers (whichever is lower) are members, and are employed by the employer.[1] Any seven or more of the union members may apply for registration. Registered unions must continue to maintain at least ten per cent or 100 workers, whichever is lower, as members, subject to a minimum of seven.

Recognition of trade unions

For the first time in India, the concept of recognition of a trade union has been included in central law. Previously, only some Indian states, such as Maharashtra (Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971) and Kerala (Kerala Recognition of Trade Unions Act, 2010), provided such recognition.

Recognising a trade union means that the employer accepts a particular trade union as having a representative character and, therefore, will be willing to engage in discussions with the union with respect to the interests of the workers. This was a long-standing demand of the trade unions, as they believe that recognition of the union is necessary to ensure collective bargaining and stability of industrial relations. The absence of trade union recognition provisions under the previous central law required employers to negotiate with multiple unions. This often resulted in divided benefits and practical difficulties in day-to-day operations, apart from delays in collective bargaining processes.

The IR Code states that once a trade union is recognised by the employer, such recognition would remain valid for three years from the date of recognition or constitution, or such further period up to five years in total, as may be mutually decided by the employer and the trade union(s). The draft central rules to the IR Code provide for the following: (1) recognising a single union as sole negotiating union where its membership is not less than 30 per cent of total workers in the establishment (when only one registered union operates); and (2) union membership shall be verified by an independent ‘verification officer’, with secret ballot as the default method, and the employer shall bear costs – electronic voting can be deployed by agreement.

Negotiating union/council

In line with the IR Code, every establishment with a registered trade union shall have a negotiating union or council to engage in negotiations with the employer on certain prescribed matters:

• If only one union is registered, it automatically becomes the negotiating union.
• If multiple unions are registered, the union with 51 per cent or more of the workers shall be treated as the negotiating union.
• If no union meets that threshold, the employer must constitute a negotiating council comprising representatives of unions which have the support of at least 20 per cent of the total workforce. Such representation shall be of one representative for each block of 20 per cent.
• Recognition and constitution of a negotiating council/negotiating union is valid for three years, extendable by mutual decision up to five years in total.

If the central government considers it is necessary for a trade union or federation of trade unions to be recognised as a central trade union, it may recognise the trade union as such, in such manner as may be prescribed.

Matters relating to negotiation

The central rules to the IR Code, which are still in a draft form, contain certain provisions for negotiation between the negotiating union or negotiating council and the employer. These are as follows:

1. classification of grades and categories of workers;
2. order passed by an employer under the standing orders applicable in the industrial establishment;
3. workers’ wages including their wage period, dearness allowance, bonus, increment, customary concession or privileges, compensatory and other allowances;
4. workers’ hours of work, their rest days, number of working days in a week, rest intervals, working of shifts;
5. leave with wages and holidays;
6. promotion and transfer policy and disciplinary procedures;
7. quarter allotment policy for workers;
8. health, safety and working conditions related standards;
9. such other matter pertaining to conditions of service, terms of employment which are not covered in the foregoing clauses; and
10. any other matter which is agreed between employer of the industrial establishment and negotiating union or negotiating council.

Conclusion

Over the last couple of decades, India’s economy has witnessed a largely amicable relationship between employers and trade unions. While there have been one-off incidents, the general mindset remains growth-oriented while promoting workers’ interests. The proposed reforms in trade union law suggest the government’s intent towards empowering the unions, some of which have a large membership. It remains to be seen whether this development will encourage more employees to become unionised, especially in India’s technology and outsourcing sectors.