Reconfiguration of Unions and Collective Bargaining: Implications of New Labour Codes

India’s new labour codes came into force on November 21, 2025. The Code on Industrial Relations, 2020 (“IR Code”) consolidates the following 3 laws ─ the Trade Unions Act, 1926 (“TU Act”); the Industrial Disputes Act, 1947; and the Industrial Employment (Standing Orders) Act, 1946 (collectively as “Erstwhile Laws”) into a unified framework.

For the first time, the IR Code has introduced statutory recognition of trade unions and a formal structured mechanism for collective bargaining. This article outlines the provisions under the IR Code on the employer’s obligations in recognising trade union and mechanisms of collective bargaining.

The purpose is to provide a practical guidance to the employers navigating this new landscape.

Under the Erstwhile Laws, the employers were not required to recognise trade unions under the TU Act. Recognition was largely discretionary and employers could choose whether and which union to engage with, unless the state-specific laws, for instance in Maharashtra and Gujarat, or the employer-union agreements provided otherwise. 

The absence of clear hierarchy or representative determination meant that the coexistence of multiple unions in a single establishment frequently created uncertainty about who the legitimate bargaining counterpart was. Varying state-level laws compounded this inconsistency in practice. The IR Code addresses these gaps by introducing membership-verified negotiating bodies and a structured engagement process. This provides employers with; (i) clear visibility on legitimate bargaining counterparts; and (ii) certainty in the collective bargaining process.

3.1 Mandatory Trade Union Recognition: The Three-Tier System

The Code replaces the employer discretion with a mandatory threshold- based recognition system. Employers must recognise worker representatives based on verified membership support through one of two bodies: 

1. Sole Negotiating Union: Where a single registered union which commands at least 51% of the workers support, or where only one registered union exists in an establishment that union is recognised as sole negotiating union. 

2. Negotiating Council: Where no sole negotiating union exists, the employer must constitute a negotiating council comprising representatives from each registered union with at least 20% of worker support, with any remaining representation as prescribed. Where the union does not have minimum 20% workers support that union will not be considered for any negotiations. 

Recognition of sole negotiating union or negotiating council is subject to membership verification. Once recognised, the sole negotiating union or negotiating council holds that status for 3 years, extendable by up to maximum period of 2 years by mutual agreement between the employer and the sole negotiating union or negotiating council as the case maybe.

3.2 Good Faith Collective Bargaining: A Statutory Obligation

For the first time, the IR Code imposes an explicit statutory duty on the employers to bargain in good faith with the sole negotiating unions or negotiating councils.  While the IR Code does not define what constitutes “good faith” in operational terms, the obligation may be understood to require:

• substantive engagement in negotiations on wages, allowances, working hours, leave, and other service conditions; 
• providing relevant information to sole negotiating unions or negotiating councils to enable informed bargaining; 
• furnishing prescribed facilities to sole negotiating unions or negotiating councils, including but not limited to the notice board displaying information on bargaining activities and appropriate venues for holding discussions; and 
• documenting negotiation sessions and maintaining those records, particularly until any disputes are fully resolved.

3.3 Institutional Mechanisms for Worker Voice: Bi-partite Committees

Beyond the framework of sole negotiating union and negotiating council, the IR Code mandates 2 additional key forums for workers:

1. Works Committee: For an establishment employing at least 100 workers the state government ‘may’ require them to constitute a works committee, comprising of the employer’s and workers’ representatives.

Constitution of a works committee is not mandatory, unless directed by the relevant state government. Its purpose is different from the sole negotiating union or the negotiating council. It functions as a joint consultation platform to address operational and welfare matters, and to maintain harmonious workplace relations with the intent to reduce the likelihood of formal disputes.

2. Grievance Redressal Committee: Every establishment employing at least 20 workers must constitute a grievance redressal committee (“GRC”) to address individual grievances on matters relating to terms of employment, or conditions of their services. The GRC must comprise of an equal number of representatives from the employer and workers, with total membership not exceeding 10. Further, the GRC must also have women representation in a proportion to their presence in the workforce. Each grievance should be decided on the majority view of the members, with at least 50% of the representatives of workers agreeing to such decisions. 

Unlike the works committee, the constitution of the GRC  is mandatory once the worker threshold is met.

3.4 Unfair Labour Practices: What Employers Cannot Do

The IR Code explicitly prohibits certain employer conducts which include but are not limited to: (i) interfering with trade union formation or operation; (ii) discriminating against workers based on union membership; (iii) retaliating against workers for participating in union activities; (iv) refusing to bargain in good faith with recognized sole negotiating union or negotiating council; (v) failing to implement settlements or arbitration awards; and (vi) establishing or supporting employer-dominated unions.

Trade unionism in India has been traditionally associated with manufacturing, public utilities, and financial sectors - where it emerged in response to the poor working conditions and exploitation of workers during the early phases of industrialisation. In recent years, however, union activity has emerged in sectors once considered "union-free", most notably the Information Technology (“IT”), Information Technology Services sector (“ITes”), and the Gig and Platform Economy. A significant development in the IT sector unionisation was the registration of the Karnataka State IT/ITeS Employees Union (“KITU”). This was the first trade union in Karnataka which was dedicated exclusively to technology sector employees. The union was registered under the provisions of the TU Act and the Karnataka Trade Union Regulations, 1958. Within 2 years of its registration, KITU initiated several statewide strikes and raised concerns about working conditions and wages for IT/ITES employees, rapidly gaining momentum within the sector. Following Karnataka's lead, similar IT-focused trade unions were registered in Tamil Nadu, Maharashtra, and West Bengal.

The IR Code’s mandatory recognition framework applies across all sectors, without carve-outs for services or technology. Further, the provisions on strikes, which were limited to public utilities, have been expanded to all establishments. Employers in IT, ITeS, e-commerce, and start-ups can therefore anticipate the possibility of union formation and must ensure they understand the obligations that would follow. Proactive employee engagement, transparent workplace policies, and effective grievance handling systems are increasingly becoming important tools for employers in these sectors, not merely, as good practice, but as a practical means of reducing the likelihood of formal union activity. 

The table below summarises the key practical implications of the IR Code’s new framework.

The provisions relating to trade unions under the IR Code represents a significant shift in India’s industrial relations framework. The move from discretionary to mandatory recognition, combined with explicit good faith bargaining obligations and sector neutral application, signals legislative intent to formalise workers’ representation across the economy.

Employers best placed to navigate this landscape will not be those who resist the framework, but those who understand it clearly and engage with it proactively.