Start with the classification, because everything follows from it. A worker under the Industrial Relations Code has a procedural right that a manager does not, and a manager has a contractual right that the Code does not deal with at all.
The provision that bites: Section 40
Section 40 of the Industrial Relations Code, 2020 says no employer who proposes to effect any change in the conditions of service applicable to any worker in respect of any matter specified in the Third Schedule shall effect that change without giving the workers likely to be affected a prescribed notice of the nature of the change proposed, and shall not effect it within twenty one days of giving that notice. There are four provisos taking a change outside the requirement: where it is made in pursuance of a settlement or award, where the workers are governed by the listed central government service rules, in an emergent situation requiring a change of shift working otherwise than under standing orders and then only in consultation with the Grievance Redressal Committee, and where the change is effected under an order of the appropriate Government.
| Item | Typical office example |
|---|---|
| Wages, including the period and mode of payment | A cut in fixed pay, or moving a fixed component into a variable one |
| Compensatory and other allowances | Withdrawing a shift allowance, transport allowance or on call payment |
| Hours of work and rest intervals | Lengthening the working day or removing a break |
| Leave with wages and holidays | Reducing the annual leave quantum or cancelling a declared holiday |
| Classification by grades | Regrading a role downward, which is what a demotion usually is on paper |
| Withdrawal of any customary concession or privilege, or change in usage | Ending a long standing practice such as a bonus paid every year without a written policy |
| Introduction of new rules of discipline or alteration of existing rules | A new attendance or performance improvement policy carrying consequences |
| Any increase or reduction, other than casual, in the number of persons employed in an occupation, process, department or shift | A team restructuring that removes headcount |
What Section 40 does not give you
It does not give you a veto. It gives you notice and twenty one days, after which the employer may effect the change and the argument becomes an industrial dispute rather than a question of procedure. Section 41 also lets the appropriate Government exempt a class of establishments or workers from Section 40 by notification where it takes the view that applying it would affect employers so prejudicially as to cause serious repercussions on the industry. And the penalties chapter of the Code does not make a breach of Section 40 an offence, so this is not a provision you prosecute on. The value of Section 40 is that a change made without the notice is a change made in breach of the statute, which is a strong opening in conciliation and before the Tribunal.
Once you have raised a dispute, the position freezes
Section 90(1) is the provision employers forget. Where an industrial dispute is already pending before a conciliation officer, an arbitrator or a Tribunal, on matters not covered by a Section 40 notice, the employer shall not, in regard to any matter connected with the dispute, alter to the prejudice of the workers concerned the conditions of service applicable to them immediately before the proceedings began, and shall not for misconduct connected with the dispute discharge or punish any worker concerned, save with the express permission in writing of the authority before which the proceeding is pending. Section 90(2) preserves the employer's freedom on matters unconnected with the dispute, in accordance with standing orders or the contract. Our note on what an employer can and cannot do while your case is pending works through the distinction between connected and unconnected matters, which is where these fights are won.
If the change is really a transfer
The Second Schedule to the Code lists unfair labour practices, and item 7 on the employer's side is to transfer a worker mala fide from one place to another, under the guise of following management policy. Item 5(b) covers discharge or dismissal not in good faith but in the colourable exercise of the employer's rights. Section 84 prohibits any employer from committing an unfair labour practice, and Section 86(5) makes it punishable with a fine of not less than ten thousand rupees extending to two lakh rupees. A sudden regrade and relocation days after you raised a grievance is the fact pattern those items were written for, and the timeline is the evidence. Our guide on the list of things an employer cannot do sets out the full Schedule.
If you are not a worker
Section 2(zr) excludes a person employed mainly in a managerial or administrative capacity, and a person employed in a supervisory capacity drawing wages exceeding eighteen thousand rupees a month. If that is you, Section 40 is not available and the question is a pure contract question. A unilateral variation of a material term is a breach, and you have three responses. Accept it. Reject it and treat the contract as repudiated, which in practice means resigning and suing, a hard road. Or continue working under written protest, which preserves the position while you decide.
The third is almost always right, and the reason is evidential. Where an employee receives a revised letter, says nothing, and draws the reduced salary for four months, the employer will argue acceptance by conduct, and it is a good argument. The objection has to be contemporaneous, specific about which term changed, and repeated on each payslip that reflects the change. Where the pressure that follows the objection becomes a manufactured exit, that is a different claim, and our guide on when a resignation is really a termination deals with how it is proved.
Pay cut or deduction
These are not the same thing and the distinction decides the forum. A prospective reduction in the rate of pay from next month is a change of terms, answered under Section 40 or under the contract. A reduction applied to wages already earned for a period already worked is a deduction, and Section 18 of the Code on Wages, 2019 permits no deduction except those in its closed list, caps total deductions in any wage period at fifty per cent, and by Section 60 makes void any agreement by which the employee relinquishes an amount due under the Code. If the revised letter is backdated, you are in the second category and the wage claim route is open to you.
What to do in the first week
- Ask for the change in writing with the effective date and the reason, if it was communicated in a meeting.
- Ask whether a notice under Section 40 was issued, and to whom, and on what date. The answer is usually no, and the question is on record.
- Record your objection naming the term that changed and stating that you continue to work under protest and without prejudice.
- Keep the old letter, the new letter and the payslips either side of the change, because the comparison is the case.