Three-fourths of India’s factories will be exempt from norms meant to protect workers against arbitrary dismissal or punishment, or discrimination in promotion and transfers, if a modified labour bill is passed, labour economists have said.

Only factories with less than 100 employees are now exempt from following these norms, under the Industrial Employment (Standing Order) Act and the Industrial Disputes Act, which the Industrial Relations Code bill looks to subsume.

The IR Code bill, introduced in the Lok Sabha on Saturday, seeks to extend the exemption to all industrial establishments with less than 300 employees.

Analysts said this would facilitate layoffs and usher in a “fire at will” culture as in the US, because three in four factories in India have fewer than 300 employees.

If the IR Code bill is enacted — likely given the government’s numbers and the standing committee’s nod — factories with less than 300 employees will not need the state government’s permission to sack workers.

Nor will they need to follow the state government’s rules on probation, promotion or transfer, or those governing notices, inquiries and punishment for misconduct.

They will also be exempt from certain rules that protect workers against punishment or dismissal for forming trade unions or for participating in strikes that had sought the necessary permissions.

Further, the code bill says that employees cannot go on strike until the company has responded to their 14-day notice while the existing law says they can start the strike if the company fails to respond within the 14-day notice period.

Apart from the Industrial Disputes Act and the Standing Order Act, the IR Code will also subsume the Trade Union Act after its passage.

The code is one of three pending labour reform bills that had been referred to a standing committee. With the panel giving its recommendations, the government has tweaked them and introduced them in the Lok Sabha.

The chapter on “standing order” (on service conditions) in the modified IR Code says: “The provisions of this chapter shall apply to every industrial establishment wherein three hundred or more than three hundred workers are employed, or were employed on any day of the preceding twelve months.”

Labour economist Shyam Sundar, professor of human resource management at the XLRI, Xavier School of Management, Jamshedpur, said the Standing Order Act aimed at standardising the terms of service as a safeguard against arbitrary or discriminatory acts by employers.

“The employers could not punish or dismiss workers according to their whims because of this law and various court judgments,” he said.

“The Standing Order Act and the Industrial Disputes Act provide substantial employment security. Now this IR Code will exempt three-fourths of factories from its purview... and provide employers the liberty to ‘fire at will’ (as in the) highly liberalised labour market of the US.”

Sundar said the exempted employers would be free to decide the probation periods, promotion criteria and transfer norms as they please. The trade unions will come under pressure and holding strikes will become virtually impossible, he added.

Labour economist Ravi Srivastava said that once the IR Code is enacted, “the workers will no longer be able to take any industrial action and their collective bargaining power will become weak”.