The Ministry of Labour and Employment, on 21 November 2025, notified the four labour codes, repealing and replacing 29 existing labour laws in what is regarded as one of India’s most ambitious reform exercises.
Labour and employment fall under the Concurrent List of the Constitution, allowing both Parliament and state legislatures to enact laws. While the Parliament enacts the primary legislation, implementation and rulemaking for most of the labour laws traditionally rested with the state governments in their capacity as the appropriate government. Under the now-repealed regime, the central government acted as the appropriate government only for limited sectors like mines, oilfields, major ports, and for central public sector undertakings and entities carried on under its authority, while private establishments largely fell under the state jurisdiction.
All four labour codes now expand the scope of central supervision by bringing in additional sectors within the delegated authority of the central government. Establishments engaged in air transport services, telecommunication, banking and insurance are now under the supervisory ambit of the central government. Earlier, the Industrial Disputes Act, 1947 had similarly expanded the definition of the appropriate government for the central government through multiple amendments over time, resulting in a broad supervisory scope, while several other labour laws had limited scope for the central government.
Additionally, under the three codes: the Code on Industrial Relations, 2020, the Code on Social Security, 2020, and the Code on Occupational Safety, Health and Working Conditions, 2020, metro railways, as defined under the Metro Railways (Operation and Maintenance) Act, 2002 and the entities in which the central government holds 51 percent or more of the shareholding are also brought within the central government’s supervisory ambit, and this position remains unchanged even if the shareholding later drops below the 51 percent threshold. The question of the appropriate government was frequently litigated under the earlier regime, particularly in cases where employers with majority central government shareholding disputed the authority of the state governments.
Further, for compliance with social security obligations, all entities having branches in more than one state would fall under the supervisory ambit of the central government. Earlier, this was the case with specific laws like the Employees Provident Fund and Miscellaneous Provisions Act, 1952 and the Payment of Gratuity Act, 1972.
These changes seek to create regulatory uniformity for industries that generally operate across multiple states. Sectors such as telecom, banking and insurance, which earlier faced varied implementation practices due to state-level oversight, are now expected to benefit from standardised compliance mechanisms and consistent enforcement under the central administration. The business of these entities is also regulated by the central government.
Centralising supervision in these sectors also reduces fragmented compliance obligations for multi-state enterprises. Bringing metro rail projects under central supervision considers the fact that they are mainly funded by the Central Government, while the continuity rule for majority-owned central government companies prevents regulatory instability caused by fluctuating shareholding patterns, considering the push of the central government for disinvestment in recent years.
Overall, the expanded scope of delegated authority of the central government, combined with a consolidated legal structure, marks a major step toward modernising India’s labour regulation and fostering greater clarity, consistency and efficiency across the employment landscape.
[The author is a Principal Associate in the Corporate and M&A Team at Lakshmikumaran & Sridharan Attorneys, Hyderabad]
