The Supreme Court on October 28 agreed to hear a petition by the All India Trade Union Congress (AITUC), Tamil Nadu, challenging the definition of ‘industry’ under the Industrial Relations Code, 2020. The union has challenged provisions of the Code that exclude certain charitable institutions and specified government activities, as well as activities that may be notified by the Centre.

The key question is whether workers performing similar jobs could have different access to labour dispute remedies depending on how their employers are classified. The matter was tentatively listed for next month.

What counts as an ‘industry’ under the new labour law?

Section 2(p) of the Code defines an ‘industry’ as a systematic activity carried out through cooperation between an employer and workers to produce, supply or distribute goods and services to meet human needs and wishes.

The definition excludes institutions owned or managed by organisations substantially engaged in charitable, social or philanthropic activities; government activities related to sovereign functions; domestic services; and any other activities that the appropriate government may notify.

The earlier definition did not expressly provide for the exclusions now incorporated into the 2020 Code. The new definition also differs from the broad approach adopted by the Supreme Court in Bangalore Water Supply and Sewerage Board v. A. Rajappa (1978), which focused on the nature of the activity rather than merely the employer’s identity or profit motive.

What happens if a worker at a charitable institution is dismissed?

The issue can be understood through an example. Consider two nurses: one works at a commercial hospital, while the other works at a charitable hospital. Both are dismissed and want to challenge their termination.

“The charitable exclusion under Section 2(p) of the Industrial Relations Code, 2020 turns on who runs the establishment rather than on the work its employees do,” said Himesh Thakur, Associate Partner, PSL Advocates & Solicitors.

A nurse at a charitable hospital may therefore lose access to the Industrial Tribunal, while a nurse performing identical work at a private hospital retains it, Thakur added.

“Workers of an excluded establishment cannot raise an 'industrial dispute' before the Industrial Tribunal, nor claim the Code's protections on retrenchment, lay-off and closure, or its conciliation machinery. Remedies shift elsewhere,” said Alay Razvi, Managing Partner, Accord Juris.

Why is AITUC challenging these exclusions?

The main basis of AITUC’s challenge is that the new definition of ‘industry’ departs from the principles laid down in Bangalore Water Supply. The judgment examined the nature of an activity and the relationship between employers and workers.

Another contention is that charitable or welfare-oriented institutions may perform organised activities that otherwise satisfy the industry test. The petition also argues that the exclusion for sovereign functions is too broad and that the Centre could exercise its power to notify additional exclusions at its discretion under the statutory provisions.

“Excluding charitable institutions and sovereign functions from "industry" could fail Article 14,” said Keyur D. Gandhi, Managing Partner, Gandhi Law Associates.

The more vulnerable aspect is the Centre’s open-ended power to notify further exclusions, as the Code does not specify criteria for exercising this power, Gandhi added.

Does exclusion from ‘industry’ mean workers lose all legal protection?

No. Exclusion from Section 2(p)’s definition does not automatically deprive employees of all their rights. Other applicable labour legislation, contractual rights or legal remedies may remain available, depending on the worker’s circumstances. The distinction is between losing access to a particular statutory mechanism for resolving industrial disputes and losing all protection under the law.

The statutory framework is important for investigating and settling industrial disputes. The petition argues that some workers could be denied access to this specialised framework before the Court even examines their employment grievances.

What will the Supreme Court decide, and who could be affected?

The Court is being asked to examine the constitutional validity of the challenged exclusions, including whether they violate Article 14’s guarantee of equality and give the Centre excessive discretion.

“In August 2026, in Jai Bir Singh, [the Supreme Court] held that the 1978 test will govern old cases under the repealed Act, while the Code must be read on its own terms,” said Nihal Bhardwaj, Counsel, SKV Law Offices.

Courts will probably apply the triple test first and then interpret the exclusions narrowly, looking at the main activity of an institution rather than its name, Bhardwaj added.

The present challenge could affect how charitable institutions, welfare bodies and specified public-service activities are classified. Its outcome may clarify which workers can access industrial dispute resolution under the new Code.