[Analysis] OSH Code Applicability – Section 2(1)(v) and 2(1)(w) | Establishment | Factory Thresholds

Table of Contents

1. Why applicability under this Code is not one question but four
2. What is an “establishment” under section 2(1)(v)?
3. What is a “factory”, and why is the threshold different?
4. The factory threshold has doubled
5. How are workers counted?
6. Where State law fixes a different number
7. Who is outside the Code?
8. The separate fifty-worker test for contract labour
9. A working sequence for testing applicability
10. Quick answers

1. Why applicability under this Code is not one question but four

Most labour statutes have a single applicability provision. This one does not.

Whether the Code reaches a given workplace depends on which of four separate tests it satisfies: the general establishment test in section 2(1)(v), the factory test in section 2(1)(w), the sector-specific coverage of Chapter XI, and — for contract labour — the wholly separate threshold in section 45. An employer can be an establishment for one purpose and not a factory for another, and can fall outside Part I of Chapter XI while remaining squarely within the general provisions.

Getting this wrong at the outset is expensive, because registration, licensing, returns and the penalty regime all follow from it.

2. What is an “establishment” under section 2(1)(v)?

The definition has four limbs.

1. A place where any industry, trade, business, manufacturing or occupation is carried on in which ten or more workers are employed.
2. A motor transport undertaking, newspaper establishment, audio-video production, building and other construction work or plantation, in which ten or more workers are employed.
3. A factory, for the purpose of Chapter II, in which ten or more workers are employed — notwithstanding the higher threshold in clause (w).
4. A mine or port, or the vicinity of a port where dock work is carried out.

The third limb repays attention. For registration purposes only, a factory becomes an establishment at ten workers even though it does not become a factory until twenty. A unit with twelve workers using power is therefore not a factory, but it is an establishment, and it must register.

The fourth limb carries no numerical threshold at all. A mine is an establishment because it is a mine. So is a port, and so is the vicinity of a port where dock work is carried on.

Two provisos qualify the first three limbs. The threshold does not apply to an establishment carrying on such hazardous or life-threatening activity as may be notified by the Central Government. And notwithstanding the threshold in the definition of factory, for the purposes of Chapter II an establishment under sub-clause (i), (ii) or (iii) is deemed an establishment where ten or more are employed.

3. What is a “factory”, and why is the threshold different?

Section 2(1)(w) defines a factory as any premises including the precincts thereof —

• whereon twenty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on with the aid of power, or is ordinarily so carried on; or
• whereon forty or more workers are working, or were working on any day of the preceding twelve months, and in any part of which a manufacturing process is being carried on without the aid of power, or is ordinarily so carried on.

The definition expressly excludes a mobile unit belonging to the armed forces of the Union, a railways running shed, and a hotel, restaurant or eating place.

One point of drafting is worth noting. The Factories Act, 1948 excluded from its definition “a mine subject to the operation of the Mines Act, 1952”. That exclusion does not appear in section 2(1)(w). It has not been lost — mines are brought in as establishments in their own right under section 2(1)(v)(iv), and are then governed by Part IV of Chapter XI.

4. The factory threshold has doubled

This is the change most likely to matter commercially, and it is easiest to see set out side by side.

A unit employing fifteen workers with power was a factory on 20th November 2025 and was not one on 21st November 2025. That is a substantial contraction of the factory regime, and it is the sort of change that a reader working only from the new text would never see, because the new text does not announce it. It becomes visible only when the two provisions are placed alongside each other.

The contraction is narrower than it looks, though, for the reason given in section 2 above: such a unit remains an establishment under section 2(1)(v)(i) at ten workers, and is treated as an establishment for Chapter II purposes under sub-clause (iii). It leaves the factory regime. It does not leave the Code.

5. How are workers counted?

Explanation I to section 2(1)(w) settles the question that generated the most litigation under the old Act: all the workers in different groups and relays in a day shall be taken into account. The count is not per shift. It is the aggregate across the working day.

Explanation II disposes of a different argument. The mere fact that an Electronic Data Processing Unit or a Computer Unit is installed in any premises or part thereof does not make it a factory, if no manufacturing process is being carried on there.

Both Explanations are carried over from the Factories Act in substantially the same terms, which means the authority decided under the old provisions continues to be of assistance.

6. Where State law fixes a different number

The proviso to section 2(1)(w) preserves State variation. Where, under any law in force in a State immediately before the commencement of the Code, the number of workers specified is more or less than the number in clause (i) or clause (ii), the number specified under the State law prevails in that State until it is amended by the competent legislature.

For a multi-State employer this is the trap. There is no single national factory threshold to apply across a group. The threshold has to be checked State by State, against the State enactment as it stood immediately before 21st November 2025.

7. Who is outside the Code?

Section 1(3) excludes:

• the offices of the Central Government;
• the offices of the State Government; and
• any ship of war of any nationality.

The proviso then pulls a large category back in. The Code does apply in the case of contract labour employed through a contractor in the offices of the Central Government or a State Government, where the Government is the principal employer.

So a Government office is outside the Code for its own employees and inside it for the contract labour engaged on its premises.

8. The separate fifty-worker test for contract labour

Part I of Chapter XI does not follow the establishment threshold. Section 45 applies Part I to:

• every establishment in which fifty or more contract labour are employed, or were employed on any day of the preceding twelve months, through contract; and
• every manpower supply contractor who has employed, on any day of the preceding twelve months, fifty or more contract labour.

There is an open question here, and it is better named than glossed. Section 2(1)(n) defines a contractor in two categories — one who undertakes to produce a given result for the establishment through contract labour, and one who supplies contract labour as mere human resource, including a sub-contractor. Section 45 is silent on whether the fifty-worker threshold reaches the first category in the same way as it plainly reaches the second. Until that is resolved, a work contractor engaging fifty or more should be advised on the footing that the point is arguable.

9. A working sequence for testing applicability

Five questions, in this order, for any workplace.

1. Is it a mine, a port, or the vicinity of a port where dock work is carried out? If yes, it is an establishment with no threshold to satisfy. Stop here.
2. Is a notified hazardous or life-threatening activity carried on? If yes, the threshold in the first three limbs of section 2(1)(v) does not apply.
3. Are ten or more workers employed? If yes, it is an establishment, and Chapter II registration follows.
4. Is a manufacturing process carried on, and with how many workers? Twenty with power or forty without makes it a factory — but check the State number first, because it prevails.
5. Are fifty or more contract labour engaged, now or on any day in the last twelve months? If yes, Part I of Chapter XI applies independently of everything above.

10. Quick answers

What is the applicability of the OSH Code, 2020?

The Code applies to an establishment employing ten or more workers under section 2(1)(v), and to a factory employing twenty or more with power or forty or more without power under section 2(1)(w). Mines, ports and dock work areas are covered without a threshold.

What is the factory threshold under the OSH Code?

Twenty or more workers where a manufacturing process is carried on with the aid of power, and forty or more where it is carried on without power. Under the Factories Act, 1948 the corresponding figures were ten and twenty.

Does the OSH Code apply to establishments with fewer than ten workers?

Not under the general establishment definition. But a mine, a port or the vicinity of a port where dock work is carried out is an establishment regardless of numbers, and the threshold does not apply where a notified hazardous or life-threatening activity is carried on.

Does the OSH Code apply to Government offices?

Not to the offices of the Central or State Government for their own employees. It does apply to contract labour engaged through a contractor in those offices, where the Government is the principal employer.

How are workers counted for the factory threshold?

Explanation I to section 2(1)(w) requires all workers in different groups and relays in a day to be taken into account. The count is the daily aggregate, not the largest shift.

Is a software office a factory under the OSH Code?

Explanation II states that the mere installation of an Electronic Data Processing Unit or Computer Unit does not make premises a factory where no manufacturing process is carried on.

Sections 1 and 2 are treated at length in Taxmann’s Law & Practice Relating to Occupational Safety Health and Working Conditions Code by Sunil Kumar Tripathi, Senior Advocate. The definition clause alone runs to 249 pages, with each of the sixty-five defined expressions in section 2(1) examined for its ingredients, exclusions and inherited case law, and set beside the corresponding provision of the repealed Act in parallel columns.

For the statute, the Central Rules 2026 and the case law together, see Taxmann.com | Research — Labour Laws. Where an applicability question has to be settled for a specific establishment, Taxmann Advisory handles registration and licensing engagements.

Related reading: the OSH Code 2020 — complete guide · key highlights of the OSH working conditions rules · the Central Rules 2026 notification.

Law stated as on 10 September 2026. The Occupational Safety, Health and Working Conditions Code, 2020 was brought into force generally with effect from 21 November 2025, and the Occupational Safety, Health and Working Conditions (Central) Rules, 2026 were notified on 8 May 2026.