Industrial Relations and Labour Laws

Industrial Relations and Labour Laws
Course Design Committee

Prof Veena Vohra
Chairperson & Associate Professor HR & OB,
NMIMS
Dr M C Agarwal
Associate Dean (Executive Education Programs)
& Professor HR and OB, NMIMS
Dr Sumi Jha
Assistant Professor in HR and OB at NITIE
(National Institute of Industrial Engineering)
Prof Sandeep Hegde

Assistant Professor in HRM, NMIMS
Prof Sharon Pandey

Associate Professor in HR & OB, NMIMS
Mrs Nora Bhatia

Head Human Resources, Mahindra Intertrade
Limited & Visiting Faculty, NMIMS
Prof Manjari Srivastava

Associate Professor in HR & OB, NMIMS
Authors: Prof Sandeep Hegde and Mrs Nora Bhatia

Reviewed by: Prof Sandeep Hegde, Assistant Professor in HRM, NMIMS
Mrs Nora Bhatia, Head Human Resources, Mahindra Intertrade Limited &
Visiting Faculty, NMIMS
Copyright 2010, SVKM's Narsee Monjee Institute of Management Studies (NMIMS)

Deemed-to-be University
All Rights Reserved
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CONTENTS
Page No.
Lesson 1
Introduction to Industrial Relations
Lesson 2
Trade Unionism
21
Lesson 3
Role of Employers Association and State in Industrial Relations
40
Lesson 4
Collective Bargaining
62
Lesson 5
Evolution of Labour Legislations
74
Lesson 6
Labour Legislations: Acts Governing Employment of Personnel and IR
84
Lesson 7
Labour Legislations: Acts Governing Compensation of Employees
114
Lesson 8
Dispute Settlement
130
Lesson 9
Comparative Global Industrial Relations Practices
154
Self Assessment Answers
165
LIST OF FIGURES
Page No.
Figure 1.1
Stakeholders in Industrial Relations
10
Figure 5.1
Management Thoughts
76
LIST OF TABLES
Table 5.1
Evolution of HR thoughts in India
75
Table 6.1
List of Registers to be maintained and returns filed under The Factories Act 1948
89
Table 6.2
Offences and Penalties
Table 7.1
Description of Injuries and Corresponding % of Earning Capacity Loss
91
116
INDUSTRIAL RELATIONS AND LABOUR LAWS
SYLLABUS
Introduction to IR
Trade Unionism
Role of State and Employers Association in IR
Labour Legislations Governing Employment of Personnel and IR
Labour Legislations Governing Employee Compensation
Industrial Dispute Settlement
Industrial Relations: Comparative Study
LESSON
1
INTRODUCTION TO INDUSTRIAL RELATIONS
CONTENTS
1.0 Aims and Objectives
1.1 Introduction
1.2 Concept of Industrial Relations
1.3 Industrial Relation System
1.4 Scope of Industrial Relations
1.5 Importance of Industrial Relations
1.6 Objectives of Industrial Relations
1.7 Dunlop's Contribution to Industrial Relations
1.8 Perspectives of Industrial Relations
1.8.1
Unitary Perspective
1.8.2
Pluralistic Perspective
1.8.3
Marxist Perspective
1.9 Challenges in IR
1.10 Evolution of Industrial Relations in India
1.11 Let us Sum up
1.12 Keywords
1.13 Self Assessment
1.14 Review Questions
1.15 Suggested Readings
1.0 AIMS AND OBJECTIVES

After studying this lesson, you will be able to:
z
Understand the concept of industrial relations
Underline the role of three actors in industrial relations
Analyse the scope, importance, objectives and challenges of industrial relations
Discuss the three perspectives of industrial relations
Trace the evolution of industrial relations in India
1.1 INTRODUCTION
Industrial relations has become one of the most delicate and complex problems of
modern industrial society. Industrial progress is impossible without cooperation of
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labors and harmonious relationships. Therefore, it is in the interest of all to create and
maintain good relations between employees (labor) and employers (management).
1.2 CONCEPT OF INDUSTRIAL RELATIONS

The term Industrial Relations comprises of two terms: Industry and Relations.
Industry refers to any productive activity in which an individual (or a group of
individuals) is (are) engaged. By relations we mean the relationships that exist
within the industry between the employer and his workmen.
The term industrial relations explain the relationship between employees and
management which stem directly or indirectly from union-employer relationship.
Industrial relations are the relationships between employees and employers within the
organizational settings. The field of industrial relations looks at the relationship
between management and workers, particularly groups of workers represented by a
union. Industrial relations are basically the interactions between employers, employees
and the government, and the institutions and associations through which such
interactions are mediated.
The term industrial relations have a broad as well as a narrow outlook. Originally,
industrial relations was broadly defined to include the relationships and interactions
between employers and employees. From this perspective, industrial relations covers
all aspects of the employment relationship, including human resource management,
employee relations, and union-management (or labor) relations. Now its meaning has
become more specific and restricted. Accordingly, industrial relations pertains to the
study and practice of collective bargaining, trade unionism, and labor-management
relations, while human resource management is a separate, largely distinct field that
deals with nonunion employment relationships and the personnel practices and
policies of employers.
The relationships which arise at and out of the workplace generally include the
relationships between individual workers, the relationships between workers and their
employer, the relationships between employers, the relationships employers and
workers have with the organizations formed to promote their respective interests, and
the relations between those organizations, at all levels. Industrial relations also
includes the processes through which these relationships are expressed (such as,
collective bargaining, workers participation in decision-making, and grievance and
dispute settlement), and the management of conflict between employers, workers and
trade unions, when it arises.
For better understanding of industrial relations, various terms need to be defined here:
Industry
Industrial Disputes Act 1947 defines an industry as any systematic activity carried on
by co-operation between an employer and his workmen for the production, supply or
distribution of goods or services with a view to satisfy human wants or wishes
whether or not any capital has been invested for the purpose of carrying on such
activity; or such activity is carried on with a motive to make any gain or profit. Thus,
an industry is a whole gamut of activities that are carried on by an employer with the
help of his employees and labors for production and distribution of goods to earn
profits.
Employer
An employer can be defined from different perspectives as:
z
A person or business that pays a wage or fixed payment to other person(s) in

exchange for the services of such persons.
A person who directly engages a worker/employee in employment.
Any person who employs, whether directly or through another person or agency,
one or more employees in any scheduled employment in respect of which
minimum rates of wages have been fixed.
As per Industrial Disputes Act 1947 an employer means:

z
in relation to an industry carried on by or under the authority of any department of

[the Central Government or a State Government], the authority prescribed in this
behalf, or where no authority is prescribed, the head of the department;
in relation to an industry carried on by or on behalf of a local authority, the chief

executive officer of that authority.
Employee
z
Employee is a person who is hired by another person or business for a wage or

fixed payment in exchange for personal services and who does not provide the
services as part of an independent business.
An employee is any individual employed by an employer.
A person who works for a public or private employer and receives remuneration
in wages or salary by his employer while working on a commission basis, piecerates or time rate.
Employee, as per Employee State Insurance Act 1948, is any person employed for
wages in or in connection with work of a factory or establishment to which the act
applies.
In order to qualify to be an employee, under ESI Act, a person should belong to any of
the categories:
z
Those who are directly employed for wages by the principal employer within the
premises or outside in connection with work of the factory or establishment.
Those employed for wages by or through an immediate employer in the premises

of the factory or establishment in connection with the work thereof.
Those employed for wages by or through an immediate employer in connection

with the factory or establishment outside the premises of such factory or
establishment under the supervision and control of the principal employer or his
agent.
Employees whose services are temporarily lent or let on hire to the principal
employer by an immediate employer under a contract of service (employees of
security contractors, labor contractors, house keeping contractors etc. come under
this category).
Employment: The state of being employed or having a job.

Labor market: The market in which workers compete for jobs and employers compete
for workers. It acts as the external source from which organizations attract employees.
These markets occur because different conditions characterize different geographical
areas, industries, occupations, and professions at any given time.
1.3 INDUSTRIAL RELATION SYSTEM

An industrial relations system consists of the whole gamut of relationships between
employees and employees and employers which are managed by the means of conflict
and cooperation.
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A sound industrial relations system is one in which relationships between management

and employees (and their representatives) on the one hand, and between them and the
State on the other, are more harmonious and cooperative than conflict and creates an
environment conducive to economic efficiency and the motivation, productivity and
development of the employee and generates employee loyalty and mutual trust.
Actors in the IR System
Three main parties are directly involved in industrial relations:
Employers: Employers possess certain rights vis--vis labors. They have the right to
hire and fire them. Management can also affect workers interests by exercising their
right to relocate, close or merge the factory or to introduce technological changes.
Employees: Workers seek to improve the terms and conditions of their employment.
They exchange views with management and voice their grievances. They also want to
share decision making powers of management. Workers generally unite to form
unions against the management and get support from these unions.
Government: The central and state government influences and regulates industrial
relations through laws, rules, agreements, awards of court and the like. It also includes
third parties and labor and tribunal courts.
Figure 1.1: Stakeholders in Industrial Relations
1.4 SCOPE OF INDUSTRIAL RELATIONS

The concept of industrial relations has a very wide meaning and connotation. In the
narrow sense, it means that the employer, employee relationship confines itself to the
relationship that emerges out of the day to day association of the management and the
labor. In its wider sense, industrial relations include the relationship between an
employee and an employer in the course of the running of an industry and may project
it to spheres, which may transgress to the areas of quality control, marketing, price
fixation and disposition of profits among others.
The scope or industrial relation is quite vast. The main issues involved here include
the following:
1. Collective bargaining
2. Machinery for settlement of industrial disputes
3. Standing orders
4. Workers participation in management
5. Unfair labor practices
1.5 IMPORTANCE OF INDUSTRIAL RELATIONS

The healthy industrial relation is the key to the progress and success. Their
significance may be discussed as under:
z
Uninterrupted Production: The most important benefit of industrial relations is

that this ensures continuity of production. This means, continuous employment for
all from manager to workers. The resources are fully utilized, resulting in the
maximum possible production. There is uninterrupted flow of income for all.
Smooth running of an industry is of vital importance for several other industries;
to other industries if the products are intermediaries or inputs; to exporters if these
are export goods; to consumers and workers, if these are goods of mass
consumption.
Reduction in Industrial Disputes: Good industrial relations reduce the industrial

disputes. Disputes are reflections of the failure of basic human urges or
motivations to secure adequate satisfaction or expression which are fully cured by
good industrial relations. Strikes, lockouts, go-slow tactics, gherao and grievances
are some of the reflections of industrial unrest which do not spring up in an
atmosphere of industrial peace. It helps promoting co-operation and increasing
production.
High Morale: Good industrial relations improve the morale of the employees.
Employees work with great zeal with the feeling in mind that the interest of
employer and employees is one and the same, i.e. to increase production. Every
worker feels that he is a co-owner of the gains of industry. The employer in his
turn must realize that the gains of industry are not for him along but they should
be shared equally and generously with his workers. In other words, complete unity
of thought and action is the main achievement of industrial peace. It increases the
place of workers in the society and their ego is satisfied. It naturally affects
production because mighty co-operative efforts alone can produce great results.
Mental Revolution: The main object of industrial relation is a complete mental

revolution of workers and employees. The industrial peace lies ultimately in a
transformed outlook on the part of both. It is the business of leadership in the
ranks of workers, employees and Government to work out a new relationship in
consonance with a spirit of true democracy. Both should think themselves as
partners of the industry and the role of workers in such a partnership should be
recognized. On the other hand, workers must recognize employers authority. It
will naturally have impact on production because they recognize the interest of
each other.
Reduced Wastage: Good industrial relations are maintained on the basis of

cooperation and recognition of each other. It will help increase production.
Wastages of man, material and machines are reduced to the minimum and thus
national interest is protected.
Thus, it is evident that good industrial relation is the basis of higher production with
minimum cost and higher profits. It also results in increased efficiency of workers.
New and new projects may be introduced for the welfare of the workers and to
promote the morale of the people at work. An economy organized for planned
production and distribution, aiming at the realization of social justice and welfare of
the massage can function effectively only in an atmosphere of industrial peace. If the
twin objectives of rapid national development and increased social justice are to be
achieved, there must be harmonious relationship between management and labor.
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1.6 OBJECTIVES OF INDUSTRIAL RELATIONS

The objectives of industrial relations are:
z
To safeguard the interest of labor and management by securing the highest level
of mutual understanding and good-will among all those sections in the industry
which participate in the process of production.
To avoid industrial conflict or strife and develop harmonious relations, which are
an essential factor in the productivity of workers and the industrial progress of a
country.
To raise productivity to a higher level in an era of full employment by lessening

the tendency to high turnover and frequency absenteeism.
To establish and promote the growth of an industrial democracy based on labor

partnership in the sharing of profits and of managerial decisions, so that ban
individuals personality may grow its full stature for the benefit of the industry and
of the country as well.
To eliminate or minimize the number of strikes, lockouts and gheraos by

providing reasonable wages, improved living and working conditions, said fringe
benefits.
To improve the economic conditions of workers in the existing state of industrial

managements and political government.
Socialization of industries by making the state itself a major employer.
Vesting of a proprietary interest of the workers in the industries in which they are
employed.
1.7 DUNLOP'S CONTRIBUTION TO INDUSTRIAL

RELATIONS
One of the significant theories of industrial labor relations was put forth by John
Dunlop in the 1950s. According to Dunlop industrial relations system consists of three
agents management organizations, workers and formal/informal ways they are
organized and government agencies. These actors and their organizations are located
within an environment defined in terms of technology, labor and product markets,
and the distribution of power in wider society as it impacts upon individuals and
workplace. Within this environment, actors interact with each other, negotiate and use
economic/political power in process of determining rules that constitute the output of
the industrial relations system. He proposed that three parties employers, labor
unions, and government are the key actors in a modern industrial relations system.
He also argued that none of these institutions could act in an autonomous or
independent fashion. Instead they were shaped, at least to some extent, by their
market, technological and political contexts.
Thus it can be said that industrial relations is a social sub system subject to three
environmental constraints the markets, distribution of power in society and
technology.
Dunlop's model identifies three key factors to be considered in conducting an analysis
of the management-labor relationship:
1. Environmental or external economic, technological, political, legal and social
forces that impact employment relationships.
2. Characteristics and interaction of the key actors in the employment relationship:
labor, management and government.
3. Rules that are derived from these interactions that govern the employment
relationship.
Dunlop emphasizes the core idea of systems by saying that the arrangements in the
field of industrial relations may be regarded as a system in the sense that each of them
more or less intimately affects each of the others so that they constitute a group of
arrangements for dealing with certain matters and are collectively responsible for
certain results.
In effect Industrial relations is the system which produces the rules of the workplace.
Such rules are the product of interaction between three key actors workers/unions,
employers and associated organizations and government.
The Dunlops model gives great significance to external or environmental forces. In
other words, management, labor, and the government possess a shared ideology that
defines their roles within the relationship and provides stability to the system.
1.8 PERSPECTIVES OF INDUSTRIAL RELATIONS

1.8.1 Unitary Perspective
In unitarism, the organization is perceived as an integrated and harmonious system,
viewed as one happy family. A core assumption of unitary approach is that
management and staff, and all members of the organization share the same objectives,
interests and purposes; thus working together, hand-in-hand, towards the shared
mutual goals. Furthermore, unitarism has a paternalistic approach where it demands
loyalty of all employees. Trade unions are deemed as unnecessary and conflict is
perceived as disruptive.
From employee point of view, unitary approach means that:
z
Working practices should be flexible. Individuals should be business process

improvement oriented, multi-skilled and ready to tackle with efficiency whatever
tasks are required.
If a union is recognized, its role is that of a further means of communication

between groups of staff and the company.
The emphasis is on good relationships and sound terms and conditions of

employment.
Employee participation in workplace decisions is enabled. This helps in

empowering individuals in their roles and emphasizes team work, innovation,
creativity, discretion in problem-solving, quality and improvement groups etc.
Employees should feel that the skills and expertise of managers supports their
endeavors.
From employer point of view, unitary approach means that:

z
Staffing policies should try to unify effort, inspire and motivate employees.
The organization's wider objectives should be properly communicated and

discussed with staff.
Reward systems should be so designed as to foster to secure loyalty and

commitment.
Line managers should take ownership of their team/staffing responsibilities.
Staff-management conflicts from the perspective of the unitary framework are

seen as arising from lack of information, inadequate presentation of management's
policies.
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The personal objectives of every individual employed in the business should be

discussed with them and integrated with the organizations needs.
1.8.2 Pluralistic Perspective

In pluralism the organization is perceived as being made up of powerful and divergent
sub-groups management and trade unions. This approach sees conflicts of interest
and disagreements between managers and workers over the distribution of profits as
normal and inescapable. Consequently, the role of management would lean less
towards enforcing and controlling and more toward persuasion and co-ordination.
Trade unions are deemed as legitimate representatives of employees. Conflict is dealt
by collective bargaining and is viewed not necessarily as a bad thing and if managed
could in fact be channeled towards evolution and positive change. Realistic managers
should accept conflict to occur. There is a greater propensity for conflict rather than
harmony.
They should anticipate and resolve this by securing agreed procedures for settling
disputes.
The implications of this approach include:
z
The firm should have industrial relations and personnel specialists who advise
managers and provide specialist services in respect of staffing and matters relating
to union consultation and negotiation.
Independent external arbitrators should be used to assist in the resolution of

disputes.
Union recognition should be encouraged and union representatives given scope to

carry out their representative duties.
Comprehensive collective agreements should be negotiated with unions.
1.8.3 Marxist Perspective

This view of industrial relations is a by product of a theory of capitalist society and
social change. Marx argued that:
z
Weakness and contradiction inherent in the capitalist system would result in

revolution and the ascendancy of socialism over capitalism.
Capitalism would foster monopolies.
Wages (costs to the capitalist) would be minimized to a subsistence level.
Capitalists and workers would compete/be in contention to win ground and

establish their constant win-lose struggles would be evident.
This perspective focuses on the fundamental division of interest between capital and
labor, and sees workplace relations against this background. It is concerned with the
structure and nature of society and assumes that the conflict in employment
relationship is reflective of the structure of the society. Conflict is therefore seen as
inevitable and trade unions are a natural response of workers to their exploitation by
capital.
1.9 CHALLENGES IN IR
Globalisation and economic reforms have had its own share of impact on Industrial
relations. The major challenges in IR are:
1. Competition on the basis of cheap labour: Globalization and increased
competition has lead to less strikes, lockouts and less man days lost due to strikes.
Also now in the era of knowledge industry employees are educated and thus do
not believe in violent activities.
2. Disinvestment: It affects IR in following ways: It changes ownership, which may
bring out changes not only in work organisation and employment but also in
Trade Union (TU) dynamics. It changes the work organization by necessitating
retraining and redeployment. It affects the right of workers and Trade unions,
including job/union security, income security, and social security.
Trade unions, management and government are responding to these challenges
through various types of new, innovative, or model arrangements to deal with
different aspects of disinvestment like:
(a) Making workers the owners through issue of shares or controlling interests
(latter is still not in India)
(b) Negotiating higher compensation for voluntary separations safeguarding
existing benefits
(c) Proposals for setting up new safety nets that not only include unemployment
insurance but also skills provisions for redundant workers.
3. New actors and the emerging dynamics: Earlier IR was mainly concerned with
Trade unions, but now consumers and the community are also a part of it. When
the right s of consumers and community are affected, the rights of workers and
unions and managers/employers take a back seat. Increasingly Trade unions are
getting isolated and see a future for them only by aligning themselves with the
interests of the wider society.
4. Pro-labour-pro-investor policies: This leads to decline in strength and power of
Trade unions if not in numbers. Unions have to make alliances with the society,
consumers and community and various civil society institutions otherwise they
will find themselves dwindling.
5. Declining trade union density: In government and public sectors workforce is
declining because of non-filling of vacancies and introduction of voluntary/early
separation schemes. New employment opportunities are shrinking in these sectors.
In the private sectors particularly in service and software sector, the new, young,
and female workers are generally less eager to join unions.
Not because of improved IR but because of the fear of job security, concern about
the futility of strikes, and concern to survive their organization for their income
survival.
Trade unions have become defensive evident from the fact that there is significant
shift from strikes to law suits. Instead of pressing for higher wages and improved
benefits, Trade unions are pressing for maintenance of existing benefits and
protection and claims over non-payment of agreed wages and benefits.
6. Collective bargaining: Level of collective bargaining is shrinking day by day.
1.10 EVOLUTION OF INDUSTRIAL RELATIONS IN INDIA

Industrial relations is a by-product of Industrial Revolution and it owes its origin from
excessive exploitation of workers by the owners of industries. The relationship was
that of two unequals the powerful employers and powerless workers. It was, in fact,
a master-servant relationship which continued for long. In the early stages, the
Government adopted the policy of Laissez-faire and, later on, enforced penalty on
workers for breaches of contract. Some legislative measures were also adopted for the
purpose. Sporadic attempts were made to form trade unions, which were resisted and
crushed by the employers.
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The First World War is the first milestone enroute to industrial relations in India. It
created certain social, economic and political conditions, which raised new hopes
among workers in industries. It was for the first time, that workers realised their
importance that unless they produce goods required for wars (like steel, etc.), the wars
cannot be fought successfully. After war, prices of consumer goods also become
dearer. This led to intense labour unrest because workers earnings did not keep pace
with the rising prices and their rising aspirations.
Many other events happened which accelerated the pace of industrial relations during
the period:
z
The success of Russian Revolution in 1917
Establishment of ILO (1919) and the influence of its conventions and

recommendations
Constitutional Development in India and formation of central and provincial

legislatures in 1919
Establishment of AITUC in 1920
The happenings at Carnatic and Birmingham Mills in which Mr. B.P. Wadia was
arrested in 1923
Emergence of Left wing on the Indian political horizon in 1924
Formation of the Labour Party Govt. in the U.K. in 1924
Influence of British liberal thought
Pressure by British Industrialists of Lancashire and Birmingham
The Indian Trade Union Act of 1926
The Trade Disputes Act, 1929
Formation of Royal Commission on Labour, 1929-31, which made a

comprehensive study of Indian Labour problem regarding health, safety and
welfare of workers and made recommendations of far-reaching consequences.
The Second World War gave a new spurt in the industrial relations field. The exigency
of the war made it essential for the Government to maintain uninterrupted flow of
goods and services for successful operation of war. Therefore, the Government of
India embarked upon a two-fold action for maintaining/countering industrial relations:
1. Statutory Regulation of industrial relations through the Defence of India
Rules Even though the Defence of India Rules lapsed after World War II,
Rule 81A which regulated industrial relations during the war was kept alive for
six months by an ordinance. Meanwhile, the tripartite deliberations during 194246 on the revision of Trade Disputes Act, 1929, helped the Union Government in
enacting the I.D. Act, 1947, which laid down a comprehensive dispute settlement
machinery to be applicable to all the States. The Act retained one of the principal
features of the Defence of India Rules, viz. compulsory adjudication of industrial
disputes.
2. Bringing all the interests together at a common forum for shaping labour policy,
tripartite consultative system was one of the important developments in the sphere
of industrial relations in our country. Tripartite consultation epitomises the faith of
India in the ILO's philosophy and objectives. The need for tripartite labour
machinery on the pattern of ILO was recommended by the Royal Commission on
Labour as early as in 1931. But the first step in this direction was taken only in the
year 1942, when the first tripartite labour conference was held at New Delhi under
the Chairmanship of Dr. B.R. Ambedkar. The conference consisted of two
organisations, namely, the Indian Labour Conference (ILC) and the Standing
Labour Committee (SLC).
The objectives, set before the two tripartite bodies at the time of their inception in
1942, were:
1. Promotion of uniformity in labour legislation;
2. Laying down of a procedure for the settlement of industrial disputes; and
3. Discussion of all matters of all-India importance as between employers and
employees. The function of ILC, as viewed by Dr. Ambedkar, was to advise the
Government of India on any matter referred to it for advice, taking into account
suggestions made by various State Governments and representatives of employers
and workers. These tripartite bodies were essentially deliberative,
recommendatory and advisory in nature and the area of their operation depended
on the discretion of the Central Government.
Tripartite deliberations helped to reach consensus, inter alia, on Statutory Minimum
Wage Fixation (1944), Constitution of Tripartite Industrial Committees (1944),
Introduction of a Health Insurance Scheme (1945) and a Provident Funds Scheme
(1950). Thus, it led to the passing of three important central labour laws, viz. the
Minimum Wages Act, 1948, the Employees' State Insurance Act, 1948, and the
Employees' Provident Funds Act, 1952.
Even though the defence of India Rules lapsed after, World War II, Rule 81 which
regulated Industrial-relations during the war was slept alive. Meanwhile in the
Iripanfite deliberations (1942-46) revised Trade Disputes Act, 1929 and helped
exactment of I.D. Act, 1947 a comprehensive legislation on dispute resolution.
Industrial Relations in Post-independence Era
Following forces were operating at the time of independence:
z
We inherited industrial relations legacies from our colonial masters with colonial
mindset, colonial habits and colonial culture.
Coincidentally, our freedom struggle coincided with the struggle by the working
class for better industrial relations. In course of these struggles, our top leaders
made promises and pledges to workers. Therefore, after independence, our leaders
had to fulfil those promises and the pledges made to the workers during
freedom struggle.
Most of our leaders were influenced by Fabian Socialist and Marxist/Communist

philosophies and after independence they were to be put in practice.
Our industrial relations were deeply influenced by all the above forces. These
philosophies got reflected in our constitution (1) Preamble of the Constitution
(2) Fundamental Rights (3) Directive Principles of State Policies. This "Trinity" of
Indian constitution is the fountainhead of all factors which shape and guide the spirit
of industrial relations. This was further put in practice when we launched our Five
Year Plans. Each of the successive Five Year Plans emphasised for the well-being of
the working class, co-operation between worker and employer, harmonious industrial
relations, workers right and workers participation, welfare state etc. social justice
and egalitarianism became the guiding spirit.
The aftermath of independence saw the mushroom growth of trade unions and a
plethora of labour legislations and this led to the furtherance of litigations and bitter
industrial relations not only between the employers and trade unions but between
multiple trade unions themselves Trade Union-rivalries.
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This was the period when Industrial Policy Resolution, 1956, facilitated the growth of
the public undertakings both at the Centre and State level. Through these PSUs, Govt.
wanted to present a role-model of industrial relations as "Model-Employers".
In the year 1957 (15th ILC) the voluntary schemes for workers participation in
management and workers education schemes and in the year 1958 (16th ILC)
voluntary code of discipline and voluntary code of conducts were introduced to
counteract the unhealthy trends of litigations and delays.
In the year 1969 the first National Commission on Labour was formed under the
chairmanship of Justice Gajendragadkar which made significant recommendations but
most of them could not be implemented.
This is also the period when nationalisation of industry was at its peak. Many banks,
sick textile mills, sick steel plants and collieries, etc., were nationalised. In banks,
workers Directors were put on the Board of Directors as per the Bank Nationalisation
Act.
This is the period when militancy and violence crept in which gave rise to many
wasteful and restrictive practices in the working of industries, especially of Public
Undertakings. The result was that many of the industries especially the Public Sector
ones became weak, sick and many of them got closed.
Emergency of 1975 had its impact on industrial relations. Mrs. Indira Gandhi, the then
PM, wanted to salvage her image as a democrat. Therefore, she amended the
constitution (Article 43 A) to provide for workers participation and added Chapter 5B
in the Industrial Disputes Act, 1947. The Janta Government and each successive
government, thereafter, competed with others to provide measures for protection of
workers' interests and formation of workers' welfare.
In the post-independence period, especially the later portion of 70s and 80s, the Indian
judiciary has displayed unprecedented judicial activism by giving pro-labour
judgements, which had tremendous impact on industrial relations. This was the period
when amendments in IDA led to inclusion of Sections 2A, 9A, 11A, 17B & Chapter
V B (Sections MNo.) Contract Labour (R&A) Act, 1972, was passed and sec. 10 of
the Act was interpreted to absorb the workers, if they have worked for substantial
years on permanent and perennial nature of job, etc. This provided excessive
protection to labour.
The result was that we had a pampered labour class and a stagnant, regulated and
controlled industrial relations in the late 80s, quite oblivious of the fact that sweeping
changes were taking place and industries and businesses were quite susceptible to
them and threatened by them, if they failed to gear themselves upto meet the situation.
Industrial Relations in Post-globalization Period from 1991 till Date
The requirements and imperatives of global competitiveness are of international
standards in quantity, quality, cost-effectiveness and customers' concerns. This, in
turn, requires introduction of state-of-art of technology, followed by innovation,
creativity and strategic alignment of divergent resources to create performing climate.
Such a performing climate requires a dynamic and synergetic employee relationship.
The traditional IR was made to "fight the fire" or "douse the fire". It was reactive,
negative, passive, ad hoc and legalistic. It was selfish by confined to its own members,
without having any concern for business organisations or society at large. It was
inflexible, rigid and ideologies-bound which have lost their relevance.
The result is that the tradition of industrial relations is under tremendous pressure,
because it was made to cater to the requirements of controlled, protected and regulated
market and it is unable to address to the imperatives of competitive global market.
A tug of war is going on between "forces of Action" and "forces of Inertia". The
Market requires a flexible, resilient and aggressive employees relations and traditional
industrial relation wants to stick to status quo and no change.
Traditional institutions of IR are losing their importance and relevance. Trade unions
are marginalised and kept outside the mainstream of business. Strike is losing its
cutting edge. Collective bargaining is being replaced by individual bargaining.
Ideological decisions are being replaced by business pragmatism.
1.11 LET US SUM UP

Industrial relations are the relationships between employees and employers within the
organizational settings. The field of industrial relations looks at the relationship
between management and workers, particularly groups of workers represented by a
union. An industrial relations system consists of the whole gamut of relationships
between employees and employees and employers which are managed by the means
of conflict and cooperation. Three main parties are directly involved in industrial
relations are state, employers and the employees. The most important benefit of
industrial relations is that this ensures continuity of production. This means,
continuous employment for all from manager to workers. Good industrial relations
improve the morale of the employees. Employees work with great zeal with the
feeling in mind that the interest of employer and employees is one and the same, i.e. to
increase production. There are three approaches to industrial relations: the unitary
perspective, pluralistic perspective and Marxist perspective. A core assumption
of unitary approach is that management and staff, and all members of the organization
share the same objectives, interests and purposes; thus working together,
hand-in-hand, towards the shared mutual goals. In pluralism the organization is
perceived as being made up of powerful and divergent sub-groups management and
trade unions. This approach sees conflicts of interest and disagreements between
managers and workers over the distribution of profits as normal and inescapable. The
Marxist perspective focuses on the fundamental division of interest between capital
and labor, and sees workplace relations against this background. The modern
industrial organization is based upon two large aggregates: (a) accumulation and
aggregation of large capital, and (b) aggregation of large number of workers organized
under trade unions. The availability and supply of a large quality of capital and of a
large number of workers divorced from any ownership of the means of production, is
the sine qua non of the establishment and the growth of modern industries. The centre
of industrial relations is the coming together of these two big aggregates. Used
narrowly, the term industrial relations covers industrial employments only, but a
wider sense, it covers public employments also.
1.12 KEYWORDS
Industrial Relations: It explains the relationship between employees and management
which stem directly or indirectly from union-employer relationship.
Industry: It is a whole gamut of activities that are carried on by an employer with the
help of his employees and labors for production and distribution of goods to earn
profits.
Employee: He is any individual employed by an employer.
Employment: The state of being employed or having a job.
Labor market: The market in which workers compete for jobs and employers compete
for workers.
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Introduction to
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and Labour Laws
1.13 SELF ASSESSMENT

1. .. are the result of the difference in conditions in different
geographies, industries and occupations.
2. perspective holds that line managers should take ownership of
their teams responsibilities.
3. As per the . view, trade unions are the result of exploitation of
workers by capital.
4. India was predominantly a economy during ancient and
medieval times.
5. In the ancient times, the employer-employee relations were those of
and later on, those of master and servant.
6. The industrial policy resolution 1956, facilitated the growth of the public
undertakings both at the centre and .. level.
7. The revision of the Trade Dispute Act, 1929, helped the union government in
enacting the Industrial Dispute Act, ..
1.14 REVIEW QUESTIONS

1. What do you mean by industrial relations? What is the importance of the work
relationship in industrial relations?
2. Who is an employee and who is an employer? Why there is a need for a labour
market?
3. Underline the importance and objectives of industrial relations.
4. Discuss the basic approaches of industrial relations. Examine the relevance of
Dunlops contribution.
5. Enumerate the challenges in developing an efficient industrial relations system.
6. What are the developments in Industrial Relations from different stages Prior to
British Raj, during colonial period, in post independent era and in post
globalization period?
1.15 SUGGESTED READINGS

PRN Sinha, Indu Bala Sinha, Seema Priyadarshini Shekhar, Industrial Relations, Trade
Unions, & Labour Legislation, Pearson Education
B D Singh, Industrial Relation Emerging Paradigms, Excel Books
Ratna Sen, Industrial Relations in India Shifting Paradigms, Macmillan Business Books
AM Sharma, Industrial Relations Conceptual and Legal Framework, Himalaya Publishing
House
C S Venkata Ratnam, Industrial Relations, Oxford
21
Trade Unionism
LESSON
2
TRADE UNIONISM
CONTENTS
2.0
Aims and Objectives
2.1
Introduction
2.2
Objectives of Trade Unions
2.3
Functions of Trade Unions

2.3.1
Militant Functions
2.3.2
Fraternal Functions
2.4
Importance of Trade Unions
2.5
Reasons for Joining Trade Unions
2.6
The Role of Trade Union
2.7
Productivity and Trade Unions
2.8
Management of Trade Unions

2.8.1
Union Structure: The Flow of Authority
2.8.2
Member Allegiance: The Organisational Bond
2.8.3
Union Goals
2.8.4
Managing Internal Affairs of the Union
2.9
The State of Trade Unions in the World
2.10
Trade Unions in India
2.11
Growth of Trade Union Movement in India

2.11.1
The First Strike
2.11.2
The First Factories Act
2.11.3
The First Workers' Organisation in India
2.11.4
Madras Labour Union
2.11.5
Textile Labour Association
2.11.6
Formation of AITUC
2.11.7
Trade Unions Act
2.11.8
Formation of NTUF
2.11.9
Formation of Indian Federation of Labour
2.11.10 Formation of INTUC, HMS and UTUC

2.11.11 Formation of BMS
2.11.12 Formation of CITU and UTUC (LS)
2.12
Let us sum up
2.13
Keywords
2.14
Self Assessment
2.15
Review Questions
2.16
Suggested Readings
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and Labour Laws

z
Enumerate the objectives, functions and importance of trade unions
Underline the reasons for joining a trade union
Discuss the management of trade unions
Analyse the present condition of trade unions
Trace the evolution of trade union movement in India
2.1 INTRODUCTION
Trade unions are organisations. They have their own structure, policies, norms,
activities, communication system, and leadership. They interact with the environment
and strive to respond to its pressures/challenges not for mere survival, but to remain
effective organisationally. Thus, managing trade unions is a challenging task. Unlike
the business organisations, trade unions as organisations, cannot purchase the
compliance of the members through monetary rewards alone. They have to ensure that
both the economic and non-economic interests of the members are satisfied on a
continuous basis.
2.2 OBJECTIVES OF TRADE UNIONS

Trade unions are formed to protect and promote the interests of their members. Their
primary function is to protect the interests of workers against discrimination and
unfair labor practices. Trade unions are formed to achieve the following objectives:
1. Representation: Trade unions represent individual workers when they have a
problem at work. If an employee feels he is being unfairly treated, he can ask the
union representative to help sort out the difficulty with the manager or employer.
Unions also offer their members legal representation. Normally this is to help
people get financial compensation for work-related injuries or to assist people
who have to take their employer to court.
2. Negotiation: Negotiation is where union representatives, discuss with
management, the issues which affect people working in an organization. There
may be a difference of opinion between management and union members. Trade
unions negotiate with the employers to find out a solution to these differences.
Pay, working hours, holidays and changes to working practices are the sorts of
issues that are negotiated. In many workplaces there is a formal agreement
between the union and the company which states that the union has the right to
negotiate with the employer. In these organizations, unions are said to be
recognized for collective bargaining purposes.
3. Voice in decisions affecting workers: The economic security of employees is
determined not only by the level of wages and duration of their employment, but
also by the managements personal policies which include selection of employees
for lay offs, retrenchment, promotion and transfer. These policies directly affect
workers. The evaluation criteria for such decisions may not be fair. So, the
intervention of unions in such decision making is a way through which workers
can have their say in the decision making to safeguard their interests.
4. Member services: During the last few years, trade unions have increased the range
of services they offer their members. These include:
(a) Education and training: Most unions run training courses for their members
on employment rights, health and safety and other issues. Some unions also
help members who have left school with little education by offering courses
on basic skills and courses leading to professional qualifications.
(b) Legal assistance: As well as offering legal advice on employment issues,
some unions give help with personal matters, like housing, wills and debt.
(c) Financial discounts: People can get discounts on mortgages, insurance and
loans from unions.
(d) Welfare benefits: One of the earliest functions of trade unions was to look
after members who hit hard times. Some of the older unions offer financial
help to their members when they are sick or unemployed.
2.3 FUNCTIONS OF TRADE UNIONS

Trade unions perform a number of functions in order to achieve the objectives. These
functions can be broadly classified into two categories:
(i) Militant functions,
(ii) Fraternal functions
2.3.1 Militant Functions

One set of activities performed by trade unions leads to the betterment of the position
of their members in relation to their employment. The aim of such activities is to
ensure adequate wages secure better conditions of work and employment and get
better treatment from employers, etc. When the unions fail to accomplish these aims
by the method of collective bargaining and negotiations, they adopt an approach and
put up a fight with the management in the form of go-slow tactics, strike, boycott,
gherao, etc. Hence, these functions of the trade unions are known as militant or
fighting functions. Thus, the militant functions of trade unions can be summed up as:
z
To achieve higher wages and better working conditions
To raise the status of workers as a part of industry
To protect labors against victimization and injustice
2.3.2 Fraternal Functions

Another set of activities performed by trade unions aims at rendering help to its
members in times of need, and improving their efficiency. Trade unions try to foster a
spirit of cooperation and promote friendly relations and diffuse education and culture
among their members. They take up welfare measures for improving the morale of
workers and generate self confidence among them. They also arrange for legal
assistance to its members, if necessary. Besides, these, they undertake many welfare
measures for their members, e.g., school for the education of children, library,
reading-rooms, in-door and out-door games, and other recreational facilities. Some
trade unions even undertake publication of some magazine or journal. These activities,
which may be called fraternal functions, depend on the availability of funds, which the
unions raise by subscription from members and donations from outsiders, and also on
their competent and enlightened leadership. Thus, the fraternal functions of trade
unions can be summed up as:
z
To take up welfare measures for improving the morale of workers
To generate self confidence among workers
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and Labour Laws
To encourage sincerity and discipline among workers
To provide opportunities for promotion and growth
To protect women workers against discrimination.
2.4 IMPORTANCE OF TRADE UNIONS

The existence of a strong and recognized trade union is a pre-requisite to industrial
peace. Decisions taken through the process of collective bargaining and negotiations
between employer and unions are more influential. Trade unions play an important
role and are helpful in effective communication between the workers and the
management. They provide the advice and support to ensure that the differences of
opinion do not turn into major conflicts. The central function of a trade union is to
represent people at work. But they also have a wider role in protecting their interests.
They also play an important educational role, organizing courses for their members on
a wide range of matters. Seeking a healthy and safe working environment is also
prominent feature of union activity.
Trade unions help in accelerated pace of economic development in many ways as
follows:
z
By helping in the recruitment and selection of workers.
By inculcating discipline among the workforce.
By enabling settlement of industrial disputes in a rational manner.
By helping social adjustments. Workers have to adjust themselves to the new

working conditions, the new rules and policies. Workers coming from different
backgrounds may become disorganized, unsatisfied and frustrated. Unions help
them in such adjustment.
Trade unions are a part of society and as such, have to take into consideration the
national integration as well. Some important social responsibilities of trade unions
include:
z
promoting and maintaining national integration by reducing the number of

industrial disputes
incorporating a sense of corporate social responsibility in workers
achieving industrial peace.
2.5 REASONS FOR JOINING TRADE UNIONS

The important forces that make the employees join a union are as follows:
1. Greater Bargaining Power: The individual employee possesses very little
bargaining power as compared to that of his employer. If he is not satisfied with
the wage and other conditions of employment, he can leave the job. It is not
practicable to continually resign from one job after another when he is
dissatisfied. This imposes a great financial and emotional burden upon the worker.
The better course for him is to join a union that can take concerted action against
the employer. The threat or actuality of a strike by a union is a powerful tool that
often causes the employer to accept the demands of the workers for better
conditions of employment.
2. Minimize Discrimination: The decisions regarding pay, work, transfer,
promotion, etc. are highly subjective in nature. The personal relationships existing
between the supervisor and each of his subordinates may influence the
management. Thus, there are chances of favoritisms and discriminations. A trade

union can compel the management to formulate personnel policies that press for
equality of treatment to the workers. All the labor decisions of the management
are under close scrutiny of the labor union. This has the effect of minimizing
favoritism and discrimination.
3. Sense of Security: The employees may join the unions because of their belief that
it is an effective way to secure adequate protection from various types of hazards
and income insecurity such as accident, injury, illness, unemployment, etc. The
trade union secure retirement benefits of the workers and compel the management
to invest in welfare services for the benefit of the workers.
4. Sense of Participation: The employees can participate in management of matters
affecting their interests only if they join trade unions. They can influence the
decisions that are taken as a result of collective bargaining between the union and
the management.
5. Sense of Belongingness: Many employees join a union because their co-workers
are the members of the union. At times, an employee joins a union under group
pressure; if he does not, he often has a very difficult time at work. On the other
hand, those who are members of a union feel that they gain respect in the eyes of
their fellow workers. They can also discuss their problem with the trade union
leaders.
6. Platform for Self Expression: The desire for self-expression is a fundamental
human drive for most people. All of us wish to share our feelings, ideas and
opinions with others. Similarly the workers also want the management to listen to
them. A trade union provides such a forum where the feelings, ideas and opinions
of the workers could be discussed. It can also transmit the feelings, ideas, opinions
and complaints of the workers to the management. The collective voice of the
workers is heard by the management and give due consideration while taking
policy decisions by the management.
7. Betterment of Relationships: Another reason for employees joining unions is that
employees feel that unions can fulfill the important need for adequate machinery
for proper maintenance of employer-employee relations. Unions help in
betterment of relations among management and workers by solving the problems
peacefully.
2.6 THE ROLE OF TRADE UNION

Trade unions are unique organisations whose role is variously interpreted and
understood by different interest groups in the society. Traditionally trade unions role
has been to protect jobs and real earnings, secure better conditions of work and life
and fight against exploitation and arbitrariness to ensure fairness and equity in
employment contexts. In the wake of a long history of union movement and
accumulated benefits under collective agreements, a plethora of legislations and
industrial jurisprudence, growing literacy and awareness among the employees and the
spread of a variety of social institutions including consumer and public interest groups
the protective role must have undergone, a qualitative change. It can be said that the
protective role of trade unions remains in form, but varies in substance.
There is a considerable debate on the purposes and role of trade unions. The
predominant view, however, is that the concerns of trade unions extend beyond 'bread
and butter' issues. Trade unions through industrial action (such as protests and strikes)
and political action (influencing Government policy) establish minimum economic
and legal conditions and restrain abuse of labour wherever the labour is organised.
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Trade Unionism
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and Labour Laws
Trade unions are also seen as moral institutions, which will uplift the weak and
downtrodden and render them the place, the dignity and justice they deserve.
2.7 PRODUCTIVITY AND TRADE UNIONS

Productivity consciousness has acquired worldwide momentum. Higher productivity
is necessary for the survival of any nation. It stands for proper utilisation of available
resources to achieve the best results with minimum cost. It is clearly understood that
labour force must increase its productivity for the survival of the industry. Workers
cannot survive in this changed economical world if the industrial units do not survive.
Improvement in productivity is the only answer to the problems in the industrial
sphere and it is the only path to national prosperity. Total productivity is the phrase
whereby organizations to take into account man productivity, machine productivity,
time productivity and the productivity of technology too as one cannot have a good
quality output when the quality of input is poor.
The trade unions should not look upon their role as one of permanent opposition to
management. Ultimately, the interests of workers e.g., wages, welfare facilities and
security of employment depend upon the prosperity of the nation and the firm. That
which hampers productivity ultimately harms the workers themselves. Therefore, a
strong trade union should presuppose an efficient and affluent firm. The trade unions
should attach great importance to harmony, efficiency and order. The unions should
be aware of the fact that ultimately the prosperity of India depends upon her
productivity and her competitive position in the world market. Therefore, the unions
should accept the need for smart work, higher productivity, pride in skill and high
quality of goods.
Role of Trade Unions in the Productivity Improvement
In introducing all schemes relating to productivity, such as, system of payment by
results, individual and group incentive schemes, norms of staffing and workload,
changes in organisation and methods, rationalisation, mechanisation etc., the
following considerations should be respected:
1. Get actively involved in the introduction of such schemes.
2. May be consider a minimum of a fallback wage, which is provided irrespective of
productivity.
3. Aid the management to carry out a continuous appraisal of factors affecting
productivity, such as methods and work-study, continuous supply of good
material, quality of tools, machine-breakdowns, lay-out, quality control, physical,
perceptual and mental loads, environmental factors, such as, lighting, ventilation,
temperature, noise, cleanliness etc. and share these studies with labour. All
revisions to productivity agreement should be made on the basis of joint studies
and agreement.
4. All measurements of work should be done jointly and must provide for factors
like needs of safety, rest and relaxation, interruptions, delays, etc. The same
should apply to valuation of physical product where such valuation forms the
basis of incentive payments.
2.8 MANAGEMENT OF TRADE UNIONS

To understand a union as an organisation, we have to focus attention mainly on three
aspects: the union structure (flow of authority within the union); allegiance of
members (organisational bond); and union goals.
2.8.1 Union Structure: The Flow of Authority

Every organisation has its own structure, which reflects the stated role of each
member, division of tasks, the interrelationship between the people performing
different tasks, and the coordination of various activities of the organisation. Within a
traditional organisation, there is flow of authority from top to bottom and there is also
Trade Unionism delegation of power (the transfer of formal rights to exercise
authority) moving down the hierarchy. But in the unions, the direction and movement
of authority/delegation of power is in part reversed. Unlike in the business
organisations, in trade unions, the formal grant of authority is from the members of the
union to the leaders. Sometimes this authority is not a direct grant, but is delegated
upwards. The members of the union elect committees, which in turn elect the
executive. Alternatively, the members of the union may elect the office bearers of the
union directly, but in addition to the office bearers, the members may elect an
executive committee, which has formal authority over the office bearers. As the
members grant authority to the leaders, the latter can exercise the same. But unlike in
a business organisation, in a trade union, the leaders depend on the members.
As such, their survival in the union (job security) depends on how they exercise the
power. But looking from the practical angle, it is the leaders who embody the
collective power of the union. An individual member of the union or an outsider
perceives that it is only the leaders who have the ability to exercise or restrain the
collective power. Such perception of the individual members prompts them to realise
the importance of establishing an organisational bond with the union.
2.8.2 Member Allegiance: The Organisational Bond

The unions to become organisationally strong need a larger membership following.
The membership to a union depends largely upon how well the union convinces the
members that it satisfies not only the economic interests, but also the non-economic
interests of its members. The non-economic interests of members, which the unions
have to take note of, may include: the desire for self-expression (the union has to serve
as the via media for communication between the employees/members and the top
management), self respect, pride, sense of belongingness, security (protection from
various types of hazards and income security such as accident injury, illness,
unemployment etc.), sense of participation (the members intend to influence the
decisions which are taken as a result of collective bargaining between the union and
the management). In other words, the unions, with the initiative taken by their leaders,
have to work constantly for strengthening the organisational bond between the
members and the unions.
2.8.3 Union Goals

The primary goal of a union is to promote and protect the interests of its members. As
such, the unions strive to better the terms and conditions of employment and generally
to advance the economic and social interests of the members so as to achieve for them
a rising standard of living. Another goal of the unions is to influence policy decisions
in the interest of workers. They intend to formulate a stand on social and economic
objectives of the community/country as a whole, and participate in activities to make
their viewpoints heard in the policy-making bodies so that the choices eventually
made and the priorities adopted sub-serve the best interests of the workers.
2.8.4 Managing Internal Affairs of the Union

In order to understand how the unions manage their internal affairs, one has
to analyse, among other things, the communication within the unions, the
decision-making process in the unions, the union elections, and the membership drive.
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Communication within the Union

Communication within the union is very crucial for the effective functioning of a
union. Flow of relevant information and knowledge within the union takes place from
the top (leaders) to the bottom (members/rank-and-file) and the feedback,
grievances/complaints, requests etc. are communicated by the rank-and-file to the
leaders. The communication may be made orally or through letters, but the former
method is more common. The information may relate to a meeting, a strike, a dharana,
individual members cases, etc. Besides the formal and direct communication between
the members and the leaders, and the union and the management, informal networks,
which get created spontaneously among the factions within the unions, may also serve
as important channels of communication.
Decision Making
In any organisation, decision-making process is an important aspect of management.
Ideally, a union should adopt the democratic method for taking decisions on matters
concerning the union and its members. The workers (members) must be involved in
the decision-making process and their views and opinions must be given due
importance by the leaders while the decisions are finalised and the same are
implemented. However, this does not happen in every union.
Union Election
The constitution of every registered trade union provides for union elections including
the method of voting, periodicity of elections (as per the Trade Unions (Amendment)
Act, 2001, the election of office bearers and Executive Committee has to be held at an
interval of not more than three years), etc. The method followed for voting may be
voice-vote or raising of hands or secret ballot. In unions where democratic practices
are adopted, every member or every faction has an equal opportunity to contest
elections. On the contrary, in unions where oligarchic tendencies prevail, the most
influential individuals or a particular group of individuals virtually suppress the others
from contesting the election. This latter method is not uncommon among the unions in
India.
Membership Drive
One of the main activities of a union is to constantly strive towards expanding its
membership base. A union with a broad membership base is likely to be financially
sound as well as organisationally strong. It may not be always possible for all the
existing members of the union, assuming that they are fully satisfied with their union,
to canvass for their union and motivate the non-members to join their union. However,
a few members devote considerable time to convince the potential new members to
join their union.
2.9 THE STATE OF TRADE UNIONS IN THE WORLD

Public opinion is hostile to trade unions in most countries. The public is not against
unionism in principle. It is against the way unions and union leaders function. The
public image of union leaders is that they are autocratic, corrupt and indifferent to the
public interest 'Too much power, too little morality' sums up the publics' assessment of
unions.
There have been many opinion surveys especially in the United States, which bring
out the poor public image of trade unions. In surveys which rank the confidence of the
American public in fourteen institutions (as for example the army, church, supreme
court, stock market, legal profession, industrialists, newspapers etc.) trade unions have
been consistently placed at the bottom of the list.
There is a serious decline in union membership in most industrialized nations. There

are two possible ways of looking at union membership figures. The first method is to
simply add up all union members in a factory, office or country. This gives overall
membership position. In the second method, the density of membership is calculated.
Density is the percentage of union members in relation to total employment, for
example, if unions have 50 members in a factory employing 100, the density is
50 percent. When the reference is to entire country, density is measured by comparing
union members against total employment in all sectors. Density is generally accepted
as a better indicator because it shows not only how many are members but also how
many are not.
Membership has dropped sharply in many European countries. In France, which is
the worst hit, the density of union membership is now estimated to be a miserable
10 percent. In Holland, which is also badly affected, density is estimated at around
25 percent. In England the density of union membership is 44 percent. The picture
is not very different outside Europe. In the United States, density has dropped to
16 percent. In Japan, it has dropped to 25 percent. In India, union density has been of a
very low order i.e., 10 percent. There are, however, some exceptions to this depressing
trend. Trade union density in Sweden, the highest in the world, stands at an extremely
impressive 91 percent the working population. Trade unions in Sweden are most
respected. They seek social, political and economic democracy. They participate at all
levels of decision-making, national and local, and share in the administration of laws.
The density in Denmark is 82 percent, and in Norway 63 percent, both very high by
world standards.
2.10 TRADE UNIONS IN INDIA

The trade union movement in India is over a century old. It is useful to take stock to
see whether the trade unions in India are at the centre stage or in periphery. In order to
do that, one may peruse the following relevant, though selective, statistics.
The Indian workforce 31.479 Crore (314.79 million) constitutes 37.3 percent of the
total population. Of the total workforce, 91.5 percent is accounted for by the informal
sector, while the formal sector accounts for 8.5 percent. Further, only abut 3 Crore
(30 million) (i.e. 9.5 percent of the workforce) are employed on permanent basis,
implying 90.5 percent being employed on casual basis. It has also been reported that
by December 1991, the claimed membership of the Indian trade union movement was
3.05 Crore (30.5 million) (i.e. 9.68 percent of the workforce) with 82.24 percent of the
trade union membership being accounted for by the organised sector. Thus the
unorganised sector is meagerly represented.
The World Labour Report summarises the trade union situation in India Indian
unions are too very fragmented. In many work places several trade unions compete for
the loyalty of the same body of workers and their rivalry is usually bitter and
sometimes violent. It is difficult to say how many trade unions operate at the national
level since many are not affiliated to any all-India federation. The early splits in Indian
trade unionism tended to be on ideological grounds each linked to a particular political
party. Much of the recent fragmentation, however, has centered on personalities and
occasionally on caste or regional considerations.
Apart from the low membership coverage and fragmentation of the trade unions,
several studies point to a decline in membership, growing alienation between trade
unions and membership particularly due to changing characteristics of the new
workforce and waning influence of national federations over the enterprise unions.
New pattern of unionisation points to a shift from organising workers in a region or
industry to the emergence of independent unions at the enterprise level whose
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obsession is with enterprise level concerns with no forum to link them with national
federations that could secure for them a voice at national policy making levels.
Several studies also point to a shift in employment from the organised to the
unorganised sector through subcontracting and emergence of a typical employment
practice where those work for the organisation do not have employment relationship,
but a contractual relationship.
Unfortunately trade unionism in India suffers from a variety of problems such as
politicisation of the unions, multiplicity of unions, inter-union rivalry, uneconomic
size, financial debility and dependence on outside leadership.
2.11 GROWTH OF TRADE UNION MOVEMENT IN INDIA

2.11.1 The First Strike
The origin of the movement can be traced to sporadic labour unrest dating back to
1877 when the workers at the Empress Mills at Nagpur struck following a wage cut.
In 1884, 5000 Bombay Textile Workers submitted a petition demanding regular
payment of wages, a weekly holiday, and a mid-day recess of thirty minutes. It is
estimated that there were 25 strikes between 1882 and 1890. These strikes were poorly
organised and short lived and inevitably ended in failure. The oppression by
employers was so severe that workers preferred to quit their jobs rather than go on
strike. Ironically, it was to promote the interests of British industry that the conditions
of workers were improved. Concerned about low labour costs, which gave an unfair
advantage to Indian factory made goods, the Lancashire and Manchester Chambers of
Commerce agitated for an inquiry into the conditions of Indian Workers.
2.11.2 The First Factories Act

In 1875, the first committee appointed to inquire into the conditions of factory work
favoured legal restriction in the form of factory laws. The first Factories Act was
adopted in 1881. The Factory Commission was appointed in 1885. The researcher
takes only one instance, the statement of a witness to the same commission on the
ginning and processing factories of Khandesh: "The same set of hands, men and
women, worked continuously day and night for eight consecutive days. Those who
went away for the night returned at three in the morning to make sure of being in time
when the doors opened at 4 a.m., and for 18 hours' work, from 4 a.m. to 10 p.m., three
or four annas was the wage. When the hands are absolutely tired out new hands are
entertained. Those working these excessive hours frequently died." There was another
Factories Act in 1891, and a Royal Commission on Labour was appointed in 1892.
Restrictions on hours of work and on the employment of women were the chief gains
of these investigations and legislation.
2.11.3 The First Workers' Organisation in India

Quite a large amount of pioneering work was done with remarkable perseverance by
some eminent individuals notably by Narayan Lokhande who can be treated as the
Father, of India's Modern Trade Union Movement. The Bombay Millhands'
Association formed in 1890 under the leadership of Narayan Lokhande was the first
workers' organisation in India. Essentially a welfare organisation to advance workers'
interests, the Association had no members, rules and regulations or funds. Soon a
number of other organisations of a similar nature came up, the chief among them
being the Kamgar Hitvardhak Sabha and Social Service League. Organisations, which
may more properly be called trade unions, came into existence at the turn of the
century, notable among them being the Amalgamated Society of Railway Servants of
India and Burma, Unions of Printers in Calcutta. The first systematic attempt to form a
trade union on permanent basis was done in 1906 in the Postal Offices at Bombay and
Calcutta. By the early years of the 20th century, strikes had become quite common in
all major industries. Even at this time. There were visible links between nationalist
politics and labour movement. In 1908, mill workers in Bombay went on strike for a
week to protest against the conviction of the nationalist leader Bal Gangadhar Tilak on
charges of sedition. There was also an outcry against the indenture system by which
labour was recruited for the plantations, leading to the abolition of the system in 1922.
2.11.4 Madras Labour Union

The Madras Labour Union was founded in 1918. Although it was primarily, an
association of textile workers in the European owned Buckingham and Carnatic Mills,
it also included workers in many other trades. Thiru Vika and B. P. Wadia the
nationalist leaders founded the Union. The monthly membership fee of the union was
one anna. The major grievances of workers at this time were the harsh treatment
meted out to Indian labour by the British supervisors, and the unduly short mid-day
recess. The union managed to obtain an extension of the recess from thirty to forty
minutes. It also opened a cheap grain shop and library for its members and started
some welfare activities.
There was a major confrontation between the union and the management over the
demand for a wage increase, which eventually led to a strike and lockout. The
management filed a civil suit in the Madras High Court claiming that Wadia pay
damages for inciting workers to breach their contract. As there was no legislation at
this time to protect the trade union, the court ruled that the Madras Labour Union was
an illegal conspiracy to hurt trading interests. An injunction was granted restraining
the activities of the union. The suit was ultimately withdrawn as a result of a
compromise whereby all victimised workers, with the exception of thirteen strike
leaders, were reinstated and Wadia and other outside leaders severed their link with
the union.6 Against this background N.M. Joshi introduced a bill for the rights of a
Trade Union. But the then member for Industries, Commerce and Labour himself
promised to bring legislation in the matter and the Trade Union Act of 1926 was
enacted.
By this time many active trade union leaders notably N. M. Joshi, Zabwalla, Solicitor
Jinwalla, S. C. Joshi, V. G. Dalvi and Dr. Baptista, came on the scene and strong
unions were organised specially in Port Trust, Dock staff, Bank employees (especially
Imperial Bank and currency office), Customs, Income-Tax, Ministerial staff etc.
2.11.5 Textile Labour Association

About the same time as the Madras Labour Union was being organised, Anusuyaben
Sarabhai had begun doing social work among mill workers in Ahmedabad, an activity
which was eventually to lead to the founding of the famous Mazdoor Mahajan Textile
Labour Association, in 1920. Gandhi declared that the Textile Labour Association,
Ahmedabad, was his laboratory for experimenting with his ideas on industrial
relations and a model labour union. He was duly satisfied with the success of the
experiment and advised other trade unions to emulate it.
There were a number of reasons for the spurt in unions in the twenties. Prices had
soared following World War I, and wages had not kept pace with inflation. The other
major factor was the growth of the nationalist Home Rule Movement following the
war, which nurtured the labour movement as part of its nationalist effort. At this time
the workers had no conception of a trade union and needed the guidance of outside
leaders. The outsiders were of many kinds. Some were philanthropists and social
workers (who were politicians). They saw in labour a potential base for their political
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organisation. The politicians were of many persuasions including socialists,

Gandhians who emphasized social work and the voluntary settlement of disputes, and
communists.
2.11.6 Formation of AITUC

The year 1920 also marked the formation of the All India Trade Union Congress
(AITUC). The main body of labour legislation and paradoxically enough even the
formation of the AITUC owes virtually to the activities of the International Labour
Organization (ILO). It was considered that the origin of the First World War was in
the disparities between the developed and undeveloped countries. As a result the treaty
of Versailles established two bodies to cure this ill viz., the League of Nations and the
ILO. India was recognized as a founder member of the latter. This is a tripartite body
on which each member state nominates its representatives. For the foundational
conference of ILO held in 1919 the Government of India nominated N. M. Joshi as the
labour member in consultation with the Social Service League, which was then
making the greatest contribution for the cause of workers. The ILO has a very
exercising machinery to see that various Governments take some actions on its
conventions and recommendations. All labour legislations in India owe a debt to these
conventions and recommendations of ILO. The formation of India's first Central
Labour Organisation was also wholly with a view to satisfy the credentials committee
of ILO. It required that the labour member nominated by Government be in
consultation with the most representative organisation of country's labour. The AITUC
came into existence in 1920 with the principal reason to decide the labour
representative for lLO's first annual conference. Thus the real fillip to the Trade union
movement in India both in matters of legislation and formation of Central Labour
Organisation came from an international body, viz., ILO and the Government's
commitment to that body. Dependence on international political institution has thus
been a birth malady of Indian Trade Union Movement and unfortunately it is not yet
free from these defects.
The AITUC claimed 64 affiliated unions with a membership of 1,40,854 in 1920 Lala
Lajpat Rai, the president of the Indian National Congress became the first president of
AITUC.
In 1924 there were 167 Trade unions with a quarter million members in India. The
Indian factories Act of 1922 enforced a ten-hour day.
2.11.7 Trade Unions Act

The Indian Trade Unions Act 1926 made it legal for any seven workers to combine in
a Trade Union. It also removed the pursuit of legitimate trade union activity from the
purview of civil and criminal proceedings. This is still the basic law governing trade
unions in the country.
Ideological Dissension
Ideological dissension in the labour movement began within few years of the AITUC
coming into being. There were three distinct ideological groups in the trade union
organisation: communists led by Shri M. N. Roy and Shri Shripad Amrut Dange,
nationalists led by Shri Gandhiji and Pandit Nehru, and moderates led by Shri N. M.
Joshi and Shri V. V. Giri. There were serious differences between these three groups
on such major issues as affiliation to international bodies, the attitude to be adopted
towards British rule and the nature of the relationship between trade unions and the
broader political movement. The communists wanted to affiliate the AITUC to such
leftist international organisations as the League against Imperialism and the
Pan-Pacific Trade Union Secretariat.
The moderates wanted affiliation with the BLO and the International Federation of
Trade Unions based in Amsterdam, The nationalists argued that affiliation with the
latter organisations would amount 10 the acceptance of perpetual dominion status for
the country under British hegemony. Similarly, the three groups saw the purpose of
the labour movement from entirely different points of view. The party ideology was
supreme to the communists, who saw the unions only as instruments for furthering
this ideology. For the nationalists, independence was the ultimate goal and they
expected the trade unions to make this their priority as well. The moderates, unlike the
first two, were trade unionists at heart. They wanted to pursue trade unionism in its
own right and not subjugate it completely to broader political aims and interests.
2.11.8 Formation of NTUF

From the mid-twenties of the present century onwards the communists launched a
major offensive to capture the AITUC. A part of their strategy was to start rival unions
in opposition to those dominated by the nationalists. By 1928 they had become
powerful enough to sponsor their own candidate for election to the office of the
President of the AITUC in opposition to the nationalist candidate Nehru. Nehru
managed to win the election by a narrow margin. In the 1929 session of the AITUC
chaired by Nehru the communists mustered enough support to carry a resolution
affiliating the federation to international communist forum. This resolution sparked
the first split in the labour movement. The moderates, who were deeply opposed to the
affiliation of the AITUC with the League against Imperialism and the Pan-Pacific
Secretariat, walked out of the federation and eventually formed the National Trade
Union Federation (NTUF). Within two years of this event the movement suffered a
further split. On finding themselves a minority in the AITUC, the communists walked
out of it in 1931 to form the Red Trade Union Congress. The dissociation of the
communists from the AITUC was, however, short-lived. They returned to the AITUC
the moment the British banned the Red Trade Union Congress. The British were the
most favourably disposed toward the moderate NTUF. N.M. Joshi, the moderate
leader, was appointed a member of the Royal Commission.
The splintering away of the NTUF had cost the AITUC thirty affiliated unions with
close on a hundred thousand members. However, the departure of the communists had
not made much difference. In any case, the Red Trade Union Congress quickly fell
apart, and the communists returned to the AITUC. During the next few years, there
was reconciliation between the AITUC and NTUF as well. The realisation dawned
that the split had occurred on issues such as affiliation with international
organisations, which were of no concern to the ordinary worker. By 1940 the NTUF
had dissolved itself completely and merged with the AITUC. It was agreed that the
AITUC would not affiliate itself with any international organisation, and further, that
political questions would be decided only on the basis of a two-thirds majority.
On the whole the thirties were a depressing period for Indian labour. There were
widespread attempts to introduce rationalisation schemes and to affect wage cuts. The
wartime inflation also took its toll. While the militant elements on the labour
movement fought for the redressal of workers grievances, the movement itself was
steeped in political dissent. The popular governments voted to power in the 1937
elections did not measure up to the workers' expectations although prominent labour
leaders such as Shri Nanda and Shri Giri had taken over as labour ministers. They did
pass some useful legislations, however a major piece of legislation was the Bombay
Industrial Disputes Act of 1938, which attempted to eliminate inter union rivalries by
introducing a system recognising the dominant union.
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2.11.9 Formation of Indian Federation of Labour

In 1939, when the British unilaterally involved India in World War II, there was
another wave of schisms in the labour movement. Congress governments voted to
power in the 1937 elections resigned in protest against the country's involvement in an
alien war, and the nationalists in the AITUC were naturally opposed to the war effort.
But Roy and his supporters stood by the British. They founded a rival labour
movement in 1941 called the Indian Federation of Labour (IFL). Initially the
communists opposed the war effort and British had in fact jailed most of their leaders.
But there was a dramatic volt face in their position in 1942 when Soviet Russia joined
the Allies.
In the same year the nationalists launched the Quit India movement under Gandhi\s
leadership. The British reacted to these developments by emptying the jails of
communists and filling them up with nationalists. With the nationalists in jail, the
AITUC was ripe for capture by the communists, and they made the most of the
opportunity. By the end of the war there were four distinct groups of trade unionists,
two in jail and two out of it Among the nationalists who were in jail there had
existed/for some time a pressure group called the congress socialists. The two groups
outside jail were the Roy faction and communists who had in common their support
for the British war effort, but had maintained their separate identities. The stage was
set for a formal division of the labour movement, which would reflect the ideological
differences.
At this juncture, the Government of India became quite active on the labour front and
Dr. B. R. Ambedkar, the then Labour Member of the Executive Council to Viceroy
with the assistance of S.C. Joshi was engaged and exercised to take action on all the
recommendations of the Royal Commission on Labour. At their instance a
fact-finding committee was appointed to study the then existing situation. During the
period 1945-47 most of the present labour legislations were drafted and the
conciliation and other machinery were also well conceived. In 1947 when the National
Government was formed Shri S. C. Joshi, the then Chief Labour Commissioner,
was entrusted with the work of implementing the various provisions of labour law.
The whole of the present set up owes a debt to the work that was done by him and
Shri V. V. Giri, the former president of India.
2.11.10 Formation of INTUC, HMS and UTUC

With the formation of National Government Sardar Vallabhbhai Patel advocated very
strongly the cause of forming a new central organisation of labour. It was his view that
the National Government must have the support of organised labour and for this
purpose the AITUC cannot be relied upon since it was thriving on foreign support and
used to change its colours according to the will of its foreign masters.
So, on 3rd May 1947, the Indian National Trade Union Congress (INTUC) was
formed. The number of unions represented in the inaugural meet was around 200 with
a total membership of over 5,75,000. There was now no doubt that the AITUC was the
labour organisation of the communists, and the INTUC the labour organisation of the
congress This was further confirmed when the congress socialists, who had stayed
behind in the AITUC, decided to walk out in 1948 and form the Hind Mazdoor
Panchayat (HMP). The socialists hoped to draw into their fold all non-congress and
non-communist trade unionists. This hope was partly realised when the Roy faction
IFL merged with the HMP to form the Hind Mazdoor Sabha (HMS). However, the
inaugural session of the HMS witnessed yet another split in the labour movement.
Revolutionary socialists and other non-communist Marxist groups from West Bengal
under the leadership of Shri Mrinal Kanti Bose alleged that the HMS was dominated
by socialists and decided to form the United Trade Union Congress (UTUC). The
UTUC is formally committed to the pursuit of a classless society and non-political
unionism. In practice, however, many of its members are supporters of the

Revolutionary Socialist Party.
By the fifties the fragmentation of the labour movement on political lines had become
a permanent fact. Disunity was costing the labour movement dearly. There were
periodic attempts at unity, but nothing much came of them. The INTUC was firmly
opposed to any alliance with the communists. The HMS was willing to consider a
broad-based unity that would include all groups, but not for any arrangement with the
AITUC alone. The major stumbling block to unity was the bitter experience to other
groups had with the communists in the thirties. Even in specific industries such as
railways where a merger between rival groups did take place, unity was short-lived
All that could be achieved between rival trade unions were purely local ad-hoc
arrangements.
2.11.11 Formation of BMS

Before the rise of Bharatiya Mazdoor Sangh (BMS) the labour field was dominated by
political unionism. The recognised Central Labour Organisations were the wings of
different political parties or groups. This often made workers the pawns in the
power-game of different parties. The conscientious workers were awaiting the advent
of a national cadre, based upon genuine trade unionism, i.e. an Organisation of the
workers/for the workers, and by the workers. They were equally opposed to political
unionism as well as sheer economism i.e. "bread butter unionism". They were votaries
of Rashtraneetee or Lokaneetee. They sought protection and promotion of workers'
interests within the framework of national interests, since they were convinced
that there was no incompatibility between the two. They considered society as the
third-and more important-party to all industrial relations, and the consumers' interest
as the nearest economic equivalent to national interest. Some of them met at Bhopal
on 23 July 1955 (the Tilak Jayanti Day) and announced the formation of a new
National Trade Union Center, Bharatiya Mazdoor Sangh.
During the All India Conference at Dhanbad in 1994, BMS has given the clarion call
to all its Karyakartas to be prepared to face the third world war and second war of
economic independence unleashed by the developed countries against the developing
countries. The emissaries of the developed countries are the multinational companies
who look up to India as an ideal market to sell their outdated consumer products &
technologies with a view to siphon out the profits to their respective countries. In fact
there is concerted effort to even change the tastes and outlook of the average Indian
through satellite and junk food channels to suit them. One might recall that the Indians
were addicted to tea and coffee by the then British rulers by distributing them free of
cost during 1940s. Today not surprisingly India is the largest consumers of both the
beverages. Now in this decade the soft drinks and potato chips rule the roost. BMS
has made it adequately clear that every country that has to develop has to adopt and
adapt methods, which suits it, both culturally and economically. Today India needs
modernisation and not blind westernisation. BMS publications Hindu Economics by
Shri M. G. Bokare and Third Way by Mananeeya Dattopant Thengdi are eye-openers
to the planners of the nation in this direction. Practising SWADESHI is the only
remedy to counter this onslaught.
In 1996, in its 41st year, BMS has rededicated itself in organising the unorganised
labour in the country (around 93% of the total workforce) with a view to raise their
standard of living and protect them against exploitation. Every member of the BMS
has donated minimum Rs.100 in the 40th year towards the cause.
BMS therefore encourages its workers to undertake social and constructive work
along with day-to-day union work. During the Pakistan war, BMS unions suspended
their demands and engaged themselves in repairing runways and donating blood for
army men.
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Aims and Objects of BMS

Those who attended the convention of 23 July 1955, the formation day, had full
confidence in the ability of our national genius to evolve new social systems and
philosophical formulae. They were determined to steer clear of both capitalism as well
as communism. They were opposed to the crude materialism of West and felt that in
the absence of Bharatiya spiritual values it was impossible to evolve any healthy
social structure free from internal dissensions and strife. They had implicit faith in the
scientific character and ultimate victory of Bharatiya Social Order based upon the
tenets of integral humanism.
The pioneers of this new movement rejected the Class Concept. They stood neither
for class-conflict nor for class-collaboration. The class concept which is a
fiction would ultimately result in the disintegration of the nation, they declared.
They however, refused to identify national interests with those of the privileged few in
the economic, political or any other department of national life as the criterion for
determining the level of national life. The criterion for determining the level of
national prosperity was, according to them, the living condition of the financially
weakest constituent of the nation. To improve the lot of the underdog they would
resort to the process of collective bargaining, so far as possible, and to conflict,
wherever necessary. Exploitation, injustice and inequality must be put an end. The
ratio between the minimum and the maximum income in the land should be 1:10.
For industrial workers, they demanded security of service, need based minimum wage,
wage differentials on the basis of job-evaluation, right to bonus as deferred wage, full
neutralisation of price-rise so as to ensure the real wage, massive industrial housing
programmes, and integrated social security and welfare schemes.
2.11.12 Formation of CITU and UTUC (LS)

By 1965 a splinter group of socialists headed by Shri George Fernandes formed a
second Hind Mazdoor Panchayat. The split in the communist movement inevitably
divided the AITUC, leading to the emergence of the Centre of Indian Trade Unions
(CITU) in 1970. The UTUC was also split into two along ideological lines, the
splinter group calling itself UTUC (Lenin Sarani) i.e., UTUC (LS). Regional Trade
Union Organisations affiliated to regional political parties such as the DMK,
AIADMK and MDMK in Tamilnadu and the Shiv Sena in Maharashtra, have also
emerged.
CTUOs in India (Central Trade Union Organisations)
At present there are twelve CTUOs in India as follows:
1.
Bharatiya Mazdoor Sangh (BMS)
2.
All India Trade Union Congress (AITUC)
3.
Centre of Indian Trade Unions (CITU)
4.
Hind Mazdoor Kisan Panchayat (HMKP)
5.
Hind Mazdoor Sabha (HMS)
6.
Indian Federation of Free Trade Unions (IFFTU)
7.
Indian National Trade Union Congress (INTUC)
8.
National Front of Indian Trade Unions (NFITU)
9.
National Labour Organisation (NLO)
10. Trade Unions Co-ordination Centre (TUCC)

11. United Trade Union Congress (UTUC) and
12. United Trade Union Congress - Lenin Sarani (UTUC - LS)
Case: No Trade Union for Indian BPO Workers
ry to imagine the sophisticated Indian BPO worker protesting with a red flag in his/her hand.
Hard to imagine? This might just happen if the trade unions succeed in their efforts to
convince Indian BPO employees to form a union. Trade unions are making effort for quiet
some time to support BPO employees to form trade unions. While much has been written about the
high salaries and perks earned by BPO employs, the other side is that the high level of stress makes it
difficult for the employees to continue working for a long period of time. The industry experts believe
that stress forces one in seven workers to leave the industry every year.
In fact, the recent VV Giri National Institute of Labours report on call center equates the condition at
Indian call centers with 19th century prisons or Roman slave ship. The study said that respondents
reported symptoms such as nervousness, chronic fatigue, body ache, insomnia, nausea, anxiety,
restlessness, irritability and even depression due to the odd working hours and stress. Workers are
also subjected to èmotional labour as they are required to display certain kinds of expressions for
customer satisfaction. In some cases even facial expressions are monitored and any deviations from
the defined framework are considered defects. In this scenario, it would be easy for trade unions to
convince BPO employees to form a union. Right? You couldnt be farther from truth. In fact, CITU
recently announced that it has deployed its cadres in Bangalore, Chandigarh, Chennai and Hyderabad
to contact IT and BPO workers to establish Indias first nationwide union of IT workers by the end of
2006.
Forming a trade union is the fundamental right of any worker and BPOs are violating the basic
labour rules and regulations. For instance, every company has to form grievance committee for
women employees but many BPOs dont have it. Also, Maternity Act is being violated and women
employees are made to work late at night. Many times, the employees dont get Provident Fund and
ESI benefits as well. We want BPO employees to form a trade union so that they are able to fight for
their rights, KP Rao, member of Delhi State Committee of CITU said. This image of BPO workers
as cyber coolies is further reiterated, if one talks to Chetan Bhagat, the successful writer of `Five
Point Someone. Chetan researched his recently launched book, Òne night@call center, for six
months. Many a times, he was forced to sneak into call centers at the peak night time since the
company managements wouldn't allow him to "rightfully" research for the book. He studied their
training materials and evaluation sheets and listened into live calls to gather dope for his book.
Bhagat also traveled with the employees in the pick-up car, ate with them at the canteen and
interviewed them. The call center employees, I interacted with during the research for my recently
launched book, Òne night@call center, were intelligent and clever and certainly deserve better jobs
than the one where they just have to answer phone calls. BPOs are corroding a generation. I mean,
there is something seriously wrong if someone gets ticked for spending too much time in the
bathroom, says Bhagat. While that is one view, the BPO industry and the analysts present the other
view. The first and foremost argument which goes in favor of BPO community is that the huge
demand and supply ratio makes it apparent that the companies treat their employees well.
This is supported by Sujoy Chohan, Vice President and Research Director Offshore BPO. Unlike
factory workers, the trade unions are dealing with an educated set of people who have made the
choice of working at a call center. Moreover, they are working in an exceptionally good environment
with good salaries and frankly, I dont see any reason as to why they should form a trade union.
Another thing which goes against these trade unions is that they are seen as negative in the country.
The history shows that trade unions have never worked to the advantage of the employees in the
country.
Also, there is a huge demand and supply gap in the Indian BPOs, making it critical that the companies
look after their employees to reduce the attrition rate. According to NASSCOM figures, BPO sector
directly employs 3,50,000 people in the country and is expected to add 80,000 jobs this year.
The demand and supply gap ensures that BPO and call center employees are well looked after. The
companies are going out of their way to provide the best possible environment to work in for their
employees. Also, one has to understand that the demands of the outsourcing business are different.
You have to be there when the customer wants you and not when you want the customer, Ashok
Chadha, President, Global Vantedge Inc. said.
Source: www.rediff.com
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2.12 LET US SUM UP

Trade unions are organisations. They have their own structure, policies, norms,
activities, communication system, and leadership. They interact with the environment
and strive to respond to its pressures/challenges not for mere survival, but to remain
effective organisationally. Trade unions are formed to protect and promote the
interests of their members. Their primary function is to protect the interests of workers
against discrimination and unfair labor practices. Trade unions perform a number of
functions in order to achieve the objectives. These functions can be broadly classified
into two categories-militant functions and fraternal function. They provide the advice
and support to ensure that the differences of opinion do not turn into major conflicts.
The central function of a trade union is to represent people at work. But they also have
a wider role in protecting their interests. Employees join trade unions due to variety of
reasons like getting greater bargaining power, lesser discrimination, sense of
belongingness, sense of participation, sense of security etc. Traditionally trade unions
role has been to protect jobs and real earnings, secure better conditions of work and
life and fight against exploitation and arbitrariness to ensure fairness and equity in
employment contexts. Every trade union has its own structure, which reflects the
stated role of each member, division of tasks, the interrelationship between the people
performing different tasks, and the coordination of various activities of the
organisation. Trade unionism in India suffers from a variety of problems such as
politicisation of the unions, multiplicity of unions, inter-union rivalry, uneconomic
size, financial debility and dependence on outside leadership.
2.13 KEYWORDS
Trade Unions: It is an organization of workers who have come together to achieve
common goals.
Negotiation: It is a process by which the involved parties or group resolve matters of
dispute by holding discussions and coming to an agreement.
Militant Functions: A set of activities performed by trade unions leads to the
betterment of the position of their members in relation to their employment.
Fraternal Functions: A set of activities performed by trade unions aims at rendering
help to its members in times of need, and improving their efficiency.
AITUC: All India Trade Union Congress
NTUF: National Trade Union Federation
INTUC: Indian National Trade Union Congress

Fill in the Blanks
1. Trade unions protect the workers against any kinds of discrimination at work. This
comes under .. functions of the union.
2. Trade unions help the employees to raise their productivity by training them. This
comes under the .. functions of the union.
3. The primary function of the trade union is to ..
4. In trade unions, authority is delegated ..
5. .. Trade Union was formed in 1918.

6. .. governs all the activities of trade unions in India.
7. IFL and HMP merged together to form the ..

1. What are trade unions? What are the reasons behind the formation of trade
unions?
2. Contrast the militant and fraternal functions of trade unions.
3. Why do employees want to become part of trade unions? What role do these
unions play in employee development?
4. Briefly discuss the management of trade of unions. Emphasise the role of
authority and responsibility in unions.
5. 'Too much power, too little morality'. Why this sentence is often used in context
of trade unions?
6. Comment on the present condition of trade unions in India.
7. Write short notes on: Madras Labor Union, AITUC and Hind Mazdoor Sabha.

House
39
Trade Unionism
40
and Labour Laws
LESSON
3
ROLE OF EMPLOYERS ASSOCIATION AND STATE IN
INDUSTRIAL RELATIONS
CONTENTS
3.0
Aims and Objectives
3.1
Introduction
3.2
Employers Association
3.3
3.2.1
Objectives
3.2.2
Origin and Growth
3.2.3
Aims and Objectives of EO
3.2.4
Council of Indian Employers (CIE)
3.2.5
International Organisation of Employers (IOE)
3.2.6
Organisation and Management of EOS in India
3.2.7
Future Challenges
3.2.8
Evaluation
State Policies and Industrial Relations

3.3.1
Role of the State in Industrial Relations
3.3.2
Constitution and Labour Policies
3.3.3
Tripartite Consultations
3.3.4
The Working of Tripartism A Critical Analysis
3.3.5
Bipartite Consultative Machinery
3.3.6
Limits to the Powers of the State
3.4
Let us Sum up
3.5
Keywords
3.6
Self Assessment
3.7
Review Questions
3.8
Suggested Readings

z
Enumerate the objectives of employers associations
Discuss the origin and growth of employers associations
Examine the role of various associations
Underline the role of state in industrial relations
Analyse the tripartite and bipartite consultative machinery
3.1 INTRODUCTION
Employers' Organisations (EOs) are "formal groups of employers set up to defend,
represent or advise affiliated employers and to strengthen their position in society at
large with respect to labour matters as distinct from economic matters. They may
conclude collective agreements but this is not a formal rule and cannot be an element
of their definition. Unlike trade unions, which are composed of individual persons,
employers' organisations are composed of enterprises. Most legal definitions of a trade
union apply to them (Oechslin, 1990). The Trade Union Act, 1926 includes in its
purview, both associations of workers as well as employers.
In the initial years of Industrial Revolution, Government followed the policy of
Laissez faire (non-interference) in settling Employers' and Workers' problems. Parties
were left free to settle scores the way they liked. Towards the end of the 19th century,
the change was witnessed in the attitude of the Government.
In this lesson we will study the role of both employers association and state in
industrial relations.
3.2 EMPLOYERS ASSOCIATION

3.2.1 Objectives
Employers' Associations are formed to promote and protect the interests of employers
in Trade and Industry. They are "formal groups of employers set up to defend,
represent or advise affiliated employers". They perform several important functions:
Primary
(a) Promote and protect the interests of employers engaged in industry, trade and
commerce in India.
(b) Study, analyse and disseminate information relating to labour policy,
labour-management relations, collective bargaining, etc.
(c) Offer advice concerning various aspects of labour policy.
(d) Liaise with Union Government and initiate steps that are representative and
legislative in nature.
Secondary
(a) Train and develop staff and members.
(b) Obtain data on wages and conditions of work in industries attached to them.
(c) Come out with surveys, research-based reports on issues of importance to both
labour and management.
(d) Take up projects for social and family welfare.
(e) Deal with safety and health at work place and working environment.
(f) Initiate steps to improve public image and improve public relations.
(g) Educate the public regarding the character, scope, importance and needs of trade,
industry and commerce represented by members.
3.2.2 Origin and Growth

The origin, growth and development of EOs in India have three distinct phases: (i) the
period upto 1933 (ii) the period between 1933 and 1946; and, the post-independence
41
Role of Employers
Association and State in
42
and Labour Laws
period. Each phase reveals its own structural and functional characteristics. In each
phase, the organisations had to undergo changes because of contemporary economic,
social and political developments. The changes have been more rapid in some areas
than in others. The periods referred to also coincided with important developments in
the labour field and these have had a great impact on the pattern and development of
EOs and also on their functioning.
Pre-1933 Period: Merchants associations (chambers of commerce) and industrial
associations (jute, textiles, engineering, etc.) come into being or were primarily set up
to pursue the sectional interests of their constituents.
Until the First World War, the chambers of commerce and trade associations did not
consider it important to deal with labour problems, except in stray cases of
employee/union militancy. By and large the attitude of employers was one of
indifference and, occasionally, aggression. Individual units had autonomy to deal with
labour matters. But soon the jute and textiles employers began to regulate working
hours and introduce standard remuneration to workers because of conditions created
by the war and shortage of skilled labour. During this period, unions also started
gaining ground. Though the chambers of commerce took birth way back in 1830s,
when the East India Company withdrew from its trading activities, the British and
giant Indian (mainly Parsi) industrial and business interests teamed up in 1920 under
the umbrella of Associated Chambers of Commerce (ASSOCHAM). The big Indian
trading and industrial interests that had long been in conflict with British business
interests and supporting Swadeshi Movement as a part of the struggle for political
independence have played a major role in setting up the Federation of Indian Chamber
of Commerce and Industry (FICCI) in 1927. Certain other developments which
occurred rapidly during the 1920s had a bearing in providing the impetus for
recognising the nature of the employers' role in dealing with industrial relations
aspects. The first in the series of these developments was the formation of the
International Labour Organisation (ILO) in 1919. The emergence of the trade union
movement in the wake of the First World War led to the enactment in 1926 of The
Trade Union Act. The Royal Commission on Labour (Whitley Commission) was set
up in 1929 to enquire into the conditions of Labour. Following the recommendations
of the Whitley Commission, labour departments were set up to redress workers'
grievances and improve their conditions. The existing chambers of commerce could
not espouse effectively, the interests of industrial employers, especially in the area of
industrial relations and labour matters. As a result, the need for greater coordination of
employers' collective interest, resolving common policies for concerted action in
labour matters and labour legislations was felt, thus necessitating the formation of
separate EOs to deal with related problems in a more exclusive and specialised
manner.
Among all the reasons mentioned above, the formation of the ILO had provided an
explicit rationale for the formation of Federation of Employers' Association during the
years, immediately following the First World War. India, as one of the original
members of the ILO (set up by the Treaty of Versailles in 1919), had the responsibility
of sending a tripartite delegation to the International Labour Conference that is held
every year. According to the constitution of the ILO, the Government of each Member
State should nominate Employers' and Workers' Delegates and Advisors, in agreement
with the industrial organisations which are most representative of the interests
concerned.
This posed a problem to both these parties in as much as there was no single
organisation in existence at the time which was representative of either workers or
employers on an all-India basis which could be entrusted with the tasks of selection of
their respective delegates. Under the circumstances, when the Government of India
resorted to the expedient of nominating these delegates on their own, trade unions and
employers' organisations found the need to establish representative federations at the
national level. While the trade unions acted speedily and established the All-India
Trade Union Congress in 1920, it took some years for the employers' organisations to
iron out the differences among different chambers and associations. Efforts to set up
Employers' Federation of India at Mumbai, though began in 1920 under the auspices
of ASSOCHAM and a few other industry associations, could not materialise during
1920s. Since the formation of the Federation of Indian Chamber of Commerce and
Industry (FICCI) with headquarters at Delhi in 1927, the Indian Employers' delegate
began to be nominated on the recommendation of FICCI. It was in 1931 that the
Government of India informed FICCI that in terms of the Treaty of Versailles, the
Chambers of Commerce could not be treated as an organisation of industrial
employers which could be consulted by the member-governments in nominating
employers' delegates. To overcome the difficulty, FICCI announced the setting up of
the All India Organisation of Industrial Employers (subsequently, the term "industrial"
was dropped from the name) (AIOE) on December 12, 1931. ASSOCHAM and others
including Bombay Chamber and Bengal Chamber took the initiative to register
Employers' Federation of India (EFI) with headquarters at Mumbai in 1933, under the
Indian Companies Act.
1933-46: Thus, two EOs came into existence in 1933, with the AIOE representing
mainly Indian and the EFI mainly the British and Parsi business and industrial
interests in the large-scale, organised sector. The modest objective of these two
organisations in the beginning was to facilitate the selection of employers' delegates
for the meetings and conferences of the ILO.
Since the two bodies began to represent mainly the large-scale industrial employers,
the need for a third limb of EOs representing the medium and small size employers
was felt. Under the inspiring leadership of M. Vishwesvarayya, a renowned engineer,
the All India Manufacturers' Organisation (AIMO) was set up in Bombay in 1941 to
represent both the trade and labour interests of the member firms in the medium and
small sectors. The AIMO could secure recognition from the Government of India for
representation at the national level and in the 1980s for the International Labour
Conference, as any other EO.
1947-Present: In the wake of the independence of the country in 1947, a plethora of
labour laws were enacted. The industrial fabric of the country began to change with
the implementation of successive Five-Year Plans and the demographic profile and
aspirations of the employees also began to undergo major changes. All these provided
new opportunities and challenges for EOs. The growth of public sector consequent
upon Government's endeavour to raise it to the "commanding heights" of the economy
led, eventually to the claim by the public sector, to represent employer's interests. A
representative organisation for public sector, called Standing Conference on Public
Enterprises (SCOPE) was registered on September 29, 1970 as a society under the
Societies Act.
Structure
At present employers' organisations are organised at three levels:
(a) Local organisations: They serve the interests of local businessmen. The Bombay
Mill Owners' Association, for example, has been formed to protect the local
interests of manufacturing units operating within the city. Such bodies operate
through the local chambers of commerce.
(b) Regional organisations: The regional outfits such as Employers' Federation to
South India and Employers' Association, Kolkata are affiliated to Central
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Role of Employers
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and Labour Laws
Employers Organisation. They offer consultancy service; take care of training,

safety and welfare measures on behalf of their members. They even have special
committees for specific region or industry-related problems.
(c) Central organisations: As stated earlier AIOE, EFI and AIMO operated as apex
bodies, governing the affairs of several regional and local associations. To have
better coordination, a superstructure called the Council of Indian Employers was
formed in 1956, bringing AIOE and EFI under one umbrella.
AIOE: The All India Organisation of Employers is a unitary type of organisation, set
up in 1953. Members hail from manufacturing, banking, insurance and commercial
establishments. However, there is no sub-organisation on an industrial or geographical
basis. The President is elected every year.
EFI: The Employers' Federation of India has a federal structure; formed in 1933 it has
a governing body, executive committee and the secretariat. The governing body
formulates policies, the executive committee implements policies and the secretariat
with its own permanent staff is responsible for carrying out the decisions of the
governing body. It had only four presidents in over 50 years. EFI was registered as a
trade union in 1963 under the Indian Trade Unions Act of 1926.
IOE: The International Organisation of Employers represents the interests of
employers in all social and labour matters at the international level. Founded in 1920
with headquarters in Geneva, it has a membership of Employers' Associations from
over 100 countries. The Central Council of Indian Employers is a member of IOE.
3.2.3 Aims and Objectives of EO

The main aims and objectives of EOs are similar though they may vary to an extent in
matter of detail.
AIOE: The principal objective of the AIOE is said to educate employers as to how
best they could maintain harmonious industrial relations. But the first objective listed
in its rules and regulations reads as follows: "To take all steps which may be necessary
to promote and protect the development of industry, trade and commerce of India."
The same point was emphasised differently in the list of objectives. To mention a few:
(i) To take all steps which may be necessary in promoting, supporting or opposing
legislative and other measures affecting or likely to affect directly or indirectly,
industry, trade and commerce in general or of particular interest; (ii) to take all
possible steps for counteracting activities inimical to industry, trade and commerce of
the country; (iii) to promote and protect the interests of employers engaged in
industry, trade and commerce in India.
The principal objectives relating to the industrial relations aspect include: (i) to
encourage the formation of EOs and to foster cooperation between EOs in India and
abroad; (ii) to nominate delegates and advisors, etc., representing Indian employers at
the International Labour Conference, International Chamber of Commerce and other
Conferences and Committees affecting the interests of trade, commerce and industry,
whether as employers or otherwise; (iii) to promote and support all well considered
schemes for the general uplift of the labour and to take all steps to establish
harmonious relations between capital and labour; (iv) to educate the public with
regard to the character, scope, importance and needs of industry, trade and commerce
represented by the members.
The rules and regulations of the AIOE thus, seem to provide for trade related activities
as well, though the preoccupation of the AIOE has always been, in influencing labour
policy and legislation and disseminating information and news to members.
EFI: The main objectives of the EFI as embodied in its constitution are: (i) to regulate
the relations between employers and workers; (ii) to promote and protect the
legitimate interest of employers engaged in industries, trade and commerce; (iii) to
maintain harmonious relations between management and labour and to initiate and
support all properly considered schemes that would increase productivity and at the
same time vouchsafe to labour a fair share of the ncreased return; and, (iv) to collect
and disseminate information affecting employers and to advise members on their
employer-employee and other ancillary problems.
Although consideration of broad economic problems is not excluded from its purview,
the EFI usually likes to reserve commercial questions such as customs and taxation for
Chambers of Commerce.
SCOPE: The objectives of the SCOPE cover a wider ambit: "SCOPE looks upon its
tasks as both internal and external to the public sector. Internally, it would endeavour
to assist the public sector in such ways as would help improve its total performance.
Externally, it would help improve its total boundary role in conveying such
information and advice to the community and the Government as would generally
help the public sector in its role.
New Roles of EOs
1. Lobbying/awareness creation
2. Training consultancy services
3. Referral services/database service
4. Information dissemination/publication/experience sharing
5. Relations with social partners and other stakeholders
6. Legal advice/assistance
7. Collective bargaining
8. Social service
9. Other service, if any as per exigencies
3.2.4 Council of Indian Employers (CIE)

The main object in setting up the CIE was to ensure closer cooperation and
coordination between the two bodies which together represent particularly the
interests of large-scale industry in India. In the year 1973, the SCOPE joined the CIE.
The CIE, with its headquarters in the office of the AIOE in Delhi, consists of equal
number of representatives of the AIOE, EFI and SCOPE. Its principal functions are:
(i) to discuss in general problems confronting Indian employers, with particular
reference to matters coming up before the ILO conferences and various Industrial
Committees and to formulate, from time to time, the policy and attitude of Indian
employers in the matter of collaboration with employers of other countries; (ii) to
furnish and exchange information on problems relating to industrial relations with
employers of other countries; (iii) to maintain a close contact with the International
Organisation of Employers (IOE) with a view to study international trends in the
employer-employee relations and to keep the two parties informed of such matters;
and, (iv) to select the personnel of the Indian Employers' Delegation to the various
Conferences and Committees of the ILO.
On behalf of the three organisations, the CIE also submits representations to the
Government of India on matters involving important issues of labour policy on which
a common approach is desired.
45
Role of Employers
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and Labour Laws
Under the Constitution of the ILO, its member countries (India is a member of the
ILO since its inception in 1919) should accord recognition to the most representative
organisations of unions and employers. CIE is the organisation which represents the
Indian employers.
3.2.5 International Organisation of Employers (IOE)

Founded in 1920, the International Organisation of Employers with headquarters in
Geneva is the only world organisation authoritatively representing the interests of
employers of the free world in all social and labour matters at the international level.
As of June 1992, it has a membership of EOs in 104 countries. One of the IOE's main
tasks is to closely follow the activities of the ILO where, under its consultative status,
it strives to preserve the principle of tripartism, according to which employers and
workers are represented at all major ILO meetings on an equal footing with the
governments, from whom they enjoy complete independence, at all times, notably
when it comes to voting. The IOE also acts as a secretariat to the employer groups at
almost all of its tripartite meetings and ensures continuous liaison with its members,
worldwide. IOE membership is open to any national central federation of employers
upholding the principles of free enterprise, which is independent of any control or
interference from governmental authority or any outside body and whose membership
is composed, exclusively, of employers. CIE is a member of the IOE.
3.2.6 Organisation and Management of EOS in India

Membership: As in most countries, in India, too, membership in EOs is voluntary.
AIOE has two categories of members: individual (enterprise) and association (group
of enterprises). EFI additionally has provision for honorary membership whereby
individuals with special skill or experience, such as legal luminaries or professionals
are co-opted to serve on various committees of the federation. While the
predominantly private sector EOs do not bar public sector enterprises from becoming
members and rather welcome their entry and indeed have a few, the SCOPE remains
an EO exclusively for the public sector, that, too, mainly the public sector enterprises
in the central sphere.
Nearly 648 EOs were registered in 1986 under the Trade Unions Act. Of these,
however, only 98 submitted returns. Several more were registered under the
Companies Act and the Societies Act whose number is not known. The definition of
an EO under these three legal forms is much wider than the meaning assigned to EO
in the ILO parlance and include industry-associations, chambers of commerce, etc., at
various levels, including national, regional, state, local, etc.
In 1986, the AIOE and the EFI had 59 and 31 association-members respectively; even
the strength of individual members (enterprises) was low at 130 and 247 respectively.
Some members in both the categories are common for the AIOE and the EFI. The
representative character of the AIOE and the EFI, even with regard to the large
industry, is thus, rather limited. The SCOPE, on the other hand, is the most
representative organisation for the public enterprises in Central sphere (i.e., those
established by the Union Government) with over 95 per cent of them being members
of the SCOPE.
Organisation Structure: The AIOE has a unitary type of organisation. It has no
sub-organisation on an industrial or geographical basis. Even though there are
important clusters of members in Calcutta and Bombay, there has been no attempt to
create local committees or offices. The EFI, however, has federal type of organisation
structure with its activities distributed over a Central body and the regional
committees. Both the AIOE and the EFI have a governing body, executive committee
and the secretariat. The governing body is the supreme policy-making body, the
executive committee is responsible for implementing the policies and objectives of the
organisation and the secretariat with a permanent staff, is responsible for carrying out
the decisions of the governing body. There is greater continuity in the leadership of
the EFI than the AIOE. The EFI had only four presidents in over 50 years. The AIOE
which used to elect a new president every two years is now electing a new president
every year. The EFI constitution provides for setting up special technical committees
if need arises to provide special attention on any subject.
The SCOPE has two administrative organs, the Governing Council and the Executive
Board besides the Secretariat with permanent staff. The Governing council lays down
the policies and elects office-bearers, the Executive Board oversees implementation of
policies. The chief Executive of a member enterprise/organisation shall automatically
be a member of the Governing Council. Additionally, it has three government
representatives nominated by the Director-General, Department of Public Enterprises,
as ex-officio member of the Governing Council with full voting rights.
Finances: EOs are referred to as rich men's poor clubs. The EFI's balance sheet for
1985-86 shows an income of Rs. 20 lakh and that of AIOE Rs. 5 lakh, approximately.
Nearly half of the income of the EFI and one-fourth of the income of the AIOE are
from membership-subscriptions. Other incomes include interest on corpus/deposits,
conferences, publications, etc. Excessive dependence on income from subscription
makes EOs financially vulnerable. The surest way for them to raise funds is to
upgrade the quality, relevance and usefulness of services to their members and other
constituents, including the community.
Representation: EOs in India play two types of roles in representing the interests of
their members: One, they are called to nominate representatives of employers in
voluntary or statutory bodies set up not only to determine wages and conditions of
employment of workers in a particular industry/sector, but also for consultation and
cooperation on social and labour matters in national and global context. Secondly,
they seek to redress the grievances arising from legislative or other measures by
making submissions to the concerned authorities. It is difficult to recapitulate and
synthesise the role played by EOs in representing the interests of employers in the
ILO, various committees/institutions, bipartite and tripartite at the national level and
on various issues such as legislation, voluntary codes, social security, bonus, etc.
Services: The real worth of an EO and the best justification for its support is the range
of services that it provides to its members. Within the overall framework of the need
to develop enlightened human resource management practices, the kind and range of
services that an EO could provide rests mainly on the needs of the members and their
priorities as also the resources and competence within the leadership and secretariat of
the EO. Some of the basic services every EO may be expected to provide include the
following: (i) study and analysis of problems and dissemination of information
advice, advocacy and dispute settlement; (ii) guidance or conduct of collective
bargaining. In India, this role is voluntary and at the initiative and request of the
members; (iii) training and development of staff and members; (iv) safety and health
at workplace and working environment; and (v) public image and public relations.
The above list is indicative and not exhaustive. A survey of members of EOs in
India (Venkata Ratnam, 1989, pp. 112-113) noted that over 70 per cent of the
respondent-members of EOs believe that EOs: (a) are active in disseminating
information to members and making representations whenever an issue or problem
arises; henceforth, need to be proactive; (b) are not doing as well as they should be
doing in their advisory role and in providing a guidance on issues relating to collective
bargaining, etc.; (c) should pay more attention to (i) study the problems of concern to
the employers, (ii) improving their interaction with members, unions and government,
(iii) concentrating on training workers and members, (iv) strengthening advisory
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Role of Employers
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and Labour Laws
services, and (v) taking up projects for social and family welfare; and (d) need not
participate; as before, directly in enterprise level negotiations or settlement of
industrial disputes at firm level.
Relations: During the course of performing their functions, EOs interact with the three
principal actors; i.e., employers (who are their members), Government and unions.
Traditionally, employers are individualistic in nature and competitive considerations
affect their ability to confederate as a cohesive entity. Employers want individual
discretion than take a collective, unified stand for a good policy. This attitude
influenced their orientation towards relations with governments. Individual office
bearers would like to cultivate personalised relations with government functionaries
than institutionalise the interactions. The relations with unions are typically
adversarial and occasional interactions but not usually founded on the realisation of
the importance of a continuous dialogue and discussion to develop rapport, mutuality,
trust and confidence in each other.
EOs also interact with political parties, professional organisations and the community.
Relations with political parties assume significance even if EOs choose to remain
avowedly apolitical. The presence of professional organisations make it imperative to
see whether these organisations of managers are similar or dissimilar to those of
employers. In today's context of large, modern corporations, the employers'
dependence on professional manager had increased. Likewise the professionals and
professional bodies do draw their sustenance, to an extent, from employers. The EOs
also need to maintain relations with the community.
3.2.7 Future Challenges

Employers are not individualistic but they are also not a homogeneous class. The
conflict of Swadeshi vs. Videshi in pre-independent era, the public-private debate in
post-independence era, the rivalry between ASSOCHAM and FICCI, AIMO's dislike
towards the big brother attitude of major chambers of commerce, the conflict among
handloom, powerloom and mill sectors in textile industry, the formal-informal sector
divide and the like exemplifies that employers are not necessarily a homogeneous
class. EOs need to reconcile the concept of a federation with the spirit of competition
among their members. EOs work may concentrate on areas where members' interests
converge. They need to overcome the criticism of being the rich men's poor clubs by
upgrading the quality, relevance, usefulness and cost-effectiveness of their services.
They should learn to be proactive than reactive. The distinction between the reactive
and proactive approaches may be described as the difference between settling disputes
and taking preventive care, between raising demands and removing grievances,
seeking amendments to the law and influencing the law in advance, controlling wages
and providing incentive, enforcing discipline and promoting good relations.
EOs should also reflect on the emerging challenges and redefine their role in a rapidly
changing scenario. For instance, the spread of democracy and the transition to free
market economy in most countries the world over rendered old notions of ideological
class conflict that are less relevant today. With the gradual shift towards information
technology, the society requires reorientation in the basic philosophy of human
resource management policies. Technological, structural, economic and other changes
require adaptation and adjustment with a "human face". These, then, are some of the
new opportunities and challenges for EOs.
3.2.8 Evaluation
Employers' Associations (EAs) have remained disparate groups, passing resolutions
and airing grievances from various platforms. EAs relations with Government have
remained individualistic in nature. They were keen to have personalised relations with
Government functionaries instead of presenting a unified stand for the common

benefit of all constituent groups. The relations with unions were also far from
satisfactory. The focus was not on having an open dialogue on issues affecting the
lives of both the employer and employee. Naturally, the occasional interactions
between the two groups remained adversarial.
Employers were never a homogeneous class. The reasons for this conclusion are fairly
obvious: the conflict between Swadeshi and Videshi in pre-independence era; the
public and private ownership debate in post-liberalisation era, the on-going rivalry and
battles between ASSOCHAM, EIMO and FICCI all these prove the point clearly.
Unless they present a unified front, maintain cordial relations among all constituent
groups and learn to address the conflicting issues head-on, it will not be possible to
achieve the ends that EAs have adopted over the years. They have many dilemmas and
challenges. The technological, structural, economic and social changes have altogether
transformed the lives of corporations in a dramatic way, especially after the 90s. The
constituent parts of EAs (their members, unions, government, and public at large)
must realise the futility of carrying the age-old clash-conflict ideology into the
21st century. The free market forces have changed the rules of the game completely.
Unless the EAs understand and adjust to such challenges and dilemmas (such as
technological, structural, economic, social, etc.) in a smooth way, they would be
falling behind.
"They should learn to be proactive than reactive. The distinction between the reactive
and proactive approaches may be described as the difference between settling disputes
and preventive care, between raising demands and removing grievances, seeking
amendments to the law and influencing the law in advance, controlling wages and
providing incentives, enforcing discipline and promoting good relations".
3.3 STATE POLICIES AND INDUSTRIAL RELATIONS

Industrial relations policies are formulated at several levels: international, national,
enterprise and shop-floor/workplace. Here, we are concerned mainly with the public
policy, i.e., the policies and role of the State in industrial relations. Industrial relations
being a "concurrent" subject (Article-254), both, the Central and State Governments
have jurisdiction over certain matters.
The public policies on industrial relations are influenced by (a) the Constitution of
India; (b) the instruments of the International Labour Organisation; (c) the policies
announced and pursued during successive Five Year Plans. The reports and
recommendations of major commissions of inquiry such as the Royal Commission,
National Labour Commission, Rural Labour Commission and tripartite institutions
such as the Indian Labour Conference and the Standing Labour Committee, Industrial
Committees, etc., also provide useful inputs in shaping the public policies. Before we
examine the influences, it is appropriate to consider the rationale for State intervention
or the role of the State in union-management relations.
3.3.1 Role of the State in Industrial Relations

As the National Commission on Labour (1969) observed, "The concern of the State in
labour matters emanates as much from its obligations to safeguard the interests of
workers and employers, as to ensure to the community, the availability of their joint
product/service at a reasonable price. The extent of its involvement in the process is
determined by the level of social and economic advancement, while the mode of
intervention gets patterned in conformity with the political system obtaining in the
country and the social and cultural traditions of its people."
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and Labour Laws
The role of the State in regulating union-management relations in a democratic

country will be different from that with a different philosophy for the governance of
the people. In a democratic set-up the emphasis will be on human freedom and human
rights, and policies reflect, broadly, the choices and will of the people. Industrial
relations policies are also influenced by the stages of development of an economy's
industrialisation strategies. Social policies concerning job and earnings, security, etc.,
are influenced by the economic health, employment situation, etc. Such influence
could be reciprocal too. In a sound economy with near full employment situation it
would be possible to offer better job and earnings security. When economic conditions
change significantly, the industrial relations institutions and policies, too, change.
The extent of the role of the State varies across countries even though in all modern
States, the State assumed powers to regulate union-management relations. This is done
in some countries such as the USA, for instance, by merely laying down ground rules
and procedures and establishing an independent agency such as the National Labour
Relations Board to administer them. In others, the State itself controls directly the
industrial relations rules and procedures, processes and outcomes. For instance, in
India the State can interfere and proceed to settle a dispute not only when there is a
dispute but also when it apprehends there could be one.
In India, the State intervenes in procedural and substantive aspects of unionmanagement relations. A variety of factors such as the following led the Government
to assign for itself, a major and more direct role in labour matters:
(a) Concern for planned development and rapid economic growth, as envisaged in the
successive five year plans.
(b) Requirements of a Welfare State envisaged in our Constitution, particularly the
Directive Principles of State Policy and more importantly Articles 43 and 43A.
(c) The socio-economic imbalances in the society, the depressed conditions of the
working class as observed by the Royal Commission on Labour and the Labour
Investigation Committee.
(d) The imbalance in and between unions and employers and the weaknesses of both
the social partners, leading to preference for adjudication despite avowed
recognition and appreciation of the merits of free and fair collective bargaining.
(e) The anxiety of the State concerning the adverse impact of industrial disputes and
work stoppages, including strikes and lock-outs, led the Government to prefer
adjudication despite lip sympathy to the apparent merits of free and fair collective
bargaining.
(f) The role of the State as a major employer, with public sector being projected to
"achieve the commanding heights of the economy as per the Industrial Policy
Resolutions". The new Economic Policy of 1991, however, seems to alter this
position.
3.3.2 Constitution and Labour Policies

The preamble to the Constitution of India provides the framework within which the
labour policies of the organisation can be formulated in India:
"We, the people of India, having solemnly resolved to constitute into a sovereign
socialist secular democratic republic and to secure to all its citizens;
Justice, social, economic and political;
Liberty of thought, expression, belief, faith and worship;
Equality of status and of opportunity; and to promote them among all,
Fraternity assuring the dignity of the individual and the unity and integrity of the
Nation"
The expression "socialist" was specifically introduced in the Preamble to the
Constitution by the Constitution (Forty-second Amendment) Act, 1976 to transform
the country from "a wholly feudal exploitative slave society to a vibrant, socialist
welfare society". The new economic policies announced in mid-1991, constitute a
marked shift towards market-oriented economy thus, raising doubts as to the
continued relevance of socialism, be it Gandhi an, Marxian or a blend of both.
Part II of the Constitution lays down fundamental rights of the citizen which include:
Right to equality: This right includes prohibition of discrimination on grounds of
religion, race, caste, sex or place of birth; Equality of opportunity in matters of public
employment and abolition of untouchability. The multi-rules, constitutional for
reservations for scheduled castes and scheduled tribes, etc., provided in the
Constitution are in the nature of affirmative action programmes for disadvantaged
groups.
Right to freedom: This includes protection of certain rights regarding freedom of
speech, etc., protection in respect of conviction for offences; protection of life and
personal liberty and, protection against arrest and detention in certain cases. Certain
acts like Official Secrets Act and Maintenance of Internal Security Act (MISA) seem
to restrict the right to some of the freedoms mentioned above.
Right against exploitation: Prohibition of forced labour and prohibition of
employment of children in factories, etc., are intended to minimise and eventually end
such exploitations. Subsequently, separate legislations have been promulgated to
guard against such exploitation. Legislations like the Bonded Labour (Abolition and
Regulation) Act and the Child Labour (Prohibition and Regulation) Act are illustrative
of legislative measures directed against prohibition and regulation of variety of
exploitations.
Part IV of the Constitution lists the Directive Principles of State Policy. The
provisions contained in this Part are not enforceable by any court, but the principles
laid down therein are, nevertheless, fundamental in the governance of the country and
it is the duty of the State to apply these principles in making laws.
The State is to secure a social order for the promotion of welfare of the people.
Towards this end, the State shall, in particular, direct its policy towards securing:
(a) that the citizens, men and women equally, have the right to an adequate means to
livelihood;
(b) that the ownership and control of the material resources of the community are so
distributed as best to sub-serve the common good;
(c) that the operation of the economic system does not result in concentration of
wealth and means of production to the common detriment;
(d) that there is equal pay for equal work for both men and women;
(e) that the health and strength of workers, men and women, and the tender age of
children are not abused and that citizens are not forced by economic necessity to
enter avocations unsuited to their age or strength;
(f) that children are given opportunities and facilities to develop in a healthy manner
and in conditions of freedom and dignity and that childhood and youth are
protected against exploitation and against moral and material abandonment.
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and Labour Laws
Some of the Directive Principles of State Policy relevant for a discussion on the labour
policies of the State include the following:
The State shall secure:
Article 39A, Equal justice and free legal aid;
Article 41, Right to work (within the limits of its economic capacity and development)
and to public assistance in certain cases;
Article 42, Just and humane conditions of work and maternity relief;
Article 43, Living wage and conditions of work ensuring a decent standard of life and
full enjoyment of leisure and social and cultural opportunities, etc.;
Article 43A, Participation of workers in management of industries;
Article 44, Uniform civil code for the citizens;
Article 45, Provision for free and compulsory education for children until they
complete the age of fourteen years;
Article 46, Promotion of educational and economic interests of Scheduled Castes,
Scheduled Tribes and other weaker sections; and also protect them from social
injustice and all forms of exploitation;
Article 47, Raising the level of nutrition and the standard of living of its people and
the improvement of public health; and Article 48A, Protection and improvement of
environment and safeguarding of forests and wildlife.
International Labour Organisation (ILO) and its Influence on IR
The International Labour Organisation (ILO) sets international labour standards by
adopting International Labour conventions and Recommendations at its Conference,
held every year, after consultation with its member-States. When a member-State
ratifies a Convention, it becomes a legally binding International obligation.
Recommendations lay down general or technical guidelines and often supplement the
corresponding convention. A country that has ratified a Convention must report
regularly on its application in law and practice. The ILO uses moral persuasion as it
does not have machinery to legally enforce the conventions and recommendations. An
independent Committee of Experts on the Application of Conventions and
Recommendations considers complaints against violations of international labour
standards by member-States. The committee's findings are discussed each year at a
tripartite committee of the International Labour Conference and the erring
governments are persuaded to amend and report back.
The International Labour Conference has adopted 172 conventions on a variety of
subjects (mentioned later) till 1st June 1992. India, which is a member of the ILO
since its inception (1919) adopted 36 of the 172 conventions as of 1st June 1992.
Evolution of Labour Policy during the Five Year Plans
A major landmark event influencing post-independence era labour policies was the
report of the Labour Investigation Committee, 1946. The National Government in
1946 drew up a four-year phased programme to:
(a) revise the existing labour legislations to meet the changing needs of the time;
(b) eliminate completely and/or control contract labour;
(c) extend employment opportunities/exchanges to cover all classes of workers;
(d) evolve fair terms of service and deal for workers;
(e) fix wages in sweated industries, rationalise rate of dearness allowance to promote
fair wage agreement; and
(f) lay down nucleus for an industrial health insurance programme.
The First Plan recognised the importance of industrial labour in the fulfillment of plan
targets and in creating an economic organisation in the country which would best
sub-serve the needs of social justice.
The Industrial Disputes Act was amended, in 1950 itself, providing for a three-tier
system of Labour Court, Industrial Tribunals and National Tribunal.
The Second Plan recognised that "certainty of industrial democracy is a prerequisite
for the establishment of a socialist society."
The Third Plan emphasised the economic and social aspects of industrial peace and
elaborated the concept that workers and management were partners in a joint venture
to achieve common ends. Adherence to Codes, not going to courts, was emphasised to
regulate union-management relations. However, this was not of much avail.
The Fourth Plan stressed the need to improve legislation concerning safety and
welfare of workers, review of workers' participation and management of workers'
education programmes and arrangements for skills training, labour research, etc.
Several new legislations and improvements to existing legislations were made during
the period. The Payment of Bonus Act, 1965, Shops and Commercial Establishments
Act, and Labour Welfare Fund Act were among the important legislative initiatives
during the period. The National Safety Council was set up in 1966.
The Sixth and the Seventh Plans reiterated the earlier programmes, expressed concern
over the shortcomings in realising the important goals of improving the conditions of
working class, workers participation, productivity improvement, etc.
The Eighth Plan echoed the concerns raised in the earlier plans with particular
reference to workers participation in management, skills training, productivity,
equitable wage policy, informal sector, etc.
The major problem with our five year plans is that the intentions are pious and noble.
But there is little that the plans offer by way of providing guidance or clues as to how
these shall be achieved, measured and monitored. The goals being abstract, the
inspection and database being weak, the daunting tasks in each of the successive plans
left more to be achieved.
3.3.3 Tripartite Consultations

Recognising the need for tripartite consultation on labour matters on the pattern of the
International Labour Organisation and in line with the recommendations of the Royal
Commission on Labour, the Government has constituted in 1942, the Indian Labour
Conference (ILC) and the Standing conference (SLC) with a view to:
(a) promote uniformity in labour legislation;
(b) lay down a procedure for the settlement of industrial disputes; and
(c) discuss all matters of all-India importance as between employers and employees.
Both the ILC and the SLC were constituted on the lines of the composition of the ILO:
(a) equality of representation between the government and non-Government
representatives;
(b) parity between employers and workers;
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and Labour Laws
(c) nomination of representatives of organised employer and labour being left to the
concerned organisations;
(d) representation of certain interests (unorganised employers and unorganised
workers), where necessary.
The Union Minister for Labour is the ex-officio Chairman of both the ILC and the
SLC. When the ILC was first constituted, the Government wanted to structure it on
the principles governing the ILO, viz., (a) equality representation among the
Government and non-Government representatives; (b) equality of representation
between employers and employees who were not otherwise represented. Thus, the
Chairman of the first ILC in 1942 proposed a strength of 44 members, including 22
from Government and 11representatives each, of employers and workers. The
representatives of employers and workers would be nominated by the Government and
who in turn would nominate two members on both sides to represent those sections of
employers and workers who were not represented by the central organisations. The
SLC was likewise proposed to comprise of 20 members, 10 from Government and
five representatives each from employers and workers, which was raised subsequently
to 24, with 12 from Government and six each from among the employers and workers.
In 1952 due to opposition from the central organisations of workers and employers,
the Government gave up the practice of inviting employers and workers not
representing any of the central federations. This in effect, reduced the size of
employers' and workers' delegations to nine each while the Government representation
remained at 22 members' in ILC and five each for employers' and workers'
organisations in the SLC as against 12 from the Government as before. The
reorganisation of States necessitated an increase in the size of government
representation in the SLC during the 1950s and 1960s. Similar need was not felt in the
case of ILC during this period so long as the number of states was less than 22.
However, by 1975, when the ILC met after a gap of 12 years for its 28th session, 46
Government representatives, 28 from States/Union Territories and 18 representing
Central Ministries took part as against 11 each representing employers' and workers'
organisations. During the 1970s, the emergence of SCOPE to represent public sector
employers' interests had affected the size of private sector representation. As for
nomination of workers' representatives, the problem became perennial, with the
Government being accused of adopting a partisan attitude ultimately leading in recent
times to the boycott of the conferences by a sizeable section of the central organisation
of trade unions, predominantly belonging to 'leftist ideology'. By 1992, the
government representation increased to 52 with 20 from Central Government and
Union Territories and 32 from State Governments. The representation for workers and
employers increased to 28. The formation of three more new states in 2000
necessitated further increase in representation for state governments. Apart from the
official nominees, the rules provide for the presence of advisers. Each delegate of a
central organisation of employers and workers and of state governments is entitled to
bring one adviser to the session, while each delegate of Central Government can bring
up to three advisers. Besides, experts and others interested in labour problems are also
allowed to attend the meetings as observers. Advisers and observers may participate in
discussion, with the permission of the Chairman, but have no right to vote. The
objectives of these tripartite institutions are laudable and their procedures flexible
enough to provide for exchange of views on a wider basis before policies and even
legal framework are decided upon. Both the ILC and SLC are non-statutory advisory
bodies. The tripartite deliberations are variously described as 'recommendations'
'decisions' 'conclusions' etc. time and again, the Union Labour Minister, who also
happens to be the ex-officio-Chairman of the ILC and SLC, has gone on record that
unanimous recommendations should be accepted by all the parties.
The 15th session of the ILC expressed confidence that the tripartite approach has been
accepted for policy making:
The legislative and administrative policies of the Central and State Government, and
the policies of employers' and workers' organisations should not run counter to the
broad lines of policy, that they be accepted by the Indian Labour Conference from
time to time after full tripartite discussions in the Conference. Proposals involving any
new major point of policy or principle should generally be undertaken after consulting
the Indian Labour Conference or Standing Labour Committee.
The role of the tripartite bodies in influencing labour policy in India was recognized in
the Third Five Year Plan thus:
Labour policy in India has been evolving in response to the specific needs of the
situations in relation to industry and the working class and has to suit the requirements
of a planned economy. A body of principles and practices has grown up as a product
of joint consultation in which representatives of Government, the working class, and
employers have been participating at various levels. The legislative and other
measures adopted by the Government in this field represent consensus among the
parties vitally concerned and thus, acquire the strength and character of a national
policy, operating on a voluntary basis. Joint committees have been set up to assist in
the formulation of policies as well as their implementation (India 1961).
However this was not to be so. The ILC recommended that minimum wages should be
need-based and defined the basis for calculation of Need-Based Minimum Wage
(NBMW), but towards the end of April 1958, a Secretary in the Union Finance
Ministry informed the Chairman of the Second Pay Commission that the Government
desired me (him) to make it clear that the recommendations of the Indian Labour
Conference should be regarded as what they are, namely, the recommendations of the
Indian Labour Conference which is tripartite in character. The Government at no time
committed itself to taking executive action to enforce the recommendation.
Six years later, in 1964, the then Union Minister for Labour, Mr. D. Sanjivayya, tried
to reverse the Government's stand: We have got to accept the unanimous
recommendations of all the tripartite bodies. However, the Union Home Minister told
the parliament in 1968 that accepting a principle or an ideal in the Indian Labour
Conference does not make any commitment as such. Truly enough in 1974, the
Deputy Labour Minister minced no words when he informed the Parliament that the
Government has no proposal to introduce need-based minimum wage.
Subsequently in 1960 and 1974, Union Ministers made the Government's policy clear
that the tripartite committee's recommendations are not binding on the government,
even if government was a party to the consensus reached at the tripartite forum. This
problem arose largely due to inadequate consultation within the concerned group
before discussion took place on the subject at the tripartite forum.
Since the time the National Commission on Labour submitted its report in 1969, there
were other problems that made consensus in tripartite forums elusive, with the result
that though there have been piece-meal changes in labour legislation, at least on three
occasion in the last quarter century, when comprehensive labour law reforms were
tabled for discussion, the government of the day fell, before the proposals could be
actually taken up for discussion.
The second objective, namely the formulation of a dispute settlement procedure, was
important too. The ILC and SLC were instituted at the time of the Second World War,
which made industrial peace paramount. The formulation of a comprehensive
procedure for industrial disputes in the industrial Disputes Act 1947, the inception of
the Labour Appellate Tribunal in 1950, and its abolition in 1956 were the outcomes of
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the deliberations at the ILC/SL. Though, third-party intervention came up for critics
on several occasions, majority of the union representatives and governments seem to
have had more than their due share in showing preference to adjudication during the
1950s.
The third objective of ILC/SLC concerns the discussion of matters of national
importance. While the sheer range and number of subjects discussed at these forums is
quite impressive, the outcomes have not been quite so, particularly since the 1970s.
The foregoing account is not complete, but only indicative. It is indeed difficult to
make an objective assessment of the successes and failures of India's tryst with
tripartism. While in the earlier years, deliberations at the ILC and SLC had make a
significant impact in evolving a progressive series of legislative enactments and
bipartite agreements, for the last two decades there has been a virtual stalemate.
However, on balance, the events during this period, point to the compounding
complexity of the industrial relations scene, with divisions and dissensions within the
respective interest groups - be it the Government (Centre-State relations), employers
(diverse interests among employers), or unions (fragmentation). Over the years, the
issue have become complex and controversial and there is rigid polarization in views,
both, between and within in the absence of purposive leadership. The result is that the
tendency among the parties has been to skirt the more stubborn questions rather than
come to grips with them.
Many issues that came up for discussion before the ILC and SLC were such that the
interests of both the parties were diametrically opposite to begin with and continue to
be so. On such issues, after repeated discussion and some give and take process,
despite the persistence of a wide gulf in the interests and approaches of employers' and
workers' representatives, the employers has agreed for compromise solutions
Apparently, this occurred because the spokesmen for the employers 'could not remain'
entirely untouched by the progressive trends on wages obtaining in the wider society'
but soon enough they realized the impracticality of the agreements so reached. Though
in the 15th session of ILC, the employers agreed to NBMW and the norms for
calculating the same, in the subsequent sessions they conceded their 'mistake' in
accepting the proposal without adequate assessment of their implications and
suggested a review. When the Government also seemed to side with the problem
before the Second Pay Commission in the year 1958, the representatives of AITUC
and HMS threatened to walk out. Government representatives, and more importantly
union labour ministers in those years often had a tough time in striking a delicate
balance between the interests of employers and workers with the Government itself
being the biggest employer.
The problems with regard to rationalization proved to be more ticklish for the
employers. As in case of NBMW, on rationalization too, there were prolonged
discussion held in the 11th to 16th sessions of ILC during 1951 to 1958 due to the
conflicting interests of employers and workers. The employers always supported
rationalization in the interest of productivity, while the workers resisted any proposal
that would deprive them of their livelihood. The workers' organisations unanimously
deplored the loss of jobs. They insisted on being consulted at the unit level before
plans were introduced and demanded one month's notice for retrenchment only to be
scotched by the AIOE. On one occasion, the employers' representatives generally
agreed to ensure that rationalization was effected without displacing labour.
Subsequently they admitted that some retrenchment was inevitable as a result of
rationalization. Finally, they approved, even if grudgingly, a resolution at the 16th ILC
in 1958 which provided, among other things that
z
There should be no retrenchment or loss of earnings of the existing employees,

that is, the full complement required for the operation before rationalization
should be maintained except for cases of natural separation and wastage. Workers
could, however, be provided with suitable alternative jobs in the same
establishment or under the same employers subject to agreement between
employer and the workers;
z
There should be an equitable sharing of benefits of rationalization between the

community, the employer, and the workers; and
There should be a proper assessment of workload made by an expert, that is

mutually agreed upon and also suitable improvement in the working conditions.
With the agreement on rationalization on the above lines, it was assumed that the
controversy on the subject was put to an end and that the Government could use the
ILC to narrow the differences between employers and unions. However in retrospect,
two decades after the pious resolution, the thorny problem still persists in a magnified
version.
On substantive economic issues requiring financial commitment on the part of
employers, consensus could not be reached. Even when it was reached, as described
above, it could not be endured. On a number of wage-related questions, the ILC had
been evasive, whether it concerned minimum wages, employers' capacity to pay,
NBMW, or wage boards (Mathur and Sheth 1969). Workers' demand for the
institution of labour welfare fund was similarly opposed and squashed by the
employers. The Government appreciated the employers stand, but it was obliged to
keep the issue alive due to its public policy of labour welfare. On regulation of
contract labour too, employers were vehement in their opposition on account of heavy
'financial burden' and the Government, being the largest employers of contract labour,
had to maintain a split personality till the Supreme Court ruled against the
indiscriminate use of contract labour.
There further evidence to substantiate that these bodies could not exert sufficient
influence on industrial relations and in fact lost much of their usefulness over the
years (EFI 1965, 1973). In 1950s, parties used to agree in principle. In 1960s when the
agreed principles were not implemented due to lack of commitment to the agreed
conclusions even on the part of the Government, difficulties were created in
understanding and solving problems. In 1970s the meetings became rare. Of the
37 sessions of the ILC between 1942 and 2001 (June) 23 were held till 1968, seven in
the following 25 years (1969-93), and another seven in the past seven years (19942001). They are supposed to be held annually. In 1980s, non INTUC unions with the
exception of HMS began to boycott the meetings even when they were held.
The ILC and SLC are both consultative and advisory bodies. The suggestion for
inclusion of subjects for discussion not only came from the Government, but also from
non-Government groups, largely central organisations of workers. The Government
has brought in not only proposals for reforms in the existing legislation and industrial
relations system, but also matters of concern for the society and national economy,
such as minimum wage, regulation of contract labour, etc. the workers' representatives
on the other hand, brought in subjects such as NBMW, dearness allowance, and
automation. Employers were mainly content with reacting to proposals.
Two Union Ministers for Labour, Mr. V.V. Giri and G.L. Nanda tried to exert their
influence on the tripartite institutions, Giri's approach was to champion the cause of
collective bargaining, but even the trade unions (notably INTUC and UTUC), which
opposed compulsory adjudication in the pre-independent era, changed their stand in
early the 1950s. The employing ministries in the Government also did not go along
with him. When employers too did not support him and welcomed adjudication if they
had the right to appeal, Mr. Giri resigned in frustration. The industrial Relation Bill of
1950 that he piloted lapsed due to the dissolution of Parliament, but the Labour
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and Labour Laws
Appellate Tribunal (LAT) that employers wanted and provided for in the Bill became
a reality in 1954. Six years later, however the LAT had to be abolished due to intense
pressure from workers who were unhappy with the decisions of the LAT. After Giri's
exit, the Union Minster who gave the most momentous thrust to voluntarism in the
deliberations of ILC and SLC, was GL Nanda during the period 1957-64. In the early
1950s as Minister for Planning, he initiated a process of joint consultation between
labour and management and put forth the idea of worker participation in management
and workers education. As Union Labour Minister and Chairman of ILC and SLC he
not only persuaded the three parties to agree to these voluntary overtures without
letting ideological differences stand in the way, but also played an instrumental role in
the resolutions on Code of Discipline (1958), Model Grievance procedure (1958),
Voluntary Arbitration (1959), code of efficiency and Welfare (1959), and Industrial
Truce Resolution (1962). No other Union Minister could hold sway over the parties
and persuade them to come together for a consensus on such lofty ideals. The ideas he
advocated had moral appeal which was astounding. It is a different thing that
gradually the morals waned and the mesmeric effect of Nanda was no longer felt by
them.
The parties seem to reach consensus easily on subjects which have a moral appeal and
are merely voluntary than statutory. Examples of this type include the Code of
Discipline and the Joint Management Councils (JMCs). The working of the Code is
discussed separately. Agreements on subjects such as the Code and JMCs entailed
little or no financial or administrative burden on the parties. They are not perceived to
be of much consequence to the parties; so they were hardly of any importance to the
structure of industrial relations. Such consensus, therefore, remained symbolic without
much substance in terms of practical applications.
3.3.4 The Working of Tripartism A Critical Analysis

Tripartite deliberations helped to reach a consensus, inter alia, on statutory minimum
wage fixation (1944), introduction of a health insurance scheme (1945), a provident
fund scheme (1950), leading to the passing of three importance Central Labour Laws,
namely, the Minimum Wages Act, 1948, the Employees' State Insurance Act,
1948, and the Employees' Provident Fund Act, 1952. The tripartite deliberations
during 1942-46 on the revision of the Trade Disputes Act, 1929 helped the Union
Government to enact the Industrial Disputes Act, 1947 which laid down
comprehensive disputes settlement procedures to be applicable to all states. However
a few states (e.g. Maharashtra and Gujarat, Madhya Pradesh, Uttar Pradesh, and
Rajasthan) made their own legislations which were operative within the state
boundaries along with the Central legislation. This duality of labour administration
could not be mitigated by the ILC due to obvious limitations set on it by the inclusive
of 'labour' in the 'Concurrent List' of the Constitution.
However, in the late 1950s the tripartite forums began to lose their earlier appeal. The
turning point came in the wake of the resolution at the 15th ILC (1957) stating that the
Minimum Wage should be need-based and defined the basis for calculation of
Need-Based Minimum Wage (NBMW). However, when the Government did not have
the money to pay the NBMW, the Minister for Labour declared on the floor of the
Parliament that tripartite recommendations are recommendations, not policies of the
Government. Even when consensus resolution were not taken up for implementation,
the representatives of labour felt aggrieved and saw little purpose in the dialogue and
discussion at the tripartite fora. The lack of representatively among workers' and
employers' organisations and the growing assertion of state governments and the
non-participation of administrative ministries in tripartite discussions resulted in the
weakening of all the three social partners and raised questions about their
representativity.
3.3.5 Bipartite Consultative Machinery

Towards the realization of the goals set out in the national economic plans, the
Government of India has also created bipartite consultative machinery for ensuring
cooperation between workers and employers. Here we shall briefly consider the
experience with Joint Consultative Board (JCB) and National Apex Body (NAB).
Joint Consultative Board
A Joint Consultative Board (JCB) of Industry and Labour was set up in 1951 largely at
the initiative of Mr. GL Nanda, then Minister for planning and deputy Chairman of the
Planning Committee of Industries of Planning Commission. To begin with, the JCB
was set up as an official body to consider, advise, and cooperate with the Government
on matters relating to industrial relations in general and specific issues such as
retrenchment in particular. After five meetings till 1959, the JCB was reconstituted as
a bipartite body with two representatives each from the AIOE, EFI, INTUC, and
HMS. Mr. GL Nanda, Union Minister was, of course, persuaded to continue as the
Chairman. The Board's budget was founded by contribution from EOs and TUs in the
ratio of 4:1. It had two secretaries, one from AIOE and the other from INTUC. Soon
after the change in the JCBs structure, Mr GL Nanda was appointed as Union Labour
Minister and consequently resigned from the Chairmanship of the JCB. The JCB
virtually became defunct thereafter except for a meeting in December 1962 to echo the
need to implement the resolutions of the ILC, maintain harmonious industrial
relations, and strengthen the national economy in the wake of the Chinese invasion
and declaration of National Emergency. After this, the JCB never met formally.
The JCB considered a variety of important subjects in the few meetings it held during
its decade-long existence. The discussions provided the framework for handling
disciplinary actions and a new set-up of three-tier Industrial Disputes Act were based
largely on the recommendations of the JCB. However, judge-made law and successive
amendments to the Industrial Disputes Act in the subsequent years made further
inroads into managerial freedom in handling discipline. The growing dissatisfaction
with the adjudication machinery led the First National Commission on Labour to
recommend in the year 1969, the setting up of independent Industrial Relation
Commission at the Central and State levels.
The JCB discussed the norms of payment of bonus. However, there were only
arguments and no agreement on the bonus issue. The discussion on discipline and
efficiency led to the drafting of a Code for Discipline in Industry and its subsequent
adoption at the 15th ILC in the year, 1957. As discussed before, the code was
observed more in breach than in practice. Ideas on subjects, such as joint consultation,
workers' participation in management, and workers' education also were mooted first
in the JCB which led to the formulation of joint management councils and the
Workers' Education Programming. The record of JMCs (NCL 1969) and the working
of the Workers' Education Programme (Virmani 1985) do little to make the originators
of these concepts feel proud.
The constituents of the JCB may view with satisfaction, the JCBs role in
implementing the Industrial Truce Resolution during the period of war and
emergency. The real test of effectiveness however lies in its ability to maintain
harmony during the normal times. On this score, there is little room for satisfaction.
3.3.6 Limits to the Powers of the State

There is a limit to the role and powers of the state governments. They are duty-bound
to refer their enactments and amendments to the Centre for the assent of the President
of India. The Central Government may on its own, or upon being referred to by the
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President, tender advice to form the basis for the President's decision. The usual
practice of the President's office is not to act, rather than to turn down the proposals
for changes per se. Some years ago, the Tamil Nadu government raised the limit of the
number of employees required in an establishment for application of certain Central
Legislations (like the Factories Act and the Industrial Disputes Act), as well as for
prior approval for lay-offs, lock-outs and closures. Similarly, it took many years for
Andhra Pradesh to get Presidential approval for its legislations concerning worker's
participation in management and insurance for workers affected by structural changes.
Finally, of course, Andhra Pradesh did not go ahead with its proposals.
Thus, in the absence of the Centre's Concurrence, State-Level initiatives on labour and
social matters can make a mockery of the fact that labour is a concurrent subject in our
Constitution. This in short is the snakes and ladders story of competitive labour
policies in the country's political set up. The potential for states to adopt competitive
labour policies to woo investors appears enormous, but this entails political and social
risks. Therefore, there is a need for caution and restraint. Also in the wake of the
pressure to link international trade with social clauses and the 1998 ILO Declaration
on Fundamental Principles, it might become necessary for maintaining uniformity and
consistency in aligning core labour standards freedom of association, right of
collective bargaining, non-discrimination and equal remuneration, child labour and
forced labour as envisaged in the relevant conventions of the ILO.
3.4 LET US SUM UP

Employers' Associations are formed to promote and protect the interests of employers
in Trade and Industry. They are "formal groups of employers set up to defend,
represent or advise affiliated employers". Employers also have the need for
presentation at different forums. Hence, they formed formal groups. Important among
them are FICCI, ASSOCHAM, CII, SCOPE and their labour wings like AOIE, EFI,
IOI etc. These forums are very effective in raising employers' concerns to national and
international forums. State in prevention, come in the shape of government policies
and government practices. Constitution of India is the fountainhead from where all the
policies and practices originate. Government of India has evolved tripartite
consultation dispensation similar to ILO where industrial relations policies are
discussed and evolved. State passes laws for regulative industrial relations and has a
labour department to implement these laws. There has been a paradigm shift in
government thinking from protecting labour to protecting business. Some of the
provincial governments are way ahead of the Central Government.
3.5 KEYWORDS
Employers Association: They are formal groups of employers set up to defend,
represent or advise affiliated employers and to strengthen their position in society at
large with respect to labour matters as distinct from economic matters
FICCI: Federation of Indian Chamber of Commerce and Industry
ASSOCHAM: Associated Chambers of Commerce
SCOPE: Standing Conference on Public Enterprises
Joint Consultative Board: It was set up as an official body to consider, advise, and
cooperate with the Government on matters relating to industrial relations in general
and specific issues such as retrenchment in particular
3.6 SELF ASSESSMENT

Fill in the Blanks
1. State policy to keep away from the matters of trade was known as
2. The British and Indian industrial and business interests came together to form
in 1920.
3. is a representative body that was set up to protect the interests of
the public sector employers.
4. The relations between the government and the employers association has always
been in nature.
5. provides the limit within which the labour policies can be
formulated in India.
6. Article includes the provision for better working conditions and
maternity relief.
7. ILO doesnt have the legal right to force anyone to accept its conventions so they
use
8. recommended that the wages should be need based and introduced
the concept of Need Based Minimum Wage.

1. What are Employers Associations and what do they attempt to do?
2. Briefly discuss the structure and management of Employers Organisations.
3. Employers are not only individualistic, but also not a homogeneous class.
Discuss.
4. Examine the role of state in industrial relations.
5. What is the role of the Constitution of India in industrial relations?
6. What do you mean by tripartism? Critically analyse the working of tripartism.
7. Write short notes on:
(a) SCOPE
(b) JMC
(c) FICCI
(d) ASSOCHAM
(e) JCB

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LESSON
4
COLLECTIVE BARGAINING
CONTENTS
4.0
Aims and Objectives
4.1
Introduction
4.2
Evolution of Collective Bargaining
4.3
Features of Collective Bargaining
4.4
Subject Matter of Collective Bargaining
4.5
Approaches to Collective Bargaining

4.5.1
Industry Bargaining
4.5.2
Enterprise Bargaining
4.5.3
Concession Bargaining
4.5.4
Composite Bargaining
4.5.5
Conjunctive/Distributive Bargaining
4.5.6
Co-operative Bargaining
4.5.7
Productivity Bargaining
4.6
Collective Bargaining vs. Negotiation Skills
4.7
Importance of Collective Bargaining
4.8
Procedure for Collective Bargaining
4.9
The Indian Scenario
4.10
Suggestions for Better Functioning of Collective Bargaining
4.11
Pre-requisites of Successful Bargaining
4.12
Emerging Issues in Collective Bargaining
4.13
Let us Sum up
4.14
Keywords
4.15
Self Assessment
4.16
Review Questions
4.17
Suggested Readings

z
Enumerate the features and importance of collective bargaining
Discuss the approaches to collective bargaining
Outline the procedure of collective bargaining
Analyse the condition of collective bargaining in India
Discuss the pre-requisites in collective bargaining
Underline the emerging issues in collective bargaining
4.1 INTRODUCTION
Collective bargaining is process of joint decision making and basically represents a
democratic way of life in industry. It is the process of negotiation between firms and
workers representatives for the purpose of establishing mutually agreeable conditions
of employment. It is a technique adopted by two parties to reach an understanding
acceptable to both through the process of discussion and negotiation.
ILO has defined collective bargaining as, negotiation about working conditions and
terms of employment between an employer and a group of employees or one or more
employee, organization with a view to reaching an agreement wherein the terms serve
as a code of defining the rights and obligations of each party in their
employment/industrial relations with one another.
Collective bargaining involves discussions and negotiations between two groups as to
the terms and conditions of employment. It is called collective because both the
employer and the employee act as a group rather than as individuals. It is known as
bargaining because the method of reaching an agreement involves proposals and
counter proposals, offers and counter offers and other negotiations.
4.2 EVOLUTION OF COLLECTIVE BARGAINING

Collective Bargaining rose and grew with the trade union movement. Roots of
Collective Bargaining lie in Great Britain where it developed in response to the
conditions created by the Industrial Revolution. Along with trade unions, the idea of
bargaining collectively gained strength in the early part of the 18th Century. Initially,
the negotiations were carried out at plant level.
By early 1900, industry and national level agreements became quite common.
The idea spread across to France, Germany, and USA. And today, through the process
of Collective Bargaining, organizations have learnt to cope with industrial conflict.
Thus the roots of collective bargaining lie in the late nineteenth century, when workers
began to agitate for more rights in their places of employment. Many skilled trades
started using their skills as bargaining tools to force their employers to meet their
workplace needs. Other workers relied on sheer numbers, creating general strikes to
protest poor working conditions. Several labour pioneers started to establish a
collective bargaining system so that labour negotiations could run more smoothly.
Typically, the employees are represented by a union. Collective bargaining actually
begins with joining a union, agreeing to abide by the rules of the union, and electing
union representatives. In general, experienced people from the union will assist the
employees with putting together a draft of a contract, and will help them present their
desires to the company. Numerous meetings between representatives of employer and
employees will be held until the two can agree on a contract.
As the contract is being negotiated, general employees also have input on it, through
their union officers. Thus, the agreement reflects the combined desires of all the
employees, along with limitations that the employer wishes to see put in place. The
result is a powerful document which usually reflects cooperative effort. In some cases,
however, the union or the employer may resort to antagonistic tactics such as striking
or creating a lockout, in order to push the agreement through.
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4.3 FEATURES OF COLLECTIVE BARGAINING

The process of collective bargaining has the following features:
z
It is a collective process: The representative of both the management and the

employees participate in it.
It is a continuous process: It establishes regular and stable relationship between

the parties involved.
It involves not only the negotiation of the contract, but also the administration or
application of the contract also.
It means that bargaining is a day-to-day process.
It would be mistake as to assume that Collective Bargaining begins and ends with
the writing of the contract. Actually, that is only the beginning of the Collective
Bargaining.
It is a flexible and dynamic process: The parties have to adopt a flexible attitude
throughout the process of bargaining.
It is a method of partnership of workers in management. It is in fact a way to

establish industrial democracy.
It is based on give and take approach and take or leave approach.
It is an attempt in achieving and maintaining discipline in industry.
It is an effective step in promoting industrial jurisprudence.
4.4 SUBJECT MATTER OF COLLECTIVE BARGAINING

Any issue relevant to management and workers can be the subject matter of collective
bargaining.
In recent times, Collective Bargaining has extended to many areas like:
z
Employment
Relationship between the workers and the management
Recognition of union
Wages and allowances, hours of work
Leave and festival holidays
Bonus & profit sharing schemes
Seniority and rationalism
Fixation of work loads
Standard of labour force
Programs of planning and development, influencing workforce
Issue related to retrenchment and lay offs
Victimization of trade union activities
PF, gratuity and other retirement benefit schemes
Incentive schemes
Housing & transport facilities
Issues related to discipline and stop rules
Grievance proceedings
Working conditions
Issues related to safety and accident prevention, occupational diseases and

protective clothing
Employment benefits such as canteens, medical & health services and crches
Administration of welfare funds
Cooperative thrift and credit societies
Educational recreational and training schemes
4.5 APPROACHES TO COLLECTIVE BARGAINING

The World Labour Report of ILO (1997-98) mentions that the collective bargaining is
weak as the state intervention plays a crucial role. The system of social dialogue is
centralised at the industry or national level and leaves little discretion at the enterprise
Collective Bargaining level. However, a new pattern of unionisation has appeared due
to the shift from organising workers in a region/industry to the formation of
independent trade unions at the enterprise level. Accordingly, the focus of collective
bargaining has shifted from the region/industry level to the enterprise or even plant
level.
4.5.1 Industry Bargaining

The industry level collective bargaining is common in the case of core industries in
public sector like coal, steel, cement, ports, banks and insurance. The collective
bargaining on industry basis is practiced by traditional industry groups like textiles,
plantations and engineering in the private sector. The recent trend in the field of
collective bargaining in India has been a gradual shift from national/industry level to
local level leadership; and enterprise/job level bargaining.
4.5.2 Enterprise Bargaining

The importance of enterprise is growing as a bargaining level as the industry-wide
bargaining is losing ground. Even in case of industry-wide bargaining, sufficient scope
is offered for enterprise level negotiations. Enterprise level agreements are steadily
increasing in number and becoming a point of decision-making. In the industrialised
countries, the trend is towards increasing autonomy of enterprises and
individualisation of labour relations.
4.5.3 Concession Bargaining

Concession bargaining originated in U.S.A as a temporary measure, to save jobs, in
the period of economic depression. Concession bargaining was undertaken by the
employers to face increased competition and cope up with higher productivity
requirements. The trade unions preferred wage cuts or wage moderation to that of job
losses and displacement. The trade unions indicated their readiness to accept other
options to avoid labour redundancies. Apart from accepting wage reduction, other
options considered under concession bargaining were: (a) shorter working hours; (b)
freeze on fresh recruitment; (c) restriction on overtime; and (d) training and retraining
of workers.
In U.S.A. the concession bargaining agreements included wage cuts in case of newly
hired workers, curbing the cost of health insurance, and increased compensation for
voluntary separation. In India, it has taken the form of downsizing of employees and
offering of voluntary retirement schemes.
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4.5.4 Composite Bargaining

The contents of conventional bargaining are mainly wages, allowances and benefits,
and conditions of work and employment. The composite bargaining calls for a
strategic shift from conventional bargaining to include issues like quality of work life,
productivity improvement, enhancing of market share or even financial matters.
Composite bargaining reflects a change in strategy from confrontation to coordination
between management and labour for the promotion of their common interest of
survival and progress of enterprises.
4.5.5 Conjunctive/Distributive Bargaining

Here, the parties try to maximize their respective gains. In this method, the parties try
to settle economic issues through a zero-sum game. Zero-sum game is where my gain
is your loss and your gain is my loss. Neither party is willing to yield an inch.
4.5.6 Co-operative Bargaining

Both parties are more open to coming down from their high horses and co-operating.
They are willing to negotiate the terms of employment in a flexible way.
This willingness is because of recession and the need to be able to survive in such
difficult times. This would not be possible without each others support and hence
co-operative bargaining. TELCO and Ashok Leyland resorted to co-operative
bargaining when the automobile sector was going through a period of recession.
Employees may now be willing to accept a cut in wages in return for job security.
Management may also agree to modernize and bring in new technology and invest in
marketing efforts in a phased manner.
4.5.7 Productivity Bargaining

In this method, workers wages and benefits are linked to productivity. Initially, a
standard productivity index is finalized through negotiations. This index is not fixed at
an exceptionally high level. Workers crossing the standard productivity norms will get
substantial benefits. This method of bargaining helps in making the workers realise the
importance of raising productivity for organizational survival and growth.
4.6 COLLECTIVE BARGAINING VS. NEGOTIATION

SKILLS
Collective Bargaining is a process by which the terms and condition of employment of
workers are regulated by agreements between their bargaining agent and their
employers.
Negotiation, on the other hand, is a process of resolving conflicts between two or
more parties wherein both or all modify their demands to reach a workable
compromise.
The process of Collective Bargaining also uses negotiations to reach a mutual
consensus. While negotiating issues, parties shift their stand from an ideal position to
a settlement point, which is mutually agreed upon.
The position of the settlement point depends on the relative bargaining strength and
skill of the negotiator.
The sacrifices to be made and the concessions to be yielded, depend to a large extent
on the negotiating skills of the bargaining agent.
If he is powerful, he will have his way. If this power is challenged on justifiable
grounds where other people see reason, he may have to yield his ground.
4.7 IMPORTANCE OF COLLECTIVE BARGAINING

Collective bargaining holds a key stand in industrial relations because:
z
It helps increase the economic strength of both the parties at the same time
protecting their interests.
It helps establish uniform conditions of employment with a view to avoid

occurrence of industrial disputes.
It helps resolve disputes when they occur.
It lays down rules and norms for dealing with labour.
It helps usher in democratic principles into the industrial world.
4.8 PROCEDURE FOR COLLECTIVE BARGAINING

The Indian Institute of Personnel Management has suggested following procedure for
negotiation and Collective Bargaining between Management and Union.
1. Composition of negotiating team
(a) Must include representatives of both workers and the employees. They should
have adequate job knowledge and skills for negotiation with full authority to
speak and make decisions.
(b) The team must have an accurate understanding of the main issue and intimate
knowledge of operations, working conditions, production norms, etc.
(c) Also preferred are basic qualities of balanced views even temper, analytical
mind, objective look out.
(d) Inclusion of functional heads will be more beneficial.
2. Make a good beginning
(a) Well begun is half done is true in the Collective Bargaining.
(b) Take steps for mutual cooperation by ensuring members are in the right frame
of mind.
(c) There should be a proper climate for mutual understanding and a common
desire to reach an agreement. Collective bargaining must be done in the true
spirit of give and take and working with the intent of maximum chances of
success.
3. Maintain continuity of talks
(a) This can be done with goodwill and understanding. You may have occasions
for emotional outbursts and roadblocks but the idea is never to reach a dead
end.
(b) Keep the dialogue process going for as long as talks continue, a solution will
be possible.
(c) Even under the worst situations breaking off temporarily for scrolling down
and rethinking may be necessary.
(d) When the main issue get confused the dust and storm raised, bringing things
to fundamentals will then help.
(e) It is better to leave controversial issues for the time being and leap over to the
next issue.
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(f) As the field of agreement is widened and the field of disagreement is

narrowed down, small gaps can be bridged over more easily later.
(g) Keeping the discussion fluid is therefore very important.
4. Develop a problem-solving attitude
(a) Appreciation and better understanding from both parties will lead to better
performance and increased prosperity for future.
(b) Proper discussion, analyses can fluid a solution with open mind.
5. Encourage leadership
(a) A need for united and homogeneous climate on both sides Management gets
the union it deserves.
(b) The process should be conducted within the principles of justice, sympathy
and firmness with possibilities of solution from both sides being argued.
6. Bring in the other managers
(a) Ensure the contribution and involvement of other managers A collective
agreement covers not just one part, but the entire field of industrial activity.
(b) Lack of understanding and proper communication often creates problems and
difficulties. Discipline for management and productivity/job security for
workers is important. These are the basic difference and conflict never gets
resolved.
(c) At times conflict grows more serious and a situation becomes explosives,
threatening discipline peace and production gets disturbed.
(d) Thus maintaining normal conditions and preserving in spirit of agreement in
such a situation presents a tough challenge to the skill & ability of the
management.
7. Contract administration
(a) Once a contract is agreed upon it must not be diluted.
(b) Contract to specify the procedure for handling disagreement over the
interpretation of different clause of the agreement.
(c) Almost all Collective Bargaining agreements contain formal procedure to be
used in resolving difference over the interpretation and application of the
agreement.
4.9 THE INDIAN SCENARIO

In India, trade unions gained prominence much later only after 1900. In 1918,
Gandhiji as the leader of the Ahmedabad textile workers advocated the resolution
of conflict through Collective Bargaining agreements. But the idea gathered interest
only after the Second World War.
The Government of that time took steps like setting up of machinery for negotiations,
conciliation and arbitration. The trade union movement and also Collective Bargaining
agreements became popular after Indian independence. Moving from agreements at
the plant level, such agreements spread to industries such as chemicals, petroleum, tea,
coal, oil and aluminum. In ports and docks, banking and insurance, collective
agreements were arrived at, right at the national level.
Other than in Ahmedabad and Mumbai, so far, collective agreements have not made
much headway in India.
Causes of Limited Success of Collective Bargaining in India

Problems with unions:
z
Collective Bargaining mainly depends on the strength of unions.
Weak trade unions cannot initiate strong arguments during negotiations.
Not many strong unions in India.
Indian unions are bogged down by the problems of: multiplicity, inter and intraunion rivalry, weak financial position and non-recognition.
So, unanimous decision is unlikely to be presented at the negotiating table.
Problems from Government:

z
The Government has not been making any strong efforts for the development of
Collective Bargaining.
Imposition of many restrictions regarding strikes and lockouts has removed the
edge of the Collective Bargaining process.
Political interference:
z
Interference of political leaders in all aspects of union matters has increased over
the years.
Almost all unions are associating themselves with some political party or the
other.
Management attitude:
z
In India, managements have a negative attitude towards unions. They do not

appreciate their workers joining unions.
The above have all stood in the way of collective agreements contributing towards
industrial harmony.
4.10 SUGGESTIONS FOR BETTER FUNCTIONING OF

COLLECTIVE BARGAINING
The Indian Institute of Personnel Management has offered the following suggestions:
z
A progressive and strong management that is conscious of its obligations and

responsibilities to the various stakeholders.
A truly representative enlightened and strong trade union should come into
being and should function on strictly constitutional lines.
There should be unanimity between labour and management on the basic

objectives of the organization and a mutual recognition of their rights and
obligations.
When there are several units of the company, there should be a delegation of
authority to the local management.
A fact-finding approach and a willingness to use new tools should be adopted for
the solution of industrial problems.
4.11 PRE-REQUISITES OF SUCCESSFUL BARGAINING

1. Bargaining must precede other measures
(a) Neither party should take any unilateral action. Results of bargaining should
be awaited.
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(b) Employers and employees attitude calls for a change

(i) The workers and the employers should be quite clear that they are not
looking for third party intervention in the form of litigation and
adjudication.
(ii) The representatives of the employees must have a firm resolution to have
an agreed solution to their individual matters.
2. Negotiations on differences: Both the parties should negotiate on their points of
differences or demands with the sole purpose of making an agreement.
3. Employers recognition of the trade union
4. Reliance on facts and figures: In order to make the negotiations result into
success, the workers and the management agents must rely on facts and figures to
substantiate their claims.
5. Written agreement
(a) The final decisions should be incorporated in a written agreement.
(b) The agreement should include the validity of the agreed matters as also the
frequency of its review.
6. Progress review
(a) Agreements should not be signed and forgotten.
(b) During their implementation, regular meetings should be held between the
representatives of both the parties to watch the progress of the
implementation.
(c) This way any changes, adjustments and amendments can be effected.
7. Respect of agreement: Both the parties must respect the agreement and see that it
is implemented in a fair and justifiable manner.
8. Arbitration provision
(a) The agreement must include an arbitration clause.
(b) Whenever the parties have any differences pertaining to the interpretation of
the terms and conditions, the arbitration clause can be resorted to.
Recommendations of the National Commission on Labour: The NCL (1969) offered
the following recommendations:
z
gradually, withdraw the easy accessibility to adjudication and shift the emphasis
to collective bargaining.
Create the conditions to promote collective bargaining in the following manner
Make the recognition of a representative union as the sole bargaining agent,

statutory
Define the employees right to strike work and place it in overall scheme of
things
Intensify workers education for building up internal union leadership and

make workers more knowledgeable
Thus, proper conditions have to be created for the success of collective bargaining.
4.12 EMERGING ISSUES IN COLLECTIVE BARGAINING

Union and management are going to face many substantive and procedural issues in
collective bargaining. Some of the issues can probably be handled at the bargaining
table by using existing structures and strategies. Some of the traditionally handled
issues are as follows:
Wage Bargaining
Wages will remain at the centre stage of future contract negotiations because the size
and security of income will continue to be of vital importance to workers.
Womens Issues
A larger women workforce may give rise to fresh challenges to both employers and
unions to squarely face the particular concerns and problems of working women. The
process will accelerate in the future as women become firmly and permanently
entrenched in the labour force and in the unions. Women issues are going to figure
substantially in future collective bargaining.
Job Security
The potential loss of jobs due to technological change has always been a major
concern for the unions. The recent economic downturn and its impact on jobs is
another crucial factor that adds to this dimension.
Productivity
Time has come, according to many economists, for the unions to be vitally concerned
with productivity and to realise that employee welfare is tied directly to the success of
the enterprise and industry. At the same time, management must recognise that to
obtain an increase in productivity, it must seek the co-operation of the employees and
the union. In short, what is needed in collective bargaining is re-approachment
between union and management that recognises the necessity of co-operating to raise
productivity.
Quality of Work Life (QWL)
The issue of quality of work life is related to the need for organised labour and
management to work co-operatively toward the goal of greater productivity. The
attention now being paid to the QWL reflects the growing importance being attached
to it. It is apparent that a substantial number of employees are unhappy with their jobs
and are demanding more meaningful work. Employees are beginning to demand
improvements in both economic and non-economic benefits from their jobs. The
importance of non-economic rewards is increasing relative to the importance of
economic ones, especially among white-collar and highly educated employees. People
are demanding greater control and involvement in the jobs. They do not want to be
treated as a cog in a wheel. QWL experiments will continue in the years ahead and
may eventually provide some impetus to the collective bargaining across countries.
4.13 LET US SUM UP

Collective bargaining is concerned with the relations between management
representatives and union representatives. Collective bargaining has been
characterised as a form of industrial democracy and industrial government. It involves
the process of negotiation, administration, and interpretation of collective agreements
covering wages, hours of work, and other conditions of employment for a specific
period of time. Collective bargaining is a dynamic concept. Various types of collective
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bargaining have been successfully used by both labour and management to respond
effectively to the changing demands of workplace functioning and market pressures.
The labour movement must devise organising and bargaining strategies that appeal to
expanding groups across segments. For workers, collective bargaining is an excellent
tool. Many workplaces benefit from unionization, which allows workers to speak
together as a body to assert their rights. Employers also benefit from collective
bargaining agreements, which set out clear expectations for both sides. The experience
of collective bargaining can also be a learning experience for both sides of the
discussion, as it encourages employers and employees alike to consider each other's
positions.
4.14 KEYWORDS
Collective Bargaining: It is a technique adopted by two parties to reach an
understanding acceptable to both through the process of discussion and negotiation.
Concession Bargaining: It was adopted as a temporary measure to save jobs in the
period of economic depression; it was undertaken by the employers to face increased
competition and cope up with higher productivity requirements.
Zero-sum Game: It is a situation where one partys gain is other partys loss and vice
versa.
Cooperative Bargaining: In this, both the parties try to get to a win-win situation.
Negotiation: It is a process of resolving conflicts between two or more parties wherein
both or all modify their demands to reach a workable compromise.
Quality of Work Life: It is related to the need for organised labour and management to
work co-operatively toward the goal of greater productivity.

Fill in the Blanks
1. The concept of collective bargaining was first introduced in ......................
2. Collective bargaining results in a long term stable relationship between the parties
to it. It shows that it is a ...................... process.
3. The process of bargaining that deals with issues like productivity, working
conditions and increasing market share is referred to as ...................... bargaining.
4. ...................... is a process of resolving conflicts and reaching to a workable
compromising situation.
5. One of the major issues in bargaining in future will be the issue of ......................
as technology is growing at a fast rate.
6. The concept of ......................, focuses on better working conditions and inclusion
of non-monetary rewards in addition to monetary rewards.
7. ...................... bargaining discusses the issues such as increasing the productivity
of the workers.

1. What is collective bargaining and how is it different from negotiation?
2. Discuss the different approaches to collective bargaining.
3. What are the pre-requisites for the success of collective bargaining?
4. Describe the procedure of collective bargaining.

5. What is the recent trend of collective bargaining in India?
6. What are the causes for the limited success of collective bargaining in India?

Dhyani, S.N., Crisis in Indian Industrial Relations, National Publishing House, New Delhi,
1984
Healy, J.J., Creative Collective Bargaining (ed.), Englewood Cliffs, New Jersey, 1965
Towers, Brian, Industrial Relations Practice, Kogan Page, London, 1987
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LESSON
5
EVOLUTION OF LABOUR LEGISLATIONS
CONTENTS
5.0
Aims and Objectives
5.1
Introduction
5.2
Historical Perspectives on Indian Labour Legislations
5.3
Role of Indias Constitutional Framework on Indian Labour Laws
5.4
Impact of International Labour Organization (ILO) on Indian Labour Laws

5.4.1
International Labour Conference
5.4.2
Governing Body
5.4.3
The International Labour Office
5.4.4
International Labour Standards ILO Conventions
5.5
Role of the National Commission on Labour
5.6
Indian Labour Laws Review by ASSOCHAM
5.7
Let us Sum up
5.8
Keywords
5.9
Self Assessment
5.10
Review Questions
5.11
Suggested Readings

z
Know the history of Indias labour legislations
Underline the impact of Indias constitutional framework on labor laws
Analyse the impact of ILO on labor laws
Discuss the role of National Commission for Labor in development of labor laws
Discuss views of ASSOCHAM on Indian labor laws
5.1 INTRODUCTION
The Indian Labour Legislations owe its existence to the British Raj. Most of the labour
legislations were enacted prior to Indias independence. The post independence
enactment of important legislations in the areas of employee security and welfare
derive their origin partly from the vision of independent Indias leaders and partly
from the provisions in the Indian Constitution and international conventions like the
International Labour Organization (ILO). The labour legislations were also enacted
keeping in mind the international standards on Human Rights and United Nations
Protocols.
5.2 HISTORICAL PERSPECTIVES ON INDIAN LABOUR

LEGISLATIONS
Initial periods of imperialism were based on exploitation of the worker class. With the
emergence of ILO at an international level and with the inhumane treatment meted out
to workmen being replaced with an outlook of dignity of labour, the whole scenario of
labour legislations began in pre independence India.
After independence legislations related to worker welfare like Provident Fund Act,
Employee State Insurance Act, Payment of Bonus Act and Payment of Gratuity Act
were enacted with the intention of providing security and retirement benefits to
workmen.
Over a period of time several amendments have been made to the existing labour
legislations as per the needs of the industry. The case in point is the latest amendment
to the Factory Act whereby women worker is allowed to work between 7pm and 6am.
Such amendments have been done after industry associations like NASSCOM and
ASSOCHAM recommendations to the labour ministry. Now BPO and IT sector which
employs a large women workforce during its nightshifts benefits tremendously from
this amendment to the Factory Act.
Table 5.1: Evolution of HR thoughts in India
Period
Developments
Emphasis on People
Outcomes
1700
Slavery due to imperialism
Exploitation of labour
Bonded labour
To
Master slave relationship
1900s
1900
To
Workmen status defined by

acts
Employer employee
relationship established.
Wages paid
Legal
recognition
of
workmen. End of slavery.
Trade
unions
organizing workers
were
Trade
unions
being
recognised by workers
and factory managers
Collective
bargaining.
Workers movements.
Independent India believed in

a socialist society.
Worker welfare by labour

officers. Laws like EPF,
ESIC, minimum wages,
and bonus act.
Beginning
of
labour
welfare administration and
personnel function
Trade unions mgt conflicts

COD, MOU, etc.
Productivity bargaining.
Workers participation in
management
Empowerment of workers
upliftment of workers
status and role.
Globalization, international
markets, new economy.
Developing people as a
key resource
HRD replaces personnel

management
Advent of the Knowledge

Era. Growth of service
sector.
Managing human assets

with a long term strategic
focus on development
and retention
People
management
need replaces HRD with
HRM. Hr is aligned to
business goals. HRM to
SHRM
1920s
1920s
To
1947
1947
To
1960s
1970s
To
1980s
1990s
To
2000
2001
Onwards
Rightsizing of organizations
to compete globally.
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Evolution of Peoples Management Thoughts
Emergence of People Management

Thoughts
LabourWelfare
Welfare
Labour
Personnel Mgt
Mgt
Personnel
HRD
HRD
HRM
HRM
SHRM
SHRM
HCM
HCM
Figure 5.1: Management Thoughts
Abbreviation used:
HRD Human Resources Development
HRM Human Resources Management
SHRM Strategic Human Resources Management
HCM Human Capital Management
z
Labour Welfare/Industrial Relations: Relationship between the employer and the

employee representatives i.e., Unions, for establishing working relationships and
for regulating the working conditions
Personnel Management: The most effective use of people to achieve

organizational and individual goals. It believes more in control mechanisms than
employee empowerment
HRD: Empower people by developing them for their current and future roles
HRM: Leveraging the systems approach to the HR function. Integrating HR

functions with other organizational functions
SHRM: Align the HR goals to the organizational goals
HCM: Human Capital Management
From the above figure we see that today HCM encompasses Labour Welfare along
with its role of providing a strategic intent to Human Resources.
5.3 ROLE OF INDIAS CONSTITUTIONAL FRAMEWORK

ON INDIAN LABOUR LAWS
The relevance of the dignity of human labour and the need for protecting and
safeguarding the interest of labour as human beings has been enshrined in Chapter-III
(Articles 16, 19, 23 & 24) and Chapter IV (Articles 39, 41, 42, 43, 43A & 54) of the
Constitution of India keeping in line with Fundamental Rights and Directive
Principles of State Policy.
Under the Constitution of India, Labour is a subject in the concurrent list where both
the Central and State Governments are competent to enact legislations. This
categorization is listed as follows:
(a) Labour laws enacted by the Central Government, where the Central Government
has the sole responsibility for enforcement
1. The Employees State Insurance Act, 1948
2. The Employees Provident Fund and Miscellaneous Provisions Act, 1952
3. The Dock Workers (Safety, Health and Welfare) Act, 1986
4. The Mines Act, 1952
5. The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labour
Welfare (Cess) Act, 1976
6. The Iron Ore Mines, Manganese Ore Mines and Chrome Ore Mines Labor
Welfare Fund Act, 1976
7. The Mica Mines Labour Welfare Fund Act, 1946
8. The Beedi Workers Welfare Cess Act, 1976
9. The Limestone and Dolomite Mines Labour Welfare Fund Act, 1972
10. The Cine Workers Welfare (Cess) Act, 1981
11. The Beedi Workers Welfare Fund Act, 1976
12. The Cine Workers Welfare Fund Act, 1981
(b) Labour laws enacted by Central Government and enforced both by Central and
State Governments
13. The Child Labour (Prohibition and Regulation) Act, 1986.
14. The Building and Other Constructions Workers (Regulation of Employment and
Conditions of Service) Act, 1996.
15. The Contract Labour (Regulation and Abolition) Act, 1970.
16. The Equal Remuneration Act, 1976.
17. The Industrial Disputes Act, 1947.
18 The Industrial Employment (Standing Orders) Act, 1946.
19. The Inter-State Migrant Workmen (Regulation of Employment and Conditions of
Service) Act, 1979.
20. The Labour Laws (Exemption from Furnishing Returns and Maintaining Registers
by Certain Establishments) Act, 1988
21. The Maternity Benefit Act, 1961
22. The Minimum Wages Act, 1948
23. The Payment of Bonus Act, 1965
24. The Payment of Gratuity Act, 1972
25. The Payment of Wages Act, 1936
26. The Cine Workers and Cinema Theatre Workers (Regulation of Employment)
Act, 1981
27. The Building and Other Construction Workers Cess Act, 1996
28. The Apprentices Act, 1961
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(c) Labour laws enacted by Central Government and enforced by the State
Governments
29. The Employers Liability Act, 1938
30. The Factories Act, 1948
31. The Motor Transport Workers Act, 1961
32. The Personal Injuries (Compensation Insurance) Act, 1963
33. The Personal Injuries (Emergency Provisions) Act, 1962
34. The Plantation Labour Act, 1951
35. The Sales Promotion Employees (Conditions of Service) Act, 1976
36. The Trade Unions Act, 1926
37. The Weekly Holidays Act, 1942
38. The Working Journalists and Other Newspapers Employees (Conditions of
Service) and Miscellaneous Provisions Act, 1955
39. The Workmens Compensation Act, 1923
40. The Employment Exchange (Compulsory Notification of Vacancies) Act, 1959
41. The Children (Pledging of Labour) Act 1938
42. The Bonded Labour System (Abolition) Act, 1976
43. The Beedi and Cigar Workers (Conditions of Employment) Act, 1966
(d) There are also Labour laws enacted and enforced by the various State
Governments which apply to respective States.
5.4 IMPACT OF INTERNATIONAL LABOUR

ORGANIZATION (ILO) ON INDIAN LABOUR LAWS
India is a founder member of the International Labour Organization, which came into
existence in 1919. At present the ILO has 175 Members. A unique feature of the ILO
is its tripartite character. The membership of the ILO ensures the growth of tripartite
system in the Member countries. At every level in the Organization, Governments are
associated with the two other social partners, namely the workers and employers. All
the three groups are represented on almost all the deliberative organs of the ILO and
share responsibility in conducting its work. The three organs of the ILO are:
z
International Labour Conferences: General Assembly of the ILO Meets every

year in the month of June.
Governing Body: Executive Council of the ILO. Meets three times in a year in the
months of March, June and November.
International Labour Office: A permanent secretariat.
The work of the Conference and the Governing Body is supplemented by Regional
Conferences, Regional Advisory Committees, Industrial and Analogous Committees,
Committee of Experts, Panels of Consultants, Special Conference and meetings, etc.
5.4.1 International Labour Conference

Except for the interruption caused by the Second World War, the international Labour
Conference has continued, since its first session in 1919 to meet at least once a year.
The Conference, assisted by the Governing Body, adopts biennial programme and
budget, adopts International Labour Standards in the form of Conventions and

Recommendations and provides a forum for discussing social economic and labour
related issues. India has regularly and actively participated in the Conference through
its tripartite delegations.
5.4.2 Governing Body

The Governing Body of the ILO is the executive wing of the Organization. It is also
tripartite in character. Since 1922 Indian has been holding a non-elective seat on the
Governing Body as one of the 10 countries of chief industrial importance. Indian
employers and workers representatives have been elected as Members of the
Governing Body from time to time.
The Governing Body of ILO functions through its various Committees. India is a
member of all six committees of the Governing Body viz. (i) Programme, Planning &
Administrative; (ii) Freedom of Association; (iii) Legal Issues and International
Labour Standards; (iv) Employment & Social Policy; (v) Technical Cooperation and
(vi) Sectoral and Technical Meetings and Related issues.
5.4.3 The International Labour Office

The International Labour Office, Geneva provides the Secretariat for all Conferences
and other meetings and is responsible for the day-to-day implementation of decisions
taken by the Conference, Governing Body etc. Indians have held positions of
importance in the International Labour Office
5.4.4 International Labour Standards ILO Conventions

The principal means of action in the ILO is the setting up the International Labour
Standards in the form of Conventions and Recommendations. Conventions are
international treaties and are instruments, which create legally binding obligations on
the countries that ratify them. Recommendations are non-binding and set out
guidelines orienting national policies and actions.
The approach of India with regard to International Labour Standards has always been
positive. The ILO instruments have provided guidelines and useful framework for the
evolution of legislative and administrative measures for the protection and
advancement of the interest of labour. To that extent the influence of ILO Conventions
as a standard for reference for labour legislation and practices in India, rather than as a
legally binding norm, has been significant. Ratification of a Convention imposes
legally binding obligations on the country concerned and, therefore, India has been
careful in ratifying Conventions. It has always been the practice in India that we ratify
a Convention when we are fully satisfied that our laws and practices are in conformity
with the relevant ILO Convention. It is now considered that a better course of action is
to proceed with progressive implementation of the standards, leave the formal
ratification for consideration at a later stage when it becomes practicable. We have so
far ratified 39 Conventions of the ILO, which is much better than the position
obtaining in many other countries. Even where for special reasons, India may not be in
a position to ratify a Convention, India has generally voted in favour of the
Conventions reserving its position as far as its future ratification is concerned.
Core Conventions of the ILO: The eight Core Conventions of the ILO (also called
fundamental/human rights conventions) are:
z
Forced Labour Convention (No. 29)
Abolition of Forced Labour Convention (No.105)
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Equal Remuneration Convention (No.100)
Discrimination (Employment Occupation) Convention (No.111)
(The above four have been ratified by India).

z
Freedom of Association and Protection of Right to Organised Convention (No.87)
Right to Organise and Collective Bargaining Convention (No.98)
Minimum Age Convention (No.138)
Worst forms of Child Labour Convention (No.182)
(These four are yet to be ratified by India)

Consequent to the World Summit for Social Development in 1995, the
above-mentioned Conventions (Sl.No. 1 to 7) were categorised as the Fundamental
Human Rights Conventions or Core Conventions by the ILO. Later on, Convention
No.182 (Sl.No.8) was added to the list.
As per the Declaration on Fundamental Principles and Rights at Work and its
Follow-up, each Member State of the ILO is expected to give effect to the principles
contained in the Core Conventions of the ILO, irrespective of whether or not the Core
Conventions have been ratified by them.
Under the reporting procedure of the ILO, detailed reports are due from the member
States that have ratified the priority Conventions and the Core Conventions every two
years. Under the Follow-up to the ILO Declaration on Fundamental Principles and
Rights at Work, a report is to be made by each Member State every year on those Core
Conventions that it has not yet ratified.
Source: Ministry of Labour GOI
5.5 ROLE OF THE NATIONAL COMMISSION ON LABOUR

Labour legislations have also been shaped and influenced by the recommendations of
the various National Committees and Commissions such as First National
Commission on Labour (1969) under the Chairmanship of Justice Gajendragadkar,
National Commission on Rural Labour (1991), Second National Commission on
Labour (2002) under the Chairmanship of Shri Ravindra Varma etc. and judicial
pronouncements on labour related matters specifically pertaining to minimum wages,
bonded labour, child labour, contract labour etc.
The First National Commission on Labour was constituted on 24.12.1966 which
submitted its report in August, 1969 after detailed examination of all aspects of labour
problems, both in the organised and unorganised sector. The need for setting up of the
Second National Commission on Labour was felt due to vast changes occurring in the
economy during the last three decades especially in the nineties due to globalization,
liberalization and privatization.
The Second National Commission on Labour was given two point terms of reference:
1. To suggest rationalization of existing laws relating to labour in the organised
sector; and
2. To suggest an umbrella legislation for ensuring a minimum level of protection to
the workers in the unorganised sectors;
The Commission submitted its Report to the Government on 29.06.2002. The
Commission has comprehensively covered various aspects of labour and given
recommendations relating to review of laws, social security, women & child labour,
wages, skill development, labour administration, unorganized sector etc.
The recommendations of Second National Commission on Labour inter-alia,

included (i) introduction of umbrella legislation for workers in the unorganized
sector and agricultural labour, (ii) emphasis on up-gradation and development of skill
of workforce by training/retraining of workers, (iii) encouragement of small scale
industries, agri-business and rural sector for higher employment generation,
(iv) bringing attitudinal change and change in the mindset and work culture where the
employer and the worker work as partners with emphasis on participative
management, (v) consolidation of social security legislations and establishment of
social security system, (vi) abolition of child labour , etc.
The Ministry of Labour had held consultations and interactions with the workers
representatives, employers organizations, experts, professionals etc. The
recommendations of the Commission were discussed in the 38th Session of Indian
Labour Conference held on 28-29 September 2002, a National Seminar on
Unorganized Sector Workers held on 7-8 November 2002, Tripartite Committee
meeting held on 18-19 February 2003, and Consultative Committee Meetings of
Ministry of Labour held on 07.02.2003 and 30.4.2003. The recommendations had
again been discussed in the 39th Session of Indian Labour Conference held on 16-18
October, 2003. While carrying out the amendments in labour laws, the
recommendations of Second National Commission on Labour are also taken into
consideration.
Source: The Planning Commission of India
5.6 INDIAN LABOUR LAWS REVIEW BY ASSOCHAM

Even after 17 years of globalization, India has yet to dismantle Inspector Raj for SSI
sector where the numbers of inspectors have rather increased from 20 to about 40 by
end of 2008, according to The Associated Chambers of Commerce (ASSOCHAM)
and Industry of India. Incidentally, liberalized and Reformed Red Books now
provide for 50% curtailment in numbers of inspectors for other sector but SSIs which
generate large employment, contribute substantially to exports cover 38% and
manufacturing is highly regulated by inspectors and cause maximum harassment to
them, ASSOCHAM analysis further unveils. The Chamber cited an example of food
processing industry which used to be regulated by 100 inspectors 17 years ago, their
numbers have reduced to 46. The unified Food Law which is composition of 9 laws,
enacted in 2007 is primarily responsible for hugely reducing the number of inspectors
for food processing industry for which the credit should go to the Ministry of Food
Processing and its Minister, Subodh Kant Sahay.
The Factory Act of 1948 would provide for taking mandatory licensing even if an
entrepreneur wanted to commence manufacturing at tiny scale, today there is no such
condition and this happened mainly because of transition process of liberalization
remained industry-friendly, pointed out the ASSOCHAM. Another case for example
is again food processing industry in which before enactment of Unified Food Law, the
industry would be subjected to multiple inspectors such as Weighing Inspector and
Inspectors for ISI, Corporation, Health, Hygiene and even Medical etc. Today, these
sectors are examined by not more than 2 inspectors. On the contrary, the SSI sector
which would brave as many as 20 inspectors over 17 years ago is now subjected to
inspectors monitoring whose number have gone beyond 40, says the ASSOCHAM
analysis. 17 years ago is now subjected to many other inspections which include one
separate inspector to monitor their register of employees, accounts, balance sheet and
on taxation fronts particularly the service tax inspector. Likewise, many more areas
were added in which the SSI sector is subjected to tedious inspections.
However, the SSI sector continues to remain under the tight grip of inspector raj
which was supposed to be come out with advancement of liberalization. This did not
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happen because most of states govern the SSI sector and governments never took
especial initiatives for reducing the number of inspectors. The analysis is based on
feedback coming to Chamber Secretariat directly from its members, be it
manufacturing, food processing and SSIs. Even obtaining of licence is no longer
required to commence industrial operations in any sector other than those enlisted in
the sensitive list which include defence, strategic alliances and to some extent
telecom, civil aviation and insurance. This change has taken place as government
brought about various notifications and amendments in some sense to prototype laws.
The SSI sector which would go through inspections from excise, customs, banks,
insurance, PF, PPF and record inspectors, 16 years ago is now subjected to many other
inspections which include one separate inspector to monitor their register of
employees, accounts, balance sheet and on taxation fronts particularly the service tax
inspector. Likewise, many more areas were added in which the SSI sector is subjected
to tedious inspections.
Besides, the Factory Act 1948, Minimum Wages Act 1948, Payment of Bonus Act
1965, Employment Exchange Compulsory Notification of Vacancies Act 1959, Air
(Prevention & Control of Pollution) Act 1981 jointly provide empowerment to
government departments and various state governments to still regulate the SSI sector.
Source: ASSOCHAM
5.7 LET US SUM UP

Initial periods of imperialism were based on exploitation of the worker class. With the
emergence of ILO at an international level and with the inhumane treatment meted out
to workmen being replaced with an outlook of dignity of labour, the whole scenario of
labour legislations began in pre independence India. Under the Constitution of India,
Labour is a subject in the concurrent list where both the Central and State
Governments are competent to enact legislations. India is a founder member of the
International Labour Organization, which came into existence in 1919. The Governing
Body of the ILO is the executive wing of the Organization. It is also tripartite in
character. Since 1922 Indian has been holding a non-elective seat on the Governing
Body as one of the 10 countries of chief industrial importance. Labour legislations
have also been shaped and influenced by the recommendations of the various National
Committees and Commissions.
5.8 KEYWORDS
Personnel Management: It is the most effective use of people to achieve
organizational and individual goals
Human Resource Development: It aims at empowering people by developing them
for their current and future roles
Human Resource Management: It is leveraging the systems approach to the HR
function and integrating HR functions with other organizational functions
Strategic HRM: It aligns the HR goals to the organizational goals
ILO Conventions: They are international treaties and are instruments, which create
legally binding obligations on the countries that ratify them
ILO Recommendations: They are non-binding and set out guidelines orienting
national policies and actions.
5.9 SELF ASSESSMENT

Fill in the Blanks
1. Amendments made under the .. now allows women to work in
night shifts.
2. In this knowledge era, the employees in the organisation are treated as
..
3. .. management believes in more control than empowering
employees.
4. .. of ILO is the body that governs the functioning of ILO.
5. ILO .. are not legally enforceable but provide guidelines
regarding labor policies.
6. The major reason for setting up the second National Commission for Labour was
..

1. Write a note on history of labour legislations in India.
2. Write short note on role of ILO in development of Indias labor laws.
3. Discuss ILOs conventions and recommendations.
4. Comment on the role of National Commission for Labour in development of
Indias labor legislations.
5. Discuss the views of ASSOCHAM on Indian labor legislations.

House
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LESSON
6
LABOUR LEGISLATIONS: ACTS GOVERNING
EMPLOYMENT OF PERSONNEL AND IR
CONTENTS
6.0
Aims and Objectives
6.1
Introduction
6.2
The Industrial Employment (Standing Orders) Act, 1946
6.3
The Factories Act, 1948
6.4
The Industrial Disputes Act, 1947
6.5
The Trade Unions Act, 1926
6.6
The Child Labour (Prohibition and Regulation) Act, 1986
6.7
The Apprentices Act, 1961
6.8
The Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
6.9
The Maternity Benefit Act, 1961
6.10
The Contract Labour (Regulation and Abolition) Act, 1970
6.11
Let us Sum up
6.12
Keywords
6.13
Self Assessment
6.14
Review Questions
6.15
Suggested Readings

Discuss the major provisions and related concepts of:
Industrial Employment (Standing Orders) Act, 1946
Factories Act, 1948
Industrial Disputes Act, 1947
Trade Unions Act, 1926
Child Labour (Prohibition and Regulation) Act, 1986
The Apprentices Act, 1961
Employment Exchanges (Compulsory Notification of Vacancies) Act, 1959
Maternity Benefit Act, 1961
Contract Labour (Regulation and Abolition) Act, 1970
6.1 INTRODUCTION
In this lesson we are going to study the major acts concerning the employment of
personnel and industrial relations one by one in brief.
6.2 THE INDUSTRIAL EMPLOYMENT (STANDING

ORDERS) ACT, 1946
Purpose
To have a uniform service condition for the workmen employed in all industrial
establishments. This is called as Standing Orders (SO).
Applicability
It is applicable to every industrial establishment employing 100 or more workmen.
In Maharashtra the Act applies to all establishments employing 50 or more workmen.
Industrial establishment means (i) an industrial establishment as defined in
section 2(i) of Payment of Wages Act (ii) Factory as defined in section 2(m) of
Factories Act (iii) Railway (iv) Establishment of contractor who employs workmen for
fulfilling contract with owner of an industrial establishment. [section 2(e)].
The term industrial establishment includes factory, transport service, construction
work, mines, plantation, workshop, building activity, transmission of power etc.
Workman has meaning assigned to it under section 2(s) of Industrial Disputes Act.
[section 2(i)]. Thus, workman includes skilled, unskilled, manual or clerical work.
However, workman does not include employees engaged in managerial or
administrative capacity or supervisory capacity. Workman does not include workers
subject to Army Act, Navy Act or Air Force Act or to police or prison services.
Draft SO
An Industrial establishment has the liberty to either draft its own SO on the guidelines
of the prescribed model SO or directly adopt model SO as specified, within 6 months
of applicability of the Act.
Every employer covered under the Act has to prepare Standing Orders, covering the
matters required in the Standing Orders. Five copies of these should be sent to
Certifying Officer for approval. [section 3(1)]. Certifying Officer means Labour
Commissioner and any officer appointed by Government to be Certifying Officer.
[section 2(c)].
Certification of SO
On receipt of the draft SO from the organization, the certifying officer (Govt. Official)
will forward the same to the organizations Trade Union/s for their objections (if any).
The copy of the certified SO will be forwarded to the TU and Employer within 7 days
of the certification.
Till standing orders are certified, Model Standing Order prepared by Government
will automatically apply. [section12A].
Objective
After the SO has been certified by the officer, it becomes a part of the statutory terms
and conditions of services between the employer, employee and the TU and is legally
binding on all of them. It is prudent to include it in their Employee Handbook/Manual.
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Commencement
On and after the 31st day from the date of receipt of the certified SO. Any employee
can appeal to the respective authorities before this period. Where appeal has been
made the SO is applicable from the 8th day of the receipt of amended SO by the
employer/employee/TU.
Once the Standing Orders are certified, they supersede any term and condition of
employment, contained in the appointment letter. If there is inconsistency between
Standing Order and Appointment Letter, the provisions of Standing Order
prevail.
Model Standing Orders: The Act has prescribed Model Standing Orders. These are
automatically applicable till employer prepares his own Standing Orders and these
are approved by Certifying Officer. [section 12A].
Disciplinary Action: The most important use of Standing Orders is in case of
disciplinary action. A workman can be punished only if the act committed by him is
misconduct as defined under the Standing Orders. The Model Standing Orders
contain such acts like insubordination, disobedience, fraud, dishonesty, damage to
employers property, taking bribe, habitual absence or habitual late attendance, riotous
behaviour, habitual neglect of work, strike in contravention of rules etc. as
misconducts. The Certified Standing Orders may cover other acts as misconduct, if
approved by Certifying Officer.
Modifications
The Act prohibits modification of SO within a period of 6 months of the certification
or previous latest modification date (if applicable)
Important Provisions
1. The SO text should be pasted prominently by the employer on special boards to be
maintained for this purpose at the factory entrances and in all depts. where
workers work.
2. Where any worker is suspended by the employer over pending inquiry into
complaints or on charges of misconduct, the employer shall:
(a) Pay a subsistence allowance @ 50% of wages for the first 90 days
(b) 75% for next 90 days
(c) 100% for remaining days until the inquiry is completed
A Standard SO should have: (This is not an exhaustive list only indicative)
1. Classification of workmen i.e: permanent, temporary, on probation, apprentice,
etc.
2. Hours of work, rest hours, holidays, pay day and wage rates
3. Shift working timings
4. Attendance and late comings
5. Provisions for application and grant of leave
6. Requirement to enter premises by certain gates and gate searches
7. Termination, suspension and dismissal rules (specially on misconduct)
8. Redressal of grievances procedures and personnel/dept incharge/ess.
6.3 THE FACTORIES ACT, 1948

Purpose
The object of the Act is to ensure for the workers employed in the factories, health,
safety and welfare measures and to provide for proper working hours, leave and other
benefits entitled to them.
The Act requires that workers should work in healthy and sanitary conditions and for
that purpose it provides that precautions should be taken for safety of workers and
prevention of accidents.
Applicability
Any premises in which 10 or more workers are employed and a manufacturing process
is carried on with the aid of power (Fuel/energy and not Animal or Human energy).
Where the process is without the aid of power the worker strength should be 20 or
more. All types of mfg or storing, constructing even Home Industry are covered as per
this Act.
'Factory' means any premises where 10 or more workers are working and a
manufacturing process is carried out with aid of power (20 if manufacture is without
aid of power). [section 2(m)]. Manufacturing process means process of altering,
repairing, ornamenting, finishing, packing, oiling, washing, cleaning, breaking up,
demolishing or otherwise treating or adopting any article or substance. It also
includes:
Pumping oil, water, sewage or any other substance
Generating, transforming or transmitting power
Composing, typing, printing
Constructing, repairing, breaking of ships or vessels
Preserving articles in cold storage. [section 2(k)].
Worker means a person employed in any manufacturing process or cleaning or any
work incidental to manufacturing process. It includes persons employed through
contractor. [section 2(l)].
If the employment is less than these numbers, the unit gets covered under Shop &
Establishment Act.
Occupier of a factory means the person who has ultimate control over the affairs of
factory. It includes a partner in case of firm and director in case of a company. In case
of Government company, occupier need not be a director. In that case, person
appointed to manage affairs of the factory shall be occupier. [section 2(n)]. Name of
occupier of the factory should be informed to Factories Inspector. The occupier
will be held responsible if provisions of Factories Act are not complied with. He has
to give notice 15 days before he begins to occupy the premises as a factory, giving
details as prescribed in section 7.
Besides 'occupier', name of 'Manager' should also be informed. Any change in name
of Manager shall also be informed. [section 7(4)].
The occupier shall ensure, as far as possible, health, safety and welfare of workers
while they are working in factory. [section 7A].
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Provisions of the Act

1. Compulsory to register the factory and get a license to operate from there. This is
after the inspection from the Chief Inspector of Factories. 'Factory' should be
licensed/registered with Chief Inspector of Factories (termed as Director of
Industrial Health & Safety in some States). [section 6]. The license/registration
has to be renewed every year by paying prescribed fees.
2. The factory should comply with the provisions of the act as to Health related
clauses like cleanliness, disposal of wastes, ventilation, temperatures, dust and
fumes, lighting, drinking water, latrines and urinals. The factory should be kept
clean. [section 11]. There should be arrangement to dispose of wastes and
effluents. [section 12]. Ventilation should be adequate. Reasonable temperature
for comfort of employees should be maintained. [section 13]. Dust and fumes
should be controlled below permissible limits. [section 14]. Artificial
humidification should be at prescribed standard level. [section 15]. Overcrowding
should be avoided. [section 16]. Adequate lighting, drinking water, latrines,
urinals and spittoons should be provided. [sections 17 to 19]. Adequate spittoons
should be provided. [section 20].
3. Safety related to fencing of machines, hoists and lifts, protective gears for
workmen, precautions against fire, etc. All machinery should be properly fenced
to protect workers when machinery is in motion. [section 21 to 27]. Hoists and
lifts should be in good condition and tested periodically. [section 28 and 29].
Pressure plants should be checked as per rules. [section 31]. Floor, stairs and
means of access should be of sound construction and free form obstructions.
[section 32]. Safety appliances for eyes, dangerous dusts, gas, fumes should be
provided. [sections 35 and 36]. Worker is also under obligation to use the safety
appliances. He should not misuse any appliance, convenience or other things
provided. [section 111]. In case of hazardous substances, additional safety
measures have been prescribed. [sections 41A to 41H]. Adequate fire fighting
equipment should be available. [section 38]. Safety Officer should be appointed if
number of workers in factory are 1,000 or more. [section 40B]. Every factory
employing more than 1000 workmen should employee a safety officer ( specially
for certain hazardous industries)
4. Welfare: like washing facilities, First aid box provision, canteen (if employing
more than 250 workmen), lunch room (more than 150 workmen), a crche (more
than 30 women workers), a welfare officer (if employees exceed 500). Following
facilities are required to be provided by large factories Ambulance room if 500
or more workers are employed. Canteen if 250 or more workers are employed. It
should be sufficiently lighted and ventilated and suitably located. [section 46].
Rest rooms/shelters with drinking water when 150 or more workmen are
employed [section 47]. Crches if 30 or more women workers are employed.
[section 48]. Full time Welfare Officer if factory employs 500 or more workers
[section 49]. Safety Officer if 1,000 or more workmen are employed.
5. Employment of women and children: Women should not be employed between
7pm to 6am. Children above 14 yrs only to be employed. A worker cannot be
employed for more than 48 hours in a week. [section 51]. Weekly holiday is
compulsory. If he is asked to work on weekly holiday, he should have full holiday
on one of three days immediately or after the normal day of holiday. [section
52(1)]. He cannot be employed for more than 9 hours in a day. [section 54]. At
least half an hour rest should be provided after 5 hours. [section 55]. Total period
of work inclusive of rest interval cannot be more than 10.5 hours. [section 56]. A
worker should be given a weekly holiday. Overlapping of shifts is not permitted.
[section 58]. Notice of period of work should be displayed. [section 61].
6. Annual leave with wages: 1 day for every 20 days of work done during the
previous year, provided that he has worked for atleast 240 days. In case of a child
it is relaxed for every 15 days of work. These leaves are exclusive of all other
holidays (general).
7. Work hours: not more than 48 hours in a week and not more than 9 hours in a
day. Overtime has to be paid at double rates, if applicable. If a worker works
beyond 9 hours a day or 48 hours a week, overtime wages are double the rate of
wages are payable. [section 59(1)]. A workman cannot work in two factories.
There is restriction on double employment. [section 60]. However, overtime
wages are not payable when the worker is on tour. Total working hours including
overtime should not exceed 60 in a week and total overtime hours in a quarter
should not exceed 50. Register of overtime should be maintained.
Labour Laws (Exemption from Furnishing Returns and Maintaining Registers by
Certain Establishments) Act, 1988
The Act has been passed to give relief to establishments employing small number of
persons from furnishing returns and maintaining registers under certain labour laws.
Small establishment means an establishment in which not less than ten and not more
than nineteen persons are employed or were employed during past 12 months. [section
2(e)]. Very Small establishment means an establishment in which not more than nine
persons are employed or were employed during past 12 months. [section 2(f)].
Such establishments are expected to submit only a core return in prescribed form as
on 31st December every year. The return should be filed on or before 15th February of
succeeding year. In addition, a small establishment is required to maintain registers
in prescribed form B, C and D. A very small establishment is required to maintain
only register in form E. [section 4(1)].
In addition, employer is required to issue wage slips to workmen. Returns relating to
accidents are required under Factories Act and Plantation Labour Act are required to
be submitted.
Once such annual return is filed and registers are maintained, no further return or
records are required under any of following laws Payment of Wages Act, Weekly
Holidays Act, Minimum Wages Act, Factories Act , Plantations Labour Act, Working
Journalists and Other Newspaper Employees Act, Contract Labour (Regulation and
Abolition) Act, Sales Promotion Employees (Conditions of Service) Act, Equal
Remuneration Act. [First Schedule to the Act]. [section 4(3)].
Table 6.1: List of Registers to be maintained and returns filed under
The Factories Act 1948
Returns/Registers
Form
No.
When to comply
Approval of Plans
Before situationg a factory

construction or extension of it
Certificate of Stability
1-A
Once every 5 years
Application for Registration
After commencement of factory
Grant and Renewal of License
Starting and renewal on or before 31st

Oct., every year
or
Contd
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Notice of Change of Manager
As and when factory manager changes
Record of white washing, varnishing,

painting, etc. & repainting, re-varnishing
To be maintained always
Register of workers attending to machinery
10
Report
of
examination
of
lifting
machinery/ropes/tackles
by
competent
person
12
Certificate to be obtained annually
Examination of pressure plant by competent

person
13
Externally
Every six months
Internally
Once in twelve months
Hydraulic Test
Once in four years
Register of Compensatory Holidays
14
Notice of period of work for adults
16
To display and maintain
Register of adult workers
17
Leave with wages register
20
Leave book
21
Report of accident by the Manager
24
To be submitted to Factory Inspection

office as and when accident takes place
Notice of dangerous occurrence
24A
Within 12 hours of taking place of

such accident
Abstract under the act
26
To be displayed always
Annual return
27
To be submitted to Factory Inspection

office on or before 1st Feb. every year
Muster roll
29
To be maintained if Form 17 & 19 are

not maintained
Register of accidents & dangerous

occurrences
30
Inspection book
31
Notification of paid holidays
Sec.92 to 106
To display and to submit to Factory

Inspection Office every year in January
Table 6.2: Offences and Penalties

Offence
Penalties
For Contravention of the provisions of the act

or rules
Imprisonment upto 2 years or fine upto Rs.

1,00,000 or both.
On continuation of contravention
Rs. 1000 per day
On contravention of Chapter IV pertaining to

safety or dangerous operations.
Not less than Rs. 25000 in case of death.
Subsequent contravention of some provisions
Imprisonment upto 3 years or fine not less

than Rs. 10,000 which may extend to Rs.
2,00,000.
Obstructing inspectors
Imprisonment upto 6 months or fine upto Rs.

10,000 or both.
Wrongful disclosing result pertaining to

results of analysis.
Imprisonment upto 6 months or fine upto Rs.

10,000 or both.
For contravention of the provisions of sec.

41B, 41C and 41H pertaining to compulsory
disclosure of information by occupier,
specific responsibility of occupier or right of
workers to work imminent danger.
Imprisonment upto 7 years with fine upto Rs.

2,00,000 and on continuation fine @ Rs.
5,000 per day.
Not less than Rs. 5000 in case of serious

injuries
Imprisonment of 10 years when contravention

continues for one year.
The Bombay Shop & Establishment Act, 1948. (For Establishments not covered
under The Factories Act, 1948)
1. Applicability: Every establishment which carries on any business, trade or
profession or any work in connection with, or incidental or ancillary to, any
business, trade or profession, but does not include any factory. Broadly speaking
the premises governed by the Act are shops, commercial establishments,
residential hotels, clubs, restaurants, eating houses, theatres and other places of
public amusement or entertainment.
2. According to Section 38-B of the Bombay Shops and Establishments Act the
provisions of the Industrial Employment (Standing Orders) Act, in its application
to the State of Maharashtra, are applicable to all establishments wherein fifty or
more employees are employed and to which the Bombay Shops and
Establishments Act applies.
3. Registration: Application for registration under the Act shall be submitted with in
31 days of its commencement.
4. Due Date for Renewal: the last date for renewal is 15th December of every year.
5. Restrictions on the working hours in shops and commercial establishments.
The main restrictive provisions of the Act about the working hours of employees
in shops and commercial establishments are as follows:
(a) The general rule about the opening hours of shops is that they are not allowed
to be opened earlier than 7 a.m. But shops selling goods like milk, vegetable,
fish etc., are allowed to be opened from 5 a.m. onward. {Section 10}
(b) This general rule about the closing hours of shops is that they must be closed
at the latest by 8.30 p.m. But shops selling goods like pan, bidi, etc., are
allowed to be kept open up to 11 p.m. {Section 11}
(c) Commercial establishment are not allowed to be opened earlier than 8.30 a.m.
and closed later than 8.30 p.m. in a day {Section 13}
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(d) An employee in a shop or commercial establishment cannot be required or

allowed to work for more than 9 hours in a day and 48 hours in a week.
{Section 14}
(e) He must be allowed an interval of rest of at least one hour after five hours of
continuous work {Section 15}
(f) His spread-over cannot exceed 11 hours in a day. {Subsection 16 & 17}
(g) Every shop and commercial establishment must remain closed on one day of
the week. No deduction can be made from the wages of any employee in a
shop or commercial establishment on account of any day on which it has so
remained closed. {Section 18}
Note: The above restrictions can be relaxed in certain circumstances.
6. Restrictions on the working hours in residential hotels and restaurants:
(a) The main restrictive provisions of the Act about the working hours of
employees in residential hotels, restaurants and eating houses are as follows:
(b) A restaurant or eating house cannot be opened earlier than 5 a.m. and closed
later than 12 midnight for service. {Section 19}
(c) An employee in a restaurant or eating house may be required to commence
work from 4.30 a.m. onwards. He cannot be required to work after 00.30 a.m.
{Section 19}
(d) An employee in a residential hotel, restaurant or eating house cannot be
required or allowed to work for more than 9 hours in a day and 48 hours in a
week. {Section 21}
(e) He must be allowed an interval of rest of at least one hour after five hours of
continuous work. {Section 22}
(f) His spread-over cannot exceed 12 hours in a day. {Section 23}
(g) He must be given at least one day in a week as a holiday. No deduction can be
made from his wages on account of such holiday. {Section 24}
Note: The above restrictions can be relaxed in certain circumstances.
7. Leave with wages:
(a) An employee is entitled to annual leave with pay for 21 days for 240 days of
work.
(b) An employee who has not worked for one year is entitled to leave with pay for
5 days for every 60 days of work.
(c) Leave with pay can be accumulated up to 42 days.
(d) A discharged employee is entitled to leave pay for the balance of leave to his
credit.
8. Holidays: In addition to annual leave with pay an employee of a shop or
establishment is entitled to a holiday on 26th January, 1st May, 15th August and
2nd October every year.
6.4 THE INDUSTRIAL DISPUTES ACT, 1947

Purpose
To settle industrial disputes
To prevent illegal strikes and lockouts
To provide compensation to workers in case of layoffs, retrenchment and unit

closure
To promote collective bargaining
To ensure social justice
Industry means any business, trade, undertaking, manufacturing or services.
Industry means any business, trade, undertaking, manufacture or calling of employers
and includes any calling, service, employment, handicraft or industrial occupation or
avocation of workmen. [section 2(j)]. Thus, the definition is very wide. The scope is
much wider than what is generally understood by the term industry.
In Bangalore Water Supply & Sewerage Board v. Rajappa (1978) a very wide
interpretation to the term 'industry' was given. It was held that profit motive or a desire
to generate income is not necessary. Any systematic activity organized by cooperation
between employer and employees for the production and/or distribution of goods and
services calculated to satisfy human wants and wishes is industry. Thus, many
hospitals, educational institutions, universities, charitable institutions and welfare
organisations have got covered under the Act. Professions, clubs, cooperatives,
research institutes etc. are also covered.
What is an Industrial Dispute?
Between employers and employers
Between employers and workmen
Between workmen and workmen
Connected with Either or All
Employment areas
Non employment areas
Terms of employment or
The conditions of labour of any person
Disputes can be individual or Collective. The Act provides that where any employer
discharge, dismisses, retrenches or otherwise terminates the services of an individual
workmen, any dispute or differences between that workmen and his employer
connected with, or arising out of, such discharge, dismissal, retrenchment or
termination shall be deemed to be an industrial dispute even if no other workmen nor
any union of workmen is party to the dispute (Section 2A).
Some Definitions
1. Layoff: means failure, refusal or inability of an employer on account of shortage
of power or raw materials or the accumulation of stocks or the breakdown of
machinery or natural calamity or for any other connected reason to give
employment to a workman whose name is borne on the muster rolls of his
industrial establishment and who has not been retrenched.
2. Retrenchment: means the termination by the employer of the service of a
workman for any reason whatsoever, otherwise than as a punishment inflicted by
way of disciplinary action but does not include:
(a) Voluntary Retirement of the workman
(b) Retirement of the workman on reaching the age of super annotation
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(c) Expiry of employment contract

(d) Termination of the service of an workman due to continuous ill health or
3. Strike: means a cessation of work by a body of persons employed in an industry
acting in combination or a concerned refusal, or a refusal, under a common
understanding of any number of persons who are or have been so employed to
continue to work or to accept employment.
Applicability
To any industry unit regardless of the numbers of workmen employed. A workman
means Skilled, Unskilled, manual labour, technical, clerical and supervisory workmen
but excludes supervisory workers having salary of more than Rs.1600 p.m.
Workman means any person (including apprentice) employed in any industry to do
any manual, clerical or supervisory work for hire or reward. It includes dismissed,
discharged or retrenched person also. However, it does not include (i) Armed Forces
i.e. those subject to Air Force Act, Army Act or Navy Act (ii) Police or employees of
prison (iii) Employed in mainly managerial or administrative capacity or (iv) person in
supervisory capacity drawing wages exceeding Rs 1,600 per month or functions are is
mainly of managerial nature. [section 2(x)].
Authorities under the Act
1
Works Committee: In an attempt to resolve industrial disputes under the Act

makes it obligatory to constitute a works committee in every industrial
establishment having 100 or more workmen. This committee constitutes of equal
number of representatives of workmen and employer.
2. Conciliation Officer: The Act provides for constitution of conciliatory machine

with conciliation officer to be appointed. The role of the CO is to mediate and
promote the settlement of Industrial Dispute. If this fails then the Act provides for
Labour Courts, District and State Tribunals and National Tribunals for the
adjudication of the dispute. The Act provides for Works Committee in factories
employing 100 or more workers. [section 3]. The committee will consist of equal
number of representatives of employer and employees. Representatives of
employees will be selected in consultation with Registered Trade Union. The
Works Committee will first try to settle disputes. If dispute is not solved, it will be
referred to Conciliation Officer. He is appointed by Government. [section 4].
The matter may also be referred to Board of Conciliation. [section 4]. He will try
to arrive at fair and amicable settlement acceptable to both parties. If he is unable
to do so, he will send report to appropriate Government. [section 12(4)]. The
Government may then refer the industrial dispute to Board of conciliation, Labour
Court or Industrial Tribunal. [section 12(5)].
Employer and employees can voluntarily refer the matter to arbitration. [section
10A]. [This provision is very rarely used by employer and workmen. Generally,
they prefer the Court route].
If no settlement is arrived at, there is three tier system of adjudication Labour
Court, Industrial Tribunal and National Tribunal. The order made by them is
award.
Award means an interim or final determination of any industrial dispute or of
any question relating thereto by any Labour Court, Industrial Tribunal or National
Tribunal. It also includes arbitration award. [section 2(b)]. The award is required
to be published by State/Central Government within 30 days. [section 17].
The award becomes effective 30 days after its publication. [section 17A].
Labour Court: Labour Courts are constituted by State Governments u/s 7. It will
be presided over by Presiding Officer. The Labour Court has powers in respect
of:
(a) Interpretation of Standing Orders
(b) Violation of Standing Orders
(c) Discharge or dismissal of a workman
(d) Withdrawal of any customary concession or privilege
(e) Illegality or otherwise of a strike or lock-out
(f) Other matters which are not under Industrial Tribunal. [Second Schedule to
the Act]
Industrial Tribunal: Industrial Tribunal is constituted by State Government
u/s 7A. The tribunal will be presided over by Presiding Officer. The Industrial
Tribunal has powers in respect of:
(a) Wages, including period and mode of payment
(b) Compensatory and other allowances
(c) Hours of work and rest intervals
(d) Leave with wages and holidays
(e) Bonus, profit sharing, provident fund and gratuity
(f) Shift working changes
(g) Classification by grades
(h) Rules of discipline
(i) Ratinlanisation and retrenchment of workmen. [Third Schedule to Act].
National Tribunal: National Tribunal is formed by Central Government for
adjudication of industrial disputes of national importance or where industrial
establishments situated in more than one States are involved. [section 7B].
Reference of Dispute: Appropriate Government can refer any dispute to Board
of Conciliation, Court of Enquiry, Labour Court or Industrial Tribunal. [section
10(1)]. Appropriate Government means (1) Central Government in case of
railways, docks, IFCI, ESIC, LIC, ONGC, UTI, Airport Authority, industry
carried on by or under authority of Central Government (2) State Government in
case of other industrial disputes [section 2(a)].
Court/Tribunal can Reduce Punishment and Order Reinstatement: As per
section 11A, the Labour Court and Tribunal have wide powers. They can
reappraise evidence. They can also see whether the punishment is disproportionate
to the gravity of the misconduct proved. If the Court or Tribunal is of the view
that the punishment is disproportionate, it can impose lesser punishment or even
set aside the termination and order reinstatement. If Court orders reinstatement
and employer files appeal in Higher Court, the employer is required to pay full
wages to the employee during the period of pendency of proceedings with
High Court or Supreme Court. However, if the workman was gainfully employed
elsewhere, Court can order that payment of such wages is not to be made.
[section 17B].
Settlement: Settlement means a settlement arrived at in the course of
conciliation proceedings. It includes a written agreement between employer and
workmen arrived at otherwise than in course of conciliation proceedings
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(i.e. outside the conciliation proceedings). The difference is that settlement arrived
at in course of conciliation or an arbitration award or award of labour court or
Tribunal binds all parties to industrial dispute including present and future
workmen and all parties who were summoned to appear in the proceedings.
[section 18(3)]. If settlement is arrived at by mutual agreement, it binds only those
who were actually party to agreement. [section 18(1)]. The settlement is binding
during the period it is in force. Even after that period is over, it continues to be
binding, unless a 2 month notice of termination is given by one party to another.
[section 19(2)]. If no period has been specified, settlement is valid for 6 months
and an award is valid for one year.
3. The Act also provides for voluntary reference of the dispute to arbitration before
the dispute is referred to Labour courts, provided both parties agree voluntarily.
Important Provisions
1. The Act makes it obligatory for the employer to give a notice of change before
affecting any change in the conditions of service in respect of matters such as
wages, leave and holidays, introducing new rules of discipline, withdrawal of
concessions or privileges. A 21 days notice has to be given to all such workmen
who are likely to be affected by these changes.
2. The Act provides for providing full wages for workers during the pending order of
dispute in High Court or Supreme Court.
3. Every Award/Settlement arrived during the settlement machinery is binding on
all parties to the dispute, legal heirs and all present and future employees.
A dismissed workman is also covered under the Act.
4. Lay-off compensation @ 50% of Basic + DA and for retrenchment @ 15 days
wages for every completed year of service, with a minimum service of 1 year
lay off means failure, refusal or inability of employer on account of shortage of
coal, power or raw materials or accumulation of stock or break down of
machinery or natural calamity; to give employment to a workman on muster roll.
Lay off means not giving employment within two hours after reporting to work.
Lay off can be for half day also. In such case, worker can be asked to come in
second half of the shift. [section 2(kkk)].
A factory employing 50 or more but less than 100 employees on an average per
working day can lay off the workmen, who have completed one year of service,
by paying compensation equal to 50% of salary (basic plus DA) (section 25C of
IDA). Employer can offer him alternate employment, if the alternate employment
does not call for any special skill or previous experience, and lay off
compensation will not be payable if employee refuses to accept the alternate
employment (section 25E).
Above provisions of compensation for lay off do not apply to (a) Industrial
establishments employing less than 50 workmen (b) seasonal industry
(c) Establishments employing 100 or more workmen, as in their case, prior
approval of Appropriate Government is necessary u/s 25M(1).
Retrenchment means termination by the employer of service of a workman for
any reason, other than as a punishment inflicted by a disciplinary action.
However, retrenchment does not include voluntary retirement or retirement on
reaching age of superannuation or termination on account of non-renewal of
contract or termination on account of continued ill-health of a workman.
[section 2(oo)].
Retrenchment means discharge of surplus labour or staff by employer. It is not

by way of punishment. The retrenchment should be on basis of last in first out
basis in respect of each category, i.e. junior-most employee in the category (where
there is excess) should be retrenched first. [section 25G]. If employer wants to
re-employer persons, first preference should be given to retrenched workmen.
[section 25H].
A worker who has completed one year of service can be retrenched by giving one
month notice (or paying one months salary) plus retrenchment compensation, at
the time of retirement, @ 15 days average wages for every completed year of
service (section 25F). In Parrys Employees Union v. Third Industrial Tribunal
2001, it was held that for purposes of retrenchment compensation under ID Act,
the monthly salary should be divided by 30.
If number of workmen are 100 or more, prior permission of Appropriate
Government is necessary u/s 25N(1)].
Meaning of Continuous Service Provisions of compensation for lay off and
retrenchment are applicable only to workman who is in continuous service for
one year. As per section 25B, continuous service includes service interrupted by
sickness, authorised leave, accident or strike which is not illegal, or lock-out or
cessation of work which is not due to fault of workman. In Workmen v.
Management of American Express AIR 1986, it was held that actually worked
cannot mean only those days where workman worked with hammer, sickle or pen,
but must necessarily comprehend all those days during which he was in the
employment of employer and for which has been paid wages either under express
of implied contract of service or by compulsion of statute, standing orders etc.
Closure means permanent closing down of a place of employment or part
thereof. [section 2(cc)]. Thus, closure can be of part of establishment also. 60 days
notice should be given for closure to Government, if number of persons employed
are 50 or more. 60 days notice is not necessary if number of persons employed are
less than 50. [section 25FFA]. Compensation has to be given as if the workman is
retrenched. [section 25FFF(1)]. If number of workmen employed are 100 or more,
prior permission of Government is necessary for closure u/s 25-O.
Provisions for large industries for lay off and closure: Large industries
employing 100 or more workmen on an average for preceding 12 months cannot
lay-off, retrench or close down the undertaking without permission from
Government (sections 25M to 25-O of Industrial Disputes Act).
5. Illegal Strikes: The Act deals with the Strike/Lock Out in Public Utility Services
that requires minimum of 14 days advance notice (cannot strike within 14 days of
giving advance notice). In other units no such prior notice is required. A lockout
in consequence of an illegal strike or a strike in consequence of an illegal lockout
shall not be deemed to be illegal.
Strike means a cessation of work by a body of persons employed in any
industry, acting in combination, or a concerted refusal, or a refusal under a
common understanding, of any number of persons who are or have been so
employed to continue to work or to accept employment. [section 2(q)].
As per section 23, workman should not go on strike in (1) during pendency of
conciliation proceedings and 7 days thereafter (2) during pendency of proceedings
before Labour Court, Industrial Tribunal or National Tribunal (3) During period of
arbitration proceedings (4) During period when settlement or award is in operation
in respect of the matters covered by award or settlement.
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In case of public utility, employees have to give at least 14 days notice for strike.
The notice is valid only if strike commences within 6 weeks. Otherwise, fresh
notice is required. Similarly, an employer cannot declare lock out without giving
14 days notice. [section 22]. If such notice is received, Government authority
should be informed within five days. As per section 2(n), Public Utility Service
includes railways, major port and docks, section of industry on the working of
which safety of establishment depends, postal/telegraph/telephone services,
industry supplying power/light/water; system of public conservancy or sanitation.
[section 2(n)]. In addition, Government can declare industry specified in Schedule
I as Public Utility Services. Such declaration can be made for 6 months at a time
[section 2(n) (vi)]. [Industries in first schedule include banking, transport, cement,
coal, defence establishments, security press, hospitals and dispensaries, oil fields,
mining of certain specified ores, foodstuff, cotton textiles, iron and steel etc].
Lock-out means temporary closing or a place of employment or the suspension
of work, or the refusal by an employer to continue to employ any number of
persons employed by him. [section 2(l)]. Workers go on strike, while lock-out is
to be declared by employer.
In every establishment, 1% of total workmen are recognised as Protected
workman u/s 33(3) (but minimum 5 and maximum 100). In case of such
workmen, order for his dismissal, discharge or punishment cannot be passed
without permission of authority before whom proceedings are pending, whether
the issue is related to dispute or not.
6. Unfair Labour Practices: Section 25T prohibits unfair labour practices by
employer or workman or a trade union. If any person commits unfair labour
practice, he is punishable with fine upto Rs 1,000 and imprisonment upto 6
months. [section 25U]. Fifth schedule to Act gives list of what are Unfair Labour
Practices. Then major are as follows:
(a) In Case of Employer: Interfering in Trade Union activities , Threatening
workmen to refrain them from trade union activities ,Establish employer
sponsored Trade Union, Discourage trade union activities by various means,
Discharge or dismiss by way of victimization or falsely implicating workman,
Abolish work of regular nature and to give that work to contractors, transfer
of workman under guise of management policy, Employ badli or casuals and
continue them for years, Recruitment workmen during strike which is not
illegal, Acts of force and violence, Not implementing settlement or agreement
or award, Refuse collective bargaining, Continue illegal lock-out
(b) In Case of Workmen and Trade Unions: Support or instigate illegal strike,
Coerce workmen to join or not to join a particular trade union, Threatening or
intimidating workmen who do not join strike, Refuse collective bargaining in
good faith, Coercive actions including go slow, gherao, squatting on work
premises after working hours etc. Willful damage to employers property,
Acts of force or violence or intimidation.
Latest Industrial Dispute in News
Jet Airways' strike enters second day. Saturday September 19, 2009, for the second
consecutive day, Jet Airways flights were disrupted following an ongoing agitation by
pilots, leading to cancellation of 160 flights across the country on Wednesday, an
airline official said. Many pilots continued to report sick on Wednesday despite a
Bombay High Court order on Tuesday evening restraining them from resorting to any
form of strike in the country's largest private airline. Many passengers, however, had
already cancelled their flights with Jet Airways. So there was relatively less chaos at
Mumbai's Chhatrapati Shivaji Airport on Wednesday morning. Meanwhile, the pilots

on strike got support from the National Union of Seafarers of India. The general
secretary, Mr. Abdul G. Sarang, said early on Wednesday that until the issue was
resolved, the NUSI would not utilise the services of Jet Airways to transfer their
members all over the country and to other parts of the world.
The Jet pilots are expected to meet the director general of civil aviation, a senior civil
aviation ministry official said on Wednesday. The directorate has asked states to see if
it is necessary to invoke the Essential Service Maintenance Act (ESMA) if the
agitation continues. The government is expected to meet the Jet Airways officials
sometime later in the day. It could also give clearance to the national carrier Air India
to add flights to carry Jet Airways passengers. Jet Airways officials have said that they
have been able to maintain their international operations. However, it had to cancel
16 international flights on Tuesday after the pilots reported sick. Meanwhile, Jet
Airways on Wednesday took disciplinary action against five more pilots after they
went on mass sick leave to protest sacking of their two senior colleagues, airline
sources said.
The airlines has taken disciplinary action against a total of eight pilots since the strike
began on Tuesday. However, Jet Airways spokesperson was not available for
comment.
The pilots had called for a strike on August 7 demanding reinstatement of the two
sacked colleagues. The matter was then referred to the Regional Labour
Commissioner (RLC) for conciliation. The Commissioner called a conciliatory
meeting on August 31 advising both Jet Airways and pilots to adhere to the Industrial
Dispute Act of 1947. Jet cannot terminate the services of any pilot and the pilot cannot
go on a strike as long as the matter was under conciliation, the RLC had said at that
time. The pilots withdrew their strike call on September 7 but went on mass sick leave
to protest the sacking.
6.5 THE TRADE UNIONS ACT, 1926

The Act provides for:
Conditions governing the registration of the trade unions
The obligations of a registered trade union and
The rights and liabilities of a registered trade union
Applicability
The act extends to the whole of India and includes all unions and associations of
workmen.
Trade Union means any combination, whether temporary or permanent, formed
primarily for the purpose of regulating the relations between workmen and employers
or between workmen and workmen, or between employers and employers, or for
imposing restrictive conditions on the conduct of any trade or business. It includes
federation of two or more trade unions. [section 2(h)].
Trade dispute means any dispute between workmen and employers or between
workmen and workmen, or between employers and employers. However, it should be
connected with employment or non-employment, or the conditions of labour, of any
person. Workman means all persons employed in trade or industry, whether or not in
the employment of the employer with whom the trade dispute arises. [section 2(g)].
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Provisions under the Act

1. Registration of trade unions: requires 7 or more members of a trade union to
make an application to the registrar. The application should have the names,
occupations and addresses of the members and the office bearers, name and
address of the trade union.
2. A certificate of registration is issued by the registrar of trade unions on
registering a trade union which shall be conclusive evidence that the trade union
has been duly registered.
3. Appeal: Any person aggrieved by any refusal of the registrar to register a trade
union can appeal in the high court within 60 days from the date of such refusal.
4. Every registered trade union becomes a corporate body and is required to create
separate funds for general purposes and a separate fund for political purposes.
5. Notification of change in the address of the head office should be given within
14 days of such change to the registrar in writing.
6. A registered trade union enjoys the following privileges:
(a) No officer or member of a registered TU is liable to punishment under Indian
Penal Code in respect of any agreement made between the members for the
purpose of furthering any objective of the TU, unless it is for committing an
offence.
(b) No suit or other legal proceeding is maintainable in any civil court against any
TU or any office bearer or member in respect of any act done in
contemplation or furtherance of a trade dispute to which a member of a trade
union is a party on the ground only that such an act induces some other person
to break a contract of employment, or that such an act is an interference with
the trade or employment, of some other person or with the right of some other
person to dispose of his capital or of his labor as he wills.
(c) A registered TU shall not be liable in any suit or other legal proceedings in
any civil courts in respective of tortuous acts done in contemplation or
furtherance of a trade dispute by an agent of the TU, if it is proved that such
person acted without the knowledge of, or contrary to the express instructions
given by the executive of the TU.
(i) Registration and recognition of Union by an employer are independent
issues. Registration of Trade Union with Registrar has nothing to do with
its recognition in a particular factory/company. Recognition of Trade
Union is generally a matter of agreement between employer and trade
union. In States like Maharashtra and Madhya Pradesh, there are specific
legal provisions for recognition of a trade union.
Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour
Practices Act (MRTU & PULP Act, 1971)
Object of the Act
Recognition of a trade union which would act as an exclusive bargaining
agent for an undertaking and
Prevention of unfair labour practices on behalf of employers and trade unions.
Applicability
The Act extends to the whole of Maharashtra State and it covers industries
falling within the purview of Bombay Industrial Relations Act, 1946 and the
Industrial Disputes Act, 1947.
Recognition of Unions (Chapter III, Sections 10 to 18)

The act provides for the recognition of unions for an undertaking employing
50 or more employees.
The union having a minimum membership of 30% of the total number of
employees employed in an undertaking for 6 calendar months preceding the
month in which an application for recognition is made, may apply to the
industrial court for registration as a recognized union.
Derecognition (Section 13)
It was recognized under a misrepresentation or fraud.
The union membership has fallen below 30% for a continuous period of 6
months.
It has instigated, aided or assisted the commencement of an illegal strike
under the Act.
Another union has been recognised in the place of the union recognised under
the Act.
Its registration is cancelled under the Trade Unions Act, 1926.
It has committed any of the unfair labour practices mentioned in schedule III
of the Act.
The recognition accorded to a trade union continues for a minimum period of
two years from the date of its recognition as a recognized trade union.
Recognition of another union (Section 14)
Application for recognition of a new trade union in place of the existing
recognized union can be made only after a lapse of two years of the date of
registration of the recognized union.
In such cases, the Industrial Court will hold a similar enquiry and procedure
which is followed in recognising a union.
Re-recognition (Section 15)
The union whose recognition was cancelled on the ground of registration
under mistake or because of membership falling below 30% can apply for
re-recognition at any time after 3 months from the date of its cancellation.
Rights of recognised union (Section 20 & 21)
To collect membership fees during pay day
To put up notice board and affix notices
To hold discussions on the premises with the employees in connection with
the prevention of industrial dispute
To meet and discuss with the employer regarding the employees grievances
To inspect in an undertaking any place where any employee is working
To appoint its nominee for the purpose of works committee
To appear before any proceedings on behalf of the employee
Rights of un-recognised union (Section 22)
The officers of such a union have a right to meet and discuss with an
employer grievances of an individual member relating to his
discharge/dismissal/termination of service etc and
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To appear on behalf of any of the members employed in the undertaking in

any domestic or departmental enquiry held by the employer
Illegal Strike and Lock-out (Section 24)
Recognized unions should not resort to strike without
Giving 14 days notice
Obtaining a vote of the majority members of the union in favor of the
strike
During the pendency of any proceedings and
During the period of operation of any settlement or award
Similarly employer shall not resort to a lock-out without adhering to the above
conditions (a, c and d only)
Unfair Labour Practices (Chapter VI Sections 26 to 29)
Require employer to refrain from influencing, coercing or dominating
workmen in the formation and functioning of unions
Prohibits the trade union from direct action like Gherao, willful go-slow,
squatting on the premises of an undertaking after working hours, and
demonstrations before the residences of the employers or the managerial staff
Procedure for dealing with complaints regarding unfair labour practices
(Section 28)
File a complaint before the Industrial Court and in certain cases before the
Labour Court
On receipt of such a complaint, the court can direct the Investigating Officer
to enquire into such a complaint and try to bring about a settlement between
the parties concerned, failing which the court itself on receipt of the report
from the investigating officer may decide the further course of action in this
regard
Enforcement Machinery (Section 30)
Industrial Court for all matters related to recognition and de-recognition of
unions
Labour Court for matters related to individual nature and empowered to
declare strike or lock-outs as illegal
Recent News Articles on MRTU & PULP Act, 1971
1. 7-day week: Dismissed BATA salesmen persist with legal battle
Their services were terminated for opposing firms 365 working days policy;
company contends that salesmen do not fall under workmen category
Fifteen salesmen of BATA India Ltd, whose services were terminated in March 2007
after they protested against the 365 working days policy introduced by the company,
had approached the Labour Commissioners office at Wakdewadi, in addition to filing
a labour suit under the MRTU and PULP Act, 1971. While they now gear up to fight
the case, the company remains firm on its decision and stresses that salesmen do not
fall under the category of workmen as specified by the Act.
In February 2007, the company informed its employees through a notice that the State
government had given it permission to keep its shops open seven days a week and
extended working hours. The change was to be effected from February 16. When the
company faced protests, it responded by terminating the services of 15 salesmen from

April 5. While seven salesmen moved the Labour Court, alleging unfair labour
practices, the rest approached the Additional Labour Commissioners Office.
We were not taken into confidence and were not in favour of this. While on one hand
we would have had to work additional hours, there was no talk about any hike in
salaries. We were also skeptical about foregoing our overtime allowance and expected
to face a loss of around Rs 10,000 if we decided to work those extra hours, explained
Ravindra Deshpande, whose services were terminated after 13 years service as a
salesman.
The company had requested that certain preliminary issues like that of the
workman/employee be framed before the case comes up for argument. The company
had argued that salesmen do not fall under the category of workmen and stressed
that the question of categorisation should be resolved before the case goes further.
However, Labour Court Judge V M Kakade passed an order on December 31, 2007,
stating that the court would hear and decide all the issues together, to avoid a
piecemeal decision. The company, however, filed a revision appeal in the Industrial
Court, which was rejected. It even approached the Bombay High Court, which again
upheld the Labour Courts decision, said Advocate A M Pradhan who is representing
the workers.
The company remains unfazed. The court has decided that it will deal with all the
issues in the case together and our contention will remain the same when the case is
argued in court that salesmen do not fall under the category of workmen. There
is no compromise possible as we had initiated action against them based on their acts
of insubordination and indiscipline. Besides, their posts have already been filled and
there is no question of reinstatement, said BATA general manager Rajiv Chabbra,
who handles the legal functions of the company. The employees counsel, however,
stressed that they were workmen, explaining the difference between sales
representatives who engage in door-to-door promotion and salesmen who work
from one location.
Besides the 15 salesmen in Pune, 153 salesmen from the companys Mumbai outlets,
too, filed a similar case with the Mumbai Labour Court. As many as 172 such
employees opted not to comply with the companys decision and were terminated
from service.
However, the reasons for the termination were conditional, as the employees were
protesting the managements decision to keep shops open seven days a week and were
refusing to sign a good conduct bond, said Chhabra. While the workers are prepared
to negotiate the case on monetary grounds not wanting to get back into
employment with the company the management has said that it would wait for the
case to be decided.
2. Strike at M&M's Nashik Plant Illegal
Nashik Industrial Court says strike is illegal.
In response to disciplinary action taken against an office bearer of the Employees
Union, workers at the Nashik plant of Mahindra & Mahindra Ltd.s Automotive
Sector have resorted, commenced with an illegal and unjustifiable strike according
to The Nashik Industrial Court. The court declared the tool down strike by the
workmen as illegal and unjustified and has thereby directed the respondent-union
workers to report to work at the earliest and withdraw the strike within 48 hours from
the said declaration. According to the Industrial Court, the strike is in breach of
Sec-24 (1) (a) & 24 (1) (b) of the MRTU and PULP Act, 1971 and prima-facie
amounts to unfair labour practice under Item-1 of Sch-III of the MRTU and PULP
Act, 1971.
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Press Release:
Mumbai, May 13, 2009: The Nashik Industrial Court, by its order dated May 13,
2009, has declared the tool down strike by workmen at the Nashik Plant of Mahindra
& Mahindra Ltd.s Automotive Sector as illegal and unjustified.
The Industrial Court order states the following: It is declared that the respondents,
working in the complainant-company have resorted, commenced illegal and
unjustified strike in breach of Sec-24 (1) (a) & 24 (1) (b) of the MRTU and PULP Act,
1971 on and from 04-05-2009, which is continued thereafter till today, prima-facie
amounts to unfair labour practice under Item-1 of Sch-III of the MRTU and PULP
Act, 1971. The respondent-union workers are hereby directed to withdraw said strike
within 48 hours from said declaration. They are advised to report for their work in
their respective shifts at the earliest.
The workmen at the Nashik Plant of Mahindras Automotive Sector had resorted to an
illegal, tool down strike from 4th May, 2009. This was in response to a disciplinary
action initiated against an office bearer of the Employees Union for alleged acts of
indiscipline.
The Court has ruled that the workmen should resume their duties within 48 hours.
3. Justify lockouts, says HC
In a judgment upholding the security of a workforce during a lockout, the Bombay
High Court has held that an Industrial Court can investigate the justifiability of a
lockout, even if the company has declared it by legal means. Hence, a company will
now have to justify the reasons for declaring a lockout and explain denial of wages to
its workforce. It can no longer justify its stand by merely fulfilling the legal provisions
under the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour
Practices Act (MRTU & PULP) Act.
Justice F I Rebello of the Bombay High Court has ruled that workers are entitled to
wages during the lockout if they can prove the lockout itself was not called for. The
order was delivered on a petition filed by the Bharatiya Kamgar Karmachari
Mahasangh, which alleged unfair labour practices by Guest Keen Williams Limited.
The company had declared a lockout in February 1998 after issuing a notice in
January 1998.
Another group of 19 employees also moved the Industrial Court against the company
under the MRTU & PULP Act. The court, however, rejected the petition, maintaining
that the lockout was legal'' and the justifiability of the lockout could not examined in
a complaint of unfair labour practices. However, the workers appealed in the high
court, maintaining that the act permits the Industrial Court to probe the circumstances
under which the lockout was declared. They maintained that even though the company
may have followed the legal procedures, the lockout itself may not have been called
for or by subsequent passage of time, it may become totally unfair to the workers. The
company's counsel argued that unless there is a prior agreement with the workers, the
latter are not entitled to wages during the lockout period.
The counsel cited past rulings (Mazdoor Congress vs. S A Patil, Billion Plastics vs.
Dyes and Chemicals Workers Union, and Maharashtra General Kamgar Union vs.
Solid Containers Ltd), which underscore the Industrial Court's inability to go beyond
the scope of the lockout's legality. Upholding the workers' contention, Justice Rebello
observed that the company was not justified in this policy decision, after outlining the
circumstances before the lockout was declared. To begin with, the management
had suspended work from January 19, much before the lockout took effect from
February 5. Also, he observed, no agreements had been reached by the warring parties
despite the workers submission of two charters of demands since 1989.There were no
recent instances of violence in the company, he said, pointing out that in their reply to
the lockout notice the workers had in fact assured peace in the factory. This had been
reiterated in the courts too. Moreover, the company had reached an agreement with the
union with regard to a particular section of the workforce. Therefore, Justice Rebello
ruled, there was no justification for the lockout at this stage and certainly not for
denial of workers' monthly wages. The judge directed the company to pay wages until
the final disposal of the petitions.
Following the ruling, the company has filed an appeal in the high court, arguing that
the single judge has erred in interfering with the Industrial Court's well-reasoned
order. Moreover, the company claims, the judge has not appreciated the lockout
notice, which clearly mentions the looming threat of violence in the establishment.
No prudent employer could be expected to wait for actual bloodshed before imposing
the lockout, the appeal states.
Colin Gonsalves and J P Cama appeared for the petitioners while K K Singhvi and
C U Singh represented the management.
4. SC ruling on unfair labour practice
THE appeal under the Maharashtra Recognition of Trade Unions and Prevention of
Unfair Labour Practices Act, 1971 (MRTU & PULP Act) is dismissed on the ground
that the complaint was not maintainable.
It is open for the appellant-union or their members to raise dispute in this behalf
before an appropriate forum provided they are entitled to do so. If they get a
declaration to the effect that they are employees of the respondent-company, then it
may be open to file such a complaint. It is also clarified that if a dispute as to their
status is raised in an appropriate forum, then the same will be decided on merits
without taking into consideration any observations made or finding given by the
Industrial Court in the impugned order.
That was all that the workers' union could obtain from the Supreme Court by
approaching it by way of special leave petition in Vividh Kamghar Sabha vs. Kalyani
Steels Ltd (Civil Appeal No. 3375 of 1998 decided on January 9, 2000) by a Division
Bench comp rising Mr. Justice S. Rajendra Babu and Mr. Justice S.N. Variava. In this
case, Vividh Kamghar Sabha, a union representing the workmen of a canteen run by
the management of Kalyani Steel Ltd (company) claimed that they were employees
of the company, but the company was not treating them at par with the other
employees, and had notionally engaged the contractors to run the canteen. The
company did not accept this claim. The union filed a complaint under Section 28(1) of
the MRTU & PULP Act, alleging that the company had engaged in unfair labour
practices under specified items of Schedule II and Schedule IV of the MRTU & PULP
Act. T his complaint came to be dismissed by the Industrial Court. The union filed a
special leave petition directly in the Supreme Court against this order as the High
Court of Bombay, in the case of Krantikari Suraksha Rakshak Sangathana vs. S.V.
Naik (1993) 1 CLR 1002 had already held that the Industrial Court cannot, in a
complaint, under the MRTU & PULP Act, abolish contract labour, and treat
employees as direct employees of the company.
The Supreme Court referred to its ruling in the case of Central Labour Union (Red
Flag) Bombay vs. Ahmedabad Mfg & Calico Printing Co. Ltd (1995) 2 LLJ 765
holding that where the workmen had not been accepted by the company to be its
employees, then no complaint would lie under the MRTU & PULP Act. The judges
expressed their full agreement with that ruling.
The judges took this opportunity to reiterate the view that the provisions of the MRTU
& PULP Act can only be enforced by persons who admittedly are workmen. If there is
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a dispute as to whether the employees are employees of the company, then that dispute
must first be got resolved by raising a dispute before the appropriate forum. It is only
after the status as a workman is established in an appropriate forum that a complaint
could be made under the provisions of the MRTU & PULP Act. It was contended by
the appellant-union that the company had always recognised the members of the
appellant-union to be their own workmen. It was submitted that a formal denial was
taken only to defeat the claim.
The judges, however, saw no substance in this contention. Going by the written
statement of the company, the judges noted that the management had categorically
denied that the members of the appellant union were employees of the company. The
judges further took into account that the question was agitated before the Industrial
Court. The Industrial Court gave a finding, on facts, that the members of the
appellant-union were not employees of the respondent-company. This being a
disputed fact, till the appellants or their members, get the question decided in a proper
forum, the present complaint was not maintainable.
6.6 THE CHILD LABOUR (PROHIBITION AND

REGULATION) ACT, 1986
Note: This Act has repealed the employment of children Act 1938.
Objective
The Act prohibits employment of Child (who has not completed 14 years) in all
the occupations indicated in Part A of schedule to the Act and in all processes
indicated in Part B of the schedule to the Act.
Lay down a procedure to decide modifications to the schedule of banned
occupations or processes
Regulate the conditions of work of children in employments where they are not
prohibited from working
Lay down penalties contravening the provisions of the Act
To define Child uniformly in all related laws
Important Provisions under this Act
1. Prohibition of employment of children in certain occupations and processes
2. Power to amend the schedule only by the Central Govt. with a 3 months notice
of its intension to do so in the official gazette.
3. The Central Government may form a Child Labour Technical Advisory
Committee to advice the government on the additions of occupations and
processes
4. The Act stipulates the hours of work for different types of processes and
occupations for a child worker
5. A Child cannot be given overtime working and weekly holiday shall be given to
him
6. The Act makes provisions for health and safety for children employed in
permitted establishments
7. Employer should maintain separate register for Child workers in permitted
establishments regarding name, age, nature of work, hours of work and rest
periods. This can be inspected by appropriate bodies.
8. Penalties: Contravention of the provisions of the Act calls for imprisonment for
atleast 3 months which can be extended to one year or with a fine which shall not
be less that Rs. 10,000/- which may be extended to Rs.20,000/- or with both.
Second conviction calls for an imprisonment of 6 months extendable to 2 years.
6.7 THE APPRENTICES ACT, 1961

Objective
The Act aims at preparing young citizens as skilled craftsmen through the joint efforts
of the employer and the apprentice. The main purpose of the Act is to provide
practical training to technically qualified persons in various trades. The objective is
promotion of new skilled manpower. The scheme is also extended to engineers and
diploma holders.
Applicability
The Act covers all industries and extends to the whole of India.
Provisions of the Act
1. Apprentice: The person should be not less than 14 years of age and should satisfy
the standards of education and of physical fitness as may be applicable to different
trades and industries.
2. Apprentice Contract: before undergoing any apprenticeship training, there should
be a contract between the employer and the person intending to be engaged as an
apprentice. In case of minor the guardian has to enter into contract with the
employer
3. The employer has to send the contract to the apprenticeship adviser for
registration with 3 months of signing the contract. The contract is valid only on
registration.
4. Duration of the apprenticeship training will be decided by National or State
Councils. Duration of training period and ratio of apprentices to skilled workers
for different trades has been prescribed in Apprenticeship Rules, 1991. Duration
of Apprenticeship may be from 6 months to 4 years depending on the trade, as
prescribed in Rules. Period of training is determined by National Council for
training in Vocational Trades (established by Government of India).
5. Employer must pay compensation to the apprentice if the contract is terminated
due to failure of the employer. However if the apprentice fails in his obligations as
per the contract, he or his guardian shall have to refund the cost of training to the
employer.
6. Employer must pay stipend to the apprentice at prescribed rates applicable.
7. Neither the employer nor the employee is bound to employment terms after the
completion of training periods.
8. An apprentice is a trainee and is not a workman and hence labour laws do not
apply to him. However certain labour welfare laws will apply as specified. An
apprentice is not a workman during apprentice training. [section 18]. Provisions of
labour law like Bonus, PF, ESI Act, gratuity, Industrial Disputes Act etc. are not
applicable to him. However, provisions of Factories Act regarding health, safety
and welfare will apply to him. Apprentice is also entitled to get compensation
from employer for employment injury. [section 16].
9. The Act deals with practical and basic training of the apprentices, for this the Act
provides certain obligations from both parties.
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10. Apprentices working in factories are eligible for benefits relating to health, safety
and welfare as provided in the factories Act 1948.
11. In case of accidents apprentices are eligible for compensation under the
workmens compensation Act 1923.
12. It is mandatory for the employer to grant a certificate of training to the apprentice
on his successful completion of the training period and subsequent tests. On
completion of training, every trade apprentice has to appear for a test conducted
by National Council. If he passes, he gets a certificate of proficiency.
13. Any offence by employer under the Act is punishable with imprisonment upto 6
months.
14. The authorities under the act are the national council, the state council, regional
boards, central apprenticeship advisor and the state apprenticeship advisor.
15. Every employer is under obligation to take apprentices in prescribed ratio of the
skilled workers in his employment in different trades. [section 11]. In every trade,
there will be reserved places for scheduled castes and schedules tribes.
[section 3A]. Ratio of trade apprentices to workers shall be determined by Central
Government. Employer can engage more number of apprentices than prescribed
minimum. [section 8(1)]. The employer has to make arrangements for practical
training of apprentice [section 9(1)]. Employer will pay stipends to apprentices at
prescribed rates. If the employees are less than 250, 50% of cost is shared by
Government. If employer is employing more than 250 workers, he has to bear full
cost of training.
6.8 THE EMPLOYMENT EXCHANGES (COMPULSORY

NOTIFICATION OF VACANCIES) ACT, 1959
Scope of the Act
It is compulsory for every employer to notify employment exchanges all
vacancies other than vacancies in the unskilled categories, temporary vacancies
and vacancies proposed to be filled through internal promotions.
Every employer is required to file returns relating to staff strengths at regular
intervals to the employment exchanges.
Applicability
The Act extends to the whole of India and covers all industrial establishments, both in
private and public sectors.
The Act shall not apply in relation to the following vacancies:
In any employment in Agriculture and Horticulture
Employment in domestic services
Where the employment is for a duration not exceeding 3 months
Any type of unskilled work
Any vacancies to be filled by internal promotions
In any employment connected with staff of parliament
Vacancies where the remuneration is below Rs. 60/- p.m.
Compulsory notification of vacancies to employment exchanges before filling

it up
The Act makes it clear that the employers obligation is only to notify the
employment exchanges regarding the available job vacancies. There is no
obligation on any employer to recruit any persons through the employment
exchanges.
The Act provides for furnishing of information of returns related to vacancies that
have occurred and those that are likely to occur in the near future.
6.9 THE MATERNITY BENEFIT ACT, 1961

Purpose
To regulate the employment of women in certain establishments and for certain
periods before and after child birth and to provide for maternity benefits.
Applicability
The Act applies to all factories and establishments where 10 or more workers are
working. Further the state governments can extend the provisions of the Act to any
other establishments which are not covered subject to the approval of the central
government.
However, this Act does not apply to factories/establishments covered by the Employee
State Insurance Act 1948. If a woman becomes ineligible for maternity benefits under
ESIS due to her salary being in excess of Rs.10,000/- p.m. (ESIS covers only
employees drawing salary upto Rs.10,000/-)
1. To be eligible for maternity benefits a woman must have worked for not less than
80 days in the 12 months preceding delivery.
2. Maximum period of maternity benefits is 12 weeks 6 weeks pre-delivery and 6
with of post-delivery.
3. In case of illness arising due to miscarriage etc, women can take extra leave with
wages upto a maximum period of one month in addition to the 12 weeks of
Maternity Benefit.
4. A woman employee can ask for light work for one month preceding the six weeks
prior to delivery.
5. No employer shall employ a woman during 6 weeks immediately following the
day of her delivery/miscarriage or medical termination of pregnancy. Similarly no
woman shall work during the aforesaid period.
6. No pregnant woman shall be given any work which involves long hours of
standing or which is likely to interfere with her pregnancy or likely to cause a
miscarriage.
7. A woman worker after resuming duties after delivery is to be given two nursing
breaks in addition to her regular rest intervals to nurse child till it attains the age of
15 months.
8. Woman cannot be dismissed during the period of maternity benefit except for
gross misconduct.
9. Penalty: Contravention of the Act is punishable with imprisonment upto 1 year
and fine upto Rs.2000/-.
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6.10 THE CONTRACT LABOUR (REGULATION AND

ABOLITION) ACT, 1970
Purpose
The Object of the Contract Labour Regulation and Abolition) Act, 1970 is to prevent
exploitation of contract labour and also to introduce better conditions of work.
A workman is deemed to be employed as Contract Labour when he is hired in
connection with the work of an establishment by or through a Contractor. Contract
Labour, by and large is not borne on pay roll nor is paid directly. The Contract
Workmen are hired, supervised and remunerated by the Contractor, who in turn, is
remunerated by the Establishment hiring the services of the Contractor.
Applicability
The Act applies to the Principal Employer of an Establishment and the Contractor
where in 20 or more workmen are employed or were employed even for one day
during preceding 12 months as Contract Labour. For the purpose of calculating the
number, contract labour employed for different purposes through different contractor
has to be taken into consideration.
This Act does not apply to the Establishments where work performed is of intermittent
or seasonal nature.
Besides Contract Labour (Regulation and Abolition) Act, various other Acts are
applicable to contract labour (a) Factories Act: The Act makes no distinction
between persons directly employed and employed through contractor, (b) Employees
Provident Funds Act, (c) ESIC, (d) Payment of Wages Act, (e) Minimum Wages Act,
(f) Industrial Disputes Act, (g) Workmens Compensation Act.
1. A workman is deemed to be employed as contract labour in or in relation to
work of the establishment, if he is hired for such work by or through a contractor,
with or without knowledge of principal employer. [section 2(1)(b)].
2. If a Principal Employer or the Contractor falls within the vicinity of this Act then,
such Principal Employer and the Contractor have to apply for Registration of the
Establishment and License respectively.
3. Principal Employer has to apply for registration in respect of each establishment.
4. The Act also provides for Temporary Registration in case the Contract Labour is
hired for a period not more than 15 days.
5. Section 9 of the Act provides that the Principal Employer, to whom this Act is
applicable, fails to get registered under the Act, then such Principal Employer
cannot employ contract labour.
6. If the Establishment is not registered or if the Contractor is not licensed then the
contract labour shall be deemed to be the direct workmen and the Principal
Employer shall be liable for the wages, services and facilities of the contract
labour etc.
7. For contravention of the provisions of the Act or any rules made there under, the
punishment is imprisonment for a maximum term upto 3 months and a fine upto a
maximum of Rs.1000/-.
8. The Act enjoins Joint and Several responsibilities on the Principal Employer and
the Contractor. The Principal Employer should ensure that the Contractor does the
following:
(a) Pays the wages as determined by the Government, if any, or;
(b) Pays the wages as may be fixed by the Commissioner of Labour.
(c) In their absence pays fair wages to contract labourer.
(d) Provides the following facilities:
(i)
Canteen (if employing 100 or more workmen in one place) and if the
work is likely to last for 6 months or more
(ii) Rest rooms where the workmen are required to halt at night and the work
is likely to last for 3 months or more
(iii) Requisite number of latrines and urinals separate for men and women
(iv) Drinking water
(v)
Washing
(vi) First Aid

(vii) Crche
(e) Maintains various registers and records, displays notices, abstracts of the Acts,
Rules etc.
(f) Issues employment card to his workmen, etc.
Prohibition of Employment of Contract Labour
Appropriate Government can prohibit employment of contract labour in any process,
operation or work in any establishment, by issuing a notification. Such order can be
issued after consultation with Advisory Board. [section 10(1)]. Before issuing such
order in respect of any establishment, Government will consider aspects of conditions
of work and benefits provided to contract labour, whether process operation or work
is incidental or necessary for the industry/trade/business, perennial nature, whether
it is done ordinarily through regular workmen in other similar establishment.
[section 10(2)].
6.11 LET US SUM UP

The Industrial Employment (Standing Orders) Act was introduced to have a uniform
service condition for the workmen employed in all industrial establishments. The
object of the Factories Act is to ensure for the workers employed in the factories,
health, safety and welfare measures and to provide for proper working hours, leave
and other benefits entitled to them. Labour Laws (Exemption From furnishing returns
and maintaining registers by Certain Establishments) Act, 1988 had been passed to
give relief to establishments employing small number of persons from furnishing
returns and maintaining registers under certain labour laws. The Industrial Dispute Act
was set up prevent industrial disputes like strikes and lockouts and promote collective
bargaining. Trade Unions Act was passed to regulate and govern the activities of a
trade union. The act extends to the whole of India and includes all unions and
associations of workmen. The Child Labour (Prohibition and Regulation) Act lays
down a procedure to decide modifications to the schedule of banned occupations or
processes and regulates the conditions of work of children in employments where they
are not prohibited from working. The Apprentices Act aims at preparing young
citizens as skilled craftsmen through the joint efforts of the employer and the
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apprentice. The main purpose of the Act is to provide practical training to technically
qualified persons in various trades. Under the Employment Exchanges (compulsory
notification of vacancies) Act it is compulsory for every employer to notify
employment exchanges all vacancies other than vacancies in the unskilled categories,
temporary vacancies and vacancies proposed to be filled through internal promotions.
The purpose of the Maternity Benefit Act is to regulate the employment of women in
certain establishments and for certain periods before and after child birth and to
provide for maternity benefits.
6.12 KEYWORDS
Standing Orders: To have a uniform service condition for the workmen employed in
all industrial establishments
Factory: It means any premises where 10 or more workers are working and a
manufacturing process is carried out with aid of power
Small establishment: It means an establishment in which not less than ten and not
more than nineteen persons are employed or were employed during past 12 months
Industry: It means any business, trade, undertaking, manufacture or calling of
employers and includes any calling, service, employment, handicraft or industrial
occupation or avocation of workmen
Strike: It means a cessation of work by a body of persons employed in an industry
acting in combination or a concerned refusal, or a refusal, under a common
continue to work or to accept employment.
Retrenchment: It means termination by the employer of service of a workman for any
reason, other than as a punishment inflicted by a disciplinary action
Trade dispute: It means any dispute between workmen and employers or between
workmen and workmen, or between employers and employers

Fill in the Blanks
1. include the people engaged in skilled, unskilled, manual or clerical
work.
2. Under Standing Orders, a workman is punishable only if he is charged
with.
3. As per Factories Act, includes oiling, washing and cleaning or
any article.
4. The Works Committee contains .number of representatives from
employers and employees side.
5. Settlement of disputes takes place in.tribunal, if it involves
industries that operate in more than one state.
6. .refers to the discharge of extra labor or staff.
7. As per Child Labour Act, no employer can employ a worker until he or she
isyears of age.
8. The maximum period of maternity benefit is.weeks.

1. What do you mean by Standing Orders? Discuss the major provisions.
2. Analyse the provisions of the Factory Act, 1948. Does this act really help in
strengthening industrial relations?
3. What is an industrial dispute? What is the difference between strike and lockouts?
4. Write short notes on: Labour Courts, Industrial Tribunal and National Tribunal.
5. What do you mean by retrenchment of employees and how is it different from
layoff?
6. Underline the importance of Trade Unions Act, 1926. Discuss its main provisions.
7. Discuss Child Labor Act, 1986 and Apprentice Act, 1961.
8. State the major provisions and exceptions of Maternity Benefit Act, 1961.

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LESSON
7
LABOUR LEGISLATIONS: ACTS GOVERNING
COMPENSATION OF EMPLOYEES
CONTENTS
7.0
Aims and Objectives
7.1
Introduction
7.2
The Workmens Compensation Act, 1923
7.3
The Payment of Wages Act, 1936
7.4
The Minimum Wages Act, 1948
7.5
The Payment of Bonus Act, 1965
7.6
The Employee Provident Funds Act, 1952
7.7
The Payment of Gratuity Act, 1972
7.8
The Employees State Insurance Act, 1948
7.9
Let us Sum up
7.10
Keywords
7.11
Self Assessment
7.12
Review Questions
7.13
Suggested Readings

Discuss the main provisions and related concepts of:
The Workmens Compensation Act, 1923
The Payment of Wages Act, 1936
The Minimum Wages Act, 1948
Payment of Bonus Act, 1965
The Employee Provident Fund Act, 1952
The Payment of Gratuity Act, 1972
Employee State Insurance Act, 1948
7.1 INTRODUCTION
In this lesson we are going to study the major acts concerning the compensation of
employees one by one in brief.
7.2 THE WORKMENS COMPENSATION ACT, 1923

Purpose
To impose statutory liability upon an employer to pay compensation to the workman
when the workman suffers from physical disabilities and diseases during the normal
employment tenure.
Applicability
All establishments hiring 20 workers and above must compulsorily register
themselves under the Employees State Insurance Act (ESI Act). It is only those
establishments, which employ a lesser number of workers, and therefore to do not
come within the purview of the ESI Act that the Workmens Compensation Act
applies to. Also if employers fail to register themselves under the ESI Act, then they
will be responsible to pay compensation under the Workmens Compensation Act.
Injury under the Act are classified as: 1. Death 2. Permanent total disablement
3. Permanent partial disablement and 4. Temporary total or partial disablement.
However the Act does not apply to factories/establishments covered by Employee
State Insurance Act 1948.
The Act will apply only to persons recognized as a workmen under the Act. The
following criteria have to be satisfied: (s. 2 (1) (n) read with Schedule II)
With the amendment of the Workmens Compensation Act in 2000 now it is not
necessary that the worker in question is engaged in the employers trade or business.
Further with the Amendment of 2000 now even casual workers are covered by this
law. The only requirement is:
The worker should be employed in an activity, which has to be either listed in
schedule II 2 of the Act OR any duty having connection with the specified activity
mentioned in the schedule.
In addition, schedule III 3 to the Act contains a list of diseases and persons in
occupations where infection is possible can claim compensation under this Act.
They are workmen for the purposes of this Act.
In addition to persons employed in the capacity mentioned in Schedule II, a
driver, a mechanic, cleaner, or person employed in any other capacity in
connection with a motor vehicle are also considered workers under this Act.
In case part of the work of an establishment is contracted out to a contractor and a
worker employed by the contractor for this purpose, is injured then, the principle
employer and not the contractor (who is the workers immediate employer), is
responsible to pay compensation as though the worker was directly employed by
him. (Section 12)
However, this principal employer holds the right to be indemnified by the person
who would normally pay for the compensation of an injured/deceased worker, i.e.
the contractor. However, nothing shall prevent the worker from claiming his
compensation from the principal employer.
Employers Liability to Pay Compensation
If personal injury is caused to workmen by accident or by occupational disease arising
out of and in the course of employment except when the injury does not last for more
than 3 days or the injury is caused by disobedience of the worker (except in cases of
death or permanent total disablement).
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Compensation of Employees
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Occupational Disease (Section 3(2))

An occupational disease while in service, is a disease that inflicts workers
in that particular occupation in which s/he was employed in and resulting from
exposure to a hazardous working atmosphere, particular to that employment.
If a worker contracts such a disease then the employer is liable to pay
compensation, provided that the worker was employed by him for a continuous
period of six months.
The occupational diseases for which compensation is payable are specified in a
list attached to the Act-specifically, Part A of Schedule III (annexure 5).
Amount of Compensation
1. Death: 50% of the monthly wages of the deceased worker multiplied by the
relevant factor depending on the workers age the amount so derived or Rs.
80,000/- whichever is more.
2. Permanent Total Disability: 60% of the monthly wages of the injured worker
multiplied by the relevant factor or Rs. 90,000/- whichever is higher.
3. Permanent Partial Disability: Worker loses one hand 60% of Rs. 90,000/4. Temporary Disability: A half monthly payment of the sum equivalent to 25% of
the monthly wages of the worker, every 15 days till the injury lasts.
5. Wages are the basis for amount of compensation paid. Two workers earning
different salaries therefore will get different amounts of compensation even
though the injury they suffered might be identical.
6. Compensation under this Act is calculated on the basis of the monthly wage
received by the worker.
7. According to this Act, it is the amount of wages which would be payable for a
months service i.e. irrespective of whether the worker is paid on a daily, weekly
or piece rate basis.
Table 7.1: Description of Injuries and Corresponding % of Earning Capacity Loss
Schedule I
SNO.
Description of injury
% of Earning
capacity loss
Part I
Injuries Deemed to Result in Permanent Total Disablement
1.
Loss of both hands
100
2.
Loss of hand and a foot
100
3.
Amputation of one leg/thigh and loss of other foot
100
4.
Loss of sight and unable to work
100
5.
Very severe disfigurement
100
6.
Absolute deafness
100
Part II
Injuries Deemed to Result in Permanent Partial Disablement
1.
Amputation through shoulder joint
90
2.
Amputation below shoulder with stump <8 from tip of acromion
80
3.
Amputation from 8 from tip of acromion to <4-1/2 Below top of

70
olecranon
4.
Loss of hand or of thumb and four fingers of one hand
60
Contd
5.
Loss of thumb
6.
Loss of thumb and its metacarpal bone
40
7.
Loss of four fingers of one hand
50
8.
Loss of three fingers of one hand
30
9.
Loss of two fingers of one hand
20
10.
Loss of terminal phalanx of thumb
20
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30
Amputation cases-lower limbs

11.
Amputation of both feet resulting in end-bearing stumps
90
12.
Amputation though both feet proximal to metatarsophalangeal joint
80
13.
Loss of all toes of both feet through the metararsophalangeal joint
40
14.
Loss of all toes of both feet proximal to the interphalangeal joint
30
15.
Loss of all toes of both feet distal to the proximal interphalangeal joint
20
16.
Amputation at hip
90
17.
Amputation below hip with stump not exceeding 5 from tip of greater
80
trochanter
18.
Amputation below hip with stump exceeding 5 but not beyond high
70
19.
Amputation below middle high to 3-1/2 below knee
60
20.
Amputation below knee with stump exceeding 3-1/2 but not 5
50
21.
Amputation below knee with stump exceeding 5
40
22.
Amputation of one foot resulting in end-bearing
30
23.
Amputation through one foot proximal to metatarsophalangeal joint
30
24.
Loss of all toes of one foot through the metatarsophalangeal joint
20
Other injuries
25.
Loss of one eye, without complication to other
40
26.
Loss of vision of one eye and other is normal
30
Index Finger of right or left hand

27.
Whole
14
28.
Two phalanges
11
29.
One phalanx
30.
Guillotine amputation of tip without loss of bone
Middle finger
31.
Whole
12
32.
Two
33.
One phalanx
34.
Ring or little
35.
Whole
36.
Two
37.
One phalanx
38.
Toes of right or left foot Great Toe

39.
Through metatarsophalangeal joint
14
40.
Part, without loss of bone
41.
Any other toe
Contd...
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42.
Part, any other toe without some loss of bone
43.
Two toes of one foot through metatarsophalangeal joint
44.
Part, two toes without loss of bone
45.
Three toes
46.
Three toes part only without loss of bone
47.
Four toes of one foot, exceeding great toe
48.
Part of four toes, without loss of bone
Some Provisions under the Act

Application for claiming the compensation to the commissioner for workmens
compensation should be within 2 years from the date of the accident.
The employer is bound to report to the commissioner fatal accidents and serious
bodily injuries within 7 days of such an event.
In case of contract workers the principal employer is liable to make payments to
the worker and he can recover the same from the contractor.
A worker can file the case in high court against orders of the commissioner if
dissatisfied with the award.
A worker has the right to approach the civil court directly instead of approaching
the labour commissioner in the first instance.
If the compensation is settled voluntarily between the worker and the employer,
such agreement must be registered with the commissioner. Hence if the settlement
is unfair the commissioner can take suitable actions.
The compensation paid under the Act is protected, i.e. it cannot be attached or
assigned. [section 9].
Principal Employer is liable to pay the amount of compensation for the injury
suffered by workman employed through contractor, if the accident arises as a
result of accident arising out of and during the course of employment.
[section 12].
A Commissioner for Workmens Compensation is appointed by Government. The
compensation must be paid only through the Commissioner in case of death or
total disablement. Any lump sum payment to workman under the Act must be
made only through Commissioner. Direct payment to workman or his dependents
is not recognised at all as compensation. However, in case of death, if employer
has paid some compensation to dependent, that will be refunded to employer.
[section 8(1)].
Expenditure made by employer for medical treatment of workman is not
considered for purposes of the compensation.
Every employee, including those employed through contractor, but excluding
casual employees who is engaged for purpose of employers business is eligible.
The Act does not cover employees employed in clerical capacity. However,
workmen in manufacturing processes, mines, ships, construction, tractor or
mechanical appliances in agriculture, circus etc. and also drivers, watchmen etc.
are covered. The compensation is payable if accident arises out of and during the
cause of employment, and such accident causes either death or disablement.
The employee is eligible to get disablement benefit only when the injury arises
out of and during the course of employment. Similarly, a workman is entitled to
get compensation only if accident is arising out of and during the course of
employment.
7.3 THE PAYMENT OF WAGES ACT, 1936

Purpose
To ensure regular and timely payment of wages to the employed persons, to prevent
unauthorized deductions being made from wages and arbitrary fines being imposed on
the employed persons.
Applicability
The Act extends to the whole of India
The Act applies to all persons employed in an Industrial or other establishments
whose monthly wages are less than Rs. 1600/-. However in the state of
Maharashtra the Act has been made applicable to all such establishments covered
by the Bombay Shops and Establishments Act.
Definition of Wages
Wages means all remunerations (whether by the way of salary, allowance or
otherwise) expressed in terms of money or capable of being so expressed which
would, if the terms of employment, express or implied, were fulfilled, be payable to a
person employed in respect of his employment or work done in such employment, and
includes:
1. any remuneration payable under any award or settlement between the parties or
order of a court
2. any remuneration to which the person employed is entitled in respect of overtime
work or holidays or any leave period
3. any additional remuneration payable under the terms of employment (whether
called a Bonus or by any other name)
4. any sum which by reason of the termination of employment of the person
employed is payable under any law, contract or instrument which provides for the
payment of such sum, whether with or without deduction, but does not provide for
the time within which the payment is to be made
5. any sum to which the person employed is entitled under any scheme framed under
the law for the time being in force.
Wages does not include
1. any bonus whether under a scheme of profit sharing or otherwise which does not
form part of the remuneration payable under the terms of employment or which is
not payable under any award or settlement between parties or order of a Court.
2. The value of any house accommodation or of amenity excluded from the
computation of wages by a general or special order of the state government.
3. any contribution paid by the employer to any pension or provident fund, and the
interest which may have accrued thereon
4. any traveling allowance or the value of any traveling concession
5. any sum paid to the employed person to defray special expenses entailed on him
by the nature of his employment
6. Any gratuity payable on the termination of employment in cases other than those
specified in the point no 4 in the Wages definition above.
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and Labour Laws

1. Every employer is responsible for the payment to the persons employed by him of
all wages required to be paid under the Act. In addition, the following persons
shall also be responsible for the payment of wages under the Act:
(a) in a factory, if a person has been named as a manager of a factory under the
factories Act 1948
(b) in industrial or other establishments, if there is a person responsible to the
employer for the supervision and control of the industrial or other
establishment
2. It is obligatory on every person responsible for the payment of wages, to fix
periods (wage periods) in respect of which such wages shall be payable. No wage
period shall exceed one month.
3. In an establishment which employs less than one thousand employees, the wages
are to be paid before the seventh day, and any other establishments shall pay the
wages before the expiry of the tenth day after the last day of the wage period.
4. Where the employment of any person is terminated by or on behalf of the
employer, the wage earned by him shall be paid before the expiry of the second
working day form the date on which his employment is terminated.
5. All wages are necessarily to be paid during a working day.
6. All wages are to be paid in current coins or currency notes or both. However the
employer may, after obtaining the written authorization of the employed person,
pay him the wages either by cheque or by crediting the wages in his bank account.
Deductions Authorized from Wages under the Act
1. Fines.
2. Deduction for absence from duty.
3. Deductions for damage to or loss of goods expressly entrusted to the employee for
custody; or for loss of money for which he is required to account, where such
damage or loss is directly attributable to his neglect or default.
4. Deduction for house accommodation supplied by the employer.
5. Deductions for specific amenities and services supplied by the employer.
6. Deductions for recovery of advances (including advances for traveling
allowances) and the interest due in respect of the same.
7. Adjustments for overpayment of wages.
8. Deductions for recovery of loans made from any fund constituted for welfare of
labour in accordance with the rules approved by the state government and the
interest due in that respect.
9. Deductions for recovery of loans granted for house building or other purposes
approved by the state government, and the interest due in that respect.
10. Deductions of income tax payable by the employed person.
11. Deductions required to be made by order of court or other authority competent to
make such order.
12. Deductions for subscriptions to and for repayment of advances from any provident
fund to which the Provident Funds Act, 1925 applies or any recognized provident
fund as defined by the Income Tax Act.
13. Deductions for payment to co-operative societies approved by the state

government or to a scheme of insurance maintained by the Indian Post Office.
14. Deductions made with the written authorization of the person employed for
payment of any premium on his life insurance policy to LIC or for being deposited
in any post office savings bank.
15. Deductions made with written authorization of the employed person, for the
payment of his contribution to any fund constituted by the employer or TU
registered under the TU Act 1926, for the welfare of the employed persons or the
members of their families, or both.
16. Deductions made with written authorization of the employed person, for the
payment of fees payable by him for the membership of any TU registered under
the TU Act 1926.
17. Deductions made with the written authorization of the employed person for
contribution to the Prime Ministers National Relief Fund or to such other funds.
18. Deductions for contribution to any insurance schemes framed by the central
government for the benefit of its employees.
Note:
1. Any other deduction from Wages will be treated as unauthorized.
2. Though this Act is not directly applicable to many establishments due to salary
ceiling of Rs.1600/- p.m., many state governments have made this act applicable
through the Shops and Establishments Acts.
3. The total deductions for Wages shall not exceed 75% of the wages.
4. An employee or his representative can make application to the authority appointed
by the government in case of unauthorized/wrong deductions or delay in the
payment of wages and such authority will pass the necessary orders. Such claims
should be within 12 months. Authority can order refund of amount wrongly
deducted along with a compensation upto 10 times the amount deducted. However
in case of delay in payment, authority can order compensation only upto Rs.25/-.
5. It is mandatory for employers to display notice containing abstracts of this Act at
prominent places in his factory/establishments.
7.4 THE MINIMUM WAGES ACT, 1948

Purpose
To prevent exploitation of labour by prescribing minimum rates of wages in the
scheduled industries.
Applicability
According to the Act certain employments (Scheduled Employments) are required
to adhere to the minimum prescribed wages for their respective industries. The Act
extends to the whole of India.
1. The minimum wage rates are reviewed at intervals not exceeding 5 years. This
means that the minimum wage rates are subject to revision even before 5 years.
2. Minimum wages are fixed for all categories of employments viz.: fixed rate,
hourly rates, piece rate and for every worker i.e.: Adults, adolescence, Child and
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and Labour Laws
apprentices. This is done as per the states. However different rates can be fixed for
different districts.
3. The minimum rate of wages is related to the cost of living Index.
4. In fixing minimum rates of wages in respect of any scheduled employment for the
first time or in revising minimum rates of wages, the appropriate government can
follow either of the two methods described below:
(a) Committee Method: The government may appoint as many committees and
sub-committees as it considers necessary to hold enquiries and advise it in
respect of such fixation or revision as the case may be. After considering the
advise of the committee/s, the appropriate government shall, by notifications
fix or revise the minimum rates of wages.
(b) Notification Method: When fixing minimum wages, the appropriate
government shall by notification, publish its proposal for the information of
persons likely to be affected by the rates of wages and specify a date not less
than 2 months from the date of notification, on which the proposals will be
taken into consideration. Thereafter fix or revise the minimum rate of wages
by notifications.
5. The Act provides that the central government shall appoint a central advisory
board for the purpose of advising the central government and the state government
in the matters of fixation and revision of the minimum rates of wages.
6. The minimum wages shall be paid in cash. Where the payment is to be made in
kind, the cash value of the wages in kind shall be estimated in the prescribed
manner. The government can also authorize for supply of essential commodities at
concessional rates.
7. Penalty: An employer who pays less than the minimum rates of wages shall be
punishable with imprisonment upto 6 months or fine upto Rs.500/- or both.
8. Apart from the payment of the minimum wages, the employer is required to
maintain registers and records giving such particulars of employees under his
employment as the work performed by them, Salary receipts, wage books, wage
slips as may be prescribed.
7.5 THE PAYMENT OF BONUS ACT, 1965

Purpose
To provide for the payment of bonus to persons employed in certain establishment on
the basis of profits or on the basis of production or productivity and for matters
connected therewith.
Applicability
The Act is applicable to every factory and establishment employing 20 persons or
more on any day during an accounting year
1. Every employer has to determine his gross profit and from such gross profit
certain deductions are to be made. The gross profit less deductions is called
available surplus. 67% of available surplus (in case of companies) and 60%
(in other cases) is called as the allocable surplus. This allocable surplus is
available for distribution as bonus to employee.
2. Employees drawing monthly salary (Basic + DA only) upto Rs.3500/- are covered
by the Act.
3. The Act provides for a minimum bonus of 8.33% and maximum of 20% of the
Salary.
4. Every employee shall be entitled to be paid by his employer in an accounting year
bonus, in accordance with the provisions of the Act, provided that he has worked
in the establishment for not less than 30 days in that year.
5. An employee shall be disqualified from receiving bonus under this Act, if he is
dismissed from service for:
(a) Fraud or
(b) Riotous or Violent behavior while on the premises of the establishment or
(c) Theft, misappropriation or sabotage of any property of the establishment.
6. Payment of minimum bonus 8.33% or Rs.100/-, whichever is higher, whether or
not the employer has any allocable surplus in the accounting year.
7. Where the monthly salary exceeds Rs.2500/- the bonus payable is calculated as if
the salary were Rs.2500/-.
8. New establishments get exemption from paying bonus for a period of 6 years or
upto the year they show profit, whichever is earlier.
9. Bonus is to be paid within a period of 8 months from the close of the accounting
year.
10. If an employee is found guilty of misconduct causing financial loss to the
employer, the amount of loss can be deducted from the bonus payable for the year
in which he was found guilty of misconduct.
7.6 THE EMPLOYEE PROVIDENT FUNDS ACT, 1952

Purpose
To provide for social security benefits for workers and their families. The Employees
Provident Funds and Miscellaneous Provisions Act is a social security legislation to
provide for provident fund, family pension and insurance to employees. Employee has
to pay contribution towards the fund. Employer also pays equal contribution. The
employee gets a lump sum amount when he retires, which will be useful to him after
retirement.
Applicability
To every factory engaged in any industry employing 20 persons or more. Any
establishment to which the Act applies shall continue to be governed by the Act even
if the number of persons employed therein at any time falls below 20. Once an
establishment is covered under PF, all its departments and branches wherever they are
situated are also covered.
As per section 16(1), the PF Act does not apply to (a) any establishment registered
under Cooperative Societies Act or State law relating to cooperative societies,
employing less than 50 persons and working without paid of power (b) to any
establishment belonging to or under Control of Central Government or a State
Government and whose employees are entitled to benefit of contributory provident
fund or old age pension. (c) to any establishment set up under any Central or State Act
and whose employees are entitled to benefit of contributory provident fund or old age
pension.
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This Act is not applicable to employees drawing salary in excess of Rs.6,500/- p.m.
(Basic +DA). Every employee, other than excluded employee is entitled and required
to become member of the fund from the date of joining factory/establishment.
The Act covers three schemes i.e. PF (Provident Fund scheme), FPF (Family Pension
Fund scheme) and EDLI (Employees Deposit Linked Insurance scheme).
1. Establishments are permitted to form their own schemes provided that terms of
such schemes are not less favorable than the scheme under the Act.
2. Contributions under the Act from the employer 10% or 12% of Basic + DA as
the case may be, and equal contribution from the employee.
As per section 2(c) contribution means a contribution payable in respect of a
member under a Scheme or the contribution payable in respect of an employee to
whom the Insurance Scheme applies.
As per section 6, contribution shall be paid by employer @ 10% of basic wages
plus dearness allowance plus retaining allowance. This amount is defined as pay
as per explanation to para 2(f) (ii) of EPF Scheme.
Equal contribution is payable by employee also. This contribution can be
increased to 12% by Central Government and in fact, has been increased to 12%
in most of the cases.
A person who is already a member continues to be a member even if his pay
exceeds Rs 6,500. However, the contribution is limited to Rs 6,500 only.
[para 26A(2) of EPF Scheme].
3. Amount lying to credit of provident fund account cannot be attached by any court
decree and in case of winding up of companies such amount gets priority.
4. If the employee is transferred or leaves the establishment, balance of his provident
fund account is transferred to new account in the new establishment.
5. There are provisions of Advances under the scheme.
6. Superannuation pension, retirement pension or permanent total disablement
pension to employees, widow or widowers pension or children pension is payable
under the Act. Provided that the employee has been contributing to PF for atleast
10 years.
7. Penalty: In case of default from the employers side, the Central Provident Fund
Commissioner may decide to recover the money from the employer as per the
following methods:
(a) By issuing of certificate to the recovery officer
(b) By recovering money from the debtors of the employer
(c) Employers money lying in any court can be adjusted for provident fund dues
subject to the permission of the court.
(d) By attaching and selling of movable/immovable property of the employer.
8. Every member shall be supplied with accounting statement after close of the
accounting year showing opening balance amount contributed, interest credited
and closing balance.
9. A non-refundable withdrawal can be made from provident fund account for house
building or for financing LIC policy or for certain illness of the member or his
family.
Employees Pension Scheme: This scheme has been introduced w.e.f.

16th November, 95. The Scheme is applicable to all subscribers of Employers
Provident Fund. It is also compulsory to persons who were subscribers as on 16.11.95.
The employers contribution of 8.33% will be diverted to the fund of Pension Scheme.
Employee does not have to make any contribution. Members will get pension on
superannuation or retirement from service and upon disablement during employment.
Family pension will be available to widow/widower for life or till he/she remarries. In
addition, children will be entitled to pension, upto 25 years of their age. In case of
orphans, pension at enhanced rate is available upon death of widow/widower or
ceasing payment of widow pension. Benefit of pension to children or orphan is only
restricted for two children/orphans.
Employees Deposit Linked Insurance Scheme: The purpose of the scheme is to
provide life insurance benefits to employees who are already covered under PF/FPF.
The employer has pay contribution equal to 0.50% of the total wages of employees In
addition, administrative charges of 0.1% of total wages. The employee does not
contribute any amount to the scheme. The salary limit for coverage of employees is
same as that of Provident Fund.
If an employee dies during employment, his nominee or family member gets an
amount equal to average balance in the Provident Fund Account of the deceased
employee during last 12 months. If such balance is more than Rs. 35,000, the
insurance amount payable is Rs. 35,000 plus 25% of the amount in excess of
Rs. 35,000, subject to overall limit of Rs. 60,000.
7.7 THE PAYMENT OF GRATUITY ACT, 1972

Purpose
Gratuity is a retirement benefit. It is a lump sum payment made by an employer to
an employee in consideration of his past service when the employment is terminated.
The main purpose to gratuity scheme is to serve as instrument of social security for
employees whose means of earning has stopped.
Applicability
The Act is applicable to all establishments employing 10 or more workmen or had
employed on any day of the preceding 12 months. The Act is applicable to all
employees, irrespective of the salary.
1. Gratuity shall be payable to an employee on the termination of his employment
after he has rendered continuous service for not less than five years:
(a) On his superannuation or
(b) On his resignation or
(c) On his death or disablement due to accident or disease.
(Note: the completion of continuous service of 5 years is not necessary where the
termination of the employment of any employee is due to death or disablement.)
2. Gratuity is calculated as numbers of completed years of service or part thereof in
excess of 6 months X last rate of wages for 15 days. Wages means Basic + DA +
other emoluments (excluding bonus, commission, HRA, overtime, and any other
allowance).
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3. The maximum limit on gratuity payable shall not exceed Rs.3,50,000/-. The
Gratuity Act provides only for minimum gratuity payable. If employee has right to
receive higher gratuity under a contract or under an award, the employee is
entitled to get higher gratuity. [section 4(5)].
4. The employer is bound to pay the gratuity within a period of 30 days from the date
of its becoming payable to the employee who is eligible, even if an employee fails
to make an application to that effect.
5. Gratuity can be forfeited only to the extent of damages/loss caused by the
employee, but in cases of riots/disorderly behavior of employee, it can be forfeited
fully.
6. Amount of gratuity is not liable to be attached in execution of any court decree or
order.
7. Employees to qualify for continuous service have to work for atleast 240 days in a
period of one year.
8. The Payment of Gratuity (Amendment) Act, 1987 has prescribed provisions for
compulsory insurance for employers liability for payment towards gratuity under
the Act from, The Life Insurance Corporation of India Ltd.
9. Each employee, who has completed one year of service, shall make nomination
for the purpose of payment of gratuity in the event of his death. If the employee
has a family at the time of making a nomination, the nomination shall be made in
favor of one or more members of his family. Any nomination made by such
employee in favor of a person who is not a member of his family shall be void.
10. Gratuity payable cannot be attached in execution of any decree or order of any
civil, revenue or criminal court, as per section 13 of the Act.
7.8 THE EMPLOYEES STATE INSURANCE ACT, 1948

Purpose
To provide a scheme of health insurance for industrial workers. The scheme framed
under the Act provides for certain cash benefits to employees in the event of sickness,
maternity, employment injuries, and medical facilities in kind.
Applicability
The Act applies to all factories except seasonal factories. The Government of
Maharashtra has extended the provisions of the Act to Hotels, Shops, Cinemas and
Newspaper employing 20 or more workers.
Workmen whose remuneration (excl. the remuneration for over-time work) does not
exceed Rs. 10,000/- p.m. are covered under the Act.
Principal Employer means:
owner or occupier of factory
Head of department in case of Government department
Person responsible for supervision and control, in case of any other establishment.
[section 2(17)].
Employees working though contractor are also covered. Contractor is termed as
Immediate Employer. Immediate employer means a person who has undertaken the
execution, on the premises of factory or establishment to which this Act applies.
He may do on his own or under the supervision of Principal Employer. The work
should be part of work of factory or establishment of principal employer or is

preliminary or incidental to the work of factory or establishment. [section 2(13)].
Primary liability of ESI contribution is of Principal Employer. [section 40(1)]. He can
recover the contribution paid by him from the immediate employer i.e. contractor.
[section 41].
Construction workers employed in construction activities are not covered under ESIC.
1. Every insured employee and his employer have to pay to the ESIC contribution
@1.75% and 4.75% respectively of the wages of the employee and such
contributions must be paid within 21 days following the end of month in which
the contribution fall due.
2. Establishments covered under this Act must apply for registration within 15 days
from the date of application of this Act.
3. There are two contribution periods and two benefit periods as under
(a) Contribution Period: 1st April to 30th September and the corresponding benefit
period is 1st January of the following year to 30th June.
(b) 1st October to 31st March of the following year and the corresponding benefit
period is 1st July to 31st December of the year following.
4. An employer who fails to pay his contribution within the periods specified shall
be liable to pay interest and damages for late payment under the Act.
5. An employee whose average daily wage is below Rs.25 is exempted from
payment of his contribution, only employers contribution will be payable
@4.75 % in respect of such employees.
6. The statutory registers to be maintained under the Act are:
(a) Register of employees
(b) Accident Book
(c) Inspection Book (to be signed by the visiting ESIC inspector)
7. Benefits:
(a) Sickness: Sickness cash benefits at standard benefit rate for a period not more
than 91 days in any two consequent benefit periods. The eligibility condition
for Sickness benefit is that the contribution of the insured person should have
been paid for atleast 78 days prior to the current contribution period.
(b) Maternity: An insured woman is entitled to maternity benefit at double the
standard benefit rate. This is equal to full wages for a period of 12 weeks, of
which not more than 6 weeks shall precede the expected date of delivery.
Additional maternity benefit is given in case of miscarriage for a period of
6 weeks immediately following the date of miscarriage. In sickness arising out
of pregnancy an additional benefit is given for a period not exceeding one
month. Insured woman will get this benefit if contributions by her were
payable for not less than 70 days in the immediate 2 consecutive contribution
periods.
(c) Disablement
(d) Dependants Benefit: This benefit is paid to the widow or children of worker
or other dependant if the worker expires due to an accident or an occupational
disease arising out of, and in the course of, employment.
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(e) Funeral Benefit: A sum not exceeding Rs.1500/- is payable as funeral benefit
to the oldest surviving member of the family of the deceased insured person.
The time limit for claiming the benefit is 3 months for the death of the insured
person.
(f) Medical: OPD medical case at dispensaries and panel clinics, Supply of
medicines and drugs as prescribed and full hospitalization benefits like
surgery and diet for the insured person and members of his family.
8. The employer is prohibited from dismissing or discharging employees during the
period the employee is in receipt of any benefit under the Act and such dismissal
would be void.
9. Disputes/Claims arising out of this Act shall be referred to ESIS Court.
10. Penalty: If contributions are not paid in time, the principal employer will suffer
the following consequences:
(a) Employer will have to pay interest @15% p.a. for the delayed period
(b) Employer will have to pay damages as specified
(c) Employer is liable for prosecution.
7.9 LET US SUM UP

The Workmens Compensation Act was passed to impose statutory liability upon an
employer to pay compensation to the workman when the workman suffers from
physical disabilities and diseases during the normal employment tenure. Payment of
Wages Act was passed to ensure regular and timely payment of wages to the
employed persons, to prevent unauthorized deductions being made from wages and
arbitrary fines being imposed on the employed persons. The Minimum Wages Act was
passed to prevent exploitation of labour by prescribing minimum rates of wages in the
scheduled industries. The Payment of Bonus Act was passed to provide for the
payment of bonus to persons employed in certain establishment on the basis of profits
or on the basis of production or productivity and for matters connected therewith.
Employee Provident Fund Act was passed to provide for social security benefits for
workers and their families. The Employees Provident Funds and Miscellaneous
Provisions Act is a social security legislation to provide for provident fund, family
pension and insurance to employees. Employee has to pay contribution towards the
fund. Employer also pays equal contribution. The employee gets a lump sum amount
when he retires, which will be useful to him after retirement. Gratuity is a retirement
benefit. It is a lump sum payment made by an employer to an employee in
consideration of his past service when the employment is terminated. The main
purpose to gratuity scheme is to serve as instrument of social security for employees
whose means of earning has stopped.
7.10 KEYWORDS
Compensation: It is a systematic approach to providing monetary value to employees
in exchange for work performed
Occupational Disease: It is a disease that inflicts workers in that particular occupation
in which s/he was employed in and resulting from exposure to a hazardous working
atmosphere, particular to that employment
Wages: It is compensation, usually financial, received by workers in exchange for
their labor
Bonus: It refers to extra pay due to good performance
Provident Fund: It is the fund which is composed of the contributions made the
employee during the time he has worked along with an equal contribution by his
employer
Gratuity: It is payable to any employee only he serves for a minimum period of 5
years at a stretch with his employer

Fill in the Blanks
1. The Workmens Compensation Act applies only to the persons recognised as
. under the act.
2. As per Workmens Compensation Act, compensation is calculated on the basis of
. received by the workers.
3. As per Payment of Wages Act, wage period should not exceed .
4. The minimum wages are calculated keeping in mind the .
5. Under Payment of Bonus Act, the minimum amount of bonus to be paid should be
less than . and maximum should not be more than .
of salary.
6. Under Employee Provident Funds Act, . contributions are made by
the employee and the employer towards the employees provident fund.
7. A lump sum amount paid by the employer to the employee, whose employment
has been terminated, considering his past service record is referred to as
.

1. What do you mean by compensation? Discuss the main provisions of Workmens
Compensation Act, 1923.
2. Keeping in mind, The Payment of Wages Act, 1936, enlist the items that are
included in wages and those that are not.
3. What do you understand by minimum wages? How are they decided? Answer
with reference to Minimum Wages Act, 1948.
4. Examine the significance of a bonus. Discuss the major provisions of Payment
of Bonus Act, 1965.
5. Discuss the applicability and provisions of the Employee Provident Fund
Act, 1952.
6. Write short notes on: Gratuity and Employee State Insurance Act, 1948.

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LESSON
8
DISPUTE SETTLEMENT
CONTENTS
8.0
Aims and Objectives
8.1
Introduction
8.2
Types of Disputes
8.3
Causes of Industrial Disputes
8.4
Settlement of Industrial Disputes
8.5
8.6
8.4.1
Statutory Machinery
8.4.2
Voluntary Machinery
Lok Adalats
8.5.1
Concept
8.5.2
Limitations of Litigation
8.5.3
Advantages of Mediation
8.5.4
Development of Lok Adalats
8.5.5
Lok Adalat as a Body to Conduct Mediation
8.5.6
Lok Adalats and the Industrial Disputes Act, 1947
Case Laws
8.6.1
Illegal Strikes The Industrial Disputes Act, 1947
8.6.2
Termination The Industrial Disputes Act, 1947
8.6.3
Retrenchment The Industrial Disputes Act, 1947
8.7
Let us Sum up
8.8
Keywords
8.9
Self Assessment
8.10
Review Questions
8.11
Suggested Readings

z
Enumerate the types and cause of disputes
Discuss the dispute settlement machinery
Understand the concept of adjudication
Analyse the concept of lok adalats
Analyse the given case laws
8.1 INTRODUCTION
Relations between labour and management do not proceed along the lines envisaged
above for a variety of reasons. Divergent views, opposite stands, contrasting demands
characterise labour-management relations. Employees want more jobs, management
wants to reduce staff, raise productivity and save on all fronts. Management wants to
computerise and introduce latest technology gradually in order to reduce the
dependence on manual force. Labour and unions cannot afford to let this happen by
keeping silence. Labour wants a fair share of productivity gains. Management wants
to demonstrate those gains as fruits of risky investments. The argument goes on and
on. However, the survival of both partners in the industrial activity is dependent on
how appreciatively they look at each others concerns and get along without rubbing
each other the wrong way.
Industrial disputes constitute militant and organised protests against existing industrial
conditions.
8.2 TYPES OF DISPUTES

The various forms of industrial disputes may be stated thus:
Strikes
A strike is a spontaneous and concerted withdrawal of labour from production
temporarily. It is a collective stoppage of work by a group of workers for pressuring
their employers to accept certain demands. The Industrial Disputes Act 1947 has
defined a strike as an assertion of work by a body of persons employed in an
industry acting in combination, or a concerted refusal or a refusal under a common
continue to work or to accept employment. Strikes are of several types:
1. Sympathetic strike: When a strike is undertaken to show sympathy with workers
in other industries, it is called a sympathetic strike.
2. General strike: It is a strike by all or most of the unions in an industry or a region.
3. Unofficial strike: It is a strike undertaken without the consent of the unions.
4. Sectional strike: It is the refusal of a section of a given class of workers to
perform their normal duties.
5. Bumper strike: It is a strike when the unions plan to paralyse the industry, firm by
firm, the order being chosen by the union. Such strikes are supported by the
contributions of those who are still at work.
6. Sit down strike (also called stay-in, tool down, pen down strike): It is a strike in
which workers cease to perform their duties but do not leave the place of work.
7. Slow-down strike: Known as a go-slow tactic, the workers do not stop working
but put breaks to the normal way of doing things.
8. Lightning strike: Out of provocation, workers may go on strike without notice or
at very short notice. There is an element of surprise in such wildcat strikes.
9. Hunger strike: To gain sympathy from the public and get noticed by the
employer, workers may decide to forego food for a specified period. Small
batches of workers may also go on a relay hunger strike in a sequential order.
Such non-violent protests generally bring moral pressure on employers to iron out
the differences with labour quickly.
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Lock-outs
Lock-out is the counterpart of strike. It is the weapon available to the employer to
close down the factory till the workers agree to resume work on the conditions laid
down by the employer. The Industrial Disputes Act of 1947 defined it as the closing
of a place of an employment, or the suspension of work or the refusal of an employer
to continue to employ any number of persons employed by him. If it is impossible to
meet the demands of the workers, employers may decide to go for lock-out. An
employer may also pull down the shutters so as to bring psychological pressure on the
workers to agree to his conditions or face closure of the unit.
Gherao
Gherao means to surround. In this method, a group of workers initiate collective
action aimed at preventing members of the management from leaving the office. This
can happen outside the factory premises too. The persons who are gheraos are not
allowed to move for a long time, sometimes even without food or water. The National
Commission on Labour, while refusing to accept it as a form of industrial protest,
opined that gheraos tend to inflict physical duress (as against economic pressure) on
the persons affected and endanger not only industrial harmony but also create
problems of law and order.
Picketing and Boycott
When picketing, workers often carry/display signs, banners and placards (in
connection with the dispute), prevent others from entering the place of work and
persuade others to join the strike.
Boycott aims at disrupting the normal functioning of an enterprise. Through forceful
appeals and negative behavioural acts, striking workers prevent others from entering
the place of work and persuade them not to cooperate with the employer.
8.3 CAUSES OF INDUSTRIAL DISPUTES

The causes for industrial disputes or unrest may be grouped in four broad categories:
1. Industrial Factors: Grievances relating to employment, i.e. work, wages, bonus,
hours of work, privileges, conditions of employment and obligations of employees
and other factors are:
(a) Attitude of workers
(b) Increasing prices and demand for increases in dearness allowance
(c) Indiscipline and violence among the workers
(d) Worker's resistance to rationalisation, introduction of new machinery and
change of place of factory
2. Management's Attitude towards the Workers:
(a) Disinterest of the management to discuss with the workers
(b) Management's unwillingness to recognise a particular trade union
(c) Not involving the workers in decision-making
(d) Inadequate communication
3. Role of Government Machinery:

(a) Not successful in implementing Labour Laws
(b) Inability of conciliation machinery of the Labour department to do its job and
employees and management's loss of confidence in that
(c) Irrelevance of certain provisions of Labour Laws in the context of challenges
of present industrial climate and imperatives of development due to
competitive environment
4. Other Causes:
(a) Affiliation of trade unions with political parties, political leadership, thereby
bringing pressures for accepting their demands
(b) Political instability and poor centre-state relations contribute to industrial
conflicts
(c) Another factor is character crisis, in values of trade union leaders, trade union
rivalry
(d) Need for change in outlook and attitudes of the parties including management.
Hence, there is an increasing tendency among the industrial workers to resort to strike
and militancy. They forget that strike is the last resort in their armoury.
Some important sources of Union-management conflict can be summarised as under:
1. Profit: Both agree that organisations are set up to make profits, but the trade
unions feel that they are not getting enough pay and benefits. Unions contest the
distribution of profits.
2. Security of Jobs: Earlier, the organisational goal was to provide jobs. It is now
replaced by the organisations to provide security of job due to competitive
environment.
3. Right to Manage: Management would like to retain the decision-making authority
and ward-off encroachments. However, trade unions seek to increase bargaining
issues.
4. Seniority: Unions plead for the seniority principle, while deciding promotion and
giving other benefits etc., and disregard competence and ability as subjective
criteria. However, managements resist seniority system in favour of productivity
and merit.
5. Productivity: Productivity is a result of labour, capital, technology and other
factors. The problem is in determining how much productivity is due to labour and
how much due to other factors. Workers want more compensation for more
productivity.
6. Inflation: Workers want linking wages to cost of living index while managements
would like allowances to be linked with productivity and performance.
8.4 SETTLEMENT OF INDUSTRIAL DISPUTES

Machinery for prevention and settlement of industrial disputes comprises of:
(a) Statutory Machinery, and
(b) Voluntary Machinery
8.4.1 Statutory Machinery

The Industrial Disputes Act, 1948 provides the mechanics of dispute-resolution and
set-up the necessary structure so as to create a congenial climate.
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Authorities under this Act

1. Works Committee
2. Conciliation Officers
3. Boards of Conciliation
4. Courts Of Inquiry
5. Labour Courts
6. Industrial Tribunals
7. National Tribunals
Works Committee
It is a committee formed for resolving disputes in the establishments with 100 or more
workers. It has equal number of representatives of the employer and employees. It
aims at promotion of good relationship between employer and employee(s)
Conciliation officers
They are appointed by the appropriate Government. Their duty is to settle industrial
disputes. They are appointed for a specified area or for specified industries in a
specified area or for one or more specified industries and either permanently or for a
limited period.
Conciliation officers Duty
z
If he succeeds in bringing about an understanding, he gets the parties to sign a

settlement in form-h as per sn.12(3), 18(3) and rule-58. As per rule 75, he has to
maintain a register in form-o, giving the details of the settlements signed by him.
If he fails to bring about a settlement, as per sn.12(4) he has to inform the

government and this is called a failure report.
Before sending the failure report he should ask the disputing parties whether they
would like the dispute to be sent for arbitration.
As per sn.12(6) he is expected to close the conciliation proceedings within 14 days

but with the consent of the parties he can keep the conciliation process going for a
longer duration.
When notice of change is issued under sn.9a he is obliged to hold meetings to

resolve the dispute. When approval/permission applications are filed under
sn.33/33a he is required to pass appropriate orders.
Note: unlike in arbitration/adjudication proceedings, a conciliation officer has no

power to enforce his decision on the parties. He can only try to persuade the parties to
accept his suggestion.
Boards of Conciliation
z
Appointed by the appropriate Government as occasion arises for settlement of

disputes
Board shall consist of an independent Chairman and two or four other members in
equal numbers to represent the parties to the dispute
Courts of Inquiry
Constituted by the appropriate Government as occasion arises for inquiring into any
matter appearing to be connected with or relevant to an industrial dispute
Labour Courts
Labour Courts are constituted by the appropriate Govt. for the adjudication of
industrial disputes relating to any matter specified in the Second Schedule and for
performing such other functions as may be assigned to them under this Act.
Matters within the Jurisdiction of Labour Courts (the II Schedule)
1. The propriety or legality of an order passed by an employer under the standing
orders;
2. The application and interpretation of standing order;
3. Discharge or dismissal of workmen including re-instatement of, or grant of relief
to, workmen wrongfully dismissed;
4. Withdrawal of any customary concession or privilege;
5. Illegality or otherwise of a strike or lock-out; and
6. All matters other than those specified in the Third Schedule.
Industrial Tribunals
Industrial Tribunals are constituted by the appropriate Govt. for the adjudication of
industrial disputes relating to any matter specified in the Second Schedule or the Third
Schedule and for performing such other functions as may be assigned to them under
this Act.
Matters within the Jurisdiction of Industrial Tribunals (the III schedule)
1. Wages, including the period and mode of payment;
2. Compensatory and other allowances;
3. Hours of work and rest intervals;
4. Leave with wages and holidays;
5. Bonus, profit sharing, provident fund and gratuity;
6. Shift working otherwise than in accordance with standing orders;
7. Classification by grades;
8. Rules of discipline;
9. Rationalisation;
10. Retrenchment of workmen and closure of establishment; and
11. Any other matter that may be prescribed.
National Tribunals
National Tribunals are constituted by the Central Government for the adjudication of
industrial disputes which, in the opinion of the Central Government, involve questions
of national importance or are of such a nature that industrial establishments situated in
more than one State are likely to be interested in, or affected by such disputes.
Adjudication
Adjudication is a judicial (decision making) process for settlement of industrial
disputes [sn.2(aa)].
The Act provides for Works Committee in factories employing 100 or more workers.
[section 3].
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The committee will consist of equal number of representatives of employer and

employees. Representatives of employees will be selected in consultation with
Registered Trade Union. The Works Committee will first try to settle disputes. If
dispute is not solved, it will be referred to Conciliation Officer. He is appointed by
Government. [section 4]. The matter may also be referred to Board of Conciliation.
[section 4].
He will try to arrive at fair and amicable settlement acceptable to both parties. If he is
unable to do so, he will send report to appropriate Government. [section 12(4)].
The Government may then refer the industrial dispute to Board of conciliation, Labour
Court or Industrial Tribunal. [section 12(5)].
Employer and employees can voluntarily refer the matter to arbitration. [section 10A].
If no settlement is arrived at, there is three tier system of adjudication Labour Court,
Industrial Tribunal and National Tribunal. The order made by them is award.
Award means an interim or final determination of any industrial dispute or of any
question relating thereto by any Labour Court, Industrial Tribunal or National
Tribunal. It also includes arbitration award. [section 2(b)]. The award is required to
be published by State/Central Government within 30 days. [section 17]. The award
becomes effective 30 days after its publication. [section 17A].
On whom are the Awards Binding?
z
It is binding on all parties to the dispute.
It is also binding on all other parties summoned to appear in the proceedings to the
dispute.
On the employer, his heirs, assigns and successors.
On workmen currently employed and who subsequently get employed in the

establishments [sn.18(3)].
Reference of Dispute: Appropriate Government can refer any dispute to Board of

Conciliation, Court of Enquiry, Labour Court or Industrial Tribunal. [section 10(1)].
Appropriate Government means: a) Central Government in case of railways, docks,
IFCI, ESIC, LIC, ONGC, UTI, Airport Authority, industry carried on by or under
authority of Central Government, and b) State Government in case of other industrial
disputes [section 2(a)].
Court/Tribunal Can Reduce Punishment And Order Reinstatement: As per section
11A, the Labour Court and Tribunal have wide powers. They can reappraise evidence.
They can also see whether the punishment is disproportionate to the gravity of the
misconduct proved. If the Court or Tribunal is of the view that the punishment is
disproportionate, it can impose lesser punishment or even set aside the termination and
order reinstatement. If Court orders reinstatement and employer files appeal in Higher
Court, the employer is required to pay full wages to the employee during the period of
pendency of proceedings with High Court or Supreme Court. However, if the
workman was gainfully employed elsewhere, Court can order that payment of such
wages is not to be made. [section 17B].
Voluntary Arbitration Sec10A
z
Agreement between the workmen and the Management
Send copy to the government and conciliation officer
Publication of the agreement. Publication of the arbitration agreement is a must

before arbitration
Notification by the Government if majority workmen are parties to the dispute
Binding nature of the award 18(2) or 18(3)
Arbitration subject to judicial review
How is Arbitration Process Initiated?

z
When conciliation fails, before sending the failure report, the conciliation officer
asks the parties if they wish to send the dispute for arbitration.
If parties desire so, they must sign an arbitration agreement in form-c under rule 7
and send it to the government.
Government will then notify him as an arbitrator.
Arbitrators hear the pleadings of both parties and submit their orders to the
government who processes it like an adjudication award and it is implemented like
an adjudication award.
Settlement
z
Settlement means a settlement arrived at in the course of conciliation

proceedings.
It includes a written agreement between employer and workmen arrived at

otherwise than in course of conciliation proceedings (i.e. outside the conciliation
proceedings).
The difference is that settlement arrived at in course of conciliation or an

arbitration award or award of labour court or Tribunal binds all parties to
industrial dispute including present and future workmen and all parties who were
summoned to appear in the proceedings. [section 18(3)]. If settlement is arrived at
by mutual agreement, it binds only those who were actually party to agreement.
[section 18(1)].
Period of Validity
z
The settlement is binding during the period it is in force. Even after that period is
over, it continues to be binding, unless a 2 month notice of termination is given by
one party to another. [section 19(2)].
If no period has been specified, settlement is valid for 6 months and an award is
valid for one year.
8.4.2 Voluntary Machinery

Voluntary machinery for settlement of industrial disputes is based on Code of
Discipline announced in 1958. The code was approved by all central organisations of
workers and employers in 16th Indian Labour Conference at the initiative of the then
Labour Minister, Shri G.L. Nanda.
1. Code of Discipline, 1958: The code reflects the policy of the government to build
up an industrial democracy on voluntary basis and is the sheet anchor of Mahatma
Gandhi's philosophy of industrial relations. It aims at preserving industrial peace
with the help of employers and employees. It represents a voluntary moral
commitment and is not a legal document. The code, which aims at providing an
alternative to conflict for the resolution of disputes, worked very well for some
time after its adoption.
The issue of discipline in industry was discussed in the Indian Labour Conference
and the code of discipline was framed and introduced by this tripartite body
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in 1958. Discipline in the relationship between workers and employers can better
be enforced if both the parties accept their responsibilities and show a willingness
to discharge them. In the absence of any statutory provision at the all-India level
for the recognition of trade union, the provision in this regard has been
incorporated in the Code of Discipline.
The main elements of the code are:
(a) The two parties agree to utilise the existing machinery for the settlement of
industrial disputes.
(b) The parties shall not resort to strikes and lock-outs without first exploring all
avenues of settlement.
(c) The parties accept that the disputes not settled mutually shall be referred to
voluntary arbitration.
(d) The code specifies the criteria for the recognition of trade union and creates an
obligation on employers to recognise the majority union in an establishment
or industry.
(e) The two parties shall not resort to the unfair labour practices detailed in the
code.
(f) Managements and trade unions agree to establish grievance procedures on a
mutually agreed basis.
Initially, by the end of March, 1962, the code was accepted voluntarily by about
900 independent employers and trade unions. The number increased to around
3000 by the end of 1967. Over the years, however, the willingness and enthusiasm
of the parties to observe the code has declined, and they have developed an
attitude of indifference to the code. It has proved to be difficult for them to abide
by self-imposed discipline in terms of obligations backed only by moral sanctions.
Industrial Truce Resolution, 1962. With the Chinese attack in October 1962, an
emergency was declared in the country, and it was realised that production should
not be jeopardised in any way. Employers' and workers' representatives, in a joint
meeting of their organisations held on November 3, 1962 at New Delhi, passed a
resolution, saying that:
"No effort shall be spared to achieve maximum production, and management and
workers will strive to collaborate in all possible ways to promote the defence
efforts of the country."
As a result of the acceptance of this Resolution, there was a sharp decline in the
number of disputes and in the number of man-days lost. Workers not only worked
for extra hours but also contributed to the National Defence Fund. Emergency
Production Committees were set-up, both at the Centre and in the States to
improve production and productivity. But the Resolution lost its importance when
prices rose sharply and disputes erupted once again.
Code of Conduct: The other code adopted in May 1958 was the code of conduct.
The representatives of the four central trade union organisations the INTUC,
AITUC, HMS and UTUC agreed to observe certain principles with a view to
maintain harmonious inter-union relations. Inter-union and intra-union rivalries
emerge out of certain weakness of Indian trade unions such as fragmentation and
multiplicity. The code was formulated to curb these evils. But it has remained
mainly on paper, for trade unions seem to have forgotten that it exists.
2. Tripartite Bodies:
(a) Indian Labour Conference,
(b) Standing Labour Committee,
(c) Industrial Committees, and
(d) Tripartite Committee on International Labour Organisation Conventions,
1954.
3. Formation of Joint Consultative Machinery (JCM) for Central Government
Employees: This is also a three-tier machinery.
4. Collective Bargaining to be encouraged.
5. Workers' Participation in Management Scheme to be introduced through
Formation of Shop Councils and Plant Council.
8.5 LOK ADALATS

8.5.1 Concept
Lok Adalats like PILs is the product of judicial activism and is a recent phenomenon.
In the fast-changing industrial scenario, institutions like lok-adalats are likely to be
more popular for speedy settlement/prevention of Industrial disputes. The term Lok
Adalat literally means Peoples' Court.' This literal meaning is misleading because of
the word 'court'. Court is popularly understood to be a place where disputes are
resolved through decisions made by a judicial authority. Court exercises the sovereign
power of the State. Sovereign power and Peoples' Court cannot go together.
Functionally, Lok Adalat means mass mediation of disputes. Lok Adalat involves
assembling of persons having disputes in the presence of experienced conciliators
who, persuade the disputing parties to find amicable settlements for their disputes.
Disputing parties negotiate in person or through their advocates. The conciliators,
using their experience, assist parties in the negotiation process and help them find
amicable solutions to their problems. Here mediation and conciliation are used to
mean the same, as there is not much difference between the two. A conciliator
mediates and persuades the parties to reach a settlement.
Mediation is very much a part of the Indian culture. Litigation, on the other hand, was
introduced by the colonial masters as a top-down model. It is alien to the Indian
culture and never really got imbibed into it. Respectable and elderly people acting as
mediators or functioning as Panchayat members is integral to Indian culture. In the
past, it was these respectable and elderly people who used to help in resolving disputes
through mediation or mediation-cum-arbitration in Panchayats. Even now, mediation
as a method of dispute resolution is quite common in India. Mediation is an informal
process where the mediator, who is a neutral third party, assists the disputing parties in
the pursuit of organisation finding a solution to their dispute. What happens in Lok
Adalats is only mediation and when mediation is done in a formal way it is called
conciliation.
8.5.2 Limitations of Litigation

There are many limitations associated with litigation. Litigation involves a lot of
delay. It is expensive. In India, the adversary method of dispute resolution is used in
litigation. The adversary method is one which gives the parties and their lawyers a
great deal of control over the way in which the facts are collected and presented. Each
party will present the evidence to the court in a way most favourable to its own
version of the facts and adverse to that of the other party. The role of the judge is
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limited to that of an umpire, ensuring that the evidence is presented in accordance with
certain ground rules. The adversary method of dispute resolution promotes game
theory of dispute resolution. Persons with good resources are likely to win the game.
Winning the game in an adversary system does not necessarily mean justice is done or
that a peaceful solution to the dispute is found. It only means that the dispute is
resolved. This is not a good way of resolving disputes in situations such as family
relations or industrial relations where human emotions are also involved. The
adversary system being a win-or-lose situation, the animosity between the disputing
parties gets worsened and usually ends up having an adverse impact on industrial
relations.
8.5.3 Advantages of Mediation

In view of the limitations of the adversary method regarding dispute resolution in
areas where human emotions are also involved, the advantages of mediation as a
method of dispute resolution have been seriously considered. Unlike a court which
gives a judgment with respect to the particular claim or charge before it, mediators
assist the disputants to explore their differences and to develop a mutually acceptable
formula for future co-existence. Moreover, mediation is cheap and quick in resolution
of disputes. For mediation to be successful, the mediator needs to normalise the
strained relations between the disputing parties. In order to achieve this, a mediator
must be a good counselor who can comprehend the emotional issues associated with
the problem. In the process of helping the parties, give vent to their emotions, all the
minor differences which culminated in the dispute are also addressed. Once the
emotional and ego-related aspects associated with the dispute are soothed, the
disputing parties are able to negotiate in a reasonable way. Once they are reasonable in
negotiating, it becomes easy to find a solution to their problems.
Mediation addresses the interests and not the positions taken by the disputing parties.
It is easy to address the interests and once that is done, it ends up in a win-win
situation. There are many ways of addressing interests. In mediation there can be one
or more mediators. The role of a mediator includes facilitating communication
between the parties, assisting in identifying interests and generating options for
settlement of the dispute.
8.5.4 Development of Lok Adalats

The concept of the Lok Adalat was developed to revive and institutionalise the
mediation process. It was developed as a mechanism for providing quick solutions to
disputes with practically no expenditure involved for the parties. Incidentally, Lok
Adalats also help in reducing backlog of cases pending before the Courts and
Tribunals. The Legal Services Authorities Act, 1987, has institutionalised the
organising of Lok Adalats. Though enacted in 1987, this Act came into effect only
from 1996. Prior to its operationalisation, Lok Adalats used to be organised by the
Committee for Implementing Legal Aid Schemes (CILAS). The settlements reached
in the Lok Adalats organised by CILAS had no legal sanctity per se. To confer legal
sanctity on them, these settlements would be sent back to the Court/Tribunal from
where they were referred to the Lok Adalat. The Court/Tribunal would convert the
settlement reached in a Lok Adalat to a compromise judgment. Such compromise
judgments became enforceable by the Court/Tribunal. The compromise judgment
being an amicable settlement, would be voluntarily honoured by the parties. It was
only as an abundant caution that they would be converted into a compromise
judgment. Also, through this the Court/Tribunal can show in its records that the case is
disposed of. Such judgment being a compromise judgment, has no appeal or writ
petition against it. The only remote possibility is challenging such a settlement as
being obtained by fraudulent means. The settlements reached in Lok Adalat must fulfil
the requirements of a contract. The conciliator in a Lok Adalat is guided by the

principles of fairness, equity and justice.
8.5.5 Lok Adalat as a Body to Conduct Mediation

What happens in Lok Adalats is essentially mediation. The mediators encourage the
disputing parties to compromise their demands and reach an amicable settlement.
Mediation is voluntary, the parties cannot be coerced to go for mediation generally. In
the mediation if the parties are not satisfied about the solutions coming forth, they can
walk out. In India, after the 2002 amendment to the Civil Procedure Code, parties can
be compelled to go to the Lok Adalat or for conciliation. Conciliation is compulsory
under the Industrial Disputes Act, 1947. However, it is not compulsory that parties
must settle their disputes in Lok Adalats or through conciliation. Conciliation is
mediation in a formal way. Though there is voluntariness in settling the disputes in
Lok Adalats, the parties will not be able to take Lok Adalats lightly. There is a lot of
seriousness built into the functioning of Lok Adalats. The conciliators in Lok Adalat
have been vested with powers of the Civil Court with respect to the collection of all
relevant information necessary to resolve the dispute. When the conciliator collects
the information or facilitates the parties to collect information from each other, the
information is furnished under oath. If false information is given it will attract the
consequences of giving false information. The Lok Adalats are adequately empowered
to collect as well as facilitate collection of complete information necessary for helping
the resolution of the dispute. The Legal Services Authorities Act also has provisions
as mentioned earlier to see that the mediators behave responsibly. Hence, Lok Adalat
is more than simple mediation process. There are adequate provisions to make all
players behave responsibly in the Lok Adalat proceedings. The Lok Adalat
proceedings are to be guided by the principles of justice, equity, fair play and other
legal principles. So the settlement of a Lok Adalat is guarded against exploitation,
though being a settlement there are compromises, to some extent.
8.5.6 Lok Adalats and the Industrial Disputes Act, 1947

The Lok Adalat process is similar to conciliation in the Industrial Disputes Act
(I.D. Act).
In I.D. Act, conciliation is compulsory. Only when conciliation fails, does the
appropriate Government body refer the dispute for adjudication. However, some State
Governments have made amendments to allow termination disputes to go directly for
adjudication before going to the labour court. When there is conciliation facility
available under the I.D. Act, why are we talking about Lok Adalats for resolution of
industrial disputes which is again conciliation?
The need for Lok Adalats in industrial disputes, in spite of conciliation being available
under the I.D. Act is because of the emotional quotient in human behaviour. When a
dispute arises, emotions run very high. When the emotions are high, reasoning is at its
lowest level. In this kind of mental framework, if the parties go for conciliation, the
conciliation will, in all probability, be a failure. This is clearly visible in termination of
disputes. After failure of conciliation, the State Government refers the dispute for
compulsory adjudication. This takes some time, giving the parties an opportunity to
introspect and the delay in the Labour Court/Tribunal, gives more time for
introspection. As time passes, the emotional level is likely to come down and reason
prevails. At this stage, if conciliation facilities are made available, the chances of
reaching an amicable settlement are greater. Here the Lok Adalat can act as a 'face
saver' for the parties to reach a compromise. Often, the parties badly need this 'face
saving' because they have refused to compromise in the conciliation process held
under the I.D. Act. In situations where the termination disputes go directly before the
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Labour Courts/Tribunals, the parties require some encouragement to settle the dispute
outside the Tribunal.
A study conducted by the author on the working of labour courts in Bangalore reveals
how parties to a termination dispute can compromise when the dispute is pending
before the labour court. The study sample comprised 142 that were disposed of
termination cases during the period 1980-1990. These 142 cases were chosen at
random. Out of this, 36 cases, i.e., 25 per cent of the total cases, were settled outside
the Court and settlements were converted into compromise awards. The study reveals
that these compromises were reached at different stages of the proceedings in different
cases. In some cases compromise was reached on the first day of appearance by the
parties, while in other compromise was reached at the stage of arguments. It may be
noted here that the Presiding Officers did not play any role in promoting these
settlements. These 25 per cent settlements were reached entirely at the parties or their
lawyers' initiative. If the presiding officers of the labour court play a proactive role,
then the rate of out-of-court settlements is likely to be higher.
The I.D. Act, 1947 does not contain any provision specifically authorising an
industrial adjudicator to record a compromise settlement and pass an award. The Civil
Procedure Code Order 23, Rule 3 provides for converting out-of-court settlement into
compromise judgment decree. The same principle is used by the Labour Court and
Industrial Tribunals to convert an out-of-Tribunal settlement into an award. Section 11
of the I.D. Act gives much wider powers to the Labour Court and Industrial Tribunal
to follow such procedures as the authority deems fit. In Workmen of Government Silk
Weaving Factory, Mysore vs. Industrial Tribunal (1973) 2 LLJ 144 S.C., the Supreme
Court upheld the validity of the Industrial Tribunal by passing an award on the basis
of a compromise settlement. The validation of the same conclusion and converting it
into an award requires the presiding officer of the Tribunal to show that there has been
some application of mind in the process.
Lok Adalat Settlements are out-of-Tribunal Settlements. While promoting a
settlement, a Lok Adalat is required to follow the principles of justice, equity and fair
play. The conciliators in the Lok Adalats are serving or retired judges. Hence, if an
industrial dispute is settled in a Lok Adalat it can be straightaway converted into an
award. Section 33C of the I.D. Act is a very powerful mechanism for enforcement of
awards/settlements. Section 29 of the I.D. Act provides for punishment for breach of
any term of any settlement or award. The Schedule on Unfair Labour Practices to the
I.D. Act considers failure to implement an award, settlement or agreement as an unfair
labour practice, which is punishable under Section 25 U of the I.D. Act. Hence, an
appropriate blend of I.D. Act and Lok Adalats should help in resolving most of the
industrial disputes amicably.
Lok Adalats are now catching on. Though, it is attempted all over India, it is very
popular in Punjab and Haryana, where thousands of cases are settled through Lok
Adalats.
8.6 CASE LAWS

A Case law is the available writings explaining the verdicts in a case. Case Laws
depict how a Labour Court/Industrial Court/High Court/Supreme Court interpret
various labour legislations and, therefore, can be cited as precedents.
Case law is most often created by judges in their rulings, when they write their
decisions and give the reasoning behind them, as well as citing precedents in other
cases and statutes that had a bearing on their decision.
A single case may generate virtually no written interpretations or opinions, or, as is

the case with many that come before the Supreme Court, it may generate a number of
opinions as it works its way through various lower-circuit courts. These collected
opinions can be referred to in the future by other judges when they make their rulings
on similar cases, allowing the law to remain relatively consistent.
The following are some select case laws from Supreme Court rulings.
8.6.1 Illegal Strikes The Industrial Disputes Act, 1947

Management of Coimbatore District Central Co-operative Bank v Secretary,
Coimbatore District Central Co-operative Bank Employees Association & Another
Date of Judgment: 23/04/2007
Case Facts
To appreciate in its proper perspective an important question raised in the appeal, it is
necessary to set out relevant facts.
The appellant is Coimbatore District Central Co-operative Bank having its head office
at Coimbatore. It is having 17 branches in the Revenue District of Coimbatore. It is
the case of the appellant-Bank that the Coimbatore District Central Bank Employees
Association ('Union' for short) gave a 'strike notice' on March 31, 1972 which was
received by the Management on April 5, 1972 proposing to go on strike from April 14,
1972. The reason for such notice and going on strike was suspension of certain
employees and withholding of their salary by the Management. Since the strike-call
was illegal and the notice was not in consonance with the provisions of the Industrial
Disputes Act, 1947 (hereinafter referred to as "the Act"), the action of going on strike
was unlawful.
The Union was accordingly informed not to go on strike. The Labour Officer,
Coimbatore in the meanwhile commenced Conciliation Proceedings in connection
with certain issues raised by the Union. Despite proper advice by Labour Officer, the
employees commenced strike from April 17, 1972. The strike was totally illegal and
unlawful. On April 19, 1972, notice was issued to the Union stating therein that the
workmen should join duties by April 22, 1972 by tendering unconditional apology.
The employees accepted it. A settlement had been arrived at between the Management
and the Union and 134 employees gave up 'strike call' and resumed work.
53 employees, however, refused to join duty and continued their illegal strike and acts
of misconduct.
The illegal acts of employees affected the work of the Bank very badly. It was alleged
that not only the workmen did not join duty and continued illegal and unlawful strike,
but also prevented other employees from resuming duty and threatened them with dire
consequences if they returned for duty. Disciplinary proceedings were, therefore,
initiated against 53 workmen, they were placed under suspension and inquiry was
instituted. The employees were intimated of the charges levelled against them, which
they denied. In spite of notices, the workmen did not participate in disciplinary
proceedings and remained absent.
The Management was, therefore, constrained to proceed with the disciplinary inquiry
ex parte against them. By an order dated January 6, 1973, the workmen were held
guilty of the charges and an order of punishment was passed. By the said order, two
punishments were awarded on the workmen; (i) stoppage of increment for 1-4 years
with cumulative effect; and (ii) non-payment of salary during the period of
suspension. According to the Bank, the case was an appropriate one to impose
extreme penalty of dismissal from service, but by taking liberal view, the extreme
punishment was not imposed on the employees and they were retained in employment
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by the Bank. The workmen joined duty on January 17, 1973. They should have
accepted the order gracefully and appreciated the attitude adopted by the
Management. The workmen, however, did not do so. They preferred to file appeal
which was dismissed by the Executive Committee.
Decision of Labour Court
The workmen, being aggrieved by the decision, raised an industrial dispute and the
matter was referred to Labour Court, Coimbatore by the Government under Section 10
of the Act. The Labour Court after extending opportunity of hearing to both the sides
and considering the evidence on record framed the following two issues;
1. Whether the punishment of stoppage of 1 to 4 increments with cumulative effect
on the 1 to 53 workers is justified?
2. Whether the 53 workmen are entitled to be paid wages for the period of
suspension? After considering the evidence in its entirety and relevant case law on
the point, the Court held that all the four charges levelled against the workmen
were proved. It also held the inquiry to be legal, valid and in consonance with the
principles of natural justice. The evidence established that threat was administered
by the employees.
The Labour Court concluded;" Unlike criminal cases it is not necessary that the
evidence should be beyond doubt. Nevertheless, the witnesses have given clear
evidence to prove charges. Therefore, we have to accept them and hold that charges
1 to 4 have been proved against all the 53 employees."
On the basis of the above finding, the Labour Court held that it could not be said that
the action of the Management could be described as illegal, unlawful or improper.
Accordingly, the demands of the workmen were rejected and reference was dismissed.
Approach of High Court
Being aggrieved by the award passed by the Labour Court, the Union approached the
High Court by filing a Writ Petition. The learned Single Judge did not disagree with
the findings recorded by the Labour Court and held that the workmen were not
entitled to wages for the period they had not worked. As to the second punishment,
however, the learned Single Judge held that stoppage of 1 to 4 annual increments with
cumulative effect was 'harsh'. The penalty of stoppage of annual increments with
cumulative effect had far-reaching consequences. It would adversely affect the
workmen throughout their service and in retrial benefits to be received by them. It
would further affect their families. Imposition of such punishment, according to the
learned Single Judge, was 'not valid in law' and liable to be set aside. The petition was,
accordingly, partly allowed confirming the withdrawal of wages for the period of
suspension, but by setting aside the order of punishment of stoppage of increments.
The Management was directed to pay the arrears in respect of stoppage of increments
to the workmen with 'interest at the rate of 12% per annum' within sixty days from the
date of receipt of the copy of the order.
The Management was aggrieved by the above order passed by the learned Single
Judge and preferred intra-court appeal before the Division Bench of the High Court.
The Division Bench rightly noted that it is settled law that the question of choice and
quantum of punishment is within the discretion of the Management. "But, the sentence
has to suit the offence and the offender". If it is unduly harsh or vindictive,
disproportionate or shocks the conscience of the Court, it can be interfered with by the
Court. Then referring to a leading decision of this Court in Ranjit Thakur v. Union of
India & Others., (1987) 4 SCC 611, the Division Bench held that the order passed by
the learned Single Judge required modification. The Division Bench opined that
proper punishment would be stoppage of increment/increments without cumulative

effect on all 53 employees would serve the ends of justice. The Division Bench also
held that the order passed by the learned Single Judge directing the Management to
pay interest was not proper and was accordingly set aside. It is this order which is
challenged by the Management in the present appeal.
Rival Submissions
We have heard the learned counsel for the parties. The learned counsel for the
appellant-Bank contended that both, the learned Single Judge as well as the Division
Bench of the High Court, were in error in interfering with the order of punishment
passed by the Management particularly when the said action had been confirmed by a
well-considered and well-reasoned award made by the Labour Court, Coimbatore. It
was urged that once an inquiry has been held to be in consonance with rules of natural
justice, charges had been proved and an order of punishment had been passed, it could
not have been set aside by a 'Writ-Court' in judicial review. The Labour Court
recorded a finding of fact which had not been disturbed by the High Court that
principles of natural justice were not violated. The inquiry was conducted in
consonance with law and all the charges leveled against the employees were
established. If it is so, the High Court was clearly wrong in interfering with the award
of the Tribunal. According to the counsel, the High Court was neither exercising
appellate power over the action taken by the Management nor on quantum of
punishment awarded.
The Court was also not having appellate jurisdiction over the Labour Court. The
jurisdiction of the High Court under Article 226/227 of the Constitution was limited to
the exercise of power of judicial review. In exercise of that power, the High Court
could not substitute its own judgment for the judgment/order/action of either the
Management or the Labour Court. The order of the High Court, therefore, deserves to
be quashed and set aside. It was also urged that even if it is assumed that the High
Court has jurisdiction to enter into such arena, then also, in the facts and
circumstances of the case and considering the allegations leveled and proved against
the workmen, it cannot be said that an order of stoppage of increment/increments with
cumulative effect could not have been made. On the contrary, the matter was very
serious which called for much more severe penalty, but by taking liberal view, the
Management had imposed only a 'minor' penalty. Such reasonable order could not
have been set aside by the High Court.
The counsel submitted that 'Banking service' is an 'essential service'. It has public
utility element therein and it was the duty of the employees connected with such
service to discharge their duties sincerely, faithfully and whole-heartedly. In the
instant case, not only the workmen refused to join duty, but they prevented other
employees who had amicably settled the matter with the Management in discharging
their duties by administering threat and by successfully obstructing the Management
in the discharge of its obligations as Public Utility Undertaking. Serious view,
therefore, was called for. There was total and complete misconception on the part of
the High Court in holding that the punishment was 'harsh'. It was, therefore, submitted
on behalf of the Management that the order passed by the learned Single Judge and
modified by the Division Bench deserves to be set aside by confirming the action
taken by the Management and approved by the Labour Court, Coimbatore.
The learned counsel for the respondent-Union, on the other hand, supported the order
passed by the Division Bench of the High Court. According to him, the learned Single
Judge was fully justified in partly allowing the petition observing that the punishment
imposed on the workmen was 'clearly harsh' and in setting aside that part of the
punishment by which increment/increments was/were stopped. Since the punishment
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imposed by the Management was grossly disproportionate, the learned Single Judge
was also right in directing the Bank Management to pay salary with 12% interest. It is
no doubt true, stated the learned counsel, that the Division Bench partly set aside the
direction of the learned Single Judge by modifying the punishment permitting
stoppage of increment/increments of the workmen without cumulative effect and by
setting aside payment of salary with 12% interest, but as the said part of the order
passed by the Division Bench has not been appealed against by the Union, it would
remain. But no case has been made out by the Bank Management to interfere with the
order of the Division Bench and the appeal deserves to be dismissed.
Findings Recorded
We have given our most anxious and thoughtful consideration to the rival contentions
of the parties. From the facts referred to above and the proceedings in the inquiry and
final order of punishment, certain facts are no longer in dispute. A call for strike was
given by the Union which was illegal, unlawful and not in consonance with law.
Conciliation proceedings had been undertaken and there was amicable settlement of
dispute between the Management on the one hand and the Union on the other hand.
Pursuant to such settlement, 134 workmen resumed duty. 53 workmen, however, in
spite of the strike being illegal, refused to join duty. Their action was, therefore, ex
facie illegal. The workmen were, in the circumstances, placed under suspension and
disciplinary proceedings were initiated. In spite of several opportunities, they did not
co-operate with the inquiry and the Inquiry Officer was compelled to proceed ex parte
against them. Four allegations were leveled against the workmen;
(i) The employees did not come for work from April 17, 1972;
(ii) They took part in illegal strike from that date, i.e. April 17, 1972;
(iii) They prevented other employees who returned for work from joining duty by
administering threat to them; and
(iv) They prevented the employees who came to receive wages on April 17, 1972.
At the enquiry, all the charges levelled against the employees were established. In the
light of the said finding, the Management imposed punishment of
(i) stoppage of increment of 1 to 4 years with cumulative effect; and
(ii) non-payment of salary during period of suspension. In our considered opinion, the
action could not be said to be arbitrary, illegal, unreasonable or otherwise
objectionable. When the Union challenged the action and reference was made by
the 'appropriate Government' to the Labour Court, Coimbatore, the Labour Court
considered all questions in their proper perspective. After affording opportunity of
hearing to both the parties, the Labour Court negated the contention of the Union
that the proceedings were not in consonance with principles of natural justice and
the inquiry was, therefore, vitiated. It held that the inquiry was in accordance with
law. It also recorded a finding that the allegations levelled against the workmen
were proved and in view of the charges levelled and proved against the workmen,
the punishment imposed on them could not be said to be excessive, harsh or
disproportionate. It accordingly disposed of the reference against the workmen. In
our considered opinion, the award passed by the Labour Court was perfectly just,
legal and proper and required 'no interference'. The High Court, in exercise of
power of judicial review under Article 226/227 of the Constitution, therefore,
should not have interfered with the well-considered award passed by the Labour
Court.
8.6.2 Termination The Industrial Disputes Act, 1947

Director, Food and Supplies, Punjab and Another v Gurmit Singh:
Case No.: Appeal (civil) 7637 of 2004
Bench: Dr. Arijit Pasayat & Lokeshwar Singh Panta
Judgment: (With Civil Appeals Nos. 6766/2004 and 2608/2004)
Dr. Arijit Pasayat, J
Challenge in these appeals is to the judgment of the Division Bench of the Punjab and
Haryana High Court dismissing the writ petitions filed by the present appellants.
Challenge in the writ petitions was to the order passed by the Presiding Officer,
Labour Court, Patiala (in short the 'Labour Court'). Background facts in a nutshell are
as follows:
The dispute in three appeals being common, factual position in Civil Appeal No. 7637
of 2004 is noted.
Civil Appeal No.7637/2004
Reference was made to the Labour Court under Section 10(1)(c) of the Industrial
Disputes Act, 1947 (in short the 'ID Act') of the following purported dispute:
"Whether termination of services of Gurmit Singh-Workman is justified and in order?
If not, to what relief is he entitled?"
The case of the workman was that he joined the present appellants as Chowkidar and
worked therein from 1.6.1985 to 24.8.1986. His services were terminated on
25.8.1986 by the Management without service of any notice, holding of any enquiry
or payment of any compensation. He was getting Rs.400/-p.m. at that time as wages.
He is covered under the Industrial Employment (Standing Orders) Act, 1946 (in short
the 'Standing Orders Act'). The Management did not comply with the principles of
natural justice while terminating his services. The notice of reference was given to the
present appellants. It was stated in the written statement inter alia that the claimant
was working as Chowkidar on daily wages. His services ended with the end of each
working day. The claim of the claimant that he had worked from 1.6.1986 to
24.8.1986 is not correct. The services of the claimant were dispensed with as he was
surplus. No notice or enquiry or compensation was required as the claimant was a
worker on daily wages. He was working in the department on daily wages as fixed by
the Deputy Commissioner, Sangrur from time to time. It was also pleaded in the
preliminary objections that there are three categories of Chowkidars in the Food and
Supplies Department to safeguard the food grains stocks.
The first category consists of regular Chowkidars according to the sanctioned strength
drawing regular pay scale. The second category consists of temporary Chowkidars.
They are recruited through employment exchange and draw emoluments equal to the
regular Chowkidars. The third category consists of daily wages Chowkidars who draw
fixed daily wage from time to time fixed by the department of concerned districts. The
services of the Chowkidars on daily wages end with the end of each working day.
Their strength increased/decreased with the increase/decrease of the food grains
stocks. The services of the daily wages Chowkidars were dispensed with on becoming
surplus. The workman in the present case belonged to the third category i.e. daily
wages Chowkidar. His services were dispensed with on becoming surplus along with
others. It was also stated that the present appellants cannot be treated as an industry
and the ID Act has no application. The Labour Court relied on certain documents and
concluded that the workman had worked for more than 240 days. Unfortunately, the
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Labour Court did not record any finding about the non applicability of the ID Act. It
was noted that the workman was gainfully employed after the termination of his
services. Accordingly, direction was given for re-instatement with continuity of
service. This finding was recorded primarily on the ground that he had worked for
more than 240 days. No finding was recorded on the plea taken by the present
appellants that the claim was made after 9 years without explaining the belated
approach.
The High Court dismissed the writ petitions filed by the present appellants on the
ground that even if there was belated approach, the Court could not decline to grant
relief but it could mould the relief.
In support of the appeals, learned counsel for the appellants submitted that both the
trial court and the High Court did not notice the basic challenge of the appellants
about the non-applicability of the ID Act. Apparently, the Labour court had not
considered the plea about non applicability of the ID Act. This was specifically
pleaded. It is true that the Labour court could not have declined to answer the
reference. The jurisdiction of the Tribunal and the Labour court as the case may be in
dealing with an industrial dispute is limited. The point was mentioned in Section 10(4)
of the ID Act in National Engineering Industries Ltd. v. State of Rajasthan and Ors.
(2000 (1) SCC 371). It was held that the High Court has jurisdiction to entertain a writ
petition when there is an allegation that there is no industrial dispute which could be
the subject matter of reference for adjudication to the Tribunal under Section 10 of the
ID Act. Thus the existence of the industrial dispute is a jurisdictional factor. Absence
of jurisdictional fact results in invalidation of the reference. The Tribunal or the
Labour Court under Section 10 gets jurisdiction to decide an industrial dispute only
upon a reference by the appropriate government. The Tribunal or the Labour Court
cannot invalidate the reference on the ground of delay. If the employer makes a
grievance that the workman has made a stale claim then an employer can challenge
the reference by way of a writ petition and contend that since the claim is belated there
was no industrial dispute. The Tribunal or the Labour Court cannot strike down the
reference on this ground. As observed in Sapan Kumar Pandit v. U.P. State Electricity
Board and Ors. (2001 (6) SCC 222) there are cases in which lapse of time had caused
fading or even eclipse of the dispute. If nobody had kept the dispute alive during the
long interval, it is reasonably possible to conclude in a particular case that the dispute
ceased to exist after some time. But when the dispute remained alive though not
galvanized by the workmen or the Union on account of other justified reasons it does
not cause the dispute to wane into total eclipse. The long delay for making the
adjudication could be considered by the Adjudicating Authority while moulding the
reliefs. That is a different matter altogether.
In the instant case apart from the fact that the long delay aspect has not been
considered by the Management it also did not decide the jurisdictional fact about the
applicability of the ID Act. That being so, the order of the Labour court as affirmed by
the High Court cannot be sustained and stands quashed. The appeal is allowed without
any order as to costs.
In view of our conclusions in Civil Appeal No.7637/2004, Civil Appeal Nos. 6766 of
2004 and 2608 of 2004 are also allowed on the same terms with no order as to costs.
The matter is remitted to the Labour court to adjudicate on these aspects. Since the
matter is pending since long the Labour court would do well to dispose of the matter
within four months from the date of receipt of this order.
8.6.3 Retrenchment The Industrial Disputes Act, 1947

Madhya Pradesh Administration v Tribhuban:
Case No.: Appeal (civil) 1817 of 2007

Bench: S.B. Sinha & Markandey Katju
Judgment: Civil Appeal No 1817/2007 [Arising out of S.L.P. (C) No. 17917 of 2005]
S.B. Sinha , J. - Leave granted.
State of Madhya Pradesh runs an establishment in Delhi known as Madhya Pradesh
Bhawan. Respondent was appointed on temporary basis from time to time with breaks
in services. He worked for the period 13.12.1991 to 1.3.1994. After his services were
terminated, an industrial dispute was raised. The said dispute was referred for its
determination before the Industrial Tribunal. The Industrial Tribunal by an Award
dated 26.7.2002, while holding that in terminating the services of the respondents the
appellant has failed to comply with the statutory requirements contained in Section 25
F of the Industrial Disputes Act, awarded only retrenchment compensation along with
notice pay together with interest @ 9% per annum. Validity of the said Award was not
questioned by the appellant. Respondent, however, filed a Writ Petition there-against.
By a Judgment and Order dated 24.2.2005 and 15.4.2005, a learned Single Judge of
the Delhi High Court allowed the said Writ Petition directing re-instatement of the
respondent with full back wages. An intra-court appeal preferred there-against has
been dismissed by a Division Bench of the said Court by reason of the impugned
judgment.
Mr. Vikas Singh, learned Additional Solicitor General appearing on behalf of the
appellant would submit that Madhya Pradesh Bhawan being merely a Circuit House of
the Government of Madhya Pradesh, is not an "Industry" within the meaning of
Section 2(j) of the Industrial Disputes Act. Learned counsel urged that in that view of
the matter, it was not a fit case where a direction of re-instatement with full back
wages should have been issued.
Mr. Sujoy Ghosh, learned counsel appearing on behalf of the respondent, on the other
hand, would submit that although the question as to whether sovereign functions of
the State would come within the purview of the definition of "Industry" is pending for
consideration before the Seven Judges' Bench having been referred to by a
Constitution Bench in State of U.P. v Jai Bir Singh [(2005) 5 SCC 1], but so long the
existing law is not set aside, Madhya Pradesh Bhawan wherein even the private guests
are also entertained would bring the establishment within the purview of "Industry". In
any event, the industrial court having arrived at a finding to that effect in its Award
dated 26.7.2002 which having not been questioned, the appellant cannot be permitted
to raise the same before this Court. It was contended that artificial breaks after 89 days
of service being not bonafide, the termination of the services of a workman would not
come within the exceptions envisaged under Section 2(oo) (bb) of the Act. It was
urged that Industrial Disputes Act does not make any distinction between a daily
wager and the permanent employee, in view of the definition of "workman" as
contained in Section 2(s) thereof. The High Court, therefore, cannot be said to have
committed any illegality in directing the re-instatement of the respondent with full
back wages as admittedly the provisions of Section 25 F of the Industrial Disputes Act
had not been complied with.
The question as to whether the activities of the Appellant satisfy the tests laid down in
the statutory definition of "Industry" as contained in Section 2(j) of the Industrial
Disputes Act or not, in our opinion need not be gone into in this case. Industrial Court
opined that it was an Industry. The legality of the Award of the Industrial Court was
not questioned. So far as the appellant is concerned, it, thus, attained finality. It,
therefore, in our opinion cannot now be permitted to turn round and contend that its
Delhi establishment does not come within the purview of the definition of "Industry".
The question, however, which arises for consideration is as to whether in a situation of
this nature, the learned Single Judge and consequently the Division Bench of the Delhi
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High Court should have directed re-instatement of the respondent with full back
wages. Whereas at one point of time, such a relief used to be automatically granted,
but keeping in view several other factors and in particular the doctrine of public
employment and involvement of the public money, a change in the said trend is now
found in the recent decisions of this Court. This Court in a large number of decisions
in the matter of grant of relief of the kind distinguished between a daily wager who
does not hold a post and a permanent employee. It may be that the definition of
"workman" as contained in Section 2(s) of the Act is wide and takes within its
embrace all categories of workmen specified therein, but the same would not mean
that even for the purpose of grant of relief in an industrial dispute referred for
adjudication, application for constitutional scheme of equality adumbrated under
Articles 14 and 16 of the Constitution of India, in the light of a decision of a
Constitution Bench of this Court in Secretary, State of Karnataka and Others v
Umadevi (3) and Others [(2006) 4 SCC 1], and other relevant factors pointed out by
the Court in a catena of decisions shall not be taken into consideration.
The nature of appointment, whether there existed any sanctioned post or whether the
officer concerned had any authority to make appointment are relevant factors.
See M.P. Housing Board and Another v Manoj Shrivastava [(2006) 2 SCC 702],
State of M.P. and Others v Arjunlal Rajak [(2006) 2 SCC 711] and M.P. State
Agro Industries Development Corporation. Ltd and Another v S.C. Pandey [(2006)
2 SCC 716]
Our attention has been drawn to a recent decision of this Court in Jasbir Singh v.
Punjab & Sind Bank and Others reported in [(2007) 1 SCC 566] by the learned
counsel appearing on behalf of the respondent. We do not see as to how the said
decision is applicable to the fact of the present case.
In Jasbir Singh (supra), the Order of termination was passed on the ground of
misconduct. The said question was also the subject matter of a suit, wherein the Civil
Court had held that the appellant therein was not guilty of the misconduct. In that
context only, the question in regard to the relief granted by the Court was considered
in the light of the relief which may be granted by the Industrial Court under
Section 11A of the Industrial Disputes Act stating;
"It was, however, urged that no back wages should be directed to be paid. Reliance in
this behalf has been placed on U.P. State Brassware Corporation. Ltd. v. Uday Narain
Pandey. In that case, this Court was dealing with a power of the Industrial Courts
under Section 11-A of the Industrial Disputes Act. Therein, as the establishment was
closed, the question of reinstatement of the workman did not arise. Still then, 25%
back wages were directed to be paid as also the compensation payable in terms of
Section 6-N of the U.P. Industrial Disputes Act.
The judgments of both the civil court and the criminal court established that the
appellant was treated very unfairly and unreasonably. For all intent and purport, a
criminal case was foisted upon him. A confession, according to learned Chief Judicial
Magistrate, was extracted from him by the bank officers in a very cruel manner. It is,
therefore, not a case where back wages should be denied. The respondent Bank has
tried to proceed against the appellant in both in civil proceedings as well as in criminal
proceedings and at both the independent forums, it failed."
We may notice that recently in Muir Mills Unit of NTC (U.P.) Ltd. v. Swayam
Prakash Srivastava and Another [(2007) 1 SCC 491], a Bench of this Court opined :
"With regard to the contention of the respondents that in the present fact scenario
retrenchment is bad under law as conditions under Section 6-N, which talks about a
reasonable notice to be served on an employee before his/her retrenchment, is not
complied with; we are of the view that even under Section 6-N the proviso states
that "no such notice shall be necessary if the retrenchment is under an agreement
which specifies a date for the termination of service". In the present case on the
perusal of the appointment letter it is clear that no such notice needs to be issued to
Respondent No.1.
The respondents had referred to many cases with regard to back wages to be paid to
the retrenched workman. The learned counsel cited a string of decisions of this Court
in support of this contention. We are however not addressing this plea of the
respondents as we have already observed that Respondent 1 is not a workman under
the Industrial Disputes Act, 1947 and the U.P. ID Act, 1947 and also that the
retrenchment was not illegal and therefore the question of back wages does not arise.
We may also notice that in Uttranchal Forest Development Corporation v M.C. Joshi
[2007 (3) SCALE 545], this Court held; "Although according to the learned counsel
appearing on behalf of the appellant the Labour Court and the High Court committed
an error in arriving at a finding that in terminating the services of the respondent, the
provisions of Section 6N of the UP Industrial Disputes Act were contravened, we will
proceed on the basis that the said finding is correct. The question, however, would be
as to whether in a situation of this nature, relief of reinstatement in services should
have been granted. It is now well-settled by reason of a catena of decisions of this
Court that, the relief of reinstatement with full back wages would not be granted
automatically only because it would be lawful to do so. For the said purpose, several
factors are required to be taken into consideration, one of them being as to whether
such an appointment had been made in terms of the statutory rules. Delay in raising an
industrial dispute is also a relevant fact.
In Haryana State Electronics Development Corporation v Mamni [AIR 2006 SC
2427], this Court directed payment of compensation. Similar orders were passed in
North-Eastern Karnataka Rt. Corporation v. Ashappa [(2006) 5 SCC 137] and U.P.
State Road Transport Corporation v. Man Singh [(2006) 7 SCC 752]
In Man Singh (supra) it was held:
The respondent admittedly raised a dispute in 1986, i.e. after a period of about
12 years, it may be true that in an appropriate case, as has been done by the Labour
Court, delay in raising the dispute would have resulted in rejection of his claim for
back wages for the period during which the workman remains absent as has been held
by this Court in Gurmail Singh vs. Principal, Govt. College of Education. But the
discretionary relief, in our opinion, must be granted upon taking into consideration all
attending circumstances. The appellant is a statutory corporation, keeping in view the
fact that the respondent was appointed on a temporary basis, it was unlikely that he
remained unemployed for such a long time. In any event, it would be wholly unjust at
this distance of time. i.e. after a period of more than 30 years, to direct reinstatement
of the respondent in service. Unfortunately, the Labour Court or the High Court did
not consider these aspects of the matter.
Keeping in view the particular facts and circumstances of this case, we are of the
opinion that instead and in place of the direction for reinstatement of the respondent
together with back wages from 1986, interest of justice would be sub-served if the
appellant is directed to pay a sum of Rs. 50,000 to him. Similar orders, we may place
on record, have been passed by this Court in State of Rajasthan v. Ghyan Chand, State
of MP vs. Arjunlal Rajak, Nagar Mahapalika (now Municipal Corporation) v. State of
U.P., and Haryana State Electronics Development Corporation Ltd. v. Mamni."
It was further held
"The legal position has since undergone a change in the light of a Constitution Bench
decision of this Court in Secretary, State of Karnataka & Ors. vs. Uma Devi (3) &
Ors. [(2006) 4 SCC 1] wherein this Court held that 'State' within the meaning of
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Article 12 of the Constitution of India is under a constitutional obligation to comply

with the provisions contained in Articles 14 and 16 of the Constitution of India."
In this case, the Industrial Court exercised its discretionary jurisdiction under Section
11A of the Industrial Disputes Act. It merely directed the amount of compensation to
which the respondent was entitled to, had the provisions of Section 25 F been
complied with should be sufficient to meet the ends of justice. We are not suggesting
that the High Court could not interfere with the said order, but the discretionary
jurisdiction exercised by the Industrial Court, in our opinion, should have been taken
into consideration for determination of the question as to what relief should be granted
in the peculiar facts and circumstances of this case. Each case is required to be dealt
with in the fact situation obtaining therein.
We, therefore, are of the opinion that keeping in view the peculiar facts and
circumstances of this case and particularly in view of the fact that the High Court had
directed re-instatement with full back wages, we are of the opinion that interest of
justice would be sub-served if appellant herein be directed to pay a sum of Rs.
75,000/- by way of compensation to the respondent. This appeal is allowed to the
aforementioned extent.
However, in the facts and circumstances of this case, there shall be no order as to
costs.
Source: Adapted from www.legalservicesindia.com
8.7 LET US SUM UP

Industrial disputes constitute militant and organised protests against existing industrial
conditions. Industrial disputes may take up various forms like strikes and lockouts,
gherao, picketing and boycott. Industrial disputes arise due to several causes relating
to recognition, retrenchment, employment conditions, indiscipline, wages and
allowances, bonus, ill-treatment etc. Strong trade unions, works committees, joint
management councils, standing orders, proper grievance procedures, code of
discipline, collective bargaining etc. help in preventing industrial disputes.
Conciliation (Conciliation Officer and Board of Conciliation) arbitration (voluntary
and compulsory) and adjudication (Labour Court, Industrial Tribunal,
National Tribunal) help in the settlement of disputes as envisaged by the Industrial
Disputes Act.
8.8 KEYWORDS
Strike: A collective stoppage of work by a group of workers.
Lock-out: Closing down of an undertaking or the suspension of work or the refusal of
an employer to continue to employ any number of persons employed by him.
Arbitrator: A person who is appointed to play the role of an umpire while resolving
differences and disputes between two parties.
Conciliation: The practice by which the services of a neutral third party are used in a
dispute as a means of helping the disputing parties to reduce the extent of their
differences and to arrive at an amicable settlement or agreed solution.
Voluntary arbitration: The process in which the disputing parties show willingness to
go to an arbitrator (a third party) and submit to his decision voluntarily.
Adjudication: It is the process of settling disputes through the intervention of a third
party appointed by the Government.
Industrial dispute: Any dispute or difference between employers and employers, or

between employment or non-employment or the terms of employment or with the
conditions of labour of any person.
8.9 SELF ASSESSMENT

Fill in the Blanks
1. The strikes which occur without the consent of related trade unions are called
strikes.
2. The action of the workers under which the employers are not allowed to leave the
office premises is called
3. The process of settlement of disputes with the help of jury is known as
4. The final or interim decision by any one of three tribunals is termed as
5. The voluntary mechanism for dispute settlement is based on

6. In general, Lok Adalats assist in mass of disputes.
7. In , each parties involved in a dispute presents his version of
the story before the court with the help of lawyers.

1. What are industrial disputes? Which forms can it take?
2. Discuss the major causes of industrial disputes.
3. Analyse the process of settlement of disputes under the Industrial Dispute
Settlement Act, 1948.
4. What do you mean by adjudication? What are its advantages?
5. Discuss code of discipline announced in 1958.
6. What are Lok Adalats? How are they useful?

House
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LESSON
9
COMPARATIVE GLOBAL INDUSTRIAL RELATIONS
PRACTICES
CONTENTS
9.0
Aims and Objectives
9.1
Introduction
9.2
ESOP (Employee Share Ownership Plan)
9.3
9.2.1
Arguments in Favour of ESOP
9.2.2
Global Experiences
9.2.3
The Importance of the Legislative Framework
9.2.4
The Japanese Experience
Attitudes of the Social Partners towards Workers' Financial Participation Attitude of

Employers' Associations
9.3.1
Enhancing Productivity
9.3.2
Workers' Participation in Decision-making, a Catalyst
9.4
Few Commendable Examples of Global IR Practices
9.5
Indian Examples of Successes
9.6
Let us Sum up
9.7
Keywords
9.8
Self Assessment
9.9
Review Questions
9.10
Suggested Readings

z
Know about ESOP
Compare ESOP schemes in US, Europe and Japan
Analyse the IR system in Japan
Link productivity and financial participation of workers
Know about successful IR practices of some global and Indian firms
9.1 INTRODUCTION
A comparative study of industrial relations shows that industrial relations phenomena
is a very faithful expression of the society in which it operates, of its characteristic
features and of the power relationships between different interest groups. Industrial
relations cannot be understood without an understanding of the way in which rules are
established and implemented and decisions are made in the society concerned.
9.2 ESOP (EMPLOYEE SHARE OWNERSHIP PLAN)

Workers' share ownership plan constitutes the major form of financial participation. It
is technically called as Employee Share/Stock Ownership Plan (ESOP). The scheme
gives the opportunity to employees to own shares in their own company. The concept
of ESOP was originally developed in 1967 by Louis Kelso, San Francisco lawyer and
investment banker, and author of books titled 'The Capitalist Manifesto' and 'How to
Turn Eighty Million Workers into Capitalists on Borrowed Money'. His objective was
to turn workers into shareholders. Kelso argued that conventional capitalism is a
closed loop financial system the rich get richer and the poor get poorer. People, he
said, get rich not through wages and salaries but by owning shares in companies. With
ESOP workers are able to get a share in this gain.
When an employer adopts the ESOP, workers form a trust to buy and hold their
shares. This trust then borrows money from a bank to buy some or all of the
company's shares at fair market value. The trust hands over the money to the employer
in return for shares. For his part, the employer guarantees the repayment of the
borrowed money, and settles it over a period of time by making contributions to the
Trust.
Why should any employer do this? In the USA the most important reason is that he
gets major tax concessions. Contributions to the trust to pay off the loan are
considered by law to be deferred wages. They can be deducted from the company's
income, exactly as wages are, before computing tax. Further changes in the law in
1984 have made ESOPs even more attractive. Half the interest earned by banks from
loans advanced to buy shares is free of tax. Companies can deduct as an expense
dividends paid on shares held by ESOPs, yet another advantage to the employer is that
ESOP protects his company from takeover by business rivals. Since shares are not
owned directly by workers but indirectly through the trust, they cannot be sold freely
in the stock market.
Because ESOPs are so attractive to employers, workers and banks, the movement has
received an enormous boost in the USA. About 10,000 companies have adopted the
plan since 1974. On an average, workers hold about 20 percent of the shares in ESOP
firms. And there are at least a thousand firms where they hold majority shares.
The ESOP shares are not individual property, which workers can freely sell. The
decision to own the shares is also not an individual decision. The shares are owned by
the trust Loans to buy shares are taken by the trust. And it is through the trust that the
employer makes payments to clear the loan ESOP shares are thus owned by all
workers. Individual workers can sell their rights when they leave or retire, but the trust
usually buys them back.
9.2.1 Arguments in Favour of ESOP

In the first place, it is often considered to be a means of improving motivation and
productivity. It leads to greater commitment, lower absenteeism and labour turnover,
greater investment in firm-specific human capital and reduced intra-firm conflict. In
contrast to individual incentives, financial participation is also likely to enhance
teamwork and a cooperative spirit, thereby facilitating improvements in work
organisation.
9.2.2 Global Experiences

Workers' financial participation in enterprise results is hardly a new idea. However, it
has only recently captured the attention of economists and policy makers, not only in
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industrialised countries but also in economies in transition, particularly in Central and

Eastern Europe. Moreover, although financial participation has been widely discussed
at the policy level, little is known about the application of financial participation
schemes in practice.
A clear distinction is made between the experiences of the industrialised countries and
those in Central and Eastern Europe. While companies in the industrialised countries
are actively promoting financial participation schemes as an efficient and flexible
payment system, which can improve motivation and productivity, in Central Eastern
Europe financial participation is mainly linked to the privatisation process.
9.2.3 The Importance of the Legislative Framework

Some countries have addressed the issues of financial participation in a more
comprehensive manner than others. In France and the United Kingdom, the law
envisages a variety of financial participation schemes, with different tax incentives,
which have recently been extended. This support has attributed to the growth in the
number of financial participation agreements in the two countries. In the USA a
notable slow down in productivity growth after 1973 generated increased interest in
worker participation. A number of tax incentives were, therefore, introduced mainly
for deferred profit sharing and ESOPs
Financial participation in Eastern European countries is closely linked to their
privatisation processes, as illustrated by recent legislative developments and
government statements in favour of share ownership schemes. In all these countries,
the first stage of privatisation is the transformation of state enterprises into joint stock
companies, in which workers' share ownership plays a central role. Hungary is a
typical example, which has implemented various forms of workers' share ownership.
Government encouragement has promoted the rapid development of ESOPs in the
privatisation process.
These schemes are more decentralised in Japan, where financial participation seems to
be part of an overall management policy and is not, therefore, promoted by legislation
or other public measures. It is implemented by the social partners, viz., employers,
employees, unions and the management at the plant level and is often developed along
with participation in decision-making, work sharing and internal labour mobility.
9.2.4 The Japanese Experience

The development of workers' financial participation depends on a series of social,
cultural and historical factors. This is confirmed by the Japanese experience, which is
characterised by a notable development of ESOPs. In the absence of direct formal
government support, this appears to be principally due to cultural, industrial relations
and other institutional factors. ESOPs have been introduced by more than 90 percent
of the firms listed on Japanese stock markets and by 60 percent of all corporations.
The average stock held by each employee through an ESOP was estimated at
US $ 14,000 in 1988. In addition to ESOPs, cash based profit sharing bonuses account
for an amount equivalent to about 25 percent of total pay, making Japan the country in
which financial participation is most advanced. 97 percent of firms with 30 or more
employees pay bonuses to their regular staff twice a year. In addition, more than
90 percent of Japanese firms operate a deferred profit sharing scheme. The success of
ESOPs and other forms of financial participation in Japan can be understood on the
basis of a number of factors. Unique features of the Japanese Industrial Relations
System are:
(a) The Lifetime Employment System;
(b) The Seniority Wage System;
(c) The Enterprise Union; and

(d) The Bonus System.
The first three characteristics are called the Three Sacred Emblems of Japanese labour
policy Lifetime employment is a unique feature of the working of large Japanese
firms. It accounts for the exceptionally dynamic functioning of a large section of
Japanese industry. The system presupposes that it is the employees that ultimately
make the firm productive, creative and respectable To Japanese management,
guarantee of lifetime employment to its staff is a sacred obligation. Lifetime
employment means employment till the employee attains the age of retirement which
is normally 55 years but it is now being extended to 58 or 60 years Top level
executives have, however, no mandatory retirement age.
Lifetime employment is not a legal or contractual obligation. And it is open to the
employee to leave the firm, which, however, is rare. There is no legal restriction on
the right of the employer to discharge or dismiss an employee, which is rarely resorted
to. Mainly large firms adopt this system and about 30-35 percent of the total labour
force is covered by this system. But these employees may be described as Japan's
standing industrial army-the backbone of her economy. Under this system,
employment has emotional and moral implications. Not only the employee but his
family also develops an attachment for the firm and the employee tries to serve the
company to the best of his abilities. The tangible advantages of the system are now
well recognised. Lifetime employment involves lifetime training as well which
facilitates innovation and which strengthens the urge for excellence in work. Lifetime
employment is described as one of the corner stones of the industrial relations system
in Japan.
Japanese firms like Sony are introducing lifetime employment in their factories even
in the USA with great success. For instance, the rate of absenteeism in the Sony
factory in America is only 0.1 percent. American workers in Japanese factories in the
USA take interest in their work and make valuable suggestions for improving
productivity and quality. Japanese management is equally effective in a totally
different American Culture.
The second salient feature of Japanese industrial relations system is the seniority wage
system. The system guarantees that wages and other benefits increase steadily from
the time of appointment. This is generally restricted to lifetime employees.
The enterprise union system of Japan is found to be very useful in strengthening the
individual worker's ties to his firm. In Japan every enterprise would have its own
independent union. It ensures better mutual understanding between union official and
management.
The Japanese firms pay their employees bonuses twice in a year. The payment is
based on the financial achievements of the firm and not linked with the productivity of
the workers. The system has three great advantages:
(a) The workers become aware of the vital importance of the successful functioning
of their firm.
(b) The Japanese workers tend to live within their monthly regular earnings and the
bonuses are mostly saved. This is one of the main reasons why Japanese
households save on an average 17 percent to 19 percent of their annual income,
(c) The bonuses represent a form of deferred payment, which enables the firm to
generate additional working capital.
Apart from the congenial and harmonious industrial relations climate, there has been
indirect public support for workers' financial participation in Japan, as a means of
preventing foreign takeovers of Japanese firms
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9.3 ATTITUDES OF THE SOCIAL PARTNERS TOWARDS

WORKERS' FINANCIAL PARTICIPATION ATTITUDE
OF EMPLOYERS' ASSOCIATIONS
Employers' associations have usually supported enterprise level schemes introduced
on a voluntary basis, with the design of the scheme being left to the discretion of the
enterprise. They oppose any binding arrangement. Employers usually consider
financial participation as an important element of human resource management for the
purposes of improving employee motivation and commitment. They have argued for
the introduction of tax incentives.
9.3.1 Enhancing Productivity

There is an impressive wide-ranging body of evidence for a positive association
between workers' financial participation and productivity gains in the industrialised
countries. In their survey of empirical results, Weitzman and Kruse, in the most
comprehensive book on this issue, edited by Blinder find a degree of consensus, which
is most unusual in empirical research. The authors, from their survey of a wide variety
of case studies and attitudinal surveys conclude that profit sharing schemes have a
positive and significant effect on productivity. Studies on European countries, recently
surveyed in the Pepper report, also concur in pointing to a positive association
between financial participation and productivity. This report led the Commission of
the European Communities to propose its recommendation on financial participation.
In Belgium, France, the United Kingdom and the United States of America it is found
that financial participation schemes tend to have been introduced and grown
particularly in large profitable export oriented enterprises. In Japan it is found that the
probability of a firm introducing financial participation schemes is higher in
companies in which human resources are a more important factor in their success. The
results of a survey carried out among 140 Belgian enterprises also emphasise the
positive effects of financial participation on workers' motivation. In Italy, a survey
carried out on a sample of 179 enterprises suggests that enterprises with financial
participation experienced a substantial (12 percent) increase in production following
the introduction of these schemes. Surveys undertaken in the United Kingdom show
that financial participation has made employees more profit conscious and increased
their sense of commitment to the company. According to a survey undertaken in the
former Czechoslovakia, the impact of financial participation differs according to the
type of enterprise and category of worker. Workers' share ownership appears to have a
much greater effect on motivation in small firms. Workers in small units can observe
and evaluate the effects of their efforts on the profits of their company. Technicians
and other skilled employees show greater interest in financial participation schemes
and are more prepared to work for lower wages for a certain period in order to
contribute to the future prosperity of their firm.
9.3.2 Workers' Participation in Decision-making, a Catalyst

A greater level of concern by workers for the success of their enterprise, as a direct
result of their financial participation, can have the effect of reducing conflict in the
work place, increasing the identification of workers with the enterprise and
lengthening their time horizon. This can be strengthened by measures to facilitate
workers' participation in decision-making. Several examples of the companies from
industrialised countries suggest that worker' financial participation schemes succeed
more often when they are combined with some kind of workers participation in
management. Combination of financial participation and increased employee
responsibility has contributed to Japanese economic miracle.
The global experiences of Labourisation suggest that the different forms and paths
taken by financial participation depend largely on national systems of industrial
relations and the attitudes and bargaining powers of the social partners.
9.4 FEW COMMENDABLE EXAMPLES OF GLOBAL IR

PRACTICES
The Mondragon Cooperatives
The Mondragon Cooperatives in Spain are famous throughout the world as the most
successful worker owned firms. The Mondragon has over a hundred cooperatives with
20,000 members, producing refrigerators, washing machines, computerised machine
tools, electronic components and automobile parts. The uniqueness of Mondragon lies
in its ability to combine democratic control with business efficiency. It ensures
continuous employment to its members. 45 percent of the profit is credited to the
capital accounts of individual employees, which can be claimed only on retirement.
One of the secrets of Mondragon's success is that no firm is allowed to grow too big.
When the size of the individual firm is kept small, there is greater scope for interaction
and effective participation by ordinary workers.
Omak Wood Products
Omak Wood Products, Washington is a successful employee owned company under
ESOP. The employees have borrowed $ 50 million to pay for the buy out of business
and to provide for working capital. They decided to set aside 10 percent of their wages
until the debt is repaid. The company is performing well.
National Steel Corporation
The National Steel Corporation (NSC) of the USA was a sick unit. While buying
shares in NSC the workers entered into an agreement with the company, which
provided for the workers' participation in management. The representatives of the
workers and management of NSC meet monthly once regularly, to share information
in the decision making process. As a result, NSC, once a losing company has become
a producer of cheap and best quality steel products and prompt supplier in the market.
Thus, the employees have saved their own fortune and also the fortune of the factory.
Tower Colliery
There was large scale closing down of coalmines owned by government in England
and thousands of miners were retrenched. In the course of privatisation process,
Tower Colliery, a prominent coal mine in England was taken over by its retrenched
workers. 239 workers contributed $ 8000 each out of their retrenchment compensation
and successfully bid reworking the mine again. The amount contributed by the
workers was the lion's share of the total amount needed. The mine is functioning
remarkably well. The colliery has signed a $70 million contract to supply coal for
another five years.
Precision Tool Production Ltd.
Videoton, the largest Hungarian electronic telecommunications State enterprise
employing nearly 20,000 employees, was divided into 21 companies in the
privatisation process. Precision Tool Production Ltd. is one among them. Its
employees have contributed nearly 85 percent of the capital, from their savings and
loans. After the transformation of the company, the employees spent their evenings or
weekends working in the factory to meet the demand. Within one year, the employees
not only paid back their loans but also were able to purchase the land and buildings
and machinery, which were still owned by the state enterprise.
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International Freight Transport Company

An international freight transport company of Hungary, formed under privatisation
process, struggled to survive. So, the employees decided to start a new company. They
contributed 50 percent of the initial capital and the remaining amount was contributed
by the parent company. The employees participating in this plan were particularly
motivated to preserve their jobs and improve the performance of the company. Their
expectations and hard work were crowned with success; they were able to broaden
their market share in spite of tough competition and general recession. Within one
year, its employees owned 90 percent of the shares.
Chyne Agricultural Cooperative
This agricultural cooperative in Czech Republic has successfully been transformed
into a joint stock company with 49 percent of its assets offered to employees in the
form of shares. This made it possible to preserve the participatory principles of the
cooperatives and motivate the workers.
Agrokombinat Slusovice
In the privatisation process, the cooperative Agrokombinat Slusovice was transformed
into a series of small and medium sized firms with workers' share ownership and
profit sharing. It led to improved efficiency and diversification of the bio
technological and microelectronic production to meet the challenge of international
competition. As a result, the firm has managed to attract most of the highly qualified
workers.
Silesian Factory Kable
Silesian Factory Kable is a polish firm. Its decision to sell the shares to the employees
at a 50 percent discount was quite successful, with 76 percent of the workers taking
advantage of this opportunity. According to the management, this has improved the
social climate within the firm as well as industrial relations in general, despite a slump
in the polish electrochemical industry, which used to absorb Kable's production.
As a conclusion to this section, illustrative data are provided on the scope and nature
of financial participation in three Japanese companies in different sectors.
Hitachi (Electronics)
The company introduced an ESOP in November 1974. In August 1985, 34.8 percent
of employees were participating in the plan. The average stake of participants is JPY
1.2 million. In 1984, the company paid the average employee JPY 0.517 million
(2.65 months' regular pay) as a summer bonus, and another JPY 0.548 (2.72 months'
regular pay) as a year-end bonus.
Hoya (Precision Engineering)
The company introduced an ESOP in October 1970. In March 1985, 47 percent of
employees were participating in the plan. The average stake of participants is JPY
255 million. In 1974, the company (currently one of the top manufacturers of optical
instruments in the world) introduced a profit sharing plan with the explicit objective of
increasing productivity. Around 40-45 percent of the annual bonus is linked to profits.
The bonus represents 6-7 months' regular pay and is clearly above the industry
average both in terms of cash and months of regular pay. Unions support the plan, and
there is a very thorough Joint Consultation Committee, which meets once a month and
has many ad hoc sub committees. Quarterly profit reports are provided to the Joint
Consultation Committee.
Mitsui Bank
The company introduced an ESOP in August 1969. In 1985, 67.6 percent of all
employees were participating in the plan. The average stake of participants is JPY
2.36 million. In 1984 the bank paid the average employee JPY 0.915 million
(3.25 months' regular pay) as a summer bonus, and JPY 0.973 million (3.40 months'
regular pay) as a year-end bonus.
9.5 INDIAN EXAMPLES OF SUCCESSES

Worker owned firms are not as common in India as in Europe. There have been
several cases, in India, of workers of sick companies forming cooperatives to save
their jobs. Many of these cooperatives have an impressive record of performance.
Kamani Tubes in Bombay, New Central Jute Mills in West Bengal and Jaipur Metals
and Electricals in Rajasthan have all been working successfully. While there are also
some cases of failure, the general experience is positive. With the right leadership and
financial support, workers have shown that they can take over sinking firms and make
them profitable.
Indian achievements regarding employee ownership are small compared to
developments on many European countries referred earlier. A feature of worker
ownership in India is the indifference, and sometimes, even hostility, of the trade
unions. When the firm runs into problems, the natural response of trade unionists is to
demand nationalisation. While this was an effective strategy some years ago, the
government now appears unwilling to take over sick firms. The government has no
clear policy on worker ownership. The CTUOs except BMS have no faith in it. The
indifference of unions and the government is mainly responsible for the present
condition in India.
Kamani Tubes
Kamani Tubes is a worker owned company located in Bombay. Before that, the
Kamanis, a well-known business family owned it. This company, that makes brass
rods and tubes for use in refrigeration and sugar production, was established in 1959.
It was a leading firm till the middle of 1970s, controlling 60 percent of the market. By
1985, the trouble started due to misunderstanding among the members of Kamani
family and financial difficulties. Kamani family abandoned the factory, as the
quantum of loss was uncontrollable.
When the owners abandoned, the independent union consisting 600 workers
approached banks, financial institutions and the state government to help revival.
None of them responded positively. The union then formed a cooperative to take over
the firm. Claiming that workers could raise the share capital from their provident fund,
wage arrears and loans, the union filed a civil petition in the Supreme Court. The court
asked the Board for Industrial and Financial Reconstruction (BIFR) to examine the
union's proposal. The BIFR gave a favourable report, but by now the Kamanis had
returned to claim the company. In spite of the legal hurdles they created, the Supreme
Court upheld the workers' action. By the end of 1988 the shares were transferred to the
cooperative In addition to workers' contribution, the state government sanctioned a
sizeable grant.
Since revival, the company has made good progress. Production, wages and profit
have gone up. The worker owned company pays annually around Rs.3 crore as excise
duty. Thus reviving the company has been beneficial to the government too.
Cooperative of Slag-Pickers
The Tata Iron and Steel Company in Jamshedpur dumps its slag in low-lying areas to
level the land and reclaim it for use. The slag contains bits of iron, which can be
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and Labour Laws
collected and sold as scrap. At one time, the job was given to contractors who
employed slag pickers at miserable wages.
In 1979, the State Government formed a cooperative of slag-pickers, with the
sub-divisional officer as the chairman. The cooperative was given the monopoly to
pick slag. In the very first year the cooperative achieved a turnover of Rs.3 crore. This
staggering amount was beyond anybody's expectations. Wages have gone up
substantially. The cooperative has taken up lot of welfare work with its own funds. It
continues to run smoothly.
Cooperatives of Iron Ore Miners
The Open Cast Iron Ore mines of Dalli Rajhera in Madhya Pradesh also have
successful cooperatives. These mines supply iron ore to the Bhilai Steel Plant. About
7500 workers organised in seven cooperatives are engaged in this task. Most of the
workers have moved from the nearby Bailadilla mines, which have been running out
of ore. The government has encouraged the formation of cooperatives to rehabilitate
these displaced workers. The cooperatives have been running successfully in spite of
competition from contractors who also operate in this area. It has generated handsome
surpluses for distribution among members and funding welfare facilities. The best free
primary school in the town is run by this cooperative.
Although the cooperatives have shown that they can operate successfully, there is not
enough support for them from the trade unions. A trade union well known for its
militancy has organised the contract labourers in this area. The members of the
cooperative are also members of this union. Instead of encouraging the formation of
more cooperatives, the union has been demanding that the Bhilai Steel Plant should
take over all the mines in the area, including those managed by workers.
9.6 LET US SUM UP

Workers' share ownership plan constitutes the major form of financial participation. It
is technically called as Employee Share/ Stock Ownership Plan (ESOP). The scheme
gives the opportunity to employees to own shares in their own company. The concept
of ESOP was originally developed in 1967 by Louis Kelso, San Francisco lawyer and
investment banker, and author of books titled 'The Capitalist Manifesto' and 'How to
Turn Eighty Million Workers into Capitalists on Borrowed Money'. In USA, the most
important reason due to which the employers opt for such schemes is that he gets
major tax concessions. The ESOP shares are not individual property, which workers
can freely sell. The decision to own the shares is also not an individual decision.
Financial participation in Eastern European countries is closely linked to their
privatisation processes, as illustrated by recent legislative developments and
government statements in favour of share ownership schemes. The development of
workers' financial participation depends on a series of social, cultural and historical
factors. This is confirmed by the Japanese experience, which is characterised by a
notable development of ESOPs. There is an impressive wide-ranging body of
evidence for a positive association between workers' financial participation and
productivity gains in the industrialised countries. The global experiences of
Labourisation suggest that the different forms and paths taken by financial
participation depend largely on national systems of industrial relations and the
attitudes and bargaining powers of the social partners.
9.7 KEYWORDS
ESOP: This scheme gives the opportunity to employees to own shares in their own
company
Lifetime Employment: It means employment till the employee attains the age of
retirement
Employee Participation: Under this, employees of the organisations participate in the
procedures of management
9.8 SELF ASSESSMENT

Fill in the Blanks
1. When the organisation opts for ESOP, the workers form a . to buy
and hold their shares.
2. The major reason for employers in USA to adopt ESOP is that they get
.
3. In eastern parts of Europe, the financial participation is mainly linked to the
. process.
4. The Seniority Wage System is a distinctive feature of . IR system.
5. As per ., there is a positive relation between financial participation
and productivity.

1. What are ESOPs and how are they useful in strengthening IR?
2. Compare the situation as regards ESOP in US and Europe.
3. Discuss the Japanese system of industrial relations.
4. How is productivity linked to workers participation? Explain with examples.
5. Give few examples of global and Indian companies that have successfully
implemented IR system.

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Comparative Global
SELF ASSESSMENT ANSWERS

LESSON 1
1.
Labour
2.
Unitary
3.
Marxist
4.
Pastoral and agrarian
5.
Master and slave
6.
State
7.
1947
LESSON 2
1.
Militant
2.
Fraternal
3.
Represent people at work
4.
Upwards
5.
Madras
6.
Trade Union Act, 1926
7.
Hind Mazdoor Sabha

LESSON 3
1.
Laissez Faire
2.
ASSOCHAM
3.
SCOPE
4.
Individualistic
5.
Constitution of India
6.
42
7.
Moral Persuasion
8.
ILC
LESSON 4
1.
United Kingdom
2.
Continuous
3.
Composite
4.
Negotiation
5.
Job Security
6.
Quality of Work Life (QWL)
7.
Productivity
LESSON 5
1.
Factory Act
2.
Human Assets
3.
Personnel
4.
Executive Council
5.
Recommendations
6.
Liberalization, Privatization and Globalisation

LESSON 6
1.
Workmen
2.
Misconduct
3.
Manufacturing Process
4.
Equal
5.
National
6.
Retrenchment
7.
14
8.
12
LESSON 7
1.
Workmen
2.
Monthly wages
3.
One month
4.
Cost of Living Index
5.
8.33%, 20%
6.
Equal
7.
Gratuity
166
and Labour Laws
LESSON 8
1.
Unofficial
2.
Gherao
3.
Adjudication
4.
Award
5.
Code of Discipline, 1958
6.
Mediation
7.
Litigation
LESSON 9
1.
Trust
2.
Tax Concession
3.
Privatization
4.
Japanese
5.
Pepper Report

Industrial Relations and Labour Laws

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Industrial Relations and Labour Laws

Course Design Committee

Prof Sandeep Hegde

Prof Sharon Pandey

Mrs Nora Bhatia

Prof Manjari Srivastava

Authors: Prof Sandeep Hegde and Mrs Nora Bhatia

Copyright 2010, SVKM's Narsee Monjee Institute of Management Studies (NMIMS)

Introduction to Industrial Relations

Role of Employers Association and State in Industrial Relations

Evolution of Labour Legislations

Labour Legislations: Acts Governing Employment of Personnel and IR

Labour Legislations: Acts Governing Compensation of Employees

Comparative Global Industrial Relations Practices

Self Assessment Answers

Stakeholders in Industrial Relations

Evolution of HR thoughts in India

Offences and Penalties

Description of Injuries and Corresponding % of Earning Capacity Loss

INDUSTRIAL RELATIONS AND LABOUR LAWS

1.0 AIMS AND OBJECTIVES

Understand the concept of industrial relations

Underline the role of three actors in industrial relations

Analyse the scope, importance, objectives and challenges of industrial relations

Discuss the three perspectives of industrial relations

Trace the evolution of industrial relations in India

1.2 CONCEPT OF INDUSTRIAL RELATIONS

A person or business that pays a wage or fixed payment to other person(s) in

A person who directly engages a worker/employee in employment.

As per Industrial Disputes Act 1947 an employer means:

in relation to an industry carried on by or under the authority of any department of

in relation to an industry carried on by or on behalf of a local authority, the chief

Employee is a person who is hired by another person or business for a wage or

An employee is any individual employed by an employer.

Those employed for wages by or through an immediate employer in the premises

Those employed for wages by or through an immediate employer in connection

Employment: The state of being employed or having a job.

1.3 INDUSTRIAL RELATION SYSTEM

A sound industrial relations system is one in which relationships between management

Figure 1.1: Stakeholders in Industrial Relations

1.4 SCOPE OF INDUSTRIAL RELATIONS

1.5 IMPORTANCE OF INDUSTRIAL RELATIONS

Uninterrupted Production: The most important benefit of industrial relations is

Reduction in Industrial Disputes: Good industrial relations reduce the industrial

Mental Revolution: The main object of industrial relation is a complete mental

Reduced Wastage: Good industrial relations are maintained on the basis of

1.6 OBJECTIVES OF INDUSTRIAL RELATIONS

To raise productivity to a higher level in an era of full employment by lessening

To establish and promote the growth of an industrial democracy based on labor

To eliminate or minimize the number of strikes, lockouts and gheraos by

To improve the economic conditions of workers in the existing state of industrial

Socialization of industries by making the state itself a major employer.

1.7 DUNLOP'S CONTRIBUTION TO INDUSTRIAL

1.8 PERSPECTIVES OF INDUSTRIAL RELATIONS

Working practices should be flexible. Individuals should be business process

If a union is recognized, its role is that of a further means of communication

The emphasis is on good relationships and sound terms and conditions of

Employee participation in workplace decisions is enabled. This helps in

From employer point of view, unitary approach means that:

The organization's wider objectives should be properly communicated and

Reward systems should be so designed as to foster to secure loyalty and

Line managers should take ownership of their team/staffing responsibilities.

Staff-management conflicts from the perspective of the unitary framework are

The personal objectives of every individual employed in the business should be