Module 4 - Corporate and labour laws

The term “Industrial laws” is used to cover all the laws which have been enacted to deal with
“employment and non employment” wages working conditions, industrial relations, social
security and welfare of persons employed in industries. Law is necessary for maintaining
peaceful environment for the growth of the industry. The objectives of these are two fold:
Preservation of the health, safety and welfare of workers, and maintenance of good relations
between employers and employees.

In India, we have many labour laws that affect the labour conditions. The main laws are:
1) The Factories Act, 1948 – provides for the health, safety and welfare of the workers.
2) The Industrial Disputes Act, 1947—provides for the investigation and settlement of
industrial disputes by mediation, conciliation, adjudication and arbitration. There is a
scope for payment of compensation in cases of lay offand retrenchment.
3) The Industrial Employment (standing orders)Act 1946 - requires employers in industrial
establishment to define precisely the conditions of employment under them and make
them known to their workmen.these rules once certified are binding on the parties for a
period of six months.
4) The Workmen’s compensation act 1923--,provides for compensation to injured workmen
of certain categories and in the case of fatal incidents to their dependants if the accidents
arouse out of and in the course of their employment.It also provides for payment of
compensation in the case of certain occupational diseases.

THE INDUSTRIAL EMPLOYMENT (STANDING ORDERS) ACT 1946

INTRODUCTION TO STANDING ORDER

The rules made defining condition of employment i.e. Conditions of recruitment, release,
disciplinary action, and holiday are known as standing orders. According to Sec. 2 (g) of the
act the following matters are to be provided in standing orders.

1. Classification of workmen as permanent, temporary trainees and probationers.

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2. Manner of indicating to workmen the periods and hours of work, shift, holidays, pay-
days and wage rates.
3. Attendance and late coming.
4. The procedure and conditions to apply for leave and the authority which may grant
leave and holidays.
5. Rules regarding search and requirement to premises by certain gates.
6. Termination of employment and the notice to be given by employer and workmen.
7. Acts or omissions which constitute misconduct and suspension or dismissal for
misconduct.
8. Closing and reopening of section of the industrial establishment, temporary stoppage
of work and the rights and liabilities of the employer and workmen arising there from.
9. Means of compensation for workmen, against unfair treatment by the employer or his
agents or servants

The objective of the act is to require employers in industrial establishment to

define the condition of employment under them and to make the said condition known to
workmen employed by them.

APPLICATION OF THE ACT:-

It applies to every industrial establishment where in 100 or more workmen are
employed, or employed on any day of the preceding 12 months. Once the act become
applicable to an industrial establishment, it does not cease to apply an account of fall in
number of workmen in that establishment below 100.
S.1 (3) empowers the appropriate government to apply the provisions of the act to any
industrial establishment employing less than100 persons by giving two months notice in
official gazette.

EXEMPTED ESTABLISHMENTS
The act does not apply to the following kind of industrial establishments where
the following rules apply to its workmen.
a) The fundamental and supplementary rules.

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 b) The civil service (temporary service) rules.
c) The civil service (classification, control and appeal) rules.
d) The civil service regulations.
e) The civilians in defence service (classification, control and appeal) rules.
f) The Indian railway establishment code, or
g) Any other rules or regulations that may be notified in this behalf by the appropriate
government in the official gazette. Also may industry to which the Bombay
Industrial Relations Act, 1946 and Madhya Pradesh Industrial Employment
(Standing Orders) Act, 1961 apply.

THE INDUSTRIAL DISPUTES ACT, 1947

OBJECTIVES OF THE ACT

The industrial disputes act, 1947 was passed to remove some of the shortcomings found in
the working of the trade disputes act, 1935. The main object of the act is to provide machinery
for a just and equitable settlement of industrial disputes of negotiation and conciliation and
thereby achieving industrial peace and economic justice. It provides for the establishment of
works committee, conciliation officer, board of conciliation, court of enquiry, labour court,
industrial tribunal and national tribunal. The works committee became the forerunner of the
present scheme of workers’ participation in management.

The objectives of the act were very clearly explained by the Supreme Court in different
cases. In the words of the Supreme Court, following are the main objects of the act:
a) The act Endeavors to secure the workers a better condition of work and ensures a
descent standard of life.
b) In substitutes arbitration and fair negotiation are used instead of a trial of strength by
strikes and lock-out.
c) It defines the cases old illegal strike and lock-out with the object of preventing illegal
strikes and lock-outs.

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 d) It lays down the conditions for a valid lay-off and retrenchment of workers with the
objective of preventing unlawful lay-off and retrenchment.
e) It also aims to give relief to workmen in case of lay-off and retrenchment.
f) The act applies to workers of both private and public sector industries.
g) It aims to provide job security to workers in industrial establishments.
h) It promotes collective bargaining.
i) It provides for payment of compensation to workmen in case of transfer or closure of an
undertaking.
j) It aims to secure peace and good relation between the employer and workmen.

DEFINITION OF INDUSTRY:-

S.2 (j) of the act defines the term ‘industry’. According to this section it means any
business, trade, undertaking, manufacture, or calling service employment, handicraft or industrial
occupation or avocation of workmen.

In order to overcome the confusion created by the Supreme Court decision in various cases, the
term ‘industry’ was redefined by the industrial disputes (Amendment) Act, 1982. According to
this amendment the term ‘industry’ means any systematic activity carried on by co-operation
between an employer and his workmen for the production supply or distribution of goods or
service with a view to satisfy human wants or wishes which are not merely spiritual or religious
nature, whether or not. (i) Any capital has been invested for the purpose of caring on such
activity; or (ii) such activity is carried on with a motive to make any gain or profit.

The new definition expressly excludes the following avocation and activities from the
definition of industry.
1. Agriculture activities
2. Hospital or dispensaries
3. Educational, Scientific, Research or Training Institutions
4. Institutions owned or managed by charitable bodies.
5. Khadi or Village Industries

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 6. Any domestic service
7. Any activity being a profession practice by an individual with less than 10 person and
8. Any activity carried on by a co-operative society with less than 10 person.

But the amendment has not been given into effect by the govt. till this date.
ESSENTIAL OF AN INDUSTRIAL DISPUTE:-
Sec.2 (k) of the Act defines the term “Industrial Dispute”.
According to this section it means
1. Any dispute or difference between employers and employers; or
2. between employers and workmen; or
3. between workmen and workmen.
which is connected with the employment or non employment or the terms of employment, or
with the condition of labour of any person. The dispute may be in relation to any workman or
workmen or any other person in whom they are interested as a body.

DEFINITION OF WORKMAN

Sec.2(s) of the act defines the term ‘workman’. According to this section workman
means any person (including an apprentice) employed in any industry to do any skilled,
unskilled, manual, supervisory, technical or clerical work for hire, or reward. The terms of
the employment may be expressed or implied. For the purpose of any proceedings under this
Act, the workman includes any such person who has been dismissed, discharged or
retrenched in connection with or as a consequence of a dispute or whose dismissal, discharge
or retrenchment has led to the dispute.

PUBLIC UTILITY SERVICES:-

Sec.2 (n) of the Act defines the term ‘Public Utility Service’. The definition is not
exhaustive because the same section empowers the appropriate govt. to declare by notification
in the official gazette any industry specified in the First Schedule of the Act as Public Utility
Service. The following are the Public Utility Services under the Act.

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 (a) Any railway service or any air transport service for the carriage of passengers or goods.
(b) Any services in or in connection with the working of any major port or dock.
(c) Any postal, telegraph or telephone service
(d) Any industry which supplies power, light or water to the public
(e) Any system of public conservancy or sanitation.
(f) Any industry specified in the first Schedule of the Act which the appropriate govt. has
declared to be a public utility service by a notification in the official gazette

When any industrial dispute arises in a public utility service, and a notice of strike or
lock-out is given in connection with an industrial dispute, the appropriate govt. is bound to refer
it to adjudication by conciliation and it is a obligatory on the part of the conciliation officer to
hold conciliation proceedings. Further the regulatory provisions on strike and lock-out under the
act are more rigorous in nature with regard to public utility service industries.
STRIKE
Sec.2 (q) of the act defines the term ‘Strike’. According to this section Strike means
cessation of work by employees of industry acting in combination, or a concerted refusal to work
or accept employment with a common understanding among the employees.

Essentials of STRIKE:
(a) There must be cessation of work or refusal to do work with a common intention
(b) It must be by a body of person employed in an industry.
(c) It must be concerted action; and
(d) It must be relate to the relationship of employment.
(e) LOCK-OUT:-
(f)
(g) Sec. 2 (L) of the Act defines the term ‘Lock-out’. It means temporary closing of a
place of employment, or the suspension of work, or the refusal by an employer to
continue to employ any number of person employed by him.
(h)
(i) Lock-out is generally used as a weapon by an employer to force the workmen to accept
his proposal or for oppressing the workmen. The Supreme Court has described Lock-out
as the anti-thesis of Strike.

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 (j) Though Lock- out and closure have some similarities, there is much difference between
these two terms. Lock-out is only a temporary closing of a place of employment or the
suspension of the work but the closure means the closing of the industry for all.

WORKMEN’S COMPENSATION ACT, 1923

Objective And Scope Of The ACT:-

The Objective of The Act is to make provision for the payment of compensation by certain
class of employers to their workmen for injury by accident. The reasons that compelled in
passing this act were attributed to the growing complexity of industry with the increasing use of
machinery and consequent danger to workmen. And also the comparative poverty of the
workmen also compelled the govt. to pass the law to protect, as far as possible, from hardships
arising from accidents.
Any persons who is covered by the E.S.I. act, 1948 and who is entitled to receive
disablement or dependant’s benefit under that act is not entitled to compensation from the
employer under the workmen’s Compensation Act.
PERSONAL INJURY:-
An employer is liable to pay compensation to a workman for personal injury caused by
accident arising out of and in the course of employment and for the occupational diseases
contracted by him. If injury is caused to workman by his willful disobedience or willful
misconduct, the employer is not liable to pay any compensation. Personal injury means injury to
the workman. If the injury is to any member of his family or his property then compensation
cannot be claimed. Personal injury includes not only physical or bodily injury but also
psychological and physiological injures like nervous shock, strain etc. which causes incapacity to
work. Thus nervous shock caused by excitement or alarm resulting from fatal accident to a
fellow workman amounts to personal injury.

EMPLOYER:-

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 Sec. 2 (1) (e) of the act defines the term ‘employer’. According to this section employer
means and includes any body of persons whether incorporated or not; any managing agent of an
employer, and the legal representatives of a deceased employer.
When the services of a workman are temporarily lent or let on hire to another person by the
person with whom the workman has entered into a contract of service, the employer means such
other persons while the workman is working for him. For example a contractor hired some
Lorries with driver from the govt. during the hire period the contractor is the employer of the
lorry drivers within the meaning of the act. Till 1948, the liability to pay compensation under the
act was only that of the person with whom the workman has entered into a contract of service.
By the amendment act, 1948 the borrowing employer is also made liable to pay compensation

TEMPORARY DISABLEMENT:-
Temporary disablement means a disablement in doing the normal work, arising out of an
accident and which lasts for a temporary period of time. Temporary disablement may be
classified into two types. They are (i) temporary total disablement and (ii) temporary partial
disablement
(i)Temporary Total Disablement: Temporary total disablement means a disablement which
disables a workman in every work which he was capable of performing at the time of the
accident resulting in such disablement which lasts for a temporary period of time
(ii)Temporary Partial Disablement: Temporary partial disablement means a disablement which
reduces the earning capacity of a workman in any employment in which he was engaged at the
time of accident resulting such disablement. It only reduces the earning capacity of the workman
but it does not make him unfit to do any work.

PERMANENT DISABLEMENT:-
Permanent disablement means a disablement arising out of an accident which is
permanent in nature. Permanent disablement may be classified into two types. They are (i)
permanent partial disablement and (ii) permanent total disablement.

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(i)Permanent partial disablement: permanent partial disablement means a disablement which
reduces the earning capacity of a workman in every employment which he was capable of doing
at that time of accident. Every injury specified in part –II of schedule –I shall be deemed as
permanent partial disablement. The part – II contains 48 kinds of injuries.
Eg.(a) Loss of thumb (30%),(b)loss of four fingers of one hand (50%) (c) amputation at hip
(90%), the percentage given in brackets 80%,50%,and 90% loss of earning capacity.

(ii) Permanent Total Disablement: permanent disable means a disablement results from every
injury specified in part –I schedule –I
Eg.(a) loss `of both hand (100%) ,(b) loss of hand and foot (100%) (c) Very serve facial
disfigurement (100%) (d) Absolute deafness (100%). The percentage given in the brackets are
the percentage of loss of earning capacity. or from any combination of injury in part II of
schedule I (permanent partial disablement) where the aggregate percentage of the loss of
capacity is 100% or more.

Eg. Amputation of hip (90%) +loss of four fingers of one hand (50%) =140 % loss of earning.
This two injury s individually comes under permanent partial disablement but in total it becomes
a permanent total disablement.

Whether a disablement is temporary or permanent and whether it results in reduction of

earning capacity the answer will depend upon the facts of each case except when the injury is
clearly included in part –II of schedule-I.

PARTIAL DISABLEMENT:-
Sec 2(1) (g) of the Act defines the term ‘partial disablement’. According to this sec partial
disablement means any disablement arising out of an accident which reduces the earning
capacity of a workman.

Partial disablement may be classified into two types. They are (i) temporary partial disablement
and (ii) permanent partial disablement.

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(I)Temporary partial disablement: It means any disablement which reduces the earning capacity
of a workman in any employment in which he was engaged at a time of accident which caused
the disablement.
(ii) Permanent partial disablement: It means any disablement which reduces the earning capacity
of a workman in every employment which he was capable of undertaking at the time of accident.

The distinction between these two types of disablement depends on the fact as to the reduction of
earning capacity. If the reduction of earning capacity is in all the employment, which the
workman was capable of undertaking then it is a permanent partial disablement. If the reduction
of earning capacity is in that particular employment in which he was engaged at the time of
injury then it is a temporary partial disablement. But every injury specified in Part- II of
Schedule – I shall be deemed as permanent partial disablement. (Eg. Amputation of upper limbs
(either arms). Amputation of lower limbs, loss of eye etc.)

TOTAL DISABLEMENT:-
Sec. 2(l)(1) of the Act defines the term ‘total disablement’. According to this section it
means any disablement, whether temporary or permanent in nature, which incapacitates a
workman for all work which he is capable of performing at the time of the accident resulting in
such disablement.
Total Disablement is deemed to result from every injury specified in Part-I of Schedule-I; or
from any combination of injuries specified in Part-II thereof where the aggregate percentage of
loss of earning capacity against those injuries amounts to 100% or more.
Total Disablement may be classified into two types. They are (i) Temporary total disablement
and (ii) Permanent Total Disablement.

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DIFFERENCE BETWEEN PARTIAL AND TOTAL DISABLEMENT:-

PARTIAL DISABLEMENT TOTAL DISABLEMENT

1. In partial disablement only the earning 1. In total disablement the workman is

capacity of the workman is reduced. rendered incapable of doing all work which
he was capable of doing at the time of
accident

2. It is divided into 2 types (i) Temporary 2. It is divided into 2 types (i) Temporary
Partial disablement and (ii) permanent total disablement and (ii) permanent total
partial disablement. disablement

3. Injuries specified in Part-II of Schedule– 3. Injuries specified in Part-II of Schedule–

I are deemed as permanent Partial I are deemed as Total Disablement.
Disablement.

4. - 4.Whether more than one injury specified

in Part-II of Schedule –I and the aggregate
percentage of loss of earning capacity
amounts to 100% or more such injuries will
also be treated as total disablement.

DIFFERENCE BETWEEN TEMPORARY PARTIAL AND PERMANENT PARTIAL

DISABLEMENT:-
TEMPORARY PARTIAL PERMANENT PARTIAL
DISABLEMENT DISABLEMENT

1. In reduces the earning capacity of a 1. It reduces the earning capacity of a

workman in a particular employment in workman in every employment which he
which he was engaged at the time of was capable of undertaking at the time of
accident. But it does not make him unfit to accident

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do any work.
2. -
2. Every injury specified in Schedule –I
Part-II shall be deemed to result in
permanent partial disablement.
ACCIDENT “ARISING OUT OF” AND “DURING THE COURSE OF
EMPLOYMENT”:-

Accident ‘arising out of’ and ‘during the course of employment’ are the twin conditions
of a worker must prove for claiming damages from the employer for any injury. The words
‘arising out of’ and ‘in the course of employment’ are used conjunctively, so both the conditions
must present simultaneously for claiming damages. An accident is said to be an accident arising
out of and in the course of employment only if the following conditions are satisfied:
(a) at the time of the accident the employee was present on the site by the express implied
terms of contract of his service.
(b) He was there in his capacity as an employee and not as a member of the general public.
(c) At the time of accident he was there under the control and direction of the employer.
(d) There should be a proximate connection between the employment and the accident.

The term ‘employment’ used in the Act differs from the term ‘work’. The term
employment has a wider meaning than the term ‘work’. The workman may be in the course of
employment not only when he is actually engaged in doing a work in the discharge of his duty to
his employer but also when he is engaged to do an act connected with his work.
Arising Out of:-
The term ‘arising out of’ means that there must be some direct connection between the
employment and the injury caused to the workman as the result of an accident. An accident
arising out of employment necessarily occurs in the course of employment. But the reverse is not
true. (ie. All accidents occurs in the course of employment may not be an accident arising out of
employment because an accident may occur during the course of employment but it may not be
one arising out of employment.) The burden of proof that the accident is one which arose out of
the employment is upon the workman.

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