The 2014 FICCI document on proposed labour reforms in India refers to the existing labour laws as archaic. It begins by stating that the large number of labour laws is what hampers India from adopting a more labour-intensive policy. The document has a special focus on Industrial Disputes Act and it suggests a number of changes in this law as well as integrating it with two other laws (Trade Union Act and Industrial Employment Act) to have a unified labour law which deals with terms and conditions of employment. Why is FICCI so hell-bent on softening and effectively removing the Industrial Disputes Act? Why is it one of the laws capitalists hate so much? In this introductory note, we take a look at what the law is—its points of strength and weakness—and discover what it is about this law that makes it an eye-sore for the Make in India campaigners.
Simply put, the most important legislations in Indian labour laws is the ID act. Formulated in 1947 to replace an older act, and to ease the then growing discontent among the Indian working class, it seeks to harmonize relations in industries by trying to settle the disputes that arise. It has gone through several amendments over past 6 decades. One of the key amendments was in section 5B, according to which, a company that has employed over 100 workers cannot lay them off or close down without prior permission. It also has a fundamental provision which protects rights of workers to unionize. However, considering the history of difficulty in unionizing that we have seen the Indian working class face in the 21st century, it must be viewed as a law that capitalists have found a way around with the helping hand of state apparatus.
Key facets of the act:
Under Industrial Disputes Act, any dispute within any industry, whether it is between employer and worker, worker and worker or between various employers, can be settled through either conciliation or awards. The act is primarily designed for and is used to settle the dispute that constantly arise between workers and management. Any disagreement or confrontation involving working conditions, wages, working hours or right to unionize are supposed to be resolved by appealing to the ID act.
It is important to note that the term industry here basically means trade, manufacture, or any other collective activity which is organized to eventually trade or manufacture. Even activities related to promotion of sales or business is considered as an industry. However, unorganized sectors like agriculture (not directly linked to an industry), domestic service, academic institutions or hospitals do not come under the purview of the ID act.
This is an all-India act, and its main strength lies in the fact that it is applicable to all workers—permanent, contractual, trainees and apprentices. Every worker in the organized sector can appeal to this act if they have a dispute with the management. It is applicable irrespective of the skill level of the worker but is not applicable to staff that work in management or administrative positions or as supervisors whose pay exceeds 6500/month, as of the last amendment.
Of course one has to consider the fact that the entire unorganized sector (and casual or temporary workmen even in the organized sector) do not come under the purview of the ID act. One may feel that this is rather obvious, as a large part of unorganized working class do not work in industries. However, we should note that the basic skeletal idea of the ID act is to protect the rights of an employee in face of its violations by the employer. Whence it makes sense to demand that this act must be formulated and applied to the entire working class.
The act is roughly divided into various schedules which deal with various aspects of the act. Each schedule deals with a different class of disputes. Depending on the type of dispute, the matter is referred to one or the other authority.
The various types of disputes which are classified under the act are, (I) Category of rights disputes, (II) Interest disputes (III) Unfair labour practices on part of employers or on part of workmen, and perhaps the most important in current climate— (IV) Recognition disputes, which pertain to the rights of trade unions in organizing workers.
Disputes related to Category of rights:
- if an employer decides to change working/service conditions of a worker without giving 3 weeks’ notice;
- if the employer decides to change the conditions of work (e.g. type of work);
- if a worker feels he or she is wrongly dismissed;
- if certain customary privileges given to workers are withdrawn;
- if it comes to deciding whether a certain lockout or strike is legal or not;
- anything else that is not covered by above points or by the third schedule below
- In any of the above cases, jurisdiction lies with labour courts for settling the dispute.
Disputes classified as interest disputes:
These are fairly self-explanatory and stated as follows (referred from the fourth schedule of the ID act):
- Wages, including the period and mode of payment;
- Compensatory allowance;
- Hours of work and rest intervals;
- Leave with wages and holidays;
- Bonus, profit sharing, provident fund and gratuity;
- Shift-working otherwise than in accordance with standing orders;
- Classification by grades;
- Rules of discipline;
- Retrenchment of workmen and closure of establishment;
- Any other matter that may be prescribed.
We quickly add here that contrary to popular misconception, retrenchment and lay-off are not the same thing and the ID act carefully distinguishes between the two. Whereas a lay-off can be temporary, retrenchment is permanent.
Chapter VA of the act has number of provisions which protect the rights of workers against lay-off and retrenchment in the organized sector. In short, workers who have worked in a company for over a year cannot be laid off for intermittent periods or retrenched without giving a month’s prior notice and certain compensations. This act does not cover casual/temporary workmen and hence we have seen a rapid rise in appointment of casual workforce in organized sector in last two decades.
Any dispute involving any of the above interests is eventually handled by an industrial tribunal. An industrial tribunal can be set up by the central or a state government and basically consists of a Judge who is supposed to have sufficient (at least 3 years) experience at the district level. There is also a national tribunal that some disputes may go to. This can only be set up by the central government.
The ID act also has a specific provision as to what actions by a company can be challenged by the workers in case it decides to change any of the above interests in contravention to how the interests are stated in the standing order (for details we refer the reader to schedule 9A of the ID act). A particular area of discontent among the bourgeoisie is around point number 10 and 11 describing the following actions:
10. Rationalization, standardization or improvement of plant or technique which is likely to lead to retrenchment of workmen;
11. Any increase or reduction (other than casual) in the number of persons employed or to be employed in any occupation or process or department or shift, not occasioned by circumstances over which the employer has no control.
Point 10 is considered by neoliberal apologists to be one of the most restrictive labour laws (http://www.livemint.com/Opinion/lNkV6AhezWrzAmUJjYUAeM/No-Make-in-India-without-labour-reforms.html), “As it requires every employer who wishes to make any change in the conditions of service to inform the affected worker in advance. Moreover, it prohibits the employer from giving effect to the change before the expiry of 21 days from such a notice.”
Along with chapter VB (discussed below) this is one of the points which the proposed labour law reforms drop entirely.
Third class of disputes: Unfair labour practices
Unfair labour practice on part of employer includes acts of violence, opposition to rights of workers to organize themselves, and discriminatory treatment for any reason whatsoever. Using this dispute, employers can also appeal to the ID act against workers if they can prove that workers have engaged in violence or that the workers have gone on strike illegally (without prior notification). One of the problematic issues with the act is the way in which resolution is sought via the act. This is an extremely long-winded procedure which often implies workers have to wait for a long time before any justice is delivered. In a nutshell, in case of discharge or dismissal a worker can approach a conciliating officer to raise the dispute. Any other case—for example dispute regarding working conditions or right to organize—should be taken to the Conciliation Officer (CO) by unions or work committees. An investigation by the CO is considered to be the beginning of conciliation proceedings. Once the CO investigates the case, he tries to settle the dispute between the concerned parties himself. However, if he fails to do so, he is supposed to send a report to the appropriate government (state or central depending on the industry) with details about the steps taken by him to settle the dispute. This report is supposed to reach the appropriate government within 14 days of conciliation proceedings. However, as has been seen in a number of cases in recent years, this rarely happens. On the contrary the report usually takes a long time to reach the concerned government.
Once the report reaches the government, depending on the nature of the dispute, it can be forwarded by the government to a tribunal or labour court, following which, the dispute is settled and awards/penalties are decided upon. If the worker is entitled a settlement or an award, she/he should get it within 30 days of the judgement given by labour court/tribunal.
One of the remarkable facts about the ID act is, while the conciliation proceedings are on, workers are not allowed to go on strikes. There is absolutely no provision for the workers to call for a strike, even if—for example—the conciliating officer delays in sending the report by more than 14 days! Thus the workers are at the mercy of the complex hierarchy of proceedings which takes a rather long time for resolution even on paper. In practice, it takes far longer.
ID act on strikes and lockouts:
ID act severely limits the possibilities of the workers to strike. There is an inherent contradiction between the way this Act is framed and the basic idea of a strike. Workers strike when there is a dispute between them and the management. However, as soon as there is a dispute, according to the ID act, conciliations proceedings begin. But workers are prohibited to go on strike till these proceedings end. Once the proceedings end before a labour board , according to section 23, the the workers cannot go on a strike 7 days after the conclusion of the proceedings. (This is applicable to any industrial establishment, be it public utility or otherwise) If the proceedings go to labour court or tribunal then the workers cannot go on strike even 2 months after the proceedings end. As these complex proceedings consume a long time, the workers are left with no tools to exercise their rights during this period.
Another side of the act, which is one of the biggest eye-sore for Indian capitalists, is that it limits their ability to lay-off workers in a place which has more than a 100 workers employed. They need prior permission from the government to lay-off workers or for retrenchment or closure.
Of course the outcome of this part of the act can be seen in the increasing contractualization of Indian working class. As contract workers are employed by contractors and not by the companies, by keeping number of permanent workers below 100, it has been possible to bypass not only this law but to curtail the unity of working class by creating differentiation between permanent and contract workers.
However, it is still one of the biggest obstacles that capitalists would like to get rid of for once and all, and there already have been attempts to overcome it. This is one of the key ideas behind labour law reforms which would integrate Industrial Dispute Act, Contract Labour Act and Trade Union Act into what would be called an Industrial Relations Law, under which any company would be allowed to retrench up to 300 workers without prior permission from the government.
ID act on unionization:
We finally come to another key aspect of the ID act which is its view on rights of workers to unionize. The fifth schedule of the ID act has detailed provisions for protecting workers who try to unionize. More explicitly, the following are the schedule terms holding practices by employers as unfair:
To encourage or discourage membership in any trade union by discriminating against any workman, that is to say: (a) discharging or punishing a workman, because he urged other workmen to join or organize a trade union; (b) discharging or dismissing a workman for taking part in any strike (not being a strike which is deemed to be an illegal strike under this Act); (c) changing seniority rating of workmen because of trade union activities; (d) refusing to promote workmen to higher posts on account of their trade union activities; (e) giving unmerited promotions to certain workmen with a view to creating discord amongst other workmen, or to undermine the strength of their trade union; (f) discharging office-bearers or active members of the trade union on account of their trade union activities.
To discharge or dismiss workmen (a) by way of victimization; (b) not in good faith, but in the colourable exercise of the employer’s rights; (c) by falsely implicating a workman in a criminal case on false evidence or on concocted evidence; (d) for patently false reasons; (e) on untrue or trumped up allegations of absence without leave; (f) in utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste; (g) for misconduct of a minor or technical character, without having any regard to the nature of the particular misconduct or the past record or service of the workman, thereby leading to a disproportionate punishment.
Of course as we see from examples in and around Chennai, examples of MRF united independent workers union case in 2009, the Renault Nissan ULF workers union case in 2016 and Greaves Cotton workers DTUC affiliated union case in 2016, in spite of these provisions in the ID act, workers continue to get victimized for unionizing as law takes its course.
ID act on penalties to employers:
Chapter VI of the ID act confers the same powers to the labour department, tribunals and conciliation officers as the civil courts (as opposed to criminal courts) have. So for example, during the negotiation proceedings, the conciliation officer can enforce the management to come to the negotiating table. And if the management does not show up then they can be penalized as per civil court procedures. What is remarkable is that, nowhere in the ID act one can find the procedure for deciding what this penalty should be in case the management tries to (and usually does) delay conciliation proceedings.
In fact, when it comes to penalties, the ID act appears to go very soft on the management. For example, Chapter VI of the ID act is dedicated exclusively to penalties which can be handed over to employers and employees for a variety of cases. If a workman is found inciting other workers to strike, for example, he or she can be fined up to 1000 rupees or jailed for 6 months or both. On the other hand, if an employer declares a commence or continuation of a lockout in violation to the rules of the act, then he can be fined exactly either 1000 rupees fine or 6 months of imprisonment or both. The fact that the magnitude of fine (and imprisonment terms) is same for a closure and for inciting a strike shows that by trying to be ‘fair’ to both parties, the ID act ends up giving a lot of leeway to the management.
We thus see that the ID act is a key legislation which, in spite of its drawbacks (pertaining to long-winded procedures workers might find themselves in), is something that should never be diluted or compromised. In fact, it can provide a platform on which other more stringent and robust laws which protect rights of contract workers, trainees and unorganized working class can be built. We thus agree with FICCI that these laws are archaic, although our reasons are different. In the new era of unprecedented liberalization, these laws must, in fact, be supplemented by more stringent laws which will protect the fundamental rights of the working class.