Centre for Public Affairs and Critical Theory

Shiv Nadar University

1C2, Taj Apartment, Rao Tula Ram Marg, New Delhi 110022
+91 11 26168482
www.snu.edu.in/CPACT
August 29, India International Centre
Prof. Dipankar Gupta (Director, C-PACT, Distinguished Professor, SNU)
Kiran Karnik (Senior Fellow, C-PACT)
Siddharth Vardarajan (Senior Fellow, C-PACT)
Gopal Gandhi (Senior Fellow, C-PACT)
Sreedeep Bhattacharya (Fellow, C-PACT)
Prof. Shubhashis Gangopadhyay (Director, SHSS SNU)
RE-THINKING
THE INDUSTRIAL
DISPUTES ACT:
LABOUR RELATIONS
FOR A NEW
INDIA"
"
Industrial relations in modern India should reect the advances democracy has made
worldwide. Beingalatestarter confersonIndiaenormousadvantages; wedonot havetogo
throughthepainful processes that older democracies underwent over decades. As inheritor
of the many achievements of democracy, India must integrate the following principles in its
publicpolicy. Thisisparticularlytrueintheareaof industrial disputes.
The two most important issues that have to be addressed are A] the predominance of
informal labour and B] the lowlevel of technological and human resource development in
industries. Therecommendationsthat arebeingofferedinthisdraft onlabor lawsattempt to
addresstheseissues.
1. Citizenship: Democracies are increasingly giving signicance to the concept of
citizens over people, communities, classes and groups. This fundamentally implies
that as citizens we all share a common basis upon which other differences and
inequalities can be admitted. However, the foundational similarity between citizens is
foremost and cannot be compromised; in fact every endeavor should be made to
enlargethiszoneof resemblance andovercomeinheritedcleavages.
2. Trust: As a consequence public policy should be premised on the notion of trust.
However, in industrial relations disputes will often arise and the primary aimof this
document is to resolve thembefore a breakdown occurs. The Industrial Disputes Act
(IDA), 1947 also has this in its charter, but there is roomfor change. We can effect an
improvement on this matter by introducing features that promote greater mutual
respect betweenworkersandmanagement
3. Role of Management: Notwithstanding the above, it should also be noted that
management has the primary responsibility for building trust and goodwill with the
enterprise. Any interventions inlabour reforms today must pay sufcient attentionto
giving workers a sense of equity, participation and dignity. This would enhance the
content of citizenshipinsocietyasawhole.
Chapter 1
Introduction: Vision Statement
02
The C-PACT Working Group on Labour Relations has prepared
a Draft paper suggesting amendments to the current
Industrial Disputes Act. It is hoped that these would go a long
way in addressing the interests of employers and workers
within a consensual legal framework. In order to accomplish
this, we strongly believe that issues of citizenship and that of
investing in human resources be placed uppermost.
The C-PACT initiative broadly aims to diminish, over time, the
presence of unorganized labor force, replace hostility with
trust between workers and employers and obliterate
unnecessary thresholds that curb labour entitlements, welfare
and job security.
Unlike what some economic think-tanks have argued, labour
exibility, even in developed market economies, does not
mean the untrammeled right to hire and re. In this document,
while we allow for labour exibility, we also insist that Workers
be entitled to benets and compensations on a universal
basis. In our view, this will signicantly lessen the burden of
informal labour in our economy, which by all standards, is
inexcusable. The primary impetus behind this document is to
protect labour across industries, at various levels, and not just
those who are currently well-served by the existing Industrial
Disputes Act.
As far as the terms, industry and industrial dispute are concerned, we accept the
denitionsprovidedinIDA, Section2, StateAmendment, Rajasthan(J), (K). Wearealsoaware
of the proceedings of the landmark Bangalore Water Supply Board case and Justice Krishna
Iyers fear that a denitive understanding of industry is still far away. As a measure of
abundant precaution, wewouldalsoliketoaddtotheunderstandingof theworkplaceinIDA
by referringtoSectionPof Sexual Harassment of Womeninthe Workplace Act, 2013 which
explicitly includes as workplace any place visited by the worker during the course of
employment including transportation provided by the employer for undertaking such a
journey.
04
4. Common Cause: Enterprises should, therefore be oriented along the principle of
creating allegiance to the enterprise. While admitting initial positional differences
between organizational levels, it is hoped that the recommendations that followwill
inhibit thegrowthof entrenchedhostilities.
5. Augmenting Skills and Human Resources: Our recommendations explicitly
encourage the augmentation of human resources within an enterprise. When
employers and workers act in tandem, with mutual trust, then commitment to the
enterprisegrows. Insuchconditions, skill enhancement endogenouslytakesplace
Therecommendations suggestedtotheexistingIDAaremindful of thefact that enterprises
need to be competitive in the global market. This is also good reason why laws affecting
industrial relationsbestatedinaslimpid, andbrief, aspossible, allowingfor exceptionstothe
ruleasararity.
ThresholdAverse
If there is one big change we believe must be effected in the IDA then that is to curb the
prevalenceof thresholds. Inthisregard, weproposetheremoval of all thresholdsasageneral
rule, whether pertainingtothe size of the enterprise, or number of days worked. This would
goalongwayinactualizingtherightsandentitlementsof bothWorkersandManagement in
theeconomyasawhole.
There are, however, two main exceptions to this rule and they concern units with less than
twentyworkers. Evenhere, thescopeof exceptionsislimitedtoonlytwoissues:
(a) Withregardtodisputeresolution(seeChapter 3of thisdocument)
(b) Withregardtothehiringof casual workersseeChapter 2,
Section3of thisdocument).
The suggestions that follow are in accordance with the governments stated mission to
abolishcontractlabour. Therefore, strictscrutinymustbeexercisedtodetermineindustriesin
whichxedperiodemployment isallowed(seeChapter 4of thisdocument).
Before we proceed we need to put on record that we are in agreement with the IDAs
denition of a worker IDA, Section 2 (s), except when it comes to placing a minimum
numerical wage qualication that separates the supervisor fromthose in rungs belowIDA,
Section 2 (s) (iii). In our view, the remuneration level has to be changed and should be
upgradedfromtimetotimebythegovernment.
03
It is in the understanding of the status of a worker that our major recommendation in
amending the IDA rests. We make these suggestions primarily to counter the negative
consequencesour industriesfaceonaccount of twomajor thresholds:
a] Thesizeof theunit. If it is over a hundredworkers thenthegovernment has tobe
notiedbeforeworkerscanbedismissed(seeIDA, 25K)
b] Only after a worker has completed 240 days of continuous employment (IDA,
25FFF; see also25B(2)(a)(ii), 25B(2)(b) a worker is entitledtofull compensation if
dismissed.
These have led to a plethora of undesirable practices where some entrepreneurs have
formally kept their units small and also limited the number of days a worker is employed in
them.
Thisleadstoinefcienciesandalsototensionsintheworkplace.
As there is reluctance on part of the entrepreneurs to increase the size of their rms, their
concerns are never really able to achieve economy of scale or aspire to high technology
status.
Nor are workers able to feel a sense of commitment to their work for they feel that their
statusinthecurrent positionisall tootemporary.
To resolve these negatives, we propose to do away with all the benets or disabilities
(dependingontheangleof vision) that suchthresholdsenforce.
Chapter 2
Status of Workers
06 05
ExceptionstotheAbove
Obviously, theserulesdonot includethoseinagricultureor ingovernment departmentswith
respect tospace, defense, atomicenergy(IDA, Section, 2, (J) (ii) (b) (6)
Thosewhoperformincidental jobs that arenot intrinsic totheunits functioningarealsonot
under the ambit of the rules mentioned above. The hiring in all such cases has to be done
throughacontractorsrm, whosecorecompetenceisjust that. Onlyinunitsbelow20such
hirescanbedirectlymadewithout themediationof acontractor.
But there are limits to howmany can be hired in a company to do work not intrinsic to the
rm. Inour view, thelimit shouldbeset at 5%of workersontheMuster. Inunitslessthan20,
it couldberelaxedto, say, twohiredworkersfor everytenontheMuster.
Onlywhenmajor infrastructural changesarebeingmadecanthislimit bebreached, but then
the appropriate government authority must be notied. The validity for this period of
exceptionfor infrastructural changes shouldbe uptoa maximumof 12 months at a stretch,
renewableat theendof everyyear, if sorequired.
Thepoint inbeingcautiousontheseissuesisbecause:
a] Placingrestrictionsonhowcontractworker canbehiredwill dampenthetendency
toinformalizelabour;
b] Further, by limiting the number of contract workers, it is difcult to pack the
enterprisewithxedperiodworkers;
c] Limitingthetimesetfor infrastructural expansion, themanagementisunder some
pressuretoplaninadvancethehiringof contract labour.
d] Finally, making it incumbent to hire through a contractor whose companys core
competence is to supply labour in that particular area of expertise, the scope for
informal labour isfurther curtailed.
Today, the Contract Labour (Regulation and Abolition) Act, S.10 (2) does pay attention to
whether or not theworkthat isbeingperformedisof aperennial natureor not; and, whether,
thekindof jobissuchthat it requiresalargenumber of wholetimeworkers.
Whilethisdoesgosomedistance, our suggestionsonContract Labour takestheobjectiveof
abolishing it very seriously. In addition, what we have just said is in line with our earlier
objective of formalizingworkers onthe Muster. Therefore, a contract labourer is alsoonthe
Muster inthecontractorsrm.
All paymentstoworkersshouldbecashless.
08
Therefore:
1. Regardless of the size of the concern, ALL workers must be on the Muster Rolls
with a clear Appointment Letter. All workers are deemed to be Permanent after
they satisfy a probation period (to be determined by the enterprise, but not
exceeding three months). As all workers are Permanent they are entitled to
receivebesides wages, Provident Fund, ESI benets andGratuity. All of thesewill
becalculatedfromthedaytheworker isemployed.
2. Shouldworkersbedismissedonaccount of re-structuringor closingdownof the
enterprise, they will receive in addition a severance pay that will be equal to 45
days salaryfor everyyear of work. As all suchcalculations will beprorata, it is not
asif thereisanyspecial advantagetotheemployertodismissaworkerbefore240
daysof employment.
3. On retirement, dismissal or resignation, the workers are entitled to Gratuity and
PF for the period they have worked. In addition, they will be entitled to leave
encashment subject toamaximumlimit that needstobelaiddownbylaw.
By taking such a step and removing the two all-important thresholds regarding size and
periodof employment, themanagement getsnobenet fromemployingworkersfor ashort
duration.
Nor will management get any advantage for keeping their units small as there is no
requirement nowtoget government permission torestructure or close down an enterprise
solongasworkersget all thebenetsmentionedabove. At anyrate, thiscautionis, over and
above, the IDA understanding of what is severable and what is not when it comes to an
undertaking (see IDA, Section 2. (ka) (a) (b). This will act as a disincentive against capricious
management behaviour andwill alsoallowfor labour exibility.
As thereis nowa pricetobepaidfor re-structuring, or closingdown, theunit, entrepreneurs
will have to take a long termviewbefore they start a business venture. Some capital, high
hopes and favours fromlending agencies, will no longer sufce unless accompanied by a
full-edged plan for the future. This should create the conditions for true enterprise and risk
takingsuchthat newskillsaresought andahightechnologyroutetogrowthndsfulllment.
07
10
ChildLabour
It goes without saying that Child Labour is not permitted. However, it is necessary to take
somecomplicationsintoaccount. WeareproposingachangeintheChildLabour Prohibition
andRegulationAct, 1986.
In our view, till the age of 14, children cannot be allowed to work. What could be taken on
boardisthat between15-18yearsof age, achildcouldbeengagedprovidedadequatetimeis
givenfor attendingschool andtocompleteclass roomassignments. However, till theageof
18, childrencannot behiredinanyhazardousoccupation. AstheParliament hasnot comeup
withanal decisiononthismatter, wehopethesefactorswill beconsideredinduecourse.
09
12
Inthis chapter weonceagainreturntoour principal concernthat whilemanagement should
be allowedtore-structure, evenclose downa concern, the workers shouldnot be penalized
unduly.
Second, inaccordancewithour positionagainst thresholds, all enterprises, regardlessof size,
must follow an identical system regarding lay offs on account of restructuring or closing
down.
The following suggested compensation for workers who are laid off abides by these two
principles.
Restructuredor ClosedDown
When a company is re-structured or closed, all employees should be given a notice of six
months. All employeesareentitledtoPF, Gratuity, bonus, leave-encashment and, inaddition,
severancepay(45dayswagesfor everyyear of employment, calculatedprorata).
ForceMajeure
Whenaconcernishit byanact of ForceMajeure, suchasood, re, earthquake, or anyother
calamity and work is to be resumed once the repairs are done then employees have the
option to leave (no severance pay, though), or stay on at reduced wages (half pay would be
just).
Strictlyspeaking, IDAconsiders layoffs tobeoperativeonlywhentheenterpriseis unableto
give employment due to shortages, and so on. Retrenchment is more general in its
application(seeIDASection2, (a) (oo). However, for thesakeof simplicity, it issuggestedthat
thetermlayoffbeomnibusincharacter sothat theintent of theamendment isunderstood
without gettingintolegal terminologies.
If a company is closingdownthenits balancesheet must beopentopublic scrutiny inorder
to protect against malfeasance. Further, in the event of closing down, the dismissal should
beginrst withthemanagement andthentheworkers, themost recentlyemployedwill exit
beforethosewhohavejoinedlater.
Chapter 3
Lay Offs: Restructuring and Closing Down
11
14
At theoutset it must bementionedthat thisdocument endorseswhat IDAconsider asUnfair
Labour Practices and Gender Harassment, along with the penalties attached (For unfair
labour practices see IDA, 25T, 25U, 26, 27, 28, 29, 30, 31) and IDA, Fifth Schedule, 2 (ra); for
Gender Harassment adopt Sexual Harassment of Womenat WorkplaceAct).
In keeping with the aversion towards threshold markers, this document proposes that
Workers Councils shouldbepresent inall enterprises regardless of size(IDA, Section3(1) on
Works Committee). Aslight exception is made, as we shall see, in units that have below20
workers, but the principle, of workers representation as a legitimate right, is in no way
compromisedeveninthat case.
This goes against the current IDA that only allows such dispute resolution mechanism in
establishments with 100 workers or more. This threshold then forces, even tempts,
management to keep their enterprises small, or resort to practices that articially break up
theestablishment intosmaller unitsjust sothat theycanget aroundthethresholdfactor.
It is veryoftenthecasethat therearefrequent disputes regardingwhichof themanyunions
within an enterprise is to be considered as the recognized union. In fact, contestations over
thisoftenleadtofracturingtheinterestsof theworkersover thenot-so-longterm. Also, ithas
beennoticedthat onanumber of occasions, Management looks down, oftendisallows, any
representative body of workers, preferring instead ad hoc, personalized interventions on
labour issues.
To be able to effectively counter such difculties we propose that company/enterprise will
have ONE elected Workers Council. Workers can have different unions within the
organization, but there will be a single Workers Council that will represent their interests to
theManagement.

Chapter 4
Workers Council and Dispute Resolution
13
09 15
Different unions are at liberty to eld their candidates for positions in the Workers Council.
Theelectionof ofcebearers totheWorkers Council shall bebysecret universal ballot. The
Workers Council will have ofce bearers at different levels, such as President, General
Secretary, Treasurers, etc., and those who occupy these positions will be elected by the
workersfromwithintheenterprise.
Nobody who is not a worker in the organization is permitted to be an ofce bearer, or a
member of the unions unit within the enterprise. The Workers Council may have external
advisers/mentors, but theywill neither beintegral partsof theunionswithinthecompanyor
ofcebearersof theWorkers Council.
This, however, does not precludetheWorkers Council frombeingafiliatedtoalarger body,
external to the enterprise, for purposes of advocacy. But all decisions regarding workers
interestswill beindependentlyexpressedbytheWorkers Council tothemanagement.
Inunitsof 20workers, or less, therewill beasingleWorkers Sabhatowhichall workerswill be
members. Suchunitsareat libertytofollowthepracticeof larger enterprises, but it isperhaps
better if that were not the case. At any rate, this provision should be kept such as to enable
workersinunitsof thissizewhowouldprefer totakethisroute.
All workers are members of the Workers Council though they may not be members of any
union. All memberswill payanamount for therunningcostsof theWorkers Council.
These proposals, as mentionedearlier, effectively deal withissues regardingthe recognition
of unions, as well as the interference of outsiders in internal matters. Please recall, at this
point, whathasbeenmentionedearlier, regardingwhattheentitlementsarefor ALLworkers.
Theseentitlementscannot benegotiatedawaybyanyWorkers Council.
DisputeResolution
Inorder toincreasethetrust levels withinanorganization, workers will elect arepresentative
totheBoardof theCompany. ThisMember of theBoardwill functionlikeanyof theothersin
the same position. This is necessary so that the Board is always kept abreast of Workers
interests onaregular basis, at thehighest level. This ties inwithwhat was saidabout Trust
inthePreambleof thisdocument. Disputes, however, will arise, andthefollowingmechanism
isofferedfor resolvingthem.
10 16
Noticesof all disputesandtheir Resolutionsmustbeinwriting(seeIDA, 10A; alsoseeSection
15onFormof report or award)
(i) Workers Council: At therst level, all disputeswill betakentotheWorkers Council.
(ii) ConciliationBoard: If thedisputecannot behandledat that level thenthematter will
be taken up at the Conciliation Board. This body will have elected representatives
from both management and workers with an external Chairperson. For workers
representation in the Conciliation Board it is also possible that the Workers Council
nominates members to this Conciliation Board. The numbers from management
andworkersshouldbeidentical inthisboard.
The Chairperson of the Conciliation Board will be an ofcer chosen along the lines
mentioned in IDA(Section 3, 4(2). However, no external legal practitioner will be its
Member. ThisBoardhastheauthoritytoenforceattendancefromthoseit callsupon
togiveevidence. (seeIDA, 11(4).
The Conciliation Board proposed here brings together the features of a Works
Committeeandthat of aConciliationOfcer inIDA.
(iii) Labour Tribunal: If the dispute is still not resolved then it will go to the Labour
Tribunal. Labour Tribunals may reinforce the decision of the Conciliatory Board, or
mayoverturnit. TheLabour Tribunalsdecisionisnal. Inthisregardwemaynotethe
provisions provided for in the National Company LawConstitutionality of Tribunals.
(see also IDA Section 7A which has been modied slightly here; also see National
CompanyLawConstitutionalityof tribunals, 2010).
For Units with 20 Workers or less: A somewhat different process will be followed by units
whichhave20workersor less.
(i) At therst level it will betheWorkers Sabha, inplaceof aWorkers Council
(ii) At the second level, it will be a Local Level Committee, set up by the District
Magistrateonthelinesof theSexual Harassment Act 2013
Inall cases, of course, therighttogotocourttoappeal againstthedecisionof theConciliation
Board or the Local Level Committee exists. However, till the court decides, the decisions of
theTribunal andLocal Level Committeestand.
09 17
ThePeriodof Deliberation
The IDA does mention a xed time frame within which different levels of disputes must be
resolved. However, therearealsoaccompanyingclauses withintheIDAthat provides rooms
for exceptionstothisrule.
Weproposeherethat theperiodof deliberationat all levelsbexedandrm.
At theWorkers Council Level, theperiodshouldbe10days, or so.
At theConciliationBoard, theperiodshouldbenomorethanaMonth
At theTribunal/ Local CommitteeLevel, theperiodshouldnot exceedThreeMonths.
IDAalsosetsdowntimelimitsbut thesealsocarryclausesthat allowthemtoberelaxed(see
Section10, 2A; alsosee17A, (2).
Strikes
Whilethematter isbeingdeliberateduponindifferent bodies, strikesarenot allowed.
ThisisinaccordancewithIDA(Section22andSection24).
Indiscipline:
(i) The rst step in taking action in this matter is to issue a warning in writing to the
worker andtotheWorkers Council.
(ii) If thematter lingersafter theWorkers Council hasdeliberatedover it, thenit goesto
theConciliationBoard.
(iii) OncedismissedaWorker isentitledtoall benets, but will not receiveseverancepay.
Inefciency
(i) Againtherst stepisthesameasinthecaseof Indiscipline.
(ii) If the matter is not resolved, then counseling and further training is advised for at
least One Month. (The Methods proposed by practices such as Kaizen may be
consideredtospot problemsandaddressthemonacontinuousbasis)
(iii) After thisperiodisover, therelevant superior reassessestheissue.
(iv) If not satised, theworker isdismissedwithall benets, excludingseverancepay.
In both cases, if the Workers Council is not satised, then it can take the dispute up to the
ConciliationBoardandthentheTribunal or theLocal Level Committee.
It is, however, possible that management may dismiss workers in large numbers at short
noticeinorder tobeat therequirementsthat it must undertakeincaseof layoffs. Thisiswhy
it is advised here that the numbers of those dismissed on grounds of inefciency or
indisciplineshouldnot exceed5%of theunitsworkers strength, averagedover theyear.
10 18
20
Itisnecessarytotakeintoconsiderationindustriesthatare, bytheirverynature, characterized
byseasonal employment. Obviously, inthesecases, theprovisionswehadmentionedearlier
do not apply, as workers will routinely be dismissed at certain times of the year. As there
might be pressure to declare a large number of industries seasonal, a strict and clear
delimitationof whichenterprisescomeunder thiscategoryshouldbelisted.
Neverthelesss, while
1. Infoodandclothing/garment industries, periodspecicemployment isallowed, the
employee, however, will be on the Muster and entitled to PF, ESI and Bonus. The
termsandconditionsof dismissal onaccountof inefciencyandindisciplinewill beat
thelevel of managementalone. Theunionmembersof suchindustrieswill comprise
only those whose job is of a perennial nature. For such employees all the usual
benetsandproceduresasinother industrieswill apply. Termemployment infood/
garment/clothingindustriesmust befor aminimumaperiodof 180days. If lessthan
that then the enterprise should hire from a contracting agency. Employees who
belong to this category are not members of the Workers Council, as mentioned
earlier
2. If thesameworker ishiredfor aperiodbeyond180days, it will bedeemedasasingle
contract for the entire year; in which case, the employee will be entitledtoGratuity.
(see Contract Labour [Regulation and Abolition] Central Rules 1971; also see
appendix4)
3. If theselabourersareprovidedbyacontractor, thenthecontractor isnottheprincipal
employer. The enterprise that hires the labourers is the principal employer and is
obligatedtoensurethat all rulesareabided.
Chapter 5
Seasonal Employment and Time-Bound Employment
19
21
4. Trade apprentices Atrade apprentice is valid up to a period of six months beyond
whichthepersonwill bedeemedashiredandplacedontheMuster withall benets.
Trade apprentices will normally be absorbed by the enterprise. The ratio of trade
apprentices to employees on the Muster should not exceed 10%. If this period of
apprenticeshipis necessaryfor a technical degreefroma recognizedinstitution, the
maximumtimecangouptooneyear but thenumbersinvolvedhavetoabidebythe
limitsmentionedabove(seeappendixCApprenticeAct 1961).
ConstructionIndustry
1. Largeconstructioncompaniesoftenengageemployeesfor axedperiod, whichwill
be specied at the time of signing a written contract. Those whoare not on a xed
period contract, and are on the muster, are entitled to PF, ESI, bonus and Gratuity.
Thosewhoare, however, onaxedperiodcontract will, asmentionedearlier, not be
entitledtoeither bonusor gratuity.
2. Inthisindustry, thexedperiodof employment mayexceed180days. Ineveryother
respect, thoseintheConstructionIndustryandthoseinIndustriessuchasGarments
andFoodProcessingwill be the same. If ina particular constructioncompany there
are those whose job is of a perennial nature, they will be on the Muster as full time
employees.
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