The recent unrest, the biggest such dispute in recent years in India, at the Samsung factory in Chennai, involving disputes over employment-related issues i.e. wage increase, working facilities, reduction of shift hours and recognition of a newly formed union for collective bargaining, offers valuable lessons for both multinational corporations and local operations in managing labour relations. In this case, around 1,500 workers at Samsung Electronics' facility in Tamil Nadu, India, had gone on strike, significantly impacting production at the plant, located in Chennai, one of Samsung's two factories in India and employs nearly 2,000 workers. It primarily manufactures home appliances and consumer goods, contributing approximately one-third of the company's annual $12 billion (£9 billion) revenue in India. The 37-day workers' strike finally ended on October 17, 2024 after intervention by the Tamil Nadu State Government.
The said unrest reinforces the need for multinational companies to have a deep understanding of the local labour laws, avenues for resolution of employment disputes and employment standards in the regions they operate in as non-awareness/ non-compliance with local labour laws can result in unrest and legal challenges.
Employment-related disputes
Employment related disputes are disputes concerning the rights, obligations or interests that arise among the parties in the process of establishing, implementing or terminating labour relations, disputes among workers' representative organizations, or disputes arising from relations that are directly related to labour relations. Employment disputes, whether individual or collective, are an inherent aspect of work environments and need to be resolved as effective and accessible systems for preventing and resolving these disputes are crucial for maintaining harmonious industrial relations, ensuring conflicts are addressed fairly and promptly.
The earliest Indian statute to regulate the relationship between employer and the workmen was the Trade Dispute Act, 1929, which was followed with Industrial Disputes Act, 1947 ("ID Act") which is based on the principle of collective bargaining for resolving industrial disputes and for maintaining industrial peace. Under ID Act, industrial dispute means any dispute or differences between employers and employers or between employers and workmen or between workmen and workmen which is connected with the employment or non-employment or the terms of employment or with the conditions of labour of any person. The ID Act is soon to be replaced with Industrial Relations Code, 2000 ("IRC") (awaiting notification).
Employment Disputes are of two types in India- individual and collective.
An individual labour dispute is a grievance from a single employee, while a collective labour dispute is a disagreement between a group of workers and an employer. Collective labour disputes can be further divided into rights disputes and interest disputes, which are dealt in schedules of ID Act.
There are several mechanisms and institutions provided in ID Act to prevent disputes and resolve disagreements between employer and the employee, which are as below (relevant corresponding sections in IRC are also mentioned):
- Works Committee under Section 3 of the ID Act (Section 3 of the IRC)
- Conciliation Officer under Section 4 of the ID Act (Section 43 of the IRC)
- Boards of Conciliation under Section 5 of the ID Act (Deleted in the IRC)
- Courts of Enquiry under Section 6 of the ID Act (Deleted in the IRC)
- Labour Courts under Section 7 of the ID Act (Deleted in the IRC)
- Labour Tribunals under Section 7A of the ID Act (Section 44 of the IRC)
- National Tribunals under Section 7B of the ID Act (Section 46 of the IRC)
- Grievance Redressal machinery under Section 9C of the ID Act (Section 4 of the IRC)
- Voluntary Arbitration under Section 10A of the ID Act (Section 42 of the IRC)
Internal Dispute Resolution Process
Industrial establishments in which one hundred (100) or more workers/workmen (non managerial workforce) are employed or have been employed in the preceding twelve months may be required to set up a Works Committee ("WC"), which is constituted of an equal number of representatives of employers and employees. The task of the WC is to resolve any controversy that may arise between the workmen and the management in the day-to-day work. The WC negotiates with representatives of the employer and the employee to resolve disputes. Under Section 9-C of ID Act, every industrial establishment employing twenty (20) or more workmen shall have one or more Grievance Redressal Committee for the resolution of disputes arising out of individual grievances. It is common for other establishments to constitute a committee which hears the complaints of employees and seeks to mediate between the employer and employee or employee and employee (as the same may be) to resolve disputes. The constitution of such Committee and the procedure for resolution of disputes are usually provided for in the employee manual.
While the soon to be enacted IRC retains the provisions of WC and GRC as laid down under ID Act, the IRC makes it mandatory for a worker to first approach the GRC and then approach the Labour Authorities for resolution of the industrial dispute.
Mediation and Conciliation
Before a labour dispute/claim is instituted in the relevant labour court or tribunal, it is usually first subject to conciliation proceedings initiated by the conciliation officer. Whenever a dispute exists or is apprehended in an industrial establishment, it is the duty of the conciliation officer to hold conciliation proceedings in the prescribed manner. Where the establishment is a public sector undertaking, the conciliation process is mandatory.
If the parties reach a settlement as a result of the conciliation proceedings, the settlement agreement is binding on the parties. Where no settlement is achieved, the conciliation officer is required to submit a report regarding the reasons thereof to the appropriate government.
In private establishments, it is common for employers to include mandatory mediation clauses in the employment contract. The mediation procedure is usually provided in the employee manual.
Arbitration
Employees and employers may agree to submit their conflicts to arbitration. Section 10A(1) of ID Act dealing with voluntary reference of disputes to arbitration provides that an industrial dispute between an employer and workman can be referred to arbitration by a written agreement, any time before it has been referred to a Labour Court/Tribunal under Section 10 of ID Act. Section 42(1) of IRC has now removed the pre-condition and any dispute can be referred to arbitration via a written agreement.
However, since arbitration is often considered as a costly mechanism, it is usually chosen or applied only in the event of conflicts between employers and senior managerial level employees and not 'workman' category of employees.
In the event of a dispute between an employer and 'workmen' category employees, the dispute is usually submitted to conciliation proceedings (as discussed above).
Court Litigation
Labour Courts hear claims relating to any of the matters specified in Schedule II of the ID Act. Schedule II mainly provides for matters such as application and interpretation of the standing orders, discharge or dismissal of workmen, including reinstatement of, or grant of relief to, workmen wrongfully dismissed, the illegality of a strike or lock-out, etc.
The Industrial Tribunal has jurisdiction over claims arising from any of the matters specified in Schedule II and Schedule III of the IDA. Schedule III mainly provides for matters such as wages, compensatory and other allowances, hours of work, bonus, PF, retrenchment of workmen and closure of establishments, etc.
Further, where the claim is of national importance, the National Tribunal is the appropriate forum. However, in cases of 'non-workmen', disputes must be instituted in a civil court having jurisdiction and not a labour court.
Significantly, in the IRC (awaiting notification for enforcement), unlike the IDA, the jurisdiction and authority of labour courts, courts of inquiry or boards of conciliation are excluded and disputes under the IRC are to be adjudicated only by conciliation officers, arbitrators and industrial tribunals. Even the composition of members has been changed and the IRC provides for one judicial and one administrative member (in place of only one judicial member who presently presides the industrial tribunal under the ID Act). Under the IRC, certain matters, as may be specified in the rules, can also be decided by single member industrial tribunal. Except for matters of national importance or for industrial establishments situated in more than one State, which could be affected by such an industrial dispute, the IRC has removed the concept of reference of disputes, for the purpose of adjudication, by the appropriate Government to the concerned authority (namely the board of conciliation, court, labour court, or tribunal) under the IDA.
Fines, Penalties and Damages
Where a person breaches any term of any settlement agreement or award issued by the conciliation officer or other competent authority, he or she could be fined and/or imprisoned for a maximum of six months or with fine, or with both and where the breach is a continuing one, with a further fine which may extend to INR 200 (approx. USD 2) for every day during which the breach continues after the conviction for the first. Once the IRC comes into effect, and the provisions of IDA be repealed, the penalty for breach of a settlement or award shall be between INR 20,000 (USD 240) and INR 200,000 (USD 2,400). Where an employer terminates the services of employees illegally (i.e., in the event the prescribed procedure is not followed or where the principles of natural justice are not followed), the Court may direct the employer to reinstate the employee with or without back wages. In addition to such remedy, the Court may award compensatory damages which include attorney fee. In India, damages can only be awarded for actual loss suffered and not as a punishment. In the event an employment contract provides for liquidated damages, the Court would consider such agreed amount as the maximum amount which may be awarded as damages. However, employment contracts in private establishments are contracts of personal service and hence cannot be specifically enforced. In the event of pending adjudication of a dispute, the employer may be directed to pay subsistence allowance to the concerned workmen during the dispute.
Anhad Law's Perspective
Employment relations in India have been well known for being governed by a labyrinth of rules and regulations. Resolving employment disputes effectively is crucial for protecting employee rights, promoting business stability, and fostering economic and social well-being in India as a well-functioning system for resolving employment disputes demonstrates a commitment to fair labour practices, which can be attractive to foreign investors. Efficient dispute resolution fosters a more harmonious industrial climate, which can contribute to overall economic growth and stability and such mechanisms minimize legal costs and disruptions to operations as long drawn-out court battles can be expensive for businesses. Additionally, effective resolution promotes a more positive work environment, leading to better employee relations and potentially attracting and retaining talent as unresolved disputes can create a strained atmosphere.
While the ID Act and soon-to-be-enacted IRC dispute resolution mechanisms offer a framework for addressing industrial conflict. However, continuous improvement is still necessary to ensure timely, fair, and cost-effective resolutions, ultimately fostering harmonious industrial relations.
The organisations should ensure that they realise legal compliance being a key aspect besides attributing importance to early intervention in labour matters and avenues being made available for open communication with employees in minimising employees-related disputes. These measures can help companies avoid disruptions and maintain smooth operations while fostering better relations with their workforce.
Originally published by Lexology, 5 November 2024
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
