CHAPTER -1 INDUSTRIAL RELATIONS EVOLUTIONS, CONCEPT AND APPROACH

1.1 INTRODUCTION
Industrial relations basically mean the relations between the employer and the
employees. Here the employer also means the management association and by
employees we also mean the trade unions. The problem of industrial or labour
management did not arise when the forms of business organizations were of small
type, but they developed when elaborate organizational structures came on the
scene during the late 19th Century, when gigantic industrial empires of the financial
tycoons came into existence followed by the technology of mass production in the
early 20th Century. The labour management became an important subject of study
only when large aggregations of people came to work together under one roof in a n
organization.
In order to understand the issues and problems involved in such a study, it is
necessary to know the essential features of the modern industry. The world has
progressed gradually from one system to another such that western Europe, USA,
Germany and Japan are highly industrialized today, while the countries Latin
America, Africa and most of South-East Asia are still in the developing stage, and
therefore, the system of production is different there.
The development of modern industries in India is because of the British Empire who
started some industries in India for their benefit like the textile, iron and steel and
sugar industries. In this unit, we will try to understand how industries developed and
how the modern industries affected the relations between the employers and
employees.
1.2 EVOLUTION OF INDUSTRIAL RELATIONS
Economists have traditionally identified three factors of production: land, capital
and labour. In the pre-industrial society, agriculture was the major source of wealth.
Production was based on rudimentary skills passed on from father to son, crude
farming tools and incremental improvements made by each generation on the soil.
Capital and labour were wedded to land and economic power belonged to those
who could control its use.
We will study the stage-wise evolution of Industrial Relations. The evolution of
Industrial relations can be classified as follows:
(1) Primitive Stage: As we know, during this stage the necessities of life were simple
and few, mostly fulfilled by hunting, fishing, collecting and pastoral activities, with
the help of crude implements. Members of the families/groups worked side by side,
with very little specialization of work except that was required by the physical
differences between sexes, or that which was dependent on tradition. The

production was just sufficient for consumption and, therefore, there were no savings
and, hence, no accumulation of wealth and no exchange of products.
(2) Agrarian economy stage: It developed during the Middle Ages and brought about
a change in the views about property. As the tribes grew, so did their needs and
requirement and the greed to acquire more and more land and stake ownerships. In
a tribal society, property was a common and collective asset of the group, but now
it was identified as the personal asset of the landlord. Thus, there arose a class of
propertied individuals who employed people to work on their land which gave rise to
a class of property less workers. Under this system, the employees were treated as
slaves and as the property of their master who purchased them for a few chips or
conquered them in some war against his opponents. The employee-employer
relationships was that of the master-servant /slave type. The slaves were required
to do all types of manual and other skilled work for their master and in return were
paid no wages except for food of the coarsest type, old clothes and a small place to
live. They had to live under the absolute authority of their master till death. Levels
or strata of supervision were few. The Government did not wield any power over the
employment relationships. Political organizations that developed from alliances and
conquests supported the authority of the owners. Some masters achieved dominant
positions, while others became subordinates.
(3) Serfdom Stage: Serfdom developed under the feudal society (comprising
princes, lords and the landowning class) which too had been created during the
Middle Ages. The position of serfs was not any better than the slaves. They had to
work hard for their lord on the land, getting only pittance and a small hut to live.
Their duties and obligations were defined largely in terms of quantities of produce
they had to give to their master and of possible military service. Serfs were
regarded as unfortunate who were born to their jobs and held these jobs throughout
their lives and thus lived a life of servitude. The authority centered on the master
and his family because he was assumed to have inborn superiority and was the
owner of vast property.
(4) HANDICRAFT STAGE: Handicrafts system developed because of the growth of
town and cities, increase in trade and commerce and a decline in the power of the
feudal lords. This system introduced an important innovation because of which the
workers could actually move from the rank of workers/ employees to those
employers. The workers/craftsmen owned factors of production, worked with their
own tools, were helped by the family members and often worked in their own
homes/ workshops, and performed tasks by hand. They sold their products directly
to the customers, without any middleman. Separate craftsmen existed for separate
works. Some basic skills such as shoemaking, blacksmith, carpentry, pottery, cloth
weaving etc. developed during this stage.
Sometimes the master craftsman also undertook to teach his craft to some young
men. These artisans began their careers as apprentices and were bound to work for

the master craftsman for a specified time during which they would learn the craft.
They got no wages except for lodging and boarding facilities from the master
craftsman. When apprenticeships were over, these artisans could settle as
independent craftsman and the apprentice worked side by side; and only one or two
levels of supervisions were involved. Master craftsman held a high status because
they had both the skill and the ownership. Then came the journeymen/craftsmen
because of their skill and relative mobility and freedom. And lastly, the apprentices
occupied a low status, it was superior to that of the slave or serf.
The cottage workers of the master craftsman developed a new institution, viz., the
crafts guilds which were similar to the modern craft unions. They regulated
economic and employment conditions of the members, the quality of materials and
workmanship, set prices and determined wages. Many of these guilds also provided
various fraternal benefits like death disability and unemployment benefits to their
members.
(5) Cottage or putting out stage: The technological changes and the expansion of
markets and trade led to the development of the economic system, and that of
steam and power because of which some individuals became employees in the new
industrial units. Other master craftsmen or travelling traders (or trading capitalists)
undertook to buy raw materials and supply as well as finances to the craftsmen who
worked in their homes/ workshops. They also hired the craftsmen who worked in
their homes/ workshops. They also hired the craftsmen to process the raw materials
and collect and sell the finished goods. The system was known as the Cottage or
Putting-out System. Under this arrangement, the craftsmen worked with the
members of their family, in their own home and were paid on a piece-work basis for
the work. They delivered their products to the financiers who supplied them with the
necessary finance.
(6) Factory or the industrial capitalism stage: With the passage of time and gaining
of experience, the trader capitalist realized that economies in production can be
achieved from newly perfected machines, so instead of farming out production to
numerous small cottage workers, he himself set up factories with the new machines
and gave employment to the people who were willing to work for him in return ooof
the pre-decided wages. The cottage workers became factory hands. In these
factories, a large number of people worked under the same roof. This made it
possible to supervise them more closely.
With the invention and manufacturing of power-driven machinery in the late 18 th
and 19th century, the process further developed. In the course of time, the factory
system came to the stand on a sound footing and human labour was replaced by
machines. This gave rise to a system which is known the world over as the
Industrial Revolution. Under this system, women and children were employed as
labour for long hours because machine production simplified operations and
reduced skill requirements. Living and working conditions became deplorable and

housing accommodation inadequate. With the increased production and the

developed technology and science, decision-making became a more specialized
task and the relation between the workers and the employers became more
impersonal.
Industrial Revolution started in Great Britain in the latter half of the 18 th Century and
then around 1830 in France, Belgium and the USA, in Germany around 1850, in
Japan and Sweden around 1870, in Canada and the USSR around 1890 and in other
countries of the world including India by the end of that century. Capital was the
critical factor which brought about Industrial Revolution.

1.3 FEATURES OF MODERN INDUSTRIAL WORLD

We have seen the stages of Industrial Revolution. Now lets see some peculiar
features, which have emerged as a result of industrial development.
(1) Elimination of heavy physical labour: With the introduction of modern
machinery, work was now less hard and safer. But it also reduced the
opportunities of employment for unskilled labour.
(2) Increasing importance of scientist and engineers: Due to the complexity of
the processes of production and advanced technology, a new class of
professional employers developed in the Industry who wielded a lot of power
in affairs of the industry. They handled the problems of automation,
technology, control of nuclear energy. Many new occupations have been
created and so the need for better education, training and skill also arose for
the labour force.
(3) Elaborate control mechanism: To coordinate the efforts of a vast number of
people, managerial and organizational arrangements have to be made.
Different departments with a number of jobs requiring production, planning
and control, system and procedures, inventory control, scheduling,
accounting, financial control have been developed. Conferences, staff
meetings and briefing sessions are held to keep all responsible personnel
abreast of important developments. Now more jobs are of the nature suited
to the white-collar and managerial group guide, regulate and coordinate the
production system; formerly it was mainly the work for blue-collar production
workers.
(4) Specialisation of functions: With division of labour, each worker/employee
becomes very proficient at specific job, and gains dexterity, and sustained
experience due to specialisation. For example, technological or occupational
specialisation as that of mechanical/electrical engineers, product design
engineers, or personnel specialists, such as labour relations managers, wage
analysts, training directors, safety engineers and employment managers.
(5) Mass production: It involves production and flow of raw materials at definite
intervals throughout the factory. The worker remains at his place of work and

all materials are moved to him. However, the work done by the operator is
highly repetitive and of short cycles, demanding close attention and a rapid
speed of movement.
(6) Automation: Machines have completely eliminated human operators from the
production process. Mechanical, electronic systems and computers substitute
man in the controlling and production process.
1.4 IMPACT OF INDUSTRIAL SYSTEM
In the previous, we saw the features which have emerged because of the industrial
development, now we will find out the impact of the industrial system on the
working population. Rise in the standard of living better education, and health
services, more leisure time are direct impact of industrialisation. In fact, the modern
workers are much better off and lead a better life than their ancestors.
The main impacts of the industrial system are as follows:
(1) Hard Work: Industrialisation resulted in hard work. People started saving their
earnings leading to more capital formation. People started striving for
material progress. Glorification of hard labour and a high worker output
became a national political religion or cult. Capital formation was
accomplished in USA, England and Germany through private enterprise and
capitalistic system. Max Weber opines that The Protestant ethics, with its
emphasis upon hard work, frugality and self-denial has been a major driving
force among people to achieve savings. The prevailing economic, social and
religious attitudes also caused a strong feeling for material programmes.
(2) Strict Discipline: In any industry there is a web of rules which binds the
individual worker. The worker lives by the clock. He has to follow the rules
and regulations laid down by the employers or he will be fired, fined or
punished.
(3) Monotony and boredom: These are results of division of labour. Repetitive
tasks cannot create any interest or sentiments towards a work. A worker feels
no pride in it because the completed product is not his own creation. In fact,
workers do their jobs mechanically and automatically. They dont have to
think about what they are doing. Their thoughts are miles away from their
work.
(4) Interdependence: Closing of one sector throws the entire system out of gear
and entire factory may go out of work, bringing about economic collapse.
(5) Change in the attitude of the labour: Workers have now started to have a
greater voice in their welfare and work through union membership. The
workers put forth their demands in front of the management for material
things such as higher wages, more fringe benefits, fair and just treatment job
security, freedom from discrimination, etc. through collective bargaining,
consultative supervision, democratic leadership, labour management
cooperation and suggestion system.

(6) Job displacement: Increased use of machinery has often resulted in changes
in employment situations. Since the operation of machines needs specialized
knowledge and skills, the simple and unskilled workers find it difficult to
adjust with the work equipment and, thus a large number of workers may
become obsolete and even superfluous.
(7) Increase in mobility: Occupational and industrial mobility also increased
greatly, facilitating geographical mobility as people started moving with their
families from one industrial Centre to another in search of employment
opportunities. Jobs were also simplified so manpower was readily adapted to
variety of positions instead of a single craft or trade.
(8) Concentration of capital and instruments of production: Concentration of
capital and instruments of production in the hands of a small group of
persons led to diverse thoughts between the working and the owing classes,
and split the society into two hostile camps at war with each other the
camp of the haves and the have-nots.
(9) Hard working and living conditions: The workers had to work under
deleterious and insecure conditions which impaired the happiness of the
family. Karl Marx points out in his Das Kapital, The most agonising spectacle
in the English factory (as also in the Indian cotton mills) was the remorseless
exploitation of children under 10 or often only 6, and even 4 years old. Forced
sometimes to work 18 hours a day, these creatures were scarcely allowed
time to bite a meal. They worked till over-powered by fatigue; they slept at
their work upright, near the dangerous machines, which frequently slashed
off their tender limbs. During the night, they were kept under lock and key by
an internal band of overseers to whom lifting tired children up by their ears
and dashing them to the ground, or pouring water on them were all art of the
days work.
Thus, insecure and the precarious life of the labourer living under an everpresent threat of unemployment, the frequent strikes and lock-outs, which threw
society out of gear, and the dislocation of the economic equilibrium due to
recurrent crises, came to be the features of the new Industrial order, and society
was faced with new complex, political and economic problems with a widened
gulf between the masters of the factories and the operators.
So in this section we have seen the different stages of the industrial evolution
and the development of the Industrial Relations in the Western countries,
starting from the primitive economy system through slavery, serfdom,
handicrafts system cottage system to the modern factory system and the
Industrial Revolution provides a clear evidence of persistent change. The pattern
of these changes has not been identical/uniform in all countries and societies,
because industrialisation has moved somewhat fast in certain countries of the
West, whereas in others it has progressed slowly and as such the changes have
been limited. It may be noted that shift from the earlier agricultural and
handicrafts system to the age of factories has been drastic; and the same thing

is now happening in many developing countries. Accelerated change is expected

because of the second Industrial Revolution brought about by automation and
computerization.
1.5 EVOLUTION OF INDUSTRIAL RELATIONS IN INDIA
In India, however the evolution of Industrial Relations has been seen in the
following manner, the stages of which are given below.
(1) Occupations in ancient India: In ancient times, the prime occupation was
agriculture. Trading was next in importance. Manual services formed the third
area of occupation. A majority of the states were ruled by the kings. India was
greatly advanced in the field of industry in ancient times as is evident in
ancient literature. Kautilyas Arthshastra gives a comprehensive picture of
organisations and functions of the social and political institutions in ancient
India.
The caste system had a profound influence on the development and progress
of the various industries and occupations. The concept of the caste system
was originally based on the transfer of skills and specialisations, which
ultimately led to the standardisation of professions. The Atharva Veda divides
the community into four classes, viz., Kshatriya (the warrior class), Vaishya
(the trading class), Shudra (the serving class) and Arya. The following
professions were hereditary: those of goldsmiths, weavers, potters,
blacksmiths, carpenters, hunters, charioteers, architects, sculptors,
armourers. Depending on their skill sets and occupations separate
communities were formed, e.g., people making and repairing shoes became a
separate community of cobblers. The institution of slavery was also in
existence in ancient India but it was not restricted to any particular caste.
(2) Labour in medieval India: The numerous castes that developed in India were
in form of guilds of self-employed persons. The caste system unified a
number of persons belonging to a particular occupation and formed the basis
of occupational guilds. Indian works of art and craft were badly ruined with
the foreign invasions, which lasted for about 700 years. These artisans
gradually lost their traditional skills. Their condition deteriorated to such an
extent that there was hardly any different between an artisan and a slave.
The situation improved only after the restoration of law and order under the
Mughals. Different kinds of work such as embroidery, goldsmiths work,
varnishing, tailoring, leather work, making of pots, polishing of metals with
gold or silver, weaving of silken clothes and superfine muslins were carried on
in big apartments known as the karkhanas. Under Akbar, government
factories operated in Agra, Lahore, Fatehpur and Ahmedabad, where
employees could develop their respective arts.

A large number of occupations were also carried on by small manufacturers

and traders in their cottages, mostly on a hereditary basis. A vast majority of
artisans lived on the fringe of starvation.
(3) Guilds and Unions: From very early days, craftsmen and workers felt the need
for being united. Their unions gradually gained strength and were helpful not
only in the evolution of arts but they were powerful Centres of arts in
themselves. Only responsible persons could become their members. The
union followed democratic principles. In the event of a dispute between the
president and members, the king intervened and brought about conciliations.
Kautilya has given a good description of the unions of employees, craftsmen
or artisans. According to him, the work of unions should be controlled by a
board of three directors, members of which should pay the entrance fee to
the president and the profits earned by the unions should be equally
distributed among their members.
The Vaishyas and Shudras, formed unions so that they could stand against
the ill-treatment meted out at the hands of the higher castes and also to
improve their economic conditions.
During the epic period, labourers working in same industry had their own
unions. These were affiliated to bigger unions of different industries called
Nigam or industrial corporations.
Almost every craft, profession or occupation had its own union which was
called Shreni. Every Shreni included about a thousand members. The
Shreni elected its chief who was called pramukha or jyestha. These
guilds and corporations wielded considerable political power and influence.
1.6 INDUSTRIAL RELATIONS IN INDIA
The Vedas mention that one of the important factors necessary for happiness in a
group or community is good interrelations. During the Vedic times, the industrial
relations machinery consisted of a madhyamasi (mediator) who was a man of
position and influence in the society. The village officials resolved the local
problems. They had the judicial as well as the executive powers. This system
prevailed under the Hindu government. The unions were not only assemblies of
employees but they were also institutions for maintaining harmonious relations
between employers and employees.
Kautilyas Arthashastra and the edicts of Emperor Asoka say that the workers
enjoyed privileges and were paid high wages, were given sick leave as well as oldage pensions. The state recognised the organisation of workers and the rulers
decided the matters related to wage disputes. The king has also appointed a Board
and the matters which were not resolved by the local Panchayat were dealt by the

board and the matters which were not resolved by the local Panchayat were dealt
by the Board. Disputes were disposed as per the written documents and injunctions
were also passed to restrain the employers as well as the workers.
In medieval times, during the Muslim rule, there was nominal difference between an
artisan, a servant, an employee and a slave. Labourers could be forced to leave
their home to work on wages as per the farman of the Emperor or the governor as
the cases may be. There were no organisations of workers during the Mughal rule
which could deal with the difficulties and problems of the members. The workers
were paid very low wages because of which their condition became deplorable.
Wages were deducted if the work was not done properly. The disputes of the
workers were resolved by the Emperor himself. As the Emperor and his officials
dealt harshly with the workers, the relations between the workers and the rulers
were not cordial.
The commercial character of the east India Company did not change the conditions
of the workers. The underdevelopment of the economy continued even under the
British rule for more than a century. But collective relations in industry were
modelled on the British pattern. In fact, the growth of industries in different parts of
the country was based on the need for good industrial relations.
Early British Rule
India was expected to be a colonial market for British goods till the second half of
19th century. The modern type of industries was first set up in the middle of 19 th
Century for the benefit of the East India Company. In 1831, indigo plantations were
started followed by the setting up of a cotton mill in Bombay in 1853, a jute mill in
Calcutta in 1855 and the coal fields were connected by rail to the port city of
Calcutta. This was the beginning of a rapid expansion of rail lines throughout India.
The workers worked under adverse conditions and were sometimes required to work
for more than 20 hours per day. The wages paid were very low. Wages were also
deducted by the employer for late attendance, insubordination or negligence.
In 1877 the weavers of the Empress Mills in Nagpur stopped work giving an
indication of the rising industrial unrest. This gave rise to frequent short lived strikes
in Bombay and Surat as well, but these strikes did not make much of an impact
because the workers were not united. These powerless workers were intimidated,
dismissed and victimized by the employers. In 1881, the Factories Act was passed,
but the provisions of the Act were more in favour of employers than the employees.
The Act prevented the workers from going on a strike. In 1884, a memorandum was
presented by about 5000 workers to Bombay Factory Labour Commission. In 1890,
the first labour association the Bombay Mill Hands Association was established. This
was the beginning of the formation of the workers unions or the trade unions.
World War I (1914-1918)

World war I was a period of boom for employers. With the rising prices, their profits
went up enormously. The wages of workers, however remained the same. Their
economic distress brought workers together and an organized working class
movement began in the country. The unrest among workers led to increased strikes
among which the one at Ahmedabad, and the other at Madras in 1921, are
outstanding. During this period, as a result of ILO influence various laws were
enacted, i.e., the Trade Disputes Act, 1917, the Workmens Compensation Act, 1923,
and the Trade Unions Act, 1926.
World War II
During the Second world war, employers made enormous profits. The workers
demanded a share in them. Bonus and dearness allowance were granted to them
but as money wages did not increase in proportion to the rise in prices, the
government tried to check the dis-satisfaction of the workers and the consequent
strike activity by prohibiting strikes under the Emergency Rules (Rule 81-A of the
Defense of India Rules), which provided for the adjudication of disputes between
employers and workers. In 1942, tripartite consultative machinery formed, which
has subsequently shaped the pattern of Industrial Relations in India.
The years immediately following the War (1946 and 1947) were the most disturbed
years from the point of view of the pattern of industrial relations in India. During this
period there were many strikes, many trade unions were formed and the Industrial
Employment (standing orders) Act, 1946 and the Industrial Disputes Act, 1947 for
the settlement of disputes were passed.
Post-Independence Era
Immediately after Independence, it was considered necessary to put a stop to
strikes/ lockouts that interrupted production, in the interests of the national
economy. Hence, the industrial Truce Resolution was adopted through a tripartite
conference convened in 1947, giving paramount importance to the maintenance of
industrial peace. The Minimum Wages Act, the Factories Act and the Employees
State Insurance Act were all enacted in 1948.
Post-independence industrial relations have been very much influenced by the preindependence industrial environments and labour management relations. When
India became independent in 1947, the industrial scene was subjected to a
considerable amount of chaos and confusion. Industrial unrest and the shattered
worker-management relation was being prevalent everywhere. The government
emerged as an arbitrator between the management and the workers. It is in this
context that the Industrial Disputes Act of 1947 deserves importance.
During the second five-year plan period, certain norms, mechanisms and practices
were evolved which formulated the need-based minimum wage, wages boards,

guidelines on rationalisation, code of discipline, code of conduct and the scheme for
workers participation in management.
1.7 INDUSTRIAL RELATIONS AND HUMAN RELATIONS
The concept of Industrial Relations has become a part and parcel of the Science of
Management, particularly that which deals with the manpower of the enterprise
and, hence, is closely linked with Personnel Management. Till recently, the use of
the term Personnel Management and Industrial Relations were not sharply
distinguished and were very often used interchangeably as would be clear from a
few definitions reproduced below.
Dale Yoder has defined Personnel Management as that phase of management
which deals with the effective control and use of manpower as distinguished from
other sources of power. Industrial relations are the relations that exist in and grow
out of employment. It refers to a wide field of relationship among people, human
relationships that exist because of necessary collaboration of men and women in
the process of modern industry.
E.F. Breach observes, Personnel management mainly deals with executive policies
and activities regarding the personnel aspects of the enterprise; while industrial
relations is mainly concerned with the employee-employer relationship.
The British Institute of Personnel Management also does not make any distinction
between Personnel Management and Industrial Relations. It defines Personnel
Management as that part of management function, which is primarily concerned
with the human relationship within an organization. Its objective is the maintenance
of those relationships on a basis, which by consideration of the well-being of the
individual, enable all those engaged in the undertaking to maximize their personal
contribution to the effective working of that undertaking. The institute, thus prefers
to
include
under
this
term,
methods of recruitment selection, training, education, proper employment of
personnel, terms of employment, methods and standards of remuneration, working
conditions, amenities, employee services, joint consultations and procedures for the
settlement of disputes, etc.
However, of late some distinction has been made between the two terms. Personnel
Management in its more restricted usage refers to that part of employment
relations which is concerned with employees as individuals. Group relationships are
excluded from its scope and form a part of Industrial Relations. Accordingly, the
collective relationship of individual workers with their management constitutes the
subject matter of industrial relations.
Besides, the term Human Relations in Industry has also come into vogue. Some
authors mean by Human Relations the direct relationship existing between the
employer and his work people considered as individuals, as distinct from the term

Industrial Relations which is used to denote collective relations. Others include

under human relations those subjects on which employers and employees have
common interests and, therefore interests likely to make for understanding, while
holding the field of industrial relations to be essentially that of divergent interests.
In the view of some others, Human Relationships are relations with the union or
personal relations with the staff; while Industrial Relations would apply to the
relations between the organisations of employers and workers at a highest level of
economy. Yet others consider human relations as the scientific investigation of the
psychological and social interrelations produced in the collective performance of
work.
These different interpretation show that while it is difficult to draw a definite line of
demarcation between the concepts of industrial relations and human relations a
broad distinction can, however, be made.

CHAPTER 2 EVOLUTION OF INDUSTRIAL RELATION POLICIES

2.1 INTRODUCTION
We have seen some aspects of industrial relations evolution, concept and
approach in the first unit and now we will try to understand and evaluate the nature
of industrial relations. Deterioration in working conditions due to development of
industrial units at a faster pace, unduly low wages and the consequent
dissatisfaction of the working class; growing indiscipline among the workers;
strained relations between labour and management and the formation of ILO; the
emergence of All India Trade Union Congress (AITUC) in 1920 and the demand for
higher wages and improved conditions of work and living all of these issues led to
serious industrial troubles and created labour problems of large dimensions. The
situation became unmanageable in Bombay and Bengal hence; committees were
appointed to look into the matter. The beginning of industrial relations dynamics can
be traced back to the inception of the Indian Labour Conference as far back as 1942
by Dr. B.R. Ambedkar, when the policy of bringing together three parties, namely
the government, management and labour on a common platform as a consultative
approach tripartite forum for all matters of labour policy and industrial relations was
accepted.
When the Second World War broke out, the Government of India passed the Defense
of India Rules to overcome the defects in the Trade Disputes Act, 1929 which
banned the strikes and lock outs in public utility services but it did not provide any
machinery for the settlement of disputes like the Board of Conciliation or court of
enquiry. The Defense Rules incorporated the provision for settling the disputes by

compulsory adjudication in Section 81 A, and later on with a few minor changes it

became the Industrial Disputes Act of 1947.
In this unit, we will see how Industrial Relations evolved in India.
2.2 PRE AND POST-INDEPENDENCE INDUSTRIAL RELATIONS IN INDIA
Pre-Independence India
State Intervention in labour/industrial relations had its beginning when the British
Government was constrained to protect its commercial interest in India.
An ILO publication observes: Far from protecting the interests of labour, the earlier
attempts to regulate labour consisted of enactments such as the Assam Labour Act,
the Workmens Breach of Contract Act, 1859, and the Employers and Workmens
(Dispute) Act, 1860. These Acts aimed at protecting the social system against
labour rather than protecting labour against the social system. Factories Act was
also enacted in 1881. Basically, the Britishers enacted all these laws to safeguard
their interests and to prevent the labour from uniting and going on strikes. The laws
also prevented the labour from leaving their jobs hence they were treated like
bonded labour.
Post-Independence India
After Independence, the government took many initiatives to streamline the
relations between management and the workers by enacting certain laws and also
formed regulatory bodies to help improve the relations between the working class
and the employers. The government also planned a phase wise development of the
industries in all the regions in the country.
Some of the steps taken by government are:
The Industrial Disputes Act (1947) provided for:
(1) The establishment of a permanent machinery for the settlement of disputes
in the shape of certain authorities like the Works committee, Conciliation
Officers, Industrial Tribunals, Labour courts.
(2) Making an award of a tribunal or any settlement brought about by conciliator,
binding on the parties and legally enforceable.
The Act seeks:
(1) The prevention and settlement of industrial disputes in all industries through
conciliation, arbitration and adjudication.
(2) To prohibit strikes and lockouts during the pendency of conciliation and
adjudication proceedings.

Besides the enactment, the two other major efforts made were to amend the Trade
Unions Act, 1926 Once in 1947 and then again in 1950. In 1947, a law was
enacted which defined unfair employer practices and unfair union practices. These
amendments were a break with the colonial British tradition and were influenced by
the American National Labour Relations Act (popularly known as the Wagner Act) of
1935. Unfortunately, these amendments to the Trade Unions Act never came into
force. The newly formed Indian National Trade Union congress (INTUC) did not
favour some of the changes. Employers were not enthusiastic. Some of the unions
did not like the exclusion of civil services and other categories of government
employees and of supervisory personnel from the scope of the Act.
In 1950, two bills were brought by the government a Labour Relations Bill and a
Trade Union Bill. They retained the provisions of 1947 amendment. They also
introduced the principle that collective bargaining would be compulsory for both
employers and unions, under stipulated conditions.
Labour courts were empowered to certify unions as sole bargaining agents. All
corrective collective agreements were to provide for a peaceful settlement without
work stoppage on all questions arising out of such agreements by arbitration or
otherwise. However, the draft bill lapsed with the dissolution of Parliament.
As a reaction to legislative approach which was advocated by Jagjivan Ram, the
then Labour Minister, 1947-52, V.V. Giri,(1952-57) advocated his Giri Approach in
terms of voluntary negotiations and collective bargaining in a tripartite relationship.
The movement towards a non-legal industrial relation system was a new trend. He
proclaimed that industrial adjudication was labours enemy no.1. This was how
Industrial Relations evolved in the pre-independence eraas well as immediately
after independence.
2.3 INDUSTRIAL RELATIONS POLICY DURING THE PLAN PERIOD
In this section, we will see the phase-wise development of the Industrial Relations
policy initiated by various governments through the Five Year Plans.
First Plan Period
The first Five Year Plan emphasized on the need for industrial peace in industry, the
ultimate oneness of interests and the virtue of harmonious relations between capital
and labour. It was felt that it is incumbent on the state to arm itself with legal
powers to refer disputes for settlement by arbitration of adjudication, upon the
failure of efforts to reach an agreement by other means.
The plan emphasized on two other principles:
(1) The workers right of association, organisation and collective bargaining
should be accepted without reservation as the fundamental basis of a mutual
relationship; and

(2) Employer-employee relationship should be accepted as a partnership in a

constructive endeavor to promote the satisfaction of the economic needs of
the community in best possible manner.
The plan said that the best way of settling disputes was to allow employer and
employees to settle these without the interference of a third party.
The plan stressed that the machinery to settle disputes should be managed in
accordance with the following principles:
(a) Legal technicalities and formalities of procedure should be used to the
minimum possible extent.
(b) Each dispute should be finally and directly settled at a level suited to the
nature and importance of the case.
(c) Tribunals and courts should be manned by specially trained expert personnel.
(d) Appeals to these courts should be reduced.
(e) Provisions should be made for a prompt compliance with the terms and
conditions of awards.
The plan also recommended the setting up of norms and standards to govern the
relations between the employers and employees and for the settlement of the
industrial disputes through tripartite bodies i.e., the Indian Labour Conference, the
Standing Committee and the Industrial Committee for particular industries.
A strike or lockout without due notice during the pending of any proceedings and in
violation of the terms of settlement, agreement, award or order was to be banned
and attended by suitable penalties and loss of privileges.
The first plan also prescribed that the Board of Directors of these undertakings
should include a few persons on the board who understand labour problems, the
labour point of view and who can also be sympathetic to the aspirations of the
labour. The following points were also made in the plan:
(1) The need for a systematic Grievance Procedure to be helped by having
elected shop-stewards was stressed.
(2) The importance of the Works Committee was emphasised and these were
described as the key to the system of industrial relations.
(3) The plan stressed that for the success of collective bargaining, it is essential
that there should be a single bargaining agent over the large an area of
industry as possible. Separate unions for industrial establishments in the
same industry in a local area would be a hindrance of the growth of strong
and healthy trade unions and their existence may be justified only in very
exceptional circumstances.
(4) The plan recognised the vital and constructive role of trade unions and
recommended a closer association between trade unions and employers
representatives at various levels at the level of the understanding, at level
of industry and the regional level and national level.

The principles of the Industrial Relations Policy, the Code of Conduct, the Code of
Discipline and the Draft Code of Efficiency and Welfare were the three important
contributions to the industrial relations policy in the first five-year plan. From the
Courts to Codes was the new movement during the period, and many
progressive policies were also evolved by Indian Labour Conference regarding
the recognition, joint management councils, workers education, and apprentice
training. During this period, the strategy was to move away from legalism to
voluntarism.
Second Five Year Plan
The second five-year plan dealt with the following aspects with a special focus
on the strengthening of the Trade unions.
(1) Avoidance of disputes at all levels, including the last stage of mutual
negotiations, namely conciliation.
(2) The plan also recommended an increased association between labour and
management, which might be achieved by councils of management,
technicians and workers.
(3) The second plan suggested that statutory provision should be made for the
recognition of unions, keeping in mind the need for having one union in an
industry.
(4) It is suggested that there should be restrictions on the number of outsiders
who served as office bearers of unions, as the workers who become office
bearers should have additional protection against victimization, and that the
finances of trade unions should be strengthened.
Third Five Year plan
The third five-year plan laid stress on moral rather than on legal sanctions for the
settlement of disputes. It laid stress on the preventions of unrest by timely action at
appropriate stage and on giving adequate attentions to root causes. This involves a
basic change in the attitude and the outlook of the parties and the new set of
readjustments in their mutual relations. Ways should be found for increasing the
application of the principle of voluntary arbitration, the same protection should be
extended to proceedings in this case as is now applicable to compulsory
adjudication. Employers should show much greater readiness to submit disputes to
arbitration than they have done hitherto. This has to be the normal practice as an
important application accepted by parties under the Code of Discipline.
Workers participation in management should be accepted as a fundamental
principle and as an urgent need. A major programme during this period was the
progressive extension of the scheme of Joint Management Councils to new
industries and units so that, in the course of a few years, it may become a normal
feature of the industrial system. It can serve to bridge the gulf between labour and
management, create better mutual understanding and facilitate the adoption, on

both sides, of an objective approach to the problems of industry and the workers. In
the course of time, management cadres should arise out of the working itself.
A large-scale expansion of the Workers Education scheme was visualized for the
period of the Third Plan. It was intended to diversify the programme and secure
fuller association of workers representatives and their organisations.
Trade union leadership would grow progressively out of the ranks of the workers and
this process would be greatly accelerated as the programme of workers education
gathered momentum.
One more resolution was initiated during this period.
Industrial True Resolution, 1962.
It stated that no effort shall be spared to achieve the maximum production, and the
management and workers will strive to collaborate in all possible ways to promote
the defense efforts of the country.
The Resolution also emphasized on:
(a) The paramount need to maximize production and laid stress on the duty of
the employers and of the workers to exercise restraint and forbearance.
(b) That no interruption of work should be allowed.
(c) That all disputes should be settled by voluntary arbitration, especially those
relating to dismissal, discharges and retrenchment of workers.
(d) That unions should discourage absenteeism and negligence on the part of
workers.
(e) That joint emergency production committees should be set up.
Fourth Five Year Plan
This plans main aim was to enhance the role of the working class in the
development of the nation. Following were some of the main aspects of the fourth
plan:
(1) In the field of industrial relations, priority will be accorded to the growth of a
healthy trade union movement so that it could secure better labour
management relations.
(2) More emphasis should be laid on collective bargaining, and productivity
should be increased through labour management co-operation
(3) Industrial disputes should be settled by voluntary arbitration.
The plan hoped that trade unions would serve not only as agencies seeking fair
wages and proper conditions of work and living for their members, but also play an
increasingly important role in the nations development.
Fifth Five Year Plan

In the fifth plan stress was laid on strengthening industrial relations and conciliation
machinery, better enforcement of labour legislation, research in labour relations and
labour laws, imparting training to labour officers, improvement to labour statistics
and undertaking studies in the field of wages and productivity. Special attention was
devoted to bring about an improvement in productivity in all spheres of economy.
Sixth Five Year Plan
The sixth plan initiated the following measures to develop the Industrial Relations
policy:
(1) Industrial harmony is indispensable for a country if it is to make economic
progress.
Healthy industrial relations, on which industrial harmony is founded cannot
be regarded as a matter of interest only to employers and workers but are of
a vital concern to the community as a whole. In the ultimate analysis, the
problem of industrial relations is essentially one of attitudes and approaches
of the parties concerned.
(2) If adequate consultative machinery and grievance procedures are evolved
and made effective, strikes and lockouts would become redundant. Effective
arrangements should be made for the settlement of inter-union disputes and
to discourage unfair practices and irresponsible conduct.
(3) At the enterprise level, it should become an integral part of the industrial
relations system to serve as an effective instrument of modern management.
It should be made a vehicle of transforming the attitudes of both employers
and workers with a view to establishing a co-operative culture which helps in
building strong self-confident and self-reliant country with a stable industrial
base.
(4) Collective bargaining should be encouraged as this would enhance the
strength and facilitate the enlargement of the trade unions role.
Seventh Five Year Plan
The Seventh plan suggested that there is a considerable scope for improvement in
industrial relations which would obviate the need for strike and the justification for
lockouts. In the proper management of industrial relations, the responsibility of
unions and employees has to be identified and inter-union rivalry and inter-union
division should be avoided.

2.4 NATIONAL COMMISSION ON LABOUR AND INDUSTRIAL RELATIONS POLICY (1969)

In this section, we will see the role of the National Commission of Labour in the
development of the Industrial Relations Policy.

While realising that reaching of agreements has not made much headway in India,
the National Commission on Labour (NCL) has recommended compulsory
recognition of a union as the sole representative for the purpose of bargaining.
It has observed that:
(1) In the absence of an arrangement of statutory recognition of unions, except
in some states and provisions which require employers and workers to
bargain in good faith, it is no surprise that reaching of collective bargaining
agreements has not made much headway in India. Nonetheless, the record of
reaching collective agreements as a wider area is certainly desirable.
(2) There is a case for shift in emphasis and increasingly greater scope for a
reliance on collective bargaining. Any sudden change replacing adjudication
by a system of collective bargaining has to be gradual. A move should be
made towards collective bargaining in such a way that it may acquire
primacy in the procedure for settling industrial disputes.
The Commission also observed that:
(1) An essential step to facilitate a collective bargaining process is the
compulsory recognition of a union as the sole representative for the purpose
of bargaining with the management.
(2) In order to enable employees to effectively participate in the process of
collective bargaining, they should be well organised and the trade unions
must become strong and stable.
(3) The place of strike/lockout should be in the overall scheme or industrial
relations defined. Collective bargaining cannot exist without the right of strike
or lockout.
(4) Reconciliation of Unions. A trade union seeking recognition as a bargaining
agent from an individual employer should have a membership of at least 30
percent of workers in the establishment.
The Committee recommends that:
(1) Recognition should be made compulsory under a central law in all
undertakings employing 100 or more workers or where the capital invested is
above a stipulated size. A trade union seeking recognition as a bargaining
agent from an individual employer should have a membership of at least 30
percent of the workers in the establishment. The minimum membership
should be 25 percent if the recognition is sought for an industry in a local
area.
(2) The Industrial Relations Committee (IRC) is to certify the union as a
representative union on the basis of either verification of membership of the
contending unions or by a secret ballot open to all workers in the
establishment. The commission will deal with various aspects of union
recognition such as:

(i)

Determining the level of recognition whether plant, industry, centrecum industry to determine which is the majority union.
(ii)
Certifying the majority union as recognised union for collective
bargaining.
(iii)
Generally dealing with other related matters.
(3) The recognised union should be statutorily given certain exhaustive rights
and facilities, such as right of sole representation, the right to enter into the
collective agreements on terms of employment and conditions of service the
right to collect membership subscriptions within the premises of the
undertaking, the right of check-off, holding discussions with departmental
representatives within factory premises, inspecting, by prior agreement, the
place of work of any of its members, and nominating its representatives on
works/grievance committees and other bipartite committees.
(4) The minority unions should be allowed only the right to represent cases of
dismissal and discharge of their members before the labour court.
(5) The unions should be made strong, organizationally and financially, and a
multiplicity of unions and intra-union rivalries should be discouraged by:
(a) Providing compulsory registration for unions.
(b) Raising the minimum number required for forming a union.
(c) Reduction in the number of outsiders.
(d) Taking steps to build internal leadership.
Strikes/Lockouts and Gheraos
The National commission on Labour has made the following recommendations
related to strikes/lockouts and gheraos:
(1) In essential industrial services, where a cessation of work may cause harm to
the community, the economy or the security of the nation itself, the right to
strike may be banned, but with the simultaneous provision of an effective
alternative like arbitration or adjudication to settle disputes.
(2) In non-essential industries, a maximum period of one month has to be fixed
for the continuance of a strike or lockout. After the lapse of this period, the
dispute has automatically to go before the IRC for arbitration. In essential
industries, the right to strike/lockout should be made redundant by requiring
the IRC to adjudicate when mutual negotiations fail and parties do not agree
to arbitration.
(3) Every strike/lockout should be preceded by notice. A strike notice given by a
recognised union should be preceded by a strike ballot open to all the
members of the union, and the strike decision must be supported by two
thirds of the members present and voting.
(4) Gherao cannot be treated as a form of labour unrest since it involves
physical coercion rather than economic pressure. It is harmful to the working
class and in the long run may affect national interest.

(5) The penalties, which have been provided for unjustified strikes/lockouts would
ultimately discharge these and would in due course persuade the parties to
sit round the table earnestly and settle their disputes by negotiation.
(6) To restrain the outbreak of unnecessary strikes/lockouts, compensation and
forfeiture of wages for strikes/lockout should be provided for.
Work committees and Joint Management Councils
As per the National Commission on Labour, works committee should be set up in
units which have a recognised union. The recommendations of the committee were:

They should be set up only in units which have a recognised union. The union
should be given right to nominate the worker members of the works
committee.
A clear demarcation of the functions of the works committee and the
recognised union, will make for a better working of the committees.
When management and unions are willing to extend co-operation in matters
they consider to be of a mutual advantage, they may set up a joint
management council. In the meanwhile, wherever the management and the
recognised trade union unit so desire, they can agree to enhance the powers
and scope of the works committees to ensure a greater degree of
consultation/co-operation. The functions of the two in this latter situation can
be amalgamated.

Settlement of Industrial Disputes

The National Commission Labour made the following recommendations for resolving
the Industrial Disputes:
1. The parties to the disputes should talk over their differences across the table
and settle them by negotiating and bargaining.
2. After negotiations have failed and the notice of a strike/lockout is served, the
parties may agree to voluntary arbitration.
3. In essential services/industries, when collective bargaining fails and parties
do not agree to arbitration, either party may notify the IRC of the failure of
the negotiations, whereupon the IRC shall adjudicate on the dispute.
4. In the case of non-essential services/industries, the failure of negotiations and
the refusal to avail of voluntary arbitration, the IRC after the receipt of notice
of direct action may offer the parties its good offices for settlement.
5. After the expiry of the notice period, if no settlement is reached, the parties
will be free to resort to direct action.
In this section, we have seen the recommendations given by the National
Commission on Labour to improve the relations between the workers and the
employers by way of giving more importance to conciliation by giving
recognition to the trade unions, by preventing strikes and lockouts, by giving

importance to the works committees and joint management councils and also by
suggesting ways to settle the industrial disputes.
2.5 MANAGEMENT VS. UNIONS
In spite of the efforts taken by the government the relations between the
workers and management did not improve so much because the concept of
Industrial Relations generally developed as a consequence of the Industrial
Revolution as, prior to this the master and servant relationship which existed
was simple and of a personal nature. With the acceleration in industrialisation,
the relation aspect became complex and impersonal. Under the early factory
system, the worker was looked upon as a commodity which could not only be
easily secured but also replaced. The attitude was that of considering the supply
and demand position as in case of a commodity. As the employer was in a
dominating situation, he dictated both the wages as well as the conditions of
service of the workers resulting in many industrial and social ills such as low
wages, unduly long hours of work, poor working conditions and persecution of
trade union activity. Trade union leaders were persecuted and victimized and the
Government adopted a laissez faire policy.
White-Collar Unions on the Warpath
The strike fever had now extended even beyond the workers level. For example,
on 28 December, 1978, 5 lakh employees of the 14 public sector banks went on
a strike. This brought the financial transaction within the economy to a virtual
halt, indicating white-collar organizational solidarity and power. On the next day
1 lakh bank officer employees in 30,000 branches of the nationalized and private
sector banks across India joined the striking workmen and Cheques worth Rs.
1000 crore lay uncleared in the vaults of the banks. The year 1978 showed
constant and recurring go-slow, work-to-rule, strikes and other forms of
agitation in nationalized banks, Life Insurance Corporation and the nationalized
General Insurance Corporation companies.
There was a bitter 53-day strike of eight lakh for state government employees in
Maharashtra in 1978. For the first time in the history of the state, the primary
and secondary school teachers participated. There was also a strike by power
engineers in Uttar Pradesh, a stir by port trust officers and merchant navy
officers. This period also saw strikes by doctors in the state-managed hospitals
and in the Labour court in Bombay, a strike by the Labour Law Practitioners
Association in protest against the appointment of a judge to the Labour Tribunal.
Militancy in Industrial Relations Situation
On 8th January, 1979, N.P. Godrej (63), Vice-Chairman of Godrej& Boyce Pvt. Ltd.
was stabbed by an unidentified knife-wielding assailant. This resulted in
widespread feelings of indignation tinged with despair over the issue of violence

in the labour movement. Public condemnation of the Janata Governments

Industrial Relations Bill by employers, workers and even the Janata Party
politicians made the labour question the burning issue of the day. The labour
situation become characterized with a defiant military mood within the organised
working class, the like of which had been rarely witnessed before. Thus, the
labour situation had deteriorated and the industrial relations situation had
declined, not only in low-wage segment, with over 30 percent of all strikes in
1978 having taken place in relatively large and modern factories including Tata
Electric and Locomotive Company Ltd., Philips India Ltd., Larsen & Toubro Ltd,
and Guest, Keen, Williams Ltd.
The strikes and lockouts in 1978 resulted in a production loss worth
approximately Rs. 291.56 crore with 21.51 million man-days lost due to strikes
and lockouts during the year against 25.32 million man days lost in 1977.
Even after the fall of the Janata government and the political debacle with the
mid-term polls in sight a few months away, the position, far from improving
deteriorated further. There were headlines such as Public sector stir Despite
Cabinet Plea and Indian Airlines May Scrap Most Flights, in newspapers. On
14th September, the entire Public sector was crippled by a one-day token strike.
The workers of the Indian Oil Corporation were already on strike.
2.6 CONDITION OF GOOD INDUSTRIAL RELATIONS
Every organization should strive to induce good industrial relations, thus
ensuring industrial peace and avoiding labour unrest such as strikes, work
stoppages, demonstrations, Gherao and slogan shouting. Importance of good
industrial relations and concern for the welfare of the labour is best expressed in
words of Dorabji Tata as follows: The welfare of the labouring classes must be
one of the first cares of every employer. Any betterment of their conditions must
proceed more from the employers downward rather than be forced up by
demands from below, since labour, contented, well housed, well fed and
generally well looked after, is not only an asset and advantage to the employer,
but serves to raise the standard of industry and labour in the country.
The following can briefly be stated as the conditions necessary for establishing
and maintaining good industrial relations;
1. Recognition by the employer that the worker are a part of a team working
towards a common objective.
2. An attitude on the part of the employees of delivering the goods, that is,
giving their moneys worth;
3. Fair redressal of the employees grievances such as working conditions,
facilities, attitude of superiors and other rights;
4. Avoidance by workers of being unduly influenced by political leaders staging
strikes as a protest or a publicity for their own political gains;

5. Payment of fair wages and an adequate wage structure as well as the

establishment of satisfactory working conditions;
6. Adoption of a policy which ensures to the workers an equitable share of the
gains of an increased productivity;
7. Introduction of a suitable system of employees education at all levels as well
as providing them with appropriate equipment, where necessary;
8. Training in industrial relations and human relations to workers, technical staff
and at all managerial levels;
9. Sufficient communication to keep the employees informed about decisions
which affect their interest; and
10.Establishment of an atmosphere of participation through joint committees or
other methods.
2.7 UNIONS AND THEIR ROLE
In the above discussion on conditions necessary for good industrial relations, it must
be remembered that trade union plays a vital role.
Employee Associations
With a view to self-protection and self-help, labour has
organised itself under
employee associations and unions. The conflicts between capital and labour in
Europe and America resulted in the origin of the trade union movement.
The Trade Union Movement in India
The trade union movements origin in a sense can be tracked back to a very early
date to the time when villages and panchayats and guilds for settling disputes
between the masters and their members. The panchayats prescribed the code of
conduct which was rigidly observed by its members. It non-observance resulted in
expulsion from the community.
Trade unions, as understood today however, originated in the first quarter of the
20th Century, although the ground work was laid during the last quarter of the 19 th
Century. In Bombay, as early as in 1875, a movement was started by reformers
under the leadership of Sorabji shapurji. They protested against the appalling
conditions of the factory workers and appealed for the introduction of an adequate
legislation to prevent them. The credit for laying foundation of organised labour
movement in India is at times accorded to N.M. Lokhande, a factory worker himself.
An agitation was organised by him in Bombay in 1884. This resulted in certain
amenities being extended to the mill workers which led to the organisation of
Bombay Mill Hands Association.
Actually a real organised labour movement in India started at the end of the First
World War. Rising prices, without a corresponding increase in wages, despite the
employers making huge profits, led to a new awakening. Many trade unions were
formed throughout India. There were a number of strikes from 1919 to 1922. To this

was added the influence of the Russian Revolution, the establishment of

International Labour Organisation (ILO) and the All-India Trade Union Congress. This
speeded up the pace of the trade union movement. Following the Second World
War, there was a spiraling of prices. The workers once again become restive. This
further indirectly strengthened the movement of India.
The Objective of Trade Unions
The following are some of the aims and objectives of trade unions:
(1) To secure for the worker fairer wages in the light of the cost of living and the
prevailing standard of living in India.
(2) To improve the workers working condition by securing shorter working hours,
better leave facilities, adequate social security benefits, appropriate
educational facilities., adequate social security benefits, appropriate
educational facilities and other welfare benefits;
(3) To assure the worker a share in the increased profitability of an industrial unit
by providing him payment of an adequate bonus;
(4) To protect workers interest and more specifically, to avoid their exploitation;
(5) To ensure the workers security of employment by resisting retrenchment and
victimization likely to harm them; and
(6) To protect the larger interest of society by aiding the improvement of trade
and industry.

CHAPTER 3 INDUSTRIAL DISPUTES

3.1 INTRODUCTION
An industrial dispute may be defined as a conflict or difference of opinion between
management and workers on the terms of employment. It is a disagreement an
employer and employees representative, usually a trade union, over pay and other
working conditions and can result in industrial actions. When an industrial dispute
occurs, both the parties, that is the management and the workmen, try to
pressurize each other. The management may resort to lockouts while the workers
may resort to strikes, picketing or gheraos.
3.2 DEFINATIONS
According to Patterson, Industrial strife constituent militant and organised protest
against existing industrial conditions. They are symptoms of industrial unrest in the
same way that boils are symptoms of disorder of body.
As per section 2(K) of Industrial Disputes Act, 1947, an industrial dispute is defined
as any dispute or difference between employers and employers, or employers and
workmen, or between workmen and workmen and which is connected with the
employment or non-employment or the terms of employment or with the conditions
of labour of any person.
This definition includes all the aspects of a dispute. It not only includes the
disagreement between employees and employers, but also emphasis on the
difference of opinion between workers. The disputes generally arise on account of
poor working conditions. This disagreement or difference could be on any matter
concerning the workers individually or collectively. It must be connected with
employment or non-employment or with the conditions of labour.

From the definition it may be concluded that industrial dispute means a conflict or
unrest or dispute or any sort of difference between employees and employers which
may relate with the employment or the terms of employment or working conditions.
For a dispute to become industrial dispute there must be dispute difference
between:
1. Employers and employees
2. Employers and workmen
3. Workmen and workmen
It is concerned with the employment or terms of employment or with the conditions
of labour. From the point of view of the employer, an industrial dispute resulting in
stoppage of work means a stoppage of production. This results in increase in the
average cost of production since fixed expenses continue to be incurred. It also
leads to a fall in sales and the rate of turnover leading to a fall in profits. The
employer may also be liable to compensate his customers with whom he may have
contracted for regular supply. Apart from the immediate economic effects, loss of
prestige and credit alienation of the labour force and other non-economic,
psychological and social consequences may also arise. Loss due to destruction of
property, personal injury and physical intimidation or inconvenience also arises.
For the employee, an industrial dispute entails loss of income. The regular income
by way of wages and allowances ceases, and great hardship may be caused to the
workers and his family. Employees also suffer from personal injury if they indulge
into strikes and picketing; and the psychological and physical consequences of
forced idleness. The threat of loss of employment in case of failure to settle the
dispute advantageously or the threat of reprisal action by employers also exist.
According to the Act, the term industrial dispute means any dispute or difference
between employers and employers, or between employers and workmen, or
between workmen and workmen, which is considered with employment or nonemployment, or the terms of employment or with the conditions of labour of any
person. The basic objectives of the Act are:

To provide a suitable machinery for the just, equitable and peaceful

settlement of industrial disputes.
To promote measures for securing and preserving amity and good relations
between employers and employees.
To prevent illegal strikes and lockouts.
To provide relief to workers against layoffs, retrenchment, wrongful dismissal
and victimization.
To promote collective bargaining.
To ameliorate the conditions of workers.
To avoid unfair labour practices.

3.3 CAUSES OF INDUSTRIAL UNREST

The causes of industrial disputes can be broadly classified into two categories:
economic and non-economic causes. The economic causes will include issues
relating to compensation like wages, bonus, allowances, and conditions of work,
working hours, leave and holidays without pay, unjust layoffs and retrenchments.
The non-economic factors will include victimization of workers, ill treatment by staff
members, sympathetic strikes, political factors, indiscipline, etc.
1. Wages and allowances: Since the cost of living index is increasing, workers
generally bargain for higher wages to meet the rising cost of living index and
to increase their standards of living. In 2002, 21.4% of disputes were caused
by demand of higher wages and allowances of disputes were caused by
demand of higher wages and allowances. This percentage was 20.4% during
2003 and during 2004 increased up to 26.2%. In 2005, wages and allowances
accounted for 21.8% of disputes.
2. Personnel and retrenchment: The personnel and retrenchment have also
been an important factor which accounted for disputes. During the year
2002, disputes caused by personnel were 14.1% while those caused by
retrenchment and layoffs were 2.2% and 0.4% respectively. In 2003, a similar
trend could be seen, wherein 11.2% disputes were caused by personnel,
while 2.4% and 0.6% of disputes were caused by retrenchment and layoffs. In
the year 2005, only 9.6% of the disputes were caused by personnel and only
0.4% were caused by retrenchment.
3. Indiscipline and Violence: In 2002, 29.9% of disputes were caused because of
indiscipline, which rose up to 36.9% in 2003. Similarly, in 2004 and 2005,
40.4% and 41.6% of disputes were caused due to indiscipline respectively.
During the year 2003, indiscipline accounted for the highest percentage
(36.9%) of the total time loss of all disputes, followed by cause-groups wage
and allowance and personnel with 20.4% and 11.2% respectively. A similar
trend was observed in 2004 where indiscipline accounted for 40.4% of
disputes.
4. Bonus: Bonus has always been an important factor in Industrial disputes.
6.7% of the disputes were because of bonus in 2002 and 2003 as compared
to 3.5% and 3.6% in 2004 and 2005 respectively.
5. Leave and working hours: Leave and working hours have not been so
important causes of industrial disputes. During 2002, 0.5% of the dispute
were because of leave and hours of work while this percentage increased to
1% in 2003. During 2004, only 0.4% of the disputes were because of leave
and working hours.
6. Miscellaneous: The miscellaneous factors include:
Inter/Intra union rivalry
Charter of demands
Workload
Standing orders/rules/service conditions/safety measures

 Non-implementation of agreements and awards etc.

3.4.1 Strikes
A strike is a powerful weapon used by trade unions and other labour associations to
get their demands accepted. It generally involves quitting of work by a group of
workers for the purpose of bringing the pressure on their employer so that their
demands get accepted. When workers collectively cease to work in a particular
industry, they are said to be on strike.
According to Sec 2(q) of the Industrial Disputes Act, 1947,
A strike is a cessation of work by a body of persons employed in an industry acting
in combination; or a concerted refusal of any number of persons who are or have
been so employed to continue to work or to accept employment; or a refusal under
a common understanding of any number of such persons to continue to work or to
accept employment.
In view of the definition, a strike postulates three main things:
1. Plurality of workmen
2. Cessation of work or refusal to do work
3. Combined or concerted action
This definition throws light on a few aspects of strike. Firstly, a strike is referred to
as stoppage of work by a group of workers employed in a particular industry.
Secondly, it also includes the refusal of a number of employees to continue work
under their employee.
In a strike, a group of workers agree to stop working to protest against something
they think is unfair where they work. Labours withhold their services in order to
pressurize their employer or government to meet their demand. Demands made by
strikers can range from asking for higher wages or better benefits to seeking
changes in the workplace environment. Strikes sometimes occur so that employers
listen more carefully to the workers and address their problems.
Causes of Strikes
Strike action, also called labour strike, on strike or simply strike, is a work stoppage
caused by the mass refusal of employees to work. A strike usually takes place in
response to employee grievances. Strikes became important during the industrial
revolution, when mass labour became important in factories and mines. Most
western countries partially legalized striking in the late 19 th or early 20th century.
Strikes are sometimes used to put pressure on governments to change policies.
Occasionally, strikes destablise the rule of a particular political party.
Strikes can occur because of the following reasons:

Dissatisfaction with company policy

Salary and incentive problems
Increment not up to the mark
Wrongful discharge or dismissal of workmen
Withdrawal of any concession or privilege
Hours of work and rest intervals
Leaves with wages and holidays
Bonus, profit sharing, provident fund and gratuity
Retrenchment of workmen and closure of establishment
Dispute connected with minimum wages

Types of Strikes
1. Economic Strike: Under this type of strike, labourers stop their work to
enforce their economic demands such as wages and bonus. In these kinds of
strikes, workers ask for increase in wages, allowances like travelling
allowance, house rent allowance, dearness allowance, bonus and other
facilities such as increase privilege leave and casual leave.
2. Sympathetic strike: When workers of one unit or industry go on strike in
sympathy with workers of another unit or industry who are already on strike,
it is called a sympathetic strike. The members of other union involve
themselves in a strike to support or express their sympathy with the
members of union who are on strike in other undertakings. The workers of
sugar industry may go on strike in sympathy with their fellow workers of the
textile industry who may already be on strike.
3. General Strike: It means a strike by members of all or most of the unions in a
region or an industry. It may be a strike of all the workers in a particular
region of industry. It may be a strike of all the workers in a particular region of
industry to force demands common to all the workers. These strikes are
usually intended to create political pressure on the ruling government, rather
than on any one employer. It may also be an extension of the sympathetic
strike to express generalized protest by the workers.
4. Sit-down strike: In this case, workers do not absent themselves from their
place of work when they are on strike. They keep control over production
facilities, but do not work. Such a strike is also known as pen down or tool
down strike. Workers show up to their place of employment, but they refuse
to work. They also refuse to leave, which makes it very difficult for employer
to defy the union and take the workers places. In June 1998, all the Municipal
Corporation Employees in Punjab observed a pen-down strike to protest
against the non-acceptance of their demands by the state government.
5. Slowdown strike: Employees remain on their jobs under this type of strike.
They do not stop work, but restrict the rate of output in an organized manner.
They adopt go-slow tactics to put pressure on the employers. Strictly
speaking, slowdown strike is not a strike. The supreme court has held that a
slowdown strike is worse than a strike because there is an element of

cheating in this form of strike. The Supreme court in the case of T.S. Kalawala
vs. Bank of India (1989) has held that wages are to be paid in consideration
of work performed and not for more physical attendance.
6. Sick-out (or sick-in): In this strike, all or a significant number of union
members has call in sick on the same day. They dont break any rules,
because they just use their sick leave that was allotted to them on the same
day. However, the sudden loss of so many employees all on one day can
show the employer just what it would be like if they really went on strike.
7. Wildcat Strike: These strikes are conducted by workers or employees without
the authority or consent of unions. In 2004, a significant number of advocates
went on wildcat strike at the City Civil Court premises in Banglore. They were
protesting against some remarks allegedly made against them by an
Assistant Commissioner.
3.4.2 Lockouts
A lockout may happen for several reasons. When only part of a trade union votes to
strike, the purpose of a lockout is to put pressure on a union by reducing the
number of members who are able to work. For example, if the anticipated strike
severely hampers the work of non-striking workers, the employer may declare a
lockout until the workers end the strike. Another case in which an employer may
impose a lockout is to avoid slowdowns or intermittent work-stoppage.
Lockout, when legal
The Act treats strikes and lockouts on the same basis; it treats one as the
counterpart of the other. The circumstances under which the legislature has banned
strike, it has also at the same time banned the lockout. Thus, what holds good-bad,
legal illegal, justified-unjustified for strikes, holds the same for the lockout. As such,
the provisions of the Act which prohibit the strike also prohibit the lockout.
The object and reasons for which the lockout are banned or prohibited are the same
for which strikes are banned or prohibited. It is because the employer and the
employees are not discriminated in their respective rights in the field of industrial
relationship between the two. As such, lockout, if not in the field of industrial
relationship between the two. As such, lockout if not the conflict with Section 22 and
23 may be said to be legal or not legal. Section 24(1)(iii), 10(3) and 10A(4A)
similarly controls the lockout. A lockout in consequence of illegal strike is not
deemed to be illegal. But if lockout is illegal, Section 26(2), 27 and 28 will come in
operation to deal with the situation. The Act does not lay down any guidelines to
settle the claims arising out of illegal lockout. The courts, therefore have adopted
the technique of apportioning the blame between the employer and employees.
This once again brings to fore the concept of justifiability of labour.
The Statutory Definition

Section 2(1) of Industrial Disputes Act, 1947 defines lockout as the temporary
closing of 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.
A lockout is an antithesis and counterpart of a strike. Just as the employees by going
on a strike stops working, in a lockout the employer has a weapon against the
employees to prevent them to continue to work in the premises.
It generally refers to the action of an employer in temporarily closing down or
shutting down the undertaking or refusing to provide its employees with work, with
the intention of forcing them either to accept the demands made by them or to
withdraw the demands made by them on him.
A delineation of the nature of this weapon of industrial warfare requires description
of:
(1) The
(2) The
(3) The
(4) The

acts which constitute it

party who uses it
party against whom it is directed
motive which prompts resort to it

Prohibition of lockout
Section 22(2) of the Act provides that no employer carrying on any public utility
service shall lockout any of his workmen:
(1) Without giving them notice of lockout as hereinafter provided, within six
weeks before locking out; or
(2) Within 14 days of giving of such notice; or
(3) Before the expiry of the day of lockout specified in any such notice as
aforesaid; or
(4) During the pendency of any conciliation proceedings before a conciliation
officer and seven days after the conclusion of such proceedings.
It makes clear that the employer has to comply with the same conditions before he
declares lockout in his industrial establishment which the workmen are required to
comply with before they go on strike.
3.5 PREVENTION OF INDUSTRIAL DISPUTES
The consequence of an industrial dispute will be harmful to the owners of industries,
workers, economy and the nation as a whole, which results in loss of productivity
profits, market share and even closure of the plant. Hence, industrial disputes need
to be averted by all means. Prevention of industrial disputes is a pro-active
approach in which an organisation undertakes various actions through which the
occurrence of industrial disputes is prevented. Like actions through which the
occurrence of industrial disputes is prevented. Like the old saying goes, prevention
is better than cure.

1. Model Standing Orders: Standing orders define and regulate terms and conditions
of employment and bring about uniformity in them. They also specify the duties and
responsibilities of both employers and employees thereby regulating standards of
their behavior. Therefore, standing orders can be good basis for maintaining
harmonious relations between employees and employers.
Under Industrial Employment (Standing Orders) Act, 1946, every establishment
employing 100 workers or more is required to frame establishment with the workers
or more is required to frame standing orders in consultation with the workers. These
orders must be certified and displayed properly by the employer for the information
of the workers.
2. Code of Industrial Discipline: The Code of Industrial Discipline defines duties and
responsibilities of employers and workers. The objectives of the code are:

To secure settlement of disputes by negotiation, conciliation and voluntary

arbitration.
To eliminate all forms of coercion, intimidation and violence.
To maintain discipline in the industry.
To avoid work stoppage.
To promote constructive co-operation between the parties concerned at all
levels.

3. Works Committee: Every industrial undertaking employing 100 or more workers

is under an obligation to set up a works committee consisting of equal number of
representatives of employer and employees. The main purpose of such committees
is to promote Industrial relations. According to Indian Labour conference, work
committees are concerned with:

Administration of welfare and fine funds.

Educational and recreational activities.
Safety and accident prevention.
Occupational diseases and protective equipment.
Conditions of work such as ventilation, lightening, temperature and sanitation
including latrines and urinals.
Amenities such as drinking water, canteen, dining rooms, medical and health
services.

The following items are excluded from the preview of the work committees.

Wages and allowances

Profit Sharing and bonus
Programmes of planning and development
Retirement benefits
PF & gratuity
Housing and transport schemes

Incentive schemes
Retirement and layoff

4. Joint Management Councils: Just to make a start of labour participation in

management, the Government suggested in its Industrial Resolution, 1956, powers
to set up joint management councils. It consists of equal number of workers and
employers (minimum six and maximum 12). Decisions of the JMC should be
unanimous and should be implemented without any delay. JMC members should be
given proper training. JMC should look after three main areas:
1. Information sharing
2. Consultative
3. Administrative
Representative of workers to the JMCs should be based on the nomination by the
representation.
Its objectives are:

Satisfy the psychological needs of workers.

Improve the welfare measures.
Increase the workers efficiency.
Improve the relation and association between workers, managers and promoters.

JMC deals with matters like:

Employee welfare
Apprenticeship scheme

5. Suggestion Schemes: The objective of these schemes is to encourage the

employees to come up with suggestions which will help the organisation to improve
the productivity and solve problems by which the quality will improve. The viable
suggestions are rewarded with cash prizes and other incentives.
6. Joint Councils: Joint councils are set up for the whole unit and deals with matter
relating to optimum production & efficiency and the fixation of productivity norms
for man and machine for the unit as a whole. In every industrial unit employing 500
and more workers, there should be a Joint Council for the whole unit.
Features and functions of joint councils

Members of the council must be actually engaged in the unit.

The chief executive of the unit will be the chairman of the council and vice
chairman will be nominated by worker members.
Term of the council will be two years.
JC shall meet at least once in a quarter.

Decision of the council will be based on consensus and not on voting.

Optimum use of raw materials and quality of finished products.
Optimum production, efficiency and function of productivity norms of man and
machine as a whole.
Preparation of schedules of working hours and of holidays.
Adequate facilities for training.
Rewards for valuable and creative suggestions received from workers.

7. Collective Bargaining: Collective bargaining is a process in which the

representatives of the employer and of the employees meet and attempt to
negotiate a contract governing the employer-employee union relationship.
Collective bargaining involves discussion and negotiation between two groups as to
the terms and conditions of employment.
8. Labour Welfare Officer: The Factories Act, 1948 provides for appointment of a
labour welfare officer in every factory employing 500 or more workers. The officer
looks after all facilities in the factory provided for the health, safety and welfare of
workers. He maintains liaison with both the employer and the workers, thereby
serving as communication link and contributing towards healthy industrial relations
through proper administration of standing orders, grievance procedure, etc.
9. Tripartite Board: Several tripartite bodies have been constituted at central,
national, and state levels. The Indian Labour Conference, Standing Labour
Committees, Wage Boards and Industrial Committees operate at the central level.
At the state level Labour Advisory Boards have been set up. All these bodies play an
important role in reaching agreements on various labour-related issues. The
recommendations given by these bodies are however advisory in nature and not
statutory.
3.6 MACHINERY FOR SETTLEMENT OF INDUSTRIAL DISPUTES
The machinery for settlement of disputes are:
1. Conciliation: Conciliation refers to the process by which representatives of
employees and employers are brought together before a third party with a view to
discuss, reconcile their differences and arrive at an arrangement through mutual
consent. The third party acts as a facilitator in this process. Conciliation is a type of
state intervention in settling industrial disputes. The Industrial Disputes Act, 1947
empowers Central and State governments to appoint conciliation officers and a
Board of Conciliation as and when situation demands.
Conciliation or mediation signifies third-party intervention in promoting the
voluntary settlement of disputes. It is equated with mediation. The International
Labour Organisation describes conciliation as a 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.
Conciliation Officer: The appropriate government may, by notification in the official
gazette, appoint such number of persons as it thinks fit to be the conciliation officer.
The duties of a conciliation officer are:

To hold conciliation proceedings with a view to arrive at amicable settlement

between the parties concerned.
To investigate the dispute in order to bring about the settlement between the
parties concerned.
To send a report and Memorandum of Settlement to the appropriate government.
To send a report to government starting forth the steps taken by him in case of
no settlement has been reached at.

The conciliation officer, however has no power to force a settlement. He can only
persuade and assist the parties to reach an agreement. The Industrial Disputes Act,
1947 prohibits strikes and lockouts during the time when the conciliation
proceedings are in progress.
2. Arbitration: A process in which a neutral third party listens to the disputing
parties, gathers information about the dispute, and then takes a decision which is
binding on both the parties. The Conciliator simply assists the parties to come to a
settlement, whereas the Arbitrator listens to both the parties to come to a
settlement, whereas the Arbitrator listens to both parties and then gives his
judgement. Arbitration can be either voluntary or mandatory(although mandatory
arbitration can only come from a statute or from a contract that is voluntarily
entered into, where the parties agree to refer all disputes to arbitration, without
knowing specifically, what disputes will ever occur) and can be either binding or
non-binding.
Non-binding arbitration is, on the surface, similar to mediation. However, the
principal distinction is that whereas a mediator will try to help the parties find a
middle background on which to compromise, the (non-binding) arbitrator remains
totally removed from the settlement process and will only give a determination of
liability and, if appropriate, an indication of the quantum of damages payable.
Advantages of Arbitration

It is established by the parties themselves and therefore both parties have good
faith in the arbitration process.
The process is informal and flexible in nature.
It is based on mutual consent of the parties and therefore helps in building
healthy Industrial Relations.

Disadvantages of Arbitration

Delay often occurs in the settlement of disputes.

Arbitration is an expensive procedure and the expenses are to be shared by the
labour and the management.
Judgement can become arbitrary when the arbitrator is incompetent or biased.

There are two types of arbitration:

Voluntary arbitration: In voluntary arbitration, the arbitrator is appointed by both

the parties through mutual consent and the arbitrator acts only when the dispute
is referred to him.
Compulsory arbitration: It implies that the parties are required to refer the
dispute to the arbitrator whether they like him or not.

Usually, when the parties fail to arrive at a settlement voluntarily, or when there is
some other strong reason, the appropriate government can force the parties to refer
the dispute to an arbitrator.
3. Adjudication: Adjudication is the ultimate legal remedy for settlement of industrial
disputes, Adjudication means intervention of a legal authority appointed by the
government to make a settlement which is binding on both the parties. In other
words, adjudication means a mandatory settlement of an industrial dispute by a
labour court or a tribunal. For the purpose of adjudication, the Industrial Disputes
Act provides a 3-tier machinery:
a) Labour Court: The appropriate government may, by notification in the official
gazette, constitute one or more labour courts for adjudication of industrial disputes
relating to any matters specified in the second schedule of Industrial Disputes Act.
They are:

Dismissal or discharge or grant of relief to workmen wrongfully dismissed.

Illegally or otherwise of a strike or lockout.
Withdrawal of any customary concession or privileges.

Where an industrial dispute has been referred to a Labour court for adjudication, it
shall hold its proceedings expeditiously and shall, within the period specified in the
order referring such a dispute, submit its report to the appropriate government.
The labour court was established in 1946 (following the enactment of Industrial
Relations Act, 1946). In its main functions were to adjudicate in trade disputes and
to provide a conciliation service. Other functions given to the court included the
establishment of Joint Labour Committee and the registration of employment
agreements and Joint Industrial Councils.
The Labour court provides a free, comprehensive service for the resolution of
industrial relation disputes and deals also with matters arising under employment

equality, organization of working time, national minimum wage, part-time work,

fixed-term work and safety, health and welfare at work legislation.
The labour court is not a court of law. It operates as an Industrial relations tribunal,
hearing both sides in trade disputes and then issuing recommendations setting out
its opinion on the dispute and the terms on which it should be settled. While these
recommendations are not binding on parties concerned, the parties are expected to
give serious consideration to the courts recommendation. Ultimately, however,
responsibility for the settlement of the dispute rests with the parties.
b) Industrial tribunal: The appropriate government may, by notification in the official
gazette, constitute one or more industrial tribunals for the adjudication of industrial
disputes relating to the following matters:

Wages
Compensatory and other allowances
Hours of work and rest intervals
Leave with wages and holidays
Bonus, profit-sharing, PF, etc
Rules of discipline
Retrenchment of workmen
Working shifts other than in accordance with standing orders.

It is also the duty of industrial tribual to hold its proceedings expeditiously and to
submit its report to the appropriate government within the specified time. The
tribunal hears disputes in the public but it may hold private sittings. Statements of
cases are asked of the parties who are then given an opportunity to support their
cases by oral pleading. Subject to the rules laid down under the Act, the tribunal is
free to regulate its own procedures but it is expected to observe the rules of natural
justice and to decide on the substantive merits of the case in front of it. Awards or
decisions are binding on both parties.
The parties are not free unilaterally to seek a revision within a year. They may,
however, ask for an interpretation if the need arises. Enforcement of the tribunals
decision vests in the tribunal itself. The minister is empowered to ask the tribunal
for advice in regard to matters relating to trade disputes.
In cases of unfair dismissal, the tribunal may order re-instatement of the employee
or award compensation. In its awards, the tribunal is expected to refrain from any
decision or consistent with any law or regulation regarding conditions of
employment. The tribunal is forbidden from encroaching upon the Public Service
Commission.
No application fee or court fees are payable. The only real expenses are the
transcripts which are obtained at a reasonable fee from the law courts transcribes
and the fee due to the person assisting the applicant.

c) National Tribunal: The Central Government may, by notification in the official

gazette, constitute one or more national tribunals for the adjudication of industrial
disputes in:

Matters of national importance.

Matters which are of a nature such that industries in more than one states are
likely to be interested in, or are affected by the outcome of the dispute.

It is the duty of the national tribunal to hold its proceedings expeditiously and to
submit its report to the Central Government within the stipulated time. The Central
Government may, by notification in the Official Gazette, constitute one or more
national industrial tribunals 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.
A national tribunal shall consist of one person only to be appointed by Central
Government. A person shall not be qualified for appointment as the presiding officer
of a national tribunal unless he is, or has been a Judge of a High Court. The Central
Government may, if it so thinks fit, appoint two persons as assessors to advise the
national tribunal in the proceeding before it.

CHAPTER 4 MEDIATION AND CONCILIATION, ARBITRATION AND ADJUDICATION

4.1 INTRODUCTION
After collective bargaining, Mediation and Conciliation are equivalent terms
referring to the same kind of third-party intervention in promoting the voluntary
settlement of disputes.
Conciliation is limited to encouraging the parties to discuss their differences and
to help them develop their own proposed solutions. Mediation on the other hand,
implies a stronger form of intervention, and a mediator may be permitted to offer
proposals to the parties for settlements.
The distinction between the two terms tends to disappear in industrial relations and
there is no consistency in their use from one country to another.
Conciliation and mediation, together with good offices, have always been important
in the field of international relations for the peaceful settlement of conflicts between
states. Conciliation and mediation likewise have their importance in industrial
relations as well. In this field, this method of settling disputes has been used most
frequently and intensively.
Mediation is the ancient art of the peacemaker. It has been practiced in a number
of areas when people disagree; it is an ancient and honourable process for the
settlement of disputes between warring nations, between litigants, between labour
and management and in general disputes between people.
4.2 FUNCTIONS AND PROCESS OF MEDIATION

Mediation is a process by which a third party brings together the opposing groups
not only to iron out the differences between them but also to find an answer to
problems or specified proposals and offer alternative suggestions.
Mediation is an attempt at settling disputes with the help of an outsider who assists
the parties in negotiations. The mediator has been described as a confidential
adviser and an industrial diplomat. He performs a messengers service for the
parties and does not impose his will or his judgement upon them. He helps the two
parties to come to an agreement of their own accord. He suggests solutions based
on knowledge and experience, which both parties, if they have confidence in him,
may agree to accept. He has a wide range of man oeuvre. At one end of the range,
mediation simply means getting the parties to talk to each other until they reach a
settlement. At the other extreme, mediation means the deliberate effort to
introduce and explore proposals which might lead to settlement.
Mediation contemplates affirmative and positive action by a third party to bring
about a settlement of disputes. It encourages the employers and the union to come
to a decision without any force or orders from the mediator. He does not exercise
any compulsion; he cannot and should not undertake to decide what parties should
do; he may advance various considerations, but certain evaluations and judgements
must be left to the parties themselves.
In this section we have tried to analyse the role of mediation.
4.3 KINDS OF MEDIATIONS
In this section we will discuss the different kinds of mediations. According to
Professor Pigou, there are three kinds of mediators:

The eminent outsider

The non-governmental board
The board connected with some part of the governmental system of the country

These mediators are not mutually incompatible but can be advantageously used to
supplement one another.
Essentials of success of Mediation
Mediation can be made a more effective and successful device if the following
measures are adopted:
1) Mediation can work only in a climate of consent. A mediator has to be
acceptable to both parties.
2) The mediator must be an impartial and unprejudiced person, having influence on
the parties, and must infuse confidence in them. He must have full knowledge of
the case and have extraordinary patience and willingness to hear both the
parties.

3) Mediation should take place in a proper setting.

4) Mediation should not be used as a substitute for bargaining but as a supplement
when such bargaining reaches an impasse. It should basically try to strengthen
collective bargaining.
4.4 CONCILIATION
Conciliation is the most important method for the prevention and settlement of
industrial disputes through third party intervention.
Conciliation may be described as 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 an
agreed solution. It is a process of rational and orderly discussion of differences
between the parties to a dispute under the guidance of a conciliator.
It is a process by which representative of workers and employers are brought
together before a third person or a group of people with a view to persuading them
to arrive at an agreement by mutual discussion between them.
As a process of peacemaking in industrial relations, conciliation tends to bring about
a speedy settlement of disputes without resorting to strikes or lockouts, and to
hasten the termination of work stoppages when these have occurred.
Its function is to assist the parties to move toward a mutually acceptable
compromise or solution.
The conciliator is a neutral third party who, without using force, seeks to find some
middle course for mutual agreement between the disputants. He tries to bridge the
gulf between the two contending parties; and if he does not succeed, he at least
tries to reduce the differences, as far as possible, by tendering advice to the parties
and bringing them close to a settlement. Thus, he is a mere go-between; his duty is
not to suggest solutions of dispute, but to make suggestions for alternative
solutions. He tries to persuade the parties to have a fresh viewpoint and a different
outlook. He acts as a catalyst in the process of reaching an agreement. He never
gives his judgement on the issues. He may suggest possible lines of solution, or he
himself may propose term of settlement if such a course is in accordance with
national practice but the parties have right to decide whether to accept the
suggestions or proposals. He cannot impose terms of settlement on them.
A unique essential characteristic of the conciliation process is its flexibility,
informality and simplicity, which sets it apart from other methods of settling
industrial disputes. A conciliator generally does not follow the same procedure in
every case. He adjusts his approach, strategy and techniques to the circumstances
of each dispute.
Conciliation and Collective Bargaining

The practice of conciliation in industrial disputes has developed mainly in

connection with disputes arising from the failure of collective bargaining.
Conciliation has thus been described as an extension of collective bargaining with
third party assistance, or simply as assisted collective bargaining.
The voluntary settlement which is the aim of conciliation implies that the parties
have reached an agreement, which is as much a collective bargaining agreement as
the one resulting from unaided direct negotiations between parties. Viewed from
another angle, collective bargaining is a process of joint decision making.
Essentially, the same process is involved in conciliation, and although the conciliator
participates in it, the joint decision which is aimed at is one made by the parties
themselves.
Conciliatory Machinery
Conciliation officer and Conciliation Board
Conciliation has essentially been regarded as a one-man job. In other countries, it is
variously called a board, a council or a committee of conciliation, or simply referred
to as a conciliation board.
In India, the government may appoint a conciliation officer for a specific area or
even for a specific industry, if it thinks fit under section 4 of the Industrial Disputes
Act, 1947. He may be appointed either permanently or for a limited period. Under
Section 5 of the same Act, the government may also, as occasion arises, appoint a
Board of Conciliation, consisting of a Chairman and two to four other members, to
promote the settlement of disputes.
The Boards of Conciliation are rarely appointed by the Government these days. The
original intention was that a major dispute should be referred to a board and minor
disputes should be handled by the conciliation officer.
Conciliation is a method of settling disputes appears to be effective when it is
carried on by means of permanent machinery.
As regards the constitution of the machinery, it is essential that the representatives
(especially of the employees) should have confidence in their clients. With regards
to procedures, it may be noted that everything that may generate irritation and bad
blood should be executed from the machinery. This obviously means that
technicalities and lawyers should not be admitted before such machinery. This will
reduce the intensity of opposition between the parties.
4.5 ARBITRATION
Arbitration is a means of securing an award on a conflict issue by referring it to a
third party. It is a process in which a dispute is submitted to an impartial outsider
who makes a decision which is usually binding on both the parties. It is a process

where there is hearing and a determination of a cause between parties in dispute

with each other, by a person or persons chosen by them or appointed under a
statutory provision. The main objective of arbitration is adjudication and hence
there is no place for compromise in awards though the parties are at a liberty to do
so. The arbitrator enforces his own point of view on the contending parties and the
opinions of the disputants are not given any predominance. Moreover, arbitration is
more judicial in character.
4.5.1 Conciliation, Arbitration and Mediation: A Comparison
The basic differences among conciliation, arbitration and mediation can be specified
as follows. Conciliation is different from arbitration, not only by reason of the fact
that the decision under arbitration is binding on both the parties, but also by reason
of its different approach and spirit. The main objective of arbitration is adjudication
and hence, there is no place for compromise in awards through the parties are at
liberty to come to a compromise. A conciliator, on the other hand, has to reconcile
the recommendations to the parties. As long as he brings about an agreement
between the contending parties, an arbitrators aim is to make an award which he
considers would be mutually acceptable to the parties. An arbitrator usually
conducts a hearing of the parties and makes his award or decision afterwards.
Arbitration proceedings do not necessarily follow the formal course of judicial
proceedings. Conciliation proceedings are less formal. While arbitration proceedings
require the presence of both the parties, the holding of a joint meeting is only one of
the ways in which a conciliator performs his task.
Arbitration is a judicial process while mediation has a legislative tinge. The award of
the arbitrator is based on equity and justice; there is no scope for compromise;
while compromise is the very essence of mediation. The arbitrators award is
binding whereas that of the mediator is not. Arbitration often leads to the
termination of the dispute, but mediation may, or may not end the dispute.
4.5.2 Advantages of Arbitration
(1) Arbitration has been popular in foreign countries, particularly USA, Canada, New
Zealand, Malaysia, because of the advantages of this system, which are: Since it is
established by the parties themselves, arbitration has the particular advantage of
bringing the dispute settlement procedure sown to the level of the parties to the
dispute.
(2) Since arbitration is established by agreement, it is more than flexible than other
procedures and can be adjusted to the views, desires and experience of the parties
and to the circumstances obtaining in the undertaking or industry.
(3) This procedure, operating at the level closest to the parties to the disputes, has
the advantage of enabling the arbitrators to acquire much greater familiarity with

the characteristics of the particular industry or undertaking than most courts or

tribunals.
(4) The procedure is relatively expeditious when compared to that in ordinary courts
or labour tribunals. It cut down delays and results in a prompt settlement of
differences.
(5) It is informal in character because the disputes are handled by the parties
themselves, often without recourse to lawyers. Arbitration, therefore is less
expensive than other procedures.
(6) Awards are capable of implementation without any grudge on the part of both
the parties to dispute and do lead to further chances of litigation.
(7) Since arbitration is based on the consent of both the parties, it helps build up a
sound based for healthy industrial relations, mutual understanding and cooperation.
(8) It is popular because it is suitable and compelling. It is far better than a costly
work-stoppage, even though not wholly satisfactory from either parties point of
view.

4.5.3 Disadvantages of Arbitration

Contrary to these claims, arbitration has also been opposed on the following
grounds:
(1) It deprives labour of its right to go in a strike, for there is often a provision in
the agreement that the trade unions and workers will refrain from a strike
during the continuance of the agreements.
(2) Judgement is often arbitrary and ill-advised as the arbitrators are not wellversed in economic and technical aspects of the industry.
(3) Arbitrators are often biased against labour and the award is therefore, usually
not in its favour.
(4) Delay often occurs in arriving at the award and settlement of disputes. This
leads to a breakdown in the morale of members.
(5) Though arbitration is an essential element for better labour-management
relations, its availability may lead to less dependence on negotiations and the
conditions imposed by a third party may be resented.
(6) Too much arbitration is not a sign of a healthy relationship which finds it
necessary to leave the disposition of disputes to third parties. They do so
often because they have not learnt how to solve their own problems or how
to lie with one another. Therefore, too frequent arbitration is not only costly
and time-consuming but promotes a hostile and rigid relationship between
the parties.

4.5.4 Procedure for Investigation

After the dispute has been referred to the arbitrator, he will hear out both the
parties. Hearing involves mastery of the facts of a particular dispute as well as the
relevance provisions of the past practices of the parties in relation to matters
relevant to the dispute.
After the collection of facts and supporting materials, arguments take place. Certain
principles are followed by an arbitrator while dealing with a particular dispute,
namely:
(1) Fair hearing, which demands that an opportunity should be given to be heard
and cross-examined.
(2) Principle of natural justice requires that a party should have due notice of
proceedings, and it must know what are the issues involved and what part it
has to play.
(3) The party should be firm to give any evidence which is relevant to the
enquiry and on which it relies for its arguments. The evidence given by one
party should be taken in presence of the other party so that the other party
may place counter evidence, if necessary.
(4) The arbitrator should not rely on any document which is not shown and
explained to the other party and to which a reply has not been received. He
has to be completely impartial without any bias or prejudice against anybody.
4.6 QUALITIES OF A CONCILIATOR AND AN ARBITRATOR
There are certain basic characteristics which are essential to the work of a
conciliation and arbitration. For conciliation as well as arbitration to be successful,
the conciliators and the arbitrators must have some specific qualities. In subsequent
sections we will discuss about these qualities: 4.6.1 Qualities of a Conciliator
The qualities needed in a conciliator are as follows:
(1) Independence and impartiality are the two attributes which every conciliator
should possess. He must be above suspicion; both parties must have
confidence in his integrity and neutrality. He should be independent enough
not to be swayed or influenced by others. He should be able to resist under
pressures or persuasion from powerful employers or unions.
(2) A conciliator should be physically and psychological fit for the rigorous task.
He must have a strong and deeply held conviction of the importance and
usefulness of conciliation. Conciliation is an expression of one of the highest
virtues which can be practiced.
(3) A conciliator should never allow conciliation proceedings before him to
constitute mere formality or a step on the road to arbitration.

(4) A conciliator must have the ability to get along well with people. He must be
a specialist in human relations. He must be honest, polite, tactful, selfconfident, even-tempered and patient in trying to achieve results.
(5) He must have not only the tact and ability to guide and control their joint
discussions, but must also have a sense of responsibility, clear-headedness
and mature judgement. He must be able to show others that he possesses
enough common sense and practical mindedness.
(6) A conciliator should have a friendly personality, a sense of humour and have
a gift for relieving tensions at joint discussions. A nimbleness of mind will
enable him to grasp quickly and analyse rapidly the main elements of
controversy.
(7) A conciliator should be well acquainted with the laws and regulations
concerning industrial relations and the settlement of industrial disputes. He
should be familiar with the industrial relations systems e.g. the development
and structure of a trade union and employers associations the prevailing
methods of collective bargaining; negotiating procedures and practices; the
operation of the agreed negotiating bodies set up by the parties; the main
causes and patterns of disputes.
(8) He should be well-trained in different aspects of the management process. He
should have some knowledge of products and services, the production
methods, practices etc. knowledge about wage rates and other financial
matters, incentive schemes and an understanding of traditional outlooks and
cultural peculiarities and of the way in which they affect labour relations.
(9) He must have the ability and versatility to form judgements. He should,
therefore, acquire knowledge from personal experience and observations.
4.6.2 Qualities of an Arbitrator
The arbitrator must have the qualities to ensure that they fulfill the responsibilities
for making decisions related to the disputes, which the disputants have entrusted
upon them. These qualities are:
(1) An understanding of the complexities of the labour-management
relationships.
(2) Knowledge of collective bargaining and the operation of the arbitration
procedures as well as skill and experience in the interpretation of collective
agreements and familiarity with the personnel policies, industrial discipline
and human relations.
(3) High integrity. Arbitrators should be unbiased persons with a deep sense of
impartiality. They should be free from any commitment to, or prejudice in
favour of one side or the other.
(4) Commitment to the maintenance of harmonious labour-management
relations and strong belief in the importance of successful arbitration.
(5) They must be acceptable to both parties.
4.7 ROLE OF THE CONCILIATOR

The conciliator induces the parties to a course of action. His intervention in the
dispute creates for the parties a situation different from one of direct confrontation.
The conciliator opens to the parties a variety of available options besides those
which they can think of themselves. By promoting their attitudes and screening in
what fields they may be prepared to show some flexibility, he gains a perspective of
the issues in dispute and of alternative possibilities of settlement. These options
may vary in number according to nature of the issues involved, and they may be
available in respect of a single issue or a combination of issues.
The conciliator controls the timing for the selection of an option, the acceptable
settlement of which, by the parties may vary from time to time.
The role of conciliator may be discussed under following heads:
1. Discussion leader: As a discussion leader, the conciliator reduces irrationality
and antagonism between the parties. He guides them towards a problem
solving approach to their dispute, he ensures that they discuss their
difference in as friendly manner as possible; he helps them to analyse their
problem, always striving to keep the analysis on a rational plane; he identifies
the elements of the problem, both for the parties benefit and for his own.
2. Safety Valve: The conciliator places himself in the position of an alternative
target when he feels that the parties are in an aggressive mood. By setting a
substitute target, the parties can achieve an emotional release without direct
and immediate damage to the negotiations.
3. Communication link: The conciliator fulfills an important function as a
communication link between the parties. Serving as a communication link
may either constitute his main conciliatory effort or be a contribution to it.
4. Innovator: The conciliator acts as an invaluable source of new information
and new thoughts, particularly in providing the parties with different views on
issues, with possible alternative solutions and possible an entirely new
approach.
5. Sounding board: He is often described as a flying ambulance squad,
appearing whenever or wherever a collision or conflict, which threatens to
disturb harmonious relations, occurs or is apprehended to occur between
interests of parties.
6. Protector: The conciliator plays a protecting role, for he readies the parties for
collective bargaining positions by exploring alternative solutions during
separate meetings.
7. Fail safe device: The conciliator often assists a party which has overstated its
position to the extent of bluff or exaggeration of its reaction to some move on
the part of the other or taken a clearly untenable stance to withdraw
gracefully under the banner of reason.
8. Stimulator: Sensing the need for positive action, the conciliator can provide
necessary impulse to a settlement, he makes a concise statement, supplies
some date, gives a hint or suggestion. He crystallises change of opinion in the

course of discussions by intervening at the appropriate moment and giving

such ideas a concrete form.
9. Adviser: The conciliator tries to remove misunderstandings regarding the
others position, intention and capabilities. He tries to see that
misinterpretation does not occur and that each side thoroughly understands
the others point of view, obtain a picture of the opponents strength and
realizes its own limitations and weaknesses.
4.8 ADJUDICATION IN INDIA
The last recourse for the settlement of an unresolved dispute is its reference to
adjudication by the government. Adjudication involves intervention in the dispute by
a third party appointed by the government for the purpose of deciding the nature of
final settlement.
On receiving the failure report of the conciliation, the government has to decide
whether it would be appropriate to refer the dispute to adjudication. The reason
behind opting for adjudication is that the developing countries cannot afford to
suffer the loss of production resulting out of strikes and lockouts. Hence, the
government intervenes and refers the disputes to the adjudication machinery.
The supreme court has emphasised the importance of adjudication by considering it
on par with the decisions on fundamental rights under the Constitution in the
following words:
As in the decision of the constitutional question of this kind, so in adjudication, it is
always a matter of making reasonable adjustments between the two competing
claims. The fundamental right of the individual citizen is guaranteed and its
reasonable restriction is permissible in the interest of the general public have to be
weighed and balanced against the claims of the individual citizen in regard to his
fundamental right. So, too, in this case of adjudication, the claims of the employer
based on the freedom of contract have to be adjusted with the claims of industrial
employees for social justice.
Hence, the adjudication machinery has to consider not only the demands of social
justice but also claims of the national economy. This requires attempts to secure a
fair share for the workers in the national income. On the other hand, the
adjudication machinery has also to take care that this attempt at fair distribution
does not dry out the source of the national income itself.
4.8.1 Types of Adjudication
Once the government receives a report on the failure of conciliation proceeding, it
has to decide whether it would be appropriate to refer the dispute to arbitration.
When both the parties agree to refer the dispute to adjudication, at their own
accord, it becomes obligatory on the part of the government to make a reference to

adjudication. This is called Voluntary Adjudication as it is made by government

without the consent of either or both the parties to the dispute it is known as
Compulsory Adjudication.
4.8.2 Three-tier System of Adjudication
In India, we have a three-tier system of adjudication, which has been provided for in
the Industrial Disputes Act, 1947. The following are the adjudicating bodies which
decide the disputes referred to them by the appropriate government and pass
awards.
1. Labour Courts: The labour courts adjudicate upon disputes listed in the
Schedule II of the Industrial Dispute Act. The labour court usually deals with
matters which arise out of the day to day working of an undertaking. One or
more labour courts may be constituted by the appropriate government.

Constitution
A labour court shall consist of one person only who:
1. Is or has been a judge of a High Court; or
2. Has been, for a period of not less than 3 years, a District Judge; or
3. Has held any judicial office in India for not less than 7 years.
No person shall be appointed or continue in the office of the labour court if he is not
an independent person, or if he has attained the age of 65.
The duties of the labour court are:
1. To hold adjudication proceedings expeditiously; and
2. Submit its award to the appropriate government as soon as possible on the
conclusion of proceedings.
Jurisdiction
The jurisdiction of the labour courts extends to the adjudication of the following
disputes relating to matters specified in the Second Schedule:
1. The propriety or legality of an order passed by an employer under the
standing orders.
2. The application and interpretation of Standing orders.
3. Discharge or dismissal of workers, including reinstatement of, or grant of
relief to workers wrongfully dismissed.
4. Withdrawal of any customary concession or privilege
5. Illegality or otherwise of a strike or lockout.
6. All matters other than those specified in the Third Schedule of the Act.

Labour courts do not have supervisory jurisdiction, i.e., it cannot act as a guardian
of an industrial establishment.
2. Industrial Tribunals: The industrial tribunals adjudicate upon disputes listed in
schedule II or III of the Industrial Disputes Act. The appropriate government may
appoint one or more industrial tribunals. The matters which are in the form of new
demands and give rise to industrial disputes which affect the working of a company
or industry are usually referred to an industrial tribunal. The industrial tribunal may
be appointed for a limited period on an ad hoc basis or permanently.
Constitution
A tribunal shall consist of one or more persons such as:
1. Are or have been Judge(s) of a high court;
2. Are or have been District Judge(s) for a period of not less than 3 years;
3. Hold or have held the office of the chairman or any other member of Labour
Appellate Tribunal or any tribunal for a period of not less than 2 years.
The government may, if it thinks fit, also appoint two persons as assessors to advise
the tribunal in the proceedings before it.
The functions and duties of the industrial tribunal are very similar to those of a body
discharging judicial functions. Although it is not a court, it has all the necessary
attributes of a court of justice. It may create a new obligation or modify contracts. In
the interest of industrial peace, protect legitimate trade union activities and prevent
unfair trade practices and victimization. The tribunals are required to give awards
based on circumstances peculiar to each dispute; and they are to a large extent,
free from restrictions of technical considerations or rules of evidence imposed on
courts.
Jurisdiction
An industrial tribunal has a wider jurisdiction than the labour courts. It has
jurisdiction over any matter specified in the Second or the Third Schedule. The
jurisdiction covers the promotion of social justice, that is, fairness in the
adjudication proceedings to all the concerned parties. The matters specified in the
Third Schedule are:
1.
2.
3.
4.
5.
6.
7.
8.
9.

Wages, including the period and mode of payment.

Compensation and other allowances.
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 the standing orders.
Classification of grades.
Rules of discipline.
Rationalisation.

10.Retrenchment of workmen and closure of an establishment.

11.Any other matter that may be prescribed.
The Industrial Tribunal has to hold the judicial proceedings expeditiously and submit
its award to the appropriate government as soon as practicable, on the conclusions
of proceedings.
3. National Tribunals: The national tribunals adjudicate upon disputes which are of
national importance, or when the dispute is of such a nature that it will affect
industrial establishments in more than one state. The Central government may, by a
notification in the official Gazette, constitute one or more national tribunals.
Constitution
A national tribunal shall consist of one person only to be appointed by the Central
Government, who:
1. Is or has been a judge of a High court; or
2. Has held the office of the chairman or any other member of the Labour
Appellate Tribunal for a period of not less than 2 years.
If the Central Government thinks fit, it may appoint two persons as assessors to
advise the National Tribunal on the proceedings before it.

CHAPTER-5 GRIEVANCE PROCEDURE

5.1 INTRODUCTION
In the last unit, we have seen the evolution of industrial relations policies. There is
hardly a company where employees do not have grievances which may be real or
false. The term grievance is used to designate claims by workers of a trade union
concerning their individual or collective rights under an applicable collective
agreement, individual contract of employment, law regulations, work rules, custom
or usage. Such claims involve questions relating to the interpretation or application
of the rules. The term grievance is used in some countries to designate this type of
claim, while in some other countries reference is made to disputes over right or
legal disputes. Grievances can arise due to any reason. Generally, a complaint
affecting one or more workmen constitutes a grievance. It may relate to the
quantum of wages, mode of payment, overtime, leave etc. Many of the industrial
disputes that result in grave repercussions originate from minor grievances. If such
grievances are amicably settled in time, many disputes could be prevented.
5.2 MEANIGN OF GRIEVANCE
Defining a grievance is a difficult task. Personnel experts have attempted to
distinguish between dissatisfaction, complaint and grievance. Dissatisfaction is any
state of feeling of discontent, whether innate and unexpressed or expressed. A
dissatisfaction which is made known by one employee to another, verbally, is known
as a complaint. A complaint becomes a grievance when this dissatisfaction, which is
mostly related to work, is brought to the notice of the management.
Definitions

A written complaint filed by an employee, claiming unfair treatment or any real or

imagined feelings of personal injustice which an employee has concerning his
employment relationship.
Grievance is any discontent or dissatisfaction, whether expressed or not, whether
valid or not, arising out of anything connected with the company which an
employee thinks, believes and even feels to be unfair, unjust or inequitable.
A complaint of any one or more workers in respect to wages, allowances, conditions
of work and interpretation of service stipulations, covering such areas as overtime,
leave, transfer, promotion, seniority, work assignment and discharge constitute
grievance.
Grievance cover dissatisfaction and may have the following characteristics:
a)
b)
c)
d)

It may be unvoiced or expressly stated.

It may be written or verbal.
It may be valid and legitimate, untrue or false or ridiculous.
It may rise out of something connected with the organisation or work- an
employee feels injustice has been done to him.

Grievance generally gives rise to unhappiness, frustration, discontent, poor morale,

etc.
5.3 CAUSES OF GRIEVANCE
Grievance generally arise from the day-to-day working relations in an undertaking,
usually with a worker or trade union protesting against an act or omission of
management that is considered to be violating workers rights. Grievance arise
because of issues like discipline and dismissal, the payment of wages and other
fringe benefits, working time, over-time and time off entitlements, promotions,
demotion and transfer, rights deriving from seniority, rights of supervisor and union
officers, job classification problems, the relationship of work rules to the collective
agreement and the fulfillment of obligations relating to safety and health as laid
down in the agreement. If these grievances are not resolved at the earliest than
they may lead to industrial strike.
Now we will look at some of the causes of grievances specified by some
management specialists.
Calhoon observes:
Grievances existing in the minds of individuals are produced and dissipated by
situations are fostered or healed by group pressures, are adjusted or made worse by
supervisors and are nourished or dissolved by the climate in the organisation which
is affected by all the above factors and by the management.
Better and others have given causes of grievance as follows:

Concerning wages
Concerning supervision
Concerning individual advancement
General working conditions
Collective bargaining

According to S. Chandra, the main causes of grievances are:

Promotion
Amenities
Continuity of service
Compensations
Disciplinary matters
Fines
Increments
Leave
Medical benefit
Nature of Job
Payment of wages, etc.

5.4 PROCEDURE FOR SETTLEMENT

In this section, we will discuss the need for a grievance procedure. The need can be
divided into primary need and secondary need.
Primary Need
1. Without proper analysis of a grievance, its nature and pattern, the cause of
employee dissatisfaction cant be removed.
2. Moreover, a detailed study helps in finding out the best possible method of
settling them.
Secondary Need
1. The procedure brings uniformity in handling the grievance.
2. It serves as an outlet for employee gripes, discontent and frustrations.
3. If an explosive situation develops, it can be promptly attended to if a
grievance handling procedure is already in existence.
4. Supervisors are not adequately trained to handle all sorts of grievance, and
thus a proper machinery is required. It also reduces the burden on the
supervisors.
5. The management has the complete authority to operate the business as it
sees fit, abiding by the legal and moral obligations and the contracts it has
entered into with its employees or their representative Trade Unions. If the

trade union does not like the way the management functions, they can
submit their grievance in accordance with the procedure laid down.
The procedure for the settlement of grievances is sometimes established by way of
legislation or often with the help of general agreements between the central
organisations of the employees and workers. In India the matter regarding the
formulation of a grievance procedure was referred to the 15 th session of the Indian
Labour Conference, 1957 which formulated the Code of Discipline, laying down that
the management and unions would establish upon a mutually agreed basis, a
grievance procedure which will ensure speedy and full investigation leading to
settlement. The guiding principles to be adopted by the parties for the Model
Grievance Procedure were settled in a tripartite committee in September 1958.
The industrial Disputes (Amendment) Act 1982, provides for the reference of certain
individual disputes to grievance settlement authorities. Section 9C of the Act
stipulates that in every establishment in which one hundred or more workmen are
employed or have been employed on any one day in the preceding twelve months,
the employer shall set up a time bound grievance redressal procedure.
A grievance procedure is a formal process which is a formal process which is
primarily for an arbitration, which enables the parties involved to attempt to resolve
this difference in a peaceful, orderly and expeditious manner. It has been pointed
out that adequate measures for establishment of a grievance are essential for
promotion and maintenance of good labour management relation and high degree
of efficiency.
The detail of the grievance procedure varies from industry to industry depending
upon various factors. The procedures may have as few as two steps or as many as
ten depending upon the size of the organisation. Although all the grievances must
necessarily be processed step by step, some formal steps may, in special
circumstances be skipped with a view to settling the grievance in an expeditious
manner.
The handling of a special grievance may involve special steps as well as the
skipping of certain steps within of certain steps within normal grievance channels.
The procedure may be

Open door
Step ladder type

In the open door procedure, the employee can even meet the head of the firm
directly to have its grievance properly attended to. It is useful in small units.
In the step ladder procedure, proper steps have to be followed. There is a proper
channel and it is followed in a large organisations. The person may first report to

supervisor and then the next authority, then the next and so on. At any step a
decision is made which is agreeable to both, the management and employees, is
final and is binding upon both.
5.5 PUBLIC GRIEVANCE REDRESSAL
Grievance handling is very important and sensitive area of the governments work
profile. It is nonetheless, an area that is, at best taken for granted and, at worst,
grossly neglected by the service providers as it does not fall into the category of
urgent matters. Its importance is very often not appreciated by those who ought to
recognise the value of grievances in order to develop a diagnosis of what ails a
government ministry, department or agency. There is, perhaps, a reasonable
justification for this perception of the grievance-handling mechanism among the
citizens at large. Every grievance points to a missed pulse beat somewhere in the
organisation, and when grievance-prone areas are identified and analysed, it can
frequently prevent cardiac arrest or avoid a moment of truth for the
organisation. One does not have to await public interest litigations and contempt
proceedings in a court of law before addressing grievances and grievance-prone
areas.
There are specific factors that make for a sound complaints-handling system. It
should ideally be accessible, simple, quick and fair. It should also respect
confidentiality, be responsive, effective and accountable. It should provide feedback
to management for systematic reform.
The mechanism for grievance handling and its redress in the Government of India
attempts to cover all these parameters through a set of guidelines issued by the
nodal agency for policy formulation on grievance handling, namely, the Department
of Administrative Reforms and Public Grievances(DARPG).
Accessibility
Grievance handling is decentralized and grievances are settled independently by
each ministry, department or agency. There is a provision for accessibility of
publically notified grievance officers to meet the aggrieved persons at specified
times and on specified days of the week. Telephone numbers and contact addresses
of the Grievance officers are widely publicized. Complaint boxes are placed at or
near the reception desks. Information and Facilitation Counters (IFCs) have been
set up by the organisations with a large public interface.
Simplicity
The streamlining of complaints handling is essential and though an outline of the
Governments requirements to assess a grievance is publicized, no strict proforma
for application is laid down. Nodal agencies, such as the DARPG, the Department of
Pensions and Pensioners Welfare (DP&PW) and the Directorate of Public Grievance

(DPG) in the Cabinet Secretariat facilitate the setting up of grievance mechanisms

by government bodies and monitor the movement and disposal of individual
grievance on a selective basis.
Speed
Time limits have to be fixed and notified for grievance handling and final disposal by
each organisation. The DAPRG has recommended 15 days for acknowledgment and
three months for interim reply or final disposal and reply.
Fairness
It is not as easy as it sounds, as it requires balancing fairness towards the
complainant with fairness towards the organisation and the individual complained
against. Perception of fairness can vary sometimes even in the face of true
impartiality. Transparency on the part of the decision-making and implementing
authority goes a long way towards ensuring fairness.
Confidentiality
It needs to be maintained in all cases, particularly in matters such as dispute
settlement in land revenue or police cases. With the increasing use of information
technology, provisions for maintaining confidentiality are being built into grievance
software too.
A reply to any grievance must cover all the points which have been raised and not
address the grievance partially. Moreover, if an application is rejected, the reasons
for such a rejection must be made explicit. If there is any follow-up action, it must
be pursued. This is not to say that such consideration is to be given to frivolous or
fictitious complaints or to those which are persistently repeated, despite a wellargued final reply having been sent.
In order to be effective, the grievance redressal mechanism should provide specific
remedies. Remedies vary from compensations and refunds to repairs and
replacements, from giving requisite information to tendering an apology. The
concept of providing remedies requires a paradigm shift from an inherently
defensive stance to one which is based on reaching out with goodwill to the
aggrieved person. It also requires a degree of sensitive handling and can differ from
case to case, Remedies also work towards ensuring both organizational and
individual accountability.
An accountable grievance-handling system is open to scrutiny by clients,
government and agency staff. Agencies can make their grievance redressal
mechanism more accountable by publishing information on the system and service
delivery standards, and reporting on the outcomes of complaints and citizen
satisfaction levels in annual reports and other public documents.

Grievances are an indicator of the agencys health and require regular trend
analysis. For this purpose, a monitoring mechanism is prescribed in each
Government organisation and monitoring and evaluation is undertaken from time to
time by the nodal agencies too. Recommendations for systematic changes are
made on the basis of such analysis and lead to simplification or improvement of
procedures.
5.6 THE PRINCIPLES FOR MODEL GRIEVANCE PROCEDURE
The need for model grievance procedure had been felt for a very long time. But it
was only in the 16th session of the Indian Labour Conference when they were
adopted.
The Principles for Model Grievance Procedure are as follows:
1. An aggrieved employee shall present in his grievance verbally or in person to the
officer designated and the answer should be given within 48 hours.
2. If the worker is not satisfied with the answer, he along with one department
representative, will present his grievance to the department head. He will give his
judgement in three days or state the reason for the delay.
3. If he is not satisfied, then they may be requested to refer the case to the
grievance committee. The grievance committee will make a recommendation within
seven days. The management has to implement it.
4. If even, then he remains unsatisfied he can report the matter to the higher tier of
management for revision.
5. If the worker is still not satisfied with the decision and then the union may ask for
voluntary arbitration the decision of which will be binding on both the parties.
But this model may be changed to suit the local conditions keeping in mind the
following factors:
a)
b)
c)
d)

Prompt, well defined and time bound.

Settled at the lowest level.
It should be in conformity with the existing legislation
The help of trade union should also be sought.

CHAPTER-6 INDUSTRIAL RELATIONS IN PUBLIC SECTOR UNITS

6.1 INTRODUCTION

We have understood the procedure of mediation, conciliation, arbitration and

adjudication in Unit-4. Now we have to know the reasons for the growth of industrial
relations in the public sectors.
Dale Yoder defines industrial relations as a whole field of relationship that exists
because of men and women in the employment process of the industry. According
to Ordway Tead and Henry Metcalf, Industrial Relations are composite result of the
attitudes and approaches of employers and employees towards each other with
regard to planning, supervision, direction and coordination of the activities of an
organisation with a minimum of human efforts and friction with an animating spirit
of cooperation and with proper regard for the genuine well-being of all members of
the organisation. In India, the public sector came into being with the adoption of
the Industrial Policy Resolution of 1948, which laid down that the industries of basic
and strategic subjects emphasised on the production and distribution of national
wealth. Prior to independence, the major objective of the Government was not to be
involved in the industrial development but this late became one of the major
objectives of Government policies. Public Sector Enterprises play a dominant role in
the growing and labour abundant industrial economy like India. Harmonious and
constructive industrial relations are essential for promoting the productivity
constructive industrial relations are essential for promoting the productivity of the
enterprises thereby contributing to the accelerated growth of the nations economy.
In this unit, we are going to critically review the manifestation and the magnitude of
industrial disputes so as to understand the nature of industrial relations in the public
sector.
6.2 REASONS FOR CREATION OF PUBLIC SECTOR
The public sector was viewed as an instrument for creating resources for planned
finance and development. It was advocated for three reasons:

To gain control towards commanding the height of economy.

To promote critical development in terms of social gain of strategic values rather
than primarily on considerations of profit.
To provide commercial surplus with which to finance further economic
development.

After Independence, India adopted mixed economy, i.e., an economic framework

consisting of both public and private sectors. The public sectors have been largest
employer in India. In fact, from the 60s to the 80s, employment has grown by
about 120% in the public sector as against a marginal growth of a little over 47% in
the private sector during the same period.
Public sector employees are those workers who work in the companies owned or
managed by the Government, including nationalized banks, the employees of the
departmental undertakings such as Post and Telegraphs, defense industrial units or

various other government departments, while the employees of public corporations

and companies are public sector industrial workers.
With the change in Governments, there have been changes in policy formulations
also. Policy formulations also. Policy formations have also been affected by the
changing world scenario. In 1991, DR. Manmohan Singh, then the Finance Minister,
had adopted a new and bold policy of economic liberalization which not only
loosened up the protective barrier around the public sector units and opened them
to stiff competition, but also diverted some traditional key sector areas like power
generation, petroleum drilling and refining, airlines, insurance etc. to the private
sector where PSUs will either survive, develop themselves further or perish in the
face of the competition. Since the public sector accounts for the largest share of
workers employed in the country, industrial relations in the same deserves special
attention. Government policies have aimed at ensuring the maximum satisfaction to
the employees of the public sector and have thrived to become a model employer.
The profit motive is not the objective of the public sector and various Five Year Plans
aim at following healthy labour policies which are conductive to securing and
keeping a competent workforce while maintaining a higher rate of wage. Thus, the
public sector is expected to maintain cordial industrial relations in order to protect a
progressive model employer image. It has to serve the national objective and
contribute to the social good.
Industrial employees are governed by various labour enactments in matters like
working conditions, payment of wages, industrial relations and social security. These
enactments include the Payment of wages, industrial relations and social security.
These enactments include the Payment of Wages Act, 1936, the Factories Act, 1948,
the Trade Unions Act, 1926 and the Industrial Disputes Act, 1947. However, all
labour enactments do not apply to the industrial employees of the Government; like
the Industrial Standing Orders Act, 1946 does not apply to workers whom the
Fundamental and Supplementary Rules, Civil Services Rules, revised Leave Rules,
Civil Service Regulation, Civilians in Defense Services Rules or the Indian Railways
Establishments Code or any other rules or regulations that may be notified in this
behalf by the appropriate Government in the Official Gazette, apply.
6.3 LEGAL STANDING OF TRADE UNIONS
There is legal standing for trade unions in the public sector enterprises. There are
no major restrictions imposed on the workers in the public sector units to organise
themselves into unions. Consequently, the public sector units are plagued with a
multiplicity of trade unions, inter-union and intra-union rivalries being rampant in
the present scenario. Since the Trade Union Act, 1926 allows for 50% membership
for outsiders, there is political interference to a large extent. This provision was
made by taking into consideration that since the workers could not put forward their
views in front of the management without fear of repercussions during the preindependence era. Though the situation has changed today, the provision has still

not been amended to suit the current demand. This has been made easier for the
political parties in power to encourage trade unions affiliated to them, while the
opposition political trade unions wait for an opportunity for their political parties to
come to power. Power politics has corrupted the trade union movement in the public
sector by rampant favouritism and nepotism.
In the public sector, the top boss is not empowered to initiate any policies or
commitments. He can only send recommendations to the higher authorities who
need not necessarily be directly connected with that sector.
The Industrial Disputes Act, 1947, enabled labour to seek constant wage revision
upwards and bonus or profits. However, the demand for higher wage is seldom
made on the basis of higher productivity. The public sector management enjoys a
considerable amount of immunity from labour pressures in such matters. Very often
the Industrial Dispute Act is not applicable or is so administered by the State
Government in favour of the public sector management that in effect, labour has no
recourse but direct action. Because of belated and posthumous probes by Public
Committees or Estimating Committees, public sector management enjoys freedom
from immediate accountability to anyone. Secondly, very few top public sector
executives enjoying authority have any longstanding relations with the industry in
which they are placed because they are administrators put in the charge of
industrial undertakings only for a specific period. Before they get themselves well
acquainted with the unit and its environment, they are liable to be transferred to
some other assignment. These perennial factors influence the labour-management
relations to a great deal.
Thus, one usually sees incompetence in exercising proper authority on the part of
top executives. At the same time, there is acute consciousness of security in all the
public sector enterprises as far as the workers are concerned. This security
mentality paves the way for indiscipline to a large extent which facilitates the
conversion of the simple industrial process into violations of law and order,
provoking the government to make use of their entire might to deal with them.
Thus, there is always a possibility that the public sector employees may resort to
frequent strikes because of the security, overconfidence, collective strength and
limited obligations to the management personnel, provided because of the
philosophy and role of the public sector in a developing economy like ours.
However, the public sector has been, by and large, successful in fulfilling its social
objectives like the development of the generation of additional employment and
protection of the employment in backward regions. But in the context of its poor
corporate performance, there is the imperative need for complete reorientation.
By and large, the public sector employees do not have a sense of belongingness
and are also concerned about productivity. Though public sector provides the best of
the welfare facilities, yet one does not find a relatively high morale among the

employees. This is also reflected in the industrial relations between the worker and
management of the public sector units.
Moreover, due to lack of autonomy in the public sector, the chain of command has
gone lengthening in the shape of board of directors, the ministry, the minister, interministerial committees, planning authorities, committees setup by representatives
of the people and the people themselves. Thus, there is no delegation and
decentralization of authority on important decision-making powers to the public
sector management, where, if the agreement is to be reached in an establishment
of a large size, it is the minister concerned who would like to be involved in final
settlement, as in the day to day performance of the public sector organisation, the
power/decision centre. The workers and the managers in the public sector,
individually and collectively, face the basic problem of identifying the power
decision centres. Furthermore, there is no proper co-relationship between authority
and responsibility in the public sector, in which every officer has a huge load of
responsibility but practically no authority.
The public sector has seen trade union strategies other than strikes to protest or
create an effect. Trade unions in the public sector units resort to go slow, tool down,
pen down and work to rule, which does not affect formal attendance but the actual
productivity suffers very badly.
In the public sector unit, goals are more difficult to determine and evaluate. There is
vast range of policies with aims which are complex and frequently difficult to
establish and the performance in achieving them is usually a matter of judgement
and is rarely measurable. Most of the time the goals are set through political means
rather than any internal process, and to permit too much flexibility would be to
substitute executive for political judgment. The tendency, therefore, to play safe at
both, the personal and the organizational level because the avoidance of error is
thought to be more important than initiative for the individual manager. There is
also the tendency to centralize financial decision making within the sector. In total,
the system is one of bureaucracy, in which rules are paramount. Individual decision
making plays a relatively small role, and the primary objective is consistency. There
is the practice of transfer of personnel in specialist cadres, within the public sector
enterprises without due appreciation to the consequences, or even the need of
transfers affecting efficiency adversely. As the tenures of the senior managers are
not long, they do not own responsibility for events. Thereby, in the public sectors we
observe mediocrity rather than initiative, conformity rather than innovativeness and
procedure oriented instead of a result-oriented performance.
6.4 ISSUES OF CONFLICT IN PUBLIC SECTOR
Issues taken up for collective bargaining include revision of wage and pay scales,
dearness allowance, house rent allowance, etc. For other allowances like loans and
advances, medical, residential and other facilities, welfare measures service

conditions and so on, prior to negotiations, preparations are made in advance, at

least a year ahead of the date of expiry of the wage settlement agreement.
Exercises are carried out to collect voluminous data from within the organisation
and many other undertakings. A hike in the annual expenditure on accounts of
increase pay, dearness and other allowances, and fringe benefits are assessed.
Thereafter, a tentative allocation of resources for ensuring the wage revision is
made and modalities of extending the benefits are worked out. Attention is then
paid to plan the overall strategy and tactics to be employed in concluding the
negotiations. In the course of collective bargaining, various pressures develop.
Sometimes powerful external forces intervene. The negations drag on and there is a
compulsion to compromise in order to settle the issues by a deadline.
There is a complete absence of intellectual commitment to the philosophy of the
public sector among most of the existing management personnel. The top
executives are drawn from the administrative services or larger private services
generally, with no adequate interest in the performance of the units they are in
charge of and conduct themselves as if they are birds of passage. Their approach to
discipline management is bureaucratic and not result oriented. Those recruited from
the private sector are devoid of any awareness of the philosophy of or the need for
public sector. Many of them continue to win their loyalty to the private sector which
views the public sector as a rival. Besides, they import private sector practices in
the public sector with a few top executives drawn from the police or armed forces or
retired persons also being inducted to top positions in the public sector units and
they find themselves in strange waters. There is a need, therefore, for imparting
education to the management personnel on the philosophy and the role of public
sector in a developing economy like ours.
6.5 SOCIAL OBJECTIVES OF PUBLIC SECTOR
However, the public sector has been, by and large, successful in fulfilling its social
objectives like the development of the backward regions, the generation of
additional employment and the protection of the employment already existing. But
in the context of its poor cooperation in its performance, there is a need for a
complete reorientation in our approach to the management of various public
enterprises.
The Bureau of Public Enterprise was set up to give broad guidelines and assistance
to the management of the public enterprises. Unfortunately, the Bureau is manned
by bureaucrats and hence the whole objective failed. Many public sector enterprises
have started the scheme of workers participation in the management. An example
of this is the steel industry where the workers are involved in different tripartite
bodies. The gamut of participation will not be on the basis of equality and not
ensuring full democratic rights to workers as there is no secret ballot for selecting
workers representatives.

Appropriate handling of industrial relations in the public sector will always remain
challenge for managers. The overall responsibility for a nationwide, coordinated
labour policy will naturally rest with the Government. The middle level managers
and their first-line supervisors need to be helped to exercise their functions more
effectively. There must be a delegation of authority to ensure public accountability.
The ultimate aim of the relationship scenario between the union and management
in the public sector should be a creation of trust and mutual appreciation and
understanding of each others functions and limitations.
CASE STUDY ON INDUSTRIAL RELATIONS PUBLIC SECTOR
We will discuss the case of Air India, which is a classic example of the dire state of
Industrial Relations in the public sector units. Though the case study is from the 90s,
the situation still remains same.
Air India
This is perfect example of the state of industrial relations in most of the public
sector units in India. It is all pervasive. Most of the dozens of people who did
business in India did not even know where to begin. The national carrier is a
monument to government folly and its saga a sordid narration of how self-serving
aviation ministers, incompetent bureaucrats and eager-to-please management
destroyed an airline, which, at one point, was hailed to be among best in the world.
So ridiculous is the situation that despite the dire straits the airline has now sunk
into, the government has still not found the solution to it.
We will have to glance at how the senior management functioned in this
organisation during the mid-90s. Brijesh Kumar, by his own admission was a parttime managing director, and he spent half his time at his full-time job of joint
secretary in ministry of civil aviation. The situation was in effect quite comical. The
airline headquartered in Bombay, the chairman Russi Mody used to sit in Calcutta,
while the acting managing director had office in Delhi. Even at Bombay end, AI
needed to gain its act together. Only the commercial and planning departments are
situated in the Air-India building on Marine drive; other key departments like
operations, engineering, in-flight and HRD are situated at Bombay airport, a good
two hours drive away. The joke in AI circles is that it does not matter whether MD
calls for a meeting with all heads of departments in Bombay or Delhi; it takes them
almost long to reach at either place.
What is even more ludicrous is that, since February in 1995, Air India did not have a
single representative on its board. Both Kumar and Mody were outsiders technically,
while the rest were non-executive directors drawn from outside. At least in all the
other public sector companies, there are many executive directors, who are on
board and who manage the company. The board had recommended that Kumar be
made a full-time managing director of the airline, a proposition that he had no
objection to, but the government did not find it appropriate to respond not that the

board was unusually bothered. Many of directors were on board as political

appointees, not to look after Air Indias interest, but to get the free tickets that
accrue when you are there.
Air India has had as many as eight heads in the 10 years prior to the 90s- probably
a record for any airline in the world. Not one of them lasted beyond three years.
Some like S.R. Gupte The Vice Chairman of the UB group had the ignominy of
being demoted to a position of deputy managing director later. The airlines
experiment with bringing in outside directors had failed as well. Ranjan Jetley stayed
for three years, before suddenly announcing his departure, while Yogi Deveshwar
was around for only two years. One Chairman, a senior bureaucrat stuck on to the
position for six months only so that he could be ensured a life-time first class travel
that the chairman and managing directors are entitled to.
This frequent change of managing directors has had all-round repercussions. The
most important of these has been the impact on the airlines expansion All
managing directors were out to prove that they were the best, says a top official.
The only way you can do this is by showing good profits and the least union
problems. The upshot of this was that union demands were pandered to in a
manner that would never happen in a private company; and more importantly, no
new capital investment could be made. A new 747-400 cost over Rs. 500 crore,
which means a straight Rs. 75 crore depreciation effect on the bottom-line. No
managing director would want to blemish his profit making record by absorbing
such a huge depreciation in the balance sheet, the official adds.
Further, most managing directors were there at the sufferance of the minster for
civil aviation. He is the super chairman and managing director of the airline, said
one former manager. Nothing moves here without his consent. Brijesh Kumar is at
least based in Delhi itself and can respond to ministers summons, but his
predecessors did not have even that luxury, half of their time in office was spent
shooting between the headquarters in Bombay and the ministry in Delhi.
So heavy is the interference of government, that there have been ministers in the
not too distant past, who wanted to be involved in the selection of the design for the
air-hostesses uniform and the buying of the on-board crockery. Besides Air Indias
high profile image meant that its managing director was answerable not just to the
board and the minister but to almost every Member of Parliament. There are as
many as five parliamentary committees that make demands on his time, including
the committee on schedule caste and schedule tribes, the committee on the
implementation on Hindi, and the public accounts committee. Every time Air India
wants to buy a plane, it has to seek eight different approvals from the government,
including one from the Union cabinet.
The other more damaging effect of the uncertainty at the top was the devastation it
left at the middle and lower levels of management, It is management by

abdication, said one working director. No one wants to take responsibility; issues
that should be tackled automatically, at other places could take weeks and even
months here. Another manager added, Management depth is a team that is
unknown in Air India. Cronyism and favoritism are the only things that work here,
promotion and lucrative foreign postings are decided by the Aviation ministry rather
than by the board or the managing directors. One former managing director says
that he did not even have the power to sack a recalcitrant traffic assistant for fear
that he might approach minister and have the order rescinded. The former
managing director D.S. Mathur commented, Air India is the only airline in the world,
where the managing director cannot sack a peon. But he himself can be sacked.
Bad image coupled with the fact that, being part of the public sector set-up the
management lacks the ability to change pay scales to match the market has meant
that Air India has lost all its aura of the much-in-demand workplace it enjoyed in
1960s and 1970s. Despite the high salary earned by the pilots and engineers, the
top management cadre continued to be badly paid. According to the 1994 balance
sheet, the managing directors salary amounted to less than Rs. 15,000. So it wasnt
surprising that when Air India wanted to appoint a Director, HRD, from the private
sector, it hardly got any responses. Two senior executives one from Indian Oxygen
and the other from UTI, who expressed interest backed off at the last minute. The
deputy director, HRD was finally promoted to the position, after 18 months.
As is the want in most public sectors, promotions in Air India come because of age
and experience rather than merit. Consequently, the airline has had as many as
three finance directors in the early 90s. The third one retired in four months time.
Air India, managers spend more time officiating in other peoples position than their
own. Six out of the current 12 directors were officiating a management upgradation
programme, to help the managing director run airline was done in the typically
public sector way. Ranga Rao, director, Airport Services was promoted because he
was the senior most and had less than a year to go before retiring, another
appointee N.C. Padhi was at that time Director Vigilance; so it was question as to
what help he would be in streamlining the commercial or technical aspects of the
airline. The people who gained the most out of this wishy-washy style of
management were the unions. There have been as many as 17 strikes that affected
the working of the airline in the early 90, leading to the loss of more than 10,000
man-days and over a 1,000 cancelled flights. The sad part was that the unions
prevailed every time, because the government pressurized the management into
accepting the settlements. Says a senior manager. Take, for example, the case
flight engineers agitation in 1993 when the airline was virtually shut down for two
months and lost Rs. 100 crores in revenue. Eventually, then cabinet secretary
prevailed upon the management to accept the demand of the engineers. The
management lost out despite its initial command, and the unions have continued to
gain. When airline put four new Boeing 747-400s into operations in early 90s, all

employees across the board were given various kind of raises, which increased the
airlines airfare bill.
The way settlements were arrived at between unions and the management had
become some kind of a joke in Air India. The pilots negotiated a deal in June 1993
with the management, whereby they would be paid $ 107 for every hour of flying. It
ensured that pilots monthly dollar emoluments of around Rs. 2.5 lakhs were not
only protected from the vagaries of the Indian inflation, but it would increase every
time the dollar strengthened. Going by the fact that the rupee depreciated by a
minimum of 10% that year, the pilots allowances went up by more than Rs. 25,000
a month. B.P Singh, the general secretary of the powerful Indian Pilots Guild said,
We also run the risk of our earning going down, if the rupee appreciates. a
remote possibility.
One more example of the industrial relations condition in Public Sector is that of the
Role Model of Pilots Agreement in India.
What was interesting about the pilots agreement is that it protects the senior pilots
allowances, even when they are not flying. Due to shortage of aircraft and
multiplicity of aircraft types (Airbuses and Boeings) in the Air India fleet, it so
happened that the senior pilots ended up flying only around 50 to 60 hours a
month, while some of the junior co-pilots ended up flying around 80 hours. The
agreement ensured seniors something called as shortfall payment, which means
that without doing any work; they get paid allowance for the excess hours that their
juniors fly around 30 hours every month. We have offered to fly as much as Air
India wants; so we should be not be penalized, because the airline does not have
fleet strength to utilize us fully. Said singh of IPG. Air India incurred an additional
expenditure of Rs. 68 crores, as a result of this deal of which Rs. 23 crore went for
shortfall payments.
But, after a chairman took over, he felt that his predecessor had signed an
agreement which was paying pilots for not working and so cancelled the
agreements. But in typical Air-India style, no action was contemplated against those
officials, who were a part of the negotiating team then. The pilots were not
expected to take the cancellation lying down. They confronted management and
another round of labour strife was in the offing.
When the pilots were sanctioned shortfall payment not unexpectedly, soon after the
deal was signed, the aircraft maintenance engineers demanded a similar deal,
started a go-slow that was responsible for much of the airlines woes. The
management struck a deal with the senior engineers, which have gave them an
increase in allowance, ranging from Rs. 26,000 to Rs. 44,000 a month.
The junior engineers continued with the strike as they wanted as much as 66% of
what pilot get. Many of the managers within Air India were upset that management
had given in. One of the managers commented, Like in the past, there was not

much of a discussion within the management. Before signing the deal, most of
these engineers were merely technicians.
Today, the condition is still the same with strikes still being heard of and the same
pattern of management existing in the organisation, with the control finally being
with the ministry of aviation.

CHAPTER 7 TRADE UNIONS AND COLLECTIVE BARGAINING

7.1 INTRODUCTION TO TRADE UNION
In the past, millions from the working class have struggled hard to get protection
against the inhuman treatment meted out to them by the employers. They have
learned to make themselves secure against the ills over which they had no control.
Individually the labourers can do very little to bring about the reforms they want.
They are only effective if they act in unison. The very idea of joint action laid down
the foundation of their instrument to struggle for security and advancement the
trade union/labour union.
A trade union is an organisation of employees formed on a continuous basis for
purpose of securing diverse range of benefits. It is a continuous association of wage
earners for the purpose of maintaining and improving the conditions of their
working lives.
A trade union is an organisation created to improve conditions in the workplace.
Whether issue is wages, illness or medical benefits, trade unions negotiate with
employers on behalf of union members. When employees and employers are unable
to reach an agreement, trade union leadership works with employers to negotiate a
compromise. Regardless of the outcome, all members of the trade union must follow
the agreed upon solution.
7.2 DEFINITIONS
The classic definition of trade union was given by Sidney and Beatric Webb.
According to them, it is continuous association of wage earners for the purpose of
maintaining and improving the conditions of their working lives.
Dale Yoder has defined trade union as a continuous long-term association of
employee, formed and maintained for the specific purpose of advancing and
protecting the interests of members in their working relationships.
S.D. Punekar has defined trade union as a monopolistic combination of wage
earners who as individual producers are complementary to one another but who

stand to employers in a relation of dependence for the sale of their labour and
production, and that the general purpose of association is in view of that
dependence to strengthen their power to bargain with the employers or bargain
collectively.
These definitions may sound good, but a legalistic definition of trade union is
desirable in understanding its concept as prevalent in a particular society.
The British Trade Union Act defines it as a combination with the main objective of
regulating the relation between workmen and masters or between workmen and
workmen or between masters and masters for imposing of restrictive conditions on
the conduct of any trade or business and also provision of benefits of members.
As per the Indian Trade Union Act, 1926, A trade union is any combination, whether
temporary or permanent , formed primarily for 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, and includes any federation of two or more trade unions.
This definition is very exhaustive as it includes associations of both the workers and
employers and the federations of their associations. Here, the relationships that
have been spoken about are both temporary and permanent. This means it applies
to temporary workers (or contractual employees) as well. Then this definition,
primarily talks about three relationships. They are the relationships between:

Workmen and workmen

Workmen and employers
Employers and employers

Thus, a trade union can be seen as a group of employees in a particular sector,

whose aim is to negotiate with employers over pay, job security, working hours etc.,
using the collective power of its members. In general, a union is there to represent
the interests of its members, and may even engage in any political activity where
legislation affects their members. Trade unions are voluntary associations formed
for the pursuit of protecting the common interests of its members and also promote
welfare. They protect the economic, political and social interests of their members.
7.3 FEATURES OF TRADE UNION
Trade union usually include workers from a particular industry, such as steel
workers, or a particular agency such as state or local government. In addition, many
trade unions have minimum requirements all members must meet before official
membership is extended. For example, many labour unions require members to
have license or certification to gain membership whereas others require members
to pay dues. Trade unions include both blue-collar workers as well as business
professionals. Because trade unions are so diverse in membership and industry, the

features and qualifications vary greatly. It is an association either of employers or

employees of independent workers. Some of the features of the trade union are
mentioned below.
1. The trade union is an association either of employers or employees or
independent workers. In India such unions may consist of:

Employers association (e.g., Employers Federation of India, Indian Paper

Mills Association, the All India Manufacturers Organisation, the All India
Manufacturers Organisation, the Tea Planters Association of North India etc.)
General Labour Unions
Friendly societies
Unions of intellectual labour (e.g. The All India Teachers Association, the AllIndia Bank Employees Association, the All India Medical Doctors Association,
etc.)

2. It is formed on a continuous basis. It is a permanent body and not a casual or

temporary one.
3. It is formed to protect and promote all kinds of interests economic, political and
social of its members. The dominant interest with which a union is concerned is,
however economic.
4. It achieves its objectives through collective action and group effort. Negotiations
and collective bargaining are the tools for accomplishing objectives.
5. The origin and growth of trade unions have been influenced by a number of
ideologies. The Socio-economic and even political movements have influenced trade
unions in one way or the other way. The creation of industrial democracy is a
prerequisite for the establishment of a socialist society.
Trade unions have shown remarkable progress since their inception; moreover, the
character of trade unions has also been changing. In spite of only focusing on the
economic benefits of workers, the trade unions are also working towards raising the
status of labour as part of industry.
7.4 FUNCTIONS OF TRADE UNIONS
Trade unions work to improve the work environment and salaries of union members.
The leaders of the trade union negotiate with employers on behalf of the entire
nation for wage increase, more vacation time, better working hours and benefits.
Any decisions agreed upon by the union leadership and employers are binding on all
union members. However, trade unions meet regularly to discuss complaints and
concerns, as well as to vote on these decisions prior to negotiations. If negotiations
stall, many trade unions reserve the right to strike. The trade unions generally
perform the following functions:

1. Collective bargaining with the management to settle terms and conditions of

employment.
2. Advise the management on personnel policies and practices.
3. Taking up the individual and collective grievances of the workers with the
management.
4. Work for achieving better say of workers in the management of affairs of the
enterprise which influence the lives of the workers directly.
5. Organising demonstrations, strikes, etc. to press demands of workers.
6. Education of workers and their children.
7. Welfare and recreational activities for their members.
8. Representing workers in various national and international forums.
9. Securing legislative protection for workers from the government.
Trade unions perform a number of functions in order to achieve the objectives of
fighting for the rights of the workers, improving the work environment and getting
better pay and facilities for the workers.
Some of the functions can also be broadly classified into five categories:
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, get better treatment from employers etc. When the union fail to
accomplish these aims by method of collective bargaining and negotiations, they
adopt a tough approach and put up a fight with the management in the form of goslow tactics, strikes, boycotts, gheraos etc. Hence, these functions of the trade
unions are known as militant functions. Thus, the militant functions of trade unions
can be summed up as:

Achieving higher wages and better working conditions.

Raising the status workers as a part of industry.
Protecting labours against3. victimization and injustice.

2. Fraternal Functions: Another set of activities performed by trade unions aim 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 industrial 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 of 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, indoor 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 function of trade union can be summed
up as:
Taking up welfare measures for improving the morale of workers.
Generating self-confidence among workers.
Encouraging sincerity and discipline among workers.
Providing opportunities for promotion and growth.
Protecting women workers against discrimination.
3. Social functions: These functions include carrying out social service activities,
discharging social responsibilities through various sections of the society like
educating the customers.
4. Political Functions: These functions include affiliating a union to a political party,
helping political party in enrolling members, collecting donations, canvassing during
election period, seeking the help of political parties during the strikes and lockouts.
5. Ancillary Functions: Ancillary functions of trade union include:
i. Communication: Trade union communicates its activities, programmes decisions
achievement, etc. to its members through publication of newsletters or magazines.
ii. Welfare activities: Trade unions undertake welfare activities like acquiring of land,
construction of houses, establishment of cooperative housing societies, cooperative
credit societies, Organising training activities, etc.
iii. Education: Trade union provides educational facilities to its members and their
family members.
iv. Research: Trade unions arrange to conduct research programmes. They
systematically connect and analyse data and information for collective bargaining.
They prepare notes for union officials, for court cases, etc. and also arrange to
analyse macro data about the economy, industry and different sectors etc.
7.5 ROLE OF TRADE UNIONS
Trade unions are unique organisations whose role 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 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 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. Trade unions are also seen as moral institutions, which will uplift weak
and downtrodden and render them the place, the dignity and justice they deserve.
Trade unionism in India developed quiet slowly as compared to the western nations.
The Indian trade union movement can be divided into three phases.
The First Phase (1850 to 1900)
During this phase, the inception of trade union took place. During this period, the
working and living conditions of the labour were poor and their working hours were
long. Capitalists were only interested in their productivity and profitability. In
addition, the wages were also low and general economic conditions were poor in
industries. In order to regulate the working hours and other service conditions of the
Indian textile labourers, the Indian Factories Act was enacted in 1881. As a result,
employment of child labour was prohibited.
The growth of trade union movement was slow in this phase and later on the Indian
Factory Act of 1881 was amended in 1891. Many strikes took place in the two
decades following 1880 in all industrial cities. These strikes taught workers to
understand the power of united action even though there was no union in real
terms. Small associations like Bombay Mill -Hands Association came up by this time.
The Second Phase (1900 to 1946)
This phase was characterized by the development of organised trade unions and
political movements of the working class. Between 1918 and 1923 many unions
came into existence in the country. The first trade union that was formed in our
country was the Madras Textiles Association formed on 27 th April 1918 in the Binny
Mills at Madras. This union was formed with the help of Mr. B.P. Wadia, a social
worker of Bombay. The union was formed to arrest the harassment from the
European Officers of the mills. The management of the mill refused to concede any
demands of the union. In fact, the management decided to crush the union. The
union therefore decide to call a strike. The strike lasted for more than a month. In
the meanwhile, the management approached the Madras High Court. There was no
law in India at that time for governing strikes. The European judges of the High

Court wanted to help their counterparts in the mills. As per the law in England called
the Workmens Breach of Contract Act, 1859, they asked B.P. Wadia and his
associates to pay a sum of Rs. 75,000/- as damage to the management of the mills
for the loss caused on account of the strike. It was beyond the capacity of B.P.
Wadia and his associates to pay such a huge amount. The decision of Madras High
Court sent shock waves across the world. Representation was made by the
management of mills to waive the amount. At first, the management of the mills
was reluctant to waive the amount of damages, but when pressure was brought
about on the management from various quarters, it agreed to waive on the
condition that B.P. Wadia should pack his bag and baggage and leave Madras by the
first available train. B.P. Wadia had no other option but to accept the condition. This
was the fate of first union that was formed on systematic lines.
At Ahmedabad, under the guidance of Mahatma Gandhi, occupational unions like
spinners union and weavers union were formed. A strike was launched by these
unions under the leadership of Mahatma Gandhi who turned it into a Satyagraha.
These unions federated into industrial union known as Textile Labour Association in
1920. In 1920, the first national trade union organisation (The All India Trade Union
Congress (AITUC)) was established. Many of the leaders of this organisation were
leaders of the National Movement. In 1926, Trade union Law came up with the
efforts of Mr. N.N. Joshi, which became operative from 1927. During 1928, All India
Trade Union Federation (AITUF) was formed.
The Third Phase
The third phase begin with the emergence of independent India (in 1947). The
participation of country affected the trade union movement particularly in Bengal
and Punjab. By 1949, four central trade union organisations were functioning in the
country.
1.
2.
3.
4.

The
The
The
The

All India Trade Union Congress.

Indian National Trade Union Congress.
Hindu Mazdoor Sangh
United Trade Union Congress

The working class movement was also politicized along the lines of political
parties. For instance, Indian National Trade Union Congress (INTUC) is the trade
union arm of the Congress Party. The AITUC is the trade union arm of the
Communist Party of India. Besides workers, white-collar employees, supervisors
and managers are also organised by the trade unions, for example in the
Banking, Insurance and Petroleum industries.
We can summarize the various roles which trade unions have undertaken:
1. Political Role: By using collective power to influence decisions of behalf of
members and the wider society.

2. Market Role: By intervening for wage bargaining and thus making an impact
on economy.
3. Regulatory Role: By setting standards in relation to job and terms and
conditions.
4. Democratizing Role: By creating industrial democracy at the workplace.
5. Service Role: By promoting the intervention of members.
6. Enhancement Role: By helping to develop the human potential of members.
7. Welfare Role: By providing assistance to particular groups.
7.6 TRADE UNIONS IN INDIA
The Indian workforce consists of 430 million workers, growing 2% annually. The
Indian labour markets consist of three sectors:
1. The rural workers, who constitute about 60% of the workforce.
2. Organised sector, which employs 8% of workforce.
3. The urban informal sector (which includes the growing software industry and
other services, not included in the formal sector) which constitutes the rest
32% of the workforce.
At present, there are tweleve Central Trade Union Organisations in India:
1. All India Trade Union Congress (AITUC)
2. Bhartiya Mazdoor Sangh (BMC)
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)
7.7 THE TRADE UNIONS ACT, 1926
The Trade Unions Act came into force in 1926, and its details are as follows:
Short title extent and commencement

(i)
(ii)
(iii)

This Act may be called the Trade Unions Act, 1926

It extends to the whole of India.
It shall come into force as the Central Government may declare it by
notification in the official gazette.

Definition
(a) Executives means the body, by whatever name called, to which the
management of the affairs of a Trade Union is entrusted;
(b) Office-bearer in case of a Trade Union, includes any member of the executive
thereof but does not include an Auditor;
(c) Registered Trade Union means a Trade Union registered under this Act;
(d) Registrar means a Registrar of Trade Unions appointed by the Appropriate
Government under Sec. 3. And includes any Additional or Deputy Registrar of Trade
unions;
(e) Trade Union means any combination, whether temporary or permanent,
formed primarily for the purpose of regulating the relations between workmen or
employer, or between workman and workmen or between conduct of any trade or
business, and includes any federation of two or more trade unions;
(f) Trade disputes means any dispute between employers and workmen or
between workmen and workmen or between employers and employers which is
connected with the employment or non-employment, or the terms of employment
or the conditions of labour of any person, and workmen means all persons
employed in trade or industry whether or not in the employment of the employer
with whom the trade dispute arises.
According to the new amended Act trade union dispute means any dispute:
(a) Between one trade union and another, or
(b) Between one or members or office-bearers of a trade union and the trade
union (whether also with any of the other members nor office-bearers of the
trade union or not) relating to its affairs, including the appointment of the
members of the executive or other office-bearers of the trade union, validity
of any such appointment, the area of operation of the trade union,
verification of the membership of any other matter arising out of the rules of
the trade union, but excluding matters involving determination of issues as to
the title, or ownership of, any building or other property or any funds.
The trade union Act does not affect:
(i)
(ii)

Any agreement between partners as to their business;

Any agreement between an employer and those employed by him as to
such employment;

(iii)

Any agreement in consideration of the sale of the goodwill of a business

or of instruction in any profession, trade or handicraft.

A trade union is not only a combination of workmen but also of the employers;
and such the Act applies not only to the unions of workers but also th association
of employers.
7.8 APPLICATION FOR TRADE UNION REGISTRATION
1. Every application for Registration of a Trade Union shall be made to the
Registrar, and shall be accompanied by a copy of the rules of the Trade Union.
Any 10% or 100, whichever is less, subject to a minimum of seven or more
members of a Trade Union may apply for registration of a Trade Union under this
Act, after complying with the provisions of this Act and furnishing the statement
of the following particulars, namely:
(a) The names, occupations and addresses of the members making the
application;
(b) The name of the Trade Union and the address of its office bearers of the
Trade Union.
(c) The titles, names, ages, addresses and occupations of the office bearers of
the Trade Union.
2. A general statement of the assets and liabilities of the Trade Union in the
prescribed form if existing for more than one year before the making of an
application for its registration.
However, the 2001 amendment to the Trade Unions Act, which has come into
force from 9 January, 2002, provides that for the registration of a union there has
to be at least 10% of the employees or minimum 100, whichever is less actually
employed in the establishment where the union is to be registered subject of
course to minimum of seven members. To be more specific if the number of
employees in the particular establishment is less than 100, then 10% of the total
employees is required to form a trade union. If the number of employees in a
particular establishment is more than 100, then the minimum number of
members required to form a trade union is 100.
7.9 PROVISIONS IN THE RULES OF TRADE UNION
A trade union shall not be entitled for registration under this Act, unless the
executive thereof is constituted in accordance with the provisions of this Act, and
the rules thereof provide for the following matters, namely:
a) The name of the Trade Union
b) The Whole of the objects for which the Trade Union has been established

c) The whole of the purposes for which the general fund of the Trade Union shall
be applicable (spent for), all of which purposes shall be purposes to which
such funds are lawfully applicable under this Act.
d) The maintenance of a list of the members of the Trade Union and adequate
facilities for the inspection thereof by the office-bearers and members of the
trade union.
e) The admission of ordinary member will be persons actually engaged or
employed in any industry with which the trade union is connected, and the
admission of the number of honorary or temporary members as officers to
form the executive of the trade unions.
f) The payment of a subscription by members of the trade union shall not be
less than Rs. 12/- per annum per member in case of a union in an organised
sector, Rs. 3/- per annum per member in the unorganized sector and Rs. 1/per annum per member for the unions in the rural sector. (The change in
subscription has been made by the amendment of 2001 to the Trade Unions
Act.)
g) The conditions under which any member shall be entitled to any benefit
assured by the rules and under which any fine or forfeiture may be imposed
on the members.
h) The manner in which the rules shall be amended, varied or rescinded.
i) The manner in which the members of the executive and the other officers of
Trade Union shall be appointed and removed.
j) The safe custody of the funds of the Trade Union, and annual audit, in such a
manner as may be prescribed, of the accounts thereof, and adequate
facilities for the inspection of the account books by the [Office- bearers] and
the members of the Trade Union.
k) The manner in which the Trade Union may be dissolved.
Rights of Registered Trade Union
A registered trade union has the right to:
a) Spend its general fund.
b) Constitute a separate political fund.
c) Claim protection, i.e., immunity from criminal and from civil suits in certain
cases.
d) Change its name.
e) Amalgamate with any other union.
f) Carry out social/cultural activities.
Obligations of Registered Trade Unions
Registration makes it obligatory for a registered trade union to:
(i)

Allow any person to be a member of the union and enjoy all the privileges
attached to a membership.

(ii)
(iii)

Keep account books and the register of members for inspection by any
member of the union.
Submission of the Annual Return to the Registrar regularly for the year
ending in the prescribed form, within the specified time limit, along with
the statement of assets and liabilities of the union audited in the
prescribed manner.

7.10 REGISTRATION AND CANCELLATION OF TRADE UNION

The Registrar on being satisfied that the Trade Union has complied with all the
requirements of this Act in regard to registration, shall register the trade union by
entering it in a prescribed register. However, if the Registrar does not communicate
with the Union and keeps quiet for a period exceeding 6 months, the Union can file
a writ of Mandamus before High Court. This has been decided by the Patna High
Court in the case of ACC Rajanka Lime Stones Vs. The Registrar of Trade Unions,
1969.
The registrar on registering a trade union under Sec. 8 shall issue a certificate of
registration in the prescribed form which shall be conclusive evidence that the Trade
Union has been duly registered under this Act.
Cancellation of Registration
A certificate of registration of Trade Union may be withdrawn or cancelled by the
Registrar.
(a) On application of the trade union.
(b) If the Registrar is satisfied that the certificate has been obtained by mistake,
misrepresentation or fraud.
(c) The trade union has ceased to exist or has willfully and after notice from the
Registrar contravened any of the provisions of this Act.
(d) The membership of the Union has fallen below the minimum required number
under the Act, (as per the 2001 amendment).
Change of Name
Any registered trade union may, with the consent of not less than two-thirds of the
total number of its members and subject to the provision of Sec. 25 change its
name.
Amalgamation of Trade Unions
Any two or more registered trade unions may amalgamate together as one trade
union with or without dissolution or division of the funds of such trade unions,
provided that the votes of at least one half of the total members of each and every
such trade union entitled to vote are recorded and that at least 60% of votes
recorded are in favour of the proposal.

Notice of Change of name or amalgamation

Notice in writing of every change of name and every amalgamation signed in case
of change of name, by the secretary and by seven members of the trade union
changing its name, and in case of amalgamation, by the secretary and by seven
members of each and every Trade Union which is a party thereto, shall be sent to
the Registrar of the place where the Head office of the amalgamated trade union is
situated and also to the respective Registrars of each and every union which is a
party to the amalgamation.
7.11 INTRODUCTION TO COLLECTIVE BARGAINING
In the last unit, we studied about the grievance procedure. It is equally important to
know the collective bargaining skills, as they may help the union to achieve the prerequisite legal expectations to solve the labour problems with the management.
Collective bargaining is an agreement in which the wage component of
remuneration and conditions of employment of workmen are settled through a
bargain between the employer and the workmen collectively whether represented
through their union or by some of them on behalf of all of them. Thus, collective
bargaining means bargaining between an employer or group of employers and a
bona fide Labour Union. Collective bargaining is the process of employer-union
negotiation for the purpose of reaching an agreement for a specific period.
Definition
Collective bargaining has been defined as the negotiations about working conditions
and the terms of employment between an employer, a group of employees or one
or more employers organisations on one hand and one or more representative
organisations of workmen on the other, with a view to reach an agreement.
Collective bargaining has been defined in the Encyclopedia of social Sciences as a
process of discussion and negotiation between two parties, one or both of whom is a
group of persons actively in concert. More specifically, collective bargaining is the
procedure by which an employer and a group of employees agree upon the
conditions of work.
Collective bargaining plays a significant role in improving the labour-management
relations and in ensuring industrial harmony.
7.12 PRE-REQUISITES OF COLLECTIVE BARGAINING
Collective bargaining is the technique that has been adopted by unions and
managements to reconcile their conflicting interests. It is called collective because
the employees, as a group, select representatives to meet and discuss differences
with the employer. Collective bargaining is the opposite of individual bargaining
which takes places between the management and the worker as an individual. The
negotiations for collective bargaining require joint sessions of the representatives of

labour and management. These help a lot in promoting a better understanding of

each others point of view as well as the problems confronting them. Through
discussions and interactions, each party learns more about the other, and
misunderstandings are often removed. The role of collective bargaining in conflict
resolution is very significant. But there are certain pre-requisites which are essential
for collective bargaining to be successful. These pre-requisites are as follows:
1. Freedom of association and the independence of unions.
2. Stability of the organisations of the workers and the employers.
3. Favourable political climate. The Government should not only be sympathetic,
but also encourage collective bargaining and agreements.
4. Mutual trust and respect and also willingness on the part of the parties
concerned to settle all matters by collective bargaining or negotiations.
5. The bargaining power of each party depends on the:
(a) Strengths of its organisation.
(b) Knowledge and skill of negotiation of its representatives.
(c) Trade recession, boom and shortages.
(d) Surplus of labour, particularly in regard to semi-skilled and unskilled workers.
Reasons for lack of success of Collective Bargaining in India
Collective bargaining in India has not made that much of headway as compared to
some other countries because of the following factors:
(i)
(ii)
(iii)
(iv)
(v)
(vi)

(vii)
(viii)

Absence of an enlightened management. Some management or

employers are still allergic to trade unions.
Weakness of trade unions due to their multiplicity, intra and inter-union
rivalries, poor financial conditions, lack of leadership.
Easy availability of government intervention for conciliation and
compulsory adjudication of disputes.
Surplus manpower.
Restricted rights of workers and employers to strike and lockout.
Different political affiliations of the unions and the consequent political
rivalries make it difficult to settle the disputes amicable by mutual
negotiations.
Lack of mutual trust, respect and the spirit of give and take.
Unfavorable political and economic climate since the Government though
wanting to encourage collective bargaining, is not prepared for endless
trials of strength for the fear of planned economy of the country being
disrupted.

Subject Matter of Collective Bargaining

For improvement of collective bargaining to reach at mutually benefitted level,
following points should be considered:
(a) Union recognition and the scope of the bargaining unit.
(b) Management rights

(c) Union Security

(d) Strikes and lockouts
(e) Union activities and responsibilities
(f) Wages
(g) Working hours and working conditions
(h) Job rights and seniority
(i) Discipline, suspension and discharge
(j) Grievance handling and arbitration
(k) Health and safety
(l) Insurance and benefit programmes
7.13 FINDINGS OF STUDY GROUPS ON INDUSTRIAL RELATIONS
Studies were conducted by various groups to find out the means to improve the
relations between the workers and the management in different sectors. In this
section, we will look at the recommendations given by these groups.
Madras Study Group
The group recommended that:
(a) The enactments of legislation by the government should be reduced to the
minimum so as to give a chance to negotiations and collective bargaining
machinery to settle industrial disputes.
(b) The practice of frequent intervention by the state and the reference of
disputes to adjudication should be avoided.
(c) Either the works committees should be abolished or the procedure for the
nomination of workers representatives should be changed, so that only the
recognised unions may have the right to send their representatives to this
body.
(d) Since the joint management councils have failed in the southern states, such
councils need not to be forced upon the employers.
(e) Independent machinery should be used to verify the membership of the union
so as to give recognition to it as a representative union for dealing with
matters for consultation.
(f) Trade Union office should be closed to all those workers who are found to be
guilty of a breach of the Code of Discipline.
Study Group on Iron and Steel Industry
The group made the following recommendations for improvements in labour
management relations:
(a) The union representing a majority of employees should be granted
recognition.
(b) Closer association should be developed between the management and the
employees at all levels in the plant.
(c) Grievances should be redressed by mutual discussion.

(d) To discuss matters relating to wages, conditions of service, leave, etc., it

would be useful if the recognised unions of all the steel plants are federated
into one body.
(e) Collective bargaining should be preferred, both at plant and the industry
levels, and adjudication should be resorted to when all other methods have
failed.
(f) A two-way communication system should be developed in the plant, for which
bipartite committees may be formed.

Study Group on Oil Industry

The group made the following recommendations:
(a) Workers should be given a sympathetic treatment by the management.
(b) Collective bargaining should be developed.
(c) Workers should be education to be enable them to understand not only their
rights but their obligations too, towards the industry, management and
towards the public.
(d) Adjudication should be resorted to only when negotiation, conciliation and
voluntary arbitration have failed.
(e) A suitable atmosphere should be created by the government by restricting
strikes and lockouts during the period when negotiations are continuing.
(f) Multiplicity of unions should go.
(g) Mutual faith should be encouraged between parties for promoting economy in
the industry regarding hours of work, overtime work and a weekly holiday.
7.14 INTERNATIONAL LABOUR ORGANISATION (ILO)
The International Labour Organisation (ILO) was established on April 19, 1919 by
Versailles Peace Conference as an autonomous body associated with the League of
Nations. It was formed as a result of the peace conference at the end of the World
war I at Versailles. India became member of ILO in 1919, as an original signatory to
the treaty of peace. ILO became the specialized agency of United Nations (UN) in
1946.
The ILO is a social institution trying to make the world conscious that world peace
may be affected by unjust conditions of its working population. It deals with
international labour problems. The unique feature of ILO is that it is a tripartite body
consisting of representations of employers, labour and government. There are three
constituents:

The government which finance it.

The workers, for whose benefit it is created.
The employers, who share the responsibility for the welfare of the workers.

The principles of ILO are:

(a) Labour is not a commodity.

(b) Freedom of expression and association is essential to substantial progress.
(c) Poverty constitutes a danger to prosperity everywhere.
(d) The war against want requires to be carried on with unrelenting vigour within
each nation, and by continuous and concerted international effort in which
the representatives of workers and employers enjoying equal status with
those of governments in free discussion and democratic decision with a view
to the promotion of the common welfare.

Objectives of ILO
A conference was convened in Philadelphia during the Second World War. During the
discussions at this conference, the aims of ILO were reframed. The declaration of
Philadelphia enunciated 10 objectives which the ILO was to further and promote
among the nations of the world. These objectives are:
1. Full employment and the raising of standards of living.
2. The employment of workers in the occupation in which they can have the
satisfaction of giving the fullest measure of their skill and make their
contribution to the common well-being.
3. The provision, as a means to the attachment of this end and under adequate
guarantees for all concerned, of facilities for training and the transfer of
labour including migration for employment and settlement.
4. Policies in regard to wages and earnings, bonus and other conditions of work
calculated to ensure a just share of the fruits of progress to all and a
minimum living wage to all employed and in need of protection.
5. The effective recognition for the right of collective bargaining, the cooperation of management and labour in continuous improvement of
productive efficiency and the collaboration of workers and employers in social
and economic measures.
6. The extension of social security measures to provide a basic income to all in
need of such protection and comprehensive medical care.
7. Adequate protection for the life and health of workers in all occupations.
8. Provision for child welfare and maternity protection.
9. The provision of adequate nutrition, housing and facilities for recreatioin and
culture.
10.The assurance of educational and vocational opportunity.
Structure of ILO
The ILO is organised around three sub-systems. They are as follows:

International Labour Conference

Governing Body
International Labour Office

Impact of ILO on the Indian Labour

India is a member of the ILO since its inception and it gave a great boost to the
labour legislation in India. India has adopted many of the conventions and
recommendations on international standards to improve the labour conditions under
Article 3 of the constitution of the ILO. India has also been nominating nongovernment delegates and advisors to the International Labour Conference every
year.
The ILO standard have influenced the Indian Labour Legislation. The ILO conventions
have formed the sheet anchor of Indian Labour Legislation especially after 1947
when the Indian National Government assumed office at the Centre.
Industrial relations, previously bipartite in nature, has become tripartite. In the early
50s, V.V. Giri, the then Labour Minister, put forward the Giri approach, which
emphasised the importance of voluntary negotiations between workers and their
management in resolving disputes. Gandhis approach to labour relations was also
based on the moral principles of truth, non-violence and voluntary arbitration of
disputes. The situation has changed since after independence, the government with
its concern of accelerated economic development and distribution of social justice is
gradually playing a vital role in the shaping of labour-management relations and
policies.
The tripartite concept of Industrial relations has also undergone a radical change
with changes in the expectations of people under the influence of a welfare state
envisaged for India.
Indian industrial relations today needs to widen its horizon to concern itself with the
larger social and national interests. The system should curb its preoccupation with
wages, bonus and allowances. As Kudchedkar has pointed out, Indian Industrial
Relations is vested in terms of profits, dividends and wages to the determent of
social and national interest. When these social and national interest plays a role,
only then do the industrial relations become a national responsibility.
Indian Industrial Relations, as already mentioned, is changing. It is witnessing the
emergence of new forces. As soon as Emergency was lifted, the country faced
industrial strikes. In order to tackle this situation, the Janta Party government tried
to placate the workers by taking certain steps culminated in enactment of the
Industrial Relations Bill, 1978.
7.15 ISSUES PERTAINING TO COLELCTIVE BARGAINING IN INDIA
The Indian Government wants to encourage collective bargaining between the
management and the trade unions rather than them resorting to adjudication for
resolving the disputes and their problems. The Government wants them to become
self-reliant. But there are certain issues which we need to discuss.

The first is the issue of strengthening collective bargaining by trying to

determine a sole bargaining for negotiation. The state of Maharashtra has
already passed a law for the creation of a sole bargaining agency in every unit
and industry. Collective bargaining is advocated where the parties involved have
a fuller understanding. This will help to arrive at a speedier settlement of
disputes between themselves.
The second issue relates to the gaps that are occurring as a result of the
variations that occur in the central and state legislation as far as labour matters
are concerned. In India, labour falls under the Concurrent List, though National
Commission on Labour has made a recommendation for forming a common
labour code which is yet to be adopted. Adopted of this recommendation will go
a long way in solving some of the problems that Indias legislation process in
facing.
Another issue is that of the workers participation in management. India has
already experienced working of many forms of worker participation schemes but
none of them seems to have made any headway. The reasons for the failure of
these schemes need to be probed into.
Its strategic importance extends beyond the limited frontiers of unionmanagement relationship and overlaps with future prospects for Indian
democracy on one hand, and the basic concepts and assumptions of economic
development on the other. The set of strategic choices must be made in the
midst of economic development on the other. The set of strategic choices must
be made in the midst of economic and political difficulties that the country is
undergoing.

7.16 INDUSTRIAL HARMONY

While industrial peace calls for both, a negative and a positive approach, the
attainment of industrial harmony necessarily calls for a positive and constructive
approach to the solution of industrial disputes. Therefore, the commission laid
emphasis on the freedom of industrial relations machinery from the political
partisan influence. This was necessary in the view of the multiparty governments
that were emerging in the country.
The commission has referred to certain weaknesses in the working of the existing
industrial relations machinery, namely the delays involved, the expenditure, the
largely ad hoc nature of the machinery and the discretion vested in the government
in matters of reference for disputes. Therefore, to make the industrial machinery
more effective and more acceptable, a suitable modification in existing machinery
should be made.
In lieu of the Indian Labour Conference, a Tripartite Labour Conference was held in
May, 1977. This conference led to the setting up of a Tripartite Committee on
Comprehensive Industrial Relations Law to recommend:

(i) The categories of workmen and industries to which the proposed legislation be
made applicable.
(ii) The organisation, structure and functions of the industrial relations machinery so
as to make it an effective instrument in promoting and maintaining industrial peace.
(iii) The conditions for the registration of unions and listing of unfair labour practices
on the part of workers union and employees.
(iv) The method of determining the representative character of the union for the
purpose of recognition as a bargaining agent by the management in a unit or
industry.
(v) To review the question of constituting the judicial sole bargaining agent with
proportional representation of various unions, possibly ascertained through secret
ballot.
A Panch Sheel, comprising five basic considerations was formulated to govern the
choice of the collective bargaining agent. They are as follows:
1. The collective bargaining agent should represent all workmen in the bargaining
process.
2. All workmen should be associated in the choice of the collective bargaining
agent.
3. Free choice of collective bargaining agent should be ensured by a secret ballot in
which all the workmen participate.
4. On all collective bargaining issues, the jurisdiction of the bargaining agent should
be exclusive.
5. The collective bargaining decision, whether for settlement or strike, should be
endorsed by all the workmen whom it binds and/ or on whose behalf it is made.
In 1977, a tripartite committee was also set up under the chairmanship of the Union
Labour Minister to formulate a constructive and meaningful comprehensive scheme
of worker participation. It recommended:
1. The adoption of a three-tier system of participation namely, at the corporate
level, plant level and shop-floor level.
2. Workers representatives on the participative forms should be selected through
secret ballot.
3. The setting up of an organisation, both at the centre and in the state, to monitor
the implementation of the scheme with a view to reviewing its working from time to
time.

4. Introduction of legislative measures to implement the scheme.

5. The decision on issues related to new technology product mix; or expansion
schemes at the board level.
6. The decision on issues like wages, bonus, housing and other fringe benefits by
collective bargaining machinery.
As a means of preventing disputes, a large number of voluntary measures have
been evolved by the state. These consist of:
(a) Codes of behavior for employers and workers in their day-to-day dealings
with each other.
(b) The holding of meetings at the national level between employers and workers
organisation under the auspices of the Indian National Labour Conference to
discuss problems of mutual interest and to evolve criteria or principles for the
resolution of disputes or issues of controversy.
7.17 PRE-NEGOTIATION PREPARATION
Before starting the bargaining process both the parties need to make some
preparations. In this section, we will see how both the parties prepare for the
negotiation.
Objectives of Pre-Negotiation Preparation
A party wishing to arrive at a satisfactory conclusion or arrangement through
collective bargaining should first identify the objectives of the exercise. Same
objectives common to employers are the following:
1. Ensuring that the enterprise is not rendered uncompetitive.
2. The need to keep wage increases below the level of productivity increases
and/or within the inflation rate.
3. Guarantees of industrial peace during the period of operation of the
agreement.
As far as possible, managers should be consulted in determining objectives; their
priorities should be solicited, and they should be aware of the companys views in
regard to objectives so that they could be tested against the managers views.
It is insufficient to merely determine objectives. A tentative plan to achieve these
objectives, which can be modified during the course of the negotiations, could be
formulated. Such a plan should include the companys requests to the union. For
instance, work reorganization to increase productivity to absorb the cost increases
upon collective bargaining, may form a part of the companys plan. Negotiations on
the unions demands are generally an ideal setting in which the management can
achieve some of its objectives through agreement. In order to achieve this, the
management must be clear about its own priorities. If there is an existing collective

agreement, it would be a useful starting point. An analysis should be made of how it

has worked, its unsatisfactory features from the companys point of view should be
identified, and the changes should be necessary determined.
Negotiating Team
The negotiating team, and the respective roles of the members, should be
determined before the negotiations. Employers would find it useful to include in the
team people from different disciplines.
Research and Study
The unions demand should be carefully studied. The following are some of the
matters to which attention should be paid:
(a) Assess the economic impact of the demands on the company.
(b) Make a comparative study, e.g., in a wage demand one should ascertain the
comparative wage rates in the industry and in allied or similar businesses,
the minimum wage, if any, and the rates applicable in other collective
agreements.
(c) Separate the demands which the company has no intention of fulfilling or
giving, either on a question of principle or due to economic incapacity.
(d) Prepare the companys position in regard to the other demands, for example,
the conditions on which the company may be prepared to grant them or to
compromise upon the same.
(e) Identify the demands which may be of a crucial importance to the union or to
the employees as the case may be. This is crucial to the success in
negotiations because, without a proper assessment of such demands, a
negotiated settlement may not result or if one does result, it may lack
durability because it has not addressed the main problems. The issues which
may be of crucial importance may not be the same in the case of both (union
and employees) as they may have differing interests. Having identified the
crucial demands, the company should formulate its strategy in relation to
them, for example, the possibility of trading some of the companys demands
in return for the unions demands.
Responding to the Unions Requests
It is a matter of assessment in each situation as to whether the management should
make an initial response in writing to the union before the negotiations commence.
Usually, it is desirable that written positions stated before negotiations commence
should not contain a flat or blanket refusal. At this stage, it is preferable to couch a
refusal in language which does not give the impression of an out-of-hand rejection
or a rejection without consideration of the merits. Negative answer may sometimes
be better given during the negotiations because it affords greater opportunities for
explanations of the reasons for the negative answers. A rejection during

negotiations would more likely give the impression to the union and employees that
such a rejection was made only after negotiation not before. It is always useful from
the point of view of reaching an agreement on other matters to first listen to the
reasons adduced by the union for a demand which the company does not propose
to accept. A rejection during negotiations also enables the employer to convince a
union of at least some of the reasons why the demand is not acceptable. It also
prevents a union from resorting to trade union action on the issue of a refusal to
negotiate, as distinct from rejection of the demands after negotiation.
Inventing options
Since negotiations may not proceed or take place in the way a party may plan, a
party should be able to provide alternative options to what he, or the other party
expects. For example, if it transpires that the wage increase sought is not
acceptable, the employer should be prepared with alternatives to cushion the
impact of increase in excess of what it had planned to agree to.
Strategy
A party to collective bargaining negotiations has to formulate a strategy for all
stages of the negotiation, including the pre-negotiation stage. Before negotiations
commence, the strategy should include matters such as:
(a) Options as referred to above.
(b) How much to offer while leaving room for further negotiation if the offer fails.
The offer should be sufficiently attractive so as not to lead to a breakdown in
negotiations.
(c) How to link ones requirement to the concessions one makes.

CHAPTER 8 WORKERS PARTICIPATION IN MANAGEMENT

8.1 INTRODUCTION
Workers participation is a system where workers and management share important
information with each other and participate in decision-making. It is the distribution
of social power in industry so that it tends to be shared among all who are engaged

in the work rather than concentrated in the hands of minority. Thinkers like Comte
and Owen advocated the participation of workers in management for achieving
distributive social justice. Karl Marx proposed complete control of the enterprise by
workers and socialization of the means of the production. Marx wanted trade unions
to be developed as an alternative for self-government. Thinkers favoured guilds of
all classes of the workers to be controlled under a charter from the state. With the
outbreak of the First World War, an acute industrial unrest was experienced. Labour
was largely regarded as a Commodity of Commerce and exploited to the
maximum in England, West Germany, France and the USA. The main concern of
ideologists in advocating workers participation in management was the sharing of a
part of managerial power with workers. Participation refers to involvement of
individuals or group of individuals for common purpose. It will be effective only if
there is interaction among individual groups.
Workers participation in Management (WPM) refers to the emotional and mental
involvement of an employee to contribute to the goals and share responsibilities of
an organisation. Workers participation in management is an essential ingredient of
industrial democracy. The concept of workers participation in management is based
on Human Relations approach to Management which brought about a new set of
values to labour and management. Traditionally, the concept of workers
participation in management refers to participation of non-managerial employees in
the decision-making process of the organisation. Workers participation is also
known as labour participation or employee participation in management. In
Germany, it is known as co-determination while in Yugoslavia it is known as selfmanagement. The International Labour Organisation has been encouraging
member nations to promote the scheme of workers participation in management.
Workers participation in management implies mental and emotional involvement of
workers in the management of the enterprise. It is considered as a mechanism
where workers have a say in the decision-making.
8.2 DEFINITIONS
The concept of WPM is a broad and complex one. Depending on socio-political
environment and cultural conditions, the scope and contents of participation
change. Lets have a look at some of the definitions of Workers Participation in
Management.
International Institute of Labour Studies: WPM is the participation resulting from
practices which increase the scope for employees share of influence in decisionmaking at different tiers of organizational hierarchy with concomitant (related)
assumption of responsibility.
John Leitch: The organisation of any factory or other business institution into a little
democratic state with the representative government which shall have both the
legislative and executive phases.

ILO: Workers participation may broadly be taken to cover all terms of association of
workers and their representatives with the decision-making process ranging from
exchange of information, consultations, decision and negotiations, to more
institutionalized forms such as the presence of workers member on management or
supervisory boards or even management by workers themselves.
The main implications of workers participation in management as summarized by
ILO:

Workers have ideas which can be useful.

Workers may work more intelligently if they are informed about the reasons for
and the intention of decisions that are taken in a participative atmosphere.

According to Keith Davis, Participation refers to the mental and emotional

involvement of a person in a group situation which encourages him to contribute to
group goals and share responsibility of achievement.
According to G.S. Walpole, Participation in Management gives the worker a sense of
importance, pride and accomplishment; it gives him the freedom of opportunity for
self-expression; a feeling of belongingness with the place of work and a sense of
workmanship and creativity.
The concept of workers participation in management encompasses the following:

It provides scope for employees in decision-making of the organisation.

The participation may be at the shop level, departmental level or at the top
level.
The participation includes the willingness to share the responsibility of the
organisation by the workers.

8.3 FEATURES OF WORKERS PARTICIPATION IN MANAGEMENT

Some of the important features of Workers Participation in Management are:
1. Participation means mental and emotional involvement rather than mere physical
presence.
2. Workers participate in management not as individuals but collectively as a group
through their representatives.
3. Workers participation in management may be formal or informal. In both the
cases, it is a system of communication and consultation whereby employees
express their opinions and contribute to managerial decisions.
There can be 5 levels of Workers Management Participation or WPM:

1. Information Participation: It ensures that employees are able to receive

information and express their views pertaining to the matter of general economic
importance.
2. Consultative importance: Here workers are consulted on the matters of employee
welfare such as work, safety and health. However, final decision always rests with
the top-level management, as employees views are only advisory in nature.
3. Associative Participation: It is an extension of consultative participation as
management here is under the moral obligation to accept and implement the
unanimous decisions of the employees. Under this method, the managers and
workers jointly take decisions.
4. Administrative participation: It ensures greater share of workers participation in
discharge of managerial functions. Here, decisions already taken by management
come to employees, preferably with alternatives for administration and employees
have to select the best from those for implementation.
5. Decisive Participation: Highest level of participation where decisions are jointly
taken on matters relating to production, welfare, etc.
8.4 OBJECTIVES OF WPM
According to Gosep, workers participation may be viewed as:

An instrument for increasing the efficiency of enterprises and establishing

harmonious relations.
A device for developing social education for promoting solidarity among workers
and for tapping human talents.
A means for achieving industrial peace and harmony which leads to higher
productivity and increased production.
A humanitarian act, elevating the status of worker in the society.
An ideological way of developing self-management and promoting industrial
democracy.

Other objectives of WPM can be cited as:

To improve the Quality of Work Life (QWL) by allowing workers greater influence
and involvement in work and satisfaction obtained from work.
To secure the mutual co-operation of employees and employers in achieving
industrial peace; greater efficiency and productivity in the interest of the
enterprise, the workers, the consumers and the nation.

8.5 IMPORTANCE OF WPM

We have seen that workers participation in management is an initiative where
workers have a say in the decision-making process of an enterprise. This definitely

makes an impact on the employees. Lets have look at the effect of workers
participation in management on the industry.
1. Higher Productivity: The increased productivity is possible only when there exists
fullest co-operation between labour and management. It has been found that poor
labour management relations do not encourage the workers to contribute anything
more than the minimum desirable to retain their jobs. Thus, participation of workers
in management is essential to increase industrial productivity.
2. Greater Commitment: An important prerequisite for forging greater individual
commitment is the individuals involvement and opportunity to express himself.
Participation allows individuals to express themselves at workplace rather than
being absorbed into a complex system of rules, procedures and systems. If an
individual knows that he can express his opinion and ideas, a personal sense of
gratification and involvement takes place within him. Participation increases the
level of commitment and employees start relating to the organisation.
3. Reduced Industrial Unrest: Industrial conflict is a struggle between two organised
groups, which are motivated by the belief that their respective interests are
endangered by the self-interested behavior of the other. Participation cuts at the
very root of industrial conflict. It tries to remove or at least minimize the diverse and
conflicting interests between the parties, by substituting it with cooperation,
homogeneity and common interests. Both sides are integrated and decision arrived
at are mutual rather than individual.
4. Improved Decisions: Communication is never a one-way process. Also note that it
is seldom, if ever possible, for managers to have knowledge of all alternatives and
all consequences related to the decisions which they must make. Because of the
existence of barriers to the upward flow of information in most enterprises, much
valuable information possessed by subordinates never reaches their managers.
Participation tends to break down the barriers, and makes the information available
to managers. To the extent such information alters the decisions, the quality of
decisions is improved.
5. Human Resource Development: Participation provides education to workers in the
management of industry. It fosters initiative and creativity among them. It develops
a sense responsibility. Informal leaders get an opportunity to reinforce their position
and status by playing an active role in decision-making and by inducing the
members of the group to abide by them.
6. Reduced Resistance to Change: Last but not the least, it should be noted that
changes are arbitrarily introduced from above without explanation. Subordinates
tend to feel insecure and take counter measures aimed at sabotage of changes. But
when they have participated in the decision-making process, they have had an
opportunity to be heard. They know what to expect and why. Their resistance to
change is reduced.

8.6 ESSENTIAL CONDITIONS FOR WPM

The success of workers participation in management depends upon the following
conditions:

The attitude and outlook of the parties should be enlightened and impartial so
that a free and frank exchange of thoughts and opinions could be possible.
Where a right kind of attitude exists and proper atmosphere prevails, the process
of participation is greatly stimulated.
Both parties should have a genuine faith in the system and in each other and be
willing to work together. The management must give the participating institution
its right place in the managerial organisation of the undertaking and
implementing the policies of the undertaking. The labour, on the other hand,
must also whole heartedly co-operate with the management through its trade
unions. The foremen and supervisory cadre must also lend full support so that
the accepted policies could be implemented without any resentment on either
side.
Participation should be real. The issues related to increase in production and
productivity, evaluation of costs, development of personnel and expansion of
markets should be brought under the jurisdiction of the participating bodies.
These bodies should meet frequently and their decision should be timely
implemented and strictly adhered to. Further, participation must work as
complementary body to help collective bargaining, which creates conditions of
work and also creates legal relations.

8.7 SCOPE AND WAYS OF PARTICIPATION

One view is that workers or the trade unions should, only be given opportunity
through their representatives, to influence managerial decisions at various levels.
In practice, the participation of workers can take place by one or all the methods
listed below:
1. Participation at the Board Level: This would be the highest form of industrial
democracy. The workers representative on the Board can play a useful role in
safeguarding interests of workers. He or she can serve as a guide and a control
element. He or she can prevail upon top management not to take the measures that
would be unpopular with the employees. He or she can guide the Board members
on matters of investment in employee benefit schemes like housing etc.
The government of India took the initiative and appointed workers representatives
on the Board of Hindustan Antibiotics (Pune), HMT (Banglore), and even nationalized
banks. The Tatas, DCM and a few others have adopted this practice.
Problems associated with this method

Focus of workers representatives is different from the focus of the remaining

members of the Board.
Communication and subsequently relation between the workers representative
and the workers suffers after the former assumes directorship.
He or she tends to become alienated from the workers.
As a result, he or she may be less effective with the other members of the Board
in dealing with employee matters.
Because of difference in the cultural and educational backgrounds and
differences in behavior and manners, such a representative may feel inferior to
the other members, and he or she may feel suffocated. Hence, his or her role as
a director may not be satisfying for either the workers or the management.
Such representatives of workers on the Board place them in minority and the
decisions of the Board are arrived at on the basis of majority vote.

2. Participation through Ownership: This involves making the workers shareholders

of the company by inducing them to buy equity shares. In many cases, advances
and financial assistance in the form of easy repayment options are extended to
enable employees to buy equity shares. Examples of this method are available in
the manufacturing as well as the service sector.

Advantages: Makes the workers committed to the job and to the organisation.
Drawback: Effect on participation is limited because ownership and
management are two different things.

3. Participation through complete control: Workers acquire complete control of

management through elected boards. The system of self-management in Yugoslavia
is based on this concept. Self-management gives complete control to workers to
manage directly all aspects of industries through their representatives.
Advantages

Ensures identification of the workers with their organisation.

Industrial disputes disappear when workers develop loyalty to the organisation.
Trade unions welcome this type of participation.

Conclusion
Complete control by workers is not an answer to the problem of participation
because the workers do not evince interest in management decisions.
4. Participation through staff and works councils: Staff Councils or Work Councils are
bodies on which the representation is entirely of the employees. There may be one
council for the entire organisation or a hierarchy of councils. The employees of the
respective sections elect the members of the councils. Such councils play a varied
role.
Their role ranges from seeking information on the managements intentions to a full
share in decision-making. Such councils have not enjoyed too much of success

because trade union leaders fear the erosion of their power and prestige if such
workers bodies were to prevail.
5. Participation through joint councils and committees: Joint councils are bodies
comprising representatives of employers and employees. This method sees a very
loose form of participation, as these councils are mostly consultative bodies. Work
committees are a legal requirement in industrial establishment employing 100 or
more workers. Such committees discuss a wide range of topics connected to labour
welfare.
Examples of such committees are welfare committee, safety committee, etc. Such
committees have not proven to be too effective in promoting industrial democracy,
increasing productivity and reducing labour unrest.
6. Participation through collective bargaining: Through the process of collective
bargaining, management and workers may reach collective agreement regarding
rules for the formulation and termination of the contract of employment, as well as
conditions of service in an establishment. Even though these agreements are not
legally a binding, they do not have some force. For collective bargaining to work,
the workers and the employers representative need to bargain in the right spirit.
But in practice, while bargaining, each party tries to take advantage of the other.
This process of collective bargaining cannot be called WPM in its strongest sense as
in reality; Collective bargaining is based on the crude concept of exercising power
for the benefits of one party. WPM, on the other hand, brings both the parties
together and develops appropriate mutual understanding and brings about a
mature responsible relationship.
7. Participation through job enlargement and job enrichment: Excessive job
specialisation that is seen as a by-product of mass production in industries, leads to
boredom and associated problems in employees. Two methods of job designing job
enlargement and job enrichment are seen as methods of addressing problems.
Job enlargement means expanding job content adding task elements horizontally.
Job enrichment means adding motivators to the job to make it more rewarding.
This WPM in that it offers freedom and scope to the workers to use their judgement.
But this form of participation is very basic as it provides only limited freedom to a
worker concerning the method of performing his/her job.
The worker has no say in other vital issues of concern to him issues such as job
and income security, welfare schemes and other policy decisions.
8. Participation through suggestion schemes: Employees views are invited and
reward is given for the best suggestion. With this, scheme, the employees interest
in the problems of the organisation is aroused and maintained. Progressive
managements increasingly use the suggestion schemes. Suggestions can come
from various levels. The ideas could range from changes in inspection procedures to
design changes, process simplification, paperwork reduction and the like. Out of
various suggestions, those accepted could provide marginal to substantial benefits
to the company. The rewards given to the employees are in line with the benefits
derived from the suggestions.

9. Participation through quality circles: The concept originated in Japan in the early
1960s and has now spread all over the world. A QC consist of seven to ten people
from the same work area who meet regularly to define, analyse or solve quality and
related problems in their area. These circles require a lot of time and commitment
on the part of members for regular meetings, analysis, brainstorming, etc. Most QCs
have a definite life cycle one to three years. Few circles survive beyond this limit
either because they lose steam or they face simple problems. QCs can be an
excellent bridge between participative and non-participative approaches. For QCs to
succeed in the long run, the management needs to show its commitment by
implementing some of the suggestions of the groups and providing feedback on the
disposition of all suggestions.
10. Empowered Teams: Empowerment occurs when authority and responsibility are
passed on to the employees who then experience a sense of ownership and control
over their jobs. Employees may feel more responsible, may take initiative in their
work, may get more work done, and may enjoy the work more.
11. Total Quality Management: TQM refers to the deep commitment, almost
obsession, of an organisation to quality. Every step in companys processes is
subjected to intense and regular scrutiny for ways to improve it. Some traditional
beliefs like the following are discarded:
High quality costs more.
Quality can be improved by inspection.
Defects cannot be completely eliminated.
Quality in the job of the QC personnel. New principles of TQM are:
Meet the customers requirement on the time, the first time, and 100% of the
time.
Strive to do error-free work.
Manage by prevention not by correction.
Measure the cost of quality.
TQM is called participative because it is a formal programme involving every
employee in the organisation, making each one responsible for improving quality
every day.
12. Financial Participation: This method involves less consultations or even joint
decisions. Performance of the organisation is linked to the performance of the
employee. The logic behind this is that if an employee has a financial stake in the
organisation, he/she is likely to be more positively motivated and involved. Some
schemes of financial participation are:
Profit-linked pay.
Profit sharing and Employees Stock Option schemes.
Pension-fund participation.
Measures for making Participation effective
1. Employer should adopt a progressive outlook. They should consider the industry
as a joint endeavor in which workers have an equal say. Workers should be provided
and enlightened about the benefits of their participation in the management.

2. Employers and workers should agree on the objectives of the industry. They
should recognise and respect the rights of each other. Workers and their
representative should be provided education and training in the philosophy and
process of participative management.
3. There should be effective communication between workers and management and
effective consultation of workers by the management in decisions that have an
impact on them. Participation should be continuous process. To begin with,
participation should start at the operating level of management. A mutual
cooperation and commitment to participation must be developed by both
management and labour.
Modern scholars are of the view that the old adage a worker is a worker, a
manager is a manager; never the twain shall meet should be replaced by
managers and workers are partners in progress of business.
8.8 EVOLUTION OF PARTICIPATIVE MANAGEMENT
The beginning of WPM was made with the Industrial Disputes Act, 1947, which
made works committee mandatory in industrial establishments employing 100 or
more workers.
Section 3 of the Industrial Disputes Act, 1947 empowered appropriate governments
to require employers employing 100 or more workmen in any industrial
establishment to constitute works committees. The Act and rules made under it
provide that the total number of representatives on works committee including
those of the employer should not exceed 20, and that the number of
representatives of workers should not be less than that of the employer. The
functions that the Act visualized for the works committees were:
To promote measures for securing and preserving amity and good relations
between employers and workmen.
To that end, comment upon matters of common interest or concern.
To endeavor to compose any material difference of opinion between the
employer and the workmen in respect of such matters.
The Industrial Policy Resolution adopted by the government in 1956, stated there
should be some joint consultation to ensure industrial peace, and improve
employer-employee relations. The functions of both these joint bodies were to be
consultative and not binding on the management. The response to these schemes
was encouraging to begin with, but gradually waned.
A study team was appointed in 1962 to report on the working of joint councils and
committees. The team identified some reasons for their failure. No concrete steps
were taken to remove the difficulties, or change the pattern of participative
management.
During the emergency of 1975-77, the interest in these schemes was revived by the
then Prime Minister by including Workers Participation in industry in the
governments 20-point programme (refer for detail page 246 of Industrial Relations,
Trade Unions and Labour Legislation by P.R.N. Sinha, Indubala Sinha, Seema

Priyadarshini Shekhar). The government started persuading large enterprises to set

up joint consultative committees and councils at different levels.
The Janta Government who came to power in 1977 carried on this initiative. It was
again emphasised by the Congress government who came back in 1979. This
continued in a non-statutory vein till the late 1980s and the response from the
employers and employees stayed lukewarm. Then, the 42 nd Amendment to the
Constitution was made.
8.8.1 Reasons for Failure of Workers Participation Movement in India
The reasons for failure of workers participation movement in India are:
1. Employers resist the participation of workers in decision-making. This is
because they feel that workers are not competent enough to take decisions.
2. Workers representatives who participate in management have to perform the
dual roles of workers spokesman and a co-manager. Very few representatives
are competent enough to assume the two incompatible roles.
3. Generally, trade unions, leaders who represent workers are also active
members of political parties. While participating in management they tend to
give priority to political interests rather than the workers cause.
4. Schemes of workers participation have been initiated and sponsored by the
Government. However, there has been a lack of interest and initiative on the
part of both the trade unions and employers.
5. In India, labour laws regulate virtually all terms and conditions of employment
at the workplace. Workers do not feel the urge to participate in management,
having an innate feeling that they are born to serve and not to rule.
6. The focus has always been on participation at the higher levels, lower levels
have never been allowed to participate much in the decision-making in the
organisations.
7. The unwillingness of the employer to share powers with the workers
representatives, the disinterest of the workers and the perfunctory attitude of
the government towards participation in management act as stumbling
blocks in the way of promotion of participative management.

CHAPTER -9 DOMESTIC INQUIRY

9.1 INTRODUCTION
For the smooth functioning of an industry, the defined codes of discipline, contracts
of service by awards, agreements and standings orders must be adhered to. In the
event of an employee not complying with these codes of conduct, he is liable to
face disciplinary actions initiated by the Management according to the standing
order. This procedure is called Domestic Inquiry and it is conducted in accordance
with standing order/agreements.
Domestic enquiry is similar to trial in a court of law, but while a trial is in a court is
for crimes done against society, domestic enquiry is conducted for misconducts

committed against establishment punishable under standing orders, rules and

regulations of the organisation. Further, while a trial in a court is in accordance with
the Criminal Procedure Code, Civil Procedure Code, Evidence Act, the domestic
enquiry is conducted in terms of what is known as Natural Justice.
A domestic inquiry is an internal hearing held by an employer to establish whether
an employee is guilty of misconduct and to provide an opportunity for the employee
to state his case. Misconduct related to duty, discipline or morality could either be a
minor misconduct or a major one. Preliminary investigation to establish this would
need to be carried out almost immediately on receiving the complaint. All those
involved need to be interviewed and their evidence/ statements recorded in writing.
For a minor misconduct an employee could be issued a warning letter while for a
major misconduct it becomes necessary to conduct a domestic enquiry.
Also, the enquiry officer while examining the evidence and pronouncing on the guilt
is not authorized to penalize the employee. It is only the employer or the appointing
authority, also known as notified disciplinary authority, who can pronounce the
penalty.
Domestic enquiry is not considered a legal requirement under the Industrial
Disputes Act, or other substantive laws such as the Factories Act, Mines Act etc. but
has been provided under the standing orders to be framed under the Industrial
Employment (Standing Order Act), 1946. As a result, it is now well established that
such standing orders have the force of law and constitute statutory terms of
employment.
The case law established over a long period has made it obligatory for the
employers to hold a fair and just enquiry to prove the misconduct before awarding
any serious punishment. Dismissal of an employee without holding a fair and just
domestic enquiry amounts to the violation of the principles of natural justice and is
frowned upon by the Labour Courts/Industrial Tribunals and adverse conclusions
may be drawn against the employer for not holding a domestic enquiry, in so much
so that the dismissal without holding a domestic enquiry is deemed to be illegal.
9.2 DEFINITION OF DOMESTIC ENQUIRY
Based on the above description of domestic enquiry, we understand that the term
domestic enquiry is mainly used to refer to an enquiry into the charges of
indiscipline and misconduct by an employee. In common parlance, domestic enquiry
means departmental enquiry or domestic tribunal. In such enquiries, the matter is
decided by administrative officers and not by courts of law. In cases of alleged
indiscipline, it is common for disciplinary authorities in a department or in an
industry to appoint an officer or officers to enquire into the allegations against an
employee. These enquiries are commonly known as Domestic Enquiries.

A domestic enquiry is an internal hearing held by an employer to ascertain whether

an employee is guilty of misconduct. The purpose of a domestic enquiry is to find
out the truth of the allegations made against the workman.
The Industrial Court, in the course of adjudicating whether a dismissal is without just
cause or excuse within the context of law does not merely examine whether there
were proper grounds for the employer to terminate the services of the employees
but also examines whether the process by which the employee was terminated was
fair or unfair.
This aspect of procedural fairness in the taking of disciplinary action against an
employee may often be a crucial factor in deciding whether the dismissal will be
upheld by the court. It is therefore, imperative to recognise that upholding a
dismissal in the Industrial Court involves satisfying two criteria:

That there were proper grounds for terminating the employee;

That the procedure by which the employee was terminated was fair.

In conducting a domestic enquiry, the rules of natural justice must be adhered to.
Justice must not only be done but must be seen to be done; the twin pillars of
natural justice being no person shall be condemned unheard and no person shall
sit in judgement in his own cause or in any in which he is interested. It is in this
context that the importance of conducting a proper domestic enquiry assumes
significance. The domestic enquiry should not be regarded by the employer as a
mere formality nor an unnecessary inconvenience but an integral part of the
disciplinary process whereby the employer can establish that the termination of the
employee was with just cause or excuse. The objective of holding a domestic
enquiry is two-fold. Firstly, to give the opportunity to the employer to prove the
charges of misconduct against a delinquent employee before punishment is meted
out and secondly to give the employee sufficient opportunity to defend himself.
Rather than view the domestic enquiry as burden on the management, and an
unnecessary waste of time, resources and expense, the employer should view the
process of the enquiry as a means to show that every possible means was made
available to avail the employee of meeting the charges against him and, if possible,
clearing himself.
Positioning under the Employment Act, 1955
Under section 14(1) of the Employment Act, 1955, it is stated that an employer
may, After Due Enquiry, dismiss the employee or take other disciplinary action
including downgrading and suspension of the employee on grounds of misconduct
inconsistent with the fulfillment of the express or implied conditions of service.

The effect of the incorporation of the term Due Enquiry into the provisions of
Section 14(1) of the Employment Act, 1955 was considered in detail in the recent
Federal Court decision of Said Dharmalingam v. Malayan Breweries (Malaya) Sdn
Bhd (1997) 1 CLJ646 where the Court stated as follows:
In R. v. BBC, ex parte Lavelle (1982) 1 RId 404, Woof J indicated, albeit obiter, that
when there is a procedure for dismissal in an employment not covered by statute at
all, employers must comply with that procedure for the dismissal to be valid. If the
contractual procedure was infringed, an injunction should be issued to prevent the
dismissal. This view was partly based on the notion that employment protection
legislation had substantially changed the position at common law, so that the
ordinary contract master and servant now has many of the attributes of an office.
In the present case, there is a statutory requirement to wit, s. 14(1) of the Act,
providing for the elementary safeguard of the right to due enquiry by the
employer. It follows, that at least prima facie, a dismissal in breach of s. 14(1) would
be void.
Having said that, we must add, that when, as here, a chairman is an employee
within the meaning of the Act, he has by s. 14(2) thereof a statutory right to due
enquiry by his employer, and so, the approach of the Industrial Court or for that
matter the High Court, in considering the question whether the claimant had been
dismissed without just cause or excuse, would be, to examine the decision not just
for substance but for process as well.
The decision of the Federal Court in Said Dharmalingam clearly states in respect of
employees governed by the employees governed by the Employment Act that
unless there is due enquiry prior to dismissal for misconduct, the dismissal can be
struck down by the Industrial Court even if the employer can show sufficient
grounds to dismiss. Hence, procedural fairness is crucial in successfully upholding
the dismissal.
It should perhaps be noted that an earlier Federal Court decision in Milan Auto Sdn
Bhd v Wong Sen Yen (1996) 1 AMR 49 held that the requirement of due enquiry
before dismissal in Section 14(1) of the Employment Act was not mandatory and,
even if there was a defective enquiry, it was curable in the sense the Industrial
Court could still enquire into the decision to dismiss and uphold the same if proper
grounds were made out.
It is respectfully suggested that the decision in the Milan Auto case can be
explained on the basis that there, the Industrial Court wrongly stuck down a
dismissal without inquiring into the merits of the dismissal which it was required to
do under Section 20 of the Industrial Relations Act, 1967. However, given that the
most recent pronouncement on the question of due enquiry, is set out in the said
Dharmalingams case, it is respectfully suggested that all prudent employers
should, when dealing with complaints of misconduct of employees governed by the

Employment Act, ensure that a proper enquiry is conducted or run the risk of
dismissal being struck down.
It is suggested that as a matter of good industrial practice and irrespective of which
the employee is governed by the Employment Act or not, a domestic enquiry should
be held whenever a complaint of misconduct is brought to ensure that the
employee is accorded fair treatment in answering the charge.
9.3 PRINCIPLES OF DOMESTIC ENQUIRY
We shall now examine the principles of the domestic enquiry and the necessary
procedures to ensure that no challenge can be successfully taken to claim the
enquiry as unfair. Rule of Natural Justice must be observed.

The delinquent is entitled to just hearing.

He can call for his own evidence.
Cross-examine any witness called by the prosecution.

Where rules are laid down, the procedure of such rules must be followed.

Disclose to the employee concerned, the documents of records and offer him
an opportunity to deal with it.
Do not examine any witness in the absence of the employee.
The enquiry officer is at liberty to disallow any evidence after recording the
reasons in writing.

Requirements in a Domestic Enquiry

Panel of enquiry to consider.

Evidence
Proof of facts by oral evidence
Proof of contents of documents
Burden of Proof
Adverse Inference (Section 144, Evidence Act, 1950)

9.4 ROLE OF PARTICIPANTS IN DOMESTIC ENQUIRY

The persons concerned with domestic enquiry are:
(a) Enquiry Officer: The Enquiry Officer is the officer appointed by disciplinary
authority to conduct an enquiry into the allegations leveled against the
charge sheeted employee. The Enquiry Officers job is to listen to and record
the statements of both the parties, i.e., the accused employee and the
management representative; allow both the parties to submit him the
relevant documents in support of their contentions; allow both the parties to
examine their witness as well as cross-examine the others witness; allow
both the parties to submit arguments and counter arguments in respect of

the charges and evidence adduced in the enquiry; and finally submit his
enquiry report to the disciplinary authority.
(b) Presenting Officer: Presenting officer is the officer appointed to present the
case of the management before the Enquiry officer relating to the charges
leveled against the accused employee. The presenting officer will produce in
enquiry; all the relevant documents relating to charges levelled against the
employee and also examine the witnesses of the Company as well as crossexamine the witness of the charge sheeted employee. In other words, he
plays the role of Prosecutor. In cases where felt appropriate, complainant may
also be appointed as Presenting Officer.
(c) Charge sheeted employee: It is necessary that the enquiry should be held in
presence of the accused. If, however, the employee fails to report for the
enquiry at the appointed place, date and time, the enquiry officer may
proceed with enquiry ex-parte, provided the charge sheet or the enquiry
notice included a provision to that effect.
(d) Defence assistant of the accused employee: If the accused employee wishes
another employee of his choice to assist him at the enquiry in the conduct of
his defence, it should be allowed, if a request is made for a non-employee
union office-bearer, he may be allowed if there is a provision to that effect
under the Conduct, Discipline and Appeal rules.
(e) Interpreter: The presence of an interpreter, from amongst the employees,
would be desirable in case the accused employee is not familiar with the
language in which the enquiry is conducted.
(f) Management witness: These are persons who appear in the enquiry to give
their statements in support of the charges leveled against the charge sheeted
employee.
(g) Charge sheeted employees witness: These are the person who appear in the
enquiry to give their statements in defence of the charge sheeted employee.
10.4.1 Who should be the Enquiry Officer?
(a) If a person is the witness in the case, he should not be Enquiry Officer.
(b) The Enquiry officer should not be appointed by an officer who is a witness in
the case.
(c) Enquiry Officer can be any officer of the Company. In exceptional cases, if it is
felt desirable, any public servant or retired honest public servant may be
appointed as enquiry officer (*Subject to the provision of Rules).
(d) A person to be an Enquiry Officer must be a responsible officer commanding
respect from the employee. He should not be a judge in his own case.
(e) A person to be an Enquiry officer should be open-minded and unbiased.
9.5 CHARGE SHEET
If on the basis of preliminary enquiry or otherwise, the disciplinary authority is
satisfied that a prima facie case exists and decides to take disciplinary action

against the employee concerned, the first thing to be done is to issue a charge
sheet to delinquent employee. Charge Sheet is a memorandum of charges or
allegations levelled against the employee which are acts of misconduct as per the
Conduct, Discipline and Appeal Rules.
When the management comes to know that a particular act of misconduct has been
committed by an employee, they should hold a preliminary enquiry into the matter.
Such an enquiry may be termed as fact-finding enquiry. The delinquent may also be
interrogated during the enquiry. The object is to arrive at a conclusion whether a
prima facie exists for taking disciplinary action against the workman concerned. In
the preliminary enquiry, if the management is satisfied that an act of misconduct
has been committed which would necessitate taking some disciplinary action
against the employee concerned, then the charge sheet will be issued.
Charge sheet is not an accusation made or information given in abstract but an
accusation made against a person in respect to an act committed or omitted in
violation. In other words, it is an accusation made against a person in respect to an
offence alleged to have been committed by him. The employer cannot justify his
action on any grounds other than those contained in the charge sheet. The charge
sheet however, is not expected to be a record of evidence. The person signing the
charge sheet is not an accuser. He does not make himself responsible for the truth
of the facts set out in the charge sheet. He merely tells the accused what he is
supposed to have done (Bennet Coleman & Co. LAC p.2 1956).
Checklist for preparation of Charge Sheet
While framing a charge sheet, the following items may be kept in mind so that
nothing relevant would be missing from the charge sheet:
(a) Date of Charge Sheet
(b) Correct name and card no. / employee no. of delinquent employee.
(c) Specify the date of incident.
(d) Description of incident.
(e) Reproduce the language in verbatim if there are words of abuse, defamation
or threat.
(f) Give reference of relevant rules of Conduct, Discipline and Appeal Rules.
(g) Specify within how much time and to whom the reply should be submitted.
(h) Check the authority competent to issue the charge sheet (See conduct,
Discipline and Appeal Rules or Delegation of Powers, as the case may be).
(i) Decide whether employee is to be kept under suspension or not.
(j) Decide whom to send the copies of charge sheet.
Guidelines of Preparing Charge Sheet
(a) The charge sheet should be specific and must spell out all the relevant
particulars of the misconduct.

(b) As far as possible, it should be precisely mentioned in the charge sheet as to

under which rule or clause, the charges constitute acts of misconduct so as to
enable the employee as to which rule are applicable to him in this context.
(c) The charge sheet must be signed by the competent authority so as to avoid
facing a situation where the charge sheet is made invalid because it is signed
by incompetent authority.
Time for reply to Charge Sheet
A reasonable period of time should be given to the employee to submit his reply to
the charge sheet. Time as stipulated in the Conduct, Discipline and Appeal Rules,
but not less than 48 hours from the receipt of the charge sheet by the employee
should be allowed for submission of reply. If the charge-sheeted employee requests
for extension of time, such request(s) may be considered on its own merit.
Who signs the Charge Sheet?
Unless it is delegated otherwise, Disciplinary Authority is the Competent Authority
to sign charge sheet. From the Annexure, it may be seen that for major penalties,
the Disciplinary Authorities are different from those for minor penalties. At the stage
of issuing the charge sheet, it may always not be very clear whether the offence is
such that a major penalty may be imposed ultimately or the decision would be only
in favour of a minor penalty. Except for very simple cases where beyond doubt the
offence may lead to imposition of only a minor penalty, it will be desirable to have
the charge sheet issued under the signature of Disciplinary Authorities empowered
to impose major penalty.
Service of Charge Sheet
Serving the charge sheet on the delinquent employee plays a very important role in
disciplinary proceedings. Hence, all efforts should be made by the employer to see
that the charge sheet is served on the delinquent employee. The charge sheet may
be handed over to the employee and his signature or thumb impression of his
having received the same obtained on the office copy.
In case he refuses to accept the charge sheet, an endorsement to the effect should
be made on the office copy in the presence of at least two witness whose signature
should be obtained.
In case the concerned employee receives the charge sheet but refuses to sign or
give his thumb impression on the office copy, an endorsement to the effect should
be made on the office copy and signatures of at least two witnesses may be taken.
9.6 SUSPENSION
Suspension from duty means keeping an employee away from workplace
temporarily for reasons of discipline. Suspension does not mean removal from

service. If a person is suspended, he continues to be in service, but is in a state, as

it were of suspended animation.
When to Suspend
The suspension of an employee from duty often arises under the following three
different types of situations:
(a) Suspension pending domestic enquiry: If an employee has committed serious
acts of misconduct such as assault, sabotage, etc. and his presence inside
the work premises poses a threat to the safety of the men and material, he
may be kept under suspension immediately, pending investigations. This is
called Suspension Pending Domestic Enquiry. At this stage, a suspension
cannot be called a punishment. It is desirable to issue the order of suspension
along with charge sheet but if not possible the charge sheet must follow
within 7 days of issue of suspension order.
(b) Suspension pending courts order: The disciplinary authority has the right to
keep an employee under suspension, if he is accused in a court of law for any
criminal offence, until the disposal of the trial.
When an employee is suspended pending enquiry, he should be paid
subsistence allowance at the following rate:
a. For the first 90 days of suspension, 50% of the wage.
b. After the first 90 days of suspension, subsistence allowance should be
paid at the rate of 75% of the wage.
The standing order further states that if there is any law that provides for
higher subsistence allowance, the employee shall be entitled for the higher
subsistence allowance.
(c) Suspension as a Punishment: Even though an employee is not suspended
pending enquiry, if it is decided to punish him by way of suspension for the
acts of misconduct committed by him, the disciplinary authority may do so
after the conclusion of enquiry in which case the suspended employee will
not be entitled to any payment for the period of suspension since it is a
punishment imposed on him.
Status of Suspended Employee
(a) During the period of suspension, the suspended employee shall not enter the
work premises without the permission of the disciplinary authority or any
other authority competent to do so.
(b) The suspended employee shall not leave the station without the written
permission of the competent authority.
(c) The employee suspended pending enquiry shall be paid subsistence
allowance as admissible to him under CDA rules, which will increase/
decrease depending upon the merits of the case if the period of suspension
gets prolonged.

(d) No leave shall be granted to a suspended employee during the period of

suspension.
(e) The suspended employee will not be paid subsistence allowance if he is
engaged in any other employment, business, profession or vocation.
(f) If it is decided after the conclusion of enquiry not to remove the suspended
employee from service, he will be simply allotted the job treating the period
of suspension as on duty or leave as decided by the disciplinary authority.
(g) If an employee suspended pending enquiry submits resignation, it is normally
not accepted unless it is in the company interest.
9.7 PROCEDURE PRIOR TO ENQUIRY
Investigation of Complaint
Normally, the source of the complaint comes from the employees immediate
superior or a fellow employee.
It is essential to investigate the complaint as soon as possible. This has the double
advantage of obtaining the relevant evidence before it becomes difficult or
impossible to trace and also to avoid any allegation by the employee subsequently
that the employers have condoned the alleged misconduct.
It is always useful to interview all parties concerned in the complaint and have their
statements recorded. In charges involving financial irregularities and misconduct, it
is best that an internal audit be conducted and full and comprehensive report be
compiled. A difficulty can sometimes arise, if the complaint is from an outside
source, i.e., not within employment, organisation and such person is reluctant to
give any written statement to substantiate his complaint. There could be difficulties
if the employee, when confronted, makes a total denial of the allegation.
To obviate the difficulty, it is suggested that the outsider complaint (i.e., the third
party), should be persuaded to reduce his complaint in writing so that disciplinary
action can be instituted against the employee concerned at the same time, the
investigation officer should ascertain if other supporting evidences from within the
company can be obtained to corroborate or support the complaint so that the third
partys complaint does not stand by itself.
It is also important that the investigating officer is unconnected with the allegations
and not a person who is likely to be selected to sit on the Enquiry Panel. If the
investigation involves some special expertise and skill or understanding of a
particular area of the operations, a suitably qualified person well versed in the area
should be approached to assist in the investigation.
9.8 SHOW CAUSE NOTICE

If the investigation establishes a prima facie case justifying the complaint which
calls for an explanation from the employee, the employer should then proceed to
issue a show-cause notice.
The letter should be drafted in clear and unambiguous language setting out all all
the allegations to which the employee is requested to Show cause. It should
normally be signed by the Personnel Manager or Head of the Department. Where
the charges are of a technical nature i.e., misappropriation or breach of trust, it is
best of draft the same in the format of a charge in a criminal case. This will
immediately highlight the elements of the offence that need to be proved for
precision in the drafting.
Where possible, the charge should specifically refer to which rules or regulations,
there has been a breach. If no specific rules have been breached, it is best to state
that the charges constitute either a breach of both the express and or implied terms
of the contract of employment.
The show-cause notice should be confidential and preferably delivered to the
employee personally. If this is not possible, the letter should be sent to the
employees address.
Suspension during Period to Show Cause
Care must be taken that the period of suspension and the amount of pay the
employee receives during the period of suspension are in accordance with the
provisions of the Employment Act or relevant Collective Agreement, where
applicable.
If the extension of the period of suspension is required to complete investigations,
especially upon receipt of the employees reply to the show-cause notice, the
employee must be notified accordingly. It is advisable to ensure that the employee
receives his full salary for any extended period of suspension.
It is normal that suspension is invoked where the presence of the employee is likely
to jeopardise the safety and discipline of the Company and hence, should only be
resorted to where charges of major misconduct are made or there are several
charges.
Furthermore, the letter of suspension should not give instructions that the employee
should stay at his place of residence during working hours as such an order
amounts to house arrest and is unlawful. Malayan Banking Berhad v. Association of
Bank Officers Peninsula Malaysia (Award 347 of 1986).
Depending on the reply received from the employee, the company may proceed to
institute a domestic enquiry. This may be necessary even if an employee, in his
reply to the show-cause letter, gives a vague response and appears to admit to only
some of the charges or just part of the charge.

9.9 PROPER DOMESTIC ENQUIRY

The first step is to send a notice of the domestic enquiry to the employee
concerned. The notice should give particulars of the date, time and place of the
enquiry and should stipulate that the employee would be entitled to cross-examine
the employers witness and, may himself, produce witness or documents to rebut
the charges.
Where there are several charges of a detailed nature, care must be taken to ensure
that the period of time between the notice of domestic enquiry and the actual
enquiry is of a reasonable period to prepare is defence.
In the meanwhile, the employer should proceed to select the panel of members for
the enquiry. The basic criteria for the selection should be:
(a) Officers who are not involved directly with the investigation and circumstance
of the case.
(b) Officers should normally be of a rank or status above the employee facing the
disciplinary charges.
(c) The Chairman should be adequately well versed with the general legislation
involving employment and the Industrial court awards.
Of particular importance is the rule that the Panel should not be seen to be biased
or even appear biased. In a number of cases, the Industrial court has held that the
element of bias vitiates the fairness of the dismissal.
In Oriental Bank Ltd. v/s Zulkiflee B. Hassan, Kaiang (1986) 2 ILR 1332, the claimant
was dismissed for breach of the express terms and limit of authority by which he
was bound and/or breach of general duty of care obligatory upon him. The Claimant
contended that the enquiry held was not carried out properly and his dismissal was
unlawful, mala fide and amounted to an unfair labour practice.
In this case, the Chairman of the Enquiry was fully informed of the results of
investigation conducted by the investigator. Subsequently, he had a meeting with
the Claimant before the Enquiry where the claimant gave his own story. Another
member of the enquiry was also present during the meeting. The Chairman and the
member knew all the facts of the allegation prior to the enquiry.
It was held that there was an element of bias because some of the members of the
enquiry had known the facts of the allegations. Although the claimant was guilty of
gross negligence and was rightly dismissed, since there was bias in the enquiry, the
claimant was entitled to get back the wages.
Similarly, care must be taken to ensure that the Panel does not appear overly keen
to question the employee. This role should be left to the employers representative
presenting the case. While the Panel may always clarify points arising during the
course of the proceedings, they should not turn the enquiry into an inquisition.

9.10 NOTES ON ENQUIRY

All statements given in the enquiry should be carefully recorded either by the panel
member or a member of staff for that purpose. Further, the notes should be typed
and made available for the employee to countersign to avoid any challenge
subsequently by the employee. See OYL Condoir Industries Sdn Bhd v. Kulijan a/I
Muthuswamy & 2 ors (1992) 2 ILR 33 where the court held that the domestic
enquiry was conducted unfairly and unjustly as the Claimants were not allowed to
call the witnesses, no notes of proceedings were recorded nor made.
The general procedure at the enquiry would normally be as follows:
The charge must be read to the employee and explained to him at the
commencement of the enquiry. If he admits the charge, he should be given the
opportunity to express the circumstances that led him to commit the offence and
mitigate his case. The Chairman then will ask the officer presenting the case to
briefly state the facts of the case including how the offence was committed to
enable the Panel to recommend the appropriate punishment or continue with the
proceedings.
If the employee concerned is absent without an explanation offered, the case may
still be heard in his absence and the outcome of it must be communicated to him.
Ant witness, called by either party to give statements, is to be subjected to crossexamination by the other party. In other words, there will be an examination in chief
by one party, cross-examination by the other party and re-examination by the
former party of witness. Statements made by these witnesses must be recorded and
signed by them. They must not be in the room where the enquiry is being held until
called in by the Chairman. It must also be noted that while an employee may be
accompanied by a Union representative at the enquiry, he is not entitled to insist on
legal representation. Petroliam Nasional Bhd. v. Mohd. Radzuan B. Rarnli 1993 1 ILP.
100 and Sime Darby Plantation Sdn Bhd v Wong Chu Meng 1983 2 ILR 210.
However in case of Chairman Board of Trustees, Bombay Port Trust v/s Dilip Kumar
Nadkarni (1983), the supreme court has held that if the management representative
or the presenting officer is a legally trained person, than denying the workman
opportunity of being defended by a legal practitioner will amount to denial of
Natural Justice.
9.11 PROCEDURE SUBSEQUENT TO NATURAL JUSTICE
After the enquiry, the Chairman should discuss the case with the panel members
and decide upon the merits of the case.
Findings should be contained in a report which should be based on the material and
evidence produced at the enquiry giving reasons in brief for conclusions on the
charges.

In Standard Charted Bank v. Cliff a/I James (1991) 2 ILR 1168, the court held that as
no finding of the enquiry was recorded at the end of the notes of enquiry, this
effectively invalidated the enquiry and the Court was entitled to disregard the notes
of enquiry.
The Report, once finalised, is then sent to the appropriate executive or officer in
management for taking requisite action. Unless it is expressly empowered to do so,
the Panel should refrain from determining what punishment should be meted out
although they may merely recommend disciplinary actions. The reason is that the
question of meting out the appropriate punishment does not involve the
deliberation of the finding of the charges but other factors such as the employees
previous records, warnings, etc. which would not normally be available to the Panel.
Once management is in a position to fully consider all the relevant factors, then the
appropriate disciplinary action can be taken. If dismissal is decided, the employee
should be informed as soon as possible and also on what grounds he is being
dismissed. If there is a right of appeal within the disciplinary procedures against the
decision, the employee should be directed to that fact and informed of the period
and to whom he may exercise his right of appeal. In this regard, court held that it is
incumbent on an employer to provide the employee an opportunity to make a plea
in mitigation.
After receiving the report and findings of the Enquiry Officer/ Panel, the
management has to forward a copy of the Report and findings to the employee
Notes calling upon him to go through the report and submit his view, if any on the
reports and findings. After doing so, the management can impose punishment on
the delinquent employee.
If without going through the copy of the report or findings of the Enquiry Officer/
Panel to the employee, the management awards punishment to the employee, the
punishment can be set aside by the courts for violating the principles of Natural
Justice. This has been held by the Supreme Court in the case of Managing Director,
Electronic Corporation of India Ltd. v/s B.Karunakarn 1994.

CHAPTER 10 THE REGULATIVE LABOUR LEGISLATIONS

10.1 INTRODUCTION INDUSTRIAL DISPUTES ACT, 1947

The Industrial Disputes Act has been an endeavour on the part of the Government
to regulate industrial relations in India and it is designed to ensure industrial peace
and harmony. It lays down authorities and procedure for investigation and
settlement of industrial disputes by negotiation, conciliation, adjudication instead of
trial of strength through strikes and lockouts as a part of objective of preventing
work stoppage.
Short title, extent and commencement
1. This act may be called the Industrial Disputes Act, 1947,
2. It extends to the Whole of India,
3. It shall come into force on the first day of April 1947.
10.2 IMPORTANT DEFINITIONS
In this act, unless there is anything repugnant in the subject of context,
1. This act may be called the Industrial Dispute act, 1947,
2. It extends to the whole of India,
3. It hsall come into force from the first day of April 1947.
10.2 IMPORTANT DEFINITIONS
In this act, unless there is anything repugnant in the subject of context,
1. Industry means any systematic activity carried on by co-operation between
any employer and his workmen (whether such workmen are employed by
such employer directly or by or through any agency, including a contractor
for the production supply or distribution of goods or services with a view to
satisfy human wants or wishes (not being wants or wishes which are merely
spiritual or religious in nature).
2. Industrial Dispute means any dispute or difference 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;
(i) Industrial establishment or undertaking means an establishment or
undertaking in which any industry is carried on;
(ii) Lay-off means the failure, refusal or inability of an employer on account
of shortage of coal, power or raw materials or the accumulation of stocks or
the break-down of machinery or natural calamity to give employment to a
workman whose name is born on the muster-rolls of his industrial
establishment and who has not been retrenched, he is paid lay-off
composition.
(iii) Lock Out means the temporary closing of work place of employment or
the suspension of work of the refusal by an employer to continue to employ
any number of persons employed by him.
10.3 CLOSURE OF AN INDUSTRY

1. Means the permanent closing down of a place of employment or part thereof.

It means working totally comes to a standstill.

It is unemployment of all workmen.
An employer intending to close the establishment should give 90 days notice
to the appropriate government.
Notice on sufficient grounds.
If no notice is given and if permission is refused, the closure will be illegal.

2. Workmen means any person employed in industry to do any skilled, unskilled,

manual supervisory, technical or clerical work for reward or wages but does not
include such persons.

Employment in police services.

Army, Navy, Air Force act.
Who is employed mainly in a managerial or administrative capacity.
Who being employed in a supervisory capacity, drawing wages exceeding
rupees Ten Thousand per month.

3. Individual dispute means any disputes or differences between employers. It shall

be individual disputes.
4. Industrial disputes means any dispute or difference between employers and
workmen or between employers and employers and between workmen and
workmen, which is connected with the employment or the terms of employment or
with the condition of labour.
A dispute connected with dismissal discharge retrenchment or termination shall be
an industrial dispute,
(a) If a group of interest is involved.
(b) There must be collective will of workmen to fight against employer for their
demands.
(c) The industrial dispute cannot be industrial dispute unless it is sponsored by a
Trade Union or by a Substantial number of workers.
10.4 SETTLEMENT OF DISPUTES
Settlement means a settlement arrived at in course of conciliation proceeding
peacefully amicable before the conciliation officer or before the conciliation
machinery.
It is a written agreement between employer and workmen signed by both the
parties, employer and workmen before the conciliation officer mentioning there in
the date of its implementation, the copy of which is sent to the appropriate
government. It must be fair and amicable.

Award means an interim or final determination of any Industrial Tribunal or national

tribunal and includes Arbitration award.
The date of its operation as fixed under this act is one year. This can be terminated
by giving two months notice given by one of the parties intimating its intention to
terminate the award.
1. Public utility service means any transport services used for passengers and
goods, telegraph, telephone, supply of power light, air transport, major port,
post, docks, safety department any system of public conservancy or
sanitation.
2. Strike means cessation of work by a body of person employed in any industry
acting in combination or refusal to work or abstain from working under a
common-understanding.
3. Retrenchment means the termination of services of a workman by the
employer for any reason.
(a) Voluntary retirement or retirement on reaching on the age of superannuation
and termination on the ground of continued ill health are not considered as
retrenchment.
(b) It means discharge of surplus labour for any reason by the employer.
(c) Gets retrenchment allowance as per provisions under this act.
(d) Notice to be sent and to put on notice board.
(e) It is the termination of service of workmen due to inability of the employer to
keep the establishment fully working for an indefinite period due to shortage
of work or surplus in workmen.
(1) If a workman is retrenched and if he has completed one year of
continuous service he is entitling for retrenchment compensation 15
days average pay for every year of service or any part in excess of 6
months.
(2) One months notice pays.
(3) In case of Retrenchment the employer has to make the following
compliance:
(f) A notice to be served on the appropriate government.
(g) The last person employed in that category should be retrenched first.
(h) Preference to be given to the retrenched person for the re-employment.
(i) A copy of notice should be displayed on the notice board.
(j) It should be published in newspaper.
(k) It should be sent to the workmen by registered post.
10.5 AUTHORITIES UNDER THE INDUSTRIAL DISPUTES ACT
Conciliation Proceedings means including the parties to come to or to arrive at
amicable, peaceful, fair settlement on the Industrial disputes.
This provides the Machinery and procedure for investigation and settlement of
Industrial disputes.
Section 3: Works Committee

For promoting dialogue between the employer and the workmen and for securing
and preserving amity, the act provides that every industrial establishment
employing 100 or more workers is to establish a work committee, comprising equal
representatives of management and workmen. The main function of this committee
is to endeavour to compose any difference of opinion in matters of common interest
and thereby promote cordial relations between employers and workmen. The
representatives of workmen are to be chosen from among the workers engaged in
the establishment in the manner specified under the act and in consultation with
their trade union if any registered under the Trade Union Act, 1926.
List of items to be discussed in the works committee:
(a) Condition of work, e.g. ventilation, lighting, temperature and sanitation.
(b) Amenities such as drinking water, canteens, lunchrooms, crches, medical
equipment.
(c) Adjustment of festival and national holidays.
(d) Administration of welfare funds, educational and recreational activities such
as libraries, reading rooms, cinema shows, sports, games, picnic, community,
welfare and celebrations, promotions of thrift and savings.
Following will not be dealt in the works committee:
(a) Wages and allowances.
(b) Management policies.
(c) Rationalisation.
(d) Matters connected with the fixation or work load.
Duties of Works Committee
It shall be duty of the works committee to promote measures for securing and
preserving amity and good relations between the employer and workmen and to
that end to comment upon matters of their common interest or concern and
endeavour to compose any material difference of opinion in respect of such
matters.
Section 4: Conciliation Officer
The appropriate Govt. may by notification in the official gazette, appoint such
numbers of persons as it thinks fit to be conciliation officers charged with the duty
of mediating in and promoting the settlement of Industrial disputes. He may be
appointed for a specified area or for specified industries either permanently or for a
limited period.
Section 5: Board of Conciliation
(1) The appropriate government may, as occasion arises, by notification in the
official gazette, constitute a board of conciliation for promoting the
settlement of an industrial dispute.

(2) A board shall consist of a chairman and two or four other as the appropriate
government thinks fit.
(3) The Chairman shall be an independent person and the other members shall
be persons appointed in equal number to represent the parties to the dispute
and any person appointed to represent a party shall be appointed on the
recommendation of that party.
Section 6: Court of Inquiry
(1) The appropriate government may, as occasion arises, by notification in the
official gazette, constitute a court of inquiry into any matter appearing to be
connected with or relevant to an industrial dispute.
(2) A court may consist of one independent person or such number of independent
persons as the appropriate government may think fit and where a court consists of
two or more members one of them shall be appointed as the Chairman.
Section 7: Labour Court
(1) The appropriate Government may, by notification in the Official Gazette,
constitute one or more Labour Courts for the adjudication of industrial disputes
relating to any matter specified in the Second Schedule and for performing such
other function as may be assigned to then, under this Act.
(2) A Labour court shall consist of one person only to be appointed by the
appropriate Government.
(3) A person shall not be qualified for appointment as the presiding officer of a
Labour Court, unless.
(a) He is, or has been, a judge of a High Court; or
(b) He has, for a period of not less than three years, been a District judge or an
Additional District Judge; or
(c) He has held any judicial office in India for not less than seven years; or
(d) He has been the presiding officer of a Labour Court constituted under any
provincial Act or State Act for not less than five years.
INDUSTRIAL TRIBUNAL
1. The appropriate government may by notification in the official gazette
constitute one more Industrial Tribunals for the adjudication of Industrial
disputes in the second scheme or the Third schedule.
2. A person shall not be qualified for appointment as the presiding officer of the
tribunal unless
(a) He is or has been a judge of high court.
(b) He has for a period not less than three years been a District Judge.

The appropriate government, if it thinks fit, appoints two persons as assessors to

advise the tribunal in proceeding before it.
Grievance Settlement Authorities:
9C. Setting up Grievance Settlement Authorities and reference of certain individual
disputes to such authorities: (1) The employer in relation to every industrial establishment in which fifty or
more workmen are employed or have been employed on any day in the
preceding twelve months, shall provide for, in accordance with the rules
made in that behalf under this Act, a Grievance Settlement Authority for the
settlement of industrial disputes connected with an individual workman
employed in the establishment.
(2) Where an industrial dispute connected with an individual workman arises in
an establishment referred to in sub-section (1), a workman or any trade union
of workmen of which such workman is a member, refer, in such manner as
may be prescribed such dispute to Grievance Settlement Authority provided
for by the employer under that sub-section for settlement.
(3) The Grievance Settlement Authority referred to in sub section (1) shall
follow such procedure and complete its proceedings within such period as
may be prescribed.
(4) No reference shall be made under Chapter III with respect to any dispute
referred to in this section unless such dispute has been referred to the
Grievance Settlement Authority concerned and the decision of the Grievance
Settlement Authority is not acceptable to any of the parties to the dispute.
10.6 NATIONAL TRIBUNAL
The Central government by notification in the official gazette constitute one or more
National Industrial Tribunals for the adjudication of Industrial disputes which, in the
opinions the Central government involve question of National importance or are of
such a nature that the industrial establishments situated in more than one state are
likely to be interested in or affected by such disputes.

A National Tribunal shall consist of one person only to be appointed by the

Central Government.
A person shall not be qualified for appointment as the presiding officer of
National Tribunal (unless he is or have been a judge of a high court.
The Central government may, if it is so thinks fit, appoint two persons as
assessors to advise the national tribunal in the proceeding before it.

Section 34: Notice of Change in Employment Conditions

If the employer wants to make a change in respect of any matter specified below,
he has to give 21 days notice to the trade union and then affix the same on the
notice board.

(1) Wage period and the mode of payment.

(2) Contribution paid or payable by the employer to any provident fund or
pension fund or for the benefit of the workmen under any law for the time
being in force.
(3) Compensatory and other allowances.
(4) Hours of work and rest intervals.
(5) Leave with wages and holidays.
(6) Starting, alteration or discontinuance of shift working otherwise than in
accordance with standing orders.
(7) Classification by grades.
(8) Withdrawal of any customary concession or privilege or change in usage.
(9) Introduction of new rules of discipline or alteration of existing rules except in
so far as they are provided in the standing orders.
(10)
Rationalisation, standardisation 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 of shift.
Section 22: Prohibition of Strikes and lock outs
1. No person shall be employed in a public utility service shall go on strike, in
breach of contract.
(a) Without giving to the employer notice of strike, as hereinafter provided,
within six weeks before striking; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of strike specified in any such notice as
aforesaid; or
(d) During the pendency of any conciliation proceedings before a conciliation
officer and seven days after the conclusion of such proceedings.
2. No employers carrying on any public utility sGovervice shall lockout any of
this workman.
(a) Without giving them notice of lock out as hereinafter provided, within six
weeks before locking out; or
(b) Within fourteen days of giving such notice; or
(c) Before the expiry of the date of lockout specified in any such notice as
aforesaid or
(d) During the pendency of any conciliation proceedings before a conciliation
officer and seven days after the conclusion of such proceedings.
3. The notice of lock out or strike under this section shall not be necessary
where there is already in existence a strike or, as the case may be, lock out
in the public utility service, but the employer shall send intimation of such
lockout or strike on the day on which it is declared, to such authority as may
be specified by the appropriate Government either generally or for a
particular area or for a particular class of public utility services.

4. The notice of strike referred to in sub-section (1) shall be given by such

number of person to such person or persons and in such manner as may be
prescribed.
5. The notice of lockout referred to in sub-section (2) shall be given in such
mmmanner as may be prescribed.
6. If on any day an employer receives from any person employed by him any
such notices as are referred to in sub section (1) or gives to any persons
employed by him any such notices as are referred to in sub -section (2), he
shall within five days, thereof report to the appropriate Government or to
such authority as that Government may prescribe the number of such notices
received or given on that day.
Section 23: General prohibition of strikes and lockouts
No workman who is employed in any industrial establishment shall go on strike in
breach of contract an no employer of any such workman shall declare a lockout.

(a) During the pendency of conciliation proceedings before a Board and seven
days after the conclusion of such proceedings;
(b) During the pendency of proceedings before a Labour Court, Tribunal or
National Tribunal and two months, after the conclusion of such proceedings;
(c) During the pendency of arbitration proceedings before an arbitrator and two
months after the conclusion of such proceedings, where a notification has
been issued under sub section (3A) of section 10A; or
(d) During any period in which a settlement or award is in operation, in respect of
any of the matters covered by the settlement or award.
Section 24: Illegal strikes and lockouts
(1) A strike or lockout shall be illegal if(i) It is commenced or declared in contravention of Section 22 or section 23;
or
(ii) It is continued in contravention of an order made under sub-section (3) of
section 10 or sub section (4A) of section 10 A.
(2) Where a strike or lock-out in pursuance of an industrial dispute has already
commenced and is in existence at the time of the referene of the dispute to a
Board, an arbitrator, a Labour Court, Tribunal or national Tribunal, the
continuance of such strike or lock-out shall not be deemed to be illegal
provided that such strike or lock out was not at its commencement in
contravention of the provisions of this Act o the continuance thereof was not
prohibited under sub-section (3) of section 10 or sub -section (4A) of section
10 A.
(3) A lockout declared in consequence of an illegal strike or a strike declared in
consequence of an illegal lockout shall not be deemed illegal.

Section 25C: Right of workmen laid-off for compensation

Right of workmen laid off for compensation. Whenever a workman (other than a
badly workman or a casual workman) whose name is borne on the muster rolls of an
industrial establishment and who has completed not less than one year of
continuous service under an employer is laid off, whether continuously or
intermittently, he shall be paid by the employer for all days during which he is so
laid-off except for such weekly holidays as may intervene, compensation which shall
be equal to fifty percent, of the total of the basic wages and dearness allowance
that would have been payable to him had he not been so laid off.
Provided that if during any period of twelve months, a workman is so laid-off for
more than forty-five days, no such compensation shall be payable in respect of any
period of the lay-off after the expiry of the first forty-five days, if there is an
agreement to that effect between the workman and the employer: Provided further
that it shall be lawful for the employer in any case falling within the foregoing
provisio to retrench the workman in accordance with the provisions contained in
section 25F at any time after the expiry of the first forty five days of the lay-off and
when he does so, any compensation paid to workman having been laid-off during
the preceding twelve months may be set off against the compensation payable for
retrenchment.
Explanation: Badli workman who is employed in an industrial establishment in the
place of another workman whose name is borne on the muster rolls of the
establishment, but shall cease to be regarded as such on the muster rolls of the
establishment, but shall cease to be regarded as such for the purposes of this
section, if he has completed one year of continuous service in the establishment.
Section 25E: Workmen not entitled to compensation in certain cases
No compensation shall be paid to a workman who has been laid-off
(i) If he refuses to accept any alternative employment in the same establishment
from which he has been laid-off, or in any other establishment belonging to the
same employer situate in the same town or village or situate within radius of five
miles from the establishment to which he belongs if, in the opinion of employer,
such alternative employment does not call for any special skill or previous
experience and can be done by the workman, provided that the wages which would
normally have been paid to the workman are offered for the alternative employment
also;
(ii) If he does not present himself for work at the establishment at the appointed
time during normal working hours at least once a day;
(iii) If such laying off is due to the strike or slowing down of production on part of
workmen in another part of the establishment.

Section 25F: Conditions precedent to retrenchment of workmen

No workman employed in any industry who has been in continuous service for not
less than one year under an employer shall be retrenched by that employer until(a) The workman has been given one months notice in writing indicating the
reasons for retrenchment and the period of notice expired, or the workman has
been paid in lieu of such notice, wages for the period of notice.
(b) The workman has been paid, at the time of retrenchment, compensation which
shall be equivalent to fifteen days average pay for every completed year of
continuous service or any part thereof in excess of six months; and
(c) Notice in the prescribed manner is served on the appropriate Government for
such authority as may be specified by the appropriate Government by notification in
official Gazette.
Section 25H: Re-employment of retrenched workmen
Where any workmen are retrenched, and the employer proposes to take into his
employ any persons he shall, in such manner as may be prescribed, give an
opportunity to the retrenched workmen who are citizens of India to offer themselves
for reemployment, and such retrenched workmen who offer themselves for
reemployment shall have preference over other persons.
Section 25 O: Procedure for closing down an undertaking
(1) An employer who intends to close down an undertaking of an industrial
establishment to which this Unit applies shall, in the prescribed manner, apply, for
prior permission at least ninety days before the date on which the intended closure
is to become effective, to the appropriate Government, stating clearly the reasons
for the intended closure of the undertaking and a copy of such application shall also
be served simultaneously on the representatives of the workmen in the prescribed
manner:
Provided that nothing in this sub section shall apply to an undertaking set up for
the construction of buildings, bridges, roads, canals, and dams or for other
construction work.
10.7 INTRODUCTION TO INDUSTRIAL EMPLOYMENT [STANDING ORDERS] ACT, 1946
An act to require employers in Industrial establishments to formally define
conditions of employment under them and make the said conditions known to
workmen employed by them.
Short title, extent and application
1. This act is called the Industrial Employment (Standing Orders) Act, 1946.

2. It extends to the whole of India.

3. It applies to every industrial establishment wherein one hundred or more
workmen are employed on any day of the preceding twelve months, provided
that the appropriate government may after giving not less than two months
notice of this act to any industrial establishment employing number of
persons less than one hundred as may be specified in the notification. Under
the provisions of this act, the employer has to submit draft standing orders.
Submission of Draft Standing Orders Section 3
1. The employer shall submit to the Certifying Officer five copies of the draft
standing orders proposed by him for adoption in his industrial establishment.
2. Provision shall be made in such draft for every matter applicable to the
industrial development and where model standing orders have been
prescribed, shall be, so far as practicable, in conformity with such model.
3. The draft standing orders submitted shall be, accompanied by a statement
giving prescribed particulars of the workmen employed in the industrial
establishment including the name of the trade union, if any, to which they
belong.
4. Subject to such conditions as may be prescribed, a group of employers, in
similar industrial establishments may submit a joint draft of standing orders
under this section.
10.8 THE MODEL STANDING ORDER
The representatives of the workmen for this purpose will be of Trade Unions
operating in the establishment. If there is no Trade Union, the certifying officer will
hold the meeting of the workmen and will elect five representatives and these
elected workmen will be deemed to be the union for the purpose.
The model standing orders classify the workmen as under:
(i) A permanent workman is one who has been employed on a permanent basis or
who has been confirmed in writing or who has completed a probationary period of
three months.
(ii) Probationer is a workman who is provisionally employed to fill a permanent
vacancy and who has not completed three months service.
(iii) Badli or Substitute is one who is appointed to the post of permanent or
probationer workman and who is temporarily absent.
10.9 TEMPORARY EMPLOYEES
a. Temporary Workman is one who is appointed for a limited period of work which is
essentially of temporary nature or who is employed temporarily as an additional
workman in connection with temporary increase in work of a permanent nature.

b. Causal Worker is one who is employed for work, which is essential of a casual
nature.
c. Apprentice is one who is a learner and who has not completed a training period
of one year.
d. Every workman is required to be given a separate ticket indicating his number
and the department. The act specifying provides for certain matters to be included
in the standing orders of the industry.
Calculation of Wages
The calculation of wages is done based on the period and hours of work completed
by the worker. The shift working is paid extra if the overtime is made. The
attendance and late coming record is observed for deduction of the wages
accordingly.
10.10 MATTERS TO BE PROVIDED IN STANDING ORDER UNDER THIS ACT
1. Classification of workmen, e.g. whether permanent, temporary, apprentices,
probationers or badlis.
2. Manner of intimating to workmen periods and hours of work, holidays, pay days
and wage rates.
3. Shift working.
4. Attendance and late coming.
5. Conditions of procedure in applying for, and the authority which may grant leave
and holidays. Requirement to enter premises by certain gates and liability to search.
6. Closing and re-opening of sections of the industrial establishment and temporary
stoppages of work and the rights and liabilities of the employer and workmen
arising therefrom.
7. Termination of employment and the notice thereof to be given by employer and
workmen.
8. Suspension or dismissal for misconduct and acts or omissions, which constitute
misconduct.
9. Means of redress for workmen against unfair treatment or wrongful exactions by
the employer or his agents or servants.
10. Any other matter, which may be prescribed.
Posting of Standing Orders

The text of the standing orders as finally certified under this Act shall be
prominently posted by the employer in English and in the language understood by
the majority of his workmen on special boards to be maintained for the purpose at
or near the entrance through which the majority of the workmen enter the industrial
establishment and in all departments thereof where the workmen are employed.
10.11 SUBSISTENCE ALLOWANCE
If a workman is suspended for pending enquiry he has to be paid subsistence
allowance @50%. of his wages for the first 90 days of suspension and thereafter
75% of the wages. If the enquiry is delayed due to reasons totally attributable to the
workman, then the subsistence allowance can be paid @ 50% of the wages.
Misconducts under the Model Standing Orders framed under the Bombay Industrial
Employment Rules, 1959.
Standing Order No. 24 provides that the following acts and commissions on the part
of workman shall amount to misconduct.
1. Willful insubordination or disobedience, whether in combination with another
or otherwise, of any lawful and reasonable order of a superior.
2. Going on illegal strike or abetting, inciting, instigating or acting in furtherance
thereof
3. Willful slowing down in performance of work or abetment or instigation
thereof
4. Theft, fraud or dishonesty in connection with the employers business or
property or the theft of property of another workman within premises of the
establishment.
5. Taking or giving bribes or any illegal gratification
6. Habitual absence without leaves or absence without leave for more than ten
consecutive days or overstaying the sanctioned leave without sufficient
grounds or proper or satisfactory explanation.
7. Late attendance on not less than four occasions within a month
10.12 HABITUAL BREACH OF ANY STANDING ORDER
The habitual breach conditions of any standing order or any law applicable to the
establishment or any rules are as under:

Collection without the permission of the Manager of any money within the
premises of the establishment except as sanctioned by any law for the time
being in force.
Engaging in trade within the premises of the establishment.
Drunkenness, riotous, disorderly or indecent behavior on the premises of the
establishment.
Commission of any act subversive of discipline or good behavior on the
premises of the establishment

Habitual neglect of work; or gross or habitual negligence

Habitual breach of any rules or instruction for the maintenance and running
of any department, or the maintenance of the cleanliness of any portion of
the establishment.
Habitual commission of any act or omission for which a fine may be imposed
under the payment of Wages Act, 1936
Canvassing for union membership or the collection of Union dues within the
premises of the establishment except in accordance with any law or with the
permission of the Manager
Willful damage to work in process or to any property of the establishment
Holding meeting inside the premises of the establishment without the
previous permission of the Manager or except in accordance with the
provisions of any law for the time being in force.
Disclosing to any unauthorized person any information in regard to the
processes of establishment, which may come into the possession of the
workman in course of his work
Gambling within the premises of establishment
Smoking or spitting on the premises of the establishment, where it is
prohibited by the employer
Failure to observe safety instructions notified by the employer or interference
with any safety device or equipment installed within the establishment
Disturbing or exhibiting within the premises of the establishment handbills,
pamphlets, posters and such other things or causing to be displayed by
means of sign or writing or other visible representation on any matter without
previous sanction of the Manager.
Refusal to accept a charge sheet, order or other communication served in
accordance with these standing orders
Unauthorised possession of any lethal weapon in the establishment

CHAPTER 11 THE PROTECTIVE LABOUR LEGISLATION

11.1 INTRODUCTION FACTORIES ACT, 1948
The objective of the Factories Act is to provide protection to the workers from being
exploited by the business establishments and to provide for the improvement of
working conditions within the factory premises.
As per the requirement of fast growing industrialisation, the Factories Act aimed to
define the norms for ensuring health, safety and welfare of the employees and also
define the powers, rights and duties of the authorities under this Act.
The short title, extend and commencement of the Factory Act is as under:

It shall be called the Factories Act, 1948.

It is applicable to the whole of India.
It shall come in to force on the 1st day of April 1949.

Definition
Definition of the factory or workplace or commercial establishment pertaining to
Factories Act, 1948 can be evaluated as under (i.e., various points mentioned in the
incorporation of the Factories Act, 1948)
a. Adult means a person who has completed his eighteenth year of age.
b. Adolescent means a person who has completed his fifteenth year of age but
not completed eighteenth year.
c. Child means a person who has not completed fifteenth year of age.
d. Young person means a person who is either a child or an adolescent.
e. Power means electrical energy, motor or any other form of energy which is
mechanically transmitted and is not generated by human or animal agency.
f. Prime mover means any engine, motor or other appliance which generates
of otherwise provided power.
11.2 MEANING OF MANUFACTURING PROCESS
The manufacturing process is an essence of the factory, the meaning which is as
per the Act, legally explained for Manufacturing process is as under:
1. Making, altering, repairing, ornamenting, finishing, packing. Oiling, washing,
cleaning, breaking up, demolishing or otherwise treating or adapting any
article or substance with a view to its use sale transport delivery or disposal
etc.
Note:
(a) The establishment of hotel would not fall for classification as a factory

under Section 2(m) of the Act; Lal Bovta Hotel Aur Bakery Mazdoor Union v.
Ritz Private Ltd., 2007(113) FLR 568.
(b) The definition of manufacturing process does not depend upon and is
not co-related with any end product being manufactured out of a
manufacturing process. It includes even repair, finishing, oiling or cleaning
process with view to its use sale transport delivery or disposal.
2. Worker means a person employed directly or through any agency (including
contractor) whether on remuneration or not in any manufacturing process or
cleaning any part of the machinery but does not include any member of the
armed forces of the union.
3. Factory means any premises including the precincts thereof
(a) Where 10 or more workers are working or were working on any day of the
preceding 12 months, and in any part of which a manufacturing process is
being carried on with the aid of power or is ordinary so carried on.
(b) Where on 20 or more workers are working or were working on any day of
preceding 12 months, and in any part of which a manufacturing process is
being carried on without the aid of power, or is ordinary so carried on but
does not include a mine subject to operations of the Mines Act, 1952 or
railway running shed.
(c) Occupier of a factory means the person who has ultimate control over
the affairs of the factory.
Provided that,
1) In the case of a firm or other association of individuals, any one of the
individual partners or members there of shall be deemed to be the occupier;
2) In the case of a company, any one of the directors shall be deemed to be the
occupier;
3) In case of a factory owned or controlled by the Central Government or any
State Government or any local authority, the persons appointed to manage
the affairs of the factory by the Central Government, the state Government or
the local authority as the case may be shall be deemed to be the occupier.
In the case of J.K. Industries Vs. Chief Inspector of Factories - 1995 the Supreme
court has held that in case of a company having a factory only a director can be
appointed as an occupier.
Section6: Approval -Licensing and Registration of Factories
The State Government may make rules
a) Requiring the submission of plans of any class or description of factories to
the chief inspector or the State Government.
b) Requiring the previous permission in writing of the State Government or the
Chief Inspector to be obtained for the site on which the factory is to be
situated and for construction or extension of any factory.

c) Requiring submission of plans and specifications and by whom they shall be

certified factories the prescribed fees payable for such registration and
licensing.
d) Regularising submission of plans and specifications and by whom they shall
be certified.
e) Requiring the registration and licensing of factories the prescribed fees
payable for such registration and licensing.
f) Where a State Government or Chief Inspector refuses to grant permission to
the site, construction or extension of a factory or the registration and the
licensing of a factory, the applicant may within 30 days of the date of such
refusal appeal to the Central Government.
Section 8: Inspectors
Appointment
1. The State Government by notification in the Official Gazette, appoint such
persons as possessing the prescribed qualifications to be inspectors for the
purposes of this Act and may assign to them such local limits as it may think
fit.
2. The State Government may, by notification in the Official Gazette, appoint
any person to be a Chief Inspector who shall, in addition to the powers
conferred on a Chief Inspector under this Act, exercise the powers of an
Inspector throughout the state.
2A. The State Government may, by notification in the Official Gazette, appoint
as many Additional
Chief Inspectors, Joint Chief Inspectors and Deputy Chief Inspectors and as
many other officers
as it thinks fit to assist the Chief Inspector and to exercise such of the
powers of the Chief
inspectors and to exercise such of the powers of the Chief Inspector as may
be specified in such
notification.
2B. Every Additional Chief Inspector, Joint Chief Inspector, Deputy Chief
Inspector and every other
officer appointed under sub-section (2A) shall, in addition to the powers of
a Chief Inspector
specified in the notification by which he is appointed, exercise the powers
of an Inspector
throughout the State.
3.

No person shall be appointed under sub section (1), sub section (2)1 sub
section (2A), or having been so appointed, shall continue to hold office, who
is or becomes directly or indirectly interested in a factory or in any process or

business carried on therein or in any patent or machinery connected

therewith.
11.3 THE INSPECTING STAFF (INSPECTORS AND CERTIFYING SURGEONS)
Section 8
The State Government may by notification in the Official Gazette may appoint such
persons who possess the prescribed qualification to be inspectors for the purpose of
this Act and may assign them such local limits as it may think fit.
Section 9
a)
b)
c)
d)
e)
f)
g)

Enter in the factory.

Make examination of the premises, plant, machinery, articles or substance.
Inquire in to any accident or dangerous occurrence.
Require production of Registers/ Records relating to the factory.
Seize or take copies of any Register, Record.
Examination of place and registers/ Records.
Examination of any article or substance found in premises.

Function: Implementation of the provision of this Act.

Section 10: Certifying Surgeons
1) The State Government may appoint qualified Medical Practitioners to be
certifying surgeons for the purpose of this Act within local limit as assigned.
2) The certifying surgeons shall carry on such duties as may be prescribed,
namely:
The examination and certification of young persons under this Act.
The examination of persons engaged in factories in such dangerous
occupations or processes, as may be prescribed.
The exercising of such medical supervision as may be prescribed for any
factory.
3) Examination of cases of illness and other conditions of work prevailing therein
and the nature of manufacturing process.
4) Examination of young persons who are, or are about to be employed in any
work which is likely to cause injury to their health.
11.4 HEALTH AND HYGIENE MEASURES
Section 11: Cleanliness
Every factory shall be kept clean
a) Accumulation of dirt and refuse shall be removed daily by sweeping by any
other effective method from the floors and benches of workrooms and from
staircases and passages and disposed of in a suitable manner.

b) All inside walls, partitions, all ceilings of passages and staircases shall be
whitewashed or varnished and be repaired or re-varnished at least once in
every period of five years.
Section 12: Disposal of wastes and effluents
Effective arrangements shall be made in every factory for treatment of wastes and
effluents due to the manufacturing process carried on therein, so as to render them
innocuous, and for their disposal.
Section 13: Ventilation and temperature
Effective and suitable provisions shall be made in every factory for securing and
maintaining
a) Adequate ventilation by the circulation of fresh air.
b) Such a temperature, well secure to workers therein providing reasonable
conditions of comfort and prevention from injury to health.
Section 14: Dust and fume
In every factory in which, by reason of the manufacturing process carried on, there
is given off any dust or fume or other in purity of such a nature and to such an
extent as is likely to be injurious or offensive to the workers employed there in.
Effective measures shall be taken to prevent its inhalation and and accumulation in
any workroom.
Section 15: Artificial Humidification
a) Preserving the standards of humidification.
b) Regulations of the methods used for artificially increasing the humidity of the
air.
c) Directing the prescribed tests for determining the humidity of the air to be
correctly carried out and recorded.
d) Prescribing methods to be adopted for securing adequate ventilation and
cooling of the air in the work area.
Section 16: Overcrowding
1. No room in any factory shall be overcrowded to an extent which is injurious to
the health of workers employed therein.
2. Without prejudice to the generality of sub section (1) there shall be in every
workroom of a factory in existence of the data of the commencement of this
at least 9.9 cubic meters and of a factory built after the commencement of
this Act at least 14.2 cubic meters of space for every worker employed
therein, and for the purposes of this sub section no account shall be taken
of any space which is more than 4.2 meters above the sea level of the floor of
room.

Section 17: Lighting

In every part of a factory where workers are working or passing, there shall be
provided and maintained sufficient and suitable lighting natural or artificial or both.
In every factory effective provision shall, so far as is practicable, be made for the
prevention of
(a) Glare, either directly from a source of light or by reflection from a smooth or
polished surface;
(b) The formation of shadows to such an extent as to cause eye strain or the risk
of accident to any worker.
Section 18: Drinking Water
1) In every factory effective arrangements shall be made to provide and
maintain at suitable points conveniently situated for all workers employed
therein a sufficient supply of drinking water.
2) All such points shall be legibly marked drinking water in the local language
and in English and no such point shall be situated within six meters of any
washing place, urinal, latrine, spittoon, open drain carrying sullage or effluent
or any other source of contamination.
3) Provision shall be made for cooling drinking water during the hot weather
wherein more than two hundred and fifty workers are ordinarily employed.
Section 19: Latrines and urinals
In every factorya) Sufficient latrine and urinal accommodation of prescribed types shall be
provided conveniently situated accessible to workers at all times while they
are at the factory.
b) Separate enclosed accommodation shall be provided for male and female
workers.
c) Such accommodations shall be adequately lighted and ventilated.
d) All such accommodations shall be maintained in clean and sanitary conditions
at all times.
e) Sweepers shall be employers for cleaning the latrines, urinals and washing
place.
Section 20: Spittoons
1) In every factory, there shall be provided for the purpose in contravention of
this the worker shall be punishable with fine not exceeding five rupees.
11.5 SAFETY MEASURES
Section 21: Fencing of Machinery

In every factory dangerous parts of machines, e.g., every moving part of a prime
mover and every fly wheel connected to the prime mover etc. shall be securely
fenced by safeguards of substantial construction which shall be kept in position
while the parts of machinery they are fencing are in motion or in use.
Section 22: Work on or near machinery in motion
No women or young person shall be allowed to clean, lubricate or adjust any part of
a prime mover or of any transmission machinery while the prime mover or
transmission machinery while the prime mover or transmission machinery is in
motion, or to clean, lubricate, or adjust any part of any machine, if cleaning,
lubrication or adjustment thereof would expose the woman or young person to risk
of injury from any moving part either of that machine or of any other adjacent
machinery.
Section 23: Employment of young persons on dangerous machine
1) No young person shall be required or allowed to work at any machine unless
he has been fully instructed as to the danger arising in connection with the
machine.
2) Has received sufficient training in work on the machine, or
3) Is under adequate supervision by a person who has a thorough knowledge
and experience of the machine.
Section 24: Striking gear and devices for cutting off power
1) In every factory
(a) Suitable striking gear or other efficient mechanical appliance shall be
provided and maintained and used to move belts to and from fast and loose
pulleys which form part of the transmission machinery, such gear or
appliances shall be so constructed, placed and maintained as to prevent the
belt from creeping back on to the fast pulley;
(b) Driving belts when not in use shall not be allowed to rest or ride upon
shafting in motion.
2) In every factory suitable devices for cutting off power in emergencies from
running machinery shall be provided and maintained in every workroom.
Section 25: Self acting machines
No person should be allowed to run on the outward or inward traverse within a
distance of forty five centimeters from any fixed structure which is not part of the
machine.
Section 26: Casing of new machinery

Every set, screw bolt or key or any revolving shaft, spindle, wheel or pinion shall be
so sunk, encased or otherwise effectively guarded as to prevent danger.
Section 27: Prohibition of employment of women and children near cotton openers
No woman or child shall be employed in any part of a factory for pressing cotton in
which a cotton opener is at work.
Section 28: Hoists and lifts
Every hoist and lift shall be
1) Of good mechanical construction, sound material and adequate strength.
2) Properly maintained and thoroughly examined by a competent person at
least once in every period of six months and register shall be maintained
thereof.
3) The maximum safe working load shall be plainly marked on every hoist or lift,
and no load greater than such load shall be carried thereon.
Section 29: Lifting machines, ropes and lifting tackles
In every factory the following provisions shall be compiled with in respect of every
chain rope and lifting tackle for the purpose of raising or lowering persons, goods or
materials.
It should be:
a) Of good construction, sound material and adequate strength and free from
defects.
b) Properly maintained, and
c) Thoroughly examined by a competent person at least once in every period of
twelve months.

Section 30: Revolving machinery

Effective measures shall be taken in every factory to ensure that the safe working
peripheral speed of every revolving vessel, cage, basket, fly wheel, pulley, disc or
similar appliance by power is not exceeded.
Section 31: Pressure Plant
If in any factory, any plant or machinery or any part thereof is operated at a
pressure above atmospheric pressure, effective measures shall be taken to ensure
that the safe working pressure of such plant or machinery or part is not exceeded.
Section 32: Floors, Stairs and means of access

All floors, steps, stairs, passages and gangway shall be of sound construction and
properly maintained and shall be kept free from obstructions and substances likely
to cause persons to slip and if necessary to ensure safety, steps, stairs, passages
and gangways shall be provided with substantial hand rails.
Section 33: Pits, sumps opening in floors etc
In every factory fixed vessels, sump, tank, pit or opening in the ground or in a floor
which, by reasons of its depth, situation, construction or contents is or may be a
source of danger shall be either securely covered or securely fenced.
Section 34: Excessive weights
No person shall be employed in any factory to lift, carry of move any load so heavy
as to be likely to cause him injury. The State Government may make rules
prescribing the maximum weights which may be lifted, carried or moved by adult
men, adult women, adolescents and children employed in factories.
Section 35: Protection of eyes
a) Risk of injury to the eyes from particles of fragments thrown off in the course
of the process, or
b) Risk to the eyes by reasons of exposures to excessive light effective screens
or suitable googles shall be provided for the protection of persons employed
on or in the immediate vicinity of, the process.
Section 36: Precautions against dangerous fumes etc.
1) No person shall be required or allowed to enter any chamber tank, vat, pit,
pipe, flue or other confined space in any factory. To prevent this injury
effective measures are to be taken in this respect.
2) Such person shall wear suitable breathing apparatus and a belt securely
attached to a rope, the free end of which is held by a person outside the
confined space.
Section 36A: Precautions regarding the use of portable electric light in any factory
unless adequate safety devices are provided.
If any inflammable gas, fume or dust is likely to be present in such chamber, tank,
vat, pit, pipe, flue or other confined space, no lamp or light other than that of flameproof construction shall be permitted to be used therein.
Section 37: Explosive or inflammable dust, gas etc.
In every factory, all practicable measures shall be taken to prevent any such
explosion by
a) Effective enclosure of the plant and machinery used in the process.

b) Removal or prevention of the accumulation of such dust, gas, fume or vapour.

Section 38: Precautions in case of fire
1) In every factory, all practicable measures shall be taken to prevent outbreak
of its size and its spread.
a) Safe means of escape for all persons in the event of a fire and
b) The necessary equipment and facilities extinguishing fire.
2) Effective measures shall be taken to ensure that all the workers are familiar
with the means of escape from fire are adequately trained.
3) Buckets full of sand and water are conveniently kept and fire extinguishers
are kept at convenient places.
Section 39: Power to require specifications of defective parts or tests of stability
If it appears to the Inspector that any building or part of building or any part of the
ways, machinery or plant in a factory is in such a condition that it may be
dangerous to human life or safety, he may serve on the occupier or manager or
both of the factory an order in writing requiring him before specified date.
a) To furnish such drawings, specifications and other particulars as may be
necessary to determine whether such building, ways, machinery or plant can
be used with safety, or
b) To carry out such test in such manner as may be specified in the order, and to
inform the Inspector of the results thereof.
Section 40: Safety of buildings and machinery
(1) If it appears to the Inspectors that any building or part of a building or any
part of the ways, machinery or plant in a factory is in such a condition that it
is dangerous to human life or safety, he may serve on the occupier or
manager or both of the factory an order in writing specifying the measures
which in his opinion should be adopted, and requiring them to be carried out
before a specified date.
Section 40A: Maintenance of buildings
If it appears to the Inspector that any building or part of a building in a factory is in
such a state of disrepair as is likely to lead to conditions detrimental to health and
welfare of workers, he may serve on the occupier or manager or both of the factory
an order in writing specifying the measures which in his opinion should be taken.
Section 40B: Safety Officer
1) In every factory Wherein one thousand or more workers are ordinarily employed or which
process or operations involves any risk or disease to the persons employed in
the factory the occupier shall, if so required by the State Government by

Notification in the official gazette, employ such number of safety officers as

may be specified in that Notification.
2) The duties, qualifications and conditions of service of safety officers shall be
such as may be prescribed by the State Government.
Comments
(1) A Safety Officer is appointed for the purpose of Factory Act only. A Safety
officer in terms of Rule 5 is merely given the status of a departmental head or
a senior executive in the factory. Such status is conferred because he would
be posted under the chief executive of the factory and would report only to
him. As regards safety aspects, other officers would be bound by his
direction; BHEL v. B.K. Vijay, 2006 (108) FLR 113
11.6 WELFARE MEASURES
Section 42: Washing facilities
Adequate and suitable facilities for washing shall be provided and maintained for
the use of the workers therein separately for male and female employees.
Section 43: Facilities for storing and driving clothing
The state government, may in respect of any factory or class or description of
factories, make rules requiring the provision therein of suitable places for keeping
clothing not worn during working hours and for the drying of the wet clothing.
Section 44: Facilities for sitting
In every factory suitable arrangements for sitting shall be provided and maintained
for all workers obliged to work in a standing position in order that they make take
advantage of any opportunity for rest which may occur in the course of their work.
Section 45: First aid appliances
a) First aid appliances shall be provided in every factory and maintained so as
to be readily accessible during all working hours first-aid boxes well
equipped with the prescribed contents. The number of such boxes or
cupboards to be provided and maintained shall not be less than one for every
one hundred and fifty workers ordinarily employed at any one time in the
factory, and under the supervision of the senior supervisor who is trained in
first-aid training and who shall always be readily available during the working
hours of the factory.
b) In every factory wherein more than five hundred workers are ordinarily
employed there shall be provides and maintained an ambulance room of the
prescribed size, and well equipped under the care of Medical Staff.
Section 46: Canteen

Wherein more than two hundred and fifty workers are ordinarily employed, a
canteen or canteens shall be provided and maintained by the occupier for the use of
the workers and a managing committee for the canteen shall be constituted of the
representatives of the workers.
Section 47: Shelters, rest rooms and lunch rooms
In every factory where in more than one hundred and fifty workers are ordinarily
employed, adequate and suitable shelter or rest rooms or lunch rooms with the
provisions of drinking water shall be provided and maintained for the use of the
workers.
Section 48: Crches
In every factory where in more than thirty women workers are ordinarily employed,
suitable rooms shall be provided and maintained for the use of children under the
age of six years of such women.
Section 49: Welfare Officers
In every factory wherein five hundred or more workers are ordinarily employed the
occupier shall employ in the factory such number of welfare officers as may be
prescribed. The State Government may prescribe the duties, qualifications and
conditions of service of officers employed.
Comments
An Assistant personal Officer of a factory cannot be held that he was in fact
appointed as a Labour Welfare officer simply because as an Assistant and Personnel
Officer he was looking after the problems of the labourers and the welfare of the
labourers and when the number of labourers in the concerned factory was less than
100 and there was no statutory requirement to appoint a Labour Welfare Officer;
Shyam Vinyals Ltd. v. T. Prasad, (1993) 83 FJR 18 (SC).
11.7 WORKING HOURS AND LEAVE WITH WAGES
Section 51: Weekly hours
No adult workers shall be required or allowed to work in a factory for more than
forty-eight hours in a week.
Section 52: Weekly holidays
1) No adult worker shall be required or allowed to work in a factory on first day
of the week unless
a) He has or will have a holiday for a whole day on one of the three days
immediately before or after the said day, and
b) The manager of the factory, has before the said day or the substituted day

under clause (a) whichever is earlier

- Delivered a notice at the office of the Inspector of his intention to require
the worker to work on the said day and on the day which is to be substituted,
and
- Displayed a notice to that effect in the factory.
Section 53: Compensatory holidays
Where as a result of the passing of an order or the making of a rule under the
provisions of this Act exempting a factory or the workers therein from the provisions
of the Section 52, a worker is deprived of any of the weekly holidays for which
provision is made in sub-section (1) of that section, he shall be allowed within a
month in which the holidays were due to him or within the two months immediately
following that month compensatory holidays of equal number to the holidays so
lost.
Section 54: Daily Hours
Subject to the provisions of Section 51, no adult worker shall be required or allowed
to work in a factory for more than nine hours in any day provided that, subject to
the previous approval of the Chief Inspector.
Section 55: Interval for rest
The period of work of adult workers in factory each day shall be so fixed that no
period shall exceed five hours and no worker shall work for more than five hours
before he has an interval for rest of at least half an hour.
Section 59: Extra wages for overtime
Where a worker works is a factory for more than nine hours in any day or for more
than forty-eight hours in any week, he shall, in respect of overtime work be entitled
to wages at the rate of twice his ordinary rate of wages.
Section 79: Annual leave with wages
1. Every worker who has worked for a period of two hundred and forty days or
more in a factory during a calendar year shall be allowed during the
subsequent calendar year; leave with wages for a number of days calculated
at the rate of:
(a) If an adult, one day for every twenty days of work performed by him
during the previous calendar year.
(b) If a child, one day for every fifteen days of work performed by him during
the previous calender year.
(c) The leave earned in the year prior to that in which the leave is enjoyed
shall be deemed to be days on which the worker has worked in a factory for

the purpose of computation of the period of two hundred and forty days or
more, but he shall not earn leave for these days.
Explanation: The leave admissible under this sub-section shall be exclusive of all
holidays whether occurring during or at either end of the period of leave.
11.8 INTRODUCTION TO CONTRACT LABOUR (REGULATION & ABOLITION) ACT, 1970
The Government of India has been deeply concerned about the exploitation of
workers under the contract labour system. With a view to removing the difficulties
of contract labour and bearing in mind the recommendations of various
commissions and committees and the decisions of the Supreme Court, particularly
in the case of Standard Vacuum Refining Company in 1960, the Contract Labour
(Regulation and Abolition) Act was enacted in 1970. This Act seeks to regulate the
employment of contract labour in certain establishments and to provide for its
abolition under certain circumstances. Contact labourers also suffer from inferior
labour status, casual nature of employment, lack of job security and poor economic
conditions. Contract labourers did the same work as the workers directly employed
but were not paid the same wages and the same working conditions as the directly
employed workers. This practice of exploitation was and still is very much prevalent
in India. Therefore, to encounter such problem and also to regulate the conditions of
these labourers the Government passed an Act called the Contract Labour
(Regulation and Abolition) Act, 1970. The Act was also passed to provide legislative
protection to these workers who had no rights to claim what they deserved like
basic amenities, urinals, drinking water facility.
Contract Labour by and large, is neither borne on payroll or muster roll nor is paid
wages directly. The establishments, which farm out work to contractors, do not own
any direct responsibility in regard to their labourers. Generally, the wage rate to be
paid and observance of working conditions are stipulated in agreements but in
practice they are not strictly adhered to.
Short title, extent, commencement and application (Section 1)
1. This Act may be called the Contract Labour (Regulation and Abolition) Act,
1970.
2. It extends to whole of India.
3. It shall come into force on such date as the Central Government may, by
notification in the Official Gazette, appoint and different dates may be
appointed for different provisions of this Act.
The Act applies to every establishment in which 20 or more workmen are employed
or were employed on any day on the preceding 12 months as contract labour and to
every contractor who employs or who employed on any day of the preceding 12
months, twenty or more workmen.

It does not apply to establishments where the work performed is of intermittent or

casual nature. The Act also applies to establishment, is of an intermittent or casual
nature, the appropriate government shall decide that question after consultation
with the Central Board or, as the case may be, a State Board and its decision shall
be final.
Explanation: For the purpose of this sub-section, work performed in an
establishment shall not be deemed to be of an intermittent nature(1) If it was performed for more than one hundred and twenty days in the
preceding twelve months, or
(2) If it is of a seasonal character and is performed for more than sixty days in a
year.
11.9 DEFINITION OF THE CONTRACT LABOUR (R&A) ACT, 1970
(a) Government means the Central Government or the State Government;
(b) A workman shall be deemed to be employed as Contract labour in or in
connection with the work-of -an establishment when he is hired in or in connection
with such work by or through a contractor, with or without the knowledge of the
principal employer;
(c) Contractor, in relation to an establishment, means a person who undertakes to
produce a given result for the establishment, through contract labour or who
supplies contract labour for any work of the establishment and includes a subcontractor;
(d) Controlled industry means any industry the control of which by the Union has
been declared by any Central Act to be expedient client in the public interest;
(e) Establishment means any office or department of the Government or a local
authority, or any place where any industries, trade, business, manufacture or
occupation is carried on;
(f) Prescribed means prescribed by rules made under this Act;
(g) Principal employer means the Government office the Head of the Department,
in a factory, the owner, manager or occupier of the factory or in case of mine, the
person who has been named as manager, owner and
(h) Wages shall have the meaning returns for the work;
(i) Workman means any person employed in or in connection with the work of any
establishment to do any skilled, semi-skilled or unskilled manual, supervisory,
technical or clerical work for hire or reward, whether the terms of employment be
express or implied.

But does not include any such person who is employed mainly in a managerial or
administrative capacity; or in a supervisory capacity draw wages exceeding five
hundred rupees per mensem or work is of managerial nature OR who is an outworker that is, a person to whom any articles and materials are given out and the
work is not being carried out within the premises under the control and
management of the principal employer.
Example to Clear the Concept
In the present day world, globalization is increasing at a very high pace and it is
resulting in profit-oriented economies which in turn are leading to the promotion of
contract labour. Concept of contract labour can be understood from the following
example:
Suppose A is an industrialist and wants to build a factory and for this A hires a
person B to get the job done. B hires other people X, Y and Z to build the factory.
Now it is not necessary that X, Y and Z should be hired by B with the permission of
A. A may not even know about this contract but B acting as a mediator has got into
a contract with other people to get As work done. These people X, Y and Z who
have no direct contact or relationship with A are the Contract labourers.
11.10 THE ADVISORY BOARDS (SECTION 3-5)
The Central Government and the State Governments are required to set up Central
Advisory Board and State Advisory Boards, which are authorized to constitute
Committees as deemed proper. The proper functions of the Boards are advisory, on
matters arising out of the administration of the Act as are referred to them. The
Boards carry out the functions assigned to them under the Act.
The Central Government constitutes a board to be called:
1. The Central Advisory Contract Labour Board (hereinafter referred to as the
Central Board) to advise the Central Government on such matters arising out
of the administration of this Act.
2. The State Government may constitute a board to be called the State Advisory
Contract-Labour Board (hereinafter referred to as the State Board) to advise
the State Government on such matters arising out of the administration of
this Act.
The Central Board and State Board shall consist of:
(a) A Chairman to be appointed by the Central Government/ State Government;
(b) The Chief Labour Commissioner (Central)/ Labour Commissioner, ex officio;
(c) Such number of members, not exceeding seventeen/ eleven but not less than
eleven/nine, as the Central Government may nominate to represent that
Government.

Provided that the number of members nominated to represent the workmen shall
not be less than the number of members nominate to represent the principal
employers and the contractors.
The Central Board or the State Board, as the case may be, may constitute such
committees and for such purpose shall meet at such time and places and shall
observe such rules of procedure in regard to the transaction of business at its
meetings as may be prescribed.
The members of a committee shall be paid such fees and allowances for attending
its meetings as may be prescribed and no fees shall be payable to a member who is
an officer of Government or of any corporation established by any law for the time
being in force.
11.11 REGISTRATION OF ESTABLISHMENTS EMPLOYING
CONTRACT LABOUR (SECTION 6-10)
(A) Appointment of registering officers
The appropriate Government may, by an order notified in the Official Gazette
appoint such persons, being Gazetted Officers of Government, as it thinks fit
to be registering officers for the purposes of this Chapter; and define the
limits, within which a registering officer shall exercise the powers conferred
on him by or under this Act.
(B) Registration of certain establishment
1. Every principal employer of an establishment to which this Act applies shall
make an application to the registering office in prescribed manner for
registration of the establishment.
2. Certificate of registration is issued to the principal employer after receiving
the application in the prescribed format if registering officer is satisfied. If
there is any misinterpretation or suppression of any material fact, or that for
any other reason registering officer may, after verification have authority to
revoke the registration. No principal employer employs contract labour in the
establishment without authentic registration.
(C) Prohibition of employment of Contract Labour
To stop the practice of the employment of contract labour in any process,
operation or other work in any establishment, Governments decision shall be
final whether any process or operation or other work of perennial nature.
(D)Criteria and circumstances for abolition of contract labour
If the work for which contract labour is employed is incidental to and closely
connected with the main activity of the industry and1. Is of a perennial and permanent nature,
2. Whether it is done ordinarily through regular workers,
3. Whether it is sufficient to employ considerable number of whole-time
worker, the abolition of contract labour is justified.

11.12 LICENCING OF CONTRACTORS (SECTION 11 15)

The appropriate Government may, by an order notified in the Official Gazette,
appoint such persons, being Gazetted Officers of Government, as it thinks fit to be
licensing officers for the purposes of this Chapter and define the limits, within which
a licensing officer shall exercise the powers conferred on licensing officers by or
under this Act.
(a) Licensing of Contractors: No contractor to whom this Act applies shall
undertake or execute any work through contract labour except under and
accordance with a license. A license contains conditions including, in
particular, condition as to hours of work, fixation of wages, and other
essential amenities in respect to contract labour. Sub contractors or piece
wagers are equally responsible for obtaining license and implementing the
provision of the Act and the Rules. Failure to obtain license will amount to
criminal offence and is punishable. This section imposed a liability not to
undertake or execute any work through contract labour without license, a
liability which continued until the license was obtained and its requirement
was complied with.
(b) Grant of Licenses: Every application for the grant of a license shall be made
in the prescribed form and shall contain the particulars regarding the location
of establishment, the nature of process, operations or work for which contract
labour is employed and such other particulars as may be prescribed. After
investigation of the application received, a license is granted for the specified
period that may be renewed from time to time.
(c) Revocation, suspension and amendment of licenses: If the licensing officer is
satisfied that a license is obtained by misrepresentation or suppression of any
material fact, or the holder of a license has, without reasonable cause, failed
to comply with the conditions subject to which the license has been granted
or as contravened any of the provisions of this Act or the rules made
thereunder, then the licensing officer may after giving the holder of the
license and opportunity of showing cause, revoke or suspend the license or
forfeit the sum deposited as security for the due performance of the
conditions subject to which the license has been granted.
(d) Appeal: Any person aggrieved by an order may, within thirty days from the
date on which the order is communicated to him, prefer an appeal to an
appellate officer who shall be a person nominated in this behalf by the
appropriate Government.
11.13 WELFARE AND HEALTH OF CONTRACT LABOUR (SECTION 16-21)
(a) Canteens: The Act states wherein work requiring employment of contract labour
is likely to continue for such period as may be prescribed, and contract labour
numbering one hundred or more is ordinarily employed by a contractor, the
appropriate Government may make rules requiring that in every establishment one

or more canteens shall be provided and maintained by the contractor for the use of
such contract labour such rules are provided for: (a) the date by which the canteens
shall be provided, (b) the number of canteens that shall be provided, and the
standards in respect of construction, accommodation, furniture and other
equipment of the canteens, and
(c) the foodstuffs which may be served therein and the charges which may be made
therefore.
(b) Rest rooms: In every place wherein contract labour is required to halt at night in
connection with the work of an establishment in which work requiring employment
of contract labour is likely to continue for such period as may be prescribed, there
shall be provided and maintained by the contractor for the use of the contract
labour such number of rest rooms or such other suitable alternative accommodation
within such time as may be prescribed. The rest rooms or the alternative
accommodation to be provided under sub-section (1) shall be sufficiently lighted
and ventilated and shall be maintained in a clean and comfortable condition.
(c) Other facilities: It shall be the duty of ever contractor employing contract labour
in connection with the work of an establishment to which this Act applies, to provide
and maintain a sufficient supply of wholesome drinking water for contract labour at
convenient places, a sufficient number of latrines and urinals of the prescribed
types so situated as to be convenient and accessible to the contract labour in the
establishment; and washing facilities.
(d) First aid facilities: There shall be provided and maintained by the contractor so
as to be readily accessible during all working hours a first-aid box equipped with the
prescribed contents at every place where contract labour is employed by him.
(e) Liability of principal employer in certain cases: Obligation to provide amenities
conferred under the Act to the workers is on the principal employer. All expenses
incurred by the principal employer in providing the amenity may be recovered by
the principal employer from the contractor either by deduction from any amount
payable to the contractor under any contract or as a debt payable by the
contractor, but if any amenity required to be provided for the benefit of the contract
labour employed in an establishment is not provided by the contractor within the
time prescribed then such amenity shall be provided by the principal employer
within such time as may be prescribed. On the Government projects, the
Government is the Principal Employer, and it also cant escape from this liability of
providing amenities to the contract labours. It amounts to violation of Art. 21
(fundamental rights) and workers can enforce their right by writ petition under Art.
32 (the right to constitutional remedies).
(f) Responsibility for payment of wages: Payment of wages including overtime
wages, etc. must be made directly to the workers in full except with authorized
statutory deductions, if any.

1. A contractor shall be responsible for payment of wages to each worker employed

by him as contract labour and such wages shall be paid before the expiry of such
period as may be prescribed. It shall be duty of the contractor to ensure the
disbursement of wages in the presence of the authorized representative of the
principal employer.
2. Every principal employer shall nominate a representative duly authorized by him
to be present at the time of disbursement of wages by the contractor and it shall be
the duty of such representative to certify the amounts paid as wages in such
manner as may be prescribed.
3. In case the contractor fails to make payment of wages within the prescribed
period or makes short payment, then the principal employer shall be liable to make
payment of wages in full or the unpaid balance due, as the case may be, to the
contract labour employed by the contractor and recover the amount so paid from
the contractor either by deduction from any amount payable to the contractor
under any contract or as a debt payable by the contractor.
11.14 PENALTIES AND PROCEDURES (SECTION 22 35)
(A) Obstructions
Whoever obstructs an inspector in the discharge of his duties or refuses or willfully
neglects to afford the inspector any reasonable facility for making any inspection,
examination, inquiry or investigation and also refuses to produce on the demand of
an inspector any register or other document kept in pursuance of this Act or
prevents or attempts to prevent or does anything which he has reason to believe is
likely to prevent any person from appearing before or being examined by an
inspector acting in pursuance of his duties under the Act, shall be punishable with
imprisonment for a term which may extend to three months, or with fine which may
extend to five hundred rupees, or with both.
Whoever contravenes any provision of this Act or of any rules or any condition of
license granted shall be punishable with imprisonment for a term which may extend
to three months, or with fine which may/ extend to one thousand rupees, or with
both, and in the case of a continuing contravention with an additional fine which
may extend to one hundred rupees for everyday during which such contravention
continues after conviction for the first such contravention.
B) Offences by Companies
1. An offence under this Act has been committed by a company and it is proved that
the offence has been committed with the consent or connivance of, or that the
commission of the offence is attributable to any neglect on the part of any director,
manager, managing agent or any other officer of the company, such director,
manager, managing agent or such other officer shall also be deemed to be guilty of

that offence and shall be liable to be proceeded against and punished accordingly
and if he proves that the offence was committed without his knowledge or that he
exercised all due diligence to prevent the commission of such offense.
2. Without complaint in writing within three months from the date of offence, no
court shall take cognizance of any offence.
3. If offence consists of disobeying a written order made by an inspector then
complaint within six months will be entertained by the court.
(C) Appointment of Inspectors
The Government may appoint inspectors for the purposes of this Act, and define the
local limits within which they shall exercise their powers under this Act.
Subject to any rules made in this behalf, an inspector may
(a) Enter, at all reasonable hours any premises or place where contract labour is
employed, for the purpose of examining any register or record or notices
required to be kept or exhibited by or under this Act or rules made
thereunder, and require the production thereof for inspection;
(b) Examine any person whom he finds in any such premises or place and who,
he has reasonable cause to believe, is a workman employed therein;
(c) Require any person giving out work and any workman, to give any
information, which is in his power to give with respect to the names and
addresses of the persons to, for and from whom the work is given out or
received, and with respect to the payments to be made for the work;
(d) Seize to take copies of such register, record of wages or notices or portions
thereof as he may consider relevant in respect of an offence under this Act
which has reason to believe has been committed by the principal employer or
contractor; and
(e) Exercise such other powers as may be prescribed.
There is legal binding of producing any document or thing or to give any
information required by an inspector by a required person. The Criminal
Procedure provisions may be, applied to any search or seizure. Frequent,
detailed and thorough inspection should be undertaken by senior officers for
ensuring compliance.
(D) Maintenance of Records
Principal employer and every contractor has to maintain registers and records
giving the particulars of: (a) Contract labour employed, (b) the nature of work
performed by the contract labour. (c) the rates of wages paid to the contract labour
and any other details in a prescribed form. Notices in the prescribed form containing
particulars about the hours of work, nature of duty and such other information
should be exhibited within the premises of the establishment where the contract
labour is employed.

(E) The contract labour employed in the established is entitled to benefits in

respect to any matter which are more favourable to the them than those to
which they would be entitled under this Act. The contract labour shall
continue to be entitled to the more favourable benefits in respect of that
matter, notwithstanding that they received benefits in respect of other
matters under this Act. Nothing contained in this Act shall be construed as
precluding any such contract labour from entering into an agreement with the
principal employer or the contractor, as the case may be, for granting them
rights or privileges in respect of any matter which are more favourable to
them than those to which they would be entitled under this Act.
(F) No suit, prosecution or other legal proceedings shall lie against any
registering officer, licensing officer or any other Government servant or
against any member of the Central Board or the State Board as the case may
be, for anything which is in good faith done or intended to be done in
pursuance of this Act or any rule or order made thereunder and no suit or
other legal proceedings shall lie against the Government for any damage
caused or likely to be caused by anything which is in good faith done or
intended to be done in pursuance of this Act or any rule or order made thereunder.
(G)The Central Government may give directions to the Government of any state
as to the existence in the State of the following provisions contained in this
Act and also to help to remove any difficulty in execution. Government has
power to make rules for carrying out the purposes of this Act.
a) The form of application for the grant or renewal of a license;
b) The manner in which an investigation is to be made in respect of an
application for the grant of license and the matters to be taken into account
in granting or refusing a license;
c) The form of a license which may be granted or renewed, the fees to be
levelled for the grant or renewal of a license and the deposit of any sum as
security for the performance of such conditions;
d) The circumstances under which licenses may be varied or amended;
e) The form and manner in which appeals may be filed and the procedure to
be followed by appellate officers in disposing of the appeals;
f) The time within which facilities required by this Act to be provided and
maintained may be so provided by the contractor and in case of default on
the part of the contractor, by the principal employer;
g) The number and types of canteens, rest rooms, latrines and urinals that
should be provided and maintained.
h) The type of equipment that should be provided in the first-aid boxes;
i) The period within which wages payable to contract labour should be paid
by the contractor;
j) The form of registers and records to be maintained by principal employers
and contractors;

k) The submission of returns, forms in which, and the authorities to which,

such returns may be submitted;
l) The collection of any information or statistics in relation to contract labour;
and
m) Any other matter which has to be, or may be, prescribed under this Act.
(H) Every rule made by the Central Government under this Act shall be laid as
soon as may be after it is made, however, that any such modification or
annulment shall be without prejudice to the validity of anything previously
done under that rule.
Employers argue that these provisions of this law are to be amended for the speedy
development of all sectors of Indian economy. But trade unions feel giving freedom
to employers means removing sheltered or secure environment of the labour and
allowing employer to hire when they need and fire when the work is completed.

CHAPTER 12 WAGE RELATED LABOUR LEGISLATIONS

12.1 INTRODUCTION
Payment of Wages Act is an Act to regulate the payment of wages to certain classes
of employed persons whereas it is expedient to regulate the payment of wages to
certain classes of employed persons.
Background
It is said that the Payment of Wages Act, 1936 is a gift of Royal Commission of
Labour to the Indian Workers. The Royal Commission of Labour which was appointed
by the Government to investigate the conditions of labour found that the employers
in India were not paying wages in time and making indiscriminate deductions from
the wages payable to the labour. The Royal Commission of Labour, therefore,
recommended that a law should be enacted in India which will fix the date of
payment of wages to the workmen and lay down the authorized deductions which
can be made from the wages payable to workmen.
This Act contained the following points:

Short title, Extent, Commencement and Application

This Act may be called the Payment of Wages Act, 1936.
It extends to the whole of India.
It shall come onto force on such date as the Central Government may, by
Notification in the Official Gazette, appoint it.

12.2 APPLICATION AND DEFINITION OF THE PAYMENT OF WAGES ACT

Application
The Act is applicable to persons employed in any factory, railway and to such other
establishments to which the Appropriate Government may by notification extend
the provisions of the Act, after giving three months notice to that effect.
The term establishment includes tramway service, motor transport service engaged
in carrying passengers or goods, or transport service in dock, wharf or jetty, mine,
quarry, oil field, plantation, workshop, construction development or maintenance of
buildings, roads, bridges, canals etc.
Presently, the employee drawing wages up to Rs. 18,000 is covered under this Act
(vide notification) no. 2260(E) dated 11-09-2012). On the basis of figures of the
Consumer Expenditure Survey published by the National Sample Survey
Organisation, the Central Government may revise the wage ceiling, after every five
years.
Definition

Employed person includes the legal representative of the deceased employed

person.
Employer includes the legal representative of the deceased employer.
The term Wages means all remuneration (whether by way of salary, allowances
or otherwise) expressed in terms of money or capable of being so expressed
which if the terms of employment, express or implied, were fulfilled, would be
payable to a person employed in respect of his employment or of work done in
such employment. It includes:
(i) Any remuneration payable under any award or settlement between the
parties or order of court.
(ii) Any remuneration to which the person employed is entitled in respect of
overtime work or holidays or any leave period.
(iii) 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.
(iv) Any sum to which the person employed is entitled under any scheme framed
under any law which for the time being is in force.

However, it does not include

Any bonus (whether under the 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.
The value of any house accommodation or of the supply of light, water, medical
attendance or other amenity or of any service excluded from the computation of
wages by a general or special order of the appropriate Government.
Any contribution paid by the employer to any pension or provident fund and the
interest which may have accrued thereon.
Any travelling concession.
Any sum paid to the employed person to defray special expenses entailed on
him by the nature of his employment; or
Any gratuity payable on the termination of employment.

12.3 RESPONSIBILITY FOR PAYMENT OF WAGES

Every employer shall be responsible for the payment to persons employed by him of
all wages required to be paid under this Act;
Provided that in the case of persons employed (otherwise than by a contractor)
a) In factories, if a person has been named as the manager of the factory.
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
establishments.

c) Upon railways (otherwise than in factories), if the employer is in the railway

administration and the railway administration has nominated a person on this
behalf for the local area concerned, the person so named, the person
responsible to the employer, or the person so nominated as the case may be,
shall also be responsible for such payment.
Fixation of wages period

Every person responsible for the payment of wages under Section 3 shall fix
periods in respect of which such wages shall be payable in wages may,
therefore, be payable daily, weekly, fortnightly and monthly.
No wage period shall exceed one month.

Time of Payment of Wages

The wages of every person employed upon or in
a) Any railway, factory or (industrial or other establishment) upon or in which
less than one thousand persons are employed, shall be paid before the expiry
of the seventh day.
b) Any other railway, factory or industrial or other establishment shall be paid
before the expiry of the tenth day.
Where the employment of any person is terminated by or on behalf of the
employer, the wages earned by him shall be paid before the expiry of the
second working day from the day on which his employment is terminated.
c) All wages shall be in current coin or currency notes or in both: (provided that
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.)
12.4 DEDUCTIONS WHICH MAY BE MADE FROM WAGES
(Authorised/permissible/Valid deduction). The wages of an employed person shall be
paid to him without deductions of any kind except those Authorised by or this Act.
This imposition of any of the following penalties, namely
i) The withholding of increment or promotions (including the stoppage of increment
at an efficiency bar);
ii) The reduction to a lower post or time scale or to a lower scale in a time scale; or
iii) Suspension shall not be deemed to be deductions from the wages where the
rules framed by the employer for the imposition of such penalty are in conformity
with the requirements if any which may be specified in this behalf by the
Appropriate Government by notification in the Official Gazette.

Deductions from the wages of an employed person shall be made only in

accordance with the provisions of this Act and may be of the following kinds only:
(a) Fine
(b) Deductions for absence from duty.
(c) Deductions for damage to or loss of goods expressly entrusted to employed
person 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.
(d) Deduction for such amenities and services supplied by the employer or by
Government or any Housing board.
(e) Deduction for such amenities and services supplied by the employer. The
word service does not include the supply of tools and raw materials required
for the purposes of employment.
Deduction for recovery of advances i.e., travelling, allowance or convenience
allowance. Deduction for recovery of loans granted for house building or
other purposes approved by the State government and the interest due in
respect thereof.
(f) Deductions of income tax payable by the employed person.
(g) Deductions required to be made by the order of court or other authority
competent to make such an order.
(h) Deductions for subscription to and for repayment of advances from any
provident fund to which the Provident Fund Act applies.
(i) Deduction for payment to co-operative societies approved by the State
Government or to a scheme of insurance maintained by the Indian Post office.
(j) Deduction for payment of premium on his life insurance policy to the Life
Insurance Corporation of India.
Deduction made with the written authorization of the employed person, for
the payment of contribution to any fund constituted by the employer or a
trade union registered under the Trade Union Act, 1926 or the members or
their families or both approved by the Government.
Deduction made for payment of the fees payable of him for the membership
of any Trade Union with the written authorization registered under the Trade
Union Act, 1926.
(k) Deduction for payment of insurance premium of Fidelity Guarantee Bonds.
(l) Deduction for recovery of loss sustained by the railway administration on
account of acceptance by the employed person of counter faith or base coins
or forged currency notes.
(m)
Deduction for recovery of
losses sustained by railway administration on account or to collect for the
appropriate charges whether his respect of fares, freight, demurrage, or in
case of sale of food in catering establishment.
(n) Deductions for recovery of losses sustained by a railway administration on
account of any rebates or refunds.

(o) Deductions, made with the written authorization of the employed person for
contribution of the employed person, for contribution to the Prime Ministers
National Relief Fund.
(p) Deduction for contribution to any insurance scheme framed by the Central
Government for the benefit of its employees.
The total amount of deductions which may be made in any wage period from
the wages of any employed person shall not exceed.
(i) In case of payments to co-operative societies, seventy-five percent of
such wages, and
(ii) In any other case fifty percent of such wages.

Fines

No fine shall be imposed on any employee in respect of such acts and omissions
on his part by the employer without previous approval of the appropriate
authority.
The list of acts and commissions shall be exhibited in the prescribed manner on
the premises at the prescribed places by the employer.
No fine shall be imposed on any employed person until and unless he has been
given an opportunity of showing cause against the fine.
The total amount of fine which may be imposed in any one wage period on any
employed person shall not exceed an amount equal to three percent of the
wages payable to him in respect of that wage period.
The fine shall not exceed an amount equal to three percent of the wages payable
to him in respect of that wage period.
No fine shall be imposed on any employed person who is under the age of fifteen
years.
Every fine shall deemed to have been imposed on the day of the act or omission
in respect of which it was imposed.
All fines and all realisations thereof shall be recorded in the prescribed register
by the employer and all realisations shall be applied only to the beneficial
purposes to the person employed in the factory or establishment as are
approved by the prescribed authority.
No fine imposed on any employed person shall be recovered from him by
installments or after the expiry of ninety days from the day on which it was
imposed.

Deduction for absence from duty

This section provides that the deduction may be made on account of absence of an
employed person from the place or places where, by the terms of his employment,
he was required to work, such absence being for the whole or any part for the

period during which he is so required to work. However, the amount so deducted

should be in proportion to the period for which he remains absent from the place of
work.
Provision of this Section tells us that, if 10 or more employed persons acting in
concert absent themselves without due notice and without reasonable cause, the
employer can deduct wages up to 8 days from the wages payable to such workmen.
12.5 MAINTENANCE OF REGISTERS AND RECORDS
Every employer shall maintain the register and records in the prescribed form,
giving such particulars of persons employed by him, such as name, nature of work
done, address, wages paid to him, deductions made from his pay, attendance, etc.,
and the same registers and records shall be preserved by the employer for the
period of three years after the date of the last entry made therein.
Inspectors
1) Appointment
The State Government may appoint inspectors for the purpose of this Act.
2) Powers
(a) An inspector may enter in the premises.
(b) May examine the register and records.
(c) May visiting the work spot and interrogate the persons for the purpose.
(d) May seize the registers and records.
(e) May prosecute the employer who is the defaulter under the provision.
3) Duty
Implementation of the provision of this Act by undertaking inspection
frequently and regularly.
Facilities to be afforded to Inspectors
Every employer shall afford an Inspector all reasonable facilities for making
any entry inspection, supervision, examination or inquiry under this Act.
Claim
1. Nature of Claim:
(a) Claim arising out of delayed payment (b) Claim arising out of illegal
deductions
2. Who can file the claim:
(a) Aggrieved person himself (b) Any legal practitioner (c) Any official of the
Registered Union (d) Any inspector under this Act (e) Any other person acting
with the permission of the authority appointed under the provision may apply
to such authority for direction.
Competent Authority: For settling a claim
Appointment

Appointed by the State Government by Notification in the Government Gazette.

Authority: Any Commissioner for workmens compensation.
1. Or other officer with experience as a judge of civil court or as stipendiary
magistrate.
2. Presiding officer of any Labour Court or Industrial Tribunal the Authority has
Civil Court power and any inquiry under this section shall be deemed to be a
judicial proceeding.
Function
To hear and decide all the claims arising out of deductions from the wages or delay
in payment of the wages and including all matter incidental to such claim.
Time Limitation
Every such application shall be presented within twelve months from the date on
which the deductions from the wages was made or from the date on which the
payment of wages was due to be made, as the case may be. Delay in submission of
claim application shall be condoned by the authority on bonafide/ sufficient ground.
The authority shall hear that applicant and the employer or other person
responsible for the payment of wages under section 3 or give them an opportunity
of being heard and stage the further inquiry in the matter if necessary and examine
all the register/records for the purpose, and issue the order for the refund of the
amount of wages to the claimant, together with the payment of compensation as
the authority may think fit. If the authority bearing an application under this Section
is satisfied that the application was malicious or vexatious, the authority may direct
that penalty not exceeding three hundred and seventy-five rupees to be paid to the
employer or other person responsible for the payment of wages by the person
presenting the application.
Single application in respect of claims from unpaid group
A single application may be presented under section 15 on behalf or in respect of
any number of employed persons belonging to the same unpaid profession, if they
are and deductions have been made from their wages in contravention of this Act
for the same cause and during the same wage period.
12.6 APPEAL
An appeal against an order dismissing either wholly or in part may be preferred
within thirty days of the date on which the order or direction was made before the
court of small causes and elsewhere before the district court.

No appeal shall be made unless the memorandum of appeal is accompanied by

certificate by the authority that the appellant has deposited the amount payable
under the direction.
Conditional attachment of property of employer or other person responsible for the
payment of wages
If the court is satisfied that the employer or other person responsible for the
payment of wages under Section 3 is likely to evade payment of any amount that
may be directed to be paid, the authority or court, as the case may be, is of opinion
that the ends of justice would be defeated by the delay after giving the employer or
other person an opportunity of being heard, may direct the attachment of so much
of the property of the employer or their person responsible for the payment of
wages as in the opinion of the authority or court be sufficient to satisfy the amount
which may be payable under the direction.
Power of authorities appointed under Section 15
Every authority appointed under Section 15 shall have all the powers of a civil court
under the Code of Civil Procedure, 1908.
12.7 PENALTY FOR OFFENCE UNDER THE ACT

Whoever being responsible for the payment of wages to an employed person

contravenes any of the provisions of any of the following Sections, namely
Section 5 except sub-section 4 thereof Section 7, Section 8 except sub-section
(8), thereof Section 9, Section 10 except sub-section(2) thereof, and Section 12
to 13 shall be punishable with fine which shall not be less than one thousand five
hundred rupees but which may extend to seven thousand five hundred rupees.
Whoever contravenes the provision of Section 4 Sub section (4) of Section 5,
Section 6 sub section (8) of sub section (20) of Section 10 or Section 25 shall
be punishable with fine which may extend to three thousand seven hundred and
fifty rupees.
Whoever being required under the Act to maintain any records or registers or to
furnish any information or return (i) fails to maintain such registers or records,
(ii) willfully refuses or neglects to furnish any information (iii) refuses to answer
or willfully gives a false answer shall for each offence be punishable with a fine
which shall not be less than one thousand give hundred rupees.
Whoever willfully obstructs an inspector in discharging his duties under this Act
or refuses to afford an inspector any reasonable facility for making any entry,
inspection, examination, supervision or enquiry or willfully or prevents this, shall
be punishable with a fine, which shall not be less than one thousand five
hundred rupees but which may extend to seven thousand five hundred rupees.
If any person who has been convicted of any offence punishable under this Act is
again guilty of an offence involving contravention of the same provision, he shall
be punishable for the same with imprisonment which shall not be less than one

month but which may extend to six months and with a fine which shall not be
less than three thousand seven hundred and fifty rupees but which may extend
to twenty-two thousand five hundred rupees.
Bar of Suits
No court shall entertain any suit for the recovery of wages or of any deduction from
wages in so far as the sum so claimed.
(a) Forms the subject of an application under Section 15 which has been
presented by the plaintiff and which is pending before the authority
appointed under that section or of any appeal under Section 17, or
(b) Has formed the subject of a direction under Section 15 in favour of the
plaintiff or
(c) Has been adjudged in any proceeding under Section 15 (not to be owned to
the plaintiff), or
(d) Could have been recovered by an application under Section 15.
Contracting Out: Any contract or agreement, whether made before or after the
commencement of this Act, whereby an employed person relinquishes any right
conferred by this Act shall be null and void in so far as it purports to deprive him of
such a right.
12.8 INTRODUCTION TO MINIMUM WAGES ACT, 1948
The Minimum Wages Act, 1948 was enacted to provide for fixing the minimum rates
of wages in certain employments. Whereas it is expedient to provide for fixing the
minimum rates of wages in certain employments; it is hereby enacted as follows:
Short title and extent:
This Act may be called as the Minimum Wages Act, 1948. It extends to the whole of
India.
12.9 IMPORTANT DEFINITIONS
(a) Wages means all remuneration, capable of being expressed in terms of money,
which would, if the terms of the contract of employment, express or implied, were
fulfilled, be payable to a person employed in respect of his employment or of work
done in such employment, [and includes house rent allowance], but does not
include
1) The value of
a) Any house-accomodation, supply of light, water, medical attendance, or
b) Any other amenity or any service excluded by general or special order of the
appropriate Government;

2) Employee means any person who is employed for hire or reward to do any work,
skilled or unskilled, manual or clerical, in a scheduled employment in respect of
which the minimum rates of wages have been fixed; and includes an out-worker to
whom any article or materials are given out by another person to be made up,
cleaned, washed, altered, ornamented, finished, repaired, adapted or otherwise
processed for sale for the purpose of the trade or business of that other person
where the process is to be carried out either in the home of the out-worker or in
some other premises not being the premises under the control and management of
that other person; and also includes an employee declared to be an employee by
the appropriate Government; but does not include any member of the Armed Forces
of the Union.
12.10 APPLICABILITY OF THE ACT
The Minimum Wages Act, 1948 applies to:
(a) Any schedule employment in respect of which the minimum rates of wages
have been fixed under this Act;
(b) Any schedule employment under the control of any Government in India in
respect of which minimum rates of wages have been fixed under this Act;
(c) Any schedule employment under any local authority in respect of which the
minimum rates of wages have been fixed under this Act.
Person responsible for ensuring the payment of minimum wages
For any scheduled employment in respect of which the minimum rates of
wages have been fixed under this Act, any person responsible to the owner
for the supervision and control of the employees or for the payment of
wages;
Schedule employment means employment specified in the Schedule, or any
process or branch of work forming part of such employment (refer the
schedule at the end of this unit).
12.11 FIXING OF MINIMUM RATES OF WAGES
Fixing of minimum rates of wages: (1) The appropriate Government shall, in the
manner hereinafter provided.
(a) Fix the minimum rates of wages payable to employees employed in an
employment specified in Part I or Part II of the Schedule and in an
employment added to either Part by notification under Section 27:
Provided that the appropriate Government may, in respect of employees
employed in employment specified in Part II of that Schedule, instead of
fixing the minimum rates of wages under this clause for the whole State, fix
such rates for a part of the State or for any specified class or classes of such
employment in the whole State or part thereof.
(b) Review at such intervals as it may think fit, such intervals not exceeding five
years, the minimum rates of wages so fixed and revise the minimum rates if

necessary.
Provided that where for any reason the appropriate Government has not
reviewed the minimum rates of wages fixed by it in respect of any scheduled
employment within any interval of five years, nothing contained in this clause
shall be deemed to prevent it from reviewing the minimum rates after the
expiry of the said period of five years and revising them, if necessary, and
until they are so revised, the minimum rates in force immediately before the
expiry of said period of five years shall continue in force.
The appropriate Government may refrain from fixing the minimum rates of
wages in respect of any scheduled employment in which there are in the
whole States less than one thousand employees engaged in such
employment, but if any time, the appropriate Government comes to finding
after such inquiry as it may make or cause to be made in this behalf that the
number of employees in any scheduled employment in respect of which it
has refrained from fixing minimum rates of wages has risen to one thousand
or more, it shall fix the minimum rates of wages payable to employees in
such employment [as soon as may be after such a finding].
The appropriate Government may fix
(a) A minimum rate of wages for time work (a minimum time rate);
(b) A minimum rate of wages for piece work (a minimum piece rate);
(c) A minimum rate of remuneration to apply in the case of employee
employed on piece work for the purpose of securing to such employees a
minimum rate of wages on a time-work basis (a guaranteed time rate);
(d) A minimum rate (whether a time rate or a piece rate) to apply in
substitution for the minimum rate which would otherwise be applicable, in
respect of overtime work done by employees (overtime rate)
12.12 FIXATION OF REVISING MINIMUM RATES
In fixing or revising minimum rates of wages, different minimum rates of wages may
be fixed for:
(1) Different Scheduled employments;
(2) Different classes of work in the same scheduled employment;
(3) Adults, adolescents, children and apprentices;
(4) Different localities;
(5) Minimum rate of wages may be fixed by any one or more of the following
wage periods, namely:
a. By the hour
b. By the day
c. By the month
d. By such other larger wage period as may be prescribed
12.13 MINIMUM RATE OF WAGES

(1) Any minimum rate of wages fixed or revised by the appropriate Government in
respect of scheduled employments under Section 3 may consist of:
(i) A basic rate of wages and a special allowance at a rate to be adjusted, at such
intervals and in such manner as the appropriate Government may direct, to accord
as nearly as practicable with the variation in the cost of living index number
applicable to such workers (hereinafter referred to as the Cost of living
allowance); or
(ii) A basic rate of wages with or without the cost of living allowance, and the cash
value of the concessions in respect of supplies of essential commodities at the
concession rates, where so authorised; or
(iii) An all-inclusive rate allowing for the basic rate, the cost of living allowance and
the cash value of the concessions, if any.
(2) The cost living allowance and the cash value of the concessions in respect of
supplies of essential commodities at concession rates shall be computed by the
competent authority at such intervals and in accordance with such directions as
may be specified or given by the appropriate Government.
Procedure for fixing and revising minimum wages
(1) In fixing the minimum rates of wages in respect of any scheduled
employment for the first time under this Act or in revising the minimum rates
of wages so fixed, the appropriate Government shall either:
(a) Appoint as many committees and sub committees as it considers
necessary to hold the enquiries and advise it in respect of such fixation or
revision, as the case may be, or
(b) By notification in the Official Gazette, publish its proposals for the
information of persons likely to be affected thereby and specify a date, not
less than two months from the date of notification, on which the proposals
will be taken into consideration.
(c) After considering the advice of the committee or committees appointed
under the clause of sub section (1), or as the case may be, all
representations received by it before the date specified in notification
under clause (b) of that sub section, the appropriate Government shall,
by notification in the Official Gazette, fix, or as the case may be, revise the
minimum rates of wages in respect of each scheduled employment, and
unless such notification otherwise provides, it shall come into force on the
expiry of three months from the date of its issue:
Provided that where the appropriate Government proposes to revise the
minimum rates of wages by the mode specified in clause (b) of sub
section (1), the appropriate Government shall consult the Advisory Board
also.

12.14 ADVISORY/ CENTRAL BOARD FOR WAGES

Advisory Board
For the purpose of coordinating the work of committees and sub committees and
advising the appropriate Government generally in the matter of fixing and revising
minimum rates of wages, the appropriate Government shall appoint an Advisory
Board.
Central Advisory Board
(1) For the purpose of advising the Central and State Governments in the
matters of fixation and revision of minimum rates of wages and other matters
under this Act and for coordinating the work of the Advisory Boards, the
Central Government shall appoint a Central Advisory Board.
(2) The Central Advisory Board shall consist of persons to be nominated by the
Central Government representing employers and employees in the scheduled
employments, who shall be equal in number, and independent persons not
exceeding one-third of its total number of members; one of such independent
persons shall be appointed the Chairman of the Board by the Central
Government.
Composition of Committees
Each of the committees, sub committees and the Advisory Board shall consist of
persons to be nominated by the appropriate Government representing employers
and employees in the scheduled employments, who shall be in equal number, and
independent persons not exceeding one third of its total number of members; one
of such independent persons shall be appointed the Chairman by the appropriate
Government.
Wages in Kind
(1) Minimum wages payable under this Act shall be paid in cash.
(2) Where it has been the custom to pay wages wholly or partly in kind, the
appropriate Government being of the opinion that it is necessary in the
circumstances of the case may, by notification in the Official Gazette, authorize the
payment of minimum wages either wholly or partly in kind
If the appropriate Government is of the opinion that provision should be made for
the supply of essential commodities at concession rates, the appropriate
Government may, by notification in the official Gazette, authorise the provision of
such supplies at concession rates.

(3) The cash value of wages in kind and of concessions in respect to supplies of
essential commodities at concession rates Authorised under sub sections (2) (3)
shall be estimated in the prescribed manner.
Payment of minimum rates of wages
Where in respect of any scheduled employment a notification made under Section
5(1) is in force, the employer shall pay to every employee engaged in a scheduled
employment under him, wages at a rate not less than the minimum rate of wages
fixed by such notification for that class of employees in that employment without
any deductions except as may be authorised within such time and subject to such
conditions as may be prescribed.
Fixing hours for a normal working day
In regard to any scheduled employment minimum rates of wages in respect of
which have been fixed under this Act, the appropriate Government may
(a) Fix the number of hours of work which shall contribute a normal working day,
inclusive of one or more specified intervals;
(b) Provide a day of rest in every period of seven days which shall be allowed to
all employees or to any specified class of employees and for the payment of
remuneration in respect of such days of rest;
(c) Provide for payment for work on a day of rest not less than the overtime rate.
The provisions of sub-section (1) shall, in relation to the following classes of
employees, apply only to such extent and subject to such conditions as may be
prescribed:
(1) Employees engaged on urgent work, or in any emergency which could not
have been foreseen or prevented;
(2) Employees engaged in work in the nature of preparatory or complementary
work which must necessarily be carried on outside the limits laid down for
general working in the employment concerned;
(3) Employees whose employment is essentially intermittent;
(4) Employees engaged in any work which for technical reasons has to be
completed before their duty is over;
(5) Employees engaged in work which could not be carried on except times
dependent on the irregular action of natural forces.
Overtime
Where an employee, whose minimum rate of wage is fixed under this Act, by the
hour, by the day or by such a longer wage period as may be prescribed works on
any day in excess of the number of hours constituting a normal working day, the
employer shall pay him for every hour or for part of an hour so worked in excess at

the overtime rate fixed under this Act or under any law of the appropriate
Government for the time being in force, whichever is higher.
Wages of a worker who works for less than a normal working day
If an employee whose minimum rate of wages has been fixed under this Act by the
day, works on any day on which he was employed for a period less than the
requisite number of hours constituting a normal working day, he shall, save as
otherwise hereinafter provided, be entitled to receive wages in respect of work done
by him on that day as if he had worked for a full normal working day:
Provided, however, that he shall not be entitled to receive wages for a full normal
working day:
(1) In any case where his failure to work is caused by his unwillingness to work
and not by the omission of the employer to provide him with work, and
(2) In such other cases and circumstances as may be prescribed.
Wages for two or more classes of work
Where an employee does two or more classes of work to each of which a different
minimum rate of wages is applicable, the employer shall pay to such employee in
respect of the time respectively occupied in each such class of work, wages at not
less than the minimum rate in force in respect of each such class.
Penalties for certain offences
Any employer who:
(a) Pays to an employee less than the minimum rates of wages fixed for that
employees class of work, or less than the amount due to him under the
provisions of this Act, or
(b) Contravenes any rule or order made under Section 13 shall be punishable
with imprisonment for a term which may extend to six months, or with a fine
which may extend to five hundred rupees, or with both, provided that in
imposing any fine for an offence under this Section, the Court shall take into
consideration the amount of any compensation already awarded against the
accused in any proceedings taken under Section 20.
Section 22 C, offences by companies
(1) If the person committing any offence under this Act is a company, every
person who at the time the offence was committed was in charge of and was
responsible to the company for the conduct of the business of the company
as well as the company shall be deemed to be guilty of the offence and shall
be liable to be proceeded against and punished accordingly.
Provided that nothing contained in this sub-section shall render any such

person liable to any punishment provided in this Act, if he proves that the
offence was committed without his knowledge or that he exercised all due
diligence to prevent the commission of such offence.
(2) Notwithstanding anything contained in sub-section (1) where any offence
under this Act has been committed by a company and it is proved that the
offence has been committed with the consent or connivance of or is
attributable to any neglect on the part of any director, manager, secretary or
other officer of the company shall also be deemed to be guilty of that offence
and shall be liable to be proceeded against and punished accordingly.
Explanation: For the purpose of this Section
(a) Company means anybody corporate and includes a firm or other
association of individuals and
(b) Director in relation to a firm means a partner in the firm.
SCHEDULE PART I
Employment in any woolen carpet making or shawl-weaving establishment.
Employment in any rice mill, flour mill or dal mill.
Employment in any tobacco (including bidi making) manufactory. Employment in
any plantation, that is to say, any estate which is maintained for the purpose of
growing cinchona rubber tea or coffee. Employment in any oil mill.
Employment under any local authority.
Employment on the construction or maintenance of roads or in building operations.
Employment in stone-breaking or stone crushing. Employment in any lac
manufactory.
Employment in any mica works. Employment in public motor transport. Employment
in tanneries and leather manufactory. Employment in gypsum mines.
Employment in barytes mines. Employment in bauxite mines. Employment in
manganese mines.
Employment in the maintenance of buildings and employment in the construction
and maintenance of runways.
Employment in China clay mines. Employment in Kyantite mines. Employment in
copper mines.
Employment in clay mines covered under the Mines Act, 1952 (35 of 1952).
Employment in magnesite mines covered under the Mines Act, 1952 (35 of 1952).

Employment in white clay mines. Employment in stone mines.

SCHEDULE PART II
Employment in agriculture, that is to say, in any form of farming including
cultivation and tillage of the soil, dairy, farming, the production cultivation, growing
and harvesting of any agricultural or horticultural commodity, the raising of
livestocks bees or poultry and any practice performed by a farmer or on a farm as
incidental to or in conjunction with farm operation (including any forestry or
timbering operations and the preparation for the market and delivery to storage or
to market or to carriage for transportation to market of farm produce).
12.15 INTRODUCTION TO PAYMENET OF BONUS ACT, 1965
Payment of Bonus Act is an Act to provide for the payment of bonus to persons
employed in certain establishments on the basis of profits or on the basis of
production or productivity and for the matters connected therewith.
The Payment of Bonus Act, 1965 was constituted by the Indian Government and it is
applicable to the whole of India. It shall apply to (a) every factory and (b) every
other establishment in which twenty or more persons are employed on any day
during giving not less than two months provided that the Appropriate Government
may after giving not less than two months notice of its intention so to do by
notification in the official gazette, apply the provisions of this Act with effect from
such accounting year as may be specified in the notification to any establishment
employing less than twenty persons, but the number of persons so specified shall in
no case be less than ten.
12.16 DEFINITIONS OF THE PAYMENT OF BONUS ACT, 1965
The Payment of Bonus has become an important point of interest of the employees.
It is to be noted that the bonus is over and above the annual salary (wages) predeclared to the employee concerned. The applicable accounting year for calculation
of the bonus would be as under: (1)Accounting year means
(a) In relation to a Corporation, the year ending on the day on which the
books of accounts of the Corporation are closed and balanced;
(b) In relation to a Company, the period in respect of which any profits and
loss accounts of the Company are laid before the annual general meeting
whether the period is a year or not;
(c) In any other case
(i) The year commencing on the 1st day of April; or
(ii) The year ending on which its accounts are so closed and balanced;
(2)Allocable Surplus means (a) In relation to an employer, being a company (other than banking

Company) sixty-seven percent of the available surplus in an accounting year;

(b) In any other case, sixty per cent of such available surplus.
(3)Employee means any person (other than an apprentice) employed on a
salary or wage not exceeding ten thousand rupees per menses in any
Industry to do any skilled or unskilled, manual, supervisory, managerial,
administrative, technical or clerical work for hire or reward, or reward, if the
terms and conditions of employment express or implied were fulfilled.
(4)Employer includes
(a) In relation to an establishment which is a factory, the owner or occupier of
the factory, including the agent, the legal representative of a deceased owner
or occupier of a factory or the manager.
(b) In relation to any other establishment, the person who or the authority
which has ultimate control over the affairs of the establishment and where
the said affairs are entrusted to a manager, managing director or managing
agent.
The following sums shall be deducted from gross profits as prior charges to arrive at
the available surplus.
(a) Any amount by way of depreciation admissible in accordance with the
provisions of sub-section
(i) of Section 32 of the Income Tax Act, 1961
(b) Any amount by way of development rebate or development allowance or
investment allowance which the employer is entitled to deduct from his
income under the Income Tax Act, 1961.
(c) Subject to the provisions of Section 7, any direct tax which the employer is
liable to pay for the accounting year in respect to his income, and the profits
and gains during the year.
(d) Any other amount specified in the Third Schedule of the Act.
12.17 ELIGIBILITY OF BONUS
Every employee shall be entitled to be paid by his employer in an accounting year,
bonus in accordance with the provisions of this Act, provided he has worked in the
establishment for not less than thirty days in that year.
Section 9: Disqualification for bonus
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
theft, misappropriation or sabotage of any property of the establishment.
Section 10: Payment of minimum bonus

Every employer shall be bound to pay to every employee in respect of the

accounting year, a minimum bonus which shall be 8.33 percent of the salary or
wage earned by the employee during the accounting year or one hundred rupees,
whichever is higher.
12.18 PAYMENT OF MAXIMUM BONUS
Where in respect of any accounting year referred to in Section 10, the allocable
surplus exceeds the amount of minimum bonus payable to the employee under that
Section, the employer shall pay for that accounting year subject to a maximum of
twenty percent of salary or wage as bonus.
Section 14: Compensation of number of working days
For the purpose of Section 13, an employee shall be deemed to have worked in an
establishment in any accounting year also on the days on which
(a) He has been laid off under an agreement or as permitted by the Standing Order
under the Industrial Employment (Standing Order) Act, 1946 or under the Industrial
Act, 1947 or under any other law applicable to the establishment.
(b) He has been on leave with salary or wages.
(c) He has been absent due to temporary disablement caused by an accident arising
out of and in the course of his employment.
(d) The employee has been on maternity leave with salary or wage, during the
accounting year.
Section 15: Set-on and Set-off of allocable surplus

Where for any accounting year, the allocable surplus exceeds the amount of
maximum bonus payable to the employees in the establishment under Section
11, then the excess shall, subject to a limit of twenty per cent of the total salary
or wage of the employees in the establishment in the accounting year, be
carried forward for being set on in the succeeding accounting year and son up to
and inclusive of the fourth accounting year to be utilized for the purpose of
payment of bonus in the manner illustrated in the Fourth Schedule. (for
schedule, please refer the Bare Act of the Payment of Bonus Act, 1965)
Where for any accounting year, there is no available or allocable surplus in
respect of that year falls short of the amount of minimum bonus payable to the
employees in the establishment under section 10, and there is no amount or
sufficient amount carried forward and set-on under sub-section
(1) Which could be utilized for the purpose of payment of minimum bonus, such
minimum amount or the deficiency, as the case may be, shall carried forward for
being set-off in the succeeding accounting year and so on up to and inclusive of
the fourth accounting year in the manner illustrated in the Fourth Schedule.

The Principle of set-on and set-off as illustrated in the Fourth Schedule shall
apply to all other cases not covered by sub-section (1) or sub section (2) for the
purpose of payment of bonus under the Act;
Where in any accounting year any amount has been carried forward and set-on
or set-off under this Section, then in calculating the bonus for the succeeding
accounting year, the amount of set-on or set-off carried forward from the earliest
accounting year shall first be taken into account.

12.19 ADJUSTMENT OF CUSTOMARY OR INTERIM BONUS

Where in any accounting year
(a) An employer has paid any puja bonus or their customary bonus to an employee;
or
(b) An employer has paid a part of the bonus payable under this Act to an employee
before the date on which such bonus becomes payable.
If that employee has been working before the date on which such bonus becomes
payable, then the employer shall be entitled to deduct the amount of bonus payable
to him to the employee under this Act in respect of that accounting year and the
employee shall be entitled to receive only the balance.
Section 18: Deduction of certain amount from bonus payable under the Act
Where in any accounting year, an employee is found guilty of misconduct causing
financial loss to the employer, then, it shall be lawful for the employer to deduct the
amount of loss from the amount of bonus payable to him to the employee under
this Act in respect of that accounting year only and the employee shall be entitled
to receive, the balance, if any.
Section 19: Time limit for payment of bonus
[All amounts] payment to an employee by way of bonus under this Act shall be paid
in cash by his employer.
(a) Where there is a dispute regarding payment of bonus pending before any
authority under Section 22, within a month from the date on which the award
becomes enforceable or the settlement comes into operations in respect of such
disputes;
(b) In any other case, within a period of eight months from the date of the
accounting year.
Section 26: Maintenance of register, records etc.
Every employer shall prepare and maintain such registers, records and other
documents in such form and in such manner as may be prescribed.

12.20 GAZETTED BONUS INSPECTOR

A) APPOINTMENT
The appropriate government may by notification in the official gazette appoint such
persons as it thinks fit to be inspectors for the purposes of this Act and may define
jurisdiction within which they shall exercise jurisdiction.
B) POWER
(a) Require and employer to furnish such information from the employer as he may
consider necessary.
(b) Enter in the establishment on any premises connected to the establishment.
(c) Production of registers/ records and other documents for examination.
(d) Examine any person for the purpose of this Act.
(e) Make copies of or take extracts from any book, registers or other documents.
(f) Every inspector shall e deemed to be a public servant within the meaning of the
IPC (45 of 1860).
Section 28: Penalty
If any person
(a) Contravenes any of the provisions of this Act or any rule made thereunder, or
(b) Fails to comply with the provision or direction shall be punishable with
imprisonment for a term which may extend to six months or with fine which
may extend to one thousand rupees, or with both.
Section 29: Offences by companies
If the person committing an offence under this Act is a company, every person who,
at time the offence was committed, was in charge of, and was responsible to
company for the conduct of business of the company, as well as the company, shall
be deemed to be guilty of the offence and shall be liable to be proceeded against
and punished accordingly:
Provided that nothing contained in sub-section (1), where an offence under this Act
has been committed by a company and it is proved that the offence has been
committed with the consent or connivance of, or is attributable to any neglect on
the part of any director, manager, secretary or other officer of the company, such
director, manager, secretary or other officer shall also be proceeded against and
punished accordingly.
Explanation: For the purposes of this Section

(a) Company means anybody corporate and includes a firm or other

association of individuals; and
(b) Director, in relation to a firm, means a partner in the firm.
12.21 PRODUCTIVITY LINKED BONUS
This Section was introduced in 1976. Under this Section a bonus can be a paid link
to productivity in lieu of profit sharing. For this purpose, the employer and the union
need to enter into a productivity-linked bonus agreement. Under the productivitylinked bonus agreement, the minimum and maximum bonus has to be within the
framework of the Payment of Bonus Act, 1965, i.e., a minimum of 8.33% and a
maximum of 20%.
Section 32: Act not to apply on certain establishments
The Payment of Bonus Act shall not be applicable to the following establishments:
a)
b)
c)
d)
e)

Life Insurance Corporation of India

Nationalised banks
Dock Workers
Universities and other educational institutions
Institutions (including hospitals, chambers of commerce and society welfare
institutions) established not for purposes of profit.
f) Public Sector Undertakings. However, when a Public Sector Undertaking
competes with the Private Sector Undertaking, the Payment of Bonus Act
applies to such an undertaking.

CHAPTER 13

SOCIAL SECURITY LABOUR LEGISLATIONS

13.1 INTRODUCTION TO EMPLOYEES COMPENSATION ACT, 1923

The Employees Compensation Act, 1923 is the first Social Security legislation in
India, which makes the employer liable to pay compensation for personal injury
caused by accident arising out of and in the course of employment.
Section 1: Short title, extent and commencement
1) This Act may be called the Employees Compensation Act, 1923.
2) It extends to the whole of India.
3) It shall come into force on the first day of July, 1924.
13.2 IMPORTANT DEFINITIONS
1. Commissioner means a commissioner for employees compensation appointed
under Section 20.

2. Dependent means any of the following relatives of a deceased employee

namely
a) A widow, a minor (legitimate or adopted) son, an unmarried (legitimate or
adopted) daughter or a widowed mother, and
b) If wholly or in part dependent on the earnings of the employee at the time to his
death
i) A widower
ii) A parent other than a widowed mother
iii) A minor illegitimate son, an unmarried illegitimate daughter or a daughter
(legitimate or illegitimate or adopted, if married and a minor or if widowed and a
minor)
iv) A minor brother or an unmarried sister or a widowed sister of a minor.
v) A widowed daughter-in-law
vi) A minor child of a pre-deceased son
vii) A minor child of a pre-deceased daughter where no parent of the child is alive,
or
viii) A paternal grandparent if no parent of the employee is alive
1) Employer includes anybody of persons whether incorporated or not and any
managing agent of an employer and the legal representative of a deceased
employer and when the services of the employee is temporarily lent or hire to
another person by the person with whom the employee has entered into contract of
service or apprenticeship, means such other person while the employee is working
for him.
2) Minor means a person who has not attended the age of 18 years.
3) Partial disablement means where the disablement is of a temporary nature,
such disablement reduces the earning capacity of an employee in any employment
in which he was engaged at the time of the accident resulting in the disablement,
and where the disablement is of a permanent nature, such disablement reduces his
earning capacity in every employment which he was capable of undertaking at that
time provided that every injury specified in Part-II of schedule shall be deemed to
result in permanent partial disablement.
4) Total disablement means such disablement whether of a temporary or
permanent nature naturally as it incapacitates an employee for all work which he
was capable of doing at that time of the accident resulting in such disablement.

5) Employee means any person other than a person whose employment is of a

casual nature and who is employed otherwise than for the purpose of the
employers trade or business who is a railway servant.
a) A master seaman or other members of the crew of a ship
b) A captain or other member of the crew of an aircraft
c) A person recruited as driver, helper, mechanic, cleaner or in any other capacity in
connection with a mother vehicle.
13.3 EMPLOYEE COMPENSATION
Section 3
If personal injury is caused to an employee by accident arising out and in the course
of employment, his employer shall be liable to pay compensation in accordance
with the provisions under the Act provided that the employer shall not be so liable.
a) In respect of an injury which does not result in the total or partial disablement
of the employee for a period exceeding three days.
b) In respect of any injury not resulting in death or permanent total disablement,
cause by an accident which is directly attributed to
(i) The employee having been at the time therefore under the influence of
drink, of drugs, or
(ii) The willful disobedience of the employee to an order expressly given to a
rule expressly framed for the purpose of security, safety of employee, or
(iii) The willful removal or disregard by the workman of any safety guard or
other device which he knows to have been provided for the purpose of
securing the safety of employee.
Section 4: Amount of Compensation
Subject to the provisions of this Act, the amount of compensation shall be as follows
namely:
a) Where the death results from the injury (i) an amount equal to fifty percent of the
monthly wages of the diseased employee multiplied by the relevant factors an
amount of one lakh twenty thousand rupees whichever is more.
b) Where permanent total disablement results from the injury (ii) an amount equal
to sixty percent of the monthly wages of the injured employee multiplied by the
relevant factor or an amount of one lakh forty thousand rupees whichever is more.
c) Where temporary disablement whether total or partial results from the injury a
half monthly payment of the sum equivalent to twenty-five percent of the monthly
wages of the employee to be paid in accordance with the provision of sub-section
(2).

The employee shall be reimbursed the actual medical expenditure incurred by him
for treatment of injuries caused during the course of employment.
Section 4-A: Compensation to be paid when due and penalty for default
1) Compensation to be paid as soon as it falls due.
2) In cases where the employer does not accept the liability for compensation to the
extent claimed, he shall be bound to make provisional payment based on the extent
of liability which he accepts, and such payment shall be deposited with the
commissioner or made to the employee, as the case may be without prejudice to
the right of the employee to make any further claim.
Where any employer is in default in paying the compensation due under this Act
within one month from the date it fell due, the commissioner shall (a) direct that
employer in addition to the amount of the arrears, pay simple interest thereon at
the rate of twelve percent per annum or at such higher lending rates of any
scheduled bank as may be specified by the Central Government, by notification in
the official gazette, on the amount due. If, in the opinion of the commissioner there
is no justification for the delay, direct that the employer shall, in addition to the
amount of arrears and interest thereon pay a further sum not exceeding 50 percent
of such amount by way of penalty.
Method of Calculating wages
In this Act and for the purposes thereof the expression monthly wages means the
amount of wages deemed to be payable for a months service (whether the wages
are payable by the month or by whatever other period or at piece rates), and
calculated as follows:
a) Where the employee has, during a continuous period of not less than twelve
months immediately preceding the accident, been in the service of the employer
who is liable to pay compensation, the monthly wages of the employee shall be
one-twelfth of the total wages which have fallen due for payment to him by the
employer in the last twelve months of that period;
b) Where the whole of the continuous period of the service immediately preceding
the accident during which the employee was in the service of the employer who is
liable to pay the compensation was less than one month, the monthly wages of the
employee shall be the average monthly amount which, during the twelve months
immediately preceding the accident was being earned by an employee employed on
the same work by the same employer, or, if there was no employee so employed,
by an employee employed on similar work in the same locality;
c) In other cases including cases in which it is not possible, for want of necessary
information, to calculate the monthly wages under clause (b) the monthly wages
shall be thirty times the total wages earned in respect of the last continuous period

of service immediately preceding the accident from the employer who is liable to
pay compensation, divided by the number of days comprising such period.
Explanation: A period of service shall, for the purposes of this Section be deemed
to be continuous which has not been interrupted by a period of absence from work
exceeding fourteen days.
Section 9: Compensation not to be assigned, attached or charged
No lump sum or half-monthly compensation is capable of being assigned or charged
or be liable to attachment or passed to any person other than employee by
operation of law, nor shall any claim be set off against the same.
13.4 NOTICE AND CLAIM FOR COMPENSASTION
No claim for compensation shall be entertained by a commissioner unless notice of
the accident has been given in the manner hereinafter provided as soon as
practicable after the happening thereof and unless the claim is preferred before him
within two years of the occurrence of the accident or in case of death, within two
years from the date of death.
Provided that, where the accident is the contracting of a disease in respect of which
the provisions of sub-section (2) of Section 3 are applicable, the accident shall be
deemed to have occurred on the first of the days during which the employee was
continuously absent from work in consequence of the disablement caused by the
disease.
Section 11: Medical examination
Where a workman has given notice of an accident, he shall if the employer before
the expiry of three days from the time at which service of the notice has been
affected, offers have him examined free of charge by a qualified medical
practitioners submit himself for such examination.
13.5 PENALTIES
Section 18 A
(1) Whoever
(a) Fails to maintain a notice book which he is required to maintain under subsection (3) of Section 10, or
(b) Fails to send commissioner a statement which he is required to send under subsection (1) of Section 10-A, or
(c) Fails to send a report which he is required to send under Section 10-B, or

(d) Fails to make a return which he is required to make under Section 16 shall be
punishable with fine which may extend to five thousand rupees.
(2) No prosecution under this Section shall be instituted except by or with previous
sanction of a commissioner.
13.6 APPOINTMENT OF COMMISSIONER
The appointment of the commissioner is as follows:

The State Government may by notification in official Gazette appoint a person to

be commissioner for employees compensation for such area as may be
specified in the notification.
Every commissioner shall be deemed to be a public servant within the meaning
of the Indian Penal Code (45 of 1860).

Section 23: Powers of Commissioners

The Commissioner shall have all powers of a civil court under the Code of Civil
Procedure, 1908 (5 of 1908) for the purpose of taking evidence on oath, and enforce
the attendance of witness and compelling the production of documents and
material objects.
13.7 POWER TO SUBMIT CASES
A commissioner may, if he thinks fit submit any question of law for the decision of
the high court and if he does so, shall decide the question in conformity with such
decision.
Section 30: Appeals
An appeal shall lie to the high court provided that no appeal shall lie against any
order unless a substantial question of law is involved in the appeal and unless
amount in dispute in the appeal is not less than three hundred rupees.
13.8 INTRODUCTION TO EMPLOYEES STATE INSURANCE ACT, 1948
The Employees State Insurance Act, 1948 was enacted with the main object of
providing to the workers medical relief, sickness, cash benefits, maternity benefits
for woman and compensation for fatal and other employment injuries including
occupational diseases in an integrated form on a contributory basis.
Section 1: Short title, extent, commencement and application
i. This Act may be called the Employees State Insurance Act, 1948.
ii. It extends to the whole of India.

iii. It shall come into force on such date or dates as the Central Government may by
Notification in the official Gazette, appoint.
iv. It shall apply in the first instance, to all the factories (including factories
belonging to the Government) other than seasonal factories.
Coverage and Contribution
For all employees earning Rs. 15,000 or less per month as wages, the employer
contributes 4.75 percentage and employee contributes 1.75 percentage, total share
6.5 percentage. This fund is managed by the ESI Corporation (ESIC) according to
rules and regulations stipulated in the ESI Act, 1948, which oversees the provision
of medical and cash benefits to the employees and their family through its large
network of branch offices, dispensaries and hospitals throughout the India. ESIC is
an autonomous corporation under Ministry of Labour and Employment, Government
of India. But most of the dispensaries and hospitals are run by the State
Government concerned.
13.9 DEFINITIONS OF THE STATE INSURANCE ACT
1. Confinement means labour resulting in the issue of a living child, or labour after
twenty-six weeks of pregnancy resulting in the issue of a child whether alive or
dead.
2. Contribution means the sum of money payable to the corporation by the
principle employer in respect of an employee and includes any amount payable by
or on behalf of the employee in accordance with the provisions of this Act.
3. Corporation means the Employees State Insurance corporation set up under
this Act.
4. Dependent means any of the following relatives of a deceased insured person
namely:

A widow, a legitimate or adopted son, who has not attained the age of
twenty-five, an unmarried legitimate or adopted (daughter), a widowed
mother.
If wholly dependent on the earning of the insured person at the time of his
death, a legitimate or adopted son or daughter who has attained the age of
Twenty-five years and is in the firm.
If wholly or in part dependent on the earnings of the insured person at the
time of his death;
A parent other than a widowed mother.
A minor illegitimate son, an unmarried illegitimate daughter or daughter
legitimate or adopted or illegitimate if married and a minor or if widowed and
a minor.
A minor brother or an unmarried sister or a widowed sister of a minor.

A widowed daughter-in-law.
A minor child of a pre-deceased son
A minor child of pre-deceased daughter where no parent of the child is alive
or
A maternal grandparent if no parent of the insured person is alive.

5. Employee means any person employed for wages in or in connection with the
work of a factory or establishment to which this Act applies but does not include.
(a) any members of the [the Indian] Naval, Military or Air Force.
6. Family means all or any of the following relatives of an insured person, namely,
i. a spouse
ii. a minor legitimate or adopted child dependent upon the insured person;
iii. a child who is wholly dependent on the earnings of the insured person and who is
a) Receiving education, till he or she attains the age of twenty-one years.
b) An unmarried daughter
iv. a child who is in firm
v. dependent parents
7. Sickness means a condition, which requires medical treatment and attendance
and necessitates abstention from work on medical ground.
13.10 ESTABLISHMENT OF EMPLOYEES STATE INSURANCE CORPORATION
Insurance Corporation shall consist of the following members, namely
a)
b)
c)
d)
e)
f)

g)

h)

A Chairman to be appointed by the Central Government.

A Vice-Chairman to be appointed by the Central Government.
Not more than five persons to be appointed by the Central Government.
One person each, representing each of the states in which this Act is in force
to be appointed by the State Government concerned.
One person to be appointed by the Central Government to represent the
Union territories.
Ten persons representing employers to be appointed by the Central
Government in consultation with employers organisation recognised by
Central Government.
Ten persons representing employees to be appointed by the Central
Government in consultation with the employees organisation as may be
recognised for the purpose by the Central Government.
Two persons representing the Medical profession to be appointed by the
Central Government in consultation with Medical practitioners organisation as
may be recognised for the purpose by the Central Government.

i) Three members of parliament of whom two shall be members of the House of

People (Lok Sabha) and one shall be member of States (Rajya Sabha) and
j) The Director General of the corporation, ex-officio.
Function: Administration of the Scheme of Employees State Insurance in
accordance with the provisions of the Act.
13.11 CONSITUTION OF STANDING COMMITTEE
A standing committee of the corporation shall be constituted from among its
members, consisting of
a) A Chairman (appointed) by the Central Government.
b) Three members of corporation (appointed) by the Central Government. Three
members of the corporation representing such three state Governments there on as
the Central Government may by notification in the official Gazette, specify from
time to time.
c) [eight] members elected by the Corporation as follows:
1. Three members from among the members of the Corporation representing
employers.
2. Three members from among the members of the Corporation representing
employees.
3. One member from among the member of corporation representing the medical
profession and
4. One member from among the members or the corporation elected by
[parliament]
d) The Director General of the Corporation ex-official.
13.12 MEDICAL BENEFIT COUNCIL
The Central Government shall constitute a Medical Benefit Council consisting of
a.
b.
c.
d.

The Director General, ESI Corporation, ex-official, as a Chairman

A Director General, Health Services
The Medical Commissioner of the corporation ex-official
One member each representing each of the state in which this Act is in force
to be appointed by the State Government concerned.
e. Three members representing employers to be appointed by the Central
Government in consultation with Employees organisation as may be
recognised for the purpose by the Central Government.

f.

Three members representing employees to be appointed by the Central

Government in consultation with employees organisation as may be
recognised for the purpose by the Central Government and
g. Three members of whom not less than one shall be a woman, representing
the medical profession, to be appointed by the Central Government in
consultation with the Medical Practitioners organisations as may be
recognised for the purpose by the Central Government.
13.13 POWERS OF THE STANDING COMMITTEE
The powers of the standing committee are as follows:
Section 18
1) The standing committee shall administer the affairs of the corporation and may
exercise any of the powers and perform any of the functions of the corporation
subject to the general superintendence and control of the corporation.
2) The Standing Committee may, in its discretion submit any other case or matter
for the decision of the Corporation all such cases and matters as may be specified in
the regulations made in this behalf.
3) The Standing Committee may, in its discretion submit any other case or matter
for the decision of the corporation.
Section 19
Corporations power to promote measures for health etc. of insured
persons: The corporation may in addition to the scheme of benefits specified in
this Act promote measures for the improvement of the health and welfare of insured
person and for the rehabilitation and (re-employment) of insured persons who have
been disabled or injured.
Section 22: Duties of Medical Benefit Council
The Medical Benefit Council shall
a) advice the corporation and the standing committee on matters relating to
administration of medical benefit, the certification for purposes of the grant of
benefits and other connected matters.
b) have such powers and duties of investigation as may be prescribed in relations to
complaints against medical practitioners in connection with medical treatment and
attendance.
c) perform such other duties in connection with medical treatment and attendance
as may be specified in the regulations.

Employees State Insurance Fund

1) All contributions paid under this Act, all other money received on behalf of the
corporations shall be paid into a fund a called the Employees State Insurance Fund
which shall be held and administered by the corporation for the purpose of this Act.
2) The corporation may accept grants, donations and gifts from the Central or any
State Government, Local authority, or any individual or body whether incorporated
or not, for all or any of the purpose of this Act.
Section 28: Purposes for which the Fund may be expended
The Employees State Insurance Fund shall be expended only for the following
purposes namely:
i) Payment of benefits, provision of medical treatment and attendance to insured
persons and their families in accordance with the provisions of this Act.
ii) Payment of fees and allowances to the members of the corporation, the standing
committee and the Medical Benefit Council.
iii) Payment of Salaries, leave and joining time allowance, travelling and
compensatory allowance, gratuities and compassionate allowances, pensions,
contribution to provident or other fund of officers and servants of the corporation.
iv) Establishment and maintenance of hospitals, dispensaries and other institutions
and the provisions of Medical and other ancillary services for the benefit of insured
persons and to their families.
v) Payment of contribution to any State Government, local authority towards the
cost of medical treatment and attendance provided to insured persons and to their
families.
vi) Payment of contribution to any State Government, local authority towards the
cost of medical treatment and attendance provided to insured persons to and to
their families.
vii) Expenses of auditing the accounts of the corporation and valuation of its assets
and liabilities.
viii) Defraying cost of the Employees Insurance Court set up under this Act.
ix) Payment of any sums under any contract entered into for the purposes of this
Act.
x) Payment of sums under any decree, order or award of any court or tribunal
against the corporation.

xi) The cost and other charges of institutions or defending any civil or criminal
proceeding arising out of any action taken under this Act.
xii) Expenditure on measures for the improvement of the health and welfare of
insured persons who have been disabled or injured.
xiii) Such other purposes as may e authorised by the corporation with the previous
approval of the Central Government.
34. Audit
1) The accounts of the Corporation shall be audited annually by the Comptroller and
Auditor General of India and any expenditure incurred by him in connection with
such shall be payable by the Corporation to the Comptroller and Auditor-General of
India.
40. Principal Employer to Pay Contributions in the First Instance
(1) The principal employer shall pay in respect of every employee, whether directly
employed by him or by or through an immediate employer, both the employers
contribution and the employees contribution.
Section 45: Inspectors their function and duties:
The Corporation may appoint such person as Inspector as it thinks fit for the
purpose of the Act.
A Powers
1) Employer do furnish information to him which is necessary for the purpose of this
Act or
2) Enter in establishment, factory
3) Production of Register Records
4) Examination of the Same
5) To seize the Register / Records
Function Implementation of the provision of this Act, by undertaking inspections.
Contributions & Benefit periods
There are two contributions periods of six months duration each in a year, in respect
of an insured employee, with corresponding benefit period of six months each as
under:Contribution Period

Corresponding benefit period

1st April to 30 September

1st January to 30th June of the year

following
1st October to 31st March of the year
1st July to 31st December of the calendar
following
year
In case a person becomes an employee within the meaning of the Act for the first
time, the first contribution period will commence from the date he enters into
insurable employment for the first time in the contribution period current on that
day and his corresponding benefit period will commence on the expiry of nine
months from the date of such employment.
Section 46: BENEFITS
In ESI scheme, a worker in insurable employment is called insured person (IP).
Insured persons and their family are entitled to different types of benefits. The
benefits are broadly classified into two: (1) Medical benefits and (2) Cash benefits.
(a) Medical Benefit: Full medical care is provided to an Insured person and his family
members from the day he enters insurable employment. There is no ceiling on
expenditure on the treatment of an Insured Person or his family member. Medical
care is also provided to retired and permanently disabled insured persons and their
spouses on payment of a token annual premium of Rs. 120/-.
1.
2.
3.
4.
5.
6.
7.

System of Treatment
Scale of Medical Benefit
Benefits to Retired IPs
Administration of Medical Benefit in a state
Domiciliary treatment
Specialist consultation
In-patient treatment

8. Imaging services
9. Artificial Limbs & Aids
10. Special provisions
11. Reimbursement
(b) Sickness Benefit (SB): Sickness benefit in the form of cash compensation at the
rate of 70 percent of wages is payable to insured workers during the periods of
certified sickness for a maximum of 91 days in a year. In order to qualify for
sickness, benefit the insured worker is required to contribute for 78 days in a
contribution period of 6 months.
1. Extended Sickness Benefit (ESB): SB extendable up to two years in the case of 34
malignant and long term diseases at an enhanced rate of 80 percent of wages.

2. Enhanced Sickness Benefit: Enhanced sickness benefit equal to full wage is

payable to insured persons undergoing sterilization for 7 days/14 days for male and
female workers respectively.
(c) Maternity Benefit (MB): Maternity Benefit for confinement/Pregnancy is payable
for three months, which is extendable by further one month on medical advice at
the rate of full wage subject to contribution for 70 days in the preceding year.
(d) Disablement Benefit
1. Temporary disablement benefit (TDB): From day one of entering insurable
employment & irrespective of having paid any contribution in case of employment
injury. Temporary Disablement Benefit at the rate of 90% of wage is payable so long
as disability continues.
2. Permanent disablement benefit (PDB): The benefit is paid at the rate of 90% of
wage in the form of monthly payment depending upon the extent of loss of earning
capacity as certified by a Medical Board.
(e) Dependents Benefit(DB): DB paid at the rate of 90% of wage in the form of
monthly payment to the dependents of a deceased Insured person in cases where
death occurs due to employment injury or occupational hazards.
(f) Other Benefits: Funeral Expenses: An amount of Rs. 10,000/- is payable to the
dependents or to the person who performs last rites from day one of entering
insurable employment. Confinement Expenses: An insured women or an I.P. in
respect of his wife in case confinement occurs at a place where necessary medical
facilities under ESI Scheme are not available.
In addition, the scheme also provides some other need based benefits to
insured workers.
Vocational Rehabilitation: To permanently disabled Insured Person for undergoing VR
Training at VRS. Physical Rehabilitation: In case of physical disablement due to
employment injury. Old age medical Care: For insured person retiring on attaining
the age of superannuation or under VRS/ERS and person having to leave service
due to permanent disability insured person & spouse on payment of Rs. 120/- per
annum.
Rajiv Gandhi Sharmik Kalyan Yojana: This scheme of Unemployment allowance was
introduced w.e.f., 01-04-2005. An insured person who become unemployed after
being insured three or more years, due to closure of factory/establishment,
retrenchment or permanent invalidity are entitled to:

Unemployment allowance equal to 50% of wage for a maximum period of up to

one year.
Medical care for self and family from ESI Hospitals/Dispensaries during the period
IP receives unemployment allowance.

Vocational Training provided for upgrading skills Expenditure on fee/travelling

allowance borne by ESIC.
Incentive to employers in the private sector for providing regular employment to
the person with disability:
Minimum wage limit for Physically Disabled persons for availing ESIC Benefits is
25000/- .
Employers contribution is paid by the Central Government for 3 years.

Benefits & Contributory Conditions:

An interesting feature of the ESI Scheme is that the contributions are related to the
paying capacity as a fixed percentage of the workers wages, whereas, they are
provided social security benefits according to individual needs without distinction.
Cash benefits are disbursed by the Corporation through its Branch Offices (BOs) /
Pay Offices (POs), subject to certain contributory conditions.
Case: In the case of Francis DCosta Vs. Regional Director ESI Corporation, Kerela
1996 the Supreme court has held that a person who on his way to work on a bicycle
meets an accident at a distance which is far away from the company is not entitled
to claim the disablement benefit under the Act. However, if the bicycle is provided
to insured person by the employer for travelling to and fro and such an insured
person meets with an accident then the accident would be treated as if it has
occurred in the courts and out of employment.
13.14 CONSTITUTION OF EMPLOYEES INSURANCE COST
1) The State Government shall by notification in the official Gazette constitute an
Employees Insurance Court for such local area as may be specified in the
Notification.
2) The court shall consist of such number of judges as the State Government may
think fit.
3) Any person who is or has been a judicial officer or is a Legal Practitioner of five
years standing shall be qualified to be a judge of the Employees Insurance court.
4) The State Government may appoint the same court for two or more local areas or
two or more courts for the same local area.
Section 75
Matters to be decided by Employees Insurance Court. If any question or dispute
arises as to
a) Whether any person is an employee within the meaning of this Act or whether he
is liable to pay the employees contribution or

b) the rate of wages or average daily wages of an employee for the purposes of this
Act, or
c) the rate of contribution payable by a Principal employer of in respect of any
employee or
d) the person who is or was the Principal employer in respect of any employee or
e) the right of any person to any benefit and as to the amount and duration there of
or any direction issued by the corporation under Section 55A on a review of any
payment of dependents benefits or
f) any other matter which is in dispute between a Principal employer and the
Corporation, or between a Principal employer and an immediate employer or
between a person and the Corporation or between an employee and a principal or
immediate employer in respect of any contribution or benefit or other dues payable
or recoverable under this Act.
The following claims shall be decided by the Employees Insurance Court namely
a) claim for recovery of contribution from the principal employer.
b) claim by a principal employer to recover contributions from any immediate
employers.
c) claim against a principal employer under Section 68.
d) any claim for the recovery of any benefit admissible under this Act.
Section 84: Penalties
In avoiding any payment knowingly:
Make a false statement or false representation shall be punishable with
imprisonment for a term which may extend to six months or with fine not exceeding
two thousand rupees or with both.
Section 85
Punishment for failure to pay contribution etc. If any person
a) fails to pay any contribution under this Act or fails or refuses to submit any return
required or makes false statement of return
b) obstructs any inspector
c) Contravention of any requirement under this Act, he shall be punishable with
imprisonment to the extent of three years but shall not less than ten years in case
of failure to pay the employees contribution, which has been deducted by him from
the employees wages of up to ten thousand rupees.

13.15 INTRODUCTION TO EMPLOYEES PROVIDENT FUNDS AND

MISCELLANEOUS PROVISIONS ACT, 1952
The intention behind the Employees Provident Funds Act was to make provisions for
the future so that
1. In case of retirement, the employee gets some substantial amount.
2. In case of the premature death of the employee, the family members would get
some substantial amount.
Application of the Act
1. All establishments in any industry specified in Schedule 1 of the Act (Refer Bare
Act)
2. At least twenty people must have been employed in it.
3. In September, 1997 by means of an ordinance, the infancy period has been
totally removed as a result of which all establishments employing 20 or more
employees are to be covered under the Act.
The Act and schemes framed are administered by a tri-partite Board known as
Central Board of Trustees, Employees Provident Fund, consisting of representatives
of Government (both Central and State), Employers and Employees. The Board
administers a contributory provident fund, pension scheme and an insurance
scheme for the workforce engaged in the organised Sector in India. The Board is
assisted by the Employees PF Organization, (EPFO), consisting of offices at 120
locations in India. The EPFO is under the administrative control of Ministry of Labour
and Employment, Government of India. The Board operates three schemes viz.
a. The Employees Provident Funds Scheme, 1952 (EPF)
b. The Employees Pension Scheme 1995 (EPS)
c. The Employees Deposit Linked Insurance Scheme 1976 (EDLI)
13.16 COVERAGE OF THE PROVIDENT FUND ACT
1. When the Act was enacted in 1952, all employees who had worked for 240 days
in the preceding 12 months were to be covered under this Act.
2. Subsequently, this period was reduced to 120 days.
3. Further, by an amendment, this period was reduced to 3 months or the employee
should have to work for 60 days during the period of 3 months.

4. From 1st November 1990, paragraph 26 of the Employees Provident Fund Scheme
has been amended and every employee employed in an establishment to which this
Act applies was to be covered from day one.
13.17 CONTRIBUTION OF PROVIDENT FUND ACT
1. For those who have a basic salary of up to 15000, contributing the EPF is
mandatory. Contributions are voluntary for those whose basic salary exceeds Rs.
15000. However, it is strongly recommended to make such contributions to avail of
the various benefits an EPF account has in store.
2. As per the new 2012 rules issued recently, the EPFO has made amendments to
the way in which employee and employer contribution would be calculated hereon.
For employees, this amendment is particularly important as it affects his/her take
home salary and income tax liability as well. Change in salary definition Previously
the term Salary for computing EPF contribution included basic DA (Dearness
allowance). As per the new rules, salary will include basic DA allowances that are
ordinarily, necessarily and uniformly paid to employees. For example, suppose your
monthly salary particulars are as follows basic Rs. 30,000 p.m. Conveyance
allowance: Rs 5,000 pm, medical allowance: Rs. 5,000 pm. As per previous EPF
rules, an amount of 12 percent on basic (Rs. 30000), i.e., Rs. 3,600 was employees
contribution. As per new rules, an amount of 12 per cent on basic allowances (Rs.
40000), i.e., Rs. 4800 would form the employees contribution.
Breakup of the Contribution: An employees monthly contribution would go into
the following three schemes as per EPF Act, 1952: EPF, 1952; EDLIS (Employees
Deposit Linked Insurance Scheme), 1976; EPS (Employees Pension Scheme), 1995.
Employers and Employee Contribution is equal in P.F. which 12%. This means 12%
Contribution from Employee and 12% contribution from Employer. Company
contribution is split into two parts 8.33% on Family Pension Fund and 3.67% on
Employee Provident Fund.
Employer also needs to pay additional charges on every month over and above PF
company Contribution. The break up is

1.1% OF Administration Charges

0.5% on Employee Deposit Linked Insurance (E.D.L.I)
0.01% E.D.L.I. Administration Charges.

EMPLOY
EE
EMPLOY
ER

CONTRIBUTION
ACCOUNTS
EPF
EPS
12
12

EDLI

ADMINISTRATION
ACCOUNTS
EPF
EDLI
EPS
0
0
0
1.1

0.5

0.01

TOTAL

12.00
13.67

Employee can contribute more than 12%. The additional contribution is known as
voluntary contribution. But such additional contribution will not be matched by the
employer. Same rules and interest rate will apply to the employee voluntary
contribution regarding withdrawal, transfer, interest rate etc.
Withdrawal of EPF: Employee can withdraw from their EPF account on the account of
their childrens education, marriage of self, children and siblings,
purchase/construction of a house, or any medical emergencies. However,
withdrawal is subject to certain conditions, non-compliance of which would result in
penal interest; Employee should have completed minimum seven years of service;
withdrawal can be made only three times in the period during which the employee
hold the EPF account, and the maximum aggregate withdrawal would be 50 percent
of the total contributions made by the employee.
For medical emergencies, there is no minimum service period. However, the
maximum amount an employee can withdraw is six times the basic salary and proof
of hospitalization is required.
Withdrawal from EPF account for purchase/construction of a house is available only
once in an individuals entire life. The minimum service period is five years and the
maximum withdrawal amount is 36 times your total salary (for construction of
property) and 24 times (for purchase of property).
13.18 FAMILY PENSION SCHEME
Application

The Family Pension Scheme was introduced from 1 st March, 1971.

It was optional for those persons who were members of the Employees Provident
Fund prior to November 1971.
Coverage for those who joined after 1st November, 1971 was compulsory under
the scheme.

Contributions

1.1/6% of Basic + Dearness Allowance + Retaining Allowance

Equal contributions from the Employers and the Central Government

Benefits

Pension to spouse and minor children up to the age of 21 years.

If an employee retires or leaves service, then he would be paid a lump sum.

Employees Deposit Linked Insurance Scheme

This scheme was introduced by an amendment in the year 1976.

It provides for relief to the nominee of the Provident Fund subscriber in case of
premature death of the subscriber.
No contribution is payable by the employer under the scheme, but the employer
has to make contributions @ 0.5% of basic wage, dearness allowance and
retaining allowance.

13.19 NEW PENSION SCHEME

Introduction

The New Pension Scheme was formulated by Mr. Ram Vilas Paswan when he was
the Labour Minister.
Same scheme of the Congress Govt. was opposed by the CPI and CPM, because
they wanted it to be Third Terminal Benefit after Provident Fund and Gratuity.

Contributions

Earlier Contributions of 1.1/6% towards the family pension scheme.

Out of 12% of the employers contribution 8.33% is to be paid in the New
Pension Scheme and remaining 3.67% to be paid in the Provident Fund.
The entire contribution of 12% of employees contribution is to be credited in the
Provident Fund Account.
The existing members as on the 1st day of September, 2014, who at the option of
the employer and employee, had been contributing on salary exceeding six
thousand five hundred rupees per month may on a fresh option to be exercised
jointly by the employer and employee continue to contribute on salary exceeding
fifteen thousand rupees per month.
The aforesaid members have to contribute at the rate of 1.16 percent on salary
exceeding fifteen thousand rupees as an additional contribution from and out of
the contributions payable by the employees for each month under the provisions
of the Act or the rules made there under:
The fresh option shall be exercised by the member within a period of six months
from the 1st day of September 2014.
The period specified above may, on sufficient cause being shown by the
member, be extended by the Regional Provident Fund Commissioner for a
further period not exceeding six months.
If no option is exercised by the member within the period of six months from 1 st
day of September, 2014 (including the extended period), it shall be deemed that
the member has not opted for contribution over wage ceiling and the
contributions to the
Pension fund made over the wage ceiling in respect of the member shall be
diverted to the Provident Fund account of the member along with interest as
declared under the
Employees Provident Fund Scheme from time to time.

Benefits
Monthly Members Pension

Superannuation Pension which the member gets after attaining the age of 58
or rendered service of 20 years or more of eligible service.
Retirement Pension: If the member renders eligible service of 20 years or more
and retires or ceases to be in employment before attaining the age of 58 years.
Short Service Pension If he has rendered a service of 10 years or more but less
than 20 years.
In case of new entrants, the amount of monthly superannuation of retiring
pension is calculated as follows:
Monthly Members Pension = Pensionable salary x Pensionable service / 70

Pension Scheme Certificate

Document showing pensionable service and the amount of pension on the date of
exit from employment are issued to the member who has not attained the age of
superannuation. Service mentioned in the certificate shall be counted for the
determination of the pension along with fresh service rendered by way of
subsequent employment, if any, with the establishment covered under the
Employees Pension Scheme 1995.

Invalidity Pension
The member is entitled for disablement pension in case of permanent and total
disablement during the course of employment. Such a member shall be entitled
for pension as per the normal rule, subject to a minimum of two hundred fifty
rupees per month. Members with a contribution for even one month are entitled
for benefits under this category. The member shall be required to produce
invalidity/ disability certificate issued by the medical Board set up under
Employees State Insurance Scheme.
Widow Pension
The Widow of the member shall be entitled for a pension from the date following
the date of death of the member whether the death has occurred while in
service or after exit from the employment or after retirement / commencement
of pension. The pension of the widow will be equal to the members pension
entitlement in case of death, prior to his retirement subject to a minimum of two
hundred fifty rupees per month. The pension to the widow shall be equal to half
of the members pension subject to a minimum of two hundred fifty rupees per
month where death occurs after retirement/ commencement of pension. Pension
under this category shall be payable for life or remarriage, whichever is earlier.
For the purpose of this benefit, widow incorporates widower also, wherever
applicable.
Child Pension
Two children of the deceased member shall be entitled to the children pension

up to the age of twenty-five years, in addition to the pension to widow. The

amount of pension for each child shall be equal to twenty-five percent of the
amount admissible to the widow subject to a minimum of one hundred fifteen
rupees per month.
Orphan Pension
Orphan Children shall be entitled to a monthly pension equal to 75% of the
amount of widow pension subject to a minimum of Rs. 170/- p.m. per child,
where the member is survived by children only. Pension under this category shall
be payable to a maximum of two orphan children up to the age of 25 years.
Nominee Pension
Members can nominate a person to receive benefits under the Employees
Pension Scheme, 1995, where a member is unmarried or does not have any
family. Such a nominee shall be paid a pension in case of the death of the
member.

Membership

Those who have been members of Employees Pension Scheme.

Those who become members of Employees Provident Fund, 1952 on or after
16.11.95.
Those who are not the members of Employees Pension Scheme can opt to
become members of the Employees Pension Scheme.
Every employee who has ceased to be a member of the Employees Family
Pension Scheme 1971 during 1.4.1993 and 15.11.1995 was given the option to
become a member of the Employees Pension Scheme 1995 up to 31.3.1998.

Option Requirement

Members who have died during 1.4.1993 and 15.11.1995, shall deemed to have
exercised the option of joining the Employees Pension Scheme 1995 with effect
from their date of death.
Members who are alive may exercise the option to become members of the
Employees Pension scheme 1995 on the date of exit from the employment by
depositing the amount, along with the interest @8.5% p.a., from the date of such
withdrawal.
Members will have the option to join the Employees Pension Scheme 1995 by
depositing the contribution along with the up-to-date interest, under ceased
Employees Family Pension Scheme, 1971 with effect from 1.3.1971.

Determination of Pensionable Service and Salary

By the contribution received on his behalf in the Employees Pension Fund.

If he superannuates at the age of 58 years or completes 20 years of Service or
more, his pensionable service is increased by adding the weightage of 2 years.

New members (joining on or after 1 September 2014) drawing wages exceeding

INR 15,000 per month shall not be eligible to voluntarily contribute to the
Pension Scheme.
The maximum pensionable salary for the purpose of determining the monthly
pension has been revised from INR 6,500 to INR 15,000 per month.
The pensionable salary shall be calculated on the average monthly pay for the
contribution period of the last 60 months (earlier 12 months) preceding the date
of exit from the membership.
The monthly pension for any existing or future member shall not be less than
INR 1,000 for the financial year 2014-15.
The pensionable salary shall be the average monthly pay drawn in any manner
including piece rate basis during contributory period of service in the span of
sixty months preceding the date of exit from the membership of the Pension
Fund and the pensionable salary shall be determined on pro-rata basis for the
pensionable service up to the 1st day of September, 2014, subject to a maximum
of six thousand and five hundred rupees per month and for the period thereafter
at the maximum of fifteen thousand rupees per month.
If a member was not in receipt of full pay during the period of sixty months
preceding the day he ceased to be the member of the Pension Fund, the average
of previous sixty months full pay drawn by him during the period for which
contribution to the pension fund was recovered, shall be taken into account as
pensionable salary, for calculating pension.
If during the said span of sixty months there are non-contributory periods of
service including cases where the member has drawn salary for a part of the
month, the total wages during the sixty months span shall be divided by the
actual number of days for which salary has been drawn and the amount so
derived shall be multiplied by 30 to work out the average monthly pay.

Option for Commutation Paragraph 12 A

Completion of a minimum of three years from the commencement of the

scheme.
Commutation up to one third of pension so as to receive a hundred times the
pension i.e., Pension = Rs 600 p.m.
Commuted Value = 1/3(600) *100 = Rs. 20,000/- Pension Receivable = Rs. 400/-

Return of Capital
Members entitled for monthly pension have a choice to opt for reduced pension and
can avail Return of Capital in addition to the commutation of pension already
availed. The scheme provides three alternatives under the category.
13.20 OPTION FOR RETURN OF CAPITAL
A member eligible to pension may, in lieu of pension normally admissible under
Paragraph 12 (subject to commutation of pension, if any, under Paragraph 12 A)

opt to draw for reduced pension and avail of return of capital under any one of the
three alternatives given below:
Alternative
Revised pension during
the lifetime of member
with return of capital on
his death.
Revised pension during
the life time of member,
further reduced pension
during lifetime of the
widow or her remarriage,
whichever is earlier and
return of capital on
widows death/
remarriage.
Pension for a fixed period
of 20 years
notwithstanding whether
the member lives for that
period or not.

Revised Pension Payable

90% of original monthly
pension.

90% of original monthly

pension to the member. On
his death, 80% of the
original monthly pension to
the widow.

Amount Payable as
return of capital
100 times the original
monthly pension on
Death of member to the
nominee.
90 times the original
monthly pension on
death of widow/
remarriage to the
nominee.

87.5% of the original

monthly pension for a fixed
period of 20 years. The
pension will cease
thereafter.

100 times the original

monthly pension at the
end of 20 years from the
date of commencement
of pension to the
member if he is alive;
otherwise to his
nominee.
Explanation 1: In alternative 2, if the spouse dies or remarries before the death of
the member, capital equal to 90 times the original monthly pension shall be paid to
the nominee on the members death.
Explanation 2: In alternative 3, if the member dies before the end of 20-year period,
the pension shall be paid to his nominee for the balance period.
Explanation3: In the case of a member who is eligible for permanent total
disablement pension and where the payment of such pension is to commence
before his attaining the age of 50 years, the options shall also be admissible but in
such cases the actual pension payable shall be reduced by 1% and the return of
capital shall be further reduced by Rs. 1000/- for every year by which the age at the
commencement of pension falls short of 50 years.
Explanation 4: In cases of exercise of option for commutation under Paragraph 12 A,
balance monthly pension payable after commutation shall be deemed to be original
monthly pension for the purpose of this paragraph.
The option under sub-paragraph (I) shall be exercised by the member at the time of
submission of the application form for pension in accordance with the provisions of

this Scheme. The option once exercised shall be final. If no option is exercised, the
member shall be deemed not to have exercised under the provisions of Paragraph
12.
Notwithstanding that the capital is returned under this paragraph, the
widow/children shall continue to be eligible for normal widow pension/ children
pension/ orphan pension under Paragraph 16 of this Scheme from the date
immediately following the date of death of the member.
Withdrawal Benefits
A member is entitled for withdrawal benefit under the Employees Pension Scheme
1995 only where the minimum pensionable service of ten years has not been
rendered on attaining age of 58 years.
Guarantee of Pensionary Benefits
Members will be entitled for the benefits under Employees Pension Scheme 1995
even if the employer has not deposited the dues Amounts due from employer under
the Employees Pension Scheme 1995, however, shall be recovered by due process
separately.
Payment of Pension through Banks
Nationalised Banks having largest network in a particular state have been identified
for disbursement of monthly pension to the pensioners. Members are required to
open an account in the bank where the pension is desired and indicate the option I
the application in form 10D. The following banks have been identified for
disbursement of pension under Employees Pension Scheme 1995 namely:
i) State Bank of India
ii) Bank of India
Valuation
Employees Pension Scheme 1995 has provided for valuation every year by Actuary
appointed by the Central Government. First valuation of pension fund by the
Actuary has resulted into increase in pension by 4%.
Duties of Employers

Every employer is required to furnish the Commissioner within three months of

the commencement of this scheme, a consolidated return of the employees
entitled to become members of the Employees Pension Fund showing their basic
wage, retaining allowance including the cash value of any food concession paid
to each of such employees, and other relevant details.

Provided that if there is no employee who is entitled to become a member of the

Employees Pension Fund, the employer needs to send NIL return.
Every employer shall send to the commissioner within fifteen days of the close of
each month, a return in respect of the employees leaving service of the
employer during the preceding month, and the new employees joining the
service during the said period.
If there is no employee leaving / joining the service of the employer during the
preceding month, the employer need not send a NIL return.
Every employer shall maintain such accounts in relation to the amounts
contributed by him to the Employees Pension Fund as the Central Board of
Trustees, Employees Provident Fund may, from time to time, direct and it shall
be the duty of every employer to assist the Central Board of Trustees Employees
Provident Fund in making such payments from the Employees Pension Fund to
his employees as are sanctioned by or under the authority of the Central Board.
Central Board of Trustees Employees Provident Fund may issue such directions to
the employers generally, as it may consider necessary or expedient, for the
purpose of implementing the scheme and it shall be the duty of every employer
to comply with such directions.

Duties of Contractors
Every contractor shall, within seven days of the close of every month, submit to the
principal employer a statement showing the particulars in respect of employees
employed by or through him in connection with the work of the establishment and
in respect of whom contributions to the employees Pension Fund are payable. The
Contractor need also furnish such information, as the principal employer is required
to furnish under the provisions of this Scheme to the Commissioner.
Exemption from the Scheme
Any establishment or class of establishments can seek exemption under paragraph
39 from the operation of the Employees Pension Scheme 1995, provided the
employees of such establishments are either members of any other pension scheme
or propose to be members of a pension scheme wherein the pensionary benefits are
at par or more Favourable than the benefits under this scheme. An application for
exemption under this paragraph shall be presented to the Regional provident fund
Commissioner having jurisdiction by the establishment or class of establishments
together with a copy of the pension scheme of the establishment(s) and other
relevant documents as may be called for by him. On receipt of such an application,
the Regional Provident Fund Commissioner shall scruitnise it, obtain the
recommendations of the Central Provident Fund Commissioner and submit the same
to the appropriate Government for decision.
13.21 INTRODUCTION TO MATERNITY BENEFIT ACT, 1961

Maternity benefits were first recognised when the Maternity Protection Conference
was held by the International Labour Organisation in 1919. A maternity benefit is
one that every women shall be entitled to, and her employer shall be liable for, the
payment of maternity benefit, which is the amount payable to her at the rate of the
average daily wage for the period of her actual absence. The Maternity Benefit Act
aims to regulate the employment of women employees in certain establishments for
certain periods before and after childbirth and provides for the maternity and
certain other benefits. This Act is to regulate the employment of women in certain
establishments for certain periods before and after childbirth and to provide for
maternity benefits and certain other benefits.
Short title, extent and commencement and Application of Act (Section1)
This Act may be called the Maternity Benefit Act, 1961. It shall come into force on
such date as may be notified in this behalf in the official Gazette.
13.22 APPLICATION AND DEFINITION OF THE MATERNITY BENEFIT ACT
(SECTION 2)
The Maternity Benefit Act is applicable all across the Union of India and is pertinent
to every factory, mine or plantation including those belonging to Government
irrespective of the number of employees, and to every shot or establishment
wherein 10 or more persons are employed or were employed on any day of the
preceding 12 months. Women can claim the benefits under the Act everywhere
except in factories and other establishments where the Employees State Insurance
Act is applicable.
Definitions
In this Act, (Section 3)
(a) Appropriate Government means, in relation to an establishment being and a
mine, the Central Government and in relation to any other establishment, the
state government.
(b)Child includes a stillborn child;
(c) Selivery means the birth of a child;
(d)Employer means the authority which has the ultimate control over the
affairs of the establishment;
(e)Establishment means a factory, mine or plantation, or an establishment for
work;
(f) Inspector means an Inspector appointed by government authority;
(g)Maternity benefit means the payment referred in the Act;
(h)Miscarriage means expulsion of the contents of a pregnant uterus at any
period prior to or during the twenty-sixth week of pregnancy;
(i) State Government in relation to a Union territory, means the Administration
thereof;

(j) Wages means all remuneration paid or payable in cash to a woman, if the
term of the contract of employment, express or implied were fulfilled and
includes
1. Such cash allowances (including dearness allowance and house rent
allowance) as a woman is for the time being entitled to;
2. Incentive bonus; and
3. The money value of the confessional supply of food grains and other
articles, but does not include (i) Any bonus other than incentive bonus;
(ii) Overtime earnings in any deduction or payment made on account of fines;
(iii) Any contribution paid or payable by the employer to any pension fund or
provident fund or for benefit of the woman under any law for the time being
in force; and
(iv) Any gratuity payable on the termination of service;
(k)Woman means a woman employed, whether directly or through any
agency, for wages in any establishment.
13.23 RESPONSIBILITY OF THE EMPLOYER
A) Employment of, or work by, women prohibited during certain periods
(Section 4)
The employer cannot knowingly employ a woman in any establishment during the
six weeks immediately following the day of her delivery or her miscarriage. A
woman is not allowed to work in any establishment during the six weeks
immediately following the day of her delivery or her miscarriage or termination of
pregnancy.
The pregnant woman got a right to request for not doing any work which is not of an
ardous nature or which involves long hours of standing, or which in any way is likely
to interfere with her pregnancy or the normal development of the foetus, or is likely
to cause her miscarriage or otherwise to adversely affect her health.
B) Right to payment of maternity benefit (Section 5)
1. Every woman is entitled to, and her employer will be liable for, the payment of
maternity benefit at the rate of the average daily wage for the period of her actual
absence immediately preceding and including the day of her delivery and for the six
weeks immediately following that day.
Explanation: For the purpose the average daily wage means the average of
womans wages payable to her for the days on which she has worked during the
period of three calender months immediately preceding the date from which she
absents herself on account of maternity, or ten rupees a day, whichever is higher.

2. To claim the maternity benefit she has to actually work in an establishment of the
employer minimum for a period of not less than eight days in the twelve months
immediately preceding the date of her expected delivery.
3. The maximum period of maternity benefit is twelve weeks, that is to say, six
weeks up to and including the day of her delivery and six weeks immediately
following that day and if a woman dies during this period, the maternity benefit
shall be payable only for the days up to and including the day of her death and if a
woman, having been delivered of a child, dies during her delivery or during the
period of six weeks immediately following the date of her delivery, leaving behind in
either case the child, the employer shall be liable for the maternity benefit for the
entire period of six weeks immediately following that day of her delivery but if the
child also dies during the said period, then, for the days up to and including the day
of the death of the child.

13.24 PAYMENT OF THE MATERNITY BENEFITS

A) Notice of claim for maternity benefit and payment thereof (Section 6)
1. Any employed woman who is pregnant is entitled for maternity benefit when she
will give notice in writing in a prescribed form, to her employer, stating that
a) Her maternity benefit and any other amount to which she may be entitled should
be paid to her or nominee nominated in the notice; and
b) She will not work in any establishment during the period for which she receives
maternity benefit.
c) She has to the date from which she will be absent from work, not being a date
earlier than six weeks from the date of her expected delivery.
2. Any woman who has not given the notice when she was pregnant may give such
notice as soon as possible after the delivery.
3. On receipt of the notice, the employer has to permit such woman to absent
herself from the establishment until the expiry of six weeks after the day of her
delivery.
4. The amount of maternity benefit has to be paid by the employer to the woman on
production of such proof as may be prescribed that the woman is pregnant.
5. The failure to give notice, however does not disentitle the woman to the benefit
of the Act.
B) Payment of maternity benefit in case of death of a woman (Section 711)

If a woman entitled to maternity benefit dies before such receiving such maternity
benefit or amount, the employer shall pay such benefit or amount to the person
nominated by the woman in the notice or to her legal representative.
Every woman entitled to maternity benefit under this Act shall also be entitled to
receive from her employer a medical bonus of one thousand rupees, if no pre-natal
confinement and post-natal care is provided for by the employer free of charge
(Medical bonus maximum up to Rs. 20,000/-)
A woman suffering from illness arising out of pregnancy, delivery, premature birth of
child or miscarriage or medical termination of pregnancy or tubectomy operation or
shall, on production of such proof as may be prescribed, be entitled, in addition to
the period of absence allowed to her to leave with wages at the rate of maternity
benefit for a maximum period of one month.
Nursing Breaks
Till the child attains the age of fifteen months, a delivered woman who returns to
duty after such delivery shall, in addition to the interval for rest allowed to her, get
two breaks of the prescribed duration for nursing the child in the course of her daily
work.
C) Dismissal during absence of pregnancy (Section 12)
Discharge or dismissal during maternity leave is considered to be void. When a
pregnant woman absents herself from work in accordance with the provisions of this
Act, it shall be unlawful for her employer to discharge or dismiss her during, or on
account of such absence, or give notice of discharge or dismissal in such a day that
the notice will expire during such absence or to vary to her disadvantage any of the
conditions of her services. Dismissal or discharge of a pregnant woman shall not
disentitle her to the maternity benefit or medical bonus allowable under the Act
except if it was on some other ground.
Section 13
No deduction from the normal and usual daily wages of a woman entitled to
maternity benefit under the provisions of this Act.
13.25 APPOINTMENT /FUNCTIONS AND POWERS OF THE INSPECTOR
(SECTION 14-17)
A) Functions and duties
The Government may, by notification in the Official Gazette appoint such officers as
it thinks fit to be Inspectors for the purposes of this Act and may define the local
limits of the jurisdiction within which they shall exercise their function as Inspector.
B) Power and duties

1. Employer to furnish information to him which is necessary for the purpose of this
Act.
2. Enter all reasonable times in any premises.
3. Examination of records as well as employed person.
4. Take copies of any registers and records or notices or any portions thereof to
seize the Register/Records.
5. Inspector has power to direct payments to be made to the claimer.
13.26 OTHERS
A) Any woman can surrender her claim of maternity benefit even though
her employer has allowed her the claim. (Section 18)
B) It is her compulsory to exhibit the Abstract of the Act and rules
thereunder in the local language or languages in a conspicuous place by the
employer in every part of the establishment in which woman are employed (Section
19).
C) Registers etc.: Every employer shall prepare and maintain such registers,
records and muster rolls and in such manner as may be prescribed. (Section 20)
D) Penalty (Section 21-26): There is a provision in the Act employer has to pay
penalty for contravention of Act and also for obstructing Inspector when he is on the
duty. Time limit for an offence punishable under this Act is one year. No court
inferior to that of a Presidency Magistrate or a Magistrate of the First class shall try
any such offence. No suit, prosecution or other legal proceeding shall lie against any
person for anything which is in good faith done or intended to be done in pursuance
of this Act or of any rule or order made there under.
The provisions of this Act are supportive to the working woman and not obstacle to
get more benefits from the employer. The minimum benefits are listed in this Act as
a right of the working woman. (Section 27).
13.27 INTRODUCTION TO PAYMENT OF GRATUITY ACT, 1972
The Payment of Gratuity Act, 1972 is an Act to provide for a scheme for the
payment of gratuity to employees engaged in factories, mines, oil fields,
plantations, ports, railways, ships or other establishments and for matters
connected therewith or incidental thereto.
1) Short title, extend, application and commencement (I). This Act may be called the
payment of Gratuity Act, 1972.
2) It extends to the whole of India; provided that in so far as it relates to plantations
or ports, it shall not extend to the state of Jammu and Kashmir.
It shall apply to

a. Every factory, mine, oil field, plantations or ports and railways.

b. Every shop or establishment within the meaning of any law for the time being in
force in relation to shops and establishment in a state, which ten or more persons
are employed or were employed on any day of the preceding twelve months, as the
central government may by notifications, specify on this behalf.
3) A shop or establishment, to which this Act has become applicable, shall continue
to be governed by this Act, notwithstanding that the number of persons employed
therein at any time after it has become so applicable falls below ten.
4) It shall come into effect on such date as the Central Government may, by
notification appoint.
13.28 DEFINITIONS OF GRATUITY
Section 2 states
1) Completed year of service means continues for one year.
2) Continuous service means continuous service as defined in Section 2-A
3) Controlling Authority means authority appointed by the appropriate government
under Section 3.
4) Employee means any person (other than an apprentice) employed on wages in
any establishment factory, mine, oil field, plantation. Port, railway or shop to do any
skilled, semi-skilled or unskilled manual, supervisory, technical or clerical work, for
hire or reward if the terms and conditions of employment were fulfilled but does not
include any such person who holds a civil post under the Central Government or
State Government and is governed by any other act by any rules providing for
payment of gratuity.
5) Employer means in relation to any establishment, factory, mine, oil fields,
plantations, port, railway or shop.
a. Belonging to or under the control of the Central Government or a State
Government, a person or authority appointed by the appropriate Government for
the supervision and control of employees, or where no person or authority has been
so appointed, the head of the Military or the Department concerned.
b. Belonging to or under the control of any local authority, the person appointed by
such authority for the supervision for the supervision and control of employees or
where no person has been so appointed, the chief executive officer of the local
authority.
c. In any other case, the person, who or the authority which has the ultimate control
over the affairs of the establishment, factory, mine, oil fields, plantation, port,

railway or shop and where said affairs are entrusted to any other person, whether
called a manager or managing director or by any other cause such person.
6) Family in relation to an employee, shall be deemed to consist of:
a. In the case of a male employer himself, his wife, his children, whether married or
unmarried, his dependent parents (and the dependent parents of his wife and the
widows) and children of his predeceased son if any.
b. In case of a female employee herself, her husband, her children, whether married
or unmarried, her dependent parents and the dependent parents of her husband
and the widow and children of her predeceased son, if any.
7) Superannuation in relation to an employee, means the attainments by the
employee of such age is fixed in the contract or conditions of service as the age on
attainment of which the employee shall vacate the employment.
Section 2-A: Continuous Service
For the purpose of this Act,
An employee shall be said to be in continuous service for a period if he has for that
period, been uninterrupted service, including service which may be interrupted on
account of sickness, accident, leave, absence from duty without leave not being
absence in respect of which break in service is given by an order, lay-off, strike or
lock-out not due to any fault of the employee.
Section 3: Controlling Authority
The Appropriate Government may by notification appoint any officer to be the
controlling authority, who shall be responsible for the administration of this Act and
different controlling authorities may be appointed for different areas.
13.29 PAYMENT OF GRATUITY
Section 4 states
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. The gratuity is
given
a) on his superannuation or
b) on his retirements or resignations
c) on his death or disablement due to accident or disease
Provided that the completion of continuous service of five years shall not be
necessary where the termination of the employment of any employee is due to
death or disablement.

Provided further that in case of death of the employee, gratuity payable to him shall
be paid to his nominee, or, if no nomination has been made to his heirs, and where
any such nominees or heirs is a minor, the share of such minor shall be deposited
with the controlling authority who shall invest the same for the benefit of such
minor in such bank or other financial institution, as may be prescribed, until such,
unit such minor attains majority.
2) For every completed year of service or part thereof in excess of six months, the
employer shall pay gratuity to an employee at the rate of fifteen days wages based
on the rate of wages last drawn by the employee concerned.
Provided that in case of a piece rated employee, daily wages shall be computed on
the average of the total wages received by him for a period of three months
immediately preceding the terminations of his employment, and for this purpose,
the wages paid for any overtime work shall not be taken into account.
Provided further that in the case of an employee who is employed in a seasonal
establishment, and who is not so employed throughout the year the employer shall
pay the gratuity at the rate of seven days wage for each season. (Explanation in the
case of a monthly rate, employees fifteen days wages shall be calculated by
dividing the monthly rate of wages last drawn by him by twenty-six and multiplying
the quotient by fifteen].
13.30 AMOUNT OF GRATUITY PAYABLE
The amount of Gratuity payable to all employees shall not exceed Rs. 10,00,000/-.
1) For the purpose of computing the gratuity payable to an employee who is
employed, after his disablement, on reduced wages, his wages for the period
preceding his disablement shall be taken to be the wages received by him during
that period, and his wages for the period subsequent to his disablement shall be
taken to be the wages as so reduced.
2) Nothing in this section shall affect the right of an employee to receive better
terms of gratuity under any award or agreement or contract with the employer.
3) Notwithstanding anything contained in Sub-section (1),
a. the gratuity of an employee, whose services have been terminated for any act,
willful omission or negligence causing any damage or loss to, or destruction of
property belonging to the employer, shall be forfeited to the extent of the damage
or loss so caused;
b. the gratuity payable to an employee may be wholly or partially forfeited to
i. if the services of such employee have been terminated for his riotous or disorderly
conduct or any other act of violence on his part, or

ii. If the services of such employee have been terminated for any act, which
constitutes an offence involving moral turpitude, provided that such offence is
committed by him in the course of his employment.
13.31 POWER TO EXEMPT
The appropriate Government may, by notification exempt any establishment,
factory, mine, oil fields, plantation, port, railway or shop to which this Act applies
from the operation of the provision of this Act if in the opinion of the appropriate
Government, the employees in such establishment, are in receipt of gratuity or
pensioner benefits not less favorable than the benefits conferred under this Act.
Section 7: Determination of the amount of Gratuity
1. A person who is eligible for payment of gratuity under this Act or any person
authorised in writing to act on his behalf shall send a written application to the
employer, within such time and in such form as may be prescribed, for payment of
such gratuity.
2. As soon as gratuity becomes payable, the employer shall whether an application
regarded so in Sub Section (1) has been made or not determine the amount of
gratuity and give notice in writing to the party on whom the gratuity is payable and
also to the controlling authority specifying the amount of gratuity so determined.
3. The employer shall arrange to pay the amount of gratuity within thirty days from
the date it becomes payable to the person to whom the gratuity is payable.
3A. If the amount of gratuity payable by the employer within the period specifies,
the employer has to pay with simple interest.
13.32 APPOINTMENT OF THE INSPECTOR
Section 7 A: Inspector
Appointment: The appropriate government may, by notification, appoint as many
inspectors as it deems fit for the purpose of this Act.
Every inspector shall be deemed to be a public servant within the meaning of
Section 21 of the Indian Penal Code (Act 45 of 1860).
13.33 POWER OF INSPECTORS
Section 7B
1. Manually require an employer to furnish such information as he may consider
necessary.
2. Enter and inspect.
3. Examine the employer or any person in premises of the establishment.

4. Seize the registers, records or take copies or extracts. Duty Implementation of

the provisions of this Act.
Section 8: Recovery of Gratuity
If the amount of gratuity payable under this Act is not paid by the employer within
the prescribed time, to the person entitled thereto. The controlling authority shall on
an application made to by the aggrieved person, issue a certificate for that amount
to the collector, who shall recover the same, to gather with compound interest there
on as arrears of land revenue and pay the same to the person entitled there to.
Section 13: Protection of Gratuity
No gratuity payable under this Act to an employee employed in any establishment
shall be liable to attachment in execution of any decree or order of any civil,
revenue, or criminal court.