Industrial Relations and Labor Law

Module description

This Module examines theories of industrial relations; union organization and structure;
labor legislation in Ethiopia; collective bargaining- negotiating and administering the
collective agreement; grievance handling and settling disputes, discipline issue, conflict
handling and international industrial relations among other topics. Furthermore, the
module aims to provide an overall knowledge and insight into the three main areas of
labor law (trade union law, industrial relations law and employment law) and the
corresponding legislation and judicial decisions that underpin them, furnish an
understanding and appreciation of key areas of importance in the everyday application of
labor law in the workplace, and equip students with a strong foundation in labor law so as
to assist them in the crucial business of maintaining full legal compliance in the Ethiopian
workplace. The aim is to acquaint students with the complexities of the labor
management relationship and explore various techniques for successfully managing this
critical area of business. The module consists of six unites. Unit I Overview of Industrial
relations, Unit II Trade Union, Unit III Labor Law, Unit IV Collective Bargaining, Unit
V Discipline & Grievance Handling, and Unit VI International Industrial Relations.

Unit I Overview of Industrial relations

Unit Presentation of Contents

1.1 Learning Objectives
1.2 Introduction
1.3 Definition of Industrial Relations
1.3.1 Approaches Used to Define Industrial Relations
1.3.2 Perspectives of industrial relations stakeholders
1.4 Importance of Industrial Relations
1.5 Determinates of Industrial relations
1.0 Objectives of Industrial Relations
1.1 Theoretical Approaches to Employment and Industrial Relations
1.2 Parties to Industrial Relations
1.3 Industrial Relations Strategy
1.4 Industrial Relations Decisions
1.5 Causes of industrial unrest
1.6 Consequences of strained Industrial relations

Summary

Key points

Self assessment questions

Unit I Overview of Industrial relations

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1.0 Learning Objectives

At the end of this unit students will be able to:

• Explain the nature of the employment relationship,
• Identify the diffe2rent perspectives in analyzing Industrial Relations,
• describe the different perspectives in analyzing the worker problem,
• Identify the roles of various parties in Industrial Relations,
• Explain the need for the peaceful employer and employee relations
• Describe the different approaches to industrial relations

1.1 Introduction

Industrial Relations (IR) has traditionally been a fire-fighting function. The IR person
comes into full play only after the crisis erupts. This is so much the case that some IR
persons are actually known to have stoked the fire to reinforce their own relevance to the
organization so goes the perception about IR. Thus, the scenario relating to IR is a mixed
one, Sparks between enlightened managers and motivated workforce coexists with large
scale violence leading to destruction and closures. But the scenario must change.
Unionization, job security, protective legislation and other measures are losing their
relevance. The catch words now relevant are productivity, competitiveness, downsizing
and union free plans.

1.2 Definition of Industrial Relations

Industrial relations encompasses a set of phenomena, both inside and outside the
workplace, concerned with determining and regulating employment relationship between
management and employees or among employees and their organization that characterize
and grow out of employment.

Industrial relation may be defined as relation of Individual or group of employee and

employer for engaging themselves in a way to maximize the productive activities. In the
words of Lester, “Industrial relations involve attempts at arriving at solutions between the
conflicting objectives and values; between the profit motive and social gain; between
discipline and freedom, between authority and industrial democracy; between bargaining
and co-operation; and between conflicting interests of the individual, the group and the
community.

Industrial relations is the relationship between employees and employers within the
organizational settings. The field of industrial relations looks at the relationship between
management and workers, particularly groups of workers represented by a union.
Industrial relations are basically the interactions between employers, employees and the
government, and the institutions and associations through which such interactions are
mediat
The concept of industrial relations has a broad as well as narrow outlook. Originally,
industrial relations were broadly defined to include the relationships and interactions

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between employers and employees. From this perspective, industrial relations cover all
aspects of the employment relationship, including human resource management,
employee relations, and union-management (or labor) relations. Now its meaning has
become more specific and restricted. Accordingly, industrial relations pertains to the
study and practice of collective bargaining, trade unionism, and labor-management
relations, while human resource management is a separate, largely distinct field that deals
with nonunion employment relationships and the personnel practices and policies of
employers.

The relationships which arise at and out of the workplace generally include the
relationships between individual workers, the relationships between workers and their
employer and the relationships between employees. The relationships employers and
workers have with the organizations are formed to promote their respective interests, and
the relations between those organizations, at all levels. Industrial relations also includes
the processes through which these relationships are expressed (such as, collective
bargaining, workers’ participation in decision-making, and grievance and dispute
settlement), and the management of conflict between employers, workers and trade
unions, when it arises.

Industrial relations refer to industry and relations. "Industry" means "any productive
activity in which an individual is engaged" and relations" means "the relations that exist
in the industry between the employer and his workmen." To observers like Kapoor, the
concept of "industrial relations is a developing and dynamic concept, and does not limit
itself merely the complex of relations between the unions and management, but also
refers to the general web of relationships normally obtaining between employees a web
much more complex than the simple concept of labor-capital conflict.

Quoted definitions of industrial relations

Different authors have defined industrial relations in a somewhat different way. Below
are given some of the quoted definitions.
• V. Agnihotri "The term industrial relations explain the relationship between
employees and management which stems directly or indirectly from union- employer
relationship.
• C,B. Kumar "Industrial relations are broadly concerned with bargaining between
employees and trade unions on wages and other terms of employment. The day to-
day relations within a plant also constitute one of the important elements and impinge
on the broader aspects of industrial relations.
• V.B. Singh "Industrial relations are an integral aspect of social relations arising out of
employer employee interaction in modern industries, which are regulates by the state
in varying degrees in conjunction with organized social forces and influenced by
prevailing institutions. This involves a study of the state, the legal system, workers'
and employers' organizations at the institutional level and that of patterns of industrial
organization (including management) capital structure (including technology),
compensation of the labor force and marked forces at the economic level".

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• Ordway Teed and Metcalfe "Industrial relations are the composite result of the
attitudes and approaches of employers and employees to each other with regard to
planning, supervision, direction and co-ordination of the activities of an organization
with a minimum of human effort and friction, with an animating sprit of a
cooperation and with proper regard for the genuine will-being of all members of the
organization.
• J. Henry Richardson "Industrial relations may be referred to as an art, the art of
living together for purposes of production.
• Allan Flanders "The subject of industrial relations deals with certain regulated
institutionalized relationship in industry.
• H.A. Clegg "The field of industrial relations includes the study of workers and their
trade unions, management, employers' associations and the state institutions
concerned with the regulation of employment.
• R.A. Lester "Industrial relations involve attempts at workable solutions between
conflicting objectives and values between incentive and economic security between
discipline and industrial democracy, between authority and freedom between
bargaining and cooperation.
• Bethel and others "Industrial relations refer to that part of management which is
concerned with the manpower of the enterprise whether machine operator, skilled
worker or manager.
• ILO, "Industrial relations deal with either the relationships between the state and
employers; and workers' organizations or the relations between the occupational
organizations themselves.' The ILO uses the expression to denote such matters as
"freedom of association and the protection of the right to organize and the right of
collective bargaining; collective agreements, conciliation and arbitration; and
machinery for co-operation between the authorities and the occupational
organizations at various levels of the economy.
• Encyclopedia Britannica defines Industrial Relations as "The concept of industrial
relations has been extended to denote the relations of the state with employers,
workers and their organizations.
The subject, therefore, includes individual relations and joint consultation between
employers and work people at their work place; collective relations between employers
and their organizations and trade unions and the part played by the state in regulating
these relations.
The following points emerge from an analysis of the above definitions
i. Industrial relations is the relations which are the outcome of the "employment
relationship" in an industrial enterprise. Without the existence of the two
parties, the employer and the workmen, this relationship cannot exist. It is the
industry which provides the setting for industrial relations.
ii. This relationship lays emphasis on the need for accommodation by which the
parties involved develop skills and methods of adjusting to, and co-operating
with, each other.
iii. Every industrial relations system creates a complex of rules and regulations to
govern the work place and the work community with the main purpose of
achieving and maintaining harmonious relations between labor and
management by solving their problems through collective bargaining.

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 iv. The government/state evolves influences and shapes industrial relations with
the help of laws, rules, agreements, awards of courts, and emphasis on usages,
customs, traditions, as well as the implementation of its policies, and
interference through executive and judicial machinery.
Therefore, the term industrial relations may be conceptualized as the relations and
interactions in industry, particularly between labor and management, as a result of their
composite attitudes and approaches to the management of the affairs of the industry for
the betterment of not only the management and workers but also of the industry and the
national economy as a whole.

The various definitions of Industrial Relations and approaches to the study of industrial
relations traverse through a vast territory from empowerment of the weak, to human
relation, collective bargaining, struggle for power and domination, securing of
commitment, adjustment, control over men, material and money, conflict resolution,
rules, structures and institutions, pluralism and bilateralism and what not.

Scholars and managers have attempted, at different times to view Industrial relations
differently, as though viewing a sphere with illumination on one side. As the sphere
rotates or the viewer moves or the direction and intensity of the illumination changes the
view also changes.

The study of Industrial Relations has also drawn from the fields of psychology,
sociology, communication, technology etc. and is now in the process of establishing its
own field of study.

The whole world started changing rapidly- politically, economically and socially, with
the changing power equation of the industrial revolution wherein were witnessed
evolution of new trades and profession and new relationship of a big employer and large
number of employees. Such equation led to new kinds of pressures and pulls, groupings
and associations, relationships and equation. Many a times such relationship titled
unequally towards a powerful group resulting in exploitation.

To avoid such exploitation, need was felt to create rules, structures and systems by
government and by organizations to take care of the sensibilities of the group and
individual players representing various stakeholders in the Industrial Relations drama,
Historically and traditionally, the interest of management and labor, - two parties (in an
organization) to negotiations and conflicts, has been seen to be opposed to each other.
In the changing economic and employment scenario we will have to start thinking,
conceptualizing and viewing Industrial Relations differently. We cannot merely look at it
as a system of balancing the acts and interests of various players and stakeholders but
also try to look at it as an opportunity for harnessing the efforts of both management and
labor towards common organizational goals.
The management of Industrial relations therefore pertains not only to resolution of
Industrial disputes and conflicts but also towards canalizing of human endeavor and
involvement of employees in realizing organizational goals and objectives.

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This can be done through taking care of individual and collective needs of employees,
and by making strategic intervention in respects of Human Resource Management
policies and practices. The ultimate philosophy behind such interventions would be to
create partnership. Since no partnership can function effectively and fruitfully unless the
efforts of all partners are directed towards common ends, the creation of partnership
requires regulation of interaction, space, and domain of the partners.
In essence, therefore, the creation of partnership will be effective and fruitful only if the
relationship between various partners is regulated.

To create harmony and equilibrium it is necessary that all the parties i.e. workers,
managers, employers should know and work for the common goals of the organization so
as to achieve a synergetic effect. They should have the foresight to accommodate and
collaborate rather than only confront. Non confrontation does not indicate absence of
dissent or difference of opinion but it means presence of constructive dissent. In short, the
approaches of the partners should be proactive and not reactive. In organizations, blame
for poor relationship may be exchanged continuously. It must be kept in mind that all
partners will be held responsible. Industrial relations can be crafted only through the
dynamic interaction of several interest groups who have to work together but carry
differences of values, interests and goals. Learning to manage the difference and to
balance the expectations is perhaps one of the most critical aspects of the management of
Industrial relations - The domination of one group or strength of one party should not
lead to the bulldozing of the weak, but, as in a true democracy, should serve as an ocean
of concern and respect for them.

Organizations should be seen as a plural society containing many but related interests and
objectives which must be maintained in some kind of equilibrium, and as Kerr (1983)
argued that in the changing context, industrial relations will involve, (balancing of)
reciprocal expectations and behavior, of employers and employee.
To understand Industrial relations in the present day context and in context of the
emerging future we have to move our focus from the establishment of merely structures
and processes towards collectivism and Human Resource management, constituting,
perhaps, a new format for employee relations. Organizations have to take care of the
indeterminate nature of the exchange relationships and the asymmetry of power in
devising Industrial Relations strategies, and not merely the institution of trade unions, and
legal institutions for conflict resolution. Industrial Relations can also, therefore, be
described as the management of organizational culture and climate which makes
conducive, for the minds and efforts of all the people- employees and managers, be at
place, at ease, satisfied and directed/channeled in the most effective and efficient manner,
towards organizational objectives.

The Industrial Relations mainly cover the following: Regulatory body to resolve
industrial disputes, Collective Bargaining, The role of management, unions and
government, Labor Laws, Worker’s Grievance Redressal system, Disciplinary policy and
practice, and Industrial Relations Training.

1.2.1 Approaches Used to Define Industrial Relations

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The approaches to define industrial relations may thus be grouped into the following
categories:
(1) Institutional-based definitions: industrial relations is the sum of institutional
processes that establish and administer the rules regulating workplace relations
(2) Social Psychology-based definitions: industrial relations is the sum of social
psychological interactions between individuals
(3) Class-based definitions: Industrial relations is the sum of institutions, interactions
and processes that are a product of wider social and economic influences, in
particular the class divisions of contemporary capitalism.
(4) Human Resource Management : contracts of employment ( involving trade unions,
worker collectives, labor courts and government agencies ) , as well as management
of conflict arising out of the personal interactions of individuals in the workplace, are
part of labor management functions ( i.e. recruitment, selection, training,
development, performance management, and so on)
(5) Employment Relations (or Employee Relations ) : contracts of employment
(involving trade unions, worker collectives, labor courts and government agencies ),
as well as the management of conflict arising out of the personal interactions of
individuals in the workplace, are part of workplace relations , together with the
normal functions of Human Resource Management.
Activity1- approaches used to define Industrial relations

Take about 20 minutes

 Explain the different approaches used to define IR. What are the
implications?

Comment: The approaches used to define Industrial relations affect the orientation
and style of managing the relationship. Industrial relations mean different things to
different people.

1.2.2 Perspectives of industrial relations stakeholders

What is industrial relations from a Worker's Perspective?

As workers, we associate Industrial Relations with Unions, Industrial Awards, and

labor laws that set the conditions under which we work. This includes our pay,
safety, employment security and opportunities for training.

What are industrial relations from an Employer's Perspective?

The modern day employer attaches great importance to maintaining good industrial
relations as a cornerstone of business growth and success. Industrial relations, for the
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 employer, is about negotiations between workers and business owners/managers that
lead to increased productivity and improved product quality in exchange for better
pay and conditions of employment for workers. These negotiations between business
owners/managers and their workers is often referred to as enterprise bargaining. The
reduction of conflict between workers and business management is also a highly
desirable objective in Industrial Relations.

What are industrial relations from a Society Perspective?

Whether we have good jobs and how we work has a fundamental effect on the
quality of our lives. Unemployment causes social isolation and economic
deprivation. When there are high levels of unemployment, there is social tension and
upheaval. Too much employment has its own set of woes. People who work long-
hours often suffer from health issues and family problems. There is a need to strike a
work-life balance to ensure healthy, happy and productive populations.

What are industrial relations from a Government Perspective?

Industrial relations are a major factor in managing the economy. As a nation we

compete in the global marketplace for goods and services. If the workforce is
inefficient and wage demands are too high, then the cost of our goods and services is
greater and consequently we are less competitive in the global marketplace.
Governments create laws and policies that affect Industrial Relations and thereby
influence the pay and conditions of work for workers.

Industrial relations has become one of the most delicate and complex problems of
modern industrial society. Industrial progress is impossible without cooperation of
labors and management harmonious relationships. Therefore, it is in the interest of all
to create and maintain good relations between employees (labor) and employers
(management) and governments must enforce laws and regulations to ensure these
harmonious relationships.

1.3 Importance of Industrial Relations

The healthy industrial relations is vital to progress. The significance of industrial

relations may be discussed as under -
1. Uninterrupted production - The most important benefit of industrial relations is that
this ensures continuity of production. This means, continuous employment for all
from manager to workers. The resources are fully utilized, resulting in the maximum
possible production. There is uninterrupted flow of income for all. Smooth running of
an industry is of vital importance for several other industries; to other industries if the

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 products are intermediaries or inputs; to exporters if these are export goods; to
consumers and workers, if these are goods of mass consumption.
2. Reduction in Industrial Disputes - Good industrial relation reduce the industrial
disputes. Disputes are reflections of the failure of basic human urges or motivations to
secure adequate satisfaction or expression which are fully cured by good industrial
relations. Strikes, lockouts, go-slow tactics, and grievances are some of the reflections
of industrial unrest which do not spring up in an atmosphere of industrial peace. It
helps promoting co-operation and increasing production.
3. High morale - Good industrial relations improve the morale of the employees.
Employees work with great zeal with the feeling in mind that the interest of employer
and employees is one and the same, i.e. to increase production. Every worker feels
that he is a co-owner of the gains of industry. The employer in his turn must realize
that the gains of industry are not for him along but they should be shared equally and
generously with his workers. In other words, complete unity of thought and action is
the main achievement of industrial peace. It increases the place of workers in the
society and their ego is satisfied. It naturally affects production because mighty co-
operative efforts alone can produce great results.
4. Mental Revolution - The main object of industrial relation is a complete mental
revolution of workers and employees. The industrial peace lies ultimately in a
transformed outlook on the part of both. It is the business of leadership in the ranks of
workers, employees and Government to work out a new relationship in consonance
with a spirit of true democracy. Both should think themselves as partners of the
industry and the role of workers in such a partnership should be recognized. On the
other hand, workers must recognize employer's authority. It will naturally have
impact on production because they recognize the interest of each other.
5. New Programs - New programs for workers development are introduced in an
atmosphere of peace such as training facilities, labor welfare facilities etc. It increases
the efficiency of workers resulting in higher and better production at lower costs.
6. Reduced Wastage - Good industrial relations are maintained on the basis of
cooperation and recognition of each other. It will help increase production. Wastages
of man, material and machines are reduced to the minimum and thus national interest
is protected. Thus, from the above discussion, it is evident that good industrial
relation is the basis of higher production with minimum cost and higher profits. It
also results in increased efficiency of workers. New and new projects may be
introduced for the welfare of the workers and to promote the morale of the people at
work. An economy organized for planned production and distribution, aiming at the
realization of social justice and welfare of the massage can function effectively only
in an atmosphere of industrial peace. If the twin objectives of rapid national
development and increased social justice are to be achieved, there must be
harmonious relationship between management and labor.

1.4 Determinates of Industrial relations

Industrial relations do not function in a vacuum but are multi-dimensional in nature, and
are conditioned with three sets of determinates, namely
I. Institutional Factors:- Under institutional factors are included such items as
state policy, labor laws, voluntary codes, collective agreements, labor unions
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 and employers organizations, social institutions the community, caste, joint
family, creed, system of beliefs, etc. attitudes to work, systems of power status,
relative nearness to the centers of power, motivation and influence and
industrial relations.
II. Economic Factors: - Under economic factors are included economic
organizations (socialist, capitalist, communist, individual ownership, company
ownership, government ownership) and the powers of labor and employers; the
nature and composition of the labor force and the sources of supply and demand
in the labor market.
III. Technological factors: - Under technological factors come the techniques of
production, modernization and rationalization, capital structure, etc. Sometimes,
external factors, such as international relations, global conflicts, dominant
socio-political ideologies, and the operations of international bodies (such as the
ILO) influence industrial relations in a country.

Industrial relations is therefore a web of rules formed by the interaction of the

government, the business community and labor, and are influenced by the existing and
emerging economic, institutional and technological factors.
In this regard, the observations of Singh are noteworthy. He declares: "A country's
system of industrial relations is not the result of caprice or prejudice. It rests on the
society which produces it. It is a product not only of industrial changes, but of the
preceding total social changes out of which the industrial society is built (and industrial
organization emerges).
It develops and moulds to the institutions that prevail in a given society (both the Pre-
industrial and the modern). It grows and flourishes, or stagnates and decays, along with
these institutions. The process of industrial relations is intimately related to the
institutional forces which give shape and content to the socio-economic policies at a
given time."

The objectives of maintenance of industrial peace is not only find out ways and means to
solve conflicts or to settle differences but also to secure the unreserved cooperation of
and goodwill among different groups in industry with a view to drive their energies and
interest towards economically viable, commercially feasible, financially profitable and
socially desirable channels. It also aims at the development of a sense of mutual
confidence dependence and respect and at the same time encouraging them to come to
closer to each other for removing misunderstanding, redressing grievances, if any, in a
peaceful atmosphere and with open mind and fostering industrial pursuits for mutual
benefits and social progress.

1.5 Objectives of Industrial Relations

The primary objective of industrial relations is to bring about good and healthy relations
between the two partners in industry labor and management. It is around this objective
that other objectives revolve. According to Kirkland, "the state of industrial relations in a

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country is intimately connected with the form of its political government, and the
objectives of an industrial organization may change form economic to political ends."
He divides these objectives into four:
a. Improving the economic condition of workers in the existing state of industrial
management and political government;
b. Control by the state over industries to regulate production and industrial relation;
c. Socialization or nationalization of industries by making the state itself an
employer; and
d. Vesting the proprietorship of industries in the workers.
If it is found that political objectives are likely to bring about disunity in the trade union
movement, then other safeguards and greater restraint are required to avoid conflict.

1.6 Theoretical Approaches to Employment and Industrial Relations

Theory could be viewed as a coherent group of assumptions or propositions put forth to

explain a phenomenon. A theory is an abstraction of reality and is synonymous with
perception, viewpoint, assumption, frame of reference or a perspective. The relevance of
theory in any field of endeavor cannot be over emphasized. Theory attempts to observe,
understand, explain, predict and control events or phenomena. “It helps in our
understanding of events and problems in the practical world” (Fajana, 2000,
p.21).Without theory, there is no practice, thus, according to Luthans “it has often been
said (usually by theoreticians) that there is nothing as practical as a good theory”
(Luthans, 1998, p.13). Hyman (1975, p.12) argues that the whole point of an explicit
theoretical perspective is to provide a framework within which the complex detail of the
real world can be organized. Hyman (1975, p.2) further asserts that “those who glory in
their pragmatism and insist that they are immune from theory are simply unaware of their
own preconceptions and presuppositions”. Without theory men cannot act, for a theory is
a way of seeing, of understanding and of planning. Phoenix (1964) as cited in Asika
(1995, p.53) opines that “a theory or model provides an abstract pattern whose structure
in relevant respects is congruent with the structure of the physical (and social) world, as
demonstrated by agreement between observations and predictions made from the theory
or model”.

Dear student, theory may be viewed as the substructure upon which practice or action
which can be likened to the superstructure is based. A Theory is different from a model.
Thus, a model or paradigm refers to the representation of reality. Models are simplified
descriptions of real situations (Waters, 1998). According to Cooper and Schindler (2001),
there is a distinction between a model and a theory. Thus, models differ from theories in
that a theory’s role is explanation whereas a model’s role is representation and
simulation. Model is a representation of a system that is constructed to study some
aspects of the system or the system as a whole (Cooper & Schindler, 2001). There are
various typologies of models. Models could be iconic, analogue, statistical, mathematical,
descriptive, graphical, as well as verbal. Theories and models abound in the field of
industrial relations. There are multifarious theories of industrial relations as a result of its
multidisciplinary nature; looking for a universal definition of industrial relations may be
as stressful as looking for an ocean in the desert.This is so because, over the years, the

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concept has been subjected to different conceptual treatment (Ogunbameru, 2004).
According to Farnham and Pimlott (1995), there are five theories by which industrial
relations institutions, structures and processes are analyzed.
They opine that the theories which individuals develop about industrial relations are
attempts to construct logically consistent ways of understanding and explaining social
behavior and real–life activities in this complex field of human interest. These are the
unitary, systems, conflict, Marxist and social action theories. Salamon (2000) posits that
industrial relations theories are unitary, pluralist or pluralistic, Marxist, systems and
social action. Green (1994) classifies industrial relations theory as follows: Unitary
perspective and a more recent variant, the neo-unitarist perspective; conflict theory,
including the Marxist and pluralist perspectives; systems approach and the contrasting
social action perspective.

No one perspective gives a perfect view but each illuminates our understanding of the
subject. There are a number of variations on all these themes. Green asserts that
generally, a viewpoint, perspective or theory is put forward and this is then modified in
the light of experience, criticism and changing circumstances. According to Otobo (2000,
p.42), “theorizing is a continuous exercise and no one model has satisfied everyone in
terms of taking into account all variables at play; attempts to provide more
comprehensive theoretical expositions on the industrial relations system have not
stopped”.

The following are the most influential theoretical frameworks of employment and
industrial relations and these are discussed hereunder.

1. Unitary theory

The unitary frame of reference is credited to Alan Fox (1966). The unitary perspective
views the organization as pointing towards a single or unified authority and loyalty
structure. Emphasis under the unitary perspective is placed on common values, interest
and objectives. Those subscribing to this view see all organizational participants as a
team or family thereby implicitly emphasizing shared values, shared goals and common
destiny.

Unitarism in essence implies the absence of factionalism within the enterprise (Fajana,
2000).Conflict is viewed as irrational and the sacking of striking workers is preferred to
consultation or negotiation. Conflict is regarded as pathological or evil or bad. Trade
unionism is outlawed and suppressed as it is viewed as an illegitimate intrusion or
encroachment on management’s right to manage. According to Rose (2008), under the
unitary perspective, trade unions are regarded as an intrusion into the organization from
outside, competing with management for the loyalty of employees. The unitary theory
tends towards authoritarianism and paternalism. It is pro- management biased and
emphasizes consensus and industrial peace. The underlying assumption of this view is
that the organization exists in perfect harmony and all conflict is unnecessary (Rose,
2008).

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2. Conflict theory

Conflict theory is synonymous with the pluralist or the pluralistic frame of reference
which is also credited to Alan Fox (1966). Conflict theory views the organization as
coalescence of sectional groups with different values, interests and objectives. Thus,
employees have different values and aspirations from those of management, and these
values and aspirations are always in conflict with those of management. Conflict theorists
argue that conflict is inevitable, rational, functional and normal situation in organizations,
which is resolved through compromise and agreement or collective bargaining. Conflict
theorists view trade unions as legitimate challenges to managerial rule or prerogatives
and emphasize competition and collaboration. This view recognizes trade unions as
legitimate representative organizations which enable groups of employees to influence
management decisions (Rose, 2008). Rose further states that the pluralist perspective
would seem to be much more relevant than the unitary perspective in the analysis of
industrial relations in many large unionized organizations and congruent with
developments in contemporary society

3. Systems theory

The concept of system derives from the structural/functionalist perspectives of social

system (society). This also connotes the macro-sociological, order or social system view
of society. There are several senses or meanings of the word ‘function’. These are (i)
teleological, where one asks about the goals or ends something serves (ii) mathematical,
where one refers to the co-variation of a set of variables e.g. y=f(x); (iii) configurational,
where one speaks of the interdependence of a set of elements within a system, and asks
what contribution each makes to the whole. The systems approach to industrial relations
is configurational. Thus, Dunlop developed his theoretical approach of industrial relations
on the basis of a systems concept and was heavily influenced by the prior work of
Parsons (Fajana, 2000). According to Ogunbameru (2004), the American system
approaches to the study of industrial relations were strongly influenced by
structural/functionalist sociology.

Dunlop based his model explicitly on Parsons social system, which assumed an inherent
bias towards order and stability. Otobo (2000, p.17) posits that Dunlop began his
explanatory model with a series of questions. “What meaning, then, is to be given to an
industrial relations system”? (Otobo, 2000, p.17). “In what sense is a ‘system’ involved?
Can the term be given rigorous and analytical definition, or shall it remain a perceptive
phrase corresponding to the insights of practical experience? Are there characteristics
common to all industrial relations system? What factors distinguish one industrial
relations situation from another? Can the same concept be used to facilitate analysis
among sectors within a country and also among countries?” (Otobo, 2000, p.17).These
questions posed by Dunlop (1958) were then followed by six general propositions.
a) “An industrial- relations system is to be viewed as an analytical sub-system of an
industrial society on the same logical plane as an economic system, regarded as
another analytical sub-system. The industrial relations system is not coterminous with
the economic system; in some respects the two overlap and in other respects both

13
 have different scopes. The procurement of a work force and the setting of
compensation for labor services are common centers of interest. A systematic
explanation of production, however, is within economics but outside the scope of
industrial relations. The full range of rule-making governing the work place is outside
the scope of an economic system but central to an industrial relations system.
b) An industrial relations system is not a subsidiary part of an economic system but is
rather a separate and distinctive subsystem of the society, on the same plane as an
economic system. Thus, the theoretical tools designed to explain the economic system
are not likely to be entirely suitable to another different analytical subsystem of
society.
c) Just as there are relationships and boundary lines between a society and an economy,
so also are there between a society and an industrial relations system. All analysis of
the economy makes some assumptions, explicitly or implicitly, about the remainder
of the social system, so also must an analysis of an industrial relations system make
some assumptions about the rest of the social system.
d) An industrial relations system is logically an abstraction just as an economic system
is an abstraction. Neither is concerned with behavior as a whole. There are no actors
whose whole activity is confined solely to the industrial relations or economic
spheres, although some may approach this limit. Neither an economic system nor an
industrial relations system is designed simply to describe in factual terms the real
world of time and space. Both are abstractions designed to highlight relationship and
to focus attention upon critical variables and to formulate propositions for historical
inquiry and statistical testing.
e) This view of an industrial relations system permits a distinctive analytical and
theoretical subject matter. To date the study of industrial relations had little
theoretical content. At its origin and frequently at its best, it has been largely
historical and descriptive. A number of studies have used the analysis of economics
particularly in treating wages and related questions and other studies, particularly of
factory departments; have borrowed the apparatus of anthropology and sociology.
Although, industrial relations aspire to be a discipline, and even though there exists
separate professional societies, industrial relations have lacked any central analytical
content. It has been a crossroads where a number of disciplines have met, history,
economics, government, sociology, psychology and law. Industrial relations require a
theoretical core in order to relate isolated facts, to point to new types of inquiries and
to make research more additive. The study of industrial relations systems provides a
genuine discipline.
f) Three separate analytical problems are to be distinguished in this framework (a) the
relation of the industrial relations to the society as a whole (b) the relation of the
industrial relations system to the subsystem known as the economic system and (c)
the inner structure and characteristics of the industrial relations subsystem
itself.”(Otobo, p.17-19) Otobo (2000, p.19) citing Dunlop (1958) argues that “An
industrial-relations system at any one time in its development is regarded as
comprised of certain actors, certain contexts, an ideology which binds the industrial-
relations system together and a body of rules created to govern actors at the
workplace and work community”. According to Dunlop, systems theory provides the
analytical tools and the theoretical basis to make industrial relations an academic

14
discipline in its own right. The variables in his theoretical framework include the
following.
i) actors
The actors that make up the industrial relations system are
 A hierarchy of managers and their representatives in supervision
 A hierarchy of workers (non-managerial) and their spokesmen
 Specialized governmental agencies and specialized private agencies created by
the first two actors, concerned with workers, enterprises and their relationships.
ii) Contexts
This refers to the setting which these actors operate, that is the larger environment
which shapes the conduct of, and the rules established by workers, employers and the
state. Dunlop highlights three aspects of the environment.
a) Technological characteristics of the work place and work community:
These influence the form of management and employee organization and the
problems posed for supervisors. Thus, the adopted technology will greatly
determine the size and skills of work force as well as availability of labor. It
also affects the health and safety at the workplace. The adopted technology has
far-reaching consequences in determining Industrial relations rule making.
b) Market/budgetary constraints: The products market or budget is a decisive
factor in shaping the rules established by an industrial relations system. More
so, the market or budgetary constraints also indirectly influences the technology
and other characteristics of the work place, including the scale and size of
operations. In all, an industrial relations system created and administered by its
actors is adaptive to its market and budgetary constraints (Otobo, 2000). More
so, the profitability of the enterprise depends on its product market.
c) The locus and distribution of power in the larger society: The relative
distribution of power among the actors in the larger society tends to a degree to
be reflected within the industrial relations system. Thus, the distribution of
power within the industrial relations system is affected by the distribution of
power in the wider society. Dunlop is not concerned about the distribution of
power within the industrial relations system, nor with the relative bargaining
powers among the actors, nor their controls over the processes of interaction or
rule setting, rather the reference to the distribution of power outside the
industrial relations system. Thus, the wider society is seen as providing certain
external influences and constraints but not as completely dominating industrial
relations system.
iii) A body of rules
The actors in given contexts establish rules for the workplace and work community.
Actors establish rules that govern their own interactions. Dunlop referred to this as
the “web of rules” that governs the parties. There is no assumption by Dunlop that
these rules are jointly made by the actors. These rules he referred to as the substantive
and procedural rules. Thus, the creation of rules is seen to be the central aim of the
industrial relations system. The substantive rules pertain to issues involving
wages/salaries, hours of work and other terms and conditions of employment. On the
other hand, the procedural rules relate to the rules governing discipline, redundancy,
settlement of disputes, periodicity of meetings, renewal of collective agreements and

15
 the like. The rules of the industrial relations systems may be expressed in a variety of
forms such as the regulations and policies of the management hierarchy, the laws of
any worker hierarchy, the regulations, decrees, decisions, awards or orders of
governmental agencies, collective bargaining agreements and the customs and
traditions of the work place and work community. The rules may be written, an oral
tradition or customary practice. Thus, the establishment and administration of these
rules is the major concern or output of the industrial relations sub-system of industrial
society.
iv) Ideology
Ideology connotes a set of ideas and beliefs commonly held by the actors that helps to
bind or integrate the system together as an entity. According to Otobo (2000, p.28)
citing Dunlop “each of the actors in an industrial relations system may be said to have
its own ideology. Dunlop insists rather strongly that all these ideologies must be
sufficiently compatible or consistent to permit a common set of ideas which recognize
an acceptable role for each actor”. Dunlop assumes that the ideology of industrial
relations system must be one or the same among the actors.

As could be deduced from the above model, there are three sets of independent
variables in an industrial relations systems, the actors, the contexts and the ideology
of the system, while the rules represent the dependent variable or the output of the
industrial relations system.
The dynamic model of the systemic paradigm, open system analysis and the oxford
school are further elaboration of the Dunlopian model.

Source: Farnham, D. & Pimlott, J. (1995), Understanding Industrial Relations, (5thed).

London: Cassell
Fig.1.1 A Simple Model of an Industrial Relations System

4. The dynamic model of the systemic paradigm

The dynamic model of the systemic paradigm of industrial relations is a refinement to

Dunlop’s analytical framework. This dynamic model is credited to Blain and Gennard
(1970). The duo adopted Dunlop’s proposition of an industrial relations system being on
the same logical plane as the economic subsystem. Their work centered on classifying the

16
variables in an industrial relations system into dependent and independent variables, a
task the Dunlopian model made difficult to achieve. They expressed the industrial
relations system algebraically as shown below:
r = f (a, t, e, s, i)
Where, r = the rules of the industrial relations system
a = the actors
t = the technical context of the work place.
e = economic or the market/budgetary constraint
s = the power context and the status of the parties
i = the ideology of the system.

From the above equation, the rules can be viewed as the dependent variables being
determined by the interaction of the five independent variables. Thus, the function of the
industrial relations system is to establish a set of rules for the workplace and work
community. In dynamic society the rules will frequently alter as a result of changes in the
contexts or environment. Thus, the dynamic model emanated as a response to the
criticisms leveled against the Dunlopian system model. It has been criticized as having a
static view of industrial relations.

5. The open system analysis

Dunlop’s systems theory uses the term ‘system’ in a too loose and undefined manner.
The open system analysis is concerned with looking at industrial relations system in
terms of inputs and outputs and the interaction with the environment. According to
Koontz, O’ Donnel and Weihrich (1980, p.19) “almost all life is a system. Our bodies
certainly are. Our homes and universities are, as are our government agencies and our
businesses.” Systems have inter-related parts which work together to form a complex
unity or whole. The features of a system are as follows:
 Whole: a system is more than the sum of its parts. It must be viewed as a whole.
 Closed or open: A system is regarded as open if it exchanges information, energy or
material with its environment. A closed system is one that does not have interactions
with its environment. All social systems are by nature open systems.
 Boundary: Every system has boundaries which separate it from its environment.
 Input and output: All systems which interact with the environment are amenable to
receiving inputs from other systems and giving output to other systems.
 Feedback: An informational input that tells whether the system is indeed at least
achieving a steady state and is not in danger of destruction.
 Homeostatic: This is referred to as dynamic homeostatic (steady state). Hence an
organization will not be able to survive if its inputs do not at least equal its outputs.
 Subsystems: With the exception of the Universe, all systems are subsystems. That is
every system is a component of other larger systems.
 Equifinality: All open systems have common ends or objectives as everyone
performs in a manner that will enhance the attainment of the broad objectives of the
system
 Differentiation and Elaboration: As the system grows, it tends to become more
specialized in its elements and to elaborate its structure. This is exemplified by the

17
 expansion of product lines or creation of new sales offices by an organization.
Having stated some of the characteristics of a system, one would be apt to state that
the Dunlopian model of an industrial relations system ought to have followed the
open system concept in formulating an industrial relations system instead of seeing it
as a system of rules, which appears too parochial. The systemic paradigm by Dunlop
has attracted an avalanche of criticisms, some of which are as follows:
 The heroic assumption taken by Dunlop that an industrial relations system will
necessarily be homeostatic has been criticized. This is because industrial conflicts
are never truly resolved and one problem arises after another. So, the system is not
completely stable as claimed by Dunlop
 The model provides no explanation of the causes of industrial action but laid more
emphasis on conflict resolution.
 Dunlop’s formulation of an industrial relations system largely omits such behavioral
variables as human motivation, perception and attitudes, personality and small group
interaction. He laid more emphasis on institutions (trade unions, employers
associations).
 Dunlop identified three main actors in the industrial relations system but failed to
make reference to the owners of industrial property. It has been argued, that this
omission stems from the fact that decisions in the industrial relations system are
made by managers and not owners. Some have argued that the number of actors has
to be increased.
 Another flaw is that Dunlop’s idea of a system is a deterministic mechanism.
Dunlop’s actors are not persons. The model suffers from reification. No provision
for the role of individual personalities was advanced.
 Limited predictive value associated with the systems model makes it difficult to
forecast whether the system will experience more or less conflicts as a result of a
given change in one or more of the environmental contexts.
 It suffers a handicap in that it does not take into account the processes by which the
rules of the system are determined or made.
 One of the criticisms of the system approach is the difficulty in defining a system.
There was no clear definition of what was meant by the concept of a system itself.
This failure may have caused some writers to misrepresent the theory of industrial
relations system.

What is the substance of a system of industrial relations? This was the question raised by
Flanders. Not until recently has it been stated that a system of industrial relations is a
system of rules. However, a system of industrial relations as propounded by Dunlop is
not a system of rules but a conceptual framework in which one component element is the
rules. The systems approach has been misrepresented by a Sociologist, Eldridge who
conceptualized the model as being comprised of only three elements (the actors, rules and
ideology).

 The claim by Dunlop that the industrial relations system is on the same logical plane
as the economic system is not correct, as Wood, Wagner, Armstrong, Goodman and
Davis (1975) have pointed out, once Dunlop accepted the Parsonian social system
that the social system is comprised of four functional sub-systems (the economic,

18
 political, integrative and pattern- maintenance) the industrial relations system could
not therefore be on the same logical plane as the economic system, but it should be
construed as on a lower logical plane than the economic system.
 It is criticized that the framework is static, not dynamic in time as processes are
ignored.
 The systems theory concentrates on formal rules as against informal rules and
processes.
 The systems model does not entail an account of the ways in which inputs are
converted into outputs.
 Power could not rightly be a property of the external context of industrial relations
system only, instead, power is considered central internally to the conduct of the
parties themselves for the establishment and defense of rules and their application. It
is a fact that workers/union and management are involved in a power relationship
within the enterprise and industry.
 Dunlop did not pay sufficient attention to all facets of conflict in the industrial
relations system, his emphasis being on conflict resolution and not its generation.
Why and how conflicts occur are likely to reveal more about industrial relations
processes and institutions than how their manifestations are sorted out (Otobo,2000).
The overall argument is that Dunlop misunderstood the Parsonian system analysis.

6. Oxford school

Since the oxford school does not necessarily have to constitute a self- contained
approach, and has the elements of the systems theory, it should probably be viewed
merely as a variant of the systems approach (Fajana, 2000). The oxford school emerged
from the systems approach as both focus on institutions of industrial relations, although
the point of difference is merely on emphasis. This approach is credited to Allan Flanders
a British academic. According to Flanders as cited in Hyman (1975, p.11), “industrial
relations is the study of the institutions of job regulation”. He opines that the rules of any
industrial relations system are seen as procedural and substantive. The procedural rules
regulate the behavior of parties to the collective agreements- trade unions and employers
or their associations, whereas, the substantive rules regulate the behavior of employees
and employers as parties to individual contracts of employment. In fact, it is the
substantive rules of collective bargaining that regulate jobs. Thus, the collective
agreement is made up of both the procedural and substantive clauses. Some of the
institutions of job regulation are internal as well as external. Internally, we have joint
consultation, the grievance procedure, a code of disciplinary works’ rules, a factory wage
structure, and a host of others. Externally, there are other institutions which limit the
freedom of the enterprise and its members in their rule-making activities, such as a
protective labor law, the rules of trade unions and employers’ association. The rules of
the industrial relations system are viewed as being determined through the rule making
process of collective bargaining which is regarded as a political institution involving a
power relationship between employers and employees. The oxford approach can be
expressed algebraically in the form of an equation. r = f (c)
Where, r = the rules governing industrial relations system.
c = collective bargaining

19
When the equation is compared with the equation of the dynamic systems model which
states that r = f (a, t, e, s, i), it can be seen that the distinction between the dynamic
systems model and the oxford approach lies in the right hand side of the equation. But
both have the same output but different inputs. The oxford approach has stressed the
process of rule making through collective bargaining while the dynamic system model
emphasizes the role of wider influence on rule determination. For the oxford approach,
political variables are seen as of paramount importance but for the dynamic system
model, economic, sociological and ideological variables are thought to be significant.
The criticisms of the oxford approach are as follows: (a) It is too narrow to provide a
comprehensive framework for analyzing industrial relations problems (b) It over
emphasized the importance of the political process of collective bargaining and gives
insufficient weight to the role of the deeper influences in the determination of rules.

7. Marxist theory

Marxism is, more or less, a general theory of society and of social change with
implications for the analysis of industrial relations within capitalist societies and does not
strictly explain the theory of industrial relations. The application of Marxian theory as it
relates to industrial relations today derives from later Marxist scholars rather than directly
from the works of Karl Marx himself (Ogunbameru, 2004). According to Hyman
(1975) the contribution of both Dunlop and Flanders are giant strides in the formulation
of industrial relations theory, but argues rather strongly that to define industrial relations
exclusively in terms of rules and institutions for job regulation is far too limited or
restrictive. What this implies is that industrial relations is all about the maintenance of
stability and regularity in industry. He argues that the issue of conflict was not given
proper analysis by the duo, as they focused on how any conflict is contained and
controlled, rather than on the process through which disagreements and disputes are
generated. Hyman asserts that the perspectives of the duo however influential, is one-
sided and inadequate. Hyman (1975, p.12) defines industrial relations” as the study of the
processes of control over work relations and among these processes, those involving
collective worker organization and action are of particular concern”. Hyman further
argues that unceasing power struggle for control is a central feature of industrial relations.
To him, this struggle for control emanates from the nature and characteristics of capitalist
society. He summarized the major characteristics of capitalism as (i) the ownership and
or control of the means of production by a small minority (ii) the domination of profit as
the fundamental determinant of economic activities (iii) the obligation on most of society
to sell their productive abilities on the market as a commodity. Against this background,
two major classes are located within capitalist industrial relations which are also a
reflection of what obtains in society. Thus, capitalist industrialism bifurcate society into
two classes. These are the owners of means of production which is the capitalist or
bourgeoisie and the owners of labor, which are the workers or proletariat. This being so,
the interests of employers and employees are diametrically opposed and conflictual. The
capitalist endeavors to purchase labor at the lowest possible price whilst labor on the
other hand tries to sell his only asset at the highest possible price in order to ensure his
existence. The capitalists tend to maximize profit whilst the workers tend to maximize
wages/salaries. Thus, in capitalist industrial society, the interests and aspirations of both

20
labor and employers are divergent and in conflict. The Marxist perspectives typify
workplace relations as a reflection of the incidence of societal inequalities and the
inevitable expression of this at the work place.

To sum it up, Hyman further states that industrial relations is all about power, interests
and conflict and that the economic, technological and political dynamics of the broader
society inevitably shape the character of relations among industrial relations actors which
he described as the political economy of industrial relations. Conflict is viewed as a
disorder precursor to change and to resolve conflict means to change the imbalance and
inequalities in society in terms of power and wealth. Trade unions are viewed as
employee response to capitalism. Marxist theory emphasizes exploitation and alienation.
This perspective is critical of capitalist society and its system of production, distribution
and exchange and emphasizes the importance of collective action including strike action
and action short of strikes (Rose, 2008). Hyman (1975) argues that given the nature of
capitalist society, industrial relations can be analyzed from a more radical perspective.
This theory is also known as the radical perspective.

8. Social action theory

According to Green (1994, p.4), “the social action theory views industrial relations from
the individual’s viewpoint and motivation”. According to Rose (2008), the social action
approach considers the organization from the position of the individual members or
actors who will each have their own goals. This perspective regards conflicts of interests
as normal behavior and part of organizational life (Rose, 2008). It is credited to Max
Weber (1864-1920); a German Sociologist. Social action theory represents a contribution
from sociologists to the study of organizations. It attempts to view the organization from
the standpoint of individual members or actors of industrial relations. The theory seeks to
analyze why the actors take certain lines of action. This contrasts with the systems
approach which states that behavior is a result of the structure and processes of the
system. Social action arises out of the expectations, norms, attitudes, values, experiences,
situation and goals of the individuals working in the system. Thus, according to Green
while the system approach is up-down, the social action theory is a bottom-up approach.
Salamon (2000) opines that the importance of the social action theory of industrial
relations is that it weakens the fatalism of structural determinism and stresses that the
individual retains at least some freedom of action and ability to influence events in the
direction that he/she believes to be right or desirable. Social action theorists emphasize
the use of interview, survey and participant observation in determining the reality of both
society and of organizations.

Comparison of subsisting orthodoxies

The central focus of comparative analysis of these theoretical formulations of

employment and industrial relations is to examine the degree of differences and
commonalities or similarities between and among them. The heroic assumption by
Dunlop that the ideology of the industrial relations system must be one, or compatible in
spite of the fact that each actor has its own ideology has been challenged by Hyman.

21
According to Hyman (1975, p.12), “if the system of industrial relations is so well
integrated, and if the goals and values of the actors are so much in agreement, how is it
that industrial conflict occurs at all?” Thus, while this may be true for the unitary
approach, it is not true for the social action theory, conflict and Marxist theory. This is so
because, the unitary theory emphasizes common values while the others emphasize
differing values, interests and objectives among actors. Thus, this assumption is spurious
in reality even within the unitary perspective. The systems theory views industrial
relations system as being stable regulated and in a steady state or homeostatis; again, this
position is favored by the unitary approach which emphasizes consensus and industrial
peace and views conflict as irrational. Marxist and other conflict theorists do not
subscribe to this idea. Hyman maintains that the definition by the systems and the oxford
school should be broadened to accommodate the sources as well as the consequences or
aftermaths of industrial conflict on the social partners. He views conflict as inevitable and
rational in the industrial relations system. Conflict and disorder cannot be excluded from
industrial relations system.

All five theories differ at the level of conceptualization of an industrial relations theory,
the Dunlopian model and its variants see the product or output of an industrial relations
system as a network or web of rules (both substantive and procedural rules). To the
system theorists, the central core or focus of an industrial relations system is the rule-
making process to govern the actors and work community. Hyman and other Marxists see
it as the study of the processes of control over work relations and among these processes;
those involving collective worker organization and action are of particular concern.
Hyman’s view is applicable to the unitary and conflict theorists. The unitary theory
emphasizes unified authority and loyalty structure whilst the conflict theory emphasizes
competitive authority and loyalty structures.

The social action theory contrasts with the systems approach. Whilst the systems
approach opines that behavior of actors is a function of the structure and processes of the
system, social action arises out of the expectations and other attributes of the individuals
working in the system. Salamon (2000) argues that the importance of the social action
theory of industrial relations is that it weakens the fatalism of structural determinism and
stresses that the individual retains at least some freedom of action and ability to influence
events in the direction that he/she believes to be right or desirable. In reality, the actors in
the system are influenced by the system and in turn they influence the system.

Dunlop’s actors are institutions not persons. The systems theoretical formulation suffers
from reification. This means that individuals involved at the workplace and whose
activities are industrial relations have been relegated to the background, while institutions
like trade unions, collective bargaining, employers’ collectivities and various state organs
have been employed in his analysis. This Hyman finds abnormal as it creates the
tendency to conceive industrial relations solely in terms of relationships between
agencies and organizations, rather than between people. To Hyman, this is a “mechanical
and depersonalized approach to social analysis. In other words, treating abstract
collective entities which are the creation of human activity, as the active agencies in
social relations and in consequence devaluing the part played by human actors”(Hyman,

22
1975, p.13). Hyman argues that the analysis of industrial relations should not only focus
on trade unions as organizations, but also on workers and their grievances and
aspirations. Hyman’s view is shared by social action theorists who stress that the
individual retains at least some freedom of action and ability to influence events based on
their aspirations, values and goals. Hyman states that the fact that labor is treated as a
commodity is one of the causes of conflicts in industry. Thus, the subjugation,
exploitation, and alienation of workers are the sources of workers grievances.
To this effect, workers aspire to control their own work, rather than being subject to
constant instructions and supervision. Hyman notes that the notion of regulation conceals
the centrality of power, conflict and instability in the processes of industrial relations.
With respect to the resolutions of conflict in work relations, the unitary, systems, conflict
and Marxist approaches favor different methods. While the unitary favors coercion, the
systems theory adopts the rule-making process, conflict theory favors compromise and
agreement and Marxists favors changing the imbalance and inequalities in society in
terms of wealth and power.

Trade unionism is accepted by the systems theory, conflict theory, and Marxist theory as
well as the social action theory. However, the unitary theory views trade unionism as
illegitimate intrusion or encroachment on management prerogatives and is outlawed and
suppressed. The theories have the following commonalities: All five theories recognize
the importance of context. Industrial relations do not and cannot exist in a vacuum. It
exists at the micro, macro and global levels. The significant aspects of context are
economic, technological, political, social and legal dynamics of the broader society.
Despite the deluge of criticisms leveled against these theoretical formulations, they have
been referred to as monumental contributions to scholarship (Onabanjo, 2001). The five
theories have sociological etymology, suggesting that they derive their fountain from
sociology. All five theories recognize that three actors or participants or social partners
are involved in industrial relations in line with the concept of tripartism in industrial
relations as proposed by the International Labor Organization (ILO). However, with the
emergent transnational organizations and the influence of host communities emphasis is
now shifting to the concept of “tripartism-plus.” None of the theories can boast of having
a comprehensive coverage of the subject area of industrial relations. However, we take
solace in Hyman’s comment that “in defining the scope of industrial relations, it is
necessary to define the subject more narrowly than the total network of social
relationships in industry” (Hyman, 1975, p.31).

In conclusion the practice of employment/industrial relations has benefited immensely

from theoretical frameworks of leading theorists in the field of industrial relations. It has
been observed that despite the criticisms leveled against some of these theories they have
stood the test of time and have contributed immensely to scholarship and practice.
Among these theories, there are areas of commonalities and differences as could be
deduced from the comparative analysis. Although, Dunlop in the preface to his Industrial
Relations System gave his objective as the advancement of a general theory for the
examination of industrial relations (Fajana, 2000) ; this objective is yet to be achieved
Fajana (2000, p.21) argues that “a large number of industrial relations theories have been

23
accepted into the body of knowledge of industrial relations, although each valid theory
emphasizes only little aspects of the field.
There is yet to emerge a general theory of industrial relations”. While giving kudos to
Dunlop for his pioneering efforts, one may ask; can there be a general/ unified theory of
industrial relations? This is food for thought for industrial relations academics and
practitioners alike.

Activity2- Understanding IR theories and perspectives.

Take about 15 minutes
1. Identify the most common IR theories and perspectives
2. Which theory do you think applies most to the Ethiopian context

Comment: 1. there are various theories but Unitary, pluralistic and systems theories
2. the Ethiopian labor law recognizes unions and management in the
industrial               relation thus pluralistic.

1.7 Parties to Industrial Relations

The major parties to Industrial Relations are the employees, employee’s representatives,
employer, associations of employers, government, and courts and tribunals.

Employees

Employees working in the organized sectors constitute the employees.

.
Trade Unions

Unions have a crucial role to play in Industrial Relations. Unions have broad objectives
which are:
1. to redress the bargaining advantage of the individual worker vis-à-vis the individual
employer, by substituting joint or collective action for individual action.
2. to secure improved terms and conditions of employment for their member and the
maximum degree of security to enjoy these terms and conditions.
3. to obtain status for the worker in his work.
4. to increase the extent to which unions can exercise democratic control over decisions
that affect their interests by power sharing at the national, corporate, and plant levels.

The union power is exerted primarily at two levels at the industrial level, to establish joint
regulation on basic wages and hours with an employers’ associations or its equivalent;
and at the plant level, where the shop stewards organizations exercise joint control over
some aspect of the organization of the work and localized terms and conditions of
employment. Unions are a party to national, local and plant procedure agreements which
govern their actions to a greater or lesser extent, depending on their power, and on local
circumstances.

24
Employers

Employers too, are directly involved in any dispute between the employers and the
employees. Employers are endowed with certain inalienable rights vis-à-vis labor. The
management has the right to hire and fire any worker, notwithstanding union restrictions.
It is not just firing a worker here of there, but the management's ability to control the
economic destiny of the workers that matters. The management has the right to relocate,
close, merge, takeover or sell a particular plant - these actions affect workers interests.
The management has another powerful weapon - introducing or threatening to use
technological change. Technological change can displace labor or reduce skills. Armed
with these rights, the management resorts to several tactics to break a strike, some of
them even could be unethical. The management is known to adopt dubious mean to
forego a strike, all of a strike, or tone down union demands. The management often
breaks a powerful union, sets one faction against another, and favors the most satisfied
and the less militant workers.

Loyal workers from sister concern are brought in, on the pretext of a factory visit, and are
induced into a plant and advised to break the strike. Another tactic employed by the
management is to gain the loyalty of employees. The aim of this tactic is to convince the
worker that the management has his or her interests at heart and can provide him or her
with much the same benefit as the union. In part, this tactic is a revival of the "welfare
capitalism" of the 1920s. High wages, pension plans, profit sharing plans, programs of
stock ownership by workers - all these schemes have been revived, though often in
modernized form, and with considerable effect in the resistance of the new industries to
unionization can be taken as evidence.

Employees’ loyalty is sought to be gained through another method, a positive one. The
management seeds to find out the sources of dissatisfaction and eliminates those irritants.
Workers are encouraged to form informal small groups, psycho-therapy is conducted on a
plant-wide scale, and interaction between the management and employees and among the
employees are structured and practiced.

A militant but incorruptible union is co-opted in routine functions of the organization. For
instance, the union may be used as a channel of information to the employees. It may be
used for meeting certain production problem. In some plants, the management has even
brought union leaders into process of decision making.
In general, managers tend to see employee relations in terms of the following activities:
1. Creating and maintaining employee motivation
2. Obtaining commitment from the workforce
3. Establishing mutually beneficial channels of communication throughout the
organization
4. Achieving of high level of efficiency
5. Negotiating terms and conditions of employment with employee representatives
6. Sharing decisions making with employees
7. Engaging in a power structure with trade union

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Employers' Associations

Employers' associations operate at local, industry and all levels.

The Confederation of Ethiopian Industries is a powerful body at the national level which
is doing an admirable fob in protecting and promoting the legitimate interests owners of
industries.
The major objectives of employers' associations include:
1. Representing employers in collective bargaining
2. Developing machinery for the avoidance of disputes
3. Providing information on employee relations and to give advice
4. Representing members on national issue
The specific objectives of Confederation of Ethiopian Industries are:
1. Identifying and strengthening industry role in the economic development of the
country.
2. Acting as a catalyst in bringing about growth and development of the Ethiopian
industry.
3. Reinforcing industries commitment to society.
4. Working towards globalization of Ethiopian industry and its integration into world
economy.
5. Providing up-to-date information and data to industry and government.
6. Creating awareness and support industry efforts on quality, environment and
consumer protection.
7. Identifying and addressing special needs of the small scale sector.
8. Promoting cooperation with counterpart organizations.

Government

In a sense, government intervention in Industrial Relations is as old as the industry itself.

However, till the 19th century, governments everywhere followed the laissez faire policy
- they left Industrial Relations to the managers and workers who were required to solve
the problems themselves. Towards the end of the 19th century, the attitude of the
governments changed. And intervention became a reality. The state, as of today, regulates
the relationship between the management and the labor and seeks to protect the interest of
both the groups. The government has setup labor courts, tribunals, and enacted laws to
lay down norms and to enforce their compliance.

Judiciary

The powers of the judiciary are of a dual type:

• The authority of the Courts to settle legal disputes;
• Judicial review - the authority of the Court to rule on the constitutionality of
legislation.

26
As far as second is concerned, the judiciary gets activated when the legislator passes laws
repugnant to the constitution and when the government implements the enactment
improved by the legislature in a manner opposed to the provision of the legislation. In
other word, the courts of justice protect the citizen from unlawful Acts passed by the
legislature and arbitrary Acts done by the executives.
It is the power of the judiciary to settle the legal disputes, referred to them, that affect
Industrial Relations considerably. The judicial pronouncements will have a far reaching
impact because:
i. Judicial errors do occur, though infrequent,
ii. Possibility of wrong assessment of penalty, "judges notoriously vary in the
severity of punishment inflicted",
iii. Judges are known for pronouncing conflicting verdicts on the same or similar
disputes, and Confusion in turn.
iv. The role of judiciary in Industrial relations has not been always positive.
The result is that indiscipline in the industry has spread like wild fire and sapped the
national production and productivity. The classic case is the textile industry which has
been wrecked by indiscipline. The conflagration is continuing to engulf various industries
one by one.
Figure 1.2
Main Actors in Industrial Relations
STATE

EMPLOYEE EMPLOYER

1.8 Industrial Relations Strategy

It is necessary to have a clear cut strategy for Industrial Relations, although the
management of Industrial Relations is essentially a knee jerk reaction to events and
problems and is, therefore, far removed from the world of strategic thinking and
planning.

Since employer-employee relations are usually presumed to be satisfactory until they get
out of hand, managers, rarely, feel the need to act before the trouble breaks out.
But the reactive strategy cannot continue for long. Growing competition, difficult
economic environment, rising labor cost, and low productivity compel business leaders to
think and plan proactive strategies towards Industrial Relations.
Where organizations have proactive strategies, the goal should be to ensure that corporate
objective can be achieved by gaining the maximum amount of cooperation from
employees and by minimizing the amount of industrial unrest.

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Factors Affecting Employee Relations Strategy

Two sets of factors, internal as well as external influence an Industrial Relations strategy.
The internal factors are:
1. The attitude of management to employees and unions.
2. The attitude of employees to management.
3. The attitudes of employees to unions.
4. The inevitability of the differences of opinion between management and union.
5. The extent to which the management can or wants to exercise absolute authority to
enforce decision affecting the interests of employees.
6. The present and likely future strength of the union.
7. The extent to which there is one dominating union or the existence of multiple
unions leading to inter-union rivalry.
8. The extent to which effective and agreed procedures for discussing and resolving
grievances or handling disputes exists within the company.
9. The effectiveness of managers and supervisors in dealing with problems and
disputes related to Industrial Relations.
10. The prosperity of the company, the degree to which is expanding, stagnating or
running down and the extent to which technological changes are likely to affect
employment conditions and opportunities.
The external factors affecting Industrial Relations strategy are:
1. The militancy of unions - nationally or locally.
2. The effectiveness of the union and its officials and the extent to which the
officials can and do control the activities of supervisors within the company.
3. The authority and effectiveness of the employers association.
4. The extent to which bargaining is carried out at national, local or plant level.
5. The effectiveness of any national or local procedures, agreements that may exist.
6. The employment and pay situation - nationally or locally.
7. The legal framework within which the Industrial Relations exists.

1.9 Industrial Relations Decisions

A proactive Industrial Relations strategy program must cover the following decisions:
1. Communication - how best we can convey our philosophy to employees?
2. Relationship - how well can we improve our relationship with employees and
unions?
3. Competence - how to improve of competence of managers and supervisors in
dealing with Industrial Relations matters?
4. Discipline and conflict - how shall we deal with it?

Communication

The core of an IR program is the personnel manual. The manual sets out the rules and
policies within which managers and employees must operate. The manual tells how the
management awards recognition to the union and offers facilities, how it recognizes the
officers associations, how to handle a grievance, code of discipline in the industry and the

28
like. The manual needs frequent updating, must be published to all employees, and all
supervisors must be familiar with it.

Relations

Relationship with the employee may be improved through joint consultation.

Relationship with union or staff associations may be developed through collective
bargaining and other IR procedures or by improving the operation of existing procedures.

Competence

Managers and supervisors need to develop competence in handling IR. Such competence
may be developed by training managers and supervisors in IR. Suffice it is to say that a
training program must be conducted after assessing the training needs of the managers
and supervisors. Each training program must have specific objectives and the contents
must help the trainees realize the goals.

Negotiating skills must form a part of the training offered to managers. Negotiating skills
are best acquired by experience, but it is dangerous to allow inexperienced managers to
meddle with negotiations. Training in negotiating skills is most effective if it is through
case analysis. A case study based on an actual problem of the company may assign to the
managers who will be required to analyze the case and offer remedies.
Training should not be confined to managers and supervisors alone. Union leaders and
employees also must be associated with the program, as they are as much a party to a
conflict managers or supervisors.

1.10 Causes of industrial unrest

Discipline and conflict

Discipline is (1) Treatment that punishes; (2) orderly behavior in an organizational

setting; or (3) training that molds and strengthens desirable conduct—or corrects
undesirable conduct—and develops self-control
Due Process- Employee’s right to present his or her position during a disciplinary action

Figure 1.3 Principles of Due Process

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Figure1.4 Appeal process

Source: “Conflict is a form of interaction among parties that differ in interest,

perceptions, and preferences.” (Osland & Rubin, 2001)

Activity3- understanding Grievance vs. dispute vs. conflict

Take about 10 minutes
 Identify the difference amongst Grievance, dispute and conflict.

Comment: Grievance means the complaints; problem expressed by concern person or

group of people....which could have immediate resolutions many times.

If Grievances are not solved for longer time then It may result in Disputes as both parties
will have their own say & difference of opinion. Conflicts can be a larger picture of all
this background.

According to John Burton (1990), a dispute is a short-term disagreement that can result in
the disputants reaching some sort of resolution; it involves issues that are negotiable.
Conflict, in contrast, is long-term with deeply rooted issues that are seen as “non-

30
negotiable”. An example of negotiable versus non-negotiable distinctions can be found in
common purchases that often require negotiation such as a car or home. In these
situations, the parties can be seen as in dispute about the price of the item; however, they
can come to an overall understanding of a compromised position.
Within the nature of a conflict, as indicated by Burton (1990), each side is fundamentally
opposed to the success of the other and will not compromise their own values at the risk
of allowing those they despise to achieve even the slightest victory. Stephen Robins
defines conflict as “a process that begins with a party perceives that another party has
negatively affected, or is about to negatively affect, something that first party cares
about”. It encompasses the wide range of conflicts that people experience in
organizations- incompatibility of goals, differences over interpretations of facts,
disagreements based on behavioral expectations and like.
What causes industrial disputes?  Pay disputes  working conditions  unfair
dismissals  Promotion  Poor industrial relations  Introduction to new technology
 Discrimination

If both employees as well as employers adhere to well laid out norms, dispute do not
occur. Where a conflict occurs, the management must resolve it. There are set procedures
to resolve disputes.

Causes of industrial unrest may be classified mainly under four heads as indicted below:
1) Financial Aspects
a) Demand for increase of wages, salaries and other perks. workers demand goes on
increasing with the increase in cost of living
b) Demand for more perks, and fringe benefits. Issue of bonus also has become a
contentious one.
c) Incentives festivals allowances, concessions etc requires a hike every now and
then, workers compare these benefits with other industries and demand them –
without comparing the capacity of the industry where they are working.
2) Non financial aspects
a) Working hours, rest hours, traveling hours are source of disputes. If houses are
provided some section of workers want to include travel time also as working
hours.
b) Introduction of machines, computers modernization, automation – In effect any
act of management which may result in economy in man power is resisted
c) More facilities like free meals free group travel etc are sought every now and then
d) Lack of skill on the part of leaders supervisors
e) Disproportionate works loads, favoritism
f) Victimization, nepotism attitude of management in recruitment, promotion,
transfer etc
g) Instead of re deployment or skill improvement easier way of retrenchment forced
voluntary retirement schemes are adopted.
3) Government and political pressures
a) Industrial unions affiliating with political unions which are in power, resulting in
frequent shift of loyalty and resultant unrest
b) Politicians influencing workers group

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 c) Sometimes unions, workers strike against mergers, acquisition, taken over,
disinvestments policies, of government and private sectors.
4) Administrators Causes
a) Non implementation of agreements awards and other local settlements – with full
sprit
b) stifling with recognition of labor unions though registered,
c) Attempt to weaken existing trade unions and trying to foist fake unions
d) Unhealthy working conditions
5) Other causes of strained relations.
a) Refusal to have workers participation in the running of the industry.
b) Non adherence to laid out ‗standing orders‘ grievances procedures
c) Refusal to have free frank, and transparent collective bargaining.
d) Sympathetic strike – a show of readership to workers of neighboring industries,
and conducting a token strike when they are in full strike. This may cause internal
bitterness.

1.11 Consequences of strained Industrial relations

The following are some of the outcomes of strained industrial relations:

1. May result in go slow tactics, Strike, lock out etc.
2. Industrial production and productivity may be affected, growth of industries will be
stunted
3. May result in recited atmosphere, law and order situation will deteriorate
4. Employer, Management, labor relations will be affected mutual faith and team spirit
will vanish.
5. Absence of mutual co operation affects participation forums and Bargaining Plot
forms.
6. Government also will lose revenue, and may need to spend more to keep law and
order around the industry
7. National income, per capital income will go order
8. Will result in loss in earnings of workers with added suffering.
9. The industries also will suffer loss, and it is a loss to common consumers also.

Activity4- understanding the difference between

IR and HRM
Take about10 minutes
 Compare and contrast IR and HEM.

Comment: The comparison may be made using the

variables indicated in the following table:

Table 1.1 Differences between IR and HRM

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 S.No Dimension IR ER/HRM

1. Nature of relations Pluralist Unitarist

2 Contract Emphasis on terms of Beyond contract, innovative

contract defined rules, ways
contract

3 Conflict Institutionalized De-emphasized is

pathological

4 Union legitimacy Unions are acceptable Not considered desirable

Nurturing.

5. Managerial task in Monitoring Nurturing

relation to labor

6 Key relation Labor-management Customer

7 Pay Standardized, based on job Performance related

evaluation

8 Basis of labor-mgt Collective bargaining Individual contract

relations contract

9 Job design Division of labor Team work

10 Conflict handling Reach temporary truce, Managing climate and

reactive culture-proactive

11 Key people PM/IR Line specialists

12 Focus of attention Personnel procedures Various culture and

structure-related personnel
strategies.

Summary

Industrial Relations is key for increased productivity in Industrial establishment. There

are three approaches and strategies to industrial relations. The inculcation of harmonious
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industrial relations requires that all the participants be motivated to work whole heartedly
for making the system to work. Industrial relations are highlighted as highly significant
from the socio-economic development of Industry.

Key Terms: Industrial relations, Theories and perspectives, employees, employers,

government, employment relationship, HRM,

Self assessment questions

1. What are the emerging trends in industrial relations in the era of globalization?
Examine significant transition and transformation in industrial relations in this
context.
2. "There is need to redefine industrial relations as in its present conception it has
became too narrow to do justice to the varied factors and processes which have a
direct bearing on its subject matter." Discuss.
3. Discuss in detail various approaches and parties to industrial relations.
4. What are the determinants of Industrial Relations.?
5. What are the consequences of strained Industrial relations?

Unit II Trade Union

Unit Presentation of Contents

1.2 Learning Objectives

34
 1.3 Introduction
1.4 Definition of trade unions
1.4.1 Categories of workers in Ethiopia
1.4.2 The right to work
1.5 Trade union rights
1.5.1 International Convention on Economic, Social and Cultural Rights (ICESCR)
1.5.2 The Constitution of the Federal Democratic Republic of Ethiopia
1.5.3 Regulations on Trade Unions in Ethiopia
1.5.3.1 The Civil Servants Proclamation
1.5.3.2 Labor Proclamation
1.5.3.3 Charities and Societies Proclamation
1.5.3.4 Supplementary legislations
1.5.3.5 Prevailing patterns in practice
1.6 Characteristics of trade unions
1.6.1 General features of trade unions
1.6.2 Types and structure of the trade union
1.6.3 Trade union & Employees
1.6.4 Role of the trade unions
1.6.5 Requisites for Making More Effective Trade Unions
1.6.6 Unfair Labor Practices
1.6.6.1 On the Part of Employers and Trade Unions of Employers
1.6.6.2 On the Part of Employees and Trade Unions of Employees
1.6.7 Future roles of trade union
1.7 Obstacles in the future growth of trade unions
1.8 Corrective measures to improve the Trade Unions

Summary

Key Terms

Self assessment questions

Unit II Trade Union

2.1 Learning Objectives

The objective of this unit is to enable students to:

• comprehend the meaning, objective, role, function and future of trade unions
• explain how trade unions contribute to the well being of employees

35
 • identify the types and structure of trade unions
• Analyze the relationships between employees and trade union

2.2 Introduction

It is a well known fact that in every industrial community there are two distinct classes
the Employees and the Employers, without whom production at a large scale is not
possible. Both these parties usually have contradictory motives, which creates many
problems. Over the ages, the teeming millions which constituted a sizeable chunk of
industrial society have struggled hard to achieve a greater measure of protection against
inhuman treatment meted out to them by employers. They have learned to make
themselves secure against ills over which they believed to have little control. In fact
individually the laborers can do little to bring about the kind of reforms they believe
desirable.

They are effective only if they act in united ways. The very idea of joint action, laid down
the foundation of the instrument of struggle for security and advancement – “Trade
Union”. The Trade Union came into existence as an agent of workers and working class
at large. It performed and still performs two functions: one to work for the redistribution
of some of the nation’s wealth by raising wages and earning of its members. This enables
workers at their own to improve their living standard and in the process become better
equipment to deal with unfavorable economic conditions. The second objective of union
is more directly related to their security role in esprit of here and now. Through various
types of union welfare funds and later through pressure for employer welfare program
and the governmental social security measures, the union aim to obtain greater benefits
for its members. In liberalized economic environment the union is looked upon as a
facilitator of change.

2.3 Definition of trade unions

What is a Trade Union? Trade Union is an organization of workers or employees formed

mainly to _ Negotiate with the employers on various employments related issues,
improve the terms and conditions at their workplace, and enhance their status in society.
In most countries, there are laws governing the formation, membership and
administration of trade unions as in the case of Ethiopia the labor law (proclamation
377/2003(as amended by Proclamation 494/2006). According to the Ethiopian labor Law
trade union is defined as “an organization formed by workers” and employers association
as “an organization established by employers” (Article 113 sub Article 2 ( a and b)).

Blacks’ Law dictionary defines a labor union as ‘an organization formed to negotiate
with employers, on behalf of workers collectively, about job-related issues such as salary,
benefits, working hours and working conditions.’ Several writers provide similar
definition reflecting the nature and function of a labor union. Labor union is an
organization, consisting predominantly of employees, the principal activities of which
include the negotiation of pay and conditions of employment for its members. In addition

36
to describing its composition and purpose, the following definition describes the means
by which labor unions advance the interest of workers: Labor union is an organization
based on membership of employees in various trades, occupations and professions,
whose major focus is the representation of its members at the workplace and in the wider
society. It particularly seeks to advance its interest through the process of rule-making
and collective bargaining.

On the other hand, as indicated earlier the Labor Proclamation no 377/2003 defines trade
unions simply as an organization formed by workers. The Proclamation states that,
among other things, trade unions have the function of observing the conditions of work,
respect the rights and interest of members and in particular, represent their members in
collective negotiation and in labor disputes, engage in awareness creation of laws at work
and laws in general and ensure their implementation by the members, initiate laws and
regulations pertaining to workers and actively participate in the process of their adoption.
The definitions provided above demonstrate that labor unions are a special type of
association both in their defined composition (workers/employees) and the modality of
operation they follow to advance the interest of workers (collective
bargaining/negotiation with employers). The legal regime regulating trade unions and
other type of associations is also different. For instance in Ethiopia, while other type of
associations are registered under the Charities and Societies Proclamation no 621/2009
either as a ‘Charity’ or a ‘Society’ at the Charities and Societies Agency, a trade union
that has membership of more than 50% support by workers is expected to register itself at
the Ministry of Labor and Social Affairs (MoLSA). The separate guarantee provided for
the ‘right to association for any cause or purpose’ under article 31 and the right of
workers ‘…to form associations to improve their conditions of employment and
economic well-being’ under article 42 of the Constitution is another evidence indicating
the unique nature of the right to freedom of association enjoyed by workers through trade
unions. On the ground, trade unions function differently from other similar associations
such as ‘professional associations’. While a professional association is composed of
group of professionals organized to practice and promote their profession, trade unions
are strictly composed of workers focused on advancing work related rights of their
members. Moreover, trade unions are more effective in that they deal with specific work-
related issues or rights, taking on an active role in the day-to-day work life of employees.
They further possess the legal right to negotiate on behalf of member employees i.e. on
payment, conditions of work and key policies at work. They also undertake the function
of representing workers in labor dispute which provides workers with strong bargaining
power. On the other hand, professional associations tend to address issues beyond the
confine of the work place. They take more of an advisory or educational role and the
tactics they use are mostly limited to dissemination of information, holding discussion
platforms, establishment of standards and improve public relations through publication
and lobbying.

37
 2.3.1 Categories of workers in Ethiopia

Broadly speaking, workers in Ethiopia can be categorized on the basis of their

employment status as government employees (civil servants) and private sector
employees. Government employees are those working in government institutions
excluding government officials. The Civil Servant Proclamation no 515/2007, which
regulates the federal civil service sector, also defines ‘Civil Servant’ as a person
employed permanently by federal government institution. The definition excludes the
following employees and officials: - Government officials with the rank of State
Minister, Deputy Director General and their equivalent and above; - Members of the
House of Peoples’ Representatives and the House of the Federation; - Federal Judges and
Prosecutors; - Members of the Armed Forces and the Federal Police including other
employees governed by the regulations of the Armed Forces and the Federal Police;
Employees excluded from the coverage of the Proclamation by other appropriate laws. At
the federal level all employment relationship of civil servants as defined above is
governed by Proclamation no 515/2007, while the employment relationships of civil
servants at the state level is expected to be regulated by laws that are adopted by states
themselves according to article 52 (2) f of the Constitution. Another major category of
employees is the category of employees at the private sector, which for the purpose of the
labor law includes employees of public enterprises. These categories of employees are
governed by the Labor Proclamation no 377/2003, a law which also provides for trade
union rights of workers in Ethiopia as guaranteed under article 42 of the Constitution.
Another category of workers are those employees working in essential public service
undertakings. Though they are not regulated by a separate law they are treated differently
from other category of workers when it comes to enjoyment of trade union rights due to
the special nature and importance of their tasks. According to article 136 (2) of the Labor
Proclamation no 377/2003 essential public service undertakings has been defined as those
services rendered by undertakings to the general public and includes the following: - air
transport; - undertakings supplying electric power; - undertakings supplying water and
carrying out city cleaning and sanitation services; - urban bus services; - hospitals,
clinics, dispensaries and pharmacies; - fire brigade services; and - telecommunication
services; As it can be inferred from the provision, the list is neither exhaustive nor limited
to services provided by only private undertakings. In the following sections, we will
discuss trade union rights and the legal basis of these rights of government employees in
Ethiopia. Legislative framework found both at the international and national level will be
discussed.

2.3.2 The right to work

The right to work is fundamental to human dignity and central to the survival and
development of human personality. The right to work is interrelated and interdependent
with other human rights such as the right to life, the highest attainable standard of

38
physical and mental health and adequate standard of living, the right to education,
freedom of movement, and freedom of association among other rights. Various
international and regional human rights instruments adopted by Ethiopia guarantee the
right to work including the Universal Declaration of Human Rights (UDHR) (1948), the
International Covenant on Economic Social and Cultural Rights (ICESCR) (1966) and
the African Charter on Human Peoples’ Rights (ACHPR) (1981).39The right to work is
also guaranteed under article 42 of the Constitution. The provision provides protection
for the following fundamental components of the right to work: - trade union rights
including the right to strike - the right of women to equal pay for equal work - defined
working hours, breaks, leisure, periodic leave with pay, paid public holidays and a safe
and healthy working environment In addition to human rights instruments guaranteeing
the right to work in general, the separate elements of rights at work are protected by
international labor standards especially by the eight fundamental ILO conventions.
Ethiopia is member of ILO since 1923 and has ratified its eight core labor conventions.
The right to work as guaranteed under various international and regional human rights
instruments obliges states to take measures with a view to move towards full and
productive employment. At the core of the right to work is freedom to gain a living by
work freely chosen or accepted. This is the first and fundamental component of the right
to work encompassing access to employment without discrimination and free choice of
work and entitlement to a supportive structure that aids access to employment, including
access to vocational training. The other significant component of the right to work is
contained under bundle of rights that can be summarized by the term ‘rights at work’.
Long hours of hazardous work and lack of decent working conditions resulting in
increased mortality and morbidity of workers and the physical and mental repercussions
of such exploitation on peoples’ lives and those of their families and communities is the
background of the struggle for recognition of rights at work.

The following are the most important components of rights at work guaranteed under
the various human rights instruments:

 the right to safe, hygienic and dignified working conditions;

 the right to work that is freely chosen or accepted; (protection against forced
labor) ‐ the right to adequate remuneration;
 the right to a limited workday and remunerated periods of rest;
 the right to equal pay for work of equal value;
 the right to equal treatment; and
 the right to freedom of association and collective bargaining.

While all the above listed rights are guaranteed for individual workers, given the fact
that employment relationship creates a degree of dependency of the employee on
his/her employer, the power of individual workers to demand and enforce their rights

39
 at work has proven to be weak. Accordingly, as it has been discussed on the history of
trade unions, collective power of workers to ‘improve their conditions of employment
and economic well being’ became necessary.

2.4 Trade union rights

The right of workers to form or join trade unions is part of the right to work and is
guaranteed under various international and regional human rights instruments and
national laws. In general, the components of trade union rights are the following.

- the right of workers to join and be active in trade union

- the right of workers and unions to organize (i.e. to form trade union or
federation and recruit members)
- the right of a union to determine its own constitution and membership
- the right of a union to decide for itself what activities to undertake, including
organizing industrial action
- the right of workers to take industrial action
- the right to free collective bargaining

The above listed components of trade union rights are guaranteed under various
international human rights instruments adopted by Ethiopia. Accordingly, the state has
three types of obligations towards enforcing this right: obligation to respect, obligation
to protect and obligation to fulfill. The obligation to respect requires states to refrain
from undertaking any action that impairs the enjoyment of trade union rights while the
obligation to protect demands that states protect right holders from third party violation
of rights by taking legislative, administrative and other necessary measures. The third
obligation which is the obligation to fulfill requires states to take relevant measure
towards the enjoyment of rights by right holders.

2.4.1 International Convention on Economic, Social and Cultural Rights

(ICESCR)

The Committee on Economic Social and Cultural Rights (Committee on ESCR), which
is part of the United Nations (UN) human rights monitoring system and the body
assigned to monitor the implementation of the ICESCR, acknowledged the fundamental
role trade unions play in ensuring the respect of the right to work at the domestic and
international level. ICESCR explicitly guarantees the following trade union rights under
article 8:50

- the right of everyone to form or join trade union of his/her choice for the
promotion and protection of his economic and social interests;
- the right of trade unions to establish national federations or confederations or
join international trade organizations;

40
 - the right of trade unions to function freely;
- the right to strike, provided that it is exercised in conformity with the laws of
the particular country.

The ICESCR guarantees trade union rights to ‘everyone’ including government

employees. Any restriction placed on the exercise of these rights should be ‘prescribed
by law and must be necessary in a democratic society in the interest of national security
or public order or for the protection of the rights and freedom of others.’ However,
states are given the discretion to restrict the exercise of these rights by ‘members of the
armed forces or of the police or of the administration of the state.’ The ICESCR did not
define what it meant by ‘members of the administration of the state’. However, similar
stipulation is found under ILO Convention no 98 (Cn 98) which states that ‘the
Convention does not deal with the position of public servants engaged in the
administration of the state’. The ILO Committee of Experts on the Application of
Conventions and Recommendations (CEACR) has explained that restricting the rights
of workers employed in the ‘public administration of the state’ to form and join trade
unions is compatible with international standards only if ‘the legislation….limits this
category to persons exercising senior managerial or policy-making responsibilities’ and
these workers ‘are entitled to establish their own organizations.’ According to article 2
of the ICESCR, states have an obligation to take steps including adopting legislative
measures with a view to the realization of rights enshrined in the Convention. States
also have an obligation of reporting to the ICESCR monitoring Committee, the steps
they have taken to enforce rights enshrined in the Convention, including measures they
took towards guaranteeing trade union rights

2.4.2 The Constitution of the Federal Democratic Republic of Ethiopia

In Ethiopia, the Constitution is the supreme law of the land and any law, customary
practice or a decision of an organ of state or a public official which contravenes the
Constitution has no effect. The bill of rights of the Constitution containing list of
fundamental rights and freedoms is found under Chapter Three. Under this chapter,
article 42 (1) (a) (b) of the Constitution explicitly guarantees trade union rights. Text of
the provision is reproduced below:

(a) Factory and service workers, farmers, farm laborers other rural workers and
government employees whose work compatibility allows for it and who are below
a certain level of responsibility, have the right to form associations to improve
their conditions of employment and economic well being. This right includes the
right to form trade unions and other associations to bargain collectively with
employers or other organizations that affect their interests.
(b) Categories of persons referred to in paragraph (a) of this sub-Article have the right
to express grievances including the right to strike. As it can be inferred from the

41
 provision significant elements of trade union rights such as the right to form trade
unions and other associations, to collectively bargain and the right to strike are
fully protected. Apart from guaranteeing trade union rights, the Constitution
stipulates the category of workers entitled to the rights i.e. factory and service
workers, farmers, farm laborers other rural workers and government employees
whose work compatibility allows for it and who are below a certain level of
responsibility. The Constitution stipulates that further legislation should be
adopted with a view to determine the category of government employees who are
entitled to trade union rights guaranteed under article 42 (1) (a) (b). The
Constitution, as evidenced above endorses trade union rights of government
employees in compliance with international and regional human rights instruments
and ILO Conventions Ethiopia has committed to. The other important stipulation
found in the Constitution relevant to the protection of trade union rights of
government employees is the manner of interpreting Chapter three and the status
of human rights instruments in the normative framework of the country. The
Constitution stipulates that fundamental rights and freedoms guaranteed under
Chapter Three should be ‘interpreted in a manner conforming to the principles of
the Universal Declaration of Human Rights, International Covenants on Human
Rights and international instruments adopted by Ethiopia.’ Accordingly, if at all an
issue of Constitutional interpretation arises regarding trade union rights, the UDHR
and other international human rights instruments, ILO standards and their
underlying principles will have to be called in to attention. The main principle
underpinning international human rights instruments such the principle of
universality, inalienability, indivisibility and interdependence of human rights also
support the entitlement of trade union rights to government employees.

By virtue of article 9 (4) all international agreements ratified by Ethiopia are an integral
part of the land which includes international human rights instruments since they are a
special type of multilateral agreement. Accordingly, international human rights
instruments which guarantee trade union rights and particularly the ICESCR and the
two ILO conventions (Cn 87 & Cn 98) that recognize trade union rights of government
employees are part of the law of the land. The main importance of this stipulation is
that government employees should be able to invoke directly the provisions of these
instruments to get remedy before the court of law where adequate guarantee is not
provided for within national legislations. However, this has a practical difficulty since
these instruments are not translated and promulgated in the Federal Negarit Gazette as
per the requirement of the Federal Negarit Gazeta Establishment Proclamation no
3/1995. Studies have shown that where the provisions of a ratified international
instrument are not officially translated into the working language, their implementation
at the domestic level is close to nil.

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 2.4.3 Regulations on Trade Unions in Ethiopia

The Ethiopian labor Proclamation No.377/2003 states that workers and employers shall
have the right to establish and form trade unions or employers association. Accordingly,
one trade union may be established in an undertaking where the number of workers is
twenty or more. Moreover, workers who work in undertaking with less than twenty
workers may form a general trade union, provided however, that the number of the
members of the union shall not be less than twenty.

 Freedom to Join and Form a Union

The Constitution and labor law provide for freedom of association and allow workers and
employers to join and form unions. This right is regulated by the labor Proclamation No.
377/2003 (amended by Proc. No. 466/2005 & Proc. No. 494/2006).

Trade union is a worker's organization that protects the rights and interests of the workers
and represents them in collective bargaining and labor dispute. Union must ensure that
laws, regulations, directives and statements are known to, be observed and implemented
by members. Union members should participate actively during preparation and
amendments of laws and regulations.

Trade unions may draw up their own constitutions that include inter alia the following:
name of the organization; address of the head office of the organization; purpose of the
organization; date of formation of the organization; emblem of the organization;
qualifications for leadership; contribution of  its members; financial and property
administration of the organization; meeting and election procedures; disciplinary
measures; the conditions for dissolving the organization; and status of the property in
case of the dissolution of the organization.

The unions must get registered with the Ministry by filing their statutes; a document
containing the names, address, and signatures of its leadership; in the case of a general
union, the names of undertakings where members are working; and name and emblem of
the organization. A trade union is considered registered if the Ministry of Labor does not
reply within fifteen days after receipt of the registration application.

If a person compels another by intimidation, violence, and fraud or any other unlawful
means to join a group or association or anyone who prevents another from freely leaving
such a group or association, is punishable, upon complaint, with simple imprisonment for
not less than three months, or fine.

2.4.3.1 The Civil Servants Proclamation

The Federal Civil Servants Proclamation no 515/2007 is the law regulating the
employment relationship of government employees at the Federal level in Ethiopia.

43
Articles 3 and 4 of the Proclamation defines the term ‘Civil Servant’ and ‘Temporary
Civil Servant simultaneously providing for list of workers falling out of the definition.
A Civil Servant is an employee employed permanently (non-permanently incase of
Temporary Civil Servant) by federal government institution. ‘Federal Government
Institution’ means ‘Federal Government Office established as an autonomous entity by
a proclamation or regulations and fully or partially financed by government budget...’
The Proclamation, however, excludes the following government employees from its
scope of application and they are not considered as ‘Permanent Civil Servants’ :

a) government officials with the rank of state minister, deputy director general and
their equivalent and above;
b) members of the House of Peoples' Representatives and the House of the
Federation;
c) federal judges and prosecutors;
d) members of the Armed Forces and the Federal Police including other employees
governed by the regulations of the Armed forces and the Federal Police;
e) employees excluded from the coverage of this Proclamation by other appropriate
laws

The following lists of personnel are also excluded from the scope of application of the
Proclamation and they are not considered as ‘Temporary Civil Servants’:

a) persons employed as daily laborers who are paid on daily basis;

b) persons who are assigned for internship or training;
c) persons who enter into a contract with a government office as an independent
contractor for consideration;
d) persons who enter into a contract with a government office due to their special
skills and ability on part-time basis for consideration

The Proclamation regulates every aspect of employment relationship of Civil Servants

with the government including recruitment, salary scale, promotion, transfer,
conditions of work etc. However, the Proclamation does not provide for trade union
rights for government employees in line with the Constitution. On the other hand,
article 421 of the Criminal Code provides for a punishment of fine not exceeding one
thousand birr or simple imprisonment not exceeding six months for any ‘public
servant who, in breach of his professional or statutory obligations, goes on strike of his
own free will or urges others to strike’.

2.4.3.2 Labor Proclamation

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Labor Proclamation no 377/2003 (the Proclamation) is the principal source of labor
law in Ethiopia and it is applicable throughout the country. Providing guarantee for the
right of workers and employers to form their respective associations and engage in
collective bargaining is one of the objectives of the Proclamation as stated under its
Preamble. Expanding on this objective, the Proclamation provides for a Part, sub
divided by Chapters, solely dealing with collective relations between workers and
employers and particularly on ‘trade unions and employers associations’ and
‘collective bargaining’ respectively. Under Chapter One, Article 113 provides for the
right of workers and employers to establish and form trade unions or employers’
associations, respectively and actively participate therein. In addition to stipulating the
right, the Proclamation contains detailed provisions on formation and function of
organizations/associations (both workers and employers), registration, refusal to
register and cancellation of registration of organizations. The following Chapter,
Chapter Two deals with the issue of collective agreement/bargaining, its definition,
subject matter, content, scope, registration and all other procedural issues of making a
collective bargaining. Save for few discrepancies with international standards, the
Proclamation is commendable for it dedicates several provisions dealing with trade
union rights and their implementation. One of the malignant discrepancies of the
Proclamation is the exclusion of several groups of workers from its scope of
applicability. This in turn excludes these workers from the rights and guarantees it
aims to extend including trade union rights. Article 3 is the provision that defines the
scope of applicability of the Proclamation. Accordingly groups covered by the
following employment contracts fall outside the scope:

 Contracts for the purpose of upbringing, treatment, care or rehabilitation;

 Contracts for the purpose of educating or training other than apprentice;
 Managerial employees;
 Contracts relating to persons such as members of the Armed Force, members
of the Police Force, employees of state administration, judges of courts of law,
prosecutors and others whose employment relationship is governed by special
laws;
 Contracts relating to a person who performs an act, for consideration, at his
own business or professional responsibility.

Most workers employed by the government who fall in the above exception are
covered either by the Civil Service Proclamation or are governed by special laws
i.e. the judiciary, public prosecutors and the army. However, the Proclamation
applies to government employees working in public enterprises.

2.4.3.3 Charities and Societies Proclamation

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 It is important to discuss the Charities and Societies Proclamation no 621/2009
(CSP) so as to emphasize the unique nature of trade unions compared to other type
of associations. As it can be inferred from the Preamble, the basic rationale behind
the adoption of the CSP is ensuring the realization of citizens’ right to association
enshrined in the Constitution. Accordingly, the CSP neither recognizes trade union
rights nor does it regulate trade unions. The Constitution under article 31
guarantees the right of every person to freedom of association for any cause or
purpose. Accordingly, workers including those working in the public sector can
form associations with a view to promoting their interest as a ‘society’ according
to the CSP. However, a workers association established under this Proclamation is
not a trade union and it is not entitled with the rights guaranteed under article 42
of the Constitution i.e the right to bargain collectively and the right to strike.
These two significant components of trade union rights are neither provided nor
regulated under the CSP.

2.4.3.4 Supplementary legislations

There are other legal regimes which regulate employment relations falling outside
the ambit of the Labor Proclamation no 377/2003 and Civil Servants Proclamation
no 515/2007. Most employees who are found under the government employment
sector and who fall outside the scope of the above legal regimes are in the
category of workers who are deemed to be engaged in either in the ‘administration
of the state’ or they are ‘senior civil servants’ as defined by the ILO supervisory
bodies. Under this category are found Government Officials, Judges, Prosecutors,
members of the police and the defense force and prison wardens. Following are
few of the legislations regulating this category of workers:

i) Federal Courts Proclamation no 25/1996.

ii) Federal Prosecutor Administration Council of Ministers Regulations no
44/1997.
iii) Police:
- Federal Police Proclamation no. 207/2000
- Federal Police Commission Proclamation no 313/2003
- Federal Police Administration Council of Ministers Regulation No. 86/2003 ‐
Prison Wardens
- Federal Prison Commission Establishment Proclamation no 365/2003 (Part
Three)
iv) Defense Forces Proclamation no 27/1996.

These legislations do not recognize trade union rights. Despite the limitation placed on
the collective bargaining rights of those employees who are ‘engaged in administration of
the state’ and members of the police and army forces, the rights of all employees without

46
any distinction to form/join trade unions is guaranteed under Cn 87. Therefore, together
with the adoption of a legislation recognizing the trade union rights of civil servants,
amending the above listed legislations so as to bring them in line with ILO conventions is
another matter that should be deliberated upon by relevant government organs.

2.4.3.5 Prevailing patterns in practice

By virtue of Labor Proclamation no 377/2003 workers in the private sector and in public
enterprises can form trade unions in their own respective institutions. Though it is not
mandatory, currently, trade unions after joining federations become part of the
Confederation of Ethiopian Trade Unions (CETU), which is the sole national centre for
more than 370,000 workers in Ethiopia. The CETU is composed of nine industrial
federations (Federation of Food and Beverage, Tobacco and Allied Workers; Ethiopian
Federation of Metal, Wood, Cement and other Workers; Federation of Commerce,
Technical Print, and other Workers; National Federation of Farm, Plantation, Fishery and
Agro-Industry; National Federation of Tourism, Hotels and Generic Service Workers;
Industrial Federation of Ethiopian Textiles, Garment and Shoe Workers; National
Federation of Energy, Chemical, Petroleum Workers; Transport and Communication
Workers; Ethiopian Banking and Insurance Industrial Federation) which are umbrella for
702 basic trade unions. Trade union activities in general were assessed as being weak
except for a relative strength of those formed by public enterprises. Public enterprises
including, financial public enterprises has been benefiting from trade union right
entitlements. However, the Supreme Court Cassation Division Judgment delivered on the
case National Bank of Ethiopia Trade Union (NBE) v Ministry of Labor and Social
Affairs (MoLSA) has posed a threat and uncertainty as to this guarantee. This Judgment
caused the dissolution of the NBE Trade Union which was functional for 33 years.
Despite the fact that the NBE argued its case citing ILO Convention no 87 and 98, the
Court simply disregarded the argument and missed an opportunity to make a case of
implementation of international human rights standards at the local level. Rather, the
Court justified its judgment by stating that the employees of the NBE are administered by
Council of Ministers Regulation no 157/2008, by virtue of which they will be exempted
from the Labor Proclamation no 377/2003 and fall within the list of employees regulated
by special laws as per article 3 (2) (e) of the Proclamation. This seems a regression in the
protection of one of the fundamental human rights. The ruling of the Court sets a bad
precedent and legitimizes the act of taking away of the rights that is currently being
enjoyed by trade unions recognized by the Labor Proclamation 377/2003 by simply
adopting a special law that governs their employment relationship. Apart from the above
mentioned trade unions, there are organizations that basically fit the structure and nature
of trade unions yet not legally recognized as such in Ethiopia. The case of the Ethiopian
Teachers Association (ETA) which is composed of workers (teachers) and which is
instituted to promote the interest of its members is one good example. The Association

47
was informally established in 1949 and got nationwide recognition in 1965 under the
name ‘Ethiopian Teachers Association’. The ETA was primarily established with a view
of supporting primary level teachers in carrier development, alleviating difficulties
teachers face due to lower salary rate, improve quality education and other similar issues.
Through time the Association evolved to an institution reaching beyond the need of its
immediate members through its activism and started being at odds with the government
on matters related to social, economic and political policies. The association was among
the prominent actors who significantly contributed to the end of the monarchical and
dictatorial regimes that existed in Ethiopia until the year 1991. The story of ETA after
1991 is marked by an extended internal conflict between groups who alleged to be the
legal representatives of the Association. After an extended court litigation that took more
than 14 years, the Supreme Court Cassation Division ruled in June 2008 upholding the
ruling of the lower courts by ordering the transfer of all property including bank asset and
the name and logo of the Association from the group that was in control of the asset to
the currently functioning ETA. The group that lost the case has been trying in vain to
register at the CSA under the name National Teachers Association (NTA) since 2008. As
for ETA, recently, the issue of teacher’s salary scale improvement that took place after a
long negotiation between the Association and the government were a point of debate.
While the ETA ‘welcomed and appreciated the decision made by the Government’ with
regard to improvements on salary scale, the subsequent fallout between dissatisfied
teachers on the one side and ETA and the Government on the other side seems to put a
question mark on the true representativeness of the Association. At the end of the day
ETA is a professional association deprived of all the legal tools available to it had it been
a trade union i.e. collective bargaining, undertaking a legal strike action, protection from
interference by the government in its activities and protection of its members from anti
union discrimination. There is no legal provision providing for trade union rights of
teachers both under the public service and private schools in the country. The CFA
expressed its concern over the matter and requested the government ‘to amend its
legislation so that teachers, like other workers, have the right to form organizations of
their own choosing and to negotiate collectively’ to no avail. Not limited to the issue of
teachers, ILO supervisory bodies have been making repeated comments on the situation
of freedom of association rights of civil servants in Ethiopia. In its observation adopted in
1995, the CEACR commended the fact that the draft Constitution of 8th December 1994
granted civil servants the right to organize and to conclude agreements with their
employers. However, in its subsequent observations the CEACR repeatedly expressed its
concern on the fact that the country has not yet taken measures to facilitate the
implementation of trade union rights of government employees. The Government,
through its response, asserted that the country is not ready to fully cater for a framework
that provides for a separate association in the civil service and the government itself has
not developed the capacity to engage in a fully fledged bargaining process with civil
servants. The Government further stated that the matter is to be presented for
48
consideration once the Civil Service Reform program is successfully implemented in the
country and the necessary national capacity is in place. The response of the government
is a clear indication of the power balance between the civil servant and its employer, the
Government. It seems to indicate that civil servants should wait to enjoy their right until
the government is ready to deal with them. This is simply an unacceptable excuse to
withhold a constitutionally guaranteed right. Apart from ILO supervisory bodies the
Committee on ESCR, expressed its concern in its Concluding Observations adopted
following the state report submitted by Ethiopia regarding trade union rights of public
servants: The Committee is concerned that the right to form and/or join trade unions is
not fully guaranteed in law and practice, and that public sector workers, in particular
teachers, have allegedly experienced dismissals and transfers in connection with their
trade union activities. It is also concerned that section 421 of the Criminal Code provides
for imprisonment for public servants who have gone on strike. The Committee on ESCR,
recommended that Ethiopia should ‘take steps to guarantee both in law and in practice,
the right to form and/or join trade unions of workers including civil servants and to
amend the Criminal Code so as to remove the sentence of imprisonment for public
servants who have gone on strike’.

To conclude, trade union right of government employees is a human right that is

recognized by international human rights instruments and guaranteed by the Constitution.
The Government has, both at the international and national level, an obligation to take
steps towards ensuring that this right is practically enjoyed by government employees. It
is obvious that adoption of enabling legislation is the first most important step to protect
trade union rights. Government employees should be able to form or join trade unions of
their choice with a view to promoting their economic or work related interests, by any
means available to them including collective bargaining. The absence of a legislative
framework implementing this constitutional right has resulted in denial of rights for
employees in the government sector. Like all other human rights the government has the
duty to respect and protect trade union rights of employees in the public sector. The
legislative void which rendered trade union rights of government employees practically
inapplicable is a failure to respect and to protect both, of a constitutionally guaranteed
fundamental human right and internationally accepted human rights standard. The
constitutional status of trade union rights of government employees is an indication of the
grave importance that lies in the same. The failure of the legislature to adopt legislation
undermines its constitutionally imposed duty to ensure the observance of the Constitution
in general and its bill of rights in particular. Not only the legislature yet both the judiciary
and the executive failed as organ of the state with a duty to ensure observance of the
Constitution as stipulated under article 9 (2) of the Constitution. By no means are they
exhaustive yet following are few remarks on the way forward. The primary step that
should be taken is the adoption of a legislation identifying the category of government
employees entitled to trade union rights as stipulated under article 42 of the Constitution.

49
The House of Peoples Representatives (HPR), the constitutionally mandated law making
organ, is the organ primarily responsible for adopting legislation as per the stipulation of
article 42 (1) (c) of the Constitution. HPR undertakes its legislative mandate through
enacting new laws and amending or repealing existing laws, ratifying international
agreements and passing resolutions. The initiative to adopt such a law could come from
1) the Government 2) Members of the House 3) Committees of the House 4) Parliament
Groups 5) Other bodies authorized by law. Among this list of organs that can initiate
laws, the Legal and Administration Affairs Standing Committee (LAASC) which has also
the function of ‘following up and supervising the effective observation of the rights and
freedoms enshrined in the Constitution’ would be the relevant organs to initiate a law on
trade union rights of government employees. Trade union right of government employees
is one of the rights and freedoms guaranteed by the Constitution and the initiation of a
law which ensures the observance of the same is in line with the ‘following up and
supervision of effective observation’ mandate of the LAASC. As for the civil service
employees at the regional level, Regional State Councils should take similar initiative to
adopt legislation. The other relevant organ for the purpose of presenting a draft law to
the HPR is the MoLSA. Initiation of laws is one of the powers and functions allotted to
Ministries according to article 10 1(a) of the Definition of Powers and Duties of the
Executive Organs of the Federal Democratic Republic of Ethiopia Proclamation no
691/2010. MoLSA is the government organ having the power and duty to promote rights
to work in general and trade union rights in particular. MoLSA could take up this task in
collaboration with the Ministry of Civil Service (MCS), the organ which is entrusted with
the regulation of the civil service sector at the federal level. The MCS itself is also a
relevant organ with regard to the task of initiating a draft law. As the name of the
establishment indicates, it is the principal body mandated to follow up on matters related
to the civil service and civil servants. For practical reasons, the MSC is better placed than
MoLSA to take the responsibility of coming up with the draft legislation identifying civil
servants entitled to trade union rights. However, there is no mention of a mandate given
to the MCS related to trade union rights. For lack of such mandate, it is reasonable to
assert the obligation of MoLSA to come up with a draft. The Ethiopian Human Rights
Commission (EHRC) is the organ with the duty of ensuring that human rights and
freedoms provided within the Constitution and those enshrined in international
agreements ratified by Ethiopia are ensured.

2.5 Characteristics of trade unions

2.5.1 General features of trade unions

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Coming out of a vast definition of the concept, let us put a light on some features of trade
union which are as follows: -
1. The trade union is voluntary association: Trade union is not a compulsory
association but voluntary association of workers, who may be in one or more
industries and occupations.
2. Common interest: There is certain common interest of the member workers. The
leader of the trade union is supposed to pursue and protect the economic and other
interest of the members which leads to their welfare.
3. Collective action: After thorough discussions in the meeting of trade union the leader
of the union takes collective steps to press their demand before the management.
4. Permanent & continuous association: A trade union is a permanent and continuous
organization. They persistently pursue their purpose conceive of their purpose as one,
which is not merely immediate but continuous and long term as well. They do not
expect to attain their purpose in a day because they anticipate and contemplate a
continuing stream of additional objectives to be adopted from time to time.
5. Association engaged in securing economic benefits: Trade unions attempts is to
secure control of supply of labor in one or more markets and to maintain that control
as a mean of fixing the price of labor as well as the conditions under which they
works.
6. The origin and growth of trade union have been influenced by a number of
ideology: The socio economic and even political movement have influenced trade
union in one or other way
7. Other benefits: Trade union is not only confined to economic benefits, but other
benefits such as cultural, political, social and psychological are also within their
broader preview.
2.5.2 Types and structure of the trade union
Ever since the dawn of industrialization there has emerged a wide variety of unions
across the globe these unions can be classed under two categories
 The purpose for which unions are formed
 The variation in the composition of their membership
(A) Union classification according to the purpose
Under this head normally two type of union have been kept.
1) Reformist
2) Revolutionary
Reformist unions
Such unions don’t believe in the destruction of economic, social and management
structure of the state or concern but want only to modify them and to have favorable
response for their members through negotiation and other peaceful manners. The
reformist union is subdivided in two parts:
(a) Business unionism: Business unions are those unions that are maintained
primarily to represent the workers in collective bargaining with the employers.
They are distinct from other reformist which tries to bring economic advantage to
their members.
(b) Friendly or Uplift unionism: Idealistic in nature and aspires to elevate the moral,
intellectual and social life of the workers and advocate idealistic plans for social

51
 regeneration. They emphasize such other consideration as education, health,
insurance etc.
Revolutionary Unions
Such unions aim at destroying the present structure and replacing it with the new and
different institution according to the ideals that are regarded as preferable. The
revolutionary unionism generally seeks to destroy capitalist industry to abolish the wage
system and substitute it with some other system generally socialist and communist. These
unions are further classified in two classes:
a) Anarchist unions: The unions which try to destroy the existing economic system
by revolutionary means called anarchist Unions. Such unions exists no more in
presently scenario.
b) Political unions: The unions which gain power through political action called
political unions. The main function of such unions is to eliminate the power of
capital and capitalists, redistributing wealth and giving effective power to
workers.
(B) Union classification on the basis of membership structure
The union can also be classified according to variations in the composition of the
members. On this basis unions have been classified in four categories:
Craft union: It is an organization of workers employed in a particular craft and trade or
in a single or few occupations. Such organizations link together those workers who have
similar skills, craft training and specialization, aiming to safeguard their interest.
Industrial union: It is an organization of workers which links all craftsmen and skilled
workers in any industry. It is organized upon the industry wise basis rather than the craft
wise basis.
Staff union: The term staff union is popularly used to both craft and industrial union. It is
organized the workers on the basis of craft working in same industry.
General union: It is an organization which covers various industries and laborers having
different skills. They have numerical superiority (large membership), for they are open to
all classes of workers and this is the source of their strength.

2.5.3 Trade union & Employees

Let us discuss now the relationship between the trade unions and the employees and why
employees join the trade union and how the trade union helps them.
(a) Objectives of trade union
Some important reason as to why workers organize themselves to form trade union are as
follows: -
1) To safeguard their interests: Workers often join trade union in order to have a
stronger voice to resist those actions of the management which are against their
interest. When employers cut wages or pay low wages; when working conditions are
unsafe or too unpleasant; when management, Interfere in worker’s personal lives,
workers resist by forming unions. Through the unions they petition management for
change and if don’t succeed; they may resort to a concerted work stoppage “a strike”.
2) To participate in union activities: Workers may join unions to obtain certain health
or insurance benefits or to participate in educational program or to learn about their
own business and occupation. They may also join to engage in social and community
activities.

52
3) To exercise leadership: Some workers join union as an outlet for their own
ambitions. They have leadership traits and to explore the power of the trade union to
be a leader they joins the trade unions.
4) To get hike in wage rate : One of the important objective behind workers joining a
union has been their belief that they would get wages increased and have stronger
impact through collective action.
5) To maintain good relation: Another reason of employees joining trade unions may
be broader realization on their part that trade unions maintain the employer –
employee or labor management relation.
6) To maintain adequate working conditions: Employee may join trade union because
of their belief that unions are effective way to secure adequate protection from
various hazards and financial security during situation like accident injury, illness,
unemployment etc.
7) To get a media of communication: The employees may join the unions because of
their feeling that this would enable them to communicate their views, ideas, feeling
and frustrations to the management and exercise an effective voice to the
management decision on the matter concerning their welfare.
8) To do fair dealing: The employees may join trade union to ensure a just and fair
dealing by management and well planned actions. Through collective strength
restrain the management from taking any such action which may be irrational or
contrary to their interest.
9) To get employment: Sometimes workers join trade union because it is a precondition
to their getting employment. This is known as the ‘closed shop’ system.
10) To get strengthen: Since the employee alone as an individual feel specially weak in a
world of mass production and mass movement, he prefers to join an organization that
may offer him an opportunity to join other for the achievement of those objectives
that he consider as socially desirable.

Activity1-Understanding the right of unions to organize

Take about 10 minutes
 Why do workers organize themselves into a trade union?
 What are the requirements to form a union?

Commentary: The worker joins a trade union for a variety of reasons, but he may be
no more conscious of the motive or motives that prompt him to join a union. The
trade unions are the voluntary organizations formed by working male and female
workers both to improve the conditions of labor and to further to attain better life.

(C) Functions of Trade Unions

A trade union is an organization whose membership consists of workers and union

leaders, united to protect and promote their common interests.
The principal purposes of a labor union are to (1) negotiate wages and working
condition terms, (2) regulate relations between workers (its members) and the

53
employer, (3) take collective action to enforce the terms of collective bargaining, (4)
raise new demands on behalf of its members, and (5) help settle their grievances. A
trade union may be: (a) A company union that represents interests of only one
company and may not have any connection with other unions.

Trade unions perform a number of functions in order to achieve the objectives.

These functions can be broadly classified in to the following categories:

1. Militant functions,
2. Fraternal functions
3. Social functions
4. Political functions

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 unions fail to accomplish these aims
by the method of collective bargaining and negotiations, they adopt an approach and
put up a fight with the management in the form of go-slow tactics, strike, boycott,
etc. Hence, these functions of the trade unions are known as militant or fighting
functions. Thus, the militant functions of trade unions can be summed up as:

• To achieve higher wages and better working conditions

• To raise the status of workers as a part of industry
• To protect labors against victimization and injustice

2. Fraternal Functions

Another set of activities performed by trade unions aims 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 to 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, indoors 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 functions of trade unions can be summed up as:

• To take up welfare measures for improving the morale of workers

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• To generate self confidence among workers
• To encourage sincerity and discipline among workers
• To provide opportunities for promotion and growth
• To protect women workers against discrimination

3. Social Functions

Besides the main economic functions consisting basically of organizing unions and
improving their terms and conditions of employment to enable workers to meet their
physical needs, some unions have now started undertaking and organizing welfare
activities and also providing variety of services to their members and sometimes to
the community of which they are a part, which may be grouped under following
heads:

1) Welfare activities provided to improve the quality of work life including

organization of mutual fund, cooperative credit societies for providing housing,
cooperative stores, cultural programs, banking and medical facilities and training for
women in various crafts to help them to supplement their family income.

2) Education: Education of members in all aspects of their working life including

improving their civic life, awareness in the environment around them, enhancement
of their knowledge particularly in regard to issues that concern them, their statutory
and other rights and responsibilities, workers’ participation in management.

3) Scheme and procedure for redressing their grievances. Some central union
organizations are also assisting the Government in implementing the Workers’
Education Scheme.

4) Publication of periodicals, newsletters or magazines for establishing

communication with their members, making the latter aware of union policy and
stand on certain principal issues and personnel matters concerning members, such as
births, deaths, marriages, promotion and achievements.

5) Research: Of late, this is gaining importance and is intended mainly to provide

updated information to union negotiators at the bargaining table. Such research is to
be more practical than academic, concerning problems relating to day-today affairs
of the union and its activities and union and management relations. Some of the
research activities are: (i) collection and analysis of wage data including fringe
benefits, and other benefits and services through surveys of comparative practices,
data on working conditions and welfare activities; (ii) preparation of background
notes for court cases and also position papers for union officials; (iii) collection and
analysis of macro data relating to the economy, industry sectors etc. All the above
mentioned activities and services are considered normal activities of unions in the
Labor Law which stipulates the objectives on which general funds of the union can
be spent.

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6) To adopt themselves to charging social needs and to rise above divisive forces of
ethnic, religion and language and to help in promoting national, social and emotional
integration at all levels.

7) To instill in their members a sense of responsibility towards industry and the

community. Further they should seek to harmonies the sectional goals of their
members with the community interests in the larger good of the society;
8) To organize the unorganized sections of the working class in the rural and urban
areas and help these groups in organizing themselves. They should involve
themselves more in the uplifting of those below the poverty line, rather than strive
for achieving more comforts for the privileged section of the organized labor.
9) To encourage capital formation by supporting small savings schemes;
10) To support modernization of equipment and rationalization programs;
11) To work for a stable social order by establishing industrial democracy and social
justice; and
12) To help in holding the price line by keeping a vigilant watch on prices.

4. Political functions

These functions include affiliating the union with a political party, helping the
political party in enrolling members, collecting donations, seeking the help of
political parties during the periods of strikes and lockouts.

2.5.4 Role of the trade unions

Trade union performs various roles regarding the various classes of the society as
follows: -
• Role towards the members of union
• Role towards the organization
• Role towards the union
• Role towards the society
Let us explain these roles in details:
(A) Role towards the trade union member
The trade union performs following duties regarding their member’s employees:
1) To safeguard the workers against all sort of exploitation by the employers, by
union and by political parties.
2) To protect workers from the unfair labor practices of the management.
3) To ensure healthy, safe and conducive work conditions.
4) To exert pressure for the enhancement of reward associated with the work only
after making a realistic assessment of its practical implication.
5) To ensure a desirable standard of living by providing various type of services
such as health, housing, education, recreational, cooperative etc.
6) To guarantee a fair deal and social justice to workers.
7) To remove the dissatisfaction and redress the day-to-day grievances and
complaints of workers.
8) To encourage the worker’s participation in the management of organization.

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9) To make the workers aware about their rights and duties.
10) To settle the disputes through negotiation, joint consultation and voluntary
arbitration and through adjudication.
(B) Role toward the Industrial organization
Trade unions perform following functions for the industrial organization in which
they are working:
1) To highlight the organization as a joint enterprise between workers and
management and to promote identity of interest.
2) To increase production quantitatively as well as qualitatively, by laying down the
norms of production and ensuring their adequate observance.
3) To help in maintenance of discipline.
4) To help in removal of dissatisfaction and redressal of day-to-day complaints and
grievances and ensure workers loyalty.
5) To create opportunity for worker’s participation in management and strengthen
the co-operation.
6) To promote harmonic relationship between workers and management by setting
disputes through negotiation, joint consultation and avoiding litigation.
7) To create favorable opinion of the management towards trade union and improve
their status in industrial organization.
8) To exert pressure on the employers to enforce legislative provision beneficial to
workers, to share the profit equitably and keep away from various type of unfair
labor practice.
9) To facilitate communication with management.
10) To impress upon the management the need to adopt reformative and not punitive
approach towards worker’s fault.
(C) Role toward the trade union organization
1) To improve financial position of the concern by fixing higher subscription, by
realizing the union dues and by organizing special fund raising campaigns.
2) To preserve and strengthen trade union democracy.
3) To train members to assume leadership position.
4) To improve workers network of communication between union and its members.
5) To promote harmonic relationship between different unions to create a unified
trade union movement.
6) To resolve the problem of factionalism and promote unity within the union.
7) To prepare and maintain the necessary records.
8) To manage the trade union organization on scientific lines.
9) To publicize the trade union objectives and functions, to know people’s reaction
toward them and make necessary modification.
(D) Role toward society
1) To render all sort of constructive co-operation in the formulation and
implementation of plans and policies relating to national development.
2) To actively participate in the development of the programs of national
development such as family planning, forestation, national integration etc.
3) To launch special campaigns against the social evils of corruption, ethnicity,
racism, etc.
4) To enable unorganized sector to organize itself.

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5) To create public opinion favorable to government’s policies and plans and to
mobilize people’s participation for their effective implementation.
6) To create public opinion favorable to trade unions thereby raising their social and
public image
7) To exert pressure, after realistically ascertaining its practical implication on the
government to enact legislation conducive to the development of trade unions and
their members.
So in above way the trade union plays an important role toward the various
concerned parties.

Activity2 –functions and roles of unions

Take about 15 minutes
 Discuss the functions and roles of trade unions in Ethiopian.

Comment: Refer to the labor proclamation No. 377/2003

2.5.5 Requisites for Making More Effective Trade Unions

The necessary conditions for making trade unions more effective are as follows:
i. Membership:
A trade union is based on its organizational strength. The trade union should possess
maximum membership in order to consolidate itself as an organization. In order to
make trade unions effective instruments of labor welfare, it is important that workers
should become its members. A nominal membership will not be working in this
area. To make a trade union more effective, all the workers should be actively
associated with the work of the trade union.

ii. Strong Economic Base:

For a successful functioning of the trade union, it not only needs members but also a
strong monetary base. The trade unions need large funds to support their members in
times of emergency such as strikes and lockouts. The trade unions do not have
special means of collecting funds. So, it is necessary that all the members contribute
regularly for their working. However, the membership fee differs from one firm to
another taking various other factors into consideration.

iii. Freedom from External Pressures:

Trade unions should function as independent organizations. They should be free
from any external pressure or control. Various political parties do try to influence the
trade unions, as they are more concerned about their selfish ends rather than the
workers’ welfare.

iv. Spirit of Unity:

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A trade union is based on the spirit of unity and sacrifice among its members. Trade
unions are able to function only on the strength of unity. For solving any problem,
unity among the members of the trade union is very important.

v. Capable Leadership:
Capable and efficient leaders are required for the successful working of the trade
unions. A person who is dedicated and thinks about the welfare of the workers
should lead a trade union. Few trade unions are quite selfish and use the workers for
their own selfish ends.

Thus, it is very important that the leadership of the trade unions should be given to
those who are genuine and selfless and interested in the welfare of the workers. The
leader of the trade union should himself be a worker, because only a worker can
understand the problems of the workers.

vi. Practical Outlook:

The main aim of the trade unions is to look after the interests of the labor and
promote their social and economic welfare. These aims can only be achieved in the
context of industrial prosperity. Therefore, it is important to consider the economic
and monetary conditions off the industry in order to achieve the social and economic
wellbeing of the workers.

In this context, it is necessary that a trade union should adopt a practical attitude to
all the problems and act only if the problem is practical and if there is a possibility to
meet the actual conditions. Unreasonable demands will create conflicts and
disharmony.

vii. Democratic Outlook:

The democratic structure in a trade union contributes to its successful working. By
democratic structure we mean that the opinion of each and every member should be
taken into account. While exercising the privilege of vote in trade union affairs, the
member develops a sense of dignity and makes a mark of his importance. This helps
to keep up his morale and loyalty. It is always preferred that the workers themselves
should choose the leaders of the trade unions democratically.

viii. Constructive Outlook:

The trade unions should adopt a constructive attitude in order to achieve their goals.
The workers should not think their bosses as enemies but instead try to settle their
problems by mutual consultation. Few trade unions try to poison the minds of
workers against the employers and try to instigate them to violence. This kind of
negative attitude will not work out. Trade unions should adopt a policy, which is
beneficial for both the employees and the employers.

ix. Freedom from Politics:

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 Political interference greatly undermines the importance of trade unions. Sometimes,
the union leaders forget their main aims and indulge in politics. These kinds of
leaders do not benefit the workers rather harm their interests.

x. Aims of Welfare:
The primary aim of any trade union should be the welfare of the workers. The trade
unions should refrain from all such activities, which act as constraints to the welfare
of the workers.

2.5.6 Unfair Labor Practices

2.5.6.1 On the Part of Employers and Trade Unions of Employers

1. To interfere with, restrain from, or coerce, workmen in the exercise of their right to
organize, form, join or assist a trade union or to engage in concerted activities for
the purposes of collective bargaining or other mutual aid or protection, that is to say
—
(a) threatening workers with discharge or dismissal, if they join a trade union;
(b) threatening a lock – out or closure, if a trade union is organized;
(c) granting wage increase to workers at crucial periods of trade union organization,
with a view of undermining the efforts of the trade union.
2. To dominate, interfere with or contribute, support, financial or otherwise, to any
trade union, that is to say—
(a) an employer taking an active interest in organizing a trade union of his
employees; and
(b) an employer showing partiality or granting favor to one of several trade unions
attempting to organize his employees, or to its members, where such a trade union
is not a recognized trade union.
3. To establish employer-sponsored trade unions of employees.
4. To encourage or discourage membership in any trade union by discriminating
against any employee, thus is to say—
(a) discharging or punishing an employee, because he urged other employees to join
or organize a trade union;
(b) discharging or punishing an employee for taking part in any strike or changing
seniority rating of employees because of trade union activities;
(c) refusing to promote employees to higher posts on account of their trade union
activities;
(d) Giving unmerited promotions to certain employees with a view of creating
discord amongst other employees, or to undermine the strength of their trade
union;
(e) discharging office-bearers or active members of the trade union on account of
their trade union activities.
5. To discharge or dismiss employees —
(a) by way of victimization
(b) not in good faith, but in the colorable exercise of the employers’ rights; by falsely
implicating an employee in a criminal case on false evidence or on concocted
evidence
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 (c) for patently false reasons;
(d) on untrue or trumped up allegations of absence without leave;
(e) in utter disregard of the principles of natural justice in the conduct or domestic
inquiry or with undue haste;
(f) for misconduct of a minor or technical character, without having any regard to the
nature of the particular misconduct or the past record or services employee,
thereby leading to a disproportionate punishment.
6. To abolish the work of a regular nature, being done by employees, and to give such
work to contractors as a measure of breaking a strike.
7. To transfer an employee mala fide from one place to another, under the guise of
following management policy.
8. To insist upon individual employees, who are on a legal strike to sign a good
conduct bond, as a pre-condition to allowing them to resume work?
9. To show favoritism or partiality to one set of employees, regardless of merit.
10. To employ employee as casuals or temporaries and to continue them as such for
years with the object of depriving them of the status and privileges of permanent
employees.
11. To discharge or discriminate against any employee for filing charges or testifying
against an employer in any inquiry or proceeding relating to any industrial dispute
12. To recruit employees during a strike that is not an illegal strike.
13. Failure to implement award, settlement or agreement
14. To indulge in acts of force or violence.
15. To refuse to bargain collectively, in good faith with the recognized trade unions.
16. Proposing or continuing a lockout deemed to be illegal under the labor law

2.5.6.2 On the Part of Employees and Trade Unions of Employees

1. To advice, actively support, or instigate any strike deemed to be illegal under the
labor law
2. To coerce employees in the exercise of their right to self-organization or to join a
trade union or refrain from joining any trade union, that is to say-
(a) For a trade union or its members to picketing in such a manner that non-striking
employees are physically debarred from entering the work places;
(b) To indulge in acts of force or violence or to hold out threats of intimidation in
connection with a strike against non-striking employees or against managerial
staff.
3. For a recognized union to refuse to bargain collectively in good faith with the
employer.
4. To indulge in coercive activities against certification of a bargaining
representative.
5. To stage, encourage or instigate such form of coercive actions as willful ‘go
slow’, squatting on the work premises after working hour or ‘holdup’ of any of
the members of the managerial or other staff.
6. To stage demonstrations at the residences of the employers or the managerial staff
members
7. To incite or indulge in willful damage to employer’s property connected with the
industry.
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 8. To indulge in acts of force or violence or to hold out threats of intimidation
against any employee with a view of preventing him from attending work.

2.5.7 Future roles of trade union

Historically, unions have been playing the role of agitators and bargainers. The thrust of
their activities has been towards the economic well being of the workers. In future unions
should be encouraged to make a thrust towards the psychological and social well being of
the workers. Some important areas in which they can participate are as follows:
a) Communication: Unions can pass on greater and more varied information to the
workers about themselves and the organization. At present they only communicate
on service conditions and related issues under the belief that workers are not
interested in receiving information on other issues. This is wrong.
b) Counseling: Union can play a very positive role in providing counseling services to
employees regarding the social evils.
c) Education and training: Another important area in which unions can play a
development role is education of workers. Unions can help them acquire new human
relations and work-related skills such as skills of collaboration, empathy, collective
action, etc.
d) Welfare: Unions can help management in developing innovative welfare schemes
for employees such as workers’ cooperatives, workers banks, nursery schools, etc.
e) Family and vocational guidance: Unions can help workers families in several ways.
For example, they can provide guidance in respect of the education and career of
workers children. They can help in creating jobs for the wives of workers and so on.
f) Research: Unions can play a very significant role in generation of data in various
dimensions of workers needs aspirations, standard of living, etc. For this purpose
they can launch research projects either independently or in collaboration with
academic institutions.

2.6 Obstacles in the future growth of trade unions

Our trade unions are not so developed as in the western countries due to following
reasons:-
1) Low membership:
2) Uneven growth of Trade Unions
3) Multiplicity of Trade Unions
4) Absence of paid office Bearers
5) Weak financial position
6) Lack of interest
7) Lack of public support
8) Limited stress on welfare

2.7 Corrective measures to improve the Trade Unions

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 1) There should be a strong base to develop the Trade Union by safeguarding the
interest of the members and by achieving the target of production.
2) To make effective unionism there should be one union in one industry.
3) Unions are influenced by political parties. Hence, there interference should be
eliminated.
4) There should be training programs to develop the internal leadership.
5) It will be more effective if office bearers of the Trade Unions are well paid.
6) Trade Unions are financially weak. This problem can be solved by raising the
membership and collecting more funds for unions.
7) Most of the unions are engaged in industrial disputes they do not undertake
economic, social and cultural activities which are equally important for raising
welfare of the working class. Trade Unions are less recognized. Hence, the
proper recognition of unions will make them more effective.

Activity3-Reasons for employees to join or not a union

Take about 10 minutes

1. Why employees join or not join trade unions?

2. What could be done to strengthen trade unions?

Comment: 1. Aside from social pressure to join a union, some workers become
union members simply because the employment contract requires them to do so.
It would appear that unions serve a broad network of employee needs. One of the
big reasons workers join a union is to ensure fair treatment in the workplace.The
problem with a union is that it strips away any control you have over that life-
changing question.
2.Some measures that can strengthen the trade union movement: Maintaining
Unity, Free from Political influence, Workers Education, Adequacy of Funds,
Welfare Activities for Workers, etc.

Summary

Trade unions are the associations of employees working as an agent of working class.
These unions not only safeguarding the financial interest of the workers but also
providing the other benefits such as cultural, political, social and psychological within
their broader preview. Trade unions adopt both the aggressive as well as federal measures
to solve the problems.

Key Terms: Trade union. Employees, Types of trade unions, Theory of unionization

SELF ASSESSMENT QUESTIONS

1. Define the term Trade Union and its features.

2. What do you mean by Trade Union? Describe the various types of the trade
unions.

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 3. Why the employees unions the Trade Unions and what functions a Trade Union
performs for their employees?
4. Describe the role of the Trade Unions.
5. Write a note on the current condition of trade union in Ethiopia? Put a light on its
future.
6. Explain the Nature and Scope of Trade Union?
7. What are the characteristics of a Trade Union?
8. Explain the Structures and types of Trade Unions in Ethiopia?

Unit III Labor Law

Unit Presentation content

3.1 The Concept, Development and Scope of Labor Law

3.1.0 Learning Objectives

3.1.1 Introduction

3.1.2 The Concept of Labor Law

3.1.3 Development of Labor Law in General

3.1.4 Development of Labor Law in Ethiopia

3.1.5 Scope of Labor Law

3.1.5.1 Who is a Worker?

3.1.5.2 Excluded Employment Relations

3.2 Contract of Employment
3.2.1 Definition of an employment contract
3.2.2 Obligations of an Employer
3.2.3 Obligations of a Worker
3.2.4 Termination of Contract of Employment
3.2.5 Effects of unlawful Termination
3.3 Psychological contract
3.3.1 Definition of Psychological contract
3.3.2 Contents of the Psychological Contract

3.4 Hours of Work, Leaves and Occupational Safety and Injury

3.4.1 Hours of Work

3.4.2 Leaves

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3.4.3 Preventing Occupational Injury
3.4.4 Medical Treatment and Compensation

Summary

Key words

Self assessment questions

Unit III Labor Law

3.1 The Concept, Development and Scope of Labor Law

3.1.0 Learning Objectives

At the end of this section, you should be able to:

 Explain the concept of labor law;

 Identify the development of labor law in general and in Ethiopia in particular;
 Identify the forces that shaped the development of labor law to its present
features; and
 Distinguish the types of employment relationships that fall within the
purview/scope of labor law.
 describe the elements of contract of employment;
 Identify how duration of contract of employment is determine;
 State the obligation of a worker and an employer under the contract;
 Explain the way and reasons of varying and suspending contract of employment;
 Determine if termination of a contract of employment is lawful or unlawful; and
 Identify the special categories of employment contracts.
 Discuss the general issues related to minimum working condition;
 Evaluate the rules and regulation related to working hours, rest and leaves;
 Assess the rules that regulates the safety and health issues in employment
relationships;
 Identify the enforcement mechanisms of safety and health rules; and
 Asses the mechanisms of compensating employment injury.

3.1.1 Introduction

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Dear students, this unit will get you to some of general points about labor law. After
having this general understanding about labor law, you will see the development of labor
law in general. Then, the development of labor law in Ethiopia will follow. The
discussion on the development of labor law in these two consecutive sections will deal
with the circumstances that have given raise to labor law in the course of human history
and the factors that determined its content and purpose through its development. Next it
will discuss the scope of labor law in Ethiopia. The discussion will state and explain the
types of employment relationships which are governed by what is commonly known as
labor law and its major contents that pertinent to the employment relationship that exist
between the employee, union and management. In addition, this unit deals with the
duration of contract of employment and hence, you will see the extent to which the
parties are free to determine the duration of their contract, the effects of contract of
employment and various rights and obligation of the parties following the conclusion of
a contract of employment.

Contract of employment, once concluded does not mean that the terms will not be
touched or the relationships are uninterrupted. Thus, unit deals also with variation and
suspension of contract of employment. The point to be discussed here is the ways and
reasons of changing and modifying, that is, variation of the terms of contract of
employment, the ways and reasons for suspension of contract of employment for some
period of time and the existence, contract of employment. Termination of contract of
employment is the most serious point in employment relationship because the contract of
the parties ceases to exist and may cause question of compensation to rise.

Contract of employment initiates the relationship between an employer and workers. It is

the agreement concluded by both to have employment relationships. But the law requires
the parties to fulfill certain requirements such as legal ability to do so, their free consent,
defining their obligations clearly, etc. Normally, in employment contract, the major
obligation of a worker is to give services to his employer and that of an employer is to
pay wage to his employee. Upon conclusion of the contract, the employment relation
between them is started. Contract of employment can either be concluded for definite or
indefinite duration. But parties are not free to determine the duration of their contract. In
principle, contract of employment is concluded for indefinite period. The parties can
conclude the contract for definite duration only when the work is not continuous in
nature. That is what it implies under Articles 9 and 10 of the Labor Proclamation.

Once the contract of employment is concluded, it does not mean that the terms of their
contract are untouchable. At any time, the parties are at liberty to change or alter the
terms of their contract. This is what is called variation of contract of employment. The
parties themselves can change certain terms of their contract by agreement. Collective
agreement and rules issued by the government can also result in variation of employment
contract. There are also the possibilities of suspension of employment contract with

66
effects of relieving the parties temporarily from discharging their obligations under the
contract.

Moreover, concluding employment contract does not mean that the contract stays forever.
There are situation in which a contract of employment is terminated with the effects of
ending the employment relationships. In this regards, there are various grounds upon
which contract of employment can be terminated. It can be terminated by the operation
of law, in case of, for instance, death of the worker or bankruptcy of the undertaking. The
parties can at any time agree to terminate their contract of employment, but their
agreement must be reduced into writing. There are also situations whereby one of the
parties by unilateral decision can terminate the contract. But the employer can
unilaterally terminate the employment contract only if the grounds provided by the law
are fulfilled. There is no ground required if a worker wants to unilaterally terminate his
employment contract except giving notice to the employer, which is 30 days.

Any termination of employment contract which contravenes the provisions of law is

unlawful termination. Termination of employment contract has certain effects such as
payment of severance pay, compensation and reinstatement. In principle, severance pay
is the effect of termination of employment contract irrespective of the manner in which it
is terminated lawful or unlawful, by law or by the unilateral decision of either of the
parties. But the right to get severance pay is somehow limited in scope under the
Ethiopian labor proclamation. Every termination may not entitle the worker to get
severance pay. There are also special categories of contract of employment. There are
contracts of young workers, female workers, apprentices, and home work contracts.
These contracts are special because there are certain special protections and privileges
legally provided.

3.1.2 The Concept of Labor Law

Dear student, to make it easy for your understanding of the concept of labor law, you will
first study the definition of labor law and next the sources of labor law. These discussions
help you to analyze the concept of labor law in detail.
Can you define what labor law is?
The term labor law is defined by different writers in different ways. But it is possible to
take one of the most common definitions. Labor law is mostly defined very generally as
the law that regulates employment relationships between worker and employer. The term
“employment” implies a situation where a person’s effort, knowledge and time are used
by another person who does something in return. That means, an employment
relationship is a relationship created by a contract in which one person, the worker,
agrees directly or indirectly to perform work for another person, the employer, in return
for a wage. Thus, labor law it basically concerned with the determination of the terms of
employment and condition of work in employment relationships.

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Although employment relation is created by a contract of employment between a worker
and an employer, it is an area where society, workers collectively and employers
collectively have interests. Accordingly, labor law includes rules that are intended to
protect society’s interests and define society’s obligations. Moreover, the employment
relation between workers and employer is divvied in to two: individual employment
relation and collective employment relation. An individual employment relation is that
existing between the contracting worker and employer whereas collective relation is that
existing between workers and employers collectively. The best example to the collective
aspect is the relation between trade union formed by worker of a factory and the
employer. Workers can organize themselves they have with their employers. Therefore,
you can easily understand that there are two major aspects of labor law: one regulating
the individual aspect and the other regulating the collective aspect.

Activity 1: understanding individual aspects of employment relationships

Take about 15 minutes
Suppose that w/ro Lemlem owns textile factory here at Bahir Dar. She needs several
workers. Thus, she employed Ato Muluneh as an accountant and other thirty workers in
different sections of her factory. Each worker has concluded a contract of employment
with w/ro Lemlem. Each contract has detailed terms and condition of employment related
to the type of work of the worker. State what individual and what collective labor relation
have arisen out of this contract?

Comment: Examples of the individual labor relation are amount of salary and type of
work which are determined on individual worker basis through negotiation with the
employer. About collective labor relations, all the workers of w/ro Lemlem have the right
to establish their association and negotiate with her through their association to improve
their conditions of work.

What are the sources of labor law? In other words, where do you find the rules which are
considered as labor law? Just like any other law, labor law has its own sources that are
the reflection of its rules and principles.
There are four major sources of labor law.
A) Contract of employment: The contract of employment that the worker and his
employer conclude is the base for their employment relationships. Once the parties are
agreed upon the terms without violating the limitation, it plays a great role in regulating
their relationships on daily basis. Therefore, contract of employment is one of the major
sources of labor law.
B) Collective agreement: Collective agreement is an agreement between worker
collectively through their trade union and their employer. It is the end result of collective
bargaining process. Once the collective agreement is concluded; it is binging upon both
parties, and hence, become the major sources of labor law.

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C) The minimum labor standards set by national laws: The minimum labor standards are
related to issues such as working hours, leaves, wages safely and health, etc. These
standards could be provided by various laws and regulations, and are mainly the
limitations to the freedom of the parties to determine the terms of their agreements. The
agreements of the parties may not derogate from these standards. According to Article
55/3/ of the FDRE Constitution, the power to issue the labor proclamation in Ethiopia is
given to the House of Peoples Representatives/ Federal parliament; accordingly, it
enacted labor proclamation No.377/2003 that provides standards of labor relations. The
States/ Regional Governments do not have the power to issue labor law as clearly
determined by the FDRE Constitution.
D) International Conventions: There are certain international Conventions related to labor
relations. These are mainly those conventions adopted and ratified by member states of
International Labor Organization (ILO). Ethiopia is one of the founding members of
ILO’s since its establishment in 1919; ILO has come up with several international labor
conventions. Now, there are more than thirty international conventions that provide some
rules related to employment relationships and minimum labor standards. The labor
standards provided by those conventions include issues related to working hours,
minimum wage, freedom of association, and other rights given to parties to employment
relation. Ethiopia is a party almost to all of the ILO’s Conventions. Article 9 of the FDRE
Constitution provides that “all international agreement ratified by Ethiopia are an integral
part of the law of the land.” That means, international convention once ratified by
Ethiopia become part of the legal system of the country. In other words, any international
convention signed and ratified by Ethiopia will be just like any primary legislation such
as the civil code, the Labor proclamation, etc. Therefore, international convention can be
one sources of labor law.

Activity 2: Categorizing labor law

Take about 15 minutes
Different laws can be put in different categories depending on their natures. Where do
you think the following laws should be categorized? Respond to this question by putting
a tick mark in the area corresponding to each of the laws under the columns.

Types of law public Law category private Law category

Tax Law
Labor Law
Law of contract
Criminal law

Comment: Hopefully you have seen classifications of laws in your business law course,
for example law of agency is categorized as private law. Thus, based on such
classification of laws, you have to identify where labor law is categorized.
3.1.3 Development of Labor Law in General

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When we talk about the development of labor law, we are talking about its history. The
origins of labor law can be traced back to the remote past and the most varied parts of the
world. The European writers often attach importantly to the guilds and apprenticeship
systems of the medieval world. Some Asian scholars have identified labor standards as
far back as the laws of Hammurabi and rules for labor-management relations in the laws
of Manu.
Nevertheless, labor law, as it is known today, is essentially the child of successive
industrial revolutions that has happened since 18th century. Labor law first becomes
necessary when customary restraints and the intimacy of employment relationships in
small communities ceased to provide adequate against the abuses incidental to new forms
of mining and manufacture on a rapidly increasing scale. It developed rather slowly,
mainly in the more industrialized countries of Western Europe, during the 19 th century
and has attained its present importance, relative maturity, and worldwide acceptance only
during the 20th century. In the early phases of its development, the scope of labor law was
limited to the most developed and important industries, undertakings above a certain size
and to wage earners. These limitations became gradually eliminated and the scope of the
laws extended to include handicrafts, rural industries and agriculture, small undertaking
and office workers. Thus, a body of law originally intended for the protection of manual
workers in industrial enterprises gradually transformed in to a broader body of legal
principles and standards.
Prior to late 18th century, the society was mainly agrarian and feudal system was
dominant. The production system was such that a person produced the goods by himself
with his own means of production and then took the goods to the market for sale by
himself. With the emergence of capitalism and industrial revolution, this system of
production was changed into factory system in which relationship between two persons
emerged; the one who owns the means of production and the other who just uses his
labor. As a result, two classes emerged; the bourgeoisie and the worker.
A parallel development at that time was that towards the middle of 18 th century, it began
to be felt that there was too much of government which was destroying individual
initiatives and affecting the prosperity of the nation. The feeling led to the evolution of
the doctrine of Laissez Fair which means” let thing alone.” The doctrine asserts that the
nation would be best served that an individual was allowed to pursue his self-interest
without restriction from outside. It asserts that individual would put forth his best efforts
willingly in activities of his own choice for which he considered himself most fitted and
would thus become a more productive member of the society. In the sphere of
employment, the doctrine was translated in to terms of concrete policy, means that every
individual was free to enter any occupation or service of his/her choice between the
employer and the employee. The bargain concluded that would thereafter be the rule
governing their employment relationships.
Although two independent classes emerged, the theory of complete economic freedom of
individuals under the theory of laissez fair brought a lot of problems such as income
insecurity, wide-scale use of child labor, poor working condition, unemployment,
economic insecurity, urban slums, disease and miserable life to the working class of the
society while brought abundant life for owners of factories. It was found that the
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employers were imposing in the name of freedom of contract, cruel and harsh terms on
the employees. Employees who had no equal bargaining power with the employers were
forced to work for hour under appalling conditions. Moreover, the employees had even
no adequate means of relief against the employer for disputes or injuries sustained in their
services. The law and the governments of the day were not ready to fine solution due to
the principle of freedom of contract. As a result, workers were not allowed to form their
association /trade union; no collective bargaining and strike. Forming trade union,
bargaining collectively with the employer, and taking strike were considered as a
criminal conspiracy. Moreover, employers were able to get civil injunction orders from
the court when workers had to collectively bargain or take strike.
These problems, in turn, produced other economic and political theories sharply opposed
to laissez faire capitalism. It was the spread of the new ideas that there must be fair
distribution of wealth and public control over the resources of production, coupled with
the increasing political influences of the working classes, led to a theory called the
welfare state. The theory of welfare state requires government intervention in the
economy for the overall direction of the economic system. It is the government’s business
to secure the economic welfare of its entire people through whatever regulation of
economic activity may be necessary for that end. This theory has been accepted by
government since the second half of 19th century. Many countries have gradually
developed laws, policies, and government agencies to regulate the economy and protect
the economic security of the entire society. Since then, labor law has developed as part of
these processes to its present feature.

Activity 3: Comparing Laissez Fair and welfare state theories

Take about 15 minutes
Work on the activity provided below. It helps you to clearly understand the contribution
of the two theories to the emergence of the concept of labor law. The first one or two
elements are done to give you a kind of clue that guides you how to deal with it.

Theories Contents Effects on employment relation

Laissez  Complete economic freedom  Employers imposed
Faire  Let things alone cruel and harsh terms on
 _____________________ workers.
_____________________  Bad working conditions.
 ___________________
___________________

Welfare  Government intervenes in the  Government intervenes

State entire economy in employment relations
 _____________________  ___________________

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Comment: Here you need to first clearly comprehend the basic features/elements of the
two theories and try to identify their differences. Read carefully the discussion under the
topics the major theories related to labor law development.
3.1.4 Development of Labor Law in Ethiopia
So fat you have seen how the labor law emerged and developed to its present features at
international scenario. From the above discussions made, you understand that labor law
was developed with the development in industries. How about in Ethiopia? Would the
emergence and development of labor law different from the international perspectives?
Let`s see the emergence and development of labor law in Ethiopia as the foundation and
objective of this course.
Prior to the 1944, there was no significant development in industry in Ethiopia. Hence,
one can hardly talk about labor law during this period. But, it seems that the government
was aware of some issues related to employment. For instance, when ministries were re-
organized by law in 1943, one of the powers given to the Ministry of Interior was to
develop schemes for reduction of unemployment and maintenance of the poor. This
might not have direct relation with the contribution of development of labor law. But, it
clearly reflected the government’s concern on employment issues.
The first legislation on labor relations was issued in 1944 which was as the Factories
proclamation. This proclamation provided, mainly, the mechanisms by which business in
factories can be engaged by businessmen. In relation to employment, it provided the rules
that regulate issues of employment relationships in factories that were flourishing during
that time. It also gave the Ministry of Commerce and Industry the power to make rules
governing the health safety, and condition of work in the country. This was the only
government concerns to the labor relations in Ethiopia. Therefore, during this period,
there was no significant development of labor law.
A tremendous development of labor law in Ethiopia came only after the 1955 Revised
Constitution. The Revised Constitution recognized and guaranteed various right and
freedoms of citizens. For the first time the Constitution guaranteed freedom of
association of workers and recognized the formation of their association.
Article 47 of the constitution provides that every Ethiopian subject has the right to engage
in any occupation and to that end form an association. This provision gave an opportunity
for workers in the country to form their trade union. It helped them to form trade union
and collectively bargain with their employers. But, there was no enabling law or
procedure as to how to form, legalize and register when workers want to form their
association. These problems were solved when the Ethiopian government issued the
1960’s Civil Code. The 1960’s Civil Code provides for the formation, legalization and
registration of association (Article 406-482) and the minimum working conditions and
standards of employment (Article 2512-2609). However, the Code/law has left some key
uncertainties in the employment relationships. For instance, the Code/law does not lay
down anything as to how employees collectively bargain with their employer. In other
words, the Code does not provide the procedure of collective bargaining process.

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  Activity 4: Identifying what is provided under the civil Code
Take about 20 minutes
This activity helps you to identify the position of the Civil Code on employment issues.
The issues that the Civil Code provided in relation to labor law are treated in the table
hereunder. Try to deal with what were not provided in the Civil Code together with your
comments.

What were provided in the What were not provided in Provide your comments
1960 Civil Code of the 1960 Civil Code
Ethiopia about Ethiopia about
employment relations? employment relations?
Forming trade union
Legalizing trade union
Minimum working
conditions

Comment: Even though, the 1960 Ethiopian Civil Code answered some of the major
questions about employment relations, there were some important issues that failed to
observe. Here you may need to clearly understand the above discussion on provisions of
the Code related to labor law. For instance, the Civil Code did not provide any provision
on collective bargaining of workers with their employers.
Because of the uncertainties that are left by the Civil Code, in 1960s there were strikes in
industries throughout the country. Under this emergency situation, the Emperor issued in
1962 a Decree on labor relations that later became proclamation in 1963 (proclamation
NO. 210/1963).
The 1963 Labor Proclamation provided the following.
 The legalization and registration of trade union and employers association,
 The definition of the rights and obligation of workers and employers,
 The setting up of conflict resolution machinery and
 The power of Ministry of National Community Development to establish, by
regulation, the minimum standards of labor conditions.
The Ministry of National Community Development came up with a regulation in 1964
that dealt with the minimum standards of labor conditions and, as a result, modified the
provisions provided under the Civil Code. The 1963 Labor Proclamation favored more
the employers in many ways. For instance, the government was half-hearted in coming
up with the proclamation as its concern about the rise of communist ideology of the time.
One of the major problems with the 1963 Labor Proclamation was the lateness of the
minimum standards of labor conditions. The regulation was issued a year after the
enactment of the proclamation. The other problem in the regulation provided was with
regard to dispute resolution, individual labor dispute was considered as any ordinary

73
dispute to be resolved by courts in their normal litigation process. This in effect, affected
the right of the workers to exercise when employers took illegal action.
In 1974, the Derg government declaring the Provisional Military Administration
overthrew the Monarchical regime. As a result, the Derg declared nationalization of rural
land, urban houses, factories and business undertakings. It declared socialist ideology as a
guiding principle of the new government. With the change in ideology in 1974, the 1963
Labor Proclamation was repealed and replaced by a new proclamation issued in 1975.
This Labor Proclamation gave many rights to the workers such as the right to fully
participate in the management affairs of undertakings. However, the proclamation did not
recognize employers association.
Again with the change of regime in 19991, the Labor Proclamation was repealed and
replaced by the 1993 Labor Proclamation. This Proclamation has tried to strike balance
between both the interests of the workers and that of the employers. Many of its
provisions reflected this fact. For instance, it gave equal right to both workers and
employers to form their own associations. With the change of regime, there came change
in ideology. The command economic system of the Derg was changed to a more of free
market economy. It was with these changes that the 1993 Labor Proclamation was issued.
Until recently, it has been regulating the employment relation in the economic activities.
Now, the 1993 Labor Proclamation is repealed and replaced by a new proclamation in
2003.
Generally, the major laws regulating labor relations in Ethiopia currently are:
 The FDRE Constitution of 1995
 The Ethiopian Civil Code of 1960
 The Labor Proclamation No. 377/2003
 The Labor Proclamation No. 494/2004
 The 2011 public Servants pensions proclamation No. 714/2011
 The 2015 public Servants pensions proclamation No. 907/2015;
 The2011 private organizations employees pension proclamation No.715/2011
 The2015 private organizations employees pension proclamation No.908/2015
For the purpose of this module, the major focus is on the Labor Proclamation
No.377/2003 and its amendment proclamation 494/2004. This new proclamation
substantially incorporates the provisions and legal contents of the 1993 Labor
Proclamation. But there are some major changes in the area of severance pay, collective
employment relations, and dispute resolutions.

Activity 5: Analyzing Labor Proclamations in Ethiopia

Take about 15 minutes
This activity helps you to understand the historical background of the Ethiopian labor
law. Do the following activity relating to the historical and legal development of labor
law in Ethiopia.

The Proclamation Differences between socio- Comments

74
 economic systems behind the
proclamations
The 1963 Labor Proclamation
The 1975 Labor Proclamation
The 1993 Labor Proclamation

The 2003 Labor Proclamation

Comment: Each of the above mentioned Labor proclamations were the reflection of the
development of the socio-economic and political systems of the day. You may need to
remember the system and ideology of the government during that time.
3.1.5 Scope of Labor Law
Dear students, in the previous sections you have discussed that labor law is defined
earlier as the law that regulates the employment relationships of workers and employers.
Now, it is the time to ask if labor law in any country regulates all types of employment
relationships. Obviously, labor laws of countries differ in scope as its scope and
substance are determined by social, economic and political developments of each
country. In other words, it is important to see the scope of application of labor law in
Ethiopia. This discussion will help you to identify the kind of employment relationships
that Ethiopian labor law reregulates. First, you will see the definition of a worker. Then,
you will see the employment relation excluded from the coverage of labor law in
Ethiopia.
3.1.5.1 Who is a Worker?
If labor regulates the employment relationships established by a worker and an employer,
then other employment relationships are basically excluded from the application of this
law. However, before talking about the excluded employment relationships, it is
necessary to know clearly whose relationships are regulated by labor law of Ethiopia.
Who is then the worker within the meaning given under labor law?
Ethiopian labor proclamation No. 377/2003 Article 2 (3) defines that in this proclamation
“worker “means a person who has an employment relationship with an employer in
accordance with Article 4 of this proclamation. This means, to understand the definition
of a worker, it is necessary to know what is meant by employment contract and what is
meant be an employer. In this regard, Article 4(1) of this proclamation provides that a
contract of employment shall be deemed formed where a person agrees directly or
indirectly to perform work for and under the authority of an employer for a definite or
indefinite period or piece work in return for wage. Article 2(1) provides that employer
means a person or an undertaking that employs one or more persons in accordance to
Article 4 of this proclamation.
Dear students, are the concepts of worker and employer clear to you now? It seems that
they ate still unclear. It is obvious that there must be an employer if a person has to be
called ‘worker’. However, the important thing is the circumstances which cause someone

75
to be called a worker or an employer. In this regard, it is useful to read Article 4(1) and
Article 2(2) together. Article 4(1) shows that if someone has to be called a worker, he/she
must have agreed to work under the authority of the employer in return for a wage.
The owner of the work exercises his/her authority in determining the type of work to be
done, the materials to be used, the place and time of work. Working under the authority
of the owner of the work also indicates an agreement to perform the work personally, that
means, the parties to the contract cannot be considered as worker and employer if the
intention of the parties is the work to be performed without the direction of the owner of
the work or if the owner of the work is interested only in the delivery of the result at the
agreed time and place.
Moreover, Article 2/2/ the labor proclamation provides that undertaking means any entity
established under a united management for the purpose of carrying on commercial,
industrial, agricultural, or any other lawful activity. This sub-article shows that the spirit
of the law is that the employment relationship intended to be regulated by the labor law is
mainly that of the business or economic activities. This means, the contract of
employment concluded between a worker and an employer must relate to the carrying on
of commercial, industrial, agricultural and the like.

Activity 6: Making Situation analysis

Take about 20 minutes.
Read and Work on the following activity designed which helps you to understand the
definition of a worker.
In the table provided below, some employment relationships are listed. On the basis of
the above – discussed provisions of the proclamation, categorize those employees based
on the question proved under column 3 and 4. Then give your reasons in the form of
comments.

situation Is he/she a Comments

worker?
Yes No
Mulugeta is employed as a driver in a garment
factory.
Dechasa is employed as a lawyer in Addis Spare
Parts Share Company.
Helen is employed as an expert in the Ministry of
Justice
Halima is employed as an accountant in Safe way
Supermarket.

Comment: The employment relationship that is meant to be regulated by the labor law is
mainly that of the business or economic activities. The activities of some of the employers
76
in the above table are not business or economic activities and hence their employees are
not normally workers.
Dear students, what do you think is important to define the concept worker? One may
think that it is nonsense and waste of time trying to define what a worker is. The
definition of a worker has far- reaching legal consequences.
 You know that every citizen has the duty to pay income tax. The amount of tax
and the process of paying the tax depend up on the source and the amount of their
income. For instance, a worker and an independent contractor pay income tax
under different schedule of income tax law. Hence, if you are able to differentiate
a worker from an independent contractor, you can easily know under which
schedule of income tax law do fall each of them.
 Under the law of extra contractual liability, an employer is liable for a damage
caused by his worker to another person. Because an employer has vicarious
liability for his/her employees worked under his control and custody. From this
perspective, understanding the definition worker is important to determine
whether a person is a worker or an employer and hence vicariously liable. For
instance a client is not vicariously liable for a damage caused by his independent
contractor while an employer is liable for the damage caused by his worker.
 More than any other, the definition of the term ‘worker’ is very important to know
whether labor law should regulate a given employment relationship or not. In
other words, the definition is important to know whether the rights, privileges,
benefits, etc. that are recognized and provided under labor law are accrued to a
person. For instance, labor law gives workers the right to have rest, sick leave,
annual leave and the right to collectively bargain with their employer. A person
can enjoy these rights only if he is a worker with in the definition of labor law.

 Activity 7: Understand the relationship between employee and employer

Take about 20 minutes
The questions hereunder are related to your own personal experience. This
activity aims at to identify an employer from a worker considering the above
definition and your experience.
1. If you are an employee, who is your employer? Is your employer the one
defined under article 2/1/ and /2/ of proclamation 377/2003 or different?
Why?
2. Consider your relationship with your employer. Are you a worker with in
the definition labor law?

Comment: In answering the above questions, it is important to understand the provision

of Article 2/1/ and 2 of labor proclamation clearly. Particularly, you need to focus on the
activities undertaken by your employer and identify whether they are activities mentioned
under labor law.
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3.1.4.2 Excluded Employment Relations
Dear students, it is hoped that the definition of worker, employer and contract of
employment in the above section has helped you to identify with some degrees of
exactness that the type of employment relation regulated by Labor Proclamation No.
377/2003. To make your understanding more clear, you will discuss the employment
relations that are excluded from the scope of application of labor law. With regard to
exclusions of employment relations, this proclamation provides two categories of
employment relations: employment relationships totally excluded and conditionally
excluded from labor law.
With regard to totally excluded employment relation, Article 3(2) provides that the
provisions of the proclamation shall not be applicable to:
a) Contract for the purpose of upbringing, treatment, care or rehabilitation ;
b) Contract for the purpose of educating or training other than apprentices;
c) Contracts relating to persons holding managerial posts;
d) Contract of personal service for non-profit making purposes;
e) Contract relating to persons such as members of the Armed Force, members of the
police Force, employees of state administration, judges of courts of law,
prosecutors and other whose employment relationship is governed by special
laws;
f) Contract relating to a person who performs an act, in consideration of payments,
at his own business or trade risk or professional responsibility under a contract of
service.
When you examine these relationships based on the definition of contract of employment
discussed above, you may understand that some relationships are not employment
relations at all. For instance, the cases mentioned under (a), (b) and (f) are not
employment relationships as the parties in these relationships do not enter into the
relationships for the purpose of getting salary and getting work done. If that is the case,
why the law lists the excluded employment relations? The reason is to avoid possible
confusion as these relationships have some features which make them look like
employment relations. For instance, you can cross check Article 3(2) (f) of the labor
proclamation that they are excluded because of the nature of relationships create.
Independent Contractors
Both a worker and an independent contractor establish their relationship by contract. A
worker establishes his relationship by contract of employment. An independent
contractor establishes his relation by contract of work and labor. Both contract of
employment and contract of work and labor are categorized as contract of service. In both
cases, a worker and an independent contractor give services to another person. However,
these two contracts differ from each other. To differentiate a worker from an independent
contractor, it is important to see how contract of employment and contract of work and
labor are defined.

78
Article 2512 of Civil Code defined as “a contract of employment is a contract whereby
one party, the employee, undertakes to render to the other party, the employer, under the
latter’s direction for a determined time, service of a physical or intellectual nature, in
consideration of wages which the employer undertakes to pay him”.
The important and decisive elements of a contract of employment are:

 The party who agrees to perform the work must be a physical person.
 The party who undertakes to perform the work must have agreed to render the
service personally by himself.
 The service must be in consideration of wage. A wage is a payment fixed over a
period of time or unit of work and indicates that the wage earner is not concerned
about the profit.
 The party who agrees to perform the work undertakes to work under direction,
supervision and control of his employer.
On the other hand, Article 2610 of the Civil Code defined contract of work and labor as
“a contract of work and labor is a contract whereby one party, the contractor, undertakes
to produce a given result, under his own responsibility, in consideration of a
remuneration that the other party, the client undertakes to pay him”. This shows that
independent contractor is a person who performs a work in consideration of payments, at
his own business or trade risk or professional responsibility under a contract of service.
In the definition of contract of work and labor, the following important points can be
identified.

 The Contract is concluded between a contractor and a client;

 The Contractor undertakes to give services to his client;
 The Contractor gives services under his own responsibility; and
 The Contractor gives services in consideration of remuneration.

While Article 2610 of the Civil Code says “Under his own responsibility”, Article 3(2)
(F) of the Labor Proclamation says “at his own responsibility”. Therefore, the major
difference between contract of employment and contract and contract of work and labor
lies in the manner in which the services are given to the other person (either employer or
client).While an independent contractor gives the service under his own responsibility, a
worker renders the services under the direction of his employer. Thus, existence or non-
existence of direction given by the person who is receiving the service is the major
difference in identifying a worker and an independent contractor.

 Activity 8: Understanding the definition of a worker

Take about 15 minutes

Work on the following activity designed to help you understand the definition of a
worker. Write a short answer to the question hereunder in the space provided.

79
 Is an “employee” within the meaning of the civil code and a “worker” within the meaning
of the Labor Proclamation the same?

Comment: The concept employee has a wider connotation when compared with the
concept worker. So look at how the concept employee is defined under the civil code of
Ethiopia and compare with the definition of the concept worker under the Labor
Proclamation.
As you have already seen, the major difference between the two contracts is “direction”.
But, How can we know whether there is a direction or not? Suppose that W/ro Adanech
has a parcel of books which she wanted to have carried to her home from a market place.
The market place is one kilometer away from her home. Ato Debebe who is earning his
living by carrying loads (traditionally named as “Shekay“) agreed to carry the books in
consideration of five Birr. She was directing him as to where d should he take the books.
While crossing the road carrying the books, he was unfortunately killed by a car accident.
A car was happened to run at a bread neck speed and escaped (not Caught). Alem, the
wife of Ato Debebe, born two children from him and is desperate to find maintenance for
herself and her children.
In the above illustration, definitely W/ro Adanech and Ato Debebe have established a
relationship based on contract of service but what kind of relationship? Is it an
employment relationship or a relation based on contract of work and labor? Is Ato
Debebe employee of W/ro Adanech?
According to the sprite of labor law provided under Article 2512 Civil Code and Article 4
of Labor Proclamation, the employees must give services under the direction of the
employer.
Did Ato Debebe give service under Adanech’s direction? In principle, in order to say
there is contract of employment, the employee must perform work under the direction,
supervision and control of his employer. This element is a key to differentiate a worker
from an independent contractor. But, the problem is the fact that the extent of direction
given by an employer varies and sometimes difficult to identify the existence of direction.
The degree varies depending on:

 The nature of the work;

 The technology & Sophistication involved in;
 The level of education of the employee; and
 The physical distance between the employer and employee.
Thus, instead of having “ direction “ as sole criteria to differentiate a worker from an
independent contractor, scholars of labor law found and established a problem solving
rules what are called “ the rules of thumb”. The rules of thumb are derived from
different provisions of the law, court decisions, experience and practices that help as

80
additional criteria to identify their differences. Let`s see the rules of thumb one by one as
indicated below.
The Intention of the Parties: Here, the important consideration is the kind of
relationships that the parties intend to have when they conclude their contract. The
question is whether they intended to conclude contract of employment or contract of
work and labor? One can assess what they intend to do by interpreting the terms of their
contract. If the intention of the parties reflected in their contract is to conclude contract of
employment, then their relation is an employment relationship.
The Directive Power: This is point that enables scholars to determine the scope of
supervising and controlling power of the employer in the activities of the worker and the
independent contractor. It shows to what extent the contractor is independent than the
worker from the directive power of the employer. Read the following Articles of the Civil
Code of Ethiopia, 1960.
Article 2616 – Independence of Contractor
(1) The Contractor shall carry out his task as he wishes and shall comply with the rules of
his profession.
(2) He shall not be bound to comply with the orders of the client, except in so far as he
has agreed; his personal capacities are not of importance of the client.
Article 2617: Delay in execution of work
The contractor shall carryout the task in person unless, considering the nature of the work
ordered, his personal capacities are not of importance to the client.

Activity 9: Understanding the reasons for non-importance of direction in contract

of work and labor?
Take about 15 minutes
This activity is designed to help you understand the difference between a worker and an
independent contractor. Write a short answer to the question hereunder in the space
provided.
What do you think direction is not important in contract of work and labor?

Comment: Dear students, in case you find this activity a bit demanding question, you
may refer the paragraph below and then try it again.
In contract of work and labor, the client is not normally interested in how, where, and
when the work is undertaken. A client is, in principle, only interested in the final outcome
of the work. It is due to this reason that direction and supervision is not as such important
for a client and the contractor renders the services under his own responsibility. On the
other hand, in contract of employment the employer is interested not only in the results of
the work but also in the manner that the work has to be executed. Thus, he/she is usually
there to determine where, when and the manner that the work has to be carried out.

81
Therefore, in order to identify the existence or non-existence of direction in their
relationships, you should consider the following major points.

 Fixed working hours;

 Report to work;
 Leave work at a fixed time;
 Permission to be absent;
 Staff regulation; and
 General & specific with kind of disciplinary measures.
If the above mentioned points exist, you can safely conclude that there is direction and
hence their relationship is an employment relationship.
The owner of the means of production: In contract of employment, the employer is (in
principle) duty bound to provide tools and materials necessary for the work unless there
is an agreement to the contrary. Read Article 2530 Civil Code and Article 12(1) (b) of the
2003 Labor Proclamation.
Article 2530 Civil Code-Tools and materials
(1) Unless the country is agreed or customary, the employer shall provide the employee
with the tools and materials necessary for his work.
(2) Where the employee provides them himself in whole or in part without being
compelled to do so, the employer shall compensate him for them.
Article 12 Labor Proclamation-Obligation of an employer
(1)(b) Unless otherwise stipulated in the contract of employment, to provide him with
implements and materials necessary for performance of the work.
But, in contract of work and labor, it is the contractor (not the client) who provides tools
and materials necessary unless there is an agreement to the contrary.
Article 2613 of Civil Code reads.
(1) The contractor shall provide at his own expense the materials and tools necessary for
the carrying out of the task.
(2) It may, however, be stipulated that he shall only provide his service and that the
materials or the tools shall be provided by the client.
The organizational Test (Regularity of the Service): In employment relationships, an
employee normally undertakes services that are part of the regular activities of his
employer. But in Contract of work and labor, the contractor renders services that are not
his regular business. This can be illustrated as follows. Suppose that “Almaz” is the
owner of a restaurant. She needs to have a cook for her restaurant and “Olana” agreed to
give cooking services for the restaurant. Cooking is the regular business of the restaurant.
But, suppose further that “Almaz” wants to have some tables and chairs for her restaurant

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and agreed with “ Konjit” so that “ Konjit” provides the tables & Chairs. Having the
tables and chairs is not part of the day to day activities of the restaurant.
Personal Services: In contract of employment, an employee cannot delegate his
obligations under the contract. He/ She must perform the work in person even when the
personal qualification is not a condition in the contract. Article 13 (1) of the Labor
Proclamation provides that a worker is duty bound to perform in person the work
specified in the contract of employment. Article 2523 (personal character of the
obligation) of the Civil Code also provides the following: The employee shall personally
carry out the work to be undertaken, unless the contract or circumstances requires
otherwise.

Activity 10: Understanding the difference between worker and an independent

contractor
Take about thirty minutes.
The following activity will help you to understand the difference between a worker and
an independent contractor. On the basis of issues provided in the first column, identify
which issue expresses the feature of being a worker or an independent contractor.

worker Independent Comment

contractor
Personal service required
Director exist
Provide tools &
materials
Comment: To answer this question appropriately, you need to understand the differences
between a worker and an independent contractor based on the above discussion clearly.
But, a contractor can fairly delegate his/her obligation under the contract unless his/her
personal qualifications are the necessary condition for the validity of the contract.
Generally, the above discussed points significantly help you to determine whether the
person is a worker or an independent contractor. Independent contractor is excluded
because his/her relationships with his/her client are not employment relationship.
Contracts for the purpose of upbringing treatment, care or rehabilitation: These are
mainly related to relationships such as tutor-minor relationship and the relationship of
prisoners with their administrators. The services that are occasionally rendered by a
minor to his/her tutor, for instance, can only be considered to guide him/her spiritually
and morally and are not based on labor relations. In most of the services that a minor
give to his/her parent or tutor is aimed at making him/her to be good member of the
society. In fact, the law prohibits the service given by children for economic purposes.
Prisoners may also undertake certain service, but it is to rehabilitate the offenders.
Prisoners are those who are convicted for prison punishment. In most cases, punishment
is aimed at rehabilitating offenders to make them good members of the society. With this
view and as a punishment, a prisoner may undertake some kinds of work. Therefore,

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these kinds of contract are not for the purpose of giving the economic benefit to the tutor
or prison administration.

 Activity 11: Understanding the scope of application of labor law

Take about 15 minutes
This activity is designed to help you understand the scope of application of labor law.
Write a short answer to the question hereunder in the space provided.
What will happen if labor law is applicable to the contracts for the purpose of upbringing,
treatment, care or rehabilitation?

Comment: If labor law is made to be applicable to upbringing, treatment, care or

rehabilitation, it may affect the purpose to be achieved in such relations.
Contracts for the purposes of educating or training other than an apprentices:
Article 3(2) (b) provides that contract for the purpose of educating or training others
cannot be regulated by labor law. It talks about the relations between academic
institutions and their students or trainees. Here, we have three categories of persons.
Such as Students, trainees, and apprentices who are doing what their educator or trainer
told them to do for the purpose of getting the knowledge and skill they have to get.
Sometimes students may, for instance, make some research projects which are considered
as part of their education. By the same token, trainees who are being trained in a
vocational school may produce, for instance, a table or chair, candle, soap etc, as part of
their training program. Therefore, the relationship between trainer/educator and
student/trainee is not employment relationships and hence not governed by labor law.
But, you have to bear in your mind that the work done by a student/trainee must be part
of the curriculum of the school. If not, this rule may not be applicable. Suppose that
Henock has a workshop producing office and house furniture, which is part of a training
institution on woodwork. If the institution requires the trainees in the institution to make
some furniture intended for sale not as part of the curriculum, the rule under Article 3(2)
(b) cannot regulate it because the trainees make furniture to generate an income to the
owner.
Unlike students and trainees in academic institutions, apprentices have employment
relationship with their employer. The employer has the duty not only to pay wage but
also to give systematic training. The purpose of activities of the employer is not to give
training rather he/she produces certain goods or services; therefore, labor law regulates
these relations. What makes apprentice different from students and trainees is, the fact
that the institution is not an academic institution and the main subject matter of their
contract is employment, not training.

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 Activity 12: Understanding the exclusion made under Article 3(2) (a)
Take about 15 minutes
The activity provided in this table helps you to understand the exclusion made under
Article 3(2) (a).

Persons Is Labor Law applicable? Comments/Reasons

yes no
Students
Trainees
Apprentices

Comment: Try to understand the above discussion on the categories of persons provided
in the table and put your answer against the words listed.
Public Servants: So far, you have seen the relationships which are not strictly speaking
employment relations, but the law excludes them from its scope of application. You have
seen the difference between a worker and an independent contractor comparing contract
of employment and contract of work and labor. Hopefully, you have got some ideas of
their differences and the mechanism or techniques of differentiating them. Now, let`s
come to the relations which are employment relations, but excluded from the scope of
application of labor law due to different reasons. We will begin with the exclusion of
public servants from labor law.
Article 3(2)(e) of the 2003 Labor Proclamation provides that contracts relating to persons
such as employees of state administration and others whose employment relations are
regulated special laws are excluded.
Who is a public servant? Public servants are persons who have employment relationship
with the government. According to Article 2513(1) the provisions of this chapter shall not
apply to the relations of public authorities with public servants. This is to mean public
servants are not regulated by the provisions of the Civil Code of Ethiopia. On the other
hand according to Article 2513(2) not all employees of the government are excluded
which stated that “unless otherwise provided by laws, provisions of this chapter shall
apply to contract of employment concluded by industrial or commercial undertakings
administered by the state or its administrative or technical departments. Under Article
3(2) (e) of the Labor Proclamation of 377/2003, employees of state administration are
excluded. These employees are public servants. Those are working in the administrative
apparatus (regulatory) offices of a government.
There are also employees of government who are working in undertakings and regulated
by the labor law. From this, you can understand that there are some government
employees who are workers and some others who are public servants but not workers.
This necessitates identifying the difference between workers and public servants. In
order to differentiate workers from public servants, we have to focus on the notion of

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“undertaking” and “state administration”. In other words, our focus must be on the
institution within which these employees are working in.
This takes us to consider the various capacities of the government. The government has
two major capacities, public and private. In its public capacity, the government
undertakes activities which can never be undertaken by a private person. This includes
keeping peace and order, collecting taxes, providing public services, issuing laws and
policies, provision of infrastructure, etc. It is not possible for a private person (individual)
to undertake such activities. In its private capacity, a government undertakes activities
which can easily be undertaken by individual members of the society. These activities
include undertaking of business activities, manufacturing goods and the like.

 Activity 13: Understanding the differences between the two capacities of

government

Take about 20 minutes

The activity provided in the table hereunder helps you to understand the difference
between the two capacities of the government. Just take time and exercise it.

Activities In its public In its private Comments

capacity capacity
Issuance of Trade
license
Regulating Health
Arresting Criminals
Banking Business
Processing Fertilizer
Transport business

Comment: First, try to identify the two capacities of the government and their
differences based on the above discussion. For instance, Insurance business is an activity
which can easily be undertaken by an individual person and the government acts on
private capacity.

Before 19th century, there was no as such problem to differentiate public servants from
workers. During this time, the theory of laissez faire had been the dominant one where
government was limited to its traditional role, exercising only its public capacity.
Through this capacity, governments were undertaking activities such as defending
country, collecting taxes, and keeping peace and order in the society. But, after the
introduction of the theory of welfare state, governments have started to intervene into
economic affairs and undertake business activities, just like an individual person. Since
then, confusion has happened as to who is a public servant and who is a worker.

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The Labor Proclamation No. 377/2003 of Ethiopia defines the term ‘undertaking” but not
the term “state administration”. Undertaking is defined as any entity established under a
united management for the purpose of carrying out any commercial, industrial,
agricultural or any other lawful activity. Therefore, the Labor Proclamation includes stat
employees working in undertakings that are owned by state; that means employees of
state owned business enterprises.

On the other hand the civil service law does not provide the difference between
undertaking and state administration. Article 2 (2) of the Federal Civil Servants
Proclamation No. 262/2002 (as amended) defined state administration as a federal
government office established as an autonomous institution by proclamation or regulation
and fully or partially financed by government budget. Article 2 (3) of the Federal Civil
Servants Proclamation No. 515/2007 doesn`t use the terminology state administration but
use and define "government Institution" means any federal government office
established as an autonomous entity by a proclamation or regulations and fully or
partially financed by government budget; included in the list of government institutions
to be drawn up by the Council of Ministers.

The Labor Proclamation No. 377/2003 does not define what state administration is. It
just says that employees of state administration are excluded from the coverage of the
Proclamation. Therefore, the law does not clearly put the distinction between an
undertaking and state administration and /or /government institution.

Activity 14: Understanding the exclusion of public servants

Take about 10 minutes

This activity helps you to understand the exclusion of public servants from labor
proclamation. Write a short answer to the question hereunder in the space provided.

Explain the reasons why the public servants are excluded?

Comment: Public servants are excluded because labor law is not meant to regulate
employment relations of government employees working in public institution with public
capacity.

Hence, the law does not clearly provide the difference between worker and public servant
in government owned institutions. Then, how their differences can be indentified? In
order to identify their differences, we have to focus on the difference between
“undertaking” and “state administration or government institution”. The difference
between “undertaking” and “state administration or government institution” lies on the
nature and role to be played by them. Hence, there are certain criteria to differentiate
these two institutions as listed down.

 Background formation of the institution;

 The manner of services;

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  The sources of finance for its activities; and
 The powers of the institution.
Background formation of the institution: Here any institution which was initially
formed by private persons cannot be part of state administration or government
institution. For instance, those institutions nationalized by the government during 1970s
in Ethiopia (though they are government institutions) cannot be part of state
administration/ government institution. By the same token, any institution forming part
of state administration cannot, in any way, fall in private hands. If the institution was
originally formed by the state, see whether that institution can be privatized, then, it
cannot be part of state administration/ government institution and vice versa.

The manner of services: Here, you have to look at how a given government institution
gives service to others. Institutions that are part of state administration/ government
institution do not operate under quid- pro quo principle. Quid-pro quo principle is a
principle which means something for something or give and take. It is the mutual
consideration of giving a valuable thing for another and the other responds equivalent
valuable thing or service. State administration gives services just to fulfill the social,
economic, political and cultural objectives. But undertakings give services based on
quid-pro quo principle by requiring the service recipients’ payment for the services
provided to them. Therefore, if the service recipients are required to pay, in returns of the
services, then the institution is an undertaking and vice – versa.
The sources of finance for its activities: How does the institution finance itself?
Undertakings have self-financing system of administration because they are established
to generate profit. Undertakings owned by the government are not normally financed by
the regular budgetary system of the state. State administration/ government institution,
on the other hand, has no self-financing system. State budget is there to finance activities
of state administration/ government institution.
The powers of the institution: State institutions are usually formed by law which
provides what powers are vested in its every institution. The regulatory or supervisory
power is normally given to institutions that are part of state administration. Regulatory or
supervisory power is the power to control the activities and behavior of third parties.
But, undertakings do not have such power because they are profit making firms which do
not have regulatory and supervisory power given by law.

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 Activity15: Understanding the differences between an undertaking and state
administration/government institution
Take about 20 minutes
Study on this activity on the basis of the information given in the table here under. This
helps you to understand the differences between an undertaking and state
administration/government institution.

Features Under-taking State Comments

Administration
Require to pay price of its
services
Financing its activities by its
own
Having regulatory power
Depends upon the budgetary
system
Not possible to privatized

Comment: In answering this question, you can clearly understand the above discussion
on the exclusive of public servants. You can easily answer it based on the discussion
made above.
Generally, public servants are state employees who are working in institutions that are
part of state administration/government institution. They are excluded because the
purpose of their employment is quite different from that of workers working in an
undertaking. Therefore, their exclusion has the effect of not getting the benefits, rights
and privileges provided under labor law.
Contract of personal services for non-profit making services
Article 3(2) (d) of Labor Proclamation No.377/2003 provides that contract of personal
service for non-profit making purpose is excluded from its scope of application.
Basically, this contract refers to employment relationships between domestic servants and
their employer. Domestic servants give services in a household to the employer and not
in business place. The personal services that domestic servant renders to his/her employer
has no commercial significance to the employer.

Activity 16: Understanding the exclusion of domestic servants

Take about 15 minutes

Work on the following activity designed to help you understand the exclusion of
domestic servants. Write a short answer to the question hereunder in the space provided.

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 Why domestic servants are excluded from labor law?

Comment: Even though domestic servants have contract of employment with their
employer, they have certain unique features that differ from other employees such as
working in household.

Judges, prosecutors, members of armed and police force

These are all employees of the government institutions who engaged in their activities
having their public capacity. Therefore, labor law which is meant to regulate
relationships mainly in business area cannot regulate the employment relationships
between the government and the above mentioned employees as clearly stated under
Article 3(2) (e) of labor proclamation No. 377/2003.

Members of management staff

The Labor Proclamation No.42/ 1993 which was repealed provides that contracts relating
to persons holding managerial posts who are directly engaged in major managerial posts
who are directly engaged in major managerial function of an undertaking and giving
decision within the power delegated to them by law or the employer depending on the
type of activities of the undertaking are excluded.

But, in the Labor Proclamation No. 377/2003, the provision is somehow amended. The
amendment is aimed at clarifying the issue of who is a manager as provided under Article
3(2) (c) of proclamation No. 377/2003 “Managerial employee who is vested with powers
to lay down and execute management policies by law or by the delegation of the
employer depending on the type of the activities of the undertaking with or without the
aforementioned powers an individual who is vested with the power to hire, transfer,
suspend, layoff, assign or take disciplinary measures against employees and include
professional who recommend measures to be taken by the employer regarding managerial
issues by using his independent judgment in the interest of the employer “ is excluded.

Who are mangers? Why managers are excluded?

As you can understand from the above mentioned provision of the law, managers are
those employees who give managerial services to the employer. In any undertaking, you
may find two categories of employees: workers and managers. Both workers and
managers are employees of the employer. The exclusion of members of management
staff is closely tied with the notion of trade unionism in labor relations.

The underlined principles of trade unionism are independence, autonomy, and

impartiality. Trade union is an association/organization formed by workers so that they
can collectively protect their rights and interests from encroachment by anyone,
particularly from the employers. It provides workers with best mechanism of preventing

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the employers’ abuse against them. Hence, trade union must be independent of and free
from any interference of the employer.

Managers are representatives of the employer. They are acting on behalf of the employer
in any affairs of the undertaking. Therefore, in order to make trade union independent,
infiltration of management staff is not important. The strength of trade union, in the face
of collective bargaining, will be diluted if managers become members of trade union.
This is because of the fact that managers are always on the side of the employer for any
issue of employment at the time of collective bargaining.

 Activity 17: Understanding the collective bargaining

Take about 15 minutes

Work on the following activity designed to help you understand the collective bargaining.
Write a short answer to the question hereunder in the space provided.

What is collective bargaining?

Comment: It is a process of negotiation between trade union and employer on issues

related to their employment relationships.

As it has already discussed above, managers are acting on behalf of their employers, and
hence the labor law excludes them. But the question is “how can we differentiate
managers from ordinary workers, notably rank and file workers?” In a given
undertaking, you can, for instance, easily indentify the general manager and his deputy.
But as you go down from the top, things are complicated, and hence difficult to easily
identify managers. Moreover, things are complicated in differentiating managers from
workers due to the employers’ practice of indiscriminating using managerial title for their
employees such as supervisor, director, superintendent, etc. There is also increasing
participation of workers in management of undertakings. Thus, there is a need to device
certain mechanism by which we can differentiate members of management staff from
ordinary workers.

In indentifying persons holding managerial post, shall we see just the title given to them?
Or shall we consider the actual functions they are undertaking? Since employers have the
practice of giving an empty title to some of their workers, considering just the given title
cannot be a solution. Rather you have to focus on the actual functions that the employee
is undertaking on a day- to -day basis.

Thus, the following rules can help you to identify whether or not an employee is a
manager or a worker based on the actual activities he/she is undertaking.

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The authority to represent an employer: A person who represents an undertaking is an
agent. In this case, if managers are representatives of their employer, they are agents in
the context of the Commercial Code. For a person to be an agent, the requirements that
need to be fulfilled are the following.

An agent has the power to:

 Sign in the name of the undertaking;

 Enter into a contract which is binding upon the undertaking; and

 issue negotiable instruments, such as cheques, promissory notes and bills of

exchange, etc.

The authority to hire, transfer suspend lay off, promote, discharge, assign, reward
or discipline other workers of the undertaking: Here, if a person has managerial
power, then he/she will have the above mentioned authorities. This is particularly the
case in the area of personnel management. If an employee is given the title of manger in
the area of personnel management then he/she must have some or all of the above
mentioned authority.

The power of organizing works and formulates policy of the undertaking of an

employer. A Manager participates actively in decision making of the undertaking in:

 Organizing works into various departments, section, etc;

 Assigning workers to the departments and sections;

 Allocating works to the workers; and

 Assessing the efficiency of the works in the undertaking.

 Activity 18: Understanding the exclusion of managers

Take about 15 minutes

Make practices on the following activity that helps to you understand the exclusion of
managers. Write a short answer to the question hereunder in the space provided.

What do you think that mangers participate in the above mentioned decisions?

Comment: Although managers are employees of the employer, they are different from
ordinary workers as they are representatives of their employer. Their capacity as
representatives enables them to participate in decision makings.

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The proportionality of the number of mangers to the number of workers and size of
activities in the undertaking: The number of managers must be proportionate to the
number of workers and the size of activities. Otherwise, it would be just duplication of
responsibilities because some of the managers function as a worker and a manager at the
same time. In an undertaking, for instance, with ten employees in total, having six
managers is just duplication.

Generally, whenever you need to differentiate managers from ordinary workers, the four
points discussed above are helpful as major standards. Just you should test the case
brought to you on the basis of this standards.

Conditionally Excluded Employees

So far, you have seen categories of employees who are totally and unconditionally
excluded from the coverage of labor law. The categories of employees who are listed
under Article 3(2) of Labor Proclamation are totally and unconditionally excluded. There
are also other categories of employees who are conditionally excluded from the coverage
of labor law. These employees are Ethiopians working in foreign diplomatic missions
and international organizations within Ethiopia, and employees of charitable and
religious organizations. Thus, under the Labor Proclamation No. 377/2003 Article 3(3)
provides “Notwithstanding the provisions of sub-article (1) of this Article”:

a) Unless the Council of Ministers by regulations decides, or an international agreement

to which Ethiopia is signatory provides otherwise, employment relation between
Ethiopian citizens and foreign diplomatic missions or international organizations
operating within the territory of Ethiopia shall be governed by this Proclamation.

b) The Council of Ministers may by regulations determine the inapplicability of this

Proclamation on employment relations established by religious or charitable
organizations.

Article 3(3) (a) of the Proclamation talks about the Ethiopian citizens who are working
for diplomatic missions and international organizations. It addresses to employees who
are Ethiopians in their nationality and working in various embassies and consular offices
of different countries of the world here in Ethiopia.

There are three possible laws that could regulate the employment relations between
Ethiopian citizens and those institutions. These are:

 An international agreement to which Ethiopia is a signatory;

 In the absence of international agreement, a regulation issued by the Council of
Ministers;

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  in the absence of both international convention and the Council of Ministers
Regulation, the Labor Proclamation.

Therefore, the exclusion of these employees is conditional on whether there is convention

that addresses their employment ratified by Ethiopia or regulation issued by the Council
of Ministers. The other conditional exclusion is employees of religious or charitable
organizations. The exclusion of employees of religious and charitable organizations is
conditional on whether there is a regulation issued by the Council of Ministers for the
purpose of governing their employment relations. In the absence of this regulation, their
employment relationships are regulated by the Labor Proclamation.

III.2 Contract of Employment

3.2.1 Definition of an employment contract

What is a contract?

An agreement with specific terms between two or more persons or entities in which there
is a promise to do something in return for a valuable benefit known as consideration.
Since the law of contracts is at the heart of most business dealings, it is one of the three or
four most significant areas of legal concern and can involve variations on circumstances
and complexities. The existence of a contract requires finding the following factual
elements: a) an offer; b) an acceptance of that offer which results in a meeting of the
minds; c) a promise to perform; d) a valuable consideration (which can be a promise or
payment in some form); e) a time or event when performance must be made (meet
commitments); f) terms and conditions for performance, including fulfilling promises; g)
performance. A unilateral contract is one in which there is a promise to pay or give other
consideration in return for actual performance. (I will pay you birr 500 to fix my car by
Thursday; the performance is fixing the car by that date). A bilateral contract is one in
which a promise is exchanged for a promise. (I promise to fix your car by Thursday and
you promise to pay birr 500 on Thursday). Contracts can be either written or oral, but oral
contracts are more difficult to prove and in most jurisdictions the time to sue on the
contract is shorter (such as two years for oral compared to four years for written). In
some cases a contract can consist of several documents, such as a series of letters, orders,
offers and counteroffers. There are a variety of types of contracts: "conditional" on an
event occurring; "joint and several," in which several parties make a joint promise to
perform, but each is responsible; "implied," in which the courts will determine there is a
contract based on the circumstances. Parties can contract to supply all another's
requirements, buy all the products made, or enter into an option to renew a contract. The
variations are almost limitless. Contracts for illegal purposes are not enforceable at law.

What is a Employment contract?

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An employment contract or contract of employment is a kind of contract used in labor
law to attribute rights and responsibilities between parties to a bargain. The contract is
between an "employee" and an "employer". It is Oral or written, express or implied,
agreement specifying terms and conditions under which a person consents to perform
certain duties as directed and controlled by an employer in return for an agreed upon
wage or salary. Whether stated or not in the contract, both the employee and the
employer owe the duty of mutual confidence and trust, and to make only lawful and
reasonable demands on each other. Every employee is under the obligation to carry
assigned duties, or the employer's instructions to the best of his or her abilities. The
employer is under the obligation to protect the employee from harm or injury, and make
fair compensation for any loss or damage resulting from any job-related accident.

Key points

• A contract of employment is an agreement between an employer and employee and

is the basis of the employment relationship.
• Most employment contracts do not need to be in writing to be legally valid, but it
is better if they are.
• A contract 'starts' as soon as an offer of employment is accepted. Starting work
proves that you accept the terms and conditions offered by the employer.
• Most employees are legally entitled to a Written Statement of the main terms and
conditions of employment within two calendar months of starting work. This
should include details of things like pay, holidays and working hours.
• An existing contract of employment can be varied only with the agreement of both
parties.

Contracts of employment, by definition, are legally binding agreements between an

employer and an employee. They consist of express terms written into the employment
contract and implied terms which are not expressly stated. Although employment
contracts are governed by contract law, there are many statutory rules which affect
employment contracts too. Updated April 01, 2017

An employment contract is a written legal document that lays out binding terms and
conditions of an employment relationship between an employee and an employer.
Differences exist in private and public sector employment contracts because the goals of
an employment contract are different in each sector.

Article 1675 of the Civil Code of Ethiopia define a contract is an agreement whereby two
or more persons as between themselves create, vary or extinguish obligation of a
proprietary nature. This is the general definition of contract and general principles
provided. In this definition there are about five concepts that should be explained.

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 A contract is an agreement. This implies that the meeting of mind or mutual
understanding of the contracting parties about the substance of the contract.
 In any kind of contractual agreement there must have at least two persons or parties
who shall have distinct common intention, this is because no one concludes a
contract as between him/herself.
 As explained earlier each contracting parties must communicate and express their
intention freely and such common intention must be to affect their legal relations.
The obligation does not transfer in to others who are not parties to the contract and it
does not affect third party. The legal relation that intended to be affected shall be
those of parties (general principle), however, as an exception there are situations
which affect third parties, example, life insurance.
 The contracting parties have the freedom to create (form) or vary (modify or
change) or extinguish (remit or cancel) obligations by themselves. In this sense even a
court can not vary the contract by the mere fact of interpretation because the court has
only the power to interpret the contract positively taking their intention.
 A contract shall be measured or valued in terms of money (proprietary nature).
The point that the law tries to address is the obligations shall have economic nature.
From this definition, one can understand that a contract is an agreement but not all
agreements are contracts. For instance, a contract is a binding agreement that creates and
defines rights and obligation which formed by the parties themselves and affected only
the parties. Taking the general definition of contact let us consider a case which show us
how a contract is created between two parties and what rights and duties do they have.

Suppose Adam has a Sony colored TV 32 inch which he wants to sell, on the other hand,
Helina is looking for a Sony colored TV32 inch. The seller and the buyer made an
agreement on the sale of the Sony colored TV32 inch at the price of Birr 12000. Then,
we can say that the parties concluded a contract that creates obligations for both of them.
The seller has the obligation to deliver the Sony colored TV 32 inch to the buyer and the
buyer has the obligation to pay the agreed price.

Article 2512 of the Civil Code defines contract of employment as a contract between
employer and employee in which the terms and conditions of one’s employment are
provided. Article 4(2) of Labor Proclamation No.377/2003 provides that a contract of
employment shall be deemed formed where a person agrees to perform work for and

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under the authority of an employer in return for remuneration. As a contract, the general
requirements provided under the 1960 Civil Code are applicable to contract of
employment. Article 1678 of the Ethiopian Civil Code provides that the following
requirements must be fulfilled in order to say a contract is validity formed.

 The capacity of the parties to enter in to a contract;

 The parties give their consent sustainable at law;

 The object of the contract shall be clearly and sufficiently defined, possible and lawful
or moral;

 Form of the contract, if any.

As this provision shows, there are four major requirements that must be fulfilled.
Therefore, you are going to see capacity for contract of employment, object of contract of
employment, and consent of the parties for contract of employment and formality
requirement for contract employment.

Capacity for Contract of Employment

Capacity is the ability of an individual person to enter into juridical acts. In relation to
contract, capacity means competence of parties to enter into a valid contract. Capacity is
the general principle that enables persons to exercise their rights because everybody is
presumed capable to enter in to a contract. If a person is not competent to enter into a
contract, then it means that he/she is incapable. This is an exception to the general
principle. Incapacity can be categorized as general incapacity or special incapacity.
General incapacity relates to age and mental conditions while special incapacity relates to
status of the person. Every person becomes competent to conclude a contract when he/she
attains the age of majority and not disqualified from entering into a contract by any law to
which he/she is subject.

A person becomes competent to enter into contract at the age of 18 years of age.
Therefore, a person who has not attained the age of 18 years cannot conclude a contract.
In relation to contract of employment, this general rule of capacity applies to both the
employer and the worker that must attain the age of 18 to enter into a valid contract of
employment. Thus, under normal circumstances, a person who is under 18 years old
cannot be employed as a worker. However, a person who has attained 14 years old may
be employed as a worker on the works specified under Article 89(4) of the Labor
Proclamation No.377/2003 of Ethiopia considering the ILO guidelines. But, a person
whose age is less than 14 cannot have the capacity to conclude employment contract as a
worker.

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  Activity 19: Understanding the rules of age requirement to contract of
employment

Take about 20 minutes.

This activity helps you to understand the rules related to capacity of contract of
employment. Analyze the hypothetical case provided hereunder and try to it.

1. Assuming that Ali and Shemu concluded a contract of sale. Ali’s age is 17 and
Shemu`s age is 19. Ali buys a bicycle at a price of Birr 1400 from Shemu. Can we
say the capacity requirement is fulfilled in this contract?
2. Would it be different, in the above question, if the contract is a contract of
employment and Ali is concluding the contract to be a worker? Give your reason.

Comment: Dear students for the first case above you should consider the general rules
for capacity and for question two above use the rules of capacity for contract of
employment.

The other issue related to capacity is that a person must be with a sound mind. This is
actually one of the essential conditions of competency of parties to any contract including
employment contract. A person is said to be of sound mind for the purpose of making a
contract if he/she understands the nature and consequences of the contract she/he is
entering into. A person who is 18 years old and above may lose his/her capacity to
understand the nature and consequences of his/her action due to several reasons. One
most common reason is insanity. An insane person is deemed to have no capacity.
Suppose that Lulu is 25 years old and an insane person whose insanity was judicially
declared. He has been attending medical treatment in Amanuel Hospital here in Addis
Ababa for a long time. Then, Lulu does not have the capacity to conclude a contract
because he is not a person with a sound mind. His mind cannot help him to understand
the content of the contract and to made rationale judgment that protects his interest.
Here, the law is aimed at protecting the interest of this kind of person and the other
contracting party.

Another important issue related to capacity for contract of employment is status. Here,
the incapacity of the person is called special in a sense that the person fulfills the age
requirement and he is with sound mind but the law declares him incapable for some cases
due to his status. For instance, foreigners cannot conclude employment contract without
having work permit from the Ministry of Labor and Social Affairs. According to Article
174 of the 2003 Labor Proclamation, a foreigner can be employed in Ethiopia only if s/he
possesses a work permit given to him/her by the Ministry. The Ministry issues work
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permit for performance of specific work only if the concerned foreigner is required for it.
Normally, foreigners are required for works in Ethiopia which citizens cannot do it due to
the required qualification, etc. If the Ministry ascertains that the foreigner is not required
for the work permit can be canceled.

 Activity 20: Understanding issues related to capacity under labor law.

Take about 20 minutes.

Work on the activity in the table hereunder. It helps you to understand issues related to
capacity under labor law. First, read carefully the cases provided in the first column.
Then, complete the 2nd and 3rd column. Finally, give your reasons for your answers.

Situation Is Capacity fulfilled?

Yes No
Ali 17 years old, a buyer and Shemu, 19 years old, a seller
concluded contract on a sale of a bicycle at a price of Birr
1400.

Ali 17 years old, being an employee in a factory and Shemu,

19 years old, employer concluded an employment contract
under the labor law.
Abeba, 13 years old an employee and Tilahun, 16 years old an
employer, concluded a contract of employment.

Ato Alemu 40 years old and Mrs. Sara 35 years old a British
citizen living in Ethiopia with no work permit concluded a
contract of employment.

Comment: In doing this activity, you need to clearly understand the discussion under
the topic of capacity for contact of employment.

Object of Contract of Employment

Any contract cannot be valid unless its object is clearly and sufficiently defined, lawful,
possible or moral. That means the subject matter of a contract must be clearly and
sufficiently defined, must not be something prohibited by law, impossible or immoral.
These requirements are equally applicable to contract of employment. Article 4 (2) of the
Labor Proclamation No.377/2003 provides that a contract of employment shall be
stipulated clearly and in such manner as that the parties are left with no unnecessary as to
their respective rights and obligation under the terms.

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Thus, the work for which a worker is to be employed must be lawful, possible or moral.
Moreover, the work and other elements of a contract of employment must be clearly and
sufficiently defined in the contract. Article 4(3) of this proclamation provides that the
parties must specify the type of employment, place of work, the rate of wages, method of
calculation, manner and interval of payment, and the duration of the contract.

 Activity 20: Understanding issues related to capacity under labor law.

Take about 20 minutes.

Work on the activity in the table hereunder. It helps you to understand issues related to
capacity under labor law. First, read carefully the cases provided in the first column.
Then, complete the 2nd and 3rd column. Finally, give your reasons for your answers.

Situation Is Capacity fulfilled?

Yes No
Ali 17 years old, a buyer and Shemu, 19 years old, a seller
concluded contract on a sale of a bicycle at a price of Birr
1400.

Ali 17 years old, being an employee in a factory and Shemu,

19 years old, employer concluded an employment contract
under the labor law.
Abeba, 13 years old an employee and Tilahun, 16 years old an
employer, concluded a contract of employment.

Ato Alemu 40 years old and Mrs. Sara 35 years old a British
citizen living in Ethiopia with no work permit concluded a
contract of employment.

Activity 21: Situation Analysis

Take about 20 minutes

The activity provided in the table helps you to understand whether the object of an
employment contract is sufficient or not.

Situation Object Reasons

sufficiently
defined?
Yes No
Omar, a worker and Kedija, an employer
concluded an employment contract stated that
Omar would give service during the daytime.

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 Sara concluded employment contract with a
factory as a driver stated that the factory must
pay her wage every month.

Comment: It is very difficult to say it is sufficient if the parties put the major terms of
their contract in a very general manner. The parties are expected to follow the standards
provided under Article 4(3) of the proclamation discussed above.

Consent for Contract of Employment

Another valid requirement for a contract is communication free and consent of

sustainable at law. Free and sustainable consent is a consent which is given by the free
will of the contracting party. Then, consent must be expressed effectively by offer and
acceptance. Article 1679 of the 1960 Ethiopian Civil Code provides that a contract shall
depend on the consent of the parties who define the object of their undertakings and agree
to be bound thereby. Article 1680(1) of the Civil Code provides that a contract is
completed where the parties have expressed their agreement thereto. Unexpressed
agreement does not create a contract. The parties’ intention to be bound may be given
expressly or may result from the circumstances. The external manifestation of the parties’
intention to enter into contract of employment is very significant. This means, to say the
parties have agreed to conclude a contract, there must be offer and acceptance. An offer
is a proposal by one party to enter into a legally binding agreement with another while
acceptance is the expression of willingness to be bound by the terms of the offer. In the
case of contract of employment, offer is usually stated by the terms of the offer. In the
case of contract of employment, offer is usually stated by the employer through vacancy
announcement. When the worker accepts the offer after satisfying the criteria, they will
be deemed to conclude a contract of employment.

Activity 22: Understanding the rules on elements of contracts of employment

Take about 20 minutes

Work on the following activity that is designed to help you understand the rules on
elements of contracts of employment. Read carefully the hypothetical case given below
and try to analyze it in light of the discussion made on elements of contract of
employment.

Suppose Abeba Giday Trading House PLC announced a vacancy for corporate legal
service manager at a monthly salary of Birr 15,000 plus birr 3,000 monthly allowance.
Belay graduates LLM from the University of Amsterdam, Amsterdam Law School. He
was so anxious to be employed in the undertaking as a corporate legal service manager.

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 Thus, he went to the undertaking and provided his sufficient document to compete for
employment and made an interview as a result the management committee of the
undertaking recruited him. After two weeks, a person who was assigned by the manager
called Belay to come to the undertaking to begin his job and when Belay comes to the
undertaking according to their appointment. The undertaking wrote an employment letter
expressing monthly salary of birr 10,000 plus birr 3,000 monthly allowances which is
different from what the undertaking announced. Belay, without saying anything,
continues to work as he is told.
Is the consent requirement fulfilled? Give your reasons.

Comment: Consent is one of the prerequisites for the validity of a contract. And it has
to be established by finding express terms in the agreement of the parties or by necessary
implication.

Formality Requirement for Employment Contract

In general, contract is consensual. Contract is deemed to be validly formed when it is

made by the free will and mutual communication of the parties about the subject matter
of the contract as discussed above. Sustainable consent without additional formal
requirement should be enough. Exceptionally, however, there are some contracts in the
Civil Code that are required to be in written form. In fact, a contract of employment is
concluded just by consent as provided like that of in the general principle. For instance,
Article 5 of the Labor Proclamation No.377/2003 provides that unless otherwise provided
by law, a contract of employment shall not be subject to any special form. Thus, the
parties are free to conclude their contract either in written form or orally.

If they conclude in written form, the contract must specify the following:

 The name and address of both of them;

 The age of the worker;

 The type and place of work;

 The rate of wage, method of calculation, manner and interval of payment;

 The duration of the contract; and

 The signature of the parties

If the contract is concluded orally, the employer is duty bound to reduce it into writing
and provide a copy to the worker. Article 7(1) of the proclamation provides that, where
the contract of employment is not made in written form, the employer shall within 15

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days from the conclusion of the contract give the worker a written and signed statement
containing the requirements specified under Article 6 of this Proclamation.

This can be illustrated as follows. Suppose Mulu and Checole are employed by Imam,
employer without any written agreement. They discuss everything orally including their
obligations, salary, types work, etc. and both of them immediately started giving service
to the employer. Then, the employer will have the duty to reduce what they have agreed
upon into writing and give a signed copy of it for each of them within 15 days as per
Article 7(1) of the Proclamation. If the employer failed to do so, the contract is
considered as it is made in written form after the expiry of 15 days.

Article23: Understanding the position of labor with regard to formality

requirement
Take about 15 minutes

This activity helps you to clearly understand the position of labor law with regard to
formality requirement.

Article 7(1) of the Proclamation provides the duty of the employer to reduce an orally
concluded contract of employment into writing. Does this mean that unless the contract
is concluded in written form, it is not valid? Why

Comment: Actually, the requirement provided under Article 7(1) is not tantamount to
formality requirement for validity of contract of employment. This is clearly reflected
under Article 5, which says that the contract should not be subject to any special form,
Moreover, Article 8 of the proclamation provides that non-compliance with the
requirement under Article 7(1) shall not deprive the worker his rights under the
proclamation.

There are some exceptional circumstances whereby the agreement between the two
parties in relation to contract of employment cannot be valid without written form. A
contract of employment with probationary period (Article11), a contract for
apprenticeship (Article48), a contract to vary the terms of an already existing contract
(Article15 (3), and a contract to terminate an already existing contract of employment
(Article 25) must always be done in written form.

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 Activity 24: Deciding Case
Take about 20 minutes.

This activity comprises two hypothetical cases in relation to issues of formality

requirement.

1. Suppose Tolossa who is the owner of a business company employed Henock as an

accountant, but the agreement was made orally. Is this contract valid? Why?
2. Assuming that Belete has a garment factory at Adwa. He wants to employ Azmera as
a chemist in his factory. Since Belete is not sure about the ability and skill of
Azmera, he employed her subject to probationary period, but the contract is
concluded orally. Is this contract valid? Explain.

Comment: 1. In principle there is no need of formality requirement for the validity of a

contract of employment. But, exceptionally, when it is contract of apprenticeship or
contract with probation that contract must be reduced in to writing.

2. Contract of employment with probationary period can only be validly concluded in

written form; therefore, unless concluded in written form, it cannot be valid.

Duration of Contract of Employment

Dear student, duration of contract of employment is another important point. The

question here is for how long should a contract of employment be concluded?

Conceptually, there are two types of durations of contract of employment as provided

under Article 4(1) of Labor proclamation No.377/2003 which states that “A contract of
employment shall be deemed formed where a person agrees directly or indirectly to
perform work for and under the authority of an employer for a definite or indefinite
period or piece work in return for wage. These are: definite and indefinite period of time.
Then it is possible to imagine the existence of contracts of employment concluded for
definite and for indefinite period of time. If a contract of employment is for definite
duration, the contract can be terminated at the expiry of that period without any further
act of the parties. As a result, there is no need to give notice for the termination of
contract of employment for definite duration. Thus, Article 24((1) of the Labor
Proclamation No. 377/2003 provides that a contract of employment shall terminate on the
expiry of the period or on the completion of the work where the contract is for definite
period or piecework. In this case, there is no need for one party to give notice for the

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other in terminating the contract. On the other hand, when the contract of employment is
concluded for indefinite period, it means that the contract is concluded for unspecified
period. Thus, the contract continues to exist unless terminated by other causes as
provided in the law.

Dear student, do you think that the employer and worker are free to determine the
duration of their contract of employment by choosing either the indefinite or definite
period?

Answering this question is admittedly not easy. Some say that parties can freely choose
while others say parties cannot freely choose duration of contract of employment. The
basic argument of those who say parties have the right to freely determine the duration of
their contract of employment is the principle freedom of contract. They say that it is
contrary to the principle of freedom of contract if the law prohibits parties to determine
the duration of their contract by their wish.

To answer this question, you need first to consider the most important reason for the
emergence of labor law and to read Article 9 and 10 of the Labor Proclamation
No.377/2003 of Ethiopia together. Article 9 provides that any contract of employment
shall be deemed to have been concluded for an indefinite period except for those
provided for under Article 10. Then, Article 10 lists types of works for which a contract
of employment can be concluded for definite period or piece work. Reading these two
provisions together tells that contract of employment must in principle be entered for
indefinite period of time unless the type of work is among the list of works in Article 10.
This way of understanding of the law is also in agreement with the intent and purpose of
emergence of labor law is to protect the weaker party, the worker. It is very easy to know
that every worker wants to have security of work. That means most workers, if not all,
want their contracts to be for indefinite period of time. Security of work is one of the
protections which labor law gives to workers.

All these show that parties are not free to determine the duration of their contract of
employment as they wish. That means a contract of employment must be entered for
indefinite period of time as long as the work continues to exist on a regular basis with the
existence of the employer’s undertaking. However, when the work does not exist on a
regular basis, the duration can be for definite period of time. The common feature of the
works listed under Article 10 is that they have irregular or intermittent or periodic or
seasonal existence. Let us take one of the lists under this article. Article 10(1) (f)
provides: “seasonal works which relate to the permanent part of the works of an employer
but performed only for a specified period of the year but which are regularly repeated in
the course of the years.” For a contract related to this work, it is possible to conclude for
definite duration. The best example for this is a sugar factory having its own sugar cane
farm. Whenever the sugar cane needs to be harvested, the factory may employ laborers

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for the purpose of harvesting the sugar cane. Therefore, the contract of employment
concluded between the factory and these laborers can only for a definite duration. This is
because harvesting the sugar cane is not a continuous service. It comes to an end when
the harvesting process is finalized. As a result, it is not the parties, but rather the nature
of the work that makes the contract between the factory and the laborers to be for definite
duration.

Activity 25: Understanding the rules related to duration of contract of

employment
Take about 20 minutes.

This activity is designed in order to help you to understand the rules related to duration of
contract of employment under labor law. Discuss the following case based on the above
legal explanation.

Suppose a teacher is employed in a private college with the need for having additional
teachers due to the expansion of the college’s services. He was employed to teach
accounting with monthly salary of Birr 9000 for a period of six months. Is this contract
of employment for definite or indefinite duration under the labor law? Explain.

Comment: Generally, the parties are not free to determine the duration of their contract
as definite or indefinite. The principle under labor proclamation No.377/2003, in this
regard, provided under Article 9 does not give any room for a contract of employment to
be concluded for definite duration. Article 10 enumerates the exceptions to this principle
and parties can conclude a contract for definite duration only in relation to the works
provided under this Article.

Probationary Employment

The other issue related to duration of contract of employment is probationary

employment provided under Article 11 of the Labor Proclamation No.377/20015 of
Ethiopia. Probationary employment is an employment in which the parties conclude the
contract for the purpose of testifying the suitability of the person to be employed to a
post. There is a fixed period of time to testify the suitability of the person, which is
called the probation period. During this period, the employer will test the person to
ensure his skill and suitability. Probationary employment is concluded with the
understanding that the employer may terminate the contract with or without good cause
during the probation period.

According to Article 11(3) of the Labor Proclamation, when the parties agree to have a
probation period, the probation period shall not exceed 45 consecutive days and shall be
made in writing. During this 45 consecutive day’s period, the employer has an absolute
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power to terminate the contract. Upon the end of the 45 consecutive days, the probation
period will end and hence, the employer will lose his absolute power. For instance,
suppose that Gebru concluded a probationary employment on September 1, 2015. It
means that the probationary period runs from September 1 to October 15, 2015, Gebru’s
employer has an absolute power to terminate the contract with or without good cause
during the period from September 1 to October 15, 2015. But if the employer does not
exercise his power during this period, starting from October 16, 2015 onwards Gebru
becomes a permanent employee and the employer cannot exercise absolute power to take
action without notice.

Even during the probationary period, the law tries to restrict the absolute power of the
employer. Thus, Article 11(2) provides that’ a worker re-employed by the same
employer for the same job shall not be subject to probation”. If the employer interrupts
the duration, he cannot exercise his power later on. Take, for instance, the case of Gebru.
Suppose, in that probationary employment Gebru was employed as a cashier. Suppose
further that the employer terminates the contract on 20 September 2015, using his power.
If the employer re-employs Gebru on the same post, then Gebru is not subject to
probation period. This is for the purpose of avoiding the possibility of terminating the
contract and re-employ on the basis of probationary employment, repeating the same
thing again and again.

Activity 26: Understanding rules related to probation employment

Take about 20 minutes

This activity helps you to understand the rules related to probationary employment. Read
the hypothetical case carefully and write your answer briefly in the provided space under
it.

Suppose Yeshi, an employee or worker and Ahmed, an employer concluded a contract

for probationary employment on a post of cooker in his restaurant. On the 30 th day of the
probation period, the employer has terminated the contract. But after a week from the
termination of the employment, Yeshi is again re-employed by Ahmed as a personnel
administrator. Can the parties conclude contract of probationary employment in their
second contract? Explain.

Comment: Probation for the second employer is prohibited when the person is re-
employed by the same employer and on the same job. If he is re-employed by the same
employer but on another post, not on the post he was previously employed, the law does
not prohibit probation.

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A worker who concludes contract of probationary employment has, in principle, the same
rights and obligations that other workers who have finished their probationary period
during his/her employment, Article 11(4) of the Labor Proclamation. But, whenever the
provisions of the labor law, work rules, or collective agreement provides otherwise, a
worker under probationary period may not have the same rights and obligations. For
instance, under Article 85(1) of the Labor Proclamation, it is clear from its acontrario
reading that a worker with probationary employment is not entitled to sick leave
provided. In addition, he/she is not entitled to get severance pay or compensation upon
the termination of his employment during the probationary period.

Activity 27: Identifying the duration of contract

Take about 20 minutes
This activity helps you to analyze the issue related to duration of contract of
employment. Work on the following activity on the basis of the table given below.

The Contract Duration Reasons

. Definite Indefinite
Getachew is employed in a textile
factory as a chemist.
Abate is employed by Shanko,
who owns a commercial farm
needs to harvest the crops of this
year.
Ahmed is employed in business
company replacing Kadar (a
former worker) who has fallen
sick.

Comment: You need to understand the discussion made on the topic of duration of
contract of employment. While doing this activity you should focus on the issues of
definite and indefinite period of contract of employment. In fact, the answer is indirectly
provided in that discussion.

Effects of Contract of Employment

Dear student, what effects does a validly concluded contract of employment give rise to?

Once a contract of employment is concluded, it gives rise to different legal consequences.

Some of the consequences are clearly provided in the contract while others are added by
labor law. The consequences are rights and obligations of the two parties. Rights and
obligations relating to amount of salary, method of calculation, type of work, and place of
work are determined by contract. Labor law does not determine amount of salary,

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method of calculation, type of work and place of work. However, there are many rights
and obligations that are directly determined by labor law even if they are not determined
by the contract of employment. You will see below the rights and obligations of the two
parties determined by labor law.

3.2.2 Obligations of an Employer

Normally, an employer has obligations with regard to the specific stipulations made in
the contract of employment. This is due to the fact that the parties have concluded a
contract and hence, the terms of their contract are laws for the two parties. But
irrespective of what are provided in the contract, an employer has also certain legally
imposed obligations. Article 12 of the labor proclamation No.377/2003 provides a long
list of obligations of the employer. The employer has obligations:

 to provide work and the tools and materials necessary to undertake the work;

 to pay the worker wages and other remuneration;

 to respect the human dignity of the worker;

 to take safety and health measures;

 to keep register information about situations of his workers;

 to give certificate of experience to his workers upon termination of employment; and

 to observe the provisions of the law, rules and directives.

Article 12(1) (a) of the Proclamation provides that the employer has the obligations to
provide work in accordance with the employment contract. In principle a worker
undertakes the service under the close supervision and direction of the employer. So,
giving service in accordance to their contract and instruction of the employer is the major
obligation of the worker. But, it is up to the employer to provide the work to be
undertaken by the worker. Once the worker avails himself to the work, it will be the
failure of the employer if he (the worker) did not render the service because he is not
provided with the work. Moreover, the employer is duty bound to provide the worker
with “implements and materials necessary for the performance of the work”. In
principle, it is the employer who is duty bound to provide the necessary tools and
materials to render services. But, take note that the parties are free to agree to the
contrary. That means, they have the right to agree that the worker provides the tools and
materials necessary to render service. In other words, the worker may agree to provide
fully or partially the tools and materials necessary for the work. Thus, unless there is
such agreement, to the counterparty, it is the employer who has the obligation in this
regard.

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Paying wage and other remuneration is the major obligation of the employer, since the
service given by the worker is in consideration of certain payment. In fact, if the service
rendered by the worker is donation, then we cannot say the contract is contract of
employment. Moreover, though the employer is economically more powerful than the
worker, both are human beings. Hence, the employer has the duty to respect the human
dignity of the worker. That is why Article 12(3) of the Proclamation provides that the
employer has the obligation to respect the worker’s human dignity. What situations are
considered as human dignity of a worker? This question is related to the respect and
dignity given to a person simply because that person is a human being. As a human
being, a worker has such dignity to respect. So, the employer having economic power
should not violate the respect and dignity that a worker has as a human being.

The employer has also obligations with respect to providing the safety and health of the
workers (Article 12(4) of the labor proclamation. It is about having a safe and healthy
working environment. In this regard, the employer has the major responsibility to take all
necessary measures to prevent employment hazards. The employer must also respect the
standards and directives given by the concerned authorities in this respect. The power to
issue those standards and directives is given to the Ministry of Labor and Social Affairs
Provided under Article 170 of this labor proclamation. If the employer fails to fulfill
these obligations, he/she is liable for a punishment with fine up to Birr 1,200. This is
clearly provided under Article 184(2) (d) of this labor proclamation.

There are also other obligations of the employer. The employer is duty bound to defray
the cost of medical examination of the worker whenever required by law or the
appropriate authority (Article 12(5) of this labor proclamation. The employer is also duty
bound to keep the register containing all relevant information about the workers (Article
12(6) of this labor proclamation. He also has the duty to provide the workers with
service certificate free of charge upon termination of employment or whenever the
worker so requires (Article 12(7) of this labor proclamation. Moreover, he has the duty
to observe the provisions of labor law, directives, collective agreement, and work rules
(Article 12(8 and 9) of this labor proclamation.

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 Article 28: Understanding obligations of employers’ under the labor
proclamation

Take about 15 minutes.

This activity helps you to identify the obligations of an employer laid down under the
labor law.

Suppose Mulunesh is a worker of Ato Ali. She has given service for the last 6 years in
his undertaking. Due to some reasons, the employer gave her notice that he is going to
terminate her employment contract just after two months from now. Thus, she started
finding employment in other undertaking. A week after she received the notice, she
asked Ato Ali to give her certificate of service. Is the employer duty bound to give a
certificate for what she has rendered a service in his undertaking? Explain.

Comment: The answer for this question is available in the discussion on obligation of
employers, which you have already seen above.

3.2. 3 Obligation of a Worker

Dear student, from your own experience, can you list some of the obligations of an
employee? The obligations of a worker are provided under Article 13 of the Labor
Proclamation No. 377/2003. The main obligations of a worker are:

 to perform in person the work specified in the contact of employment;

 to follow instructions given by the employer based on the terms of the contract and
work rules;

 to handle with due care all instruments and tools entrusted to him for work;

 to report for work always in fit mental and physical conditions;

 to give all proper aid when an accident occurs or an imminent danger threatens life or
property in his place of work without endangering his safety and health;

 to inform immediately the employer any act which endangers himself or his fellow
workers or which prejudice the interests of the undertakings; and

 to observe the law, collective agreement, work rules and directives issued in
accordance with the law.

In fact, one of the major obligations of a worker is to give service to the employer. That
is why the employer is paying him wage. But, the worker must give the service in person

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to his employer. He cannot delegate his duty to serve the employer to another person, say
for instance, to his/her son, brother, etc. In giving service to the employer, he is expected
to follow instruction of his employer given on the basis of the terms of their contract and
work rules. The worker can refuse to obey his employer’s instruction if it is not based on
the terms of their contract or/and work rules.

But can he refuse to follow the instruction given by the employer based on the law or
collective agreement? Article 13((2) of the Proclamation seems narrow. For instance,
suppose that the employer instructs his worker to undertake an overtime work which is
not provided in the contract or in the work rule. But according to Article 66(3) and 67(1),
the employer can instruct his worker to undertake overtime work. And one may argue
that since Article 13(2) does not oblige the worker to follow the instruction of the
employer given on the basis of the law or collective agreement, he/she can refuse. But
since there is other obligation such as the duty to observe the provisions of the
Proclamation and collective agreement, one may also argue that the worker cannot refuse
it.

More importantly, a worker is duty bound to inform immediately the employer any act
which endangers him or other workers or which prejudice the interests of the
undertaking. The failure of the worker to discharge his obligation in this regard may
entail the possibility of losing right to get compensation in case of injury. For instance,
suppose that Mesert is a worker who is working as operator of a machine Lema`s Textile
Factory. These days, the machine has some problems which threaten his safety. Then,
Meseret has the duty to do his best to solve it and if it is beyond his ability he shall report
it immediately to the employer. But if he fails to do so and as a result he sustains injury,
there is a possibility not to get compensation.

Under Article 12 of the Labor Proclamation, you have seen that the employer is duty
bound to provide the tools and materials necessary to perform the work. This means that
the tools and materials are to be used by the worker at the time of giving the service. As
a consequent effect of this obligation, the law imposes obligation upon the workers to
handle with due care all instruments and tools given to him/her for work. Moreover, the
worker has the duty to come to the work place fit both mentally and physically.

Article 29: Situation Analysis

Take about 25 minutes

This activity helps you to understand the rules related to obligations of the parties to a
contract of employment. Analyze the situations provided in the table hereunder and the
hypothetical case provided in question 2 of this activity.

1. The table hereunder is about obligations of the parties in contract of employment.

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 Identify those obligations and also give your reasons.

Obligations Of Of Worker Of Both Reasons

Employer
To give service in
person
To provide work
To follow
instructions
To take measures in
preventing
accidents
To provide tools

2. Suppose Ahmed is a worker. One day, he is not able to attend the work due to some
problem related to his personal commitment. As a result, he sends his brother so that his
brother renders the service to the employer in his place. Can he do so? Explain.

Comment: In principle this is impossible. You can refer to the discussion on obligation
of a worker.

Variation and Suspension of Employment Contract

Dear student, in this section, you are going to see how the terms of contract of
employment can be varied and how and when suspension of contract of employment can
be made.

How is variation of a contract of employment possible?

The employment relationships regulated by labor law are mainly related to economic
activities in the society. As economic situations change from time to time, employment
relations are dynamic in nature. Thus, variation of contract of employment is inevitable
because of the dynamic nature of labor relations. Due to some economic changes, there
might be promotion, demotion, transfer, change in place of work and the like. Thus,
Article 15 of the Labor Proclamation provides that it is possible vary (modify or change)
conditions of a contract of employment which are not determined under this
Proclamation. According to this Article, the grounds upon which conditions of a contract
of employment can be varied are based on the:

. collective agreement;

 work rules issued in accordance with the proclamation;

 written agreement of the parties.

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Collective agreement is an agreement concluded by a trade union (representing workers)
and an employer. Working hours, salary, and other issues related to their employment
relations can be improved by negotiation. When both parties agree at the points of
negotiation, they sign a collective agreement. Provisions of a collective agreement have
the effects of modifying or changing the working conditions in a contract of employment
or in a previous collective agreement. Only a worker and an employer may also conclude
an agreement to modify some of the terms of their contract. In this case, the agreement
of the two parties is valid only if it is concluded in written form.

Activity 30: Understand the rules on modification of contract of employment

Take about 30 minutes

This activity helps you to understand the rule on variation of contract of employment.
This activity is based on hypothetical cases. Analyze the cases and provide your answers
in the space provided.

1. Suppose Belachew is the owner of a garment factory at Gonder and decided to sell it.
Molalign, who is a well-known businessman in the town, has decided to buy the factory
and they concluded a contract. Then Molalign tells the workers of the factory that he is
planning to reshuffle them and there can be change in position as well as in their salary.
Is this variation of contract of employment possible? Explain

2. Suppose Ahmed and Dereje want to modify their contract of employment which the
views to promote Ahmed, the worker. They orally made the agreement to modify their
contract. Can we say modification is made to their contract? Explain.

Comment: 1. Article 16 of the labor proclamation provides that the amalgamation,

division or transfer of ownership of an undertaking cannot a cause for modification of
employment contract, except in one of the three situations discussed above.

2. Modification is possible by agreement of the two parties. They are free to agree for
the modification of their contract. But there is one basic requirement for the validity of
their agreement. That is, concluding their agreement shall be in written form.

Suspension

Suspension of contract of employment is a temporary interruption of employment

relations between the two parties. It is different from termination of contract which
brings an end to employment relations. Suspension of contract of employment is not
considered as a measure taken by employee or employer. It is not even considered as a
problem resulting from fault of either party. It is usually considered as a result of

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situations which make the worker absent or work non-existent for some time. In this
case, rights and obligations of the two parties related to actual performance of work will
be suspended until that period of time lapses. For instance, the worker is not duty bound
to come to work place and to perform work. The employer is not also duty bound to pay
salary and to give work.

These situations are provided under Article 18 of this Labor Proclamation. These are:

 leave without pay granted by the employer upon request by the worker;

 leave of absence for the purpose of holding office in trade unions or other social
services;

 detention for a period not exceeding thirty days provided that the employer is notified
within ten days or is supposed to know of the detention;

 national call;

 full or partial suspension due to force majeure of the activities of the employer for a
period of not less than 10 consecutive days;

 financial problems not attributable to the fault of the employer that requires the
suspension of the activities of the employer for not less than ten consecutive days.

Labor law distinguishes between situations where leave with pay and leave without pay
must be given. If the worker faces a situation where he/she can request only leave
without pay and the employer grants him, then it means the worker is permitted to be
absent from work for the leave period and the employer may deduct the worker’s salary.
This means, the rights and obligations related to the actual performance of work are
suspended until the period of leave without pay expires. A similar situation is when a
worker takes office in the trade union of their undertaking. This can be illustrated as
follows. Suppose Alene is elected as chairman of the trade union and is expected to take
the office of the trade union and hence, until he finished his terms he is entitled to get
leave without pay with regard to his employment relationships. Thus, the contract of
employment will be suspended.

The third ground is when a worker was detained up to 30 days. But with regard to the
detention, the period of detention shall not exceed 30 days and the employer must have
the information about his detention. This can be illustrated as follows. Suppose that
Ashenafi is a worker who was detained due to the fight with his neighbor on September
01, 2015 and remained behind the bar until 30 September 2015. Then, according to
Article 18(3) of the Labor Proclamation, the contract is suspended. But the fact that
Ashenafi was detained must be communicated to his employer within 10 days from 01

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September 2015. In all the above mentioned cases, the three grounds are more of related
with reasons attributable to the concerned worker.

Activity 31: understanding some issues related to suspension of employment

contract

Take about 20 minutes.

This activity helps you to understand some issues related to suspension of employment
contract. Read the hypothetical case carefully and analyze it. Write a short answer to the
question in the space provided.

Suppose Alene, who is a worker, was called to defend his country. Do you think this can
cause suspension of the contract of employment? Why?

Comment: The contract must be suspended because national call is one of the grounds
provided under Article 18 (4) of the labor proclamation.

The last two situations stated under Article 18(5) and (6) are problems of the undertaking
itself and are not related to the worker. These situations happen due to force majeure,
financial, market or economic problems. Thus, if a problem resulting from any of such
situation continues for ten and more days the employer is given the power to close the
undertaking or its affected part until the problem is solved. Obliging the employer to keep
workers and pay salary in these situations is pushing him to bankruptcy. That means, the
employer cannot suspend the contract of employment if the problems continue only for
less than ten days. However, it is the Ministry of Labor and Social Affairs which
determine the existence and nature of the situations. This means, in case an employer
faces any of these two problems, he/she has the duty to inform the Ministry in writing
within 3 days of the occurrence of the ground for suspension. Then, the Ministry of Labor
and Social Affairs has the duty to determine the existence of a good cause for suspension
within these days after receipt of the written information from the employer. Where the
Ministry finds that there is no good cause for suspension, it orders the resumption of work
and payment for the days on which the work was suspended. But if the Ministry is
convinced that there is good cause for suspension, it fixes the duration of suspension
which is a maximum of 90 days. If the problem continues for more than 90 days, then
there will be termination by notice rather than continuing suspension of employment
contract.

This may be illustrated as follows. Suppose that Ato Umed has a food processing factory
with 100 employees. On July 10, 2003 the factory was partly damaged by flood caused by
a heavy rain. The damage prevents totally the production processes in the factory. Here,
according to Article 18(5), there is a good cause for the employer to suspend the contract
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of employment upon written information submitted to the Ministry of Labor and Social
Affairs. But he can do so only after July 20, 2003. Once he suspends the contract, the
suspension can exist for a maximum of ninety days from the date of suspension. But take
note that the employer has the duty to inform the Ministry in writing within three days of
the occurrence of the ground of suspension under Article 18(5and 6).

Activity 32: Case Analysis

Take about 15 minutes

This activity is designed to help you understand some rules related to suspension of
contract of employment. Read the cases hereunder carefully and provide your answers in
the space provided.

If a worker is detained by the decision of a court of law for 2 months the contract of
employment will be suspended during this detention period. Do you agree? Why or why
not?

Comments: Detention of a worker is one of the grounds of suspension under labor law.
But the suspension period is limited to 30 days. If the detention goes beyond this, the
contract is logically terminated. Suspension of contract cannot go beyond the 30 days
period.

3.2.4 Termination of Contract of Employment

Dear student, now you are going to see how employment relationships come to an end
under labor law. Termination is ending the employment relationships between a worker
and an employer. In one or another way, one day the contract of employment will come to
an end which means that their relationships will come to an end. Knowing this, labor law
provides the grounds and the procedures of terminating contract of employment legally
with a view to discourage unlawful termination of contract of employment. You will first
see below the lawful termination of employment.

In this regard, Article 23(1) of Labor Proclamation No. 377/2003 provides that a contract
of employment shall only be terminated upon initiation by the employer or worker and in
accordance with the provisions of the law or a collective agreement or by the agreement of
the two parties. This provision shows four types of terminations. These are: termination
by agreement, termination by operation of law, termination by employer and termination
by worker. All these terminations have to be done by complying Labor Proclamation,
contract of employment and collective agreement.

Termination by operation of the Law

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This termination of contract of employment is caused by the happening of situations that
are recognized by the law as having the effect of terminating contract of employment.
Labor Proclamation declares the termination of contract of employment at the happening
of these situations. Article 24 of the Labor Proclamation provides the list of these
happenings as follows:

 On the expiry of the period on the completion of the work, where the contract of
employment is for a definite period or piecework;

 Upon the death of the worker;

 Upon the retirement of the worker in accordance with the law;

 When the undertaking ceases operation permanently due to bankruptcy or for any other
cause;

 When the worker is unable to work due to partial or permanent incapacity.

If a contract of employment is lawfully concluded for a definite period or for a piece work
and when that period expires or the piece work is completed, then the contract of
employment is terminated. The expiry of the period specified or the completion of the
work is the maximum lifetime of the contract. This can be clear by providing illustration.
Suppose Gelana is employed to replace a worker who has fallen sick and unable to attend
his work. The worker who has fallen sick is entitled to get sick leave for a maximum
period of six months. Thus, the employment of Gelana is until the worker who has taken
sick leave recovers from his/her illness and resumes his/her work. Thus, upon the
recovery of the worker who has fallen sick, the contract of employment of Gelana will be
terminated without necessarily raised by one of the parties.

Death of a worker also has a natural effect of terminating a contract of employment. It is

impossible to continue having a legal relation with a dead person. The contract of
employment cannot be transferred to the heirs of the deceased worker. Similarly, a
worker has reached the age of retirement means he/she cannot work. Age of retirement is
fixed by Pension Law to be 60. So, if a person reaches at this age, he will be retired from
his employment. Thus, the effect of retirement is termination of the contract of
employment.

Moreover, when the undertaking permanently stops its operation due to bankruptcy or any
other cause, the law terminates the contract of employment. Unless resolved, the
economic problem mentioned under Article 18(6) as ground of suspension of contract of
employment can finally take the undertaking to bankruptcy. And bankruptcy is one of the
grounds for termination of contract of employment by law. For instance, suppose Ahmed
has a textile factory with more than 100 workers. Due to very high competition in the

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market, the employer suspends the contract in accordance with Article 21 of the Labor
Proclamation. But the problem has not yet been solved within the 90 days maximum
suspension period and, hence, the procedure to declare the insolvency of the factory has
taken place. Then, it means that the contract of employment is terminated due to
declaration of bankruptcy.

The last ground is related to the permanent incapacity of the worker. If he is unable to
work due to permanent incapacity sustains after an employment injury, then the contract
must be terminated. Generally, these are the grounds upon which the law itself
terminates the contract of employment. But it seems there is conflict between Article
24(5) and 28(1) (b). Article 24 is generally talking about termination by law and Article
28 about termination by employer. The ground for termination in both Article 24(5) and
Article 28(1) (b) is the same. Then, how can we resolve the conflict?

Activity 33: Deciding a case relating to termination of contract of employment by

law

Take about twenty minutes

The activity provides hereunder helps to understand termination of contract of

employment by law. Read the case carefully and provide your answer in the space
provided.

Suppose that Alemash, who is an employer and Araya, who is a worker, have a contract
of employment and they concluded a contract to undertake a service of harvesting crop
on the farmland owned by Alemash. Can his contract be terminated in accordance with
Article 24?

Comment: Contract of employment can be terminated by law on the basis of various

grounds. One of these grounds is when a contract is concluded for a definite period or
for piece work.

Termination of contract of employment by Agreement of the Parties

Contract of employment may also be terminated by the agreement of the parties. No one
can prohibit the parties from terminating their contract of employment by free and mutual
agreement. But the law wants to make sure that the worker’s agreement to terminate
his/her contract of employment is given freely without the influence of an employer. For
this purpose, Article 25 of Labor Proclamation No.377/2003 provides that the agreement

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must be made in writing and the conclusion of such agreement to terminate the contract
cannot compel the worker to waive any of his rights under the law.

Activity 34: Understanding termination of employment contract by Agreement of

the Parties

Take about 15 minutes.

This activity is designed to help you understand some issues relating to termination by
agreement of the parties. Read the case carefully and provide your answer in the space
provided.

Suppose Alemash is a worker who is working as an accountant and her employer made
an agreement to terminate their employment relations. One of the terms in their
agreement is saying that Alemash agrees not to claim the payment of her wage of fifteen
days. They make the agreement in written form. What would be the effect of this
agreement? Explain.

Comment: In fact, parties are free to make an agreement to terminate their contract of
employment. But the agreement must be made in writing and should not imply any of the
waivers of the worker’s rights.

Termination by the Employer

Dear student, termination by unilateral decision of an employer is the most problematic

area about termination of contract of employment. Most labor litigations in court are
related to this termination. You will see here how labor law tries its best to strictly
regulate termination by employer.

There are two types of termination by employer; termination without notice and
termination with notice. Each type of termination needs an acceptable reason for
termination. Moreover, the law determines the reasons of termination that are acceptable
as ground of termination by employer. That means an employer cannot unilaterally
terminate contract of employment unless any of the reason stated by the law has
happened. Article 26(1) generally provides that a contract of employment may only be
terminated where there are grounds connected with the worker’s conduct or with
objective circumstances arising out of his ability to do his work or the organizational or
operational requirements of the undertaking. Moreover, Article 26(2) of the
Proclamation prescribes grounds that cannot be considered as legitimate for the employer
to terminate the contract of employment. Accordingly, the following shall not be deemed
to constitute legitimate grounds for the termination of a contract of employment of a
worker.

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 His membership in a trade union or his participation in its lawful activities;

 His seeking or holding office as a workers’ representative;

 His situation of grievance or his participation in judicial or other proceedings against

the employer;

 his nationality, sex, religion, political outlook, marital status, race, color, family
responsibility, pregnancy, lineage or social status.

The Labor Proclamation has provided lists of grounds which satisfy the criteria of Article
26(1). Article 27 provides those serious grounds which are attributable to the fault of an
employee. As employee is deplorable for the happening of the grounds stated in Article
27, termination is punitive, if any of the grounds happen, then the employer may decide
automatic termination or termination without prior notice. When you see the grounds
stated in Article 28, you can understand that most of them are not faults of the employee
and then termination is done fairly with prior notice. Read Article 27 and 28 provided
below for your understanding.

Article 27, Termination of Contract of Employment without Notice

1) Unless otherwise determined by a collective agreement, a contract of employment

shall be terminated without notice only on the following grounds.

a) Repeated and unjustified tardiness despite warning to that effect;

b) Absence from work without good cause for a period of five consecutive working days
or ten working days in any period of one month and thirty working days in a year;

c) Deceitful or fraudulent conduct in carrying out his duties having regard to the gravity
of the case;

d) Misappropriation of the property or fund of the employer with intent to procure for
himself or to a third person undue enrichment;

e) Returning output which, despite the potential of the worker, is persistently below the
qualities and quantities stipulated in the collective agreement or determined by the
agreement of the two parties;

f) Responsibility for brawls or quarrels at the work place having regard to the gravity of
the case;

g) Conviction for an offense where such conviction tenders him incapable for the post
which he holds;

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h) Responsibility for causing damage intentionally or through gross negligence to any
property of the employer or to another property which is directly connected with the work
of the undertaking;

i) Commission of any of the activities referred to in Article 14 sub-article 2;

j) Absence from the work due to sentence of imprisonment passed against the worker for
more than thirty days;

k) Commission of other offenses stipulated in collective agreement as grounds of

terminating a contract of employment without notice.

Article28. Termination of Contract of Employment with Notice

(1) The following grounds relating to the loss of capacity of, and situations affecting, the
worker shall constitute good cause for terminating a contract of employment with notice;

a) the worker’s manifest loss of capacity to perform the work to which he has been
assigned; or his lack of skill to continue his work as result of his refusal to take the
opportunity of training prepared by the employer to upgrade his skill or after having been
trained, his inability to acquire the necessary skill;

b) The worker is for reasons of health or disability, permanently unable to carry out his
obligations under the contract of employment;

c) The worker’s unwillingness to move to a locality to which the undertaking moves;

d) The post of the worker is canceled or good cause and the worker cannot be transferred
to another post;

2) The following grounds relating to the organizational or operational requirements of the

undertaking shall constitute good cause for the termination of a contract of employment
with notice;

e) any event which entails direct and permanent cessation of the worker’s activities in
part or in whole resulting in the necessity of a reduction of the work force;

f) fall in demand for the products or services of the employer resulting in the reduction
of the volume of the work and profit and thereby resulting in the necessity of the
reduction of the work force;

g) a decision to alter work methods or introduce new technology with a view to raise
productivity resulting in the reduction of the work force.

The first ground under Article 28(1) is related to the ability and efficiency of the worker.
That means there is lack of efficiency and required skill necessary for the performance of

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the service. But before terminating the contract based on this ground, the employer is
expected to make some efforts to upgrade the worker’s skill by providing some training
opportunities. If the worker is not willing to take such training opportunity or if,
irrespective of the training given, s/he is not making improvement, the employer can
terminate his contract upon giving legal notice period.

The second ground is related to the health or permanent disability that readers the worker
unable to carry out his duties under the contract. Here there are some kinds of
confusions. The same ground provided under Article 28(1) (b) is also provided under
Article 24(5) of the Proclamation. How are we going to reconcile this?

The third ground is when the worker is not willing to move to the place where the
undertaking is moved. For instance, suppose Amare is working in a garment factory here
in Addis Ababa. Due to the business requirement, the owner of the factory has decided to
move it to Bahir Dar Town. If Amare is not willing to move there, then the employer has
the right to terminate his contract. But you have to take note that the employer, in order
to terminate on the grounds provided under Article 28(1), is required to give legal notice
period as per Article 35 of the Labor Proclamation.

Activity 35: understanding termination of contract of employment by the

Employer

Take about 20 minutes.

This activity helps you in understanding the rules related to termination of contract of
employment by employer. The activity is based on hypothetical cases. Read the cases
carefully and try to analyze them in light of the discussions made above. Then provide
your answer in the space provided.

1. Suppose Alemayehu is a worker in a factory that Processes foods. On June 20, 2015,
he causes a quarrel in the work place with one of his colleagues, where two workers are
seriously injured and some property of the undertaking is damaged. Can the employer
unilaterally terminate the employment of Alemayehu on August 26, 2015? Explain.

2. Suppose in the above mentioned case that the police detained Alemayehu on the same
day and he remained arrested for a period of three months. Can the employer terminate
his contract of employment?

Comments: 1. the right of employer to unilaterally terminate the contract of employment

as per Article 27 is lapsed after 30 working days from the date he knows the occurrence.
So, first you have to identify when the employer heard about the incident. But, after 30
working days from that date, the employer will not have the right to terminate the contract

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2) If a worker is detained for a period of more than 30 days, the employer can have the
right to unilaterally terminate the contract as per Article 27(1) (j) of the Labor
Proclamation. Even it is possible for the employer to terminate the contract without
notice.

The provision under Article 28(2) related to the organizational or operational requirements
of the undertaking, shall constitute good cause for the termination of a contract of
employment with notice. The first ground is related to any event that entails the
permanent cessation of the service given by the worker. One best example is the ground
mentioned under Article 18(5) or for suspension of contract of employment force majeure
is one of the grounds. Suppose that Adwa Garment Factory is owned by Hagos. The
factory was established here in Addis Ababa in 1980 and has more than 100 workers. On
March, 2014, the factory was totally damaged due to Arson. In the absence of any
insurance scheme for this kind of risk, the factory was totally closed. As a consequence,
the employment of all the workers is terminated. The same will happen in case of fall in
demand, which can be a ground for suspension of contract of employment under Article
18(6). If you remember the discussion on Article 18(5) (6) about suspension, the
maximum period of suspension for these grounds cannot exceed 90 days.

Then, the question here is what will happen to the contract of employment if the problem
continues to exist even after the 90 days period is lapsed. In this case, the only solution is
termination of the contract by the employer as per Article 28(2). But you have to take
note that the grounds under Article 28(2) are not something related to the workers whose
contracts are terminated. The worker may be very diligent and punctual but his/her
contract of employment is terminated due to something that relates to the undertaking.
Take also note that in most cases, it is not a question of terminating the contract of one
worker rather it causes the termination of contract of employment of many workers. This
is what is called redundancy of work which may result in the termination of the contract of
employment of two or with the substantial number of workers. If redundancy results in
the termination of the contract of substantial number of workers, it is called reduction of
work force. Article 29(3) of the Labor Proclamation provides the following. Where the
cancellation of a post affects a number of workers thereby constituting a reduction of work
force in accordance with Sub-Article (1) of Article 29, the termination shall take place in
compliance with the requirements laid down in sub-article (3) of Article 29.

Reduction of work force is defined under Article 29(1) differently. It states that
“Reduction of work force” means reduction of the work force of an undertaking for any of
the reasons provided for in sub-article (2) of Article 28 affecting a number of workers
representing at least ten percent of the number workers employed or in the case of an
undertaking where the number of workers is between twenty and fifty, a reduction of
workers affecting at least five employees over a continuous period of not less than ten
days. For instance, a given undertaking has fifty workers and due to fall in demand of the

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 service of the undertaking, it was put in a difficulty. In this case, with the view to save the
undertaking it becomes necessary to terminate the contract of eight workers of the
undertaking. Then, it is reduction of work force because the undertaking has fifty workers
and the reduction is going to affect more than five employees within the meaning of
Article 29(1).Thus, how do you think, the reduction should take place? Whose contract
should be terminated and who should be retained?

Whenever a reduction of work force takes place within the meaning of Article 29(1), the
employer must follow certain procedures to terminate whose contract of employment from
among the fifty workers in the above case must be determined. First of all, the employer
must consult the trade union or representative about how should the reduction takes place.
In this process, the employer has the right to retain the workers with skills and higher rate
of productivity to the undertaking. But, in case of equal skill and rate of productivity, the
workers to be affected first by the reduction shall be in the following order as provided in
Article 29 (3):

(a) Subject to the provisions of (a)-(e) of this Sub--Article, those having the shortest length
of service in the undertaking;

(b) Those who have fewer dependents;

(c) Those not covered under Sub-Article 3 (a) and (b) of this Article;

(d) Those are disabled by an employment injury in the undertaking;

(e) Workers’ representatives; and

(f) Expectant mothers.

This legal principle may be supported by the following illustration. Suppose the above
undertaking has fifty workers. Most members of the staffs are senior and skilled but from
amongst them, 9 staff members are identified as junior and five are to be reduced. Thus, their
skill, service and social status of staff members who are under the project of the reduction of
work force are stated here under. Alemash and Belete are employed just eight months before.
Tariku, Hilawie, Getie and Roman have one-year equal service to the undertaking. But
Hilawie and Getie are with skill and highest productivity to the undertaking that makes them
key workers that cannot be missed. There are also Wogayehu and Kaleab, each with equal
service of three years but Wogayehu is married and has five children in addition to his
mother who is solely dependent upon him while Kaleab is single with no dependent. Then, if
the reduction of work force is to be made to five workers, the employer has the right to retain
Hilawie and Getie because they are with highest productivity and important to the
undertaking. Alemash, Belete, Tariku and Roman are the first to go because they are with
the shortest length of service to the undertaking. In order to identify the fifth worker from

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Wogayehu and Kaleab, it is Kaleab who should go because though both of them have equal
service, Kaleab has no dependents while Wogayehu has many dependents as indicated from
the illustration.

Workers’ representatives and pregnant women have got the highest protection during
termination of contract of employment on the grounds of reduction of work force as they go
last. This is to mean, their contracts of employment are terminated only at the last.
Generally, an employer can unilaterally terminate contract of employment only on the
grounds discussed above.

Therefore, if the grounds for termination of contract of employment are not based on those
situations, then the termination will be unlawful which is strictly prohibited. For instance
suppose that the employer terminates the contract of employment of Amarech. The major
reason for the termination of the contract is because she participates in a legal strike taken by
workers of the undertaking. This is unlawful for the employer to terminate the contract of
employment on such ground, as taking strike against the employer is a right granted by law
to workers. Generally, the employer has the right to unilaterally terminate the contract of
employment in accordance with the legitimate grounds provided under provisions of Article
27 and 28. And as a rule, the employer must give notice before termination except for the
grounds provided under Article 27. The notice must be given in accordance with the
provisions of Articles 34 and 35 of the Labor Proclamation.

Activity 36: understanding the grounds for an employer to terminate contact of

employment unilaterally

Take about 25 minutes

This activity helps you to understand some of the grounds for an employer to unilaterally
terminate contract of employment. Read the hypothetical cases provided in the first
columns of the table below and give your answer on the second and third columns of the
table and also you are required to give sufficient reason to each of your answers under the
fourth column.

Comment: You need to clearly understand the discussion on termination by employer to

answer it appropriately. In most cases, the grounds enumerated under Article 27 of the
Proclamation are subjective and based on the gravity of the wrong committed by the
concerned worker.

Termination by the Worker

It is not only the employer who can unilaterally terminate contract of employment. The
worker too has the right for unilateral termination of the contract of employment. Here, if a

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worker wants to terminate his/her contract of employment; she/he can do so without
necessarily mentioning the reason or ground for termination. To be more specific, unlike
employer, a worker is not required to specify grounds for his unilateral decision to terminate
the contract. The only requirement is to give notice of thirty days to his employer that he is
going to terminate the contract. Accordingly, Article 31 of Labor Proclamation provides
that: Without prejudice to Article 32 of this proclamation, any worker who has completed his
probation period, may, by giving thirty days prior notice to the employer, terminate his
contract of employment.

As you may have understood from Article 31 and the above discussion, a worker can
unilaterally terminate contract of employment without being required to have a legitimate
ground. An employer is required to have legitimate grounds provided under the law for
unilateral termination of the contract. But the worker who wants to unilaterally terminate his
contract is required in principle to give notice of thirty days to the employer. This enables
the employer to find someone else that replaces the worker who is going to terminate his
contract. But the worker can terminate his contract without giving notice in one of the
following grounds as provided under Article 32 of the Labor Proclamation No.377/2003

1) The following shall be good cause to terminate a contract of employment without notice:

a) If the employer has committed against the worker any act contrary to his human
dignity and morals or other acts punishable under the Penal Code;

b) if, in the case of imminent danger threatening the worker’s safety or health, the
employer, having been made aware of such danger, failed to act within the time limit in
accordance with the early warning given by the competent authority or appropriate trade
union or the worker himself to avert the danger;

c) If, the employer has repeatedly failed to fulfill his basic obligations towards the worker
as prescribed under this proclamation, collective agreements work rules or other relevant
laws.

This can be illustrated as follows. Suppose that Dereje is a worker who is working as a
driver in a factory. The car he is driving has serious brake defects, which he has reported the
urgent need to repair the car. But the employer just gives him a deaf ear to the problem. In
this case, if the worker wants to terminate the contract, he is not required to give notice to the
employer. But the worker will lose his right to terminate the contract without notice if he
fails to use it within 15 days of the occurrence (Article33).

2) Where a worker terminates his contract of employment for the reason referred to
under Sub-Article (1) of Article 32, he shall inform the employer in writing the
reasons for termination and the date on which the termination is to take effect.

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 Activity 37: Understanding termination of contact of employment by a worker

Take about twenty minutes.

The following activity helps you to understand some issues related to termination of
contract of employment by a worker. Write a short and brief answer to the question.
You may use the space provided.

Why do you think that the law does not require grounds for a worker to unilaterally
terminate the contract of employment he has with his employer? Explain.

Comment: The law does not provide any ground to be satisfied for a worker to terminate
unilaterally his contract of employment. This is because, worker is a weaker party to the
contract and as a result, the law wants to respect his liberty.

Notice to Terminate a Contract of Employment

As you have seen, contract of employment can be terminated in various ways. The parties
can unilaterally terminate contract of employment, particularly when the contract is for
indefinite duration. But in case of contract for definite duration, both parties know that the
contract will cause to an end upon the end of the specified period in the contract unless issues
of termination come before the expiry date.

But in case of contract for indefinite duration, since the contract is concluded for unspecified
period, this kind of contract is normally terminated upon the initiation of one of the parties.
Thus, in case one of the parties to the contract wants to terminate the contract, she/he is
expected to give notice to the other party. Thus, notice to terminate a contract of
employment must be in writing specifying the reasons for termination and the date on which
the termination shall take effect. The written notice must be served on the worker in person
and if this is not possible be affixed on the notice board in his/her work place for ten
consecutive days. But if it is the worker who is terminating the contract, she/he can hand to
the employer or his representative or deliver to his office. With regard to period of notice
given by the employer, Article 35 of the Labor Proclamation provides standards.

1) Unless otherwise provided for in this proclamation, the period of notice given by the
employer shall be as follows:

a) One month in case of a worker who has completed his probation and has a period of
service not exceeding one year;

b) Two months in case of a worker who has period of service above one year to nine
years;

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c) Three months in case of a worker who has period of service of more than nine years’

d) Two months in case of a worker who has completed his probation and whose contract
of employment is terminated due to reduction of work force.

If the worker is the one who is terminating the contract, the period of notice expected to
be given by the worker is 30 days according to Article 31 of the Proclamation. So the
worker must give 30 days prior notice to the employer. Take note that if the worker is
terminating his contract for reasons specified under Article 32, he is not duty bound to
give notice to the employer. By the same token, if the employer is terminating the
contract on those grounds specified under Article 27(1), he is not expected to give notice
as per Articles 34 and 35 of the Labor proclamation.

Activity 38: Analyzing how notice period made

Take about 15 minutes.

This activity helps you to understand some issues related to notice period. Read the case
carefully and provide your answer in the space provided.

Suppose Yonas is a worker in Addis Ababa textile factory. He served the factory for the
last six years. Due to fall in demand, the employer has decided to terminate employment
contract of some of the workers among which Yonas is the one. Is the employer duty
bound to give notice to worker? If yes, what is the period of notice to be given to him?

Comment: The employer is expected to give notice because the ground upon which he is
terminating the contract is based on Article 28(2). For a worker who served for more
than a year but not in excess of nine year, the notice period to be given must be two
months.

3.2.5 Effects of unlawful Termination

Dear student, so far, the discussion has focused on the lawful termination of contract of
employment. It is expected that both worker and employer comply with the law in
terminating contract of employment. But what if termination is done by contradicting the
law?

Article 42 of the Labor Proclamation provides that termination shall be unlawful when an
employer or a worker fails to comply with requirements laid down in this proclamation
regarding termination. This is to mean that if, for instance, the employer terminates the
contract under Article 26, 27, 28, 29, without existence of grounds stated under each
provision and the provisions related to notice period, then the termination is unlawful.

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By the same token, if the worker terminates the contract in violation of Article 31 & 32 of
the Proclamation, that termination is unlawful.

Activity 39: Analyzing Cases of lawful or unlawful Termination

Take about 30 minutes.

Identify the unlawful termination of employment contract from amongst the following
situations. First read carefully each of the cases of termination provided in the first
column of the table. Then, identify whether the termination is lawful or unlawful.
Finally, give your reasons for your decision as lawful or unlawful.

Case of termination Lawful? Reasons

Yes No
Elsa is the owner of a manufacturing Company. Due to
the fall in demand of the goods that the company was
exporting, the company faced a serious financial
problem that threatens its existence. Then, the
management of the company has decided to close one of
its branches established at Debre-Birhan. As the result,
the employer terminates the contract of employment of
three workers.
Yeshi is a worker at Wayaya PLC. One day, the guards
of the Company caught her at the gate while she was
trying to misappropriate the company’s property. As a
result, her employer terminates the contract of
employment.
Salah has a contract of employment with Addis Foam.
He was elected as a leader of their trade union and
because of this his employer terminates his contract of
employment.

Comment: 1. Employer has the right to unilaterally terminate the contract of

employment whenever the grounds provided under Article 28(2) of the Proclamation. But
the employer must also respect the procedure provided under Article 29(3) of the
proclamation and the notice period.

2. An employer can terminate contract of employment on grounds related to the character

of the worker. This is clearly provided under Article 27 of the proclamation. One among
those grounds is misappropriating the undertakings property.

3. An employer can lawfully terminate the contract of employment he/she has with a
worker only on those grounds provided under the law. Article 26(2) provides grounds

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that are considered unlawful for the employer to terminate employment contract. One
among these is the worker’s being taking a post in trade union office.

Termination of contract of employment has certain effects or consequences to be borne by

the parties. Whether it is lawful or unlawful, termination has certain pecuniary effects on
both the employer and the worker. First of all, according to Article 36, if the worker has
wage or other payment due to him, the employer is duty bound to pay him within seven
working days from the date of termination. If the employer tries to delay such payment,
the competent court can order the payment amount up to three months salary of the
worker. On the other hand, the worker is expected to return the property or any sum of
money which he received from or is due to the employer. His failure in this regard may
result in delay of any payment such as wage due to him. But the major effect of
termination is severance pay. When a contract of employment is terminated lawfully by
agreement or by unilateral decision, the employer has still duty bound to pay severance
pay. Article 39 (1) of the Labor Proclamation No.377/2003 provides that a worker who
has completed his probation shall have the right to get severance pay from the employer
where:

a) his contract of employment is terminated because the undertaking ceases operation

permanently due to bankruptcy or of any other reason;

b) his contract is terminated by the initiation of the employer against the provisions of the
law;

c) he is reduced as per the conditions described under this proclamation;

d) he terminates his contract because his employer did things which hurts the worker`s
human honor and moral or the thing done by the employer is deemed as an offence under
the penal code;

e) he terminates the contract because the employer being informed of the danger that
threats the security and health of the worker did not take measures; or

f) his contract of employment is terminated because of reason of partial or total disability

and is certified by the medical board.

Severance pay is a payment which a worker is entitled to get from the employer
whenever there is termination of contract of employment. In principle, this payment is
irrespective of the person who terminates it and the manner in which the contract was
terminated. What are the reasons that justify the payment of severance pay? According
to some of the scholars of labor law, there are two main reasons that justify the payment
of severance pay. First they said that the worker whose contract was terminated was
beneficial to the employer. The vigor, strength, energy and vitality of the worker had

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been used for the benefit of the employer. As a result, the worker’s vigor and energy has
been dwindled. Hence, these scholars have said that it is absolutely against justice to
throw the worker away like unwanted dish as if he was not beneficial to the employer.

Second, they base their argument on the proprietary right. They say that the worker has a
proprietary interest over his job. Hence, when he lost his job, he needs to be
compensated just like an owner of a property who lost it. Therefore, the payment of
severance pay is, in principle, a consequence of termination regardless of the nature and
ground of termination. Moreover, the payment of severance pay is not aimed at
punishing the employer.

But it seems that Article 39(1) of the Labor Proclamation No.377/2003 makes the right to
severance pay to be claimed in a limited scope. In other words, the above mentioned
principle is not applicable for payment of severance pay under the Labor Proclamation
No.377/2003. What one can easily understand from the provision of Article 39 is that
any termination may not necessarily entitle the worker to get severance pay. For instance,
suppose the worker has terminated his contract in accordance to Article 31. If the reason
for his termination cannot be justifiable under Article 39 (1) (d) and (e), he is not entitled
to severance pay. The same will be true if the contract is terminated by the employer
lawfully on the grounds provided under Article 27 of the Proclamation. Therefore, a
worker is entitled to severance pay if the manner in which the contract is terminated falls
within the list provided under Article 39(1).

Activity 40: Understanding severance pay

Take about 20 minutes

The activity helps you to understand some issues of severance pay. This activity is
composed of two questions. Read the cases carefully and try to analyze them.

1. Suppose Mulualem was a worker whose contract is terminated by the employer due to
sentence of imprisonment passed against him for more than 30 days. Can he be entitled
to get severance pay?

2. Suppose Shumalem is a worker who has been working at Commercial Bank of

Ethiopia. Now she reached at retirement age and as a result the Bank informed her that it
is going to terminate the contract of employment. Can she claim severance pay? Give
sufficient reason.

Comment:1. If a contract is terminated by the initiation of the employer, the worker is

entitled to get severance pay if the termination is against the provision of the law. If the

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employer terminates the contract without violation of the law, particularly on Article 27,
the worker will not be entitled to get severance pay.

2. The major issue is whether this kind of termination can fall under the lists provided
under Article 39(1) of the proclamation. Retirement is one of the grounds of termination
by law provided under Article 24 of the proclamation. It seems that this kind of
termination is not included under Article 39(1).

Article 40 – Amount of Severance Pay

The severance pay referred to in Article 39 shall be:

1. thirty times the average daily wages of the last week of service for the first year of
service; for the service of less than one year, severance pay shall be calculated in
proportion to the period of service.

2. In case of a worker who has served for more than one year, payment shall be increased
by one-third of the said sum referred to in sub-article 1 of this Article for every additional
year of service, provided that the total amount shall not exceed twelve months’ wage of
the worker.

3. Where a contract of employment is terminated in accordance with Article 24(40 and

29, the worker shall be paid, in addition to payments under sub-article 1 and 2 of this
Article, sum equal to 60 multiplied by his average daily wage of the last week of service.

Therefore, the amount of severance pay to be paid to the worker is provided under Article
40 of the Labor Proclamation. Accordingly, it is thirty (30) times the average daily wage
of the worker for the first year of service, plus one-third of the amount for each additional
year. But the total amount cannot exceed 12 months wage of the worker. For instance,
suppose that Shimelis, whose contract of employment is terminated, was receiving Birr
6000 as monthly salary. He served the undertaking for three years. Then the amount of
severance pay he is entitled to is 30x birr 200 = 6000 + 1/3 of 6000 for the remaining two
years of service.

If a worker has less than one-year service, he is entitled to the amount proportional to his
service. In case the contract is terminated due to grounds mentioned under Article 24(4)
that resulted in reduction of work force, the workers whose contract of employment is
terminated are entitled to be paid a sum equal to 60 times average daily wage of the last
week of service as redundancy payment. This payment is in addition to the payment of
severance pay that those workers are entitled to. Moreover, you have to bear in mind that
in case a worker has terminated lawfully in accordance with Article 32(1), she/he is
entitled to payment of a sum equal to 30 times his daily wage of the last week of service.
This is the case, where the reasons for termination are due to act contrary to his human

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dignity and morals by the employer, or the employer has repeatedly failed to fulfill his
basic obligations towards the worker.

But in case of unlawful termination of a contract of employment by the employer, then

the effect of such termination is either reinstatement of the worker to his work or
payment of compensation. In case of unlawful termination due to the violation of Article
26 (2), the court has the duty to order reinstatement unless the worker opts to leave his
employment in which case he gets compensation. Article 43(1) of the Labor
Proclamation provides that ‘where a contract of employment is terminated because of
those grounds mentioned under Article 26(2), the employer shall be obliged to reinstate
the worker’. Article 26(2) of the Labor Proclamation has already been discussed on
termination of contract of employment by employer. Do you remember the situations
provided under Article 26 (2)? You can refer back the discussion on termination by
employer.

The situations provided under Article 26 (2) can be illustrated as follows. Suppose that
the employer terminates a contract of employment he has with one of his workers. The
reason for the termination of the contract of employment was the fact that the worker
becomes representative of the worker; or member of a trade union; or the employer is not
happy with the worker`s political outlook. Therefore, the termination of contract of
employment is unlawful and even against the dignity and liberty of the worker. For this
reason, in case of violation of Article 26 (2), the court has the duty to order the employer
to return the dismissed worker back to his job. But take note of the fact that worker can
refuse to be reinstated in which case compensation must be awarded to him.

For unlawful termination by the employer who violates the provision of Articles 24, 25,
27, 28, and 29, it is within the desecration of the court to order either reinstatement or
payment of compensation. In this case, depending upon the circumstances, the court may
order the reinstatement of the worker or awards him compensation for the unlawful
termination. Article 43 (2) provides that ‘where a worker’s contract of employment is
terminated contrary to the provisions of Articles 24, 25, 27, 28 and 29 of this
proclamation, the labor dispute settlement tribunal may order the reinstatement of the
worker or the payment of compensation”. What is the amount of compensation to be paid
by an employer for unlawful termination? Read the provisions of Article 43 (4)
hereunder.

Article 43(4)

The compensation to be paid under Sub-Article (1) (2) or (3) of this Article shall, in
addition to the severance pay referred under Article 39 – 40, be as follows; this provision
shall also apply to a worker covered by the relevant pension law.

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a) one hundred eighty times the average daily wages and a sum equal to his remuneration
for the appropriate notice period in accordance with Article 44 in case of unlawful
termination of a contract of employment for an indefinite period;

b) a sum equal to his wages which the worker would have obtained if the contract of
employment has lasted up to its date of expiry or completion provide however that such
compensation shall not exceed one hundred eighty times the average daily wage in the
case of unlawful termination of a contract of employment for a definite period or for
piece work.

Article 43(4) (a) of the Labor Proclamation refers to unlawful termination of contract of
employment for indefinite period while (b) of this sub-article refers to unlawful
termination of contract of employment with definite duration.

The following case studies outline best employment practices to be implemented at the
time of recruiting staff and during their employment which can greatly reduce the
chances of unfair dismissal claims.

Understanding the causes and effects of dismissal

Case Study One

A butcher lost his unfair dismissal claim after it was found he deliberately contravened
health standards and breached quality assurance standards by throwing meat on the floor.
These standards were well known and displayed, and all staff had been warned about the
consequences of not complying with these standards.

By having policies and procedures displayed and understood by all staff an employer
ensures that a disgruntled employee can't claim ignorance.

Case Study Two

An employee who was dismissed for breaching the non-smoking policy won her job back
because, although the company had a non-smoking policy, the consequence of breaching
was not known nor was the policy adhered to.

If an employer/manager introduces any workplace policies, they must be prepared to

enforce them.

Case Study Three

A plant operator lost his unfair dismissal application when he failed to notify his
employer about a serious valve malfunction. The employer told the Commission that the
employee had been shifted around to various jobs within the company because his

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disenchantment with his job meant he could not integrate with the various work teams
within the business.

He had been counseled but had been given a final warning after the valve malfunction
incident. The employer was commended for his perseverance.

By following a proper counseling and disciplinary system the employer avoided a finding
against him.

Case Study Four

A sheet-metal worker who was dismissed because he took too long with his work won his
unfair dismissal case. It was found that the first time the employee felt his job was in
jeopardy was on the actual date of termination. The Commissioner stated that while
verbal warnings can be just as effective as written ones, particularly in a small business,
what may be intended as a serious warning by an employer could be interpreted by the
employee as a passing comment.

Make sure all employees understand the seriousness of the consequences of their poor
performance.

Case Study Five

A clerical employee who was late to work almost every day dropped her unfair dismissal
claim after conciliation. The employer told the Commission that the woman's lateness
had only been approved on two occasions. Although reminded that she was on probation,
and needed to improve her timekeeping, she told the company she had difficulty getting
up in the morning.

If the employer had used the probation period to adequately counsel and coach the
employee on her attendance, then the trip to the Commission may not have been
necessary. Also, if timekeeping was an essential requirement for the position, the
employer should have probably discussed this at the interview. Chances are the employee
may have volunteered that she wasn't a "morning person".

Case Study Six

A club steward was reinstated after being sacked for refusing to do up his top button and
tie firmly because it gave him migraine headaches. He supported this claim with a
medical certificate.

The employer should have discussed the matter in greater depth with the employee and
come up with alternatives that suited both their requirements - such as specially tailored
shirts.

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Case Study Seven

A store man and packer, dismissed when the company hired someone who was better
qualified, was awarded compensation. The employer argued that a new structure meant
that he needed two store men not three, and he had chosen the other worker who had only
been employed for seven weeks because he was older and would find it hard to get work.
He also had a family to support.

The Commission rejected this, saying that it was discriminatory to act against the
dismissed man because he was young, single and had no children. It was also stated that
dismissing the younger man in order to keep the older man's wider talents was not in
keeping with decent management principles.

Employers must be sure that they are not acting in a discriminatory way when you
dismiss an employee. Most importantly, if an employee doesn't have the skills you need
when your business changes directions, it is better to get him or her trained for new skills.

Activity 41: Understanding some effects of termination of contract of

employment

Take about thirty minutes.

This activity helps you to understand some issues related to effects of termination of
employment contract. Write short answers to the questions hereunder in the space
provided.

1. If a worker whose contract of employment was terminated by the employer is

reinstated to his job, can he claim back payment of his wage?

2. You have seen that if an employer terminates a contract of employment in violation of

the provision of Article 26 (2), the court has not any other option other than ordering
reinstatement of the dismissed worker. Why the law prescribed this as a solution?

Comment: 1. Reinstatement means basically putting back everything to its former

position. So, from this perspective, it is possible to claim back payment of his salary.

2. There is no as such a clearly provided reason under labor law. But the law has
already provided that termination by the employer on such grounds provided under
Article 26(2) is unlawful. It seems that it considers forced performance as a remedy for
violation of this provision.

The payment of compensation for unlawful termination of contract of employment,

which is provided under Article 43, is mainly to punish the employer. That is why the

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amount of payment is much higher than even severance pay. But you have to bear in
mind that in case the court orders reinstatement of the worker for unlawful termination of
the contract, the court has to order the back-pay payment of the salary of the worker.
According to Article 43(5) of the Labor Proclamation, if the court decides for
reinstatement of the worker to his job is the first instant court, it can order payment of
back-pay not exceeding six months. But if appeal was taken to the appellate court and
the court confirms the reinstatement decision of the lower court, it shall order payment of
back-pay not exceeding one year.

If a worker unlawfully terminates a contract of employment, he is liable to pay

compensation to the employer which should not exceed his 30 days wages. Moreover, if
the termination was unlawful due to the non-compliance with the provisions of Article35
of the Proclamation, it does not entail the effects provided under Article 43 and, hence,
no compensation under this Article be paid. This is due to the fact that violation of notice
requirements results in the payment of wages in lieu of the notice period in addition to the
payment under Article 40 of the Labor Proclamation.

3.3 Psychological contract

While the origins of the concept of ‘the psychological contract’ can be traced to the
1960s, the idea gained widespread currency in the academic and research fields of
organizational psychology, organizational behavior and HRM in the 1990s following the
publication of a key article, then a book, by Rousseau (1989, 1995) which stimulated
renewed interest in the idea. The concept is now also popular in practitioner circles.

3.3.1 Definition of Psychological contract

The psychological contract refers to the unwritten set of expectations of the employment
relationship as distinct from the formal, codified employment contract. Taken together,
the psychological contract and the employment contract define the employer-employee
relationship.

The psychological contract develops and evolves constantly based on communication, or

lack thereof, between the employee and the employer. Promises over promotion or salary
increases, for example, may form part of the psychological contract.

Managing expectations is a key behavior for employers so that they don’t accidentally
give employees the wrong perception of action which then doesn’t materialize.
Employees should also manage expectations so that, for example, difficult situations or
adverse personal circumstances that affect productivity aren’t seen by management as
deviant.

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While there is no one universally accepted definition of the psychological contract, most
definitions tend to see it as the implicit understanding of the mutual obligations owed by
an employee and their employing organization to one another. It is often contrasted with
the formal, legal employment contract that specifies the formal duties, responsibilities
and obligations of employer and employee in the employment relationship.
Commentators vary in the extent to which they see these two sorts of contracts as
mutually exclusive, overlapping or interdependent. Shields (2007: 49), for example, sees
the psychological contract as ‘filling in the gaps’ left by the formal legal contract of
employment to constitute a more complete account of the entire range of mutual
obligations between employer and employee.

The most widely accepted definition is Rousseau’s (1995: 9):

The psychological contract is individual beliefs, shaped by the

organization, regarding terms of an exchange arrangement between the
individual and their organization.

Rousseau’s (1989) earlier definition is also instructive:

The term psychological contract refers to an individual’s belief

regarding the terms and conditions of a reciprocal exchange agreement
between the focal person and another party. Key issues here include the
belief that a promise has been made and a consideration offered in
exchange for it, binding the parties to some set of reciprocal obligations.

Key features of the concept include the following1:

1) the psychological contract is based on beliefs or perceptions. It follows that

different individuals (even in the same organization) will have potentially
different conceptions of what the psychological contract actually entails.

2) the psychological contract is implicit rather than explicit. It is thought to be

inferred from the promises made or implied by the organization or the employee.
Therefore the parties are thought to draw conclusions as to the existence and
substance of various promises and obligations based on the observed behaviors of
the other party.

3) the psychological contract is based on perceived agreement rather than an actual

agreement. This suggests the possibility that employees and managers will often
disagree as to the content of the psychological contract, and research suggests that
this is indeed, often, the case.

4) the psychological contract is based on an exchange and is therefore founded on

the principle of reciprocity. The implied promise to behave in a certain way at
1
Adapted from Conway and Briner (2005)

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 work, for example, is conditional on the other party providing something as ‘part
of the deal’.

5) the psychological contract is ongoing and evolving. Unlike a written legal contract
that might be set for a specific period, the terms of the psychological contract are
(potentially) being continually ‘re-written’ as the parties interact and mutual
expectations, obligations and promises are generated and implied.

3.3.2 Contents of the Psychological Contract

While it is impossible to be definitive about the content of inherently subjective

perceptions that inevitably vary across organizations and individuals, some empirical
studies are instructive.

Table 3.1: The Content of the Psychological Contract

According to employees – what employees can expect from their organization

1. Safe and congenial environment
2. Fair and equitable pay with respect to market and across the company
3. Fairness in selection, appraisal, promotion, redundancy
4. Providing adequate training
5. Providing job security as much as is possible

According to employees – what organizations can expect from their employees

1. To work contracted hours
2. To do a good job in terms of quantity and quality
3. To be honest
4. Self-presentation – dressing and behaving correctly
5. Flexibility – willing to go beyond job description when required

According to managers – what employees can expect from their organization

1. Fairness and consistency of benefits
2. Humanity, acting in a responsible and supportive manner
3. Fairness in selection, appraisal, promotion, redundancy
4. Recognition for special contributions
5. Safe and congenial environment

According to managers – what organizations can expect from their employees

1. To work contracted hours

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 2. To do a good job in terms of quantity and quality
3. To be honest
4. Loyalty – staying with the organization and putting its interests first
5. Flexibility – willing to go beyond job description when required

Source: Adapted from Conway and Briner (2005): 41, drawing on survey by Herriot,
Manning and Kidd (1997)

Consistent with other studies, it is apparent that while there are similarities and
differences in employees’ and managers’ perceptions of the terms of the psychological
contract, there is substantially more agreement about the obligations owed by employees
than the obligations owed by the employer.

Evidently a number of the terms in the (typical) psychological contract reflect and expand
on terms that might normally be found in the legal employment contract (eg: hours of
work). However others suggest the anticipation or expectation of behaviors beyond the
terms of the formal contract, for example, organizational support, employee loyalty and
flexibility and what are often referred to as ‘extra role behaviors’ or ‘organizational
citizenship behavior’ on the part of the employee.

One of the most common distinctions used in interpreting psychological contracts

recognizes this variability. A distinction between transactional and relational contracts
has been drawn by Rousseau and others.

 Transactional contracts are thought to be based on very specific exchanges

pertaining to a narrow range of behaviors over a limited time period. These types
of contracts tend to emphasize financial rewards in exchange for fairly tightly
defined sets of employee behaviors.
 Relational contracts, on the other hand, are based on a longer term relationship
where a broader range of benefits and opportunities are provided in exchange for
a deeper and more extensive commitment to the job and the organization. These
contracts tend to be more amorphous, uncertain and open-ended and evidently
rely on a higher level of trust.
 Rousseau also identified balanced contracts involving a mix of transactional and
relational promises and obligations. Although transactional and relational
contracts might appear, on first inspection, to be opposites, the idea of balanced
contracts, and other empirical evidence (Coyle-Shapiro and Kessler 2000),
suggests that employees often have both relational and transactional contracts at
work.
 Fourth variant, transitional contracts have also been identified in circumstances
where organizations change the terms of the contract in response to a crisis or
short-term contingency.

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Drawing on Rousseau and others, Shields (2007) has developed the following matrix
elaborating these four forms of the psychological contract.
Table 3.2: Types of Psychological Contract
Specified performance
contingencies
Transactional (new deal)
Espoused deal: ‘If you perform at a
high level for as long as we need
you, we will provide you with
exciting work and opportunities to
develop your human capital and
employability’
 Rewards based on short-term
role performance, especially
task behavior and results
 Emphasis on individual
Short
performance and rewards
-term  Rewards matched to external
markets
Example: Sales, executive and
senior management roles
Balanced
Espoused deal: ‘If you contribute
consistently as a team player and
organizational citizen, we will offer
you a reward mix that balances your
needs and ours’
 Rewards based on
contribution, broadly defined
including competencies,
membership, task or results,
and citizenship
 Flexible balance between
collective and individual
Unspecified performance
contingencies
Transitional
Espoused deal: ‘If you work harder
than before, we may be able to keep
you on, but you may have to be
prepared to take a pay freeze or pay
cut’
 Rewards not linked to
performance or membership
 Work intensification
 Reward levels in decline
 Incentives to quit or accept
redundancy deals
Example: during restructuring or
downsizing
Relational (old deal)
Espoused deal: ‘If you are loyal and
work hard and as directed we will
provide you with a secure job, steady
pay increases and internal training and
promotion opportunities’
 Rewards based on individual
membership, length of service
or seniority, loyalty
 Rewards emphasize internal
equity, incremental
adjustment and fixed benefits
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 Long performance, intrinsic and
-term extrinsic rewards, short and
long term incentives, Example: traditional business
flexible benefits and work-
life balance.
Example: high involvement work
teams

Source: Shields (2007): 55.

Why is the concept of the psychological contract so popular now?

This interpretation of the different forms of the psychological contract suggests some of
the reasons for the contemporary popularity of the concept.

While the terms of formal legal employment contracts have undoubtedly changed in most
western economies in recent decades as deregulation of labor markets and working
conditions, decentralization of bargaining and de-unionization have accelerated, many of
the changes have occurred behind or beyond the formal employment contract. It is often
observed that contemporary work arrangements offer employees a very different ‘deal’
than traditional work arrangements. Under the traditional deal, employees received a
degree of job security, training, development, seniority and guaranteed pay increases,
reasonably extensive benefits and career pathways, in exchange for working designated
hours according to defined job descriptions. The ‘new deal at work’ (Cappelli 1999) by
contrast, is based on the need to work more intensively across a broader range of tasks,
using a greater variety of skills that employees need to have already acquired, and
assuming greater accountability for outcomes and high performance in exchange for
contingent pay without job security. The different forms of the psychological contract
provide a means of interpreting the magnitude of these profound changes at work.

From a different perspective the psychological contract signals a new ground of

contestation at work and over work. The fundamental contradiction of contemporary
work is the incompatibility of flexibility and commitment (Bratton 2007: 43). Employers,
facing intensified competition, have increasingly called for increased productivity and
performance from employees. Under the influence of ideas associated with strategic
HRM they have sought to achieve this through increasing employee commitment to the
job and the organization as a way of driving and sustaining greater work intensity and
high performance. However at the same time they have sought to drive down costs
through, amongst other things, greater labor flexibility that has tended to result in harsher
working conditions for most employees. The lens of the psychological contract magnifies

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the ways in which employers are demanding more for less in the contemporary
workplace.

A psychological contract is an unwritten set of expectations that exists between an

employee and the manager.  When most employees undergo the hiring process, managers
may make promises to new employees such as, “You will be able to advance here
without any problem.”  Employees take these statements seriously and may think of such
statements as promises for the future.  Therefore, when these promises are broken,
employees lose trust in his or her manager and the organization.

An employee’s feelings of self-worth may rest heavily on the psychological contract

between the employee and the organization.  Therefore, behaviors in the workplace rest
heavily on the psychological contract.  If an organization fails to take authority over the
psychological contract, employees may be left feeling disappointed and ultimately
motivation on the job will suffer.  Employees may choose to leave the organization if he
or she feels that promises have broken.

Organizations can become frustrated with employees if the work produced is not what is
expected.  Organizations too can be guilty of unwritten expectations.  While these may
not always be a problem, some employees need expectations clearly defined.  When
expectations, pay increases, and job descriptions are clearly outlined and documented
from the beginning, the employee will know what to expect and avoid disappointment.

So, what should organizations do in regards to psychological contracts?  Most

importantly, organizations should work to motivate and encourage employees without
making verbal promises.  The organization should also establish itself as a strong
authority figure from the beginning of an employee’s career.  That is, the organization
should enforce the contract to indicate that the organization has the ultimate power in the
employee vs. employer relationship.

Psychological contracts change overtime based on organizational and employee needs. 

For changes to occur, both parties must accept the changes and stick to the changes.  If
large changes are made, the organization should document the changes.

Simply, in an employment context, the Psychological Contract is the fairness or balance

(typically as perceived by the employee) between:

4 how the employee is treated by the employer, and

5 What the employee puts into the job.

 Activity 42- strategies for managing employee resistance to change.

Take about 10 minutes
 Describe the strategies for managing employee resistance to change

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 Comment: Common strategies for managing employee resistance to change centre on
the following (Brown and Harvey 2006):

- Education and communication concerning the need for change

- Creating and reinforcing the vision of where the organization is headed
- Ensuring participation and involvement of those affected in the change process
- Facilitating and supporting change through training and resources
- Negotiating with resistors
- Use of reward systems to encourage changed behaviors
- Use of explicit or implicit coercion

3.4 Hours of Work, Leaves and Occupational Safety and Injury

3.4.1 Hours of Work

Working hours are those hours in a day and in a week that the worker gives service to
his/her employer. The amount and arrangement of work hours are historically among the
most important aspects of employment relations where the intervention of government
was felt to be important. Previously, any statutory limitation of the hours of work,
particularly for adult workers, was highly questionable. Leaving hours of work totally to
be determined by the parties has, however, brought about exploitation of workers by
employers. That is why the amount and arrangement of work hours are determined by
labor law today at international and national level. Today, fixing the maximum hours of
work and regulating their arrangement have become the most essential objective of labor
law of any country.

It was the goal of the first modern industrial legislation and the first ILO Convention of
1919 to determine the working hours of a worker per day and per week as well. The 1919
International Labor Organization’s (ILO) Convention embodied the principle of eight
hour as normal working hours per a day. Today, the eight-hour a day has been
superseded by the 40-hours per week. In United Kingdom, there is no statutory control
of working hours, but it is regulated by custom. In France, it is eight-hour a day and 39-
hour a week while in Germany it is eight-hour a day and a48-hour a week. What about in
the Ethiopian case?

In Ethiopia, the Labor Proclamation No.377/2003 provides maximum daily and weekly
hours of work. Accordingly, Article 61(1) of the Proclamation provides that normal
hours of work shall not exceed eight hours (8) a day or forty-eight (48) hours a week.
The term ‘normal hour’s work’ is defined in the Proclamations ‘the time during which a
worker actually performs work or avails himself for work in accordance with law,

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collecting agreement or work rules. Thus, a contract of employment cannot stipulate
hours of wok exceeding eight (8) hours per day or forty-eight (48) hours per week.

Concerning distribution of weekly hours of work, under normal circumstances, Article 63

provides that hours of work shall spread equally over the working days of a week. This
has two consequences. The first consequence is that there will be six working days and
the seventh day will be a weekly rest day. This cannot be changed by parties. The
second consequence is that each working day will have equal working hours. This,
however, can be changed without exceeding the maximum limit. Where the nature of the
work so requires, hours of work in any one of the working days may be shortened and the
differences are distributed over the remaining days of the week without extending the
daily limits of eight hours by more than two hours. Moreover, in case the normal hours
of work cannot evenly be distributed over an individual week, it is possible to calculate it
as an average over a period longer than one week. However, the average number of
hours over a period should not exceed eight hours a day or 48-hours a week. This can be
illustrated as follows. Suppose that Lemlem owns a theater undertaking. She has 25
workers working as artists in her undertaking. Those artists are normally practicing the
theater or drama for a long time in four or three days of a week and are free for the other
days of the week. It is the nature of their work that requires their working hours to be
irregular. So the working hours cannot evenly be distributed over the working days of a
week. As a result, the working hours in any one of the working days may be shortened
and the differences be distributed over the remaining working days of the week.

 Activity 43: Situation Analysis for issues related to working hours

Take about twenty-five minutes.

This activity helps you to understand the normal hours of work. There are cases provided
in the table hereunder and read carefully and analyze the situations related to working
hours.

Cases Valid Not Valid Reasons

1. Suppose Halima and Rebecca concluded a contract of
employment and agreed the normal daily working hours to
be 9 hours and 52 hours a week.
2. Suppose Bethlehem, the worker, concluded contract of
employment with Ruth and they provided that the normal
working hours to be 7 hours a day and 42 hours a week.

Comment: In any case, the normal working hours cannot exceed eight hours a day and
forty-eight hours a week. But it can be less than this if the parties so agree.

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If the amount and arrangement of work hours are determined by law, then any work
performed in excess of normal hours of work is considered as overtime work. That
means work done within the limits referred to in Articles 61(Reduction of Normal Hours
of Work), 63(Arrangement of Weekly hours of Work) and 64 (Averaging of Normal
Hours of Work) cannot be considered as overtime work. However, overtime work is not
totally left to the determination of parties. As provided under Article 66 (3) overtime
shall be worked only in cases expressly provided for under Article 67 and on the express
instructions of the employer.

Article 67- Circumstances in which overtime work is permissible

1. A worker may not be compelled to work over-time; however, overtime may be worked
whenever the employer cannot be expected to resort to other measures and only where
there is:

a) Accident, actual or threatened

b) Force majeure provide

c) Urgent work

d) Substitution of absent workers assigned on work that runs continuously without

interruption.

2. Notwithstanding the provisions of sub-article, 1 of this Article, overtime work of an

individual worker due to an urgent work shall not exceed 2 hours in a day or 20 hours in
a month or 100 hours in a year.

Article 67 of the Proclamation shows that, normally, a worker should not be compelled
against his will to undertake an overtime work. There are two important conditions
provided under Article 67(1) of the Labor Proclamation for an employer to compel his
worker to undertake an overtime work. One is when the employer cannot be expected to
resort to other measures. It means he has no any other option other than giving
instruction to the worker to undertake the overtime work due to some compelling reasons.
For instance, the employer may not have time to employ some other persons, as the work
cannot be interrupted. The second condition is the existence of one of the situation listed
under the sub-articles (a--d). These two conditions must exist cumulatively in order for
an employer to have ground to instruct his worker to undertake overtime work. More
importantly, an overtime work undertaken by a worker due to urgent work cannot exceed
2 hours in a day or 20 hours in a month or 100 hours in a year. This is the only limitation
upon the duration of overtime work. There is no time limitation for overtime work due to
grounds other than urgent work under the Ethiopian Labor Proclamation.

Activity 44: Case Analysis related to over-time work

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 Take about 20 minutes

This activity helps you to identify some issues provided in the table below related to
over-time work and analyze each of them thoroughly whether or not fall under the issue
of over-time work that enable them the workers to claim. Finally, give your reasons on
the space provided in the table.

Cases Overtime? Not Reasons

overtime?
Molla is a worker who is instructed by his
employer to work on weekly rest day for three
hours.
Kedir who is a worker undertook a work on
public holiday for 4 Hours
Sitotaw whose normal working hour is 6 a day
undertook work for eight hours on Monday by
the instruction of the employer.

Comment: Overtime work is a work in excess of the normal daily working hours. But in
order to undertake overtime work, the condition under Article 67 of the Proclamation
must be fulfilled.

If a worker undertakes an overtime work, then he/she is entitled to get an overtime

payment. According to Article 68 of the Labor Proclamation, in addition to his normal
wage, a worker who works overtime is entitled to get payment for the work he undertakes
during this time. The law has actually made the rate of payment for an overtime work
higher than that of the normal hours of work. Accordingly, the following payments are
considered as overtime payment as provided under Article 68 (1) (a-d) of the Labor
Proclamation.

a) In case of work done between 6 a.m. in the morning and 10 p.m. in the evening, at the
rate of one and one quarter (1+1/4) multiplied by the ordinary hourly rate;

b) In case of night time, work done between 10 p.m. and 6 a.m., at the rate of one and
one-half (1+1/2) multiplied by ordinary hourly rate;

c) In case of work done on weekly rest day, at the rate of 2 multiplied by the ordinary
hourly rate;

d) In case of work done on public holiday, at the rate of 2 and one-half (2+1/2) multiplied
by ordinary hourly rate.

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Overtime pay is rated on the basis of two categories of situations. One is payment for an
overtime work done during the working days of the week and the other is payment for
overtime work done during the rest day and public holiday. For an overtime work done
during the daytime or early evening, the rate is one and one-fourth multiplied by the
ordinary hourly rate. For instance, suppose that Asgedom is working at Mesebo cement
factory. The normal daily working hour of the undertaking is 7 hours from Monday to
Saturday. The time framework of the undertaking is from 8:30 a.m. to 12:30 a.m. in the
morning and from 1:30 p.m. to 4:30 p.m. in the afternoon. On Wednesday Asgedom
undertakes an overtime work upon the instruction of his employer from 5 p.m. to 9 a.m.
In this case, the rate of payment for the overtime work is at the rate of one and one-fourth
multiplied by his ordinary hourly wage, which is Birr 40.

For overtime work done on weekly rest day and public holiday, the rate is a little bit
higher than that of the overtime work done during the working days, Article 68 (1) (c)
provides that overtime payment for work done on weekly rest day has to be paid at rate of
two multiplied by the ordinary hourly rate. Article 71(2) provides that, subject to the
provision of Article 68 (1) (c), a worker who, by virtue of the provision of this chapter,
works on a weekly rest day, shall be entitled to a weekly rest period provided, however,
that he shall be compensated in the form of money if his contract of employment is
terminated before he is granted the compensatory rest period.

Activity 45: Deciding on a Case on overtime work

Take about 20 minutes.

Work on the following activity designed to help you in understanding issues of overtime
work. Read the case carefully and provide your decision in the space provided.

Suppose Kebebush is a worker at Meta Abo Brewery factory PLC. She has been serving
the factory for five years and her salary is Birr 8000 per month. Her normal daily
working hour is five. On a weekly rest day, she was instructed to work for ten hours due
to some urgent work. Is Kebebush entitled to get overtime payment? If, so, for how
many hours?

Comment: The worker has five hours overtime work payment under Article 68 of the
Proclamation. For the rest hours he renders the service on weekly rest day, he is entitled
to get a compensatory rest period, not payment.

Article 66(1) of the Labor Proclamation provides that work done in excess of the normal
daily hours of work fixed in accordance with the provision of this proclamation shall be
deemed to be overtime. From this definition and from the provision of the above
mentioned two Articles, you can understand that every work undertaken on weekly rest
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day does not entail an overtime work. It will be overtime only if the work done on that
day is in excess of the normal daily hours of work. This can be illustrated as follows.
For instance, take the case of Asgedom in the above mentioned example who is working
at Mesebo cement factory. Suppose that Asgedom undertakes work for five hours on his
weekly rest day. Then the work done by him is not overtime work because the work he
has undertaken is not in excess of the normal daily hours of work. The normal daily
hours of work of Asgedom are 7. So, his case is to be treated under Article 71 of the
Labor Proclamation rather than Article 68. But if he undertakes, say, ten hours work on
that weekly rest day, he will be entitled to get overtime payment for three hours, which is
hours in excess of his normal daily hours of work. For the rest 7 hours he will be entitled
to a compensatory weekly rest day. You will find similar situation when you see Article
68(1) (d) and Article 75 which talk about work done on public holiday.

Weekly Rest Period and Public Holiday

Both weekly rest day and public holiday are considered as rest periods. Weekly rest day
is a rest that a worker takes once every week. Article 69(1) of the Labor proclamation
provides that ‘a worker shall be entitled to a weekly rest period consisting of not less than
twenty-four non-interrupted hours in the course of each period of seven days.’ Whenever
it is possible, it is recommended for this day to fall on Sunday and be granted
simultaneously to all of the workers of the undertaking. Moreover, the weekly rest day
shall be calculated so as to include the period from 6 a.m. to the next 6 a.m. But the
parties can arrange it differently through their collective agreement. Where the nature of
the work of the undertaking prevents the weekly rest day to fall on Sunday, another day
can be made a weekly rest period as a substitute. For instance, undertakings giving
entertainment services, and those giving telephone, electricity and similar services, which
cannot be interrupted, may have a different weekly rest day for some of their workers.

The employer cannot require a worker to undertake work on weekly rest day. According
to Article 71(1), the employer can require him to work on weekly rest period only where
it is necessary to avoid serious interference with the ordinary working of the undertaking
related to accident, force majeure, and urgent work to be done. If the worker undertakes
work on his weekly rest period, he/she is entitled to get a compensatory rest period. The
worker cannot claim payment in lieu of the work he/she undertakes on this day unless
there is overtime work as per Article 68 or the contract is terminated before he has got the
compensatory rest period. Public holidays observed under the relevant law are paid rest
days. Article 74(1) of the Labor proclamation provides that a worker who is paid on a
monthly basis shall incur no reduction in his wage on account of having not worked on
public holiday. The payment of wage on a public holiday to a worker who is not paid on
a monthly basis has to be determined by his contract of employment or collective
agreement. If a worker undertakes work on public holiday he/she is entitled to payment
of his hourly wage multiplied by two for each hours of work on public holidays.

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 Activity 46: Case analysis on issues related to hours of work and rest period

Take about 30 minutes.

This activity helps you to understand cases of overtime work. Read the following cases
carefully and try to analyze and answer on the blank space provided in each of them.

1. Suppose Teklu is a worker. His normal daily working hour is eight. One day, he
undertakes a work on weekly rest day, upon the instruction of his employer, for seven
hours. Is he entitled to get overtime payment? Why?

2. Suppose Abraham is a worker who is working in a sugar factory. Due to the nature of
the work, his wage is paid on a weekly basis. Can he claim the payment of his wage of
the day that falls on a public holiday? Explain.

Comment: Article 66(1) of the Labor proclamation provides that work done is in excess
of the normal daily hours of work fixed in accordance with the provision of this
proclamation shall be deemed to be overtime. From this definition and from provision of
Articles 68 (Overtime Payment) and 71(Work Done on Weekly Rest Days), you can
understand that every work undertaken on weekly rest day does not an overtime work. It
will be overtime only if the work done on that day is in excess of the normal daily hours
of work.

3.4.2 Leaves

There are various leaves which a worker is entitled to get as per Labor Proclamation.
These are annual leave, sick leave, maternal leave, mourning leave, union leave and
special leaves.

Article 77(1) of the Labor Proclamation provides that a worker is entitled to

uninterrupted annual leave with pay which is not to be less than fourteen working days
for the first one year of service plus one day for every additional year of service. Weekly
rest day, public holidays that come in the course of the leave are not included in the days
designated for annual leave. A worker cannot waive his right to annual leave. A term of
agreement that prohibits taking annual leave has no effect. Even, it cannot be replaced by
wage unless it is allowed by law as in the case of termination of contract of employment.

But you have to bear in mind that additional annual leave with pay may be fixed in a
collective agreement for workers engaged in a work which is particularly arduous or in
unhealthy conditions. The duration for annual leave excludes public holidays and weekly
rest days. Rights and benefits of a worker such as bonus and salary increment cannot be
denied simply because he is on leave. If a worker has fallen sick while he is on annual

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leave, the duration of his sickness should not be counted on the duration of annual leave.
But how should a worker is granted annual leave? According to Article 78(2), an
employer shall grant a worker his annual leave in accordance with a leave schedule in the
course of the calendar year in which it becomes due. The leave schedule has to be
prepared with due regard, as far as possible, to the wish of the worker and the need for
maintaining the normal functioning of the undertaking. A worker cannot demand the
proportional annual leave before he has served a year. At least for his first year of
service, he cannot claim annual leave before he has served a year. At least for his first
year of service, he cannot claim annual leave before finishing the year. But after a year
of service to the employer, he doesn`t require to stay a year to get annual leave. He can
demand annual leave to be granted to him in proportion to his service as per Article 77(6)
of the Labor Proclamation, that is, where the length of service of a worker does not
qualify for an annual leave provided for in this Article, the worker shall be entitled to an
annual leave proportion to the length of his service.

Activity 47: Deciding a Case on annual leave

Take about 20 minutes.

This activity helps you to understand rules related to annual leave. Read the following
cases carefully and give your decision in the space provided.

1. Solomie is a worker who is employed just six months ago. Now, at her six months of
service, she wants to get annual leave. Can he be entitled to it? Explain.

2. Suppose Kassa is a worker who has serviced eight years. How many days of annual
leave is he entitled to?

Comment: 1. in principle, a worker can be entitled to get proportional annual leave only
if s/he served at least one year.

2. according to Article 77(1) of the labor proclamation, a worker is entitled for 14 days
for the first year of service plus one day for every additional year of service.

The other important leave under labor law is sick leave. Thus, where a worker who has
completed his probation is rendered incapable of work owing to sickness other than
resulting from employment injury, he shall be entitled to a sick leave. Sick leave is a
leave granted to a worker for a maximum period of six months counted consecutively or
separately in a year. The worker has to notify to the employer the day following his
absence. But sick leave is not granted to a worker fully with pay. The manner in which
sick leave is granted to a worker is provides under Article 85 of the Labor Proclamation
as follows:

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i) The first one month of the sickness, sick leave with 100% of his wage;

ii) The next two months of his sickness, sick leave with 50% of his wage;

iii) The last three months of the maximum period of sick leave, the worker is granted
leave without pay.

Activity 48: Understanding Sick Leave

Take about 20 minutes.

This activity helps you understand the rules related to sick leave. Read the given
situation carefully and try to analyze it. You may use the space provided.

Suppose Bekele has completed his probation period and has been sick and granted sick
leave by his employer starting from January 1/2015 and remained in bed after the month
of July 2015. For how long do you think is he entitled to sick leave? Explain.

Comment: In case the worker is unable to recover from his illness and resume work
within the six months of the maximum period, his employment will be terminated.
Remember the discussion on termination of contract of employment in the previous unit.
Article 28(1) (b) provides that a worker’s permanent inability due to health or disability
to carry out his obligation is a good cause of the employer to terminate his contract of
employment.

There are also other leaves such as marriage leave and mourning leave (Article 81. Leave
for family events). A worker is entitled to leave with pay for three working days when
he/she concludes marriage or his relative up to the second degree dies. There is union
leave as provided under Article 82 of the Labor Proclamation for leaders of trade union
for the purpose of presenting cases in labor court, negotiating collective agreement and
attending seminars or training courses. There is a leave for special purposes (Article 82)
for any worker to appear before bodies competent to hear labor dispute and to exercise
his civil rights or duties in which he is entitled to leave with pay for the time utilized for
such purposes.

3.4. 3. Preventing Occupational Injury

Dear student, you are coming to see the rules intended to ensure the safety and health of
workers. Ensuring safety and health of workers is an important objective of labor law.
Historically, the first state intervention in employment relationships was made on safety
and health of the workers. Ethiopian Labor Proclamation provides two aspects of safety

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and health rules: rules on prevention and rules on medication and compensation.
Preventive rules are those rules designed to prevent accidents and diseases in
employment relationships. These rules prescribe certain obligations of both employer
and worker that could play a great role in preventing or at least minimizing employment
injury. These rules are discussed now while rules on medication and compensation will
be discussed in the next section of the unit.

Articles 92 and 93 of the Labor Proclamation provide the major obligations of both
employer and workers. Hence, the major responsibility of preventing injury lies on the
employer. According to Article 92 of Labor Proclamation, an employer shall take the
necessary measures to safeguard adequately the health and safety of the workers; the
employer shall in particular:

1. Comply with the occupational health and safety requirements provided for in this
Proclamation;

2. take appropriate steps to ensure that workers are properly instructed and notified
concerning the hazards of their respective occupations and the precautions necessary to
avoid accident and injury to health; ensure that directives are given and also assign safety
officer; establish an occupational, safety and health committee of which the committee`s
establishment, shall be determined by a directive issued by the Minister;

3. Provide workers with protective equipment, clothing and other materials and instruct
them of their use;

4. Register employment accident and occupational diseases and notify the labor the labor
inspection of same;

5. arrange, according to the nature of the work, at his own expense for the medical
examination of newly employed workers and for those workers engaged in hazardous
work, as may be necessary;

6. Ensure that the work place and premises do not cause danger to the health and safety of
the workers;

7. Take appropriate pre-executions to insure that all the processes of work shall not be a
source or cause of physical, chemical, biological, ergonomic and psychological hazards
to the health and safety of the workers;

8. Implement the directives issued by the appropriate authority in accordance with this
Proclamation.

The employer is duty bound to take measures and complies with the safety and health
requirements provided by the Labor Proclamation. This is the first major duty of the

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employer with regard to safety and health of the workers. He has to adequately instruct
the workers about the hazard involved in their work. This is helpful for the workers to
protect themselves. He has to assign safety officer, who makes sure that everything is
well operating. Moreover, the employer is duty bound to establish an occupational safety
and health committee of the undertaking. More importantly, the provision of protective
equipment is another key obligation of the employer. The employer has to provide to his
workers with protective equipment, clothing and other necessary materials and give
instruction as to how to use them. Therefore, the long list provided under Article 92
prescribes the obligation of an employer to prevent or at least minimize employment
injury that could happen to his workers. He is duty bound to do all these so that workers
can render better services to the undertaking. Here, take note that this same obligation of
the employer is provided under Article 12(4) of the Labor Proclamation states that “the
employer has an obligation to take all the necessary occupational safety and health
measures and to abide by the standards and directives to be given by the appropriate
authorities in respect of these measures” which is discussed on under unit one of this
course.

It is not only the employer who has obligations to prevent and minimize accident and
injuries in employment relationships. Workers, too, have certain duties that they should
observe. This is clearly provided under Article 93 (obligations of a worker) of the Labor
Proclamation. Accordingly, a worker has the following obligations in the prevention of
injury; a worker shall:

1. Co-operate in the formulation of work rules to safeguard the workers health and safety
and implement same;

2. Inform forthwith to the employer any defect related to the appliances used and injury
to health and safety of the workers that he discovers in the undertaking;

3. Report to the employer any situation which he may have reason to believe could
present a hazard and which he cannot avoid on his own any accident or injury to health
which arise in the course of or in connection with work.

4. Make proper use of all safeguards, safety devices and other appliances furnished for
the protection of his health or safety and for the protection of the health and safety of
others; and

5. Obey all health and safety instructions issued by the employer or by the competent
authority.

Therefore, a worker should respect the safety and health rules of the undertaking, the
instruction given by the employer, and respect to the employer any situation which could
cause hazard. This is important because the purpose of the rules cannot be achieved only

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by efforts of employer, but by the efforts of both of them. It is unlawful for a worker, if
he fails to observe and discharge these obligations. In fact, it is already provided under
Article 14(2) (a) and (e) of the Proclamation.

Activity 49: Understanding the preventive rules related to health and safety of
workers

Take about 20 minutes.

This activity is aimed at helping you to understand the preventive rules related to health
and safety of workers. Work on the following activity that comprises two questions.

1. What will happen if an employer disregards all the obligations endangering the safety
and health of his workers?

2. What are the effects of non-compliance of a worker with his obligations enumerated
under Article 93 of the Labor Proclamation?

Comment: 1. an employer is duty bound to take all necessary measures to prevent the
danger posed to the life and health of his workers. If he fails to do so, he is liable to a
penalty.

2. If a worker fails to observe his obligations in preventing injury in employment

relationships, he/she will be forfeited his right to get compensation if he himself is the
victimized.

3.4.4. Medical Treatment and Compensation

The Labor Proclamation also provides for certain measures that must be taken in case
where a worker sustains an employment injury. To understand how this remedial and
compensatory system functions, three points will be considered step-by-step. First, you
need to understand the concept of employment injury. It is only employment injury
which enables to benefit from the system. Secondly, you will see the disablement levels
which also determine the amount of benefit. Finally, the disablement benefits will be
discussed.

Concept of Employment Injury

Employment injury is an injury which a worker sustains during or in connection with the
performance of his work. It can either be occupational accident or occupational disease.

Occupational Accident

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According to Article 97 of the Labor proclamation “occupational accident” means any
organic injury or functional disorder sustained by a worker as the result of any cause
extraneous to the injured worker or any effort he makes during or in connection with the
performance of his work. It should be an injury caused by any cause extraneous to the
injured worker. In other words, the injured worker should not contribute to the injury
sustained. The injury must also happen either during or in connection with the
performance of his work. For instance, suppose Alene sustained accident while he was
operating the machine in the factory he was employed to. In this case, Alene sustained
the accident while he was performing his work. According to Article 97 of the Labor
Proclamation, occupational accident particularly includes the following situations:

a) Any injury sustained by a worker while carrying out the employer’s order, even away
from the work place or outside his normal hours of work;

b) Any injury sustained by a worker before or after his work or during any interruption of
work if he is present in the work place or the premises of the undertaking by reason of
his duties in connection with his work;

c) Any injury sustained by a worker while he is preceding to or from place of work in ;a

transport service vehicle provided by the undertaking which is available for the common
use of its workers or in a vehicle hired and expressly destined by the undertaking for the
same purpose;

d) Any injury sustained by a worker as a result of an action of the employer or a third

party during the performance of his work.

Under Article 97 of the Labor Proclamation, sustaining an injury in the place of work is
an indispensable prerequisite for the existence of occupational accident. It doesn’t matter
what causes the accident, rather where and when it has happened is the key. The injury
can be caused by the employer or any third party. What you have to focus on is the place
where the accident has happened. For instance, a worker under the employer’s
instruction, wherever he is and whenever it is, if sustained accident that accident is
occupational accident as per Article 97(a).

Suppose Alene is a worker who is working in a biscuit manufacturing factory situated at

Addis Ababa as a purchaser. One day he was ordered by the general manager to go to
Dire Dawa and purchase some goods for the factory. While he was traveling to Dire
Dawa, he faced a car accident near Metahara Town. Thus, the accident did not happen in
his work place, it is occupational accident because Alene was under the instruction of his
employer.

But you have to bear in mind that any injury sustained by a worker while he is going to or
coming from place to work can only be an occupational accident if he is using the

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transport service vehicle provided or hired by the undertaking for the common use of its
workers. This kind of vehicle is considered as the extension of the place of work and
thus, if a worker faces accident on this vehicle while going or coming to his work place,
it is occupational accident. For instance, suppose Negash is a worker in an undertaking
situated at Aakaki here in Addis Ababa and he is living at Submit. He sustained accident
while he was going to his work place using Taxi. Then, the accident he sustained cannot
be occupational accident because he was not using a transport designated by his
undertaking.

Activity 50: Analyzing cases of Occupational Accident

Take about 20 minutes

This activity helps you to understand issues of occupational accident and answer the
following question based on the given hypothetical case.

Suppose Alebel is a worker working in an undertaking situated at Gondar. On a working

day, while he was at the work place and giving service to the employer, he was killed by
an earthquake, causing a serious damage to the undertaking. Can this be an occupational
accident?

Comment: According to Article 97 of the Labor Proclamation, the factor that makes a
happening that of occupational accident is that the worker sustains on injury in
connection with the performance of work. It doesn’t matter what causes the accident.
The key point is where and when it has happened. The injury can be caused by the
employer or any third party. What you have to focus on this is the place where the
accident has happened.

Occupational Disease

Occupational disease is another important aspect of employment injury. According to

article 98 of the Labor Proclamation No. 377/2003 it defined as occupational disease is
any pathological condition caused by physical, chemical or biological agents in relation
to the work undertaken by the injured worker. Occupational disease must arise as a
consequence of the type of work performed by the worker or due to the surroundings in
which he is obliged to work during a certain period prior to the date the disease became
evident. But the epidemic or endemic disease prevalent in the area where the work is
done cannot be considered as occupational disease. This kind of disease can be
considered as occupational only in case workers are exclusively engaged in its combat by
reason of their occupation.

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There must be a cause and effect relationship between the nature of work and the disease.
You have to establish causal relationship. In other words, the disease must relate to the
occupation of the worker. Suppose a worker is working in a cement factory as an
operator of the grinding machine. In this case, the worker is working in a situation where
he always inhales the dust particles coming out from the grinding machine. In the long
run, there is a high probability for this worker to be encountered with certain respiratory
diseases. One can, in this case, easily establish a cause and effect relationship.

The Labor Proclamation prescribes issuance of a directive containing schedules that list
diseases to be of occupational origin. The schedule has to be revised at least every five
years. This is actually the responsibility of the labor inspection service provided under
Article 177(3) of the Proclamation. There is no need of proof for a worker who
encounters the disease listed in the schedule, provided, however, that he is working in a
corresponding type of work. But, for the disease not listed in the schedule, the worker
needs to leave proof that establishes nexus between the work he is undertaking and the
disease.

Activity 51: Analyzing a case on occupational disease

Take about 20 minutes.

This activity helps you to understand occupational disease. Work on the following
activity based on the given hypothetical case.

Suppose, Chala and Mahlet are working as accountants in a Metal Business Company in
Axum. They are working in the same room, in other words, they share the office. Chala
has a tuberculosis disease (T.B) and as a result Mahlet is encountered by such disease.
Can this be an occupational disease within the meaning of the Labor Proclamation?

Comment: There must be a cause and effect relationship between the nature of work
and the disease. You have to establish causal relationship in which the disease must
relate to the occupation of the worker.

Disablement Levels

Dear student, it is a rule of labor law that a worker must prove that he/she has lost his/her
working capacity in order to be entitled to disablement benefits, that means, he must
prove disablement. What do we mean by disablement?

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Article 99(1) of the Labor Proclamation states “Disablement means any employment
injury as a consequence of which there is a decrease or loss of capacity to work”.
Existence of physical injury may not necessarily entitle a worker to claim compensation
for injury. A worker is entitled to get compensation when there is decrease or loss of
working capacity. As a result, an injury sustained by a worker must have the effect of
decreasing or losing the working capacity if the worker has to be compensated. Mere
physical injury does not entitle a worker to get compensation. The only situation by
which compensation can be claimed in the absence of reduction or loss of working
capacity is when there is a serious mutilation or disfigurement of the injured worker.

According to Article 99(2) of the Labor Proclamation disablement is classified into four
main categories: a) temporary disablement (Article 100); b) permanent partial
disablement (Article101 (1); c) permanent total disablement (101(2); and d) death. When
there is reduction of the worker’s working capacity for a limited period of time, it is a
temporary disablement. This basically refers to the period he undergoes medical
treatment for recovery from the injury. When there is an incurable injury causing
reduction or total loss of working capacity, then it means that there is permanent
disablement. In this case, the worker’s injury remains permanently with him. This can
be illustrated as follows. Suppose Tesfaye is a worker working in a metal work factory
here in Addis Ababa. While he is rendering service in the factory, he sustains injury that
causes loss of his left eye. In this case, once he lost his eye, means he lost it forever.
Hence, the injury causes a permanent disablement.

Permanent disablement is either partial or total. Permanent partial disablement means

incurable employment injury decreasing the injured worker’s capacity. That means, the
person can still work, but his working capacity is reduced. For instance, in the above
example, the injury sustained on Tesfaye is permanent partial disablement. Permanent
total disablement means incurable employment injury, which prevents the injured worker
from engaging in any kind of remunerated work. If the injured worker can engage in
some kind of remunerative work, then there cannot be permanent total disablement.
Permanent total disablement is almost equivalent to death in its effect. But, how do we
assess and determine disablement? The mechanism of assessment of degree of
disablement is addressed under Article 102 of the Labor Proclamation as provided
hereunder and you should read and understand it thoroughly.

Article 102 – Assessment of disablement

1. The degree of permanent total or partial disablement shall be fixed in accordance with
the assessment table of disablement prescribed by directives issued by the Ministry of
Labor and Social Affairs.

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2. The degree of disablement shall be assessed in accordance with the assessment table
provided for in sub-article (1) of this Article, by a competent medical board. The board
shall determine the extent of degree of disablement as far as possible within twelve
months from the date of injury.

3. Disablement which has been assessed may be reviewed in accordance with sub-articles
(1) and (2) of this Article where the worker’s condition deteriorates or improves or is
wrongly diagnosed:

a) on the initiation of the appropriate authority, or

b) at the request of the worker or employer concerned.

4. Where the result of the review warrants it, the rights of the worker to a disablement
benefit shall be recognized or withdrawn or that the rate payable increased or reduced as
the case may be.

5. Where a worker who has suffered an employment injury sustains a further employment
injury, his disablement shall be reassessed in light of his new circumstances.

What do you understand from the above mentioned Article of the Labor Proclamation?
According to Article 102(1) of the Labor Proclamation, a competent medical board in
accordance with an assessment table of disablement must fix the degree of permanent
partial or total disablement. The assessment table is to be prescribed by directives issued
by the Ministry of Labor and Social Affairs. Thus, the physical injury is assessed by the
medical board after which the board submits its report to the court.

Disablement Benefits

Under this sub-section we will study points, such as: Periodical payment Disablement
Compensation, Dependents Benefits, and Disablement and Dependents Benefits under
Pension Law.

In case of employment injury that has happened to a worker, the employer has a lot of
obligations. The employer cannot say that he has taken all necessary measures to prevent
injury and hence, not to be held liable if an injury is sustained. What are the obligations
of employer for his employee who sustains an employment injury?

According to the provisions of Article 104 (1) of the Labor Proclamation, an employer
shall have the following special obligations to execute:

a) to prove the injured worker with first aid in time;

b) to carry the injured worker by an appropriate means of transport to the nearest medical
center;

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c) to notify the occurrence to the appropriate organ in accordance with the directives
issued by the Ministry;

2) to pay the funeral expenses specified under Article 110(1)(b) in case of death; and to
pay all cash benefits recognized under Article 107 of the Labor Proclamation
No.377/2003.

Therefore, an employer is duty bound to discharge these obligations. First aid is normally
provided at the spot of injury or at work place. In addition, the employer should not only
take the injured worker to hospital, but also should cover all medical expenses. The
medial expenses can only be withdrawn upon the decision of the medical board. If the
worker has unfortunately died, the employer should cover his funeral expenses, which is
up to two months’ salary of the deceased worker. Moreover, the employer is duty bound
to pay all cash benefits recognized by the Labor Proclamation. Article 107(1) of the
Proclamation provides the following cash benefits.

Article 107 – General

1) A worker who has sustained employment injury shall be entitled to;

a) Periodic payment while he is temporarily disabled;

b) Disablement pension or gratuity or compensation where he sustains permanent

disablement;

d) Survivors’ pension gratuity or compensation to his dependent where he dies;

Periodical Payment: What do we mean by periodic payment? Periodic payment is a

payment that the employer should pay to the injured worker for temporary disablement.
That means, until he recovers from the immediate injury that forced him to be unable to
resume his work or declared permanently disabled. It refers to the period that the worker
is under medical treatment. The duration for the periodic payment depends on the period
that the worker is under medical treatment. But, the maximum period for this payment
cannot exceed one year. Article 108 (1) provides that the employer shall pay for one year
the periodical payment mentioned in Article107 (1) (a). This is illustrated as follows.
Suppose the worker was injured on January 1, 2016. He was taken to a hospital and not
recovered from his immediate injury until June 1, 2016. Here, the worker is entitled to
get the periodic payment only for one year from January 1, 2016 to January 1, 2017.
Thus, the payment will be terminated on January 2, 2017.

Periodic payment is aimed at enabling the worker to live in the condition he was living
before sustaining the injury. The mode of Periodic payments made by the employer for
the worker who sustained injury while performing his duties in accordance to the contract
of employment are provided in Article 108 (2) of the labor proclamation as follows. The

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periodic payments referred to in Sub-Article (1) shall be at the rate of full wage of the
worker previous average yearly wages during the first three months following the date of
his injury, not less than 75% (seventy five percent) of the worker previous average yearly
wages for the next three months following the date of injury and 50% (fifty percent) of
his previous average yearly wages months for the remaining six months. During this
one-year period, the payment may cease to be made whenever one of the following takes
place first as provided under Article 108(3) (a-c).

a) The worker is medically certified to be longer disabled;

b) On the day the worker becomes entitled to disablement pension or gratuity;

c) Twelve months from the date the worker stopped work.

Activity 52: Understanding disablement benefits

Take about 20 minutes.

The activity helps you understand the rules related to disablement benefits. Try to analyze
the given cases and provide your answer in the space provided under each of them.

1. Suppose a worker was wounded, but it was light injury in which he was just recovered
immediately after he gets the first aid. Is there any disablement in this case?

2. A worker seriously injured while he was giving service. He has been under medical
treatment for six months after which he fully recovers and resumes his work. For how
long is he entitled to get periodic payment?

Comment: 1. in the first case there cannot be disablement because there is no loss or
decrease in his working capacity. But the employer, if any, will incur the medical
expenses.

2. The worker is entitled to get periodic payment for six months duration.

Disablement Compensation: What is disablement compensation? The employer is also

duty bound to pay disablement benefits whenever permanent disablement sustained by
the worker is medically ascertained. Disablement compensation is the payment of
compensation for the permanent incapacity that the injured worker has sustained. Here, it
is important to recall the discussion made above about the concept ”disablement”
provided under Article 99 of the Labor Proclamation. After the injured worker recovers
from his immediate injury through medical treatment, the next step is determining the
permanent disablement he sustained due to the injury. Permanent disablement means

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incurable injury that remains with the worker forever. Read the illustration given above
under the discussion made about disablement.

The permanent disablement may result in partial or total decrease in the working capacity
of the worker. Therefore, disablement compensation is the benefit that the worker is
entitled to get in such circumstances. The disablement compensations are provided under
the provisions of the Labor Proclamation. There are also some provisions deals with
disablement compensation under the Public employees’ Pension Proclamation
No.907/2015 and Private employees Pension ProclamationNo.908/2015. According to
the provisions of Article 109 (2) of the Labor Proclamation, an employer shall pay a lump
sum of disablement compensation to workers who sustain permanent disablement and are
not covered by pension law.

The amount of disablement compensation to be paid by the employer provided under

Article 109 (3) of the labor Proclamation shall be:

a) Where the injury sustained by the worker is permanent total disablement, a sum equal
to five times his annual salary;

b) where the injury sustained by the worker is below permanent total (partial)
disablement, a sum proportionate to the degree of disablement calculated on the basis of
the compensation provided for in Sub-Article (3) (a) of this Article.

The disablement compensation to be paid for permanent partial disablement is a lump

sum payment, which is 5 X rate of incapacity X his annual salary = partial disablement
compensation. This compensation is paid for the decrease in the working capacity. This
can be illustrated in the following manner. Suppose Muluken is a worker who sustained
injury. Muluken’s salary is Birr 4,000 per month and 40% of his working capacity is
decreased due to the injury. Therefore, the compensation to be paid to Muluken is 5 X
40% X48, 000 (4,000 x 12) = Birr 96,000. 48,000 is his annual salary and 40% is the
degree of his disablement. Thus, the total amount of partial permanent disablement
compensation to be paid to Muluken is Birr 96,000.

The disablement compensation to be paid for permanent total disablement is also a lump
sum payment, which is 5 X his annual salary = the permanent total Compensation. This
compensation is paid for the total loss of working capacity or death of the injured worker.
If you take the above illustration provided for the permanent partial disablement, suppose
that the injury sustained by Muluken is permanent total disablement, which means 100%
loss of working capacity. Then the amount of compensation to be paid to Muluken is 5 X
48000 = Birr 240,000.

Activity 53: Case on Disablement Compensation

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 Take about thirty minutes.

This activity comprises three questions that help you to understand the rules related to
disablement. First, carefully read each of the cases. Second, try to relate with the
discussions made above and the provisions of the Labor Proclamation.

1. Suppose Alem is an operator of a machine in a textile factory here in Addis Ababa.

He sustained injury in which he lost his right hand. What kind of disablement does he
sustain?

2. Suppose Alem`s salary is 7,000 per month and he lost 50% of his working capacity.
Identify the liability of the employer for the permanent disablement and its kind.

3. Suppose Alem`s salary is 10,000 per month and he lost 100% of his working capacity.
Identify the liability of the employer for the permanent disablement and its kind.

Comment: 1. the disablement of Alem is a permanent partial disablement because the

loss of an arm may result in a decrease in his working capacity.

2. The liability of the employer is 5 X 50% (rate of incapacity) X (7000 X 12).

3. The liability of the employer is 5 X his annual salary (10,000 X 12).

Dependents` Benefits: What are dependents` benefits? If, in case, the injured worker
has unfortunately died, the employer is duty bound to pay dependent` compensation to
the worker`s dependents. This payment is called “dependents` benefits”, which is a lump
sum payment. The amount of dependents` benefits is 5 x the annual salary of the
deceased. It is equal to the amount that a worker who sustains the permanent total
disablement is entitled to. According to the provisions of Article 110(1(a-b) of the Labor
Proclamation, where a worker or an apprentice dies as a result of an employment injury,
the following benefit shall be payable:

a) dependent`s compensation in accordance with the provisions of Sub-Article (2) and (3)
of this Article; and

b) Subject to the provisions of a collective agreement or work rules, payments for funeral
expenses which shall be not less than two months wage of the worker.

The payments of funeral expenses are actually subject to the provision of collective
agreement or work rules. Dependents of the worker within the meaning of Article 110
(2) of the labor Proclamation are the following:

a) The worker’s widow or widower;

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b) Children of the deceased worker who are under eighteen years of age; and

c) Any parent who was being supported by the deceased worker.

As you have already seen the amount of the dependents compensation for workers not
covered by pension law, shall be a sum equal to five times the annual salary of the
deceased and for those stipulated under Sub-Article 2 of this Article paid by the employer
in a lump sum (at once). The total amount will be divided and given to the above
mentioned three categories of dependents as follows (Article 110 (3) (a-c) :

a) 50% (fifty percent) for the deceased worker’s lawful husband or wife;

b) 10% (ten percent) each for the deceased worker’s children who are below eighteen;

c) 10% (ten percent) each for the deceased worker’s parents who were being supported
by him.

But, you have to bear in mind that the amount distributed among the dependents cannot
be more or less than 100% of the total amount to be paid. For instance, if there is one
person in each of the three categories of dependents, it means that the dependents will not
take 70% (50 + 10) of the total amount. The remaining 30% of the total amount shall be
distributed proportionately to each of them.

Activity 54: Understanding Dependents’ Benefits

Take about twenty-five minutes.

This activity helps you to identify who can be entitled to dependents’ benefits. Read
carefully this hypothetical case first before you try to answer the question and put your
answer on the space provided.

Birratu is a worker at Fincha Sugar Factory who unfortunately died on a car accident
while he was giving service to his employer. His salary was Birr 10,000 per month and
he had a wife and one child. There are also his parents who are living with his sister
having their own regular income. Who can claim dependents’ benefit among the above
mentioned relatives of Birratu? Why?

Comment: In the above case only the widow and his child are entitled to dependent’s
benefit. His parents cannot claim because they are not dependent upon him as they have
their own regular income.

Disablement and Dependents` Benefits under Pension Law: So far, what you have
studied with regard to disablement and dependents benefits can also the required not

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only by labor law but also by the provisions of Pension Proclamation. In this regard,
there is a difference between workers of private undertaking. Article 109(1) provides the
following;

Unless otherwise provided for in a collective agreement disablement benefits payable to

workers of state enterprise covered under this proclamation shall be in accordance with
the insurance scheme arranged by the undertaking or pension law. Where the
undertaking does not have any increase arrangement, the pension law shall apply to
workers covered under public pension law.

From the provision of Article 109(1) you can easily understand that there are two options
for the state business enterprises. One is arranging insurance scheme where the
undertaking makes agreement with some insurance companies. The other, is making the
workers to be regulated by the pension law. Normally, in the absence of the first option,
the workers of state enterprises are entitled to get disablement compensation under
pension law. Thus, this may force us to consider and analyze the current legislation what
is provided under the private organizations Employees Pension Proclamation
No.715/2011 as amended by Proclamation No. 908/2015 which lays down similar benefit
scheme to that of workers of state enterprises. This Proclamation generally provides two
major kinds of benefits that assure like that of the workers of public enterprises benefits.
These are: benefits for permanent injury (incapacity benefits) and benefits for retirement.
The incapacity benefits under pension law are designed for the purpose of compensating
employment Injury of employees. The discrepancy created between the benefits of the
workers of state enterprises and workers of private organizations provided under the labor
law has already adjusted as the result of the enactment of the new private organizations
employees’ pension proclamation No.715/2011.

Hence, the pension law provides the following as incapacity benefits.

Article35: Incapacity pension (IP)

Article 35 of private organizations employees pension proclamation No.715/2011

provided that “An employee of private organization who sustains employment injury of
not less than 10% and separates from work due to permanent incapacity that prevents him
from engaging in any remunerated work shall receive incapacity pension for life.” It is a
benefit for permanent total disablement which is 47% of the monthly salary of the injured
worker Article 36 (1). It is 47% of his basic monthly salary which he was receiving
during the month prior to the injury. A worker who sustains a permanent total disability
is, thus entitled to get a periodic payment of incapacity pension for life. This is clearly
provided under Article 36(1) of the Proclamation. Incapacity pension can be illustrated
as follows. Suppose that Birratu is a worker who was working as a driver in a cement
factory covered by pension law. One day, while he was driving a car of the office, the

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car was turned down and he lost his two arms and got blind, which can be considered as
permanent total incapacity. Birratu was receiving basic monthly salary of Birr 6000
during the month prior to the injury. Then, Birratu is entitled to get 47% of Birr 6000,
that is, 47X6000÷100=2820 every month for life.

Article37: Incapacity gratuity (IG)

This is a benefit paid for permanent partial disability, which is a lump sum payment. But
a worker is not entitled to incapacity gratuity if the rate of incapacity is less than 10% of
his working capacity. Unlike incapacity pension, incapacity gratuity is a lump sum
payment.

Example

Suppose Amare is a worker of Tendaho Sugar Factory sustained an employment injury.

The authorized medical board assesses the extent of his injury and it is found that his
incapacity is 8% of his working capacity. Then, according to Article 35, Amare is not
entitled to get incapacity gratuity because his incapacity is less than 10%.

According to Article 38 of the pension law, the amount of incapacity gratuity payable for
a worker who sustains permanent partial disability is 47% of his basic monthly salary,
which he was receiving during the month prior to the injury multiplied by 60 and the
percentage of injury sustained (the rate of incapacity). Thus, IG = 47% Monthly Salary x
60 x Rate of Incapacity. This can be illustrated as follows.

Suppose Menelik is a worker serving as a driver in Tekeze Sugar Factory covered by the
pension law. He sustained an employment injury due to car accident happened while he
was discharging his responsibility. His basic monthly salary of the month preceding the
injury was Birr 6,000. The authorized medical board assessed his injury and rates it as
40%. Then the amount of incapacity gratuity that Menelik is entitled to is 47% of Birr
6,000 x 12 x 60 x 40%.

But take note the amount of disablement compensation that a worker is entitled under
Labor Proclamation is different from the amount of incapacity gratuity he is entitled
under Pension Proclamation. Let us see just the following illustration. Suppose the
injured worker is Abebe whose salary is Birr 4000 per month and 40% of his working
capacity is decreased due to the employment injury. Therefore, the compensation to be
paid to Abebe is 5 x 48,000 (4,000 x 12) x40%=96,000. Here 48000 is his annual salary
and 40% is the degree of his disablement. Then the total amount of disablement
compensation to be paid to Abebe is Birr 96,000. So, this is the total amount that Abebe
is entitled to get under the labor law.

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But when you come to the amount he is entitled to cover under pension law, it is quite
different. The amount under pension law would be 47% of Birr 4000 x 60 x 40%. Forty-
seven percent of Birr 4000 is 1880. Then, the amount has to be calculated as follows.
1880x 60 x 40% = 45,120. So the amount that Abebe is entitled to under pension law is
Birr 45,120, which is less than half of what he can get under the labor law.

Activity 55: Case on Incapacity Benefits

Take about twenty minutes.

Work on the following activity. The activity is designed to help you understand the
incapacity benefits. Read the given case hereunder and try to analyze it. You may use
the space provided.

Suppose that Hailu is a worker in a Factory who sustains an employment injury. He has
been receiving monthly basic salary of Birr 1000. His incapacity, due to such injury, is
assessed at 30%. But Hailu is absolutely prevented from engaging on any remunerative
work. What is the incapacity benefit that Hailu is entitled to get?

Comment: Under the pension law, if a worker sustains incapacity rated at not less than
10% and if he/she cannot engage in any remunerated work, the incapacity benefit he/she
can get is permanent incapacity pension.

Article 39: Survivors’ Pension (SP)

This is the benefit that is paid to dependants in case of death of the injured worker under
Pension Proclamation. It is a periodic payment for life to the widow or widower and
parents. In the case of children, this periodic payment will be made until they reach the
full age of 18. Survivors within the meaning of the Article 39 (3(a, b and c) Private
Organizations Employees Pension Proclamation No.715/2011are:

 A widow or widower
 Children of the deceased who are under 18 years of age
 Parents who were wholly or mainly supported by the deceased.

The benefits given to the survivors are:

 for widow or widower 50% of the pension-Article 40(1);

 for the deceased children 20% the pension for each of them-Article 41(1); and
 For parents 15% of the pension for each of them-Article 42.

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Summary

In this unit you have seen mainly three important issues. These are definition of labor
law, the emergence and development of labor law, and, finally, the subject-matter of
labor law including its sources. Labor law is al law that regulates employment
relationships mainly in business and industrial activities. This law can also be named as
“industrial law” or “employment relations law’. Thus, Labor law is a law that regulates
the employment relationships between a worker and an employer, as well as between
trade union and employer or employers” association. As a result, labor law has two
aspects- individual aspect and collective aspect of employment relationships.

Individual relationships begin when the conclusion of contract of employment made.

Contract of employment is normally concluded between persons who have unequal
bargaining power. As a result, the concepts of collective relationships, the formation of
labor union, state intervention etc, have been developed. The emergence and
development of labor law is the reflection of development in industry, which begun
during the 18th and 19th centuries. Such development in industry had brought about
certain political and economic theories such as laissez-faire and welfare state. Prior to
the 2nd half of the 19th century, the lasses-faire theory was dominant and the employment
relationships were governed only by the employment contract. The government could
not interfere with their relationships. This had created a lot of problems in employment
relationships. Finally, however, the theory of welfare state has taken the dominant
position after the 2nd half of the 19th century, where the government started intervening in
employment relations. Since then, labor law has developed to its present feature.

In Ethiopia, labor law has emerged and developed since 1944. But the tremendous
development of labor law in Ethiopia came after the adoption of the 1955 Revised
Constitution that recognized formation of association. Yet, the full-fledged picture of
labor law was issued in 1963/64, which was later on repealed and replaced by the 1975
Labor Proclamation. The 1975 Proclamation was, in turn, repealed and replaced by the
1993 Labor Proclamation, which was revised and repealed in 2003.

Generally, labor law now-a-days regulates the employment relationships of a large

portion of population in the world. Law labor provides rules that set the minimum labor
standards; rules that regulate the establishment and activities of labor institutions; rules
that device mechanisms for state interventions, compensation, etc. Moreover, contract of
employment, collective bargaining, the minimum labor conditions set by law and the
ILO’s conventions are the major sources of labor law.

In employment relationships, always an employee and employer exist. Labor law is a

law that regulates employment relationships. But it does not regulate every employment
relationships. Labor law normally regulates the employment relationships established by

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a worker and an employer. The law is applicable only to an employee who is a worker.
As a result, it is important for anyone who wants to study labor law, to know the
definition of the concept worker. The Labor Proclamation No.377/2003 defines the
concept worker as a person who has an employment relationship with an employer, and
who consequently agrees to perform work for and under the employer’s authority in
return for remuneration in accordance to this proclamation. Moreover, the employer who
employs a worker within the meaning of labor law must not be a state in its public
capacity. Hence, workers are employees who perform work in the area of business and
industry to their employer in return for remuneration. When a government participates in
profit making firms with the intention to generate an income, the employees who perform
work in this business are considered as workers and the employment relationship is
regulated by labor proclamation.

The definition of the concept ‘worker’ is important basically because the rights and
privileges provided under labor law can only be enjoyed by workers. Thus, you can
easily understand that labor law does not regulate every employment relationship. There
are some relations that are excluded from the scope of labor law. When exclusions made
by labor law is analyzed in relation to its historical context, the 1960 Labor Proclamation
was wider than the Civil Code because it excluded, in addition to public servants, three
more categories of employees. The 2003 Labor Proclamation has excluded so many
categories of relationships provided under Article 3 of Labor Proclamation No. 377/2003
and also excludes conditionally some categories of employees such as diplomatic mission
or international organizations as clearly discussed in this unit.

In addition, you have seen in this unit some important issues related to contract of
employment. Contract of employment initiates the relationship between an employer and
workers. It is the agreement concluded by both to have employment relationships. But
the law requires the parties to fulfill certain requirements such as legal ability to do so,
their free consent, defining their obligations clearly, etc. Normally, in employment
contract, the major obligation of a worker is to give services to his employer and that of
an employer is to pay wage to his employee. Upon conclusion of the contract, the
employment relation between them is started. Contract of employment can either be
concluded for definite or indefinite duration. But parties are not free to determine the
duration of their contract. In principle, contract of employment is concluded for
indefinite period. The parties can conclude the contract for definite duration only when
the work is not continuous in nature. That is what it implies under Articles 9 and 10 of
the Labor Proclamation.

Once the contract of employment is concluded, it does not mean that the terms of their
contract are untouchable. At any time, the parties are at liberty to change or alter the
terms of their contract. This is what is called variation of contract of employment. The
parties themselves can change certain terms of their contract by agreement. Collective

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agreement and rules issued by the government can also result in variation of employment
contract. There are also the possibilities of suspension of employment contract with
effects of relieving the parties temporarily from discharging their obligations under the
contract.

Moreover, concluding employment contract does not mean that the contract stays forever.
There are situation in which a contract of employment is terminated with the effects of
ending the employment relationships. In this regards, there are various grounds upon
which contract of employment can be terminated. It can be terminated by the operation
of law, in case of, for instance, death of the worker or bankruptcy of the undertaking. The
parties can at any time agree to terminate their contract of employment, but their
agreement must be reduced into writing. There are also situations whereby one of the
parties by unilateral decision can terminate the contract. But the employer can
unilaterally terminate the employment contract only if the grounds provided by the law
are fulfilled. There is no ground required if a worker wants to unilaterally terminate his
employment contract except giving notice to the employer, which is 30 days.

Any termination of employment contract which contravenes the provisions of law is

unlawful termination. Termination of employment contract has certain effects such as
payment of severance pay, compensation and reinstatement. In principle, severance pay
is the effect of termination of employment contract irrespective of the manner in which it
is terminated lawful or unlawful, by law or by the unilateral decision of either of the
parties. But the right to get severance pay is somehow limited in scope under the
Ethiopian labor proclamation. Every termination may not entitle the worker to get
severance pay. There are also special categories of contract of employment. There are
contracts of young workers, female workers, apprentices, and home work contracts.
These contracts are special because there are certain special protections and privileges
legally provided as discussed in this unit.

Furthermore, you have seen that the minimum working conditions are basically related to
work hours, weekly rest day, leaves, and safety and health of workers. At the time of
conclusion of employment contract, parties cannot violate these minimum-working
conditions set by the law. According to the Ethiopian labor Proclamation, the normal
hours of work shall not exceed eight hours a day or forty-eight hours a week.

In this unit, you also have seen some issues related to overtime work. Overtime work is a
work done by a worker in excess of the normal daily working hours. The limitation on
the maximum working-hour is aimed to achieve certain purposes of labor law, but at the
same time one can hardly avoid the possibility of exceeding such maximum limitation.
That is why the law provides a room of having overtime work. Still you have to bear in
mind that overtime work cannot freely be undertaken by the parties.

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Weekly rest days and leave are also other categories under the rules providing the
minimum working conditions. Workers are entitled to get rest, at least 24 uninterrupted
hours once in a week, and on every public holiday. Moreover, labor law provides various
leaves for workers, the majors being annual leave and sick leave. Annual leave is a leave
for few days that a worker is entitled to get once or twice a year. A worker cannot waive
his right to annual leave. A term of agreement that prohibits taking annual leave has not
effect. Even it cannot be replaced by wage unless it allowed by law as in the case of
termination of contract of employment. Moreover, workers are also entitled to get sick
leave in case of illness that prevents them from giving service to the employer.

You have also seen that the rules regulating the minimum working conditions include the
protection of the health and safety of workers. The law here imposes obligations upon
both the employer and workers to take certain preventive measures aimed at minimizing
the occurrence of employment injuries. In case an employment injury has happened, the
employer is duty bound to pay compensation for the injured worker irrespective of any
fault of the employer’s part. Employment injury includes occupational accident and
occupational disease. The employer liability to pay compensation due to such case
comes into picture whenever there is disablement.

Disablement is reduction or loss of the worker’s working capacity due to the employment
injury. Disablement includes temporary disablement, permanent partial disablement, and
permanent total disablement. The employer has the duty to cover medical expenses,
discharge his other obligations, and pay all the cash benefits that the worker is entitled to.
For temporary disablement, he has to pay periodic payment for a maximum of one year.
For the permanent disablement, partial and total, he has to pay disablement compensation
in accordance with the provisions of labor proclamation. But, you should not forget that
workers are also optionally to be regulated either by the insurance scheme arranged by
the concerned undertaking or by the pension law.

Key Terms: labor law, employment contract, termination of employment contract,

working condition, working hours, rest and leaves, safety and health, employment injury

Self assessment questions

1. What is labor law? What are the sources of Labor law?

2. Identify the two aspects of labor law and discuss their differences.
3. Discuss the rationales for the intervention of a government in employment
relationships regulated by labor law.
4. Parties to the contract of employment have unequal bargaining power in determining
the terms of their contract. Evaluate the validity of this statement.
5. Enumerate the relationships that are excluded from the scope of Labor Proclamation.

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6. Do you think labor law is applicable to employees of religious organizations?
Explain.
7. Explain the reasons that managers excluded from the scope of labor law?
8. Discuss the differences between undertakings and state administrations?
9. Enumerate and explain briefly the rules of thumb that help us to differentiate workers
from other employee.
10. Read carefully the situations given below and determine with reasons whether there is
ground for suspension of contract of employment in each situation.
a) Ayele is a worker in a factory. He requests leave without pay and his employer
grants him to have it for two months.
b) Yeshi is a worker of XY Company. One day, she fought with her neighbor and as
a consequence detained in a police station for two weeks.
c) Amir has a Coffee-Export Company. He exports coffee mainly from Harer
through Djibouti Port to the Middle East. In January 2015, Port of Djibouti was
closed for a week due to rehabilitation made.
11. What is Effect of unlawful Termination
12. State the conditions for the termination of a contract of employment of a worker
which are considered illegitimate.
13. List the conditions for termination by operation of the Law
14. Discuss the scope of application of labor law
15. Answer the following questions by writing the right phrase that completes the
sentence correctly in the space provided.
a) ____________________________ refers to occupational accident and
occupational disease.
b) A work done in excess of the normal daily working hours is called
_________________________.
c) Suppose a worker has lost one of his arms. Then the disablement he sustains
is called ________________.
d) _______________________________ is the benefit provided under pension
law for a worker who sustains a permanent total disablement.
e) The maximum period of paid sick leave granted to workers under labor law is
_____________________.

Unit IV Collective Bargaining

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 Unit presentation contents

4.0 Learning Objectives

4.1 Introduction
4.2 Scope of collective bargaining

4.2.1 Freedom to collective bargaining

4.2.2 The Right to Strike

4.3 Characteristics of Collective Bargaining
4.4 Objectives of Collective Bargaining
4.5 Types of Collective Bargaining
4.6 Process of Collective Bargaining
4.7 Prerequisites for Collective Bargaining
4.8 Collective Bargaining in Developed and Developing Countries: A Comparison

Summary

Key words

Self assessment questions

Unit IV Collective Bargaining

4.0 Learning Objectives

At the end of this unit students will be able to:

• Describe the concept of collective bargaining
• identify the strategy & tactics of collective bargaining
• comprehend the process and prerequisites for collective bargaining
• explore factors that contribute to successful agreement

4.1 Introduction

Industrial Relations is inherently a bipartite relationship. Parties to this relationship

include union and management, representing workers and the employers, respectively.
Similar to other relationships, the union and management relationship is also highly
fragile and complex. It is because of the divergence of interests, perspective,
expectations, value systems and goals of the two parties. Consequently, there is a
immense possibility of misunderstanding and conflict at any point of time in
organizational setting over the terms and conditions of employment. As the organization
find it difficult to survive and grow in an environment of conflict and misunderstanding,
it is desirable that both the parties sit together to resolve their differences and conflicts
through mutual discussions and negotiations without the intervention of the third party.

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This process of resolving the differences between union and the management in the
absence of any third party may be called as collective bargaining.
Perhaps, the term “Collective Bargaining” was identified by Sydney and Beatrice Webb
in 1897. Probably, it means, “to bar the gains (of others), collectively.” Collective
Bargaining is referred to as Contract Negotiation and administration which involves the
relations between employers operating through their representatives and the organized
labor. It can be defined as the process through which representatives of management and
union meet to negotiate a labor agreement. This means that both management and labor
are required by law to negotiate wages, hours, and terms and conditions of employment
“in good faith”.

Good faith bargaining is a term that means both parties are communicating and
negotiating and that are being matched with counter proposals with both parties making
every reasonable effort to arrive at agreements. It does not mean that either party is
compelled to agree to a proposal. According to Harbinson, collective bargaining is “a
process of accommodation between two institutions which have both common and
conflicting interests.” The Asian Regional Conference of ILO held in 1953, asserts that
collective agreements are usually the best measures for the determination and adjustment
of wages and that attempt should be made as early as possible to develop systems of
collective negotiations based on free associations of employers and workers.
In the National labor Relations Act of the United States, collective bargaining finds a
place. The Act, in section 8(d), defines collective bargaining as “the performance of the
mutual obligation of the employer and representative of the employees to meet at a
reasonable time and confer in good faith with respect to wages, hours and other terms and
condition of employment, or the negotiation of an agreement, or any question arising
there under, and the execution of the written contract incorporating any agreement
reached if requested by either party, but such obligation does not compel either party to
agree to a proposal or require the making a concession.”

4.2 Scope of collective bargaining

The scope of collective bargaining is quite vast because of the delicacy of the employer,
employee relationship, changing necessity of the organization and its employees, changes
in the business environment and competition within the industry and across industry.
According to Monappa, the scope of collective bargaining agreements now covers issues
such as wages, bonus, and overtime, paid holidays, paid sick leave, safety wear,
production norms, hours of work, performance appraisal, workers participation in
management, hiring, fixing of job evaluation norms and modernization. The scope of
collective bargaining varies from organization to organization and industry to industry
depending upon existence of strong and matured union and its leadership trust and
confidence between union and management, past history and present status of
organization with respect to negotiation and their implementation.

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 4.2.1 Freedom to collective bargaining

Labor Proclamation No. 377/2003 (amended by Proc. No. 466/2005 & Proc. No.
494/2006) recognizes right to collective bargaining and the right to strike. Collective
agreement is an agreement concluded in writing between one or more representative of
trade unions and one or more employers or agents or representatives of employers
organizations. Collective bargaining is a negotiation made between employers and
workers organizations or their representatives concerning conditions of work or collective
agreement or the renewal and modifications of the collective agreement. A Collective
Bargaining Agreement (CBA) usually provides better benefits to the worker than those
provided in the law. If a CBA has provisions which are less favorable than those provided
under the law, it cannot be enforced.

A CBA is legally effective from the date of signature and is valid for at least 3 years,
unless otherwise specified in the agreement. It is applicable to all the parties covered by
it. The CBA is valid between the employer and the workers even if a trade union which is
a party to a collective agreement is dissolved.

The parties must send sufficient copies of collective agreement to the concerned Ministry
for registration. Signed and registered agreement may be acceded to by others.

4.2.2 The Right to Strike

Right to strike is provided under the constitution and is regulated under the Labor
Proclamation. However, unreasonable restrictions on the right to strike (long list of
essential services, excessive penal or civil sanctions against those engaged in
unauthorized strikes and lengthy procedures) actually frustrate this right.

Peaceful strike is allowed to protect their interests only after all the efforts of dispute
resolution fail. Compulsory recourse to long and complex conciliation and mediation
procedures prior to strike actions generally restricts the right to strike. There is a
compulsory 30-day mediation period before lawful strike action may be taken.

Majority workers must support the strike in a meeting in which at least two-third (2/3)
members of the trade union were present. Strikers must notify the other concerned party
and the representative of the Ministry in the region or the concerned government office at
least 10 days prior to the proposed date of strike and indicate the reasons for taking this
action.

Strike is considered illegal if it is not peaceful and does not comply with the provisions of
labor law. Violence, threats of physical force or with any act which is clearly and
officially unlawful is strictly prohibited. Measure should be taken to ensure observance,
of employers and workers, of safety regulations and accident prevention procedures in
the undertaking.

Activity1- understanding the industrial limits to strike.

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 Take about 15 minutes

 Strike is prohibited in certain areas of services. Why? List the areas of activity
labor services is restricted.

Comment: Right to strike is provided under the constitution and is regulated under the
Labor Proclamation. Restrictions on the right to strike are not allowed for essential
services, Such as utilities, health, transport, etc.

4.3 Theories of Collective Bargaining

There are three important concepts on collective bargaining which have been discussed as
follows:
1. The Marketing Concept and the Agreement as a Contract
The marketing concept views collective bargaining as a contract for the sale of labor. It is
a market or exchange relationship and is justified on the ground that it gives assurance of
voice on the part of the organized workers in the matter of sale. The same objective rules
which apply to the construction of all commercial contracts, are invoked since the union-
management relationship is concerned as a commercial one.
According to this theory, employees sell their individual labor only on terms collectively
determined on the basis of contract which has been made through the process of
collective bargaining. Thus, collective bargaining remains a means for employees to sell
their manpower through a common agent.
The uncertainty of trade cycles, the spirit of mass production and competition for jobs
make bargain a necessity. The trade union’s collective action provided strength to the
individual laborer. It enabled him to resist the pressure of circumstances in which he was
placed and to face an unbalanced and disadvantageous situation created by the employer.
The object of trade union policy through all the maze of conflicting and obscure
regulations has been to give to each individual worker something of the indispensability
of labor as a whole. This is also called the union approach to collective bargaining.
It cannot be said whether the workers attained a bargaining equality with employers. But,
collective bargaining had given a new relationship under which it is difficult for the
employer to dispense without facing the relatively bigger collective strength.

2. The Governmental Concept and the Agreement as Law

The Governmental Concept views collective bargaining as a constitutional system in
industry. It is a political relationship. The union shares sovereignty with management
over the workers and, as their representative, uses that power in their interests. The
application of the agreement is governed by a weighing of the relation of the provisions
of the agreement to the needs and ethics of the particular case.
Thus, the Governmental concept/theory establishes a political relationship admitting the
contractual nature of the bargaining relationship. The contract is viewed as a constitution,
written by the point conference of union and management representatives in the form of a
compromise or trade agreement. The agreement lays down the machinery for making

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executing and interpreting the laws for the industry. The right of initiative is
circumscribed within a framework of legislation.

Whenever, management fails to conform to the agreement of constitutional requirements,

judicial machinery is provided by the grievance procedure and arbitration. This creates a
joint Industrial governance where the unions share sovereignty with management over
the workers and defend their group affairs and joint autonomy through the exercise of
external interference.

3. The Industrial Relations (Managerial) Concept at Jointly Decided Directives

The industrial relations concept views collective bargaining a system of industrial
governance.
It is a functional relationship. The union representatives get a hand in the managerial role.
Discussions take place in good faith and agreements are arrived at jointly with company
officials in reaching decisions on matters in which both have vital interests. Thus, union
representatives and the management meet each other to arrive at a mutual agreement
which they cannot do alone. When the terms of agreement fail to provide the expected
guidance to the parties, it is the joint objective and, not the terms, which must control.
Hence, this theory recognizes the principle of mutuality, joint concern and the extension
to workers of the corporate responsibilities.
To some extent, these approaches represent stages of development of the bargaining
process itself. Early negotiations were a matter of simple contracting for the terms of sale
of labor. Developments of the latter period led to the emergence of the Government
theory. The industrial relations approach can be traced to the labor law proclamation No.
377/2003 of our country, which established a legal basis for union participation in the
management.

Constituents of Collective Bargaining

There are three distinct steps in the process of collective bargaining;

(1) the creation of the trade agreement,
(2) the interpretation of the agreement, and
(3) the enforcement of the agreement.
Each of these steps has its particular character and theme, and therefore, each requires a
special kind of intellectual and moral activity and machinery.

1. The Creation of the Trade Agreement In negotiating the contract, a union and
management present their demands to each other, compromise their differences, and
agree on the conditions under which the workers are to be employed for the duration
of the contract. The coverage of collective bargaining is very uneven; in some
industries almost all the workers are under agreement, while in others only a small
portion of the employees of the firms are covered by the agreement. The negotiating
process is the part of collective bargaining more likely to make headline news and
attract public attention; wage increases are announced, ominous predictions about
price increases are reduction in employment are made. And it is in the negotiating

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 process that strikes and threats of strikes are most liable to occur, particular strikes
which shut down an entire industry.
2. The Interpretation of the Agreement The administrative process is the day-to-day
application of the provisions of the contract to the work situation. At the time of
writing the contract, it is impossible to foresee all the special problems which will
arise in applying its provisions. Sometimes, it is a matter of differing interpretations
of specific clause in the contract, and sometimes, it is a question of whether the
dispute is even covered by the contract. Nevertheless, each case must somehow be
settled. The spirit of the contract should not be violated. The methods that
management and the union pointy adopt for this purpose constitute the
administrative process.
3. Enforcement of the Agreement Proper and timely enforcement of the contract is
very essential for the success of collective bargaining. If a contract is enforced in
such way that it reduces or nullifies the benefits expected by the parties, it will defeat
basic purpose of collective bargaining. It may give rise to fresh industrial disputes.
Hence, in the enforcement of the contract the spirit of the contract should not be
violated.
However, new contracts may be written to meet the problems involved in the previous
contract. Furthermore, as day-to-day problems are solved, they set precedents for
handling similar problems in future. Such precedents are almost as important as the
contract in controlling the working conditions. In short, collective bargaining is not an
on-and-off relationship that is kept in cold storage except when new contracts are drafted.
Rather it is continuously, going relationship that takes on new dimensions each day.

4.4 Characteristics of Collective Bargaining

Randle observes: “A tree is known by its fruit. Collective bargaining may best be known
by its characteristics.” The main characteristics of collective bargaining are:
1. It is a group action as opposed to individual action and is initiated through the
representatives of workers. On the management side are its delegates at the
bargaining table; on the side of workers is their trade union, which may represent
local plant, the industry membership or nation-wide membership.
2. It is flexible and mobile, and not fixed or static. It has fluidity and ample scope for a
compromise, for a mutual give-and-take before the final agreement is reached or the
final settlement is arrived at.
3. It is a bipartite process. The employers and the employees are the only parties
involved in the bargaining process. There is no third party intervention. The
conditions of employment are regulated by those directly concerned.
4. It is a continuous process which provides a mechanism for continuing and organized
relationships between management and trade unions. “The heart of collective
bargaining is the process for a continuing joint consideration and adjustment of plant
problems.”
5. It is industrial democracy at work. Industrial democracy is the governance of labor
with the consent of the governed workers. The principle of arbitrary unilateralism
has given way to that of self-government in industry. Collective bargaining is not a
mere signing of an agreement granting seniority, vacations and wage increases. It is

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 not a mere sitting around a table, discussing grievances. Basically, it is democratic: it
is a joint formulation of company policy on all matters which directly affect the
workers.
6. Collective bargaining is not competitive process but is essentially a complementary
process, i.e. each party needs something that the other party has, namely, labor can
make a greater productive effort and management has the capacity to pay for the
effort and to organize and guide it for achieving its objectives.
In the words of Davey: “Collective bargaining is a complex process. It involves
psychology, politics and power of the work group. It frequently involves a contest
between sovereign institutional entities whose survival requirements are, in some
instances related and in other instances, independent of, or in conflict with, one
another.”

4.5 Objectives of Collective Bargaining

The objectives of collective bargaining, include the recognition of union as an authority

in the workplace, improvement of workers standards of living and enlargement of their
share in the profit of the enterprise, expression of the worker’s desire in a concrete form
to be treated with due respect and attainment of democratic participation in decision
influencing their working conditions, development of orderly practices for sharing in
these decisions and settlement of disputes which may stem in the day-to-day working of
the enterprises and accomplishment of broad general objectives including defending and
promoting the workers interest throughout the country.

According to DeCenzo and Robbins, the objective of collective bargaining is to agree

upon an acceptable contract to management, union representative and the union
membership. The purpose of collective bargaining is to attain industrial peace not at any
price. Rather, it aims at the commonly held goals of a free society. In fact, the major
function of collective bargaining is to generate pressures for enhancement of the dignity,
worth and freedom of individual workers.

4.6 Types of Collective Bargaining

Collective bargaining can be classified on different basis. It can be classified in terms of

level of work place as “plant or work place bargaining” between the shop stewards and
the plant management representatives. Moreover, at the level of enterprise, there may
occur “company bargaining” that is between representatives of union(s) and
management. Further a “national bargaining” may occur at the level of industry between
the representative of a union or a federation of unions and those of employer’s
association or federation of employer’s associations.

It may be noted that sometimes there occurs “effort bargaining” where the amount of
work to be accomplished for a predetermined wage becomes negotiable alike the wage
itself. In addition, there is also a trend of “productivity bargaining” irrespective of
financial system involved. Productive bargaining is a process by which employers

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 minimize or at least or stabilize unit labor cost by getting more effective work done and
by which employees obtain greater rewards for doing it.

Bargaining can be “formal” as well as “informal” forms. Formal bargaining involves only
very limited range of issues including basic wage rates and basic conditions of work, the
informal bargaining may embrace the wider issues such as financial incentives,
disciplines, work practices, recruitment and redundancy.

The Collective Bargaining is the process wherein the unions (representatives of

employees or workers), and the employer (or their representative) meet to discuss the
issues related to wage, the number of working hours, work environment and the other
terms of the employment.

There are four types of Collective Bargaining classified on the basis of their nature and
the objectives, and can be practiced depending on the different situation requirements.

Figure 3.1 Types of Collective bargaining

1. Conjunctive or Distributive Bargaining: In this form of collective bargaining,

both the parties viz. The employee and the employer try to maximize their respective
gains. It is based on the principle, “my gain is your loss, and your gain is my loss” i.e.
one party wins over the other.

The economic issues such as wages, bonus, other benefits are discussed, where the
employee wishes to have an increased wage or bonus for his work done, whereas the
employer wishes to increase the workload and reduce the wages.

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2. Co-operative or Integrative Bargaining: Both the employee and the employer
sit together and try to resolve the problems of their common interest and reach to an
amicable solution. In the case of economic crisis, such as recession, which is beyond the
control of either party, may enter into a mutual agreement with respect to the working
terms.

For example, the workers may agree for the low wages or the management may agree to
adopt the modernized methods, so as to have an increased production.

3. Productivity Bargaining: This type of bargaining is done by the management,

where the workers are given the incentives or the bonus for the increased productivity.
The workers get encouraged and work very hard to reach beyond the standard level of
productivity to gain the additional benefits.

Through this form of collective bargaining, both the employer and the employee enjoy
the benefits in the form of increased production and the increased pay respectively.

4. Composite Bargaining: In this type of collective bargaining, along with the

demand for increased wages the workers also express their concern over the working
conditions, recruitment and training policies, environmental issues, mergers and
amalgamations with other firms, pricing policies, etc. with the intention to safeguard their
interest and protect the dilution of their powers.

Thus, the purpose of the Collective Bargaining is to reach a mutual agreement between
the employee and the employer with respect to the employment terms and enjoy a long
term relationship with each other.

4.7 Process of Collective Bargaining

Collective bargaining has two phases:

a) The negotiation state; and
b) The stage of contract administration.
The process of collective bargaining involves six major steps
c) Preparing for negotiations
d) Identifying bargaining issues.
e) Negotiating
f) Settlement and contract agreement
g) Administration of the agreement.
The environment in which collective bargaining undertakes influences the collective
bargaining process. One bargaining environment is the type of bargaining structure that
exists between the union and the company. The four major types of structures are:
(i) one company dealing with a single union,
(ii) several companies dealing with single union,
(iii) several unions dealing with a single company, and

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 (iv) several companies dealing with several unions. The bargaining process is
comparatively simple and easy if the structure is of first type and becomes
difficult and complicated in the remaining.

Negotiation Stage
Negotiation- Mutual discussions for the purpose of arriving at the terms of a transaction
or agreement. Successful negotiating is a skill. It is not something you have or don’t
have.” (Gerard Nierenberg, The Art of Negotiating) Like playing a sport, flying an
airplane, or driving a car, becoming an effective negotiator is a skill that can be learned.
Some people have a natural talent for it. Others do not. If you do not have a natural
inclination for negotiating you can learn how to do it, and do it well! If you do have a
natural talent for it, you can improve that skill with training and practice.

Win - Win Negotiations- “Negotiations in which both parties come away winners and
both parties are committed to upholding their ends of the agreement”. “Negotiations in
which both parties come away winners and both parties are committed to upholding their
ends of the agreement”.

Figure 3.2 Negotiating strategies

Principles of Win – Win Negotiating

What it is not: A game — where one side wins and the other side loses
What it is: A relationship whereby we both win (1+1 = 4)
Why?
Fundamental principle in negotiations is need satisfaction. Look for creative ways to
satisfy your and your counterpart’s needs. Establish a friendly climate of mutual interests

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and trust. Negotiation is the beginning of a process, not the end but looks for a long-term
mutually beneficial relationship. Don’t be afraid to give up something to get something.
Be open to creative ways to satisfy critical needs and look beyond current situation for
win – win, where everyone is better off than before the negotiation.
Figure 3.2 Negotiating strategies (continued)

Possible Negotiating Strategies

Winner’s Circle!
Your needs satisfied
HIGH
Win-Win/Short
Win-Lose/Short You Command/ Collaborate/ Win-Win/Long
Lose-Lose/Long
My way or highway Win-Win This is our goal!
Your apparent win

Compromise

Okay/Short Term Avoid, don’t You Give In/ Lose-Win/Short

Lose-Lose/Long negotiate Need Any Deal Lose-Lose/Long

LOW
HIGH
Other side’s apparent win
Counterpart’s needs satisfied

At the negotiation stage, certain proposals are put forward which explore the possibility
of their acceptance and have the way to mutually agreed terms after careful deliberation
and consideration. The negotiation stage itself involves three steps namely preparation for
negotiation, identifying bargaining issues and negotiating.
1. Preparation for negotiation
Careful advance preparations by employers and employees are necessary because of the
complexity of the issue and the broad range of topic to be discussed during negotiations.
Effective bargaining means preparing an orderly and factual case to each side. Today,
this requires much more skill and sophistication than it did in earlier days, when shouting
and expression of strong emotions in smoke filled rooms were frequently the keys to
getting one’s proposals accepted.
From the management side the negotiations are required to:
i. Prepare specific proposal for changes in the contract language.
ii. Determine the general size of the economic package the company proposes to
offer.
iii. Prepare statistical displays and supportive date for use in negotiations, and
iv. Prepare a bargaining book for company negotiations, a compilation of
information on issues that will be discussed, giving an analysis on the effect of
each case, its use in other companies, and other facts.
From the employee’s side, the union should collect information in at least three areas:
i) The financial position of the company and its ability to pay.
ii) The attitude of the management towards various issues in past negotiation or
inferred from negotiations in similar companies.
iii) The attitudes and desires of the employees.

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The other arrangements to be made are selecting the negotiators from both sides and
identifying a suitable site for negotiation.

2. Identifying Bargaining Issues:

The major issues discussed in collective bargaining fall under the following four
categories:
a. Wage related issues:
This includes such topics as how basic wage rates are determined, cost of living
adjustments, wage differentials, overtime rates, wage adjustments and the like.
b. Supplementary economic benefits:
These include such issues as pension plans, paid vacations, paid holidays, health
insurance plans, retrenchment pay, Unemployment pension, and the like.
c. Institutional issues:
These consist of the rights and duties of employers, employees, unions, employee’s stock
ownership schemes, and the like.
d. Administrative issues:
These include such issues as seniority, employee discipline and discharge procedures,
employee health and safety, technological changes, work rules, job security, and the like.
While the last two categories contain important issues, the wage and benefit issues are the
ones which receive the greatest amount of attention at the bargaining table.
3. Negotiating:
Preparations have been made and issues being identified, the next logical step in
collective bargaining process is negotiation. The negotiating phase begins with each side
presenting its initial demands. The negotiation goes on for days until the final agreement
is reached. But before the agreement is reached, it is a battle of wits, playing on words,
and threats of strikes and lockouts. It is a big relief to everybody when the management
representatives and the union finally sign the agreement.

The success of negotiation depends on skills and abilities of the negotiators. At times,
negotiations may breakdown even through both the labor and the management may
sincerely want to arrive at an amicable settlement. In order to get negotiations moving
again, there are several measures that are usually adopted by both the parties, which
sometimes even include unethical measures:
a. Through third party intervention such as arbitration and adjudication,
b. Unions tactics likes strikes and boycotts, and
c. Management strategies such as lockouts, splitting the union, bribing union leaders
and using political influence.

Activity2 – understanding the objectives of unions in collective bargaining

Take about 10 minutes
 Describe the Objectives of Unions in Collective Bargaining.

Comment: The central focus of union activity is collective bargaining i.e., the process of
arriving at compromises to settle disputes between an employer and an organization of
employees. It is called collective bargaining because the employees, as a group, select
representatives to meet and discuss differences with the employer.

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 (A) Contract Administration

When the process of negotiation has been completed, it is time to sign the contract, the
terms of which must be sincerely observed by both the parties. The progress in collective
bargaining is not measured by the more signing of an agreement rather; it is measured by
the fundamental human relationships agreement. Once an agreement is signed, both the
trade union and the management are required to honor it in letter and spirit. The union
officers and company executives should explain the terms and implications of the
contract to employees and supervisors with a view to ensuring that the day to day
working relationship between workers and management is guided by that contract. It is
important that contract must be clear and precise. Any ambiguity leads to grievances or
other problems.

The whole process of contract administration is identified by two steps, namely

settlement and contract agreement i.e. settlement of disputes by collective bargaining and
find a solution as an contract agreement between union and management and
administration of agreement i.e. implementation according to the letter and spirit of the
provisions of the agreement.

4.8 Prerequisites for Collective Bargaining

(1) The parties must attain a sufficient degree of organization. If the workers’
organization is weak, employers can say that it does not represent the workers and
will refuse to negotiate with it. Unless the workers are able to form strong and
stable unions, collective bargaining will not be successful.

(2) Freedom of association is essential for collective bargaining. Where there is no

freedom of association, there can be no collective bargaining. Freedom of
association implies that the workers as well as the employers will have the right to
form an organization of their own to protect their interests.

(3) There should be mutual recognition between both the groups. Collective
bargaining cannot begin if the employers do not recognize the workers’
organization. The conflict of interests makes the two groups hostile to each other.
They must recognize each other and realize that adjustment and understanding is
essential for the achievement of organizational goals.

(4) There must exist a favorable political climate, essential for successful collective
bargaining. If the government encourages collective bargaining as the best
method of regulating conditions of employment, it will be successful. Where the
governments restrict trade union activities, there can be no collective bargaining.

(5) Agreement must be observed by those to whom they apply. The workers’
organization must be strong enough to exercise its authority over its members. If

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 the trade union has no power over its members, collective bargaining will not be
effectively implemented.

(6) A give and take policy must prevail in the organization. The difference between
two parties can be adjusted only by compromise so that an agreement can be
reached. Neither side should be too rigid on its demand.

Their attitudes should be flexible and both sides should be ready to give up some of its
demands. Unions should not rigidly insist upon unreasonable demands and should be
ready to reduce its demands to come to an agreement.

(7) Sometimes unfair labor practices are resorted to by both the employers and the
trade unions. These will restrict the development of collective bargaining. Unfair
labor practices should be avoided by both the sides, as this will create an
atmosphere of goodwill.

(8) There should be careful selection of negotiation teams and issues. The team
should have a mixed composition, including productions finance and IR experts.
It should be headed by personnel and industrial relations specialists of sufficient
seniority, who has adequate authority to commit the enterprise and take decisions,
without frequent referrals to top management. For instance, many organizations
have a vice-president personnel or director-personnel heading the team with a
brief to commit the organization up to a certain amount which can be spread out
depending on the negotiating depending on the negotiating situation based on
union demands.

(9) It is important for the management to recognize the union and to bargain in more
good faith, in unionized situations. This can put pressure on the union to
formulate plans and demands in a systematic way. Strong unions and progressive
managements can help create an atmosphere of mutual confidence.

(10) The negotiating teams should have open minds, to listen and appreciate
the other’s concern and point of view and also show flexibility in making
adjustments to the demands made.

(11) The need to study adequately or do ‘homework’ on the demands

presented, i.e. to gather data on wages and welfare benefits in similar industries in
the geographical area.

(12) Both the management and union should be able to identify grievances,
safety and hygiene problems on a routine basis and take appropriate remedial
steps.

(13) Trade unions should encourage internal union democracy and have
periodic consultations with the rank and file members.

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 (14) Trade unions should show their equal concern regarding both quantity of
work output as agreed upon and quality of work. They should show their full
commitment towards the viability of the firm and its products/services.

Periodic discussions may be necessary between the management and the unions to
interpret the provisions of the contract and clarify doubts.

4.9 Collective Bargaining in Developed and Developing Countries: A

Comparison

The bargaining behavior in a developing economy and in a developed economy may be

different in their approach: ideological, political and social variables.

Ideological Differences

In developed countries, labor has gained considerably in earning and in accomplishing a

standard of living. What is shared with the employer is a cake of big size. Thus, labor,
becomes interested in a continuous relationship with the employer rather than in frequent
conflicts. However, in developing countries the cake to be shared is of a small size and
the conflict is frequent and has at times ideological flavor. In several of these countries
the habit of conflict still persists and the idea of class struggle is still appealing to labor.

Political Differences

In developed economies, the industrial revolution emerged much earlier. In some of

them, along with the revolution, some kind democratic government was also formed.
This has happened in USA and U.K. The democratic government provided gradually the
political base to labor which it used for its economic gains. However, the labor
organizations, try even today to keep the trade union activities separate from their
political activities. This is true even of the UK and France. On the other hand, in
developing economies, there may be immense interest in political activities on the part of
labor than in activities which directly promote their economic gains.

Social Differences

In developed countries, practically all-available manpower is used for production. There

is generally full employment. As productivity is high because of superior technology, less
labor is needed. In this process labor become expensive, both in the case skill and
payment. This explains the migration of cheap labor from less developed countries to
developed countries. Within a developing country itself, there may be certain pockets of
prosperity which similarly attracts labor from less developed areas. In developing
countries much more workers are available than that can be utilized. Accordingly,
efficiency tends to be l
Some Possibilities Common to both Developed and Developing Countries

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Since the bargaining leads to the joint decisions to regulate working conditions, wage
etc., generally it makes for peace and harmony in both developed and developing
countries. This is likely to occur especially where such an agreement is entered into with
a recognized trade union having a majority following. These joint decisions establish a
kind of rule of law in labor-management relations and remove arbitrariness on the part of
the employer or militancy on the part of the workers. In an industry where such
bargaining takes place, a sound mutual understanding is achieved between parties. Each
understands the position of the other and a genuine negotiation takes place on the basis of
such mutual understanding.

Collective bargaining with its flexible and adjusting behavior opens with the knowledge
and consent of all the parties concerned. Thus, under certain conditions some clauses of
agreement can be opened for negotiation. Collective bargaining reflects a willingness
approach towards dispute resolution. So that it is considered as constructive approach
towards organizational conflict.

Factors of success in any collective bargaining

1. Trust between parties

2. Confidence of the members in their representatives in the negations
3. Open and honest communication
4. Group participation
5. Negotiators must possess the required skills for negation
6. Establishment of clear procedures and ground rules for negation
7. The resolution of conflicts during negation
8. Accessibility of information to make informed decisions
9. Use of the problem solving team approach to identify issues and come up with
options to discuss during negations

Activity 3: Understanding the difference and similarities of collective in

Developed and Developing Countries.
Take about 10 minutes
 Discuss the variables that determine the difference and similarities of collective
bargaining in Developed and Developing Countries

Comment: The bargaining behavior in a developing economy and in a developed

economy may be different in their approach: ideological, political and social variables

SUMMARY

While describing the nature of collective bargaining, attempt has been made to present its
definition, characteristics, objectives, functions, process and types. The widening scope
of collective bargaining embraces various issues. The collective bargaining procedure
involves variation, preparation, stages, critical situations, drafting and designing of
contract and contract administration. It reveals several prerequisites for collective

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bargaining. It also reveals several similarities and dissimilarities across developed and
developing countries. At present, trade unions are irritant rather than threat to
management. Accordingly, concept of collective bargaining has changed with growing
power of employers and dwindling fortunes of trade unions.

Key words: Collective bargaining, strategies and tactics of collective bargaining,

procedure of collective bargaining, types of collective bargaining, Negotiation, Collective
Bargaining Agreements

SELF ASSESSMENT QUESTIONS

(1) What is collective bargaining? What are its major functions?

(2) Describe the nature and scope of collective bargaining?
(3) Describe the characteristics & classification of collective bargaining.
(4) Describe various strategies and tactics of collective bargaining.
(5) Describe the procedure of collective bargaining.
(6) Explain the major similarities and dissimilarities of collective bargaining in
developed and developing countries.
(7) What contributes to successful Collective Bargaining Agreements?
(8) Explain the historical background of collective bargaining in Ethiopia.

CASE STUDY

ABC limited is private company making tires with their HQ at Addis. Labor management
relations were cordial. They have three years wage agreement renewed periodically
without any strike or lockout for the last ten years. The Union has allegiance to political
party.
Current wages agreement is likely to expire shortly. Solomon, Director, HR was holding
negotiations with union leaders for the last three months. During this period, he sorted out
differences on all seven out of 8 points. The 8th point was in regard to the wages
increase. Union originally demanded a wage rise of 30% whereas the management was
prepared to go only for 15%. After a series of discussion, Union leaders agreed to come
down to 25% and the management has agreed to increase to 17%. The stalemate
continued for the next 20 days. Finally the management has accepted 18% increase.
Union leaders did not agree and called for a strike.
Even after one week strike, the management did nothing. The Union gave a public
advertisement stating its side and the management has also given an advertisement that
the strike is unwarranted and they have no other alternative except to go for a lockout.
It also stated that their offer of present agreement will remain valid only for the next three
days.

Questions:
Based on the Ethiopian Labor law Proclamation 277/2003
(a) Explain the Unions rationale of the latest demand.
(b) Explain the reasons for management action.
(c) Predict the outcome, of this dispute.

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(d) Suggest additional gestures from management or union to break the statement.

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193
 Unit V Discipline & Grievance Handling

Unit presentation contents

5.0 Learning Objectives

5.1 Introduction
5.2 Discipline in the Workplace
5.2.1 Objectives of discipline
5.2.2 Causes of Indiscipline
5.3 Types of Discipline
5.3.1 Alternatives to Punishment
5.3.2 Essentials of a Good Disciplinary System
5.3.3 Kinds of Punishment
5.3.4 Progressive discipline - Procedure for Taking Disciplinary Action
5.3.5 The Theoretical Aspects progressive discipline
5.3.6 Typical steps in a progressive discipline system
5.4 Grievance and grievance handling
5.4.1 Organizational Responsibility
5.4.2 Features of Grievance
5.4.3 Causes of Grievances
5.4.4 Model of Grievance Procedure
5.4.5 Effects of Grievance
5.4.6 Typical Grievance procedure
5.4.7 Essential Pre-requisites of a Grievance Handling Procedure
5.4.8 Basic Elements of a Grievance Handling Procedure
5.5 Conciliation and Mediation

Summary

Key Terms

Self assessment questions

Unit V Discipline & Grievance Handling

5.1 Learning Objectives

The Objectives of this unit is to enable students to:

 Comprehend the concept of employee discipline

 Identify the causes for indiscipline
 Describe the procedure for taking disciplinary action
 Identify the reasons for taking disciplinary action

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  Understand the importance of proper documentation
 Understand the key issues in the discipline/grievance process
 Understand the concept of Grievances
 Knowing the causes of Employee Grievances
 Use the model Grievance procedure
 describe the steps in the disciplinary process
 describe the concept of Conciliation
 identify the roles of Arbitration and Adjudication in bringing the industrial peace

5.2 Introduction

No man ever grows until he is disciplined. Discipline is an inevitable correlate of

organization. To be organized means to be disciplined and vice versa. The behavior of an
employee is at the root of all discipline in an organization. Every manager wants this
behavior to be in conformity with the required system which he has prescribed in order to
achieve the organizational goals. However, not infrequently we find employees deviating
from systems of behavior which they cannot easily give up when they enter as members
of an organization. It is at that many problems of employer-employee relations and of
individual adjustment arise.

Grievances are becoming more common as employment and equality legislation take
hold. Genuine grievances need careful, competent and empathetic management, it's
really important to make good the damage that has been done to the employee. It's all too
often not about money or compensation; but about the employee feeling that they have
been heard, that you acknowledge mistakes have been made and that they are assured that
neither they nor their colleagues will face similar problems in the future.

Nobody wants to have to discipline an employee but on occasion it can be the only way
to ensure that poor performance is addressed in a way that you need for your business to
run smoothly and enhance customer satisfaction. A disciplinary managed well can also
be an opportunity for employee to reflect on and improve their performance, attitude and
behavior.

All workplace grievance and disciplinary issues must be handled in accordance with due
process and the principals of natural justice including:

•the right to a fair hearing;

•the right to respond;

•the right to be accompanied; and

• the right of an independent appeal.

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A disciplinary procedure and grievance procedure permit employers to deal fairly and
consistently with employee misconduct and complaints from employees about the
workplace.

The principal object of any grievance system is to encourage human problems to be

brought to the surface. Management can learn about them and may try corrective
action. The social organization of a plant is very much like a complicated machine. Both
need constant attention and frequent adjustments. Grievances expressed and presented
formally or informally, are symptoms which should be carefully studied by management
to determine the real causes of these dissatisfactions. Almost everyone agrees that it is
better to prevent fire than trying to stop them after that have started and the same
philosophy applies to grievances.

Grievance system helps to solve problems before they become serious. If problems are
allowed to accumulate unsolved, their quantity may get so great that they may have
adequate pressure “to blow off the lid of the whole section or department.” A good
grievance system can prevent the developments of unwanted system and keep social
pressures within bounds.
Within the grievance system, counseling comes with the hope to release employees’
emotions. More the employee(s) can free their emotions, better they are likely to reduce
their dissatisfactions. This is because through the release of emotion a frustrated and
aggrieved employee can put control over his or her aggressions. So, emotional release,
often, plays an important role in individual grievance cases.

Grievance procedures help to establish and maintain a work culture or way of life.
Each group has its own particular way of living together, and the grievance procedure
helps to develop this group culture. A manager tends to give more care to the human
aspects of the jobs because some of the actions may generate the possibilities to be
challenged and reviewed and may be dragged under grievance system. In industry, today,
a manager is encouraged always to develop effective ways and means to elaborate
compromise mechanism and thereby, needs to learn the development and sustenance of
the friendly working relationships with his group members. It is obvious that grievances
are human problems and are to be handled in a human way. Every worker has the right to
present his grievances to his employer and obtain the solutions. The management has to
see that grievances are so received and properly settled so that the worker may get the
necessary sense of satisfaction.

Conciliation is a process by which representatives of workers and employers are brought

together before a third person or a group of persons with a view to persuade them to
come to a mutually satisfying agreement. The objective of this method is to settle
disputes quickly and prevent prolonged work stoppages if they have already occurred.
The essential hallmarks of this approach are
1. The conciliator tries to bridge the gap between the parties, if possible.
2. If he does not fully succeed, he tries to reduce the differences to the extent possible.
He acts as a conduit through which message are passed from one side to the other,
coupled with his own interpretations

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facilitating the understanding of disputing parties. To the extent possible, he tries to ‘clear
the fog’ surrounding the issue.
3. He persuades parties to take a fresh look at the whole issues, through a process of
give and take and explore the possibility of reaching a consensus.
4. He only advances possible lines of solutions for consideration by the disputants. He
never tries to force the parties to accept his viewpoint. He never offers judgment on the
issues. If parties feel that the suggestions offered by the conciliator are acceptable, they
may strike a deal.
5. The conciliator need not follow the same path in each case. The process of
conciliation, therefore, has a certain amount of flexibility and informality built around it.

5.3 Discipline in the Workplace

Discipline in the workplace is the means by which supervisory personnel correct

behavioral deficiencies and ensure adherence to established company rules. The purpose
of discipline is correct behavior. It is not designed to punish or embarrass an employee.
Employee Discipline: Meaning, Features and Objectives

Definition

In simple words, the word discipline connotes orderly behavior by the

members/employees. In other words, discipline implies behaving in a desired manner. By
that we mean that employees confirm to the rules and regulations framed by the
organization for an acceptable behavior. Following definitions of discipline will make its
meaning more clear.

According to Richard D. Calhoon’, “Discipline may be considered as a force that

prompts individuals or groups to observe the rules, regulations and procedures which are
deemed to be necessary for the effective functioning of an organisation”.

William R. Spreigel and Edward Schultz define discipline as “the force that prompts an
individual or a group to observe the rules, regulations and procedures which are deemed
to be necessary to the attainment of an objective, it is force or fear of force which
restrains an individual or a group from doing things which are deemed to be destructive
of group objectives. It is also the exercise of restraint or the enforcement of penalties for
the violation of group regulations”.

In the opinion of Ordway Tead, “Discipline is the order, members of an organization who
adhere to its necessary regulations because they desire to cooperate harmoniously in
forwarding the end which the group has in view”.

Thus, discipline can now be defined as a condition in the organization when employees
conduct themselves in accordance with the organization’s rules and standards of
acceptable behavior.

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Features:

The main features or characteristics of discipline that flow from above definitions are:

1. Discipline is self-control:

It refers to one’s efforts at self-control to conform to organizational rules, regulations and

procedures which have been established to ensure the successful attainment of
organizational goals.

2. It is a negative approach:

It means discipline encourages people to undertake some activities, on the one hand, and
restrains them from undertaking others, on the other.

3. It is a punitive approach:

It means that discipline also imposes penalty or punishment if the rules and regulations
framed by the organization are not obeyed or ignored by the members. Punishment is
imposed not to change past behavior but to prevent its recurrence in future.

5.2.1 Objectives of discipline

The objectives of discipline are to:

l) Motivate an employee to comply with the company’s performance standards:

Employee receives discipline after failing to meet some obligation of job. The failure
could be either directly related to the tasks performed by the employee or ignoring rules
and regulations that define proper conduct at work.

2) Maintain respect and trust between the supervisor and employee:

Discipline if not properly administered can create problems like low morale, resentment,
and ill-will between the employees. In such case, improvement in employee’s behavior, if
any, will be relatively short-lived and the supervisor will need to discipline the employee
again and again. On the contrary, properly administered discipline will not only improve
employee behavior but will also minimize future disciplinary problems through good
relationship between the supervisor and the employee.

3) Improve the performance of the employee:

Discipline for poor task performance should not be applied while employees are on
training or learning the job. Nor should employees be disciplined for problems beyond
their control, for example, failure to meet output standards due to the lack of raw
materials. Yes, discipline should be exercised when employees are found responsible for
unsatisfactory performance.
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 4) Increase the morale and working efficiency of the employees.

5) Foster industrial peace which is the very foundation of industrial democracy.

5.2.2 Causes of Indiscipline

It is very difficult to prepare an exhaustive list of the reasons which lead employees to
indiscipline. In fact, a number of social, economic, cultural and political reasons
contribute to indiscipline in an organization. Important among these causes are the
following:
1. Ineffective leadership which cannot control, coordinate and motivate workers.
2. Low wages and poor working conditions.
3. Lack of promotional opportunities due to which people feel stagnated
4. Absence of any code of conduct to regulate behavior on both sides.
5. Lack of timely redressal of workers’ grievances.
6. Unfair management practices.
7. Defective communication system.
8. Lack of workers’ education.
9. Uninteresting work.
10. Drunkenness and family problems.
11. Outside political influences.
12. Excessive work pressure.

5.3 Types of Discipline

Discipline may be of two types positive and negative.

Positive discipline or ‘self-discipline’ is the best discipline. This refers to an
organizational atmosphere in which subordinates willingly abide by rules, which they
consider fair. The techniques followed by the management to achieve this type of
discipline include positive motivational activities such as praise, participation and
incentive pay.
Negative or punitive discipline is one in which management has to exert pressure or
hold out threat by imposing penalties on wrongdoers. When this pressure becomes
increasingly severe each time a man is disciplined, it is called “progressive” or
“corrective” discipline.
Arguments Against Negative Discipline or Punishment
Many people argue that punishment should be avoided as a means of trying to Influence
Behavior. Their objections are as follows
(a) For punishment to be effective there must be continued monitoring or
surveillance, which is a very wasteful use of high-priced managerial time.
(b) Punishment never really extinguishes or eliminates undesirable response
tendencies, but only temporarily suppresses them. These tendencies reappear with
full force when the threat of punishment is removed
(c) Punishment has undesirable side effects. It may cause resentment and hostility
awards the punisher with motive of trying to “get even” later through sabotage,

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 output restriction, or doing things that make the punisher “look bad” or cause him
inconvenience. The fear associated with the punishing agent may lead the
punished person to avoid his very presence; this, in turn, makes it more difficult
for the manager to play the desired role of coach, teacher, or counselor.
Alternatively, the reaction to punishment may be more extreme, resulting in
generalized inhibition and rigidity or stereotyped behavior in the punished person;
this can make it more difficult for the person to learn new behavior, including
very desirable behavior, or to adjust to change.

5.3.1 Alternatives to Punishment

Alternatives to punishment in eliminating undesired behavior include the following

(a) Extinction. Find out what reinforces the undesired behavior. For example, the
unruly subordinate may be getting praise and recognition from peers. Then get
those peers to co-operate with you by ignoring the unruly behavior. When such
behavior is not reinforced, it will eventually lose strength and extinguish.
(b) Environment Engineering. Rearrange the features of the environment so that
the Stimulus situation does not evoke the undesired response but some other
response. Skinner (1953) tells the story of a manager who had a traffic problem
caused by women hurrying down the corridor as soon as the end of the
workday was signaled. The manager solved his problem by placing wall
mirrors along the corridor. The stimulus situation that had evoked stampeding
down the hallway was transformed into one which encouraged a more leisurely
and orderly walk-and-stop sequence.
(c) Reward. Reward either desirable or natural behavior, which is physically
incompatible with the undesired behavior. If children are rewarded for taking
exercise or for performing light outdoor chores before dinner, they are
prevented from excessive snacking and television watching.
(d) Adjustment. Allow adjustment, development, or maturation to take its course.
New or inexperienced employees make many mistakes and do many wrong
things that they will learn to avoid, given a reasonable period of adjustment
punishment may not hasten this process, and it causes undue anxiety, it can
actually retard this process.

5.3.2 Essentials of a Good Disciplinary System

While punitive discipline or punishment may sometimes be ineffective in changing

behavior or may produce unwanted by-products, there is nevertheless considerable
evidence that punishment can be an effective tool under certain conditions. These are as
under
1. Knowledge of Rules The employee must be informed clearly about what
constitutes good behavior and the rewards that may emanate from it. All
instructions should be clear and understandable. It is common sense that an
employee will obey an instruction more readily if he understands it. The
supervisor himself must know all the rules. He cannot effectively communicate
with his workers if his own knowledge about rules is half baked. In fact, he needs

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 to know more than the barest minimum that he wants his workers to know. This
reserve of knowledge is essential in order to be able to answer several unexpected
question from workers. In other works, a supervisor’s span of knowledge and
understanding of rules should be greater than that of his workers. If this is not so,
the supervisor will lose personal prestige both before his supervisors and
subordinates.
2. Prompt Action All violations and misconducts-big and small-should be promptly
enquired into. For example, a supervisor is most unwise to wait until lunch break
before rebuking a worker for arriving late. Beat the iron when it is hot. This is
because when the penalty is imposed immediately following the violation of a
rule the person punished tends to identify the punishment with the act he
committed. Accordingly, the subordinate attempts to avoid the violation in future.
This is called the “law of effect”. The greater the delay the more one forgets and
the more one feels that punishment is not deserved.
3. Fair Action Promptness of disciplinary action at the cost of its fairness is not
proper. An action in order to be fair must possess the following characteristics
(a) All violations-big and small-should be duly punished. A violation should not
be overlooked or condoned merely because it is small otherwise this will give
an impression that announced rules are meaningless.
(b) All individuals-big and small-should receive equal punishment for equal
indiscipline. If a rule is applied to one individual but not to another, the
management is bound to be accused of favoritism.
(c) Discipline should be uniformly enforced at all times. If management soft-
pedals on taking a disciplinary action when there is shortage of labor and
toughens its policy when labor is plentiful it is acting arbitrarily. Similarly, if
the management overlooks a wrong on one occasion and punishes it on
another occasion it is acting inconsistently. Inconsistent behavior of
management leads to uncertainty in the minds of subordinates. They simply
do not know where they stand.
(d) The alleged violation should be fully inquired into. Making a mistake by
hastily administering a penalty which on the basis of facts collected later on is
found to be uncalled for will mean a permanent destruction of the morale of
the punished worker and general loss of face for the supervisor.
(e) The employee should always be given an opportunity to explain his action.
The common law principle that an offender is innocent until he is proved
guilty beyond doubt should be followed. The burden of proving the violation
always lies on the management.
4. Well Defined Procedure The procedure to be followed to reach to a penalty
decision should be carefully laid down. It should include the following steps
(a) The supervisor must assure himself that some violation of the rules has taken
place.
(b) He should state precisely and objectively the nature of the alleged violation.
(c) He should then proceed to gather full facts about the case and maintain proper
records. Facts will have to be gathered concerning the nature of the event, the
participants and the surrounding circumstances. Extenuating circumstances such
as ill-health, family troubles, etc., should be found out. A critical analysis should

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 be made of the person’s background such as his past service record, length of
service, local practice, etc. Fact gathering is often a process of fact-sifting.
Opinions should not be mistaken for facts. The methods used for gathering the
fact must not smack of spying and statements should not be prejudged.
(d) After all the facts have been gathered, thought should be given to the various
types of disciplinary action which can be taken in the case in question. It is
advisable to prepare three separate lists of actions. The first list should include all
types of disciplinary action to make certain that no possibility is overlooked. The
second list should classify penalties according to rank in order to acquaint the
executive with those actions which lie within his command and those for which
he should refer the case to his superiors. The third list should include only those
penalties, which the offence in question specifically calls for.
(e) The appropriateness of a disciplinary action should be decided in terms of its
effectiveness in correcting the employee. This is very important because the
purpose of a disciplinary action is to mend an employee and not to punish him, to
help him and not to harm him.
(f) The accused employee should have the right to appeal to higher authority.
5. Constructive Handling of Disciplinary Action. Disciplinary action should be
handled in a constructive manner. It should be carried out by the immediate line
supervisor. This employee should be told not only the reasons for the action taken
against him but also how he can avoid such penalties in future. Disciplinary action
should be taken in private. By exposing an employee to public ridicule the
supervisor attacks his dignity and social standing. This may produce an opposite
effect on the employee. He may react violently or may become obstinate to
preserve his ego. It is most unwise for a supervisor to take a general disciplinary
action against a group of subordinates. Disciplinary action is a matter for the
individual. It is the individual who should be held responsible for any wrong. A
management which takes disciplinary action against a group is likely to set off a
wave of unrest associated with falling morale and even the possibility of wildcat
strike. After the disciplinary action has been taken the supervisor must assume a
normal attitude towards the employee. He should revert to his role of a helping
hand-as if nothing has happened. This is possible only when the supervisor uses
an impersonal approach in administering a penalty. He should not engage in
personal ridicule, insult or even criticism. He should avoid getting into an
argument. In short, he must play the role of a judge enforcing the law with
impartiality.

Hot-Stove Rule

This rule, so called by Douglas McGregor, draws an analogy between touching a hot
stove and undergoing discipline. When a person touches a hot stove
1. The burn is immediate.
2. He had warning. Particularly if the stove was red hot he knew what would happen
if he touched it.
3. The effect is consistent. Everyone who touches a red-hot stove would be burned.

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 4. The effect is impersonal. A person is burned not because of who he is but because
he touched the hot stove.
5. The effect is commensurate with the gravity of misconduct. A person who
repeatedly touches the hot stove is burnt more than one who touched it only one.
The same should be with discipline. The disciplinary process should begin
immediately after the violation is noticed. It must give a clear warning that so many
penalties would be imposed for a given offence. The same kind of punishment should
be consistently imposed for the same offence. Punishment should be imposing
regardless of status difference. In other words, it should be impersonal in application.
Punishment should be commensurate with the gravity of the offence.
An employee found guilty of an act of minor misconduct like unpunctuality or
irregular attendance should not be awarded the same punishment as may justifiably be
awarded to an employee found guilty of an act of major misconduct like the theft of
employer’s property.

5.3.3 Kinds of Punishment

For various types of misconduct there are various punishments which are set out below in
the ascending order of their severity.
1. Oral Reprimand This is the mildest form of disciplinary action in which the
superior makes it clear to his subordinate that he does not approve of the
subordinate’s behavior. This punishment is generally given for some minor offences
such as failure to obey safety rules, smoking in a prohibited area, sleeping on the
job or giving sub-standard performance.
Issue of reprimand does not involve loss of status or wages to the employee and,
therefore, though it amounts to disciplinary action, it is not deemed to be a substantive
punishment.
Minor Punishments Major Punishments
1. Oral reprimand 5. Punitive suspension
2. Written reprimand 6. Withholding of increments
3. Loss of privileges Punishments 7. Demotion8. Discharge
4. Fines 9. Dismissal

However, as people invariably value the social approval of their superiors and fellow
beings a reprimand is generally effective in correcting subordinates. However, it should
be used sparingly; otherwise it will not produce any effect on the subordinate. A
subordinate who is continually criticized tries to cover up his mistakes, becomes tense,
and loss his sense of security. He does not want to accept responsibility and on account of
low morale commits further mistakes.
2. Written Reprimand An oral reprimand may not be sufficient in case of habitual
misconduct or inefficiency. In such a situation it is desirable that it is issued in
writing and brought on record so that it may support, if necessary, any substantive
punishment that may have to be given to the employee in future. A written
reprimand may state that certain privileges would be withheld or withdrawn if the

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 subordinate continues with his present conduct. In some enterprises the records of
an employee may be marked and the employee shown a copy of the notation to
serve as a warning. A warning serves to alter the expectations of an individual by
making him aware of the exact nature of punishment that awaits him following
further acts of disobedience. It is not fair for a superior to warn a subordinate and
later punish him more severely than was expected at the time of the warning.
3. Loss of Privileges For such offences as tardiness or leaving work without
permission, the employee may be put to loss of various privileges such as good job
assignments, right to select machine or other equipment and freedom of movement
about the workplace or company.
4. Fines Fine means a deduction from the remuneration of the employee by way of
punishment. Power to make penal deductions from the remuneration of the
employee is not an implied term of ordinary contract between master and servant
and can be exercised only if especially reserved to the employer under the contract
of employment or a statute.
5. Punitive Suspension Punitive suspension is different from the suspension pending
an enquiry. Punitive suspension is inflicted on the workman as a punishment for
some misconduct whereas suspension pending an enquiry is only an expedient
action which a manager may find necessary to take following commission of a
grave and serious misconduct. Under punitive suspension an employee is prohibited
from performing the duties assigned to him and his wages are withheld for so long
as the prohibition subsists. Under suspension pending an enquiry, unless the
conditions of service make a contrary provision, a workman is entitled to wages for
the period of suspension.
6. Withholding of Increments Withholding of annual increment of an employee in a
graded scale is a major punishment and, generally speaking, the acts of misconduct
for which this punishment may be awarded are the same as those for which the
extreme punishment of dismissal may be awarded. The cumulative effect of losing
an increment is considerable. It is equal to the amount of increment times twelve
months times the number of the year of service still remaining.
7. Demotion. Demotion means reduction of an employee to a lower grade from the
one hitherto enjoyed by him. According to some writers since demotion implies
condemnation of the employee as being unfit for the position occupied by him it
should not be used as a penalty if the employee is properly qualified for the present
assignment. Demotion should be used only in a case when an employee does not
meet present job requirement or in the event of a cutback in the work force.
8. Discharge In common law; if both parties to an agreement have performed what
they have agreed to do, the contract is discharged. Thus, in a contract of service if
both parties have agreed to terminate the contract by giving stipulated amount of
notice or by paying money in lieu thereof the contract of service can be terminated
in the agreed manner for reasons which do not imply any act of misconduct; for
example, an employee may be discharged owing to either redundancy, or
superannuation or infirmity, etc., in accordance with his contract of service, without
any fault on his part. However, in the field of industrial jurisprudence the term
‘discharge’ is used to denote removal of an employee from service by way of
punishment. However, no stigma is attached to the expression ‘discharge’. Hence, it

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 is not a disqualification for future employment. Discharge should be distinguished
from discharge simplicities which is termination of an employee’s service not
necessarily for any misconduct but for loss of confidence. The plea of loss of
confidence should, however, be bonafide and should be supported by evidence and
should not be used as a mere pretext to terminate the services of an unwanted
employee. In the case of discharge simplicities the employer is not bound to hold an
enquiry.
9. Dismissal Also referred to as industrial capital punishment, dismissal is the ultimate
penalty which is rarely resorted to now days. Though discharge and dismissal both
have the same result, namely, the termination of service of the employee, there are
some vital differences between the two. These are as follows
(a) While dismissal is always a punishment, discharge may or may not be a
punishment
(b) A dismissal is more severe punishment than discharge. There is a stigma attached
to the expression “dismissal” which makes dismissal a disqualification for future
employment. This is not so in the case of discharge.
(c) A dismissal is usually summary, that is, immediate action is taken to terminate the
employment contract of the employee without notice. However, in case of a
discharge an agreed amount of notice may have to be given. The justification for
not giving a warning lies in the general acceptance that the acts and omissions for
which the punishment of dismissal may be inflicted are socially repugnant and a
management is fully entitled to protect itself against such acts.
(d) In cases of dismissal the employee is not usually entitled to provident fund or
gratuity benefits but this is not so in the case of a discharge.
The supreme punishment of dismissal is inflicted very rarely. Managers generally try to
avoid it. They very often follow several other means of eliminating a person without an
outright dismissal. These are as follows
(a) The flow of work may be altered so that it goes around the particular employee;
thus he may take hint and submit his resignation.
(b) The job may be abolished and duties scattered about among other employees.
Then after the employee has left the organization, the duties can be reassembled
and a new employee hired to fill the job.
(c) Resignation may be demanded by holding out threat of discharge.
(d) In higher positions, the employee may be ‘kicked upstairs’ and promoted out of
the way; he may be made a special consultant and never consulted. The cost of his
salary may be much less than the loss from retention in his present job.
(e) The employee may be transferred to some other department.

5.3.4 Progressive discipline - Procedure for Taking Disciplinary Action

Progressive discipline is an employee disciplinary system that provides a graduated

range of responses to employee performance or conduct problems. Disciplinary measures
range from mild to severe, depending on the nature and frequency of the problem.

Progressive discipline is a process for dealing with job-related behavior that does not
meet expected and communicated performance standards. The primary purpose of

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progressive discipline is to assist the employee to understand that a performance problem
or opportunity for improvement exists.

The process features a series of increasingly formal efforts to provide feedback to the
employee so that he or she can correct the problem.

The goal of progressive discipline is to get the employee's attention so that he or she
understands that employee performance improvement is essential if they want to remain
employed.

The process of progressive discipline is not intended as a punishment for an employee,

but to assist the employee to overcome performance problems and satisfy job
expectations. Progressive discipline is most successful when it assists an individual to
become an effectively performing member of the organization.

5.3.5 The Theoretical Aspects progressive discipline

In terms of the principle of progressive discipline, it is generally not appropriate to

dismiss an employee for a first offence unless the misconduct is so serious or untenable
that it renders a continued employment relationship intolerable. This principle is based
on the philosophy that discipline in the workplace is not punitive but is intended to secure
a standard of performance or conduct by employees that is required by employers. To
this end discipline is progressive and dismissal for a first offence can only be justified if
the misconduct makes a continued employment relationship intolerable.

Under this principle relatively minor acts of misconduct are dealt with by a range of
warnings, often referred to as verbal, written, or final written warnings. The purpose of
the warning is two-fold: first to register or record the misconduct, and second to alert the
employee that any further infractions might warrant more serious forms of warnings or
dismissal and to encourage the employee to improve his conduct. In the event of
recurrent acts or the commission of more serious acts of misconduct , the employee faces
the prospect of disciplinary proceedings with the very real prospect of dismissal .
Consequentially, disciplinary proceedings should generally be instituted in the event of
serious acts of misconduct which may warrant dismissal, or in circumstances that are
provided for in a disciplinary code or procedure.

The most common reason for dismissal is premised on allegations of misconduct.

However, the Labor law stipulates that an employee may be dismissed for one of three
reasons, namely dismissal for misconduct, incapacity or operational requirements. By
implication, a dismissal that is not for a reason based on one of these three categories is
likely to be unfair. Significantly, this categorization also has practical implications for
the processing of disputes, giving rise to specific and separate regulation of each category
and generating different jurisdictional issues. Given that dismissals for misconduct are,

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in the main, referred for conciliation and arbitration , rather than to the Labor Court for
adjudication, the jurisprudence in relation to this topic arises mainly from judgments in
respect of review applications, where the basis for review of arbitrators’ awards are
limited.

Progressive discipline enables the organization too fairly, and with substantial
documentation, terminates the employment of employees who are ineffective and
unwilling to improve.

5.3.6 Typical steps in a progressive discipline system

Typical steps in a progressive discipline system may include the following:

Counsel the employee about performance and ascertain his or her understanding of
requirements. Ascertain whether there are any issues that are contributing to the poor
performance. These issues are not always immediately obvious to the supervisor. Solve
these issues, if possible.

An example of an issue is the employee doesn't understand the goal of what he needs to
contribute. A second example of an issue in a poor attendance performance situation is
that the employee is taking time off to assist his sick mother. He didn't tell his manager
who would have referred the situation to Human Resources for addressing as family
eligible time off.

Verbally reprimand the employee for poor performance. Tell the employee that you will
document the next steps in progressive discipline and that termination can result at any
point in the progressive discipline process when the employer believes that the employee
is unable to improve despite repeated warnings. Document the conversation.

Provide a formal written verbal warning in the employee's file, in an effort to improve
employee performance. Continue progressive discipline as long as you believe the
employee is making efforts to bring his performance on track.

Provide an escalating number of days in which the employee is suspended from work
without pay. Start with one day off, escalate to three and then escalate to five.

End the employment of an individual who refuses to improve.

Progressive discipline is the process of using increasingly severe steps or measures when
an employee fails to correct a problem after being given a reasonable opportunity to do
so. The underlying principle of sound progressive discipline is to use the least severe
action that you believe is necessary to correct the undesirable situation. Increase the
severity of the action only if the condition is not corrected.

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Some guidelines to consider are:

• Thoroughly investigate the situation which includes obtaining the employee's

explanation or response prior to administering discipline.
• Document the process and results of your investigation.
• It is acceptable to repeat a step if you feel that it will correct the problem. This
may be the case if some time has passed since it was last necessary to address the
issue and the situation has only recently reappeared. Or perhaps, the employee
misunderstood or you feel there is value in doing it again in a clearer fashion. If
repeating the step works, the situation has been resolved without escalating it
unnecessarily. However, be aware that an employee may be led to believe that
nothing worse will happen if you continually repeat a step. If repeating a step
does not resolve the problem, you can then move on to a higher step.
• The goal is to modify the unacceptable behavior or improve the performance. The
goal is not to punish the employee but to more strongly alert the employee of the
need to correct the problem.
• There is no rigid set of steps nor is there an inflexible rule that all steps must be
followed before terminating an employee. The circumstances of each case and
your judgment as to the least severe action that is necessary to correct the
situation will help determine which step to use.
• Early, less stringent, measures are skipped for serious offenses such as theft,
fighting, drug or alcohol use or sale. All steps are typically used for attendance or
general work performance problems.
• While usually unnecessary, it is acceptable to have a witness or note taker present
when meeting with the employee during the progressive discipline process. Your
witness/note taker should never be a peer of the employee.
• Human Resources is available for consultation at any step of the process, but it is
especially important at the steps of suspension and termination.

Essential elements of each progressive discipline step

Disciplinary actions are often overturned completely or reduced to a lesser level when
any of the essential elements of progressive discipline are missing.

• The employee is explicitly informed of the unacceptable behavior or performance

and is given specific work-related examples. It is not sufficient to assume that the
employee knows what the problem is.
• Explain acceptable behavior or performance standards and give the employee
reasonable time to comply. This may be a longer time frame if a skill needs to be
learned or a shorter time frame if it is a behavior to be changed.
• The employee is informed of the consequences of failing to comply. This is not a
threat, rather it gives the employee reasonable expectations of the consequences if
change does not occur.
These three essential elements need to be present at each step of progressive discipline
and are discussed prior to taking disciplinary action.

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Typical progressive discipline steps

 Counseling
 Written warning
 Suspension without pay
 Termination

Counseling

Counseling is usually the initial step.

 Conduct the whole counseling session in a "low-key" manner. Be friendly, yet

firm.
• This discussion should be done in private. Tell the employee the purpose for the
discussion. Identify the problem.
• Try not to be mechanical or read from a piece of paper. Have documentation
available to serve as a basis for the discussion.
• Seek the input from the employee about the cause of the problem.
• Where possible jointly identify a solution to the problem; otherwise, identify your
desired solution.
• Clarify the employee's understanding of your expectations concerning the
situation.
• Let the employee know that possible disciplinary action may follow if the
problem is not corrected.
• Try to get a commitment from the employee to resolve the problem.
• Schedule follows up with the employee. Provide feedback. Let the employee
know how he/she is progressing on solving the problem.
Counseling sessions are used to bring a problem to the attention of the employee before it
becomes so serious that it has to become part of a written warning and placed in the
employee's file.

The purpose of this discussion is to alleviate any misunderstandings and clarify the
direction for necessary and successful correction. Most "discipline" problems are solved
at this stage.

If some progress is seen, this counseling step can be repeated to allow the employee full
opportunity to correct the problem.

It is not necessary to document the counseling session as it is considered an informal step

in progressive discipline. However, a brief statement confirming the subject matter
discussed and the agreed upon course of action to correct the problem can be noted in a
short memo to the employee.

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Written warning

• Initiate this step by repeating the process used in the counseling step, i.e., talk
before preparing any written action.
• After this discussion, prepare the written warning. Build in information,
responses, and commitments made in the discussion.
• The written warning will have three parts:
- A statement about the past, reviewing the employee's history with respect to
the problem.
- A statement about the present, describing the who, what, when, etc. of the
current situation, including the employee's explanation.
- A statement of the future, describing your expectations and the
consequences of continued failure.
• The warning is addressed to the employee.
• This step may be repeated with stronger consequence statements. Examples range
from a statement that failure to correct this situation "may lead to further
disciplinary action" to a statement that "this is a final warning and failure to
correct the problem will lead to discharge."
• See the Sample written warning memorandum

Suspension without pay

• When suspension without pay is used, see the sequence described under the
counseling section. Again, the situation is discussed with the employee first. The
employee's explanation is obtained and, then, a decision is made about the
appropriate disciplinary step.
• The length of the suspension is not as critical as the step of suspension. One to
three days emphasizes the seriousness of the situation.
• The written record of the suspension is prepared after the discussion with the
employee. It specifies the start and end dates, emphasizes that it is a final
warning, states the reason, and is given to the employee at the start of the
suspension so that the reasons for not working are clearly understood.

Termination

• This is the last step of any progressive discipline system and is used when earlier
steps have not produced the needed results.
• A discussion with the employee must occur before a final determination is
reached. Inform the employee about the nature of the problem. See sequence
described under counseling.
• The employee must be given an opportunity to explain his or her action and to
provide information.
• If the employee takes this opportunity, you must investigate where appropriate
and give consideration to the information provided.
• A written notice of termination is prepared after the discussion and consideration
of all available information.

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The Standing Orders of an organization provides the basis for the procedure of the same.
They should be strictly followed for the punishment. These may be held invalid if there is
any deviation from the laid down procedures.
Whether or not there are Standing Orders the procedure for taking disciplinary action
against workers should be based on the following principles of natural justice
(a) The worker charged should be given an opportunity to present witnesses of his
own choice on whom he relies;
(b) The worker should be given the right to cross examine management’s evidence;
(c) The evidence of the management should be taken in worker’s presence;
(d) No material should be used against the worker without giving him an opportunity
to explain;
(e) The enquiry against the worker should be fair and conducted by an impartial
person; and
(f) The punishment awarded should not be out of proportion to the misconduct
committed.

Following should be the steps for taking disciplinary action

1. Preliminary Investigation The first and primary step should be to hold a preliminary
investigation in order to find out whether a prima facie case of misconduct exists.
2. Issue of a Charge-sheet. On the prima facie case of misconduct being established
the management should proceed to issue a charge-sheet to the worker. Charge-sheet
is not a punishment in itself. It is merely notice of a charge that the worker is
responsible for some misconduct and that the management wants to know what he
has to say about it. It gives the worker an opportunity to explain his conduct. A
charge-sheet is, therefore, also called a ‘show cause notice. This fact should be
explained to the worker also who may sometimes refuse to accept the charge-sheet
on the ground that he has not done any wrong.

The following guidelines may be followed in framing the charges

(a) Each charge must be very clear and precise. It should not be vague.
(b) There should be a separate charge for each allegation.
(c) There should be no multiplication of charges for the same allegation.
(d) Charges must not relate to any matter which has already been decided upon.

On the question whether the proposed punishment should or should not be mentioned in
the charge-sheet, there is divergence of opinion among various High Courts. They
observe that the mere mention of the proposed punishment mentioned in the charge-sheet
does not vitiate the enquiry. It does not mean that the employer intended to punish the
employee irrespective of the result of the enquiry or that he formed any opinion against
the employee. It rather makes the employee aware of the seriousness of the charges
against him so that he can take proper defense. To be on the safer side, however, the
employer should avoid mentioning proposed punishment in the charge-sheet.
3. Suspension Pending Enquiry, if Needed If the nature of misconduct is grave and if
it is in the interest of discipline and security in the establishment, the management

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 may suspend a worker even before the charge-sheet is issued or an order of
suspension may be given to the worker along with the charge-sheet.
4. Notice of Enquiry On receipt of reply to the charge-sheet, three situations may arise
(i) The worker may admit the charge in an unqualified manner. If so, the employer
can go ahead in awarding the punishment without getting the matter enquired
further, (ii) The worker may not admit the charge and the charge merits only minor
penalty. In this case also the employer can go ahead in awarding the punishment
without holding further enquiry. (iii) The worker may not admit the charge and the
charge merits major penalty. In this case the employer must hold enquiry to
investigate into the charge against the worker. This enquiry is classed domestic
enquiry. Proper and sufficient advance notice should be given to the worker
indicating the date, time and venue of the enquiry and name of the enquiry officer so
that the worker may prepare his case. It should also be notified that he should be
ready with oral and documentary evidence on the date of enquiry and bring
witnesses to prove his case.
5. Conduct of Enquiry This step should deal with three points
 deciding as to who should be the enquiry officer;
 deciding as how to proceed;
 deciding about the order of examining witnesses.
Standing orders may provide as to who should hold the enquiry. Otherwise, an assistant
manager or labor welfare officer or company’s lawyer or some outsider may be
nominated. It should be remembered that for the purpose of enquiry, the enquiry officer is
a judge. Therefore, it is necessary that he must be impartial and qualified to act in that
capacity. An enquiry officer is disqualified on any of the following grounds
(a) If he is involved in the incident which led to the charge-sheet.
(b) If he has personal knowledge of the incident or himself gives or collects evidence
for the very enquiry conducted by him or helps others in doing so.
(c) If he himself has issued the charge-sheet.
(d) If he is directly subordinate to the person accused.

If the accused employee requests for another co-worker to represent and assist him or her
in the conduct of his or her defense, the enquiry officer should allow this. However, it is
management’s discretion to allow or not to allow the accused worker to be defended by a
non-employee official of the union.

As regards the order of examining witnesses, first the management witnesses should be
examined in the presence of the accused. Then fair opportunity should be given to him to
cross-examine the management witnesses. Next, he himself and his witnesses should be
examined. They can be cross-examined by the management.
If a worker does not turn up for the enquiry without notice or reasonable cause or refuses
to participate or walks out then the enquiry officer may proceed to hold the enquiry
exported. The person who leads evidence from the management side is called the
Presentation Officer.
6. Recording of Findings by the Enquiry Officer At the conclusion of the enquiry
proceedings the enquiry officer should decide as to whether the charges made are
valid or not along with the reasons for his findings. As far as possible he should

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 refrain from recommending punishment and leave it to the decision of the
appropriate authority.
7. Awarding Punishment This is the task of management. The punishment should be
awarded on the basis of findings of the enquiry, past record of the employee and
gravity of misconduct.

8. Communication of Punishment The punishment awarded to the accused should be

communicated to him expeditiously. The letter communicating the punishment
should contain
 reference to the letter of charges issued to the employee;
 reference to the enquiry;
 reference to the findings of the enquiry;
 decision whether to punish or not;
 date from which the punishment is to be effective.

Activity 1: Pros and Cons of Progressive Discipline

Take about 10 minutes

 Describe the Pros and Cons of Progressive Discipline.

Comment: With any workplace policy, there are pros and cons, and progressive
discipline is no exception. Let’s take a look at some of the biggest advantages and
disadvantages to such a policy.

Here are the pros:

 It provides a clear explanation of the consequences of not following the

employer’s rules or not meeting expectations.
 It provides the opportunity for consistency and fairness in disciplinary
procedures for different employees.
 It gives the opportunity for an employee to change behaviors. This is especially
true in cases where the employee may not have realized they were breaking the
rules or causing a problem.
 It gives the employer the chance to explain to the employee what actions can be
taken to improve the situation; this is a chance for coaching and mentoring.
 It provides the employer with alternatives to termination for minor infractions.
This improves employee retention.
 It also can enhance employee morale when the employees know the employer is
not going to fire them for a minor issue. Morale can also be enhanced by the
knowledge that poor behavior of others will be addressed.
 It provides evidence that the employer gave the employee every opportunity to
improve.

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Here are the cons:

 Such a policy can seem inflexible; HR and managers have to make judgment calls
when to deviate from the progressive steps (as may be necessary when
considering all circumstances).
 If not followed consistently for all employees, this could appear to be
discriminatory. (Note: This problem exists any time different disciplinary actions
are taken for different employees who have committed the same violation; it is not
unique to employers using progressive discipline.) The primary concern here is
the potential for litigation if this occurs.
 Some fear that such a policy implies that the steps must be followed before any
termination, which could have the effect of an implied contract stating that an
employee will never be terminated without these steps. The fear is that this might
jeopardize the “at-will” status of the employment.
 It can be time-consuming to use in practice, especially for organizations with
limited resources. Not only does the process itself take time but it also requires
training in advance, documentation during each incidence, and follow-up.
 For some businesses, especially small organizations, it may not be practical to
follow these steps as it may not be practical to keep an employee on staff who
violates any rule. Or, it may not be feasible to keep the business running with a
suspended employee. It just might not be practical to implement for every
organization.

5.4 Grievance and grievance handling

A grievance is any dissatisfaction or feeling of injustice having connection with one’s

employment situation which is brought to the attention of management. Speaking
broadly, a grievance is any dissatisfaction that adversely affects organizational relations
and productivity. To understand what a grievance is, it is necessary to distinguish
between dissatisfaction, complaint, and grievance.

1. Dissatisfaction is anything that disturbs an employee, whether or not the unrest is

expressed in words.
2. Complaint is a spoken or written dissatisfaction brought to the attention of the
supervisor or the shop steward.
3. Grievance is a complaint that has been formally presented to a management
representative or to a union official.

According to Michael Jucious, ‘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 or even feels to be unfair, unjust or
inequitable’.

In short, grievance is a state of dissatisfaction, expressed or unexpressed, written or

unwritten, justified or unjustified, having connection with employment situation.

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 5.4.1 Organizational Responsibility

Organizational responsibility for handling grievances should be divided and shared by all
levels of management and representatives of labor unions. As a good practice or
procedure the employees should be required to present their grievances to their
immediate superior, even if the final decision matter rests with the higher authority. This
will save the supervisor from losing his importance and respect with his subordinates.
After examining and investigating the matter at his level he can pass it on to the higher
level with his findings and recommendation.
Similarly, action can be taken by the executives at the middle level, if the matter is
beyond their jurisdiction. The top-level management has the responsibility to decide
cases which are having companywide implication. In this they may be even assisted by
personnel or labor officers with their advice and the information collected and
maintained. The top-level management must establish the broad policies and rules, which
may form the basis for handling grievances.
In some companies labor unions assume the responsibility of getting the grievances
redressed, particularly at the middle and top-level management.

5.4.2 Features of Grievance

The features of grievance handling include the following:

1. A grievance refers to any form of discontent or dissatisfaction with any aspect of the
organization.
2. The dissatisfaction must arise out of employment and not due to personal or family
problems.
3. The discontent can arise out of real or imaginary reasons. When employees feel that
injustice has been done to them, they have a grievance. The reason for such a feeling
may be valid or invalid, legitimate or irrational, justifiable or ridiculous.
4. The discontent may be voiced or unvoiced, but it must find expression in some form.
However, discontent per se is not a grievance. Initially, the employee may complain
orally or in writing. If this is not looked into promptly, the employee feels a sense of
lack of justice. Now, the discontent grows and takes the shape of a grievance.
5. Broadly speaking, thus, a grievance is traceable to be perceived as non-fulfillment of
one’s expectations from the organization.

5.4.3 Causes of Grievances

Grievances may occur due to a number of reasons:

1. Economic:

Employees may demand for individual wage adjustments. They may feel that they are
paid less when compared to others. For example, late bonus, payments, adjustments to
overtime pay, perceived inequalities in treatment, claims for equal pay, and appeals
against performance- related pay awards.

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 2. Work environment:

It may be undesirable or unsatisfactory conditions of work. For example, light, space,

heat, or poor physical conditions of workplace, defective tools and equipment, poor
quality of material, unfair rules, and lack of recognition.

3. Supervision:

It may be objections to the general methods of supervision related to the attitudes of the
supervisor towards the employee such as perceived notions of bias, favoritism, nepotism,
caste affiliations and regional feelings.

4. Organizational change:

Any change in the organizational policies can result in grievances. For example, the
implementation of revised company policies or new working practices.

5. Employee relations:

Employees are unable to adjust with their colleagues, suffer from feelings of neglect and
victimization and become an object of ridicule and humiliation, or other inter- employee
disputes.

6. Miscellaneous:

These may be issues relating to certain violations in respect of promotions, safety

methods, transfer, disciplinary rules, fines, granting leaves, medical facilities, etc.
In other words the causes of employee guidance may include any or a combination of the
following factors.
1. Promotions
2. Amenities
3. Continuity of service
4. Compensation
5. Disciplinary actions
6. Fines
7. Increments
8. Leave
9. Medical benefits
10. Nature of job
11. Payment
12. Transfer
13. Recovery of dues
14. Safety appliances
15. Superannuation
16. Supersession
17. Victimization and

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18. Condition of work

The International Labor Organization (ILO) classifies a grievance as a complaint of one

or more workers with respect to wages and allowances, conditions of work and
interpretations of service stipulations, covering such areas as overtime, leave, transfer,
promotion, seniority, job assignment and termination of service.
A point to be noted is that where the issue is of a wider or general in nature, or has
general applicability, and then it will be outside the purview of the grievance machinery.
Policy issues relating to hours of work, incentives, wages, and bonus are beyond the
scope of the grievance procedure—they fall under the purview of collective bargaining.
A grievance has a narrower perspective; it is concerned with the interpretation of a
contract or award as applied to an individual or a few employees.

5.4.4 Model of Grievance Procedure

The model Grievance Procedure settled by the tripartite committee has successive time
bound steps, each leading to the next in case of dissatisfaction.
1. Under the procedure, an aggrieved employee would first present his grievance
verbally to a designated officer within 48 hours.
2. In case the worker is dissatisfied with the decision or fails to get an answer within
stipulated time, he or she would, personally or accompanied by his or her
departmental representative, present his or her grievance to the head of the
department.
3. If the departmental head fails to give a decision within three days or if his or her
decision is unsatisfactory, the aggrieved worker can seek relief through the
“Grievance Committee” consisting of management and workers. This committee
would communicate its recommendations to the manager within seven days of the
grievance reaching it.
4. If the recommendation is not made within the stipulated time, reasons there for
would be recorded, and in case unanimous recommendations are not possible, the
relevant papers would be placed before the manager for decision. The manager is
expected to communicate his decision to the worker within three days,
5. The worker would have a right to appeal to the higher authorities for revision of
the manager’s decision. All such appeals have to be decided within a week of the
worker’s petition. The worker, if he or she so desires, can take an union official
with him or her for discussion with the appellate authority.
6. In case of failure to settle the grievance even at this stage, the union and
management may refer it to voluntary arbitration within a week of receipt of the
management’s final decision

5.4.5 Effects of Grievance

Grievances, if not identified and redressed, may adversely affect workers, managers, and
the organization.

The effects are the following:

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 7. On the production:

a. Low quality of production

b. Low productivity

c. Increase in the wastage of material, spoilage/leakage of machinery

d. Increase in the cost of production per unit

8. On the employees:

a. Increase in the rate of absenteeism and turnover

b. Reduction in the level of commitment, sincerity and punctuality

c. Increase in the incidence of accidents

d. Reduction in the level of employee morale.

9. On the managers:

a. Strained superior-subordinate relations.

b. Increase in the degree of supervision and control.

c. Increase in indiscipline cases

d. Increase in unrest and thereby machinery to maintain industrial peace

5.4.6 Typical Grievance procedure

Need for a Formal Procedure to Handle Grievances:

A grievance handling system serves as an outlet for employee frustrations, discontents,

and gripes like a pressure release value on a steam boiler. Employees do not have to keep
their frustrations bottled up until eventually discontent causes explosion.

The existence of an effective grievance procedure reduces the need of arbitrary action by
supervisors because supervisors know that the employees are able to protect such
behavior and make protests to be heard by higher management. The very fact that
employees have a right to be heard and are actually heard helps to improve morale. In
view of all these, every organization should have a clear-cut procedure for grievance
handling.

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Grievances are concerns, problems or complaints raised by an employee about workplace
issues such as their work, workload, where they work or who they work with.  These
Grievances are best dealt with at an early stage, informally, but businesses and HR
Directors must be prepared to handle employee grievances that cannot be resolved
informally using a formal Employee Grievance Procedure

The procedure should require the employee to set out in writing the nature of their
grievance and for employers to deal with the grievance fairly and consistently.  Do not
ignore any concern or complaint raised by an employee, however casual the manner in
which it was raised.

These are the 5 steps:

1. INFORMAL ACTION – Initially and as soon as they can the line manager should
have a quiet word with the employee making the complaint. Problems can often
be settled quickly and informally in the course of everyday work. However, if the
grievance is not settled at this stage or circumstances make this route
inappropriate then, if they have not already done so, the employee should be
requested to submit a formal Grievance letter.
2. INVITE EMPLOYEE TO A FORMAL MEETING – This should be held in a
private and confidential room between the Manager designated to hear the
Grievance and the employee who may be accompanied by a work colleague or
Trade Union official.  This is the opportunity for the grievance to be thoroughly
discussed and any witnesses called.
3. INVESTIGATION – Depending on the complexity of the grievance it may be
necessary to adjourn the meeting so that further investigation may take place
before any decision is taken.
4. COMMUNICATE DECISION & KEEP RECORDS – After the grievance
meeting and any investigations have taken place, the employer needs to decide
whether to uphold or dismiss the grievance and communicate this decision to the
employee in writing without unreasonable delay, usually within 10 working days.
The HR Director or Manager handling the employee grievance must ensure that
the minutes of all formal grievance meetings are taken and copies given to the
employee for information.  The minute taker should not be part of the discussions
about the outcome of the grievance or appeal other than to record the key points
of the discussion.
5. APPEAL – if the Grievance is rejected or partially rejected then the employee has
the right to appeal against that decision.  The appeal should be heard promptly
and wherever possible by a Manager not previously involved in the case.   The
employee may be accompanied as before and notified in writing of the decision,
again within 10 working days is standard practice.

THE 2 GOLDEN RULES OF HANDLING EMPLOYEE GRIEVANCES

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 1. A very helpful question to ask an employee raising a grievance is “what outcome
do you want from this grievance?” This tends to focus the employee’s mind on
the solution he or she is looking for rather than just the problem.
2. BE PREPARED FOR A GRIEVANCE.   Check that there is an up to date
procedure in place, published in the handbook that supports the resolution of
grievance issues in your workplace.

Note that an employee can raise a grievance during a disciplinary process.  The
disciplinary process may be temporarily suspended or if the grievance and disciplinary
cases are related it may be appropriate to deal with both issues concurrently. The size of
the business may require an expert outside advisor e.g experienced HR professional to
hear the Grievance, the Appeal or even the Disciplinary.

Bear in mind also that where the Grievance Procedure itself is not appropriate then with
the employee’s consent an external Mediator might be more suitable.

Key Features of a Good Grievance Handling Procedure:

(a) Fairness:
Fairness is needed not only to be just but also to keep the procedure viable, if employees
develop the belief that the procedure is only a sham, then its value will be lost, and other
means sought to deal with the grievances. This also involves following the principles of
natural justice, as in the case of a disciplinary procedure.

(b) Facilities for Representation:

Representation, e.g., by a shop steward, can be of help to the individual employee who
lacks the confidence or experience to take on the management single-handedly. However,
there is also the risk that the presence of the representative produces a defensive
management attitude, affected by a number of other issues on which the manager and
shop steward may be at loggerheads.

(c) Procedural Steps:

Steps should be limited to three. There is no value in having more just because there are
more levels in the management hierarchy. This will only lengthen the time taken to deal
with matter and will soon bring the procedure into disrepute.

(d) Promptness:
Promptness is needed to avoid the bitterness and frustration that can come from delay.
When an employee ‘goes into procedure/ it is like pulling the communication cord in the

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train. The action is not taken lightly and it is in anticipation of a swift resolution.
Furthermore, the manager whose decision is being questioned will have a difficult time
until the matter is settled.

5.4.7 Essential Pre-requisites of a Grievance Handling Procedure

Every organization should have a systematic grievance procedure in order to redress the
grievances effectively. As explained above, unattended grievances may culminate in the
form of violent conflicts later on.

The grievance procedure, to be sound and effective should possess certain pre-
requisites:

(a) Conformity with Statutory Provisions:

Due consideration must be given to the prevailing legislation while designing the
grievance handling procedure.

(b) Unambiguity:

Every aspect of the grievance handling procedure should be clear and unambiguous. All
employees should know whom to approach first when they have a grievance, whether the
complaint should be written or oral, the maximum time in which the redressal is assured,
etc. The redressing official should also know the limits within which he can take the
required action.

(c) Simplicity:

The grievance handling procedure should be simple and short. If the procedure is
complicated it may discourage employees and they may fail to make use of it in a proper
manner.

(d) Promptness:

The grievance of the employee should be promptly handled and necessary action must be
taken immediately. This is good for both the employee and management, because if the
wrong doer is punished late, it may affect the morale of other employees as well.

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(e) Training:

The supervisors and the union representatives should be properly trained in all aspects of
grievance handling before hand or else it will complicate the problem.

(f) Follow up:

The Personnel Department should keep track of the effectiveness and the functioning of
grievance handling procedure and make necessary changes to improve it from time to
time.

5.4.8 Basic Elements of a Grievance Handling

The basic elements of a grievance redressal procedure are:

(i) The existence of a sound channel through which a grievance may pass for
redressal if the previous stage or channel has been found to be inadequate,
unsatisfactory or unacceptable. This stage may comprise three, four or five
sub-stages.
(ii) The procedure should be simple, definite and prompt, for any complexity or
vagueness or delay may lead to an aggravation of the dissatisfaction of the
aggrieved employee.
(iii) The steps in handling a grievance should be clearly defined.

These should comprise:

(a) Receiving and defining the nature of the grievance:

(b) Getting at the relevant facts, about the grievance;
(c) Analyzing the facts, after taking into consideration the economic, social,
psychological and legal issues involved in them;
(d) Taking an appropriate decision after a careful consideration of all the
facts; and
(e) Communicating the decisions, to the aggrieved employee.
(iv) Whatever the decision, it should be followed up in order that the reaction to
the decision may be known and in order to determine whether the issue has
been closed or not.

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 Activity 2 Causes of workplace grievance

Rake about 10 minutes

 Identify five most common Causes of workplace grievance

Comment: Grievances may occur due to a number of reasons: Economic:

Employees may demand for individual wage adjustments, Work environment,
Supervision, Organizational change, Employee relations, Miscellaneous

5.5 Conciliation and Mediation

5.5.1 Meaning of Conciliation and Mediation

The absence of permanently constituted organs of negotiations and its creation when a
conflict is threatened does not solve the disputes effectively in the world of industry.
Moreover, a temporary phase only provides hostility to bargaining. It deprives the
employers and the employees of a feeling of partnership in a joint venture. The values of
organization and work get jeopardized due to the inability of the parties in conflict to
avoid extreme action. To avoid the shock in adjustment and working jointly in a cordial
atmosphere necessitate the help of outsiders in negotiations. Thus, conciliation and
mediation are the methods of settling industrial disputes with ‘help of an outsider. It is
considered necessary when mutual negotiations breaks down and issues remain
unresolved.

Agreements are arrived at mutually by an intermediary who either mediates or

conciliates. Conciliation is a method or a process which brings together the
representatives of workers and employers before a conciliator (a third person or a group
of persons). The main objective is to help mutual discussion and persuasion in order to
come to an agreement. Thus, conciliation is usually employed when management and
labor are in dead-lock in negotiating a trade agreement. In conciliation both parties look
towards the conciliators with the intention that he should help us to agree. The
conciliator’s aim is to reconcile the parties bringing them to an agreement which is very
much similar to that of the mediator. He offers his advice and suggests ways of resolving
the controversy. The parties may or may not accept his recommendations but once they
accept them, they become legally bound by them.

Again, the aim of the conciliator is to break the dead lock, if any, explain the stand and
view-points of one party to the other’, convey messages and generally keep the
negotiation going. Suggestions may come from the conciliator or the mediator, but the
parties are tree to accept reject them. It is the parties who ultimately decide the issues.
They may come to an agreement or they may not. These are the methods, which are
primarily based on the principles of collective bargaining. Mediator helps the parties at

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their initiation or at least with the consent of both parties, but it is not necessary in
conciliation It is a passive act of intervention by a third party, i.e. the mediator. A
mediator does not impose his will or judgment upon the disputants but helps the parties to
agree and reach a final decision of their own making.
Thus, mediation by an outsider helps the parties towards positive settlement of a dispute
without imposing any personal will or judgment. A compromise formula is suggested by
the mediator with a view to bring about voluntary agreement between the parties. But the
parties may or may not accept it. Thus, a mediator plays a more positive role by am sing
the views and interest of the parties in dispute and by advancing suggestion for
compromise for their consideration.

Conciliation and mediation are similar in that neither is compulsory nor judicial. The
mediator has been described as a confidential adviser and an industrial diplomat. His
chief function is to help the two sides to come to an agreement of their own accord; he
does not impose his will or judgment but helps the parties to reach to an agreement. Thus,
it is very much similar to conciliation. Hence, the term conciliation is often used for the
method which would be more properly described as mediation Obviously, the objective
of conciliation and mediation is the same that is to avert an impending rupture between
the disputant or if the rupture has already taken place to bring them together as soon as
possible without resorting to arbitration. It should, however, be noted that conciliation is
based on mutual negotiation while mediation is based on negotiation through the third
party. There is intervention of third party both in conciliation and mediation out the
conciliator is more active and more intervening than the mediator.

5.5.2 Arbitration

Arbitration is the means of securing a definite judgment or award for any controversial
issue by referring it to a third party. It may imply the existence of an authority set apart to
adjudicate on industrial disputes under recognized conditions. Arbitration is by mutual
consent of the parties. When the Government decides to refer a case to a Labor Court or
Industrial Tribunal, it is called adjudication. Thus, compulsory arbitration is referred to as
adjudication. Arbitration involves the exercise of an authority to bring about an
agreement or to help the process of settlement by adjudicating on industrial disputes. The
arbitrator has powers to probe and in the process becomes acquainted with the facts of the
industrial situation.

Arbitration in industry shares several common features with conciliation and mediation.
Just like conciliation and mediation, there is also intervention of third party. It can either
be voluntary or compulsory like conciliation and mediation. The note of distinction
between arbitration and conciliation is that in the former the decision is finding on the
parties, while in the case of later the parties may or may not accept the decision.
Arbitration is characterized by a different approach than conciliation and mediation.
Arbitration procedure is more of judicial nature and the award has the resemblance of a
court’s judgment. The arbitrator has his own decision and does not care for the
recommendations of the parties. The procedure of conciliation is not of judicial nature

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and the conciliator persuades the parties towards positive settlement of dispute without
imposing any personal will or judgment.
Arbitration is the submission of a disputed matter to an impartial person (the arbitrator)
for decision.

The Process: Arbitration is typically an out-of-court method for resolving a dispute. The
arbitrator controls the process, will listen to both sides and make a decision. Like a trial,
only one side will prevail. Unlike a trial, appeal rights are limited.

In a more formal setting, the arbitrator will conduct a hearing where all of the parties
present evidence through documents, exhibits and testimony. The parties may agree to, in
some instances, establish their own procedure; or an administrating organization may
provide procedures. There can be either one arbitrator or a panel of three arbitrators. An
arbitration hearing is usually held in offices or other meeting rooms.

The result can be binding if all parties have previously agreed to be bound by the
decision. In that case, the right to appeal the arbitrator’s decision is very limited. An
arbitrator’s award can be reduced to judgment in a court and thus be enforceable. In
nonbinding arbitration, a decision may become final if all parties agree to accept it or it
may serve to help you evaluate the case and be a starting point for settlement talks.

Characteristics of Arbitration:

 Can be used voluntarily

 Private (unless the limited court appeal is made)

 May be less formal and structured than going to court, depending on applicable
arbitration rules

 Usually quicker and less expensive than going to court, depending on applicable
arbitration rules

 Each party will have the opportunity to present evidence and make arguments

 May have a right to choose an arbitrator with specialized expertise

 A decision will be made by the arbitrator which may resolve the dispute and be
final

 Arbitrator’s award can be enforced in a court

 If nonbinding, you still have the right to a trial

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 5.5.2.1 Methods of Arbitration

Arbitration processes fall into two major types:

(a) Voluntary Arbitration

The arbitration can either be voluntary or compulsory. Arbitration is voluntary, if the
parties, having failed to settle their differences by negotiation agree to submit their cases
to arbitrator whose decision they agree to accept. Arbitration is voluntary in the sense that
the disputants are free to give their consent or to refuse to submit their differences to the
decision of the arbitrator. Hence, the fundamental character of voluntary arbitration is the
voluntary submission of cases to an arbitrator, and therefore, it does not necessitate the
subsequent attendance, of witness, investigation and enforcement of awards may not be
necessary, because there is no compulsion. Under voluntary arbitration, it is not
necessary that there may be an “arbitration agreement” or “arbitration clause”. The
former refers to the arrangement for submission of certain types of disputes while the
latter is concerned with the disputes to occur in future.
(b) Compulsory Arbitration
Compulsory arbitration or adjudication means, when the Government decides to refer the
dispute to arbitration and for the parties to abide by the award of the arbitration and at the
same time prohibit parties from causing work-stoppages. The main idea behind the
imposition of compulsory arbitration is to maintain industrial peace by requiring the
parties to refrain from causing work-stoppages and providing a way for settling the
dispute.

Where parties fail to arrive at a settlement by the voluntary method, recourse is taken to
compulsory arbitration. Arbitration is compulsory, when parties to the dispute are
compelled to submit their cases to an outside person, board or court and the decision of
such agencies is binding upon them. Thus, arbitration when compulsory follows statutory
action and necessitates the submission of case by parties to an arbitrator. Generally, when
the parties fail to arrive at a settlement by voluntary methods, the Government under
statutory provision refers the case to an authority for adjudication and enforces its award
on the parties. Hence, adjudication is a form of arbitration, which implies compulsory
arbitration. The rules and procedures of arbitration are similar to those commonly
followed in courts of law.

It is to be noted here that disputes ascending out of different causes like victimization of
the worker(s), dismissal of them, lay-off, retrenchment etc., are to be resolved by
voluntary arbitration. Voluntary arbitration is acceptable because
1) It is quick and simple;
2) It eliminates the mistrust and encourages the parties to be cordial and friendly;
3) It helps to reiterate the beliefs of the parties on democratic values and generates an
atmosphere so that the parties involved may opt for friendly negotiation instead of
litigation.
Appropriate government may issue such order to restrict the parties to go for strike or
lockout with the disputed matter, referred to voluntary arbitration.

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Precisely then, when conciliation proceedings fail to settle the dispute, the conciliation
officer may persuade the conflicting parties to voluntary refer the dispute to a third party
known as Arbitrator, appointed by the parties themselves. The arbitrator listens to the
viewpoints of both parties and delivers an award or judgment on the dispute. He,
however, does not enjoy judicial powers. The arbitrator submits his judgment on the
dispute to the government.
Thereafter the government publishes the award within 30 days of its submission. The
award becomes enforceable after 30 days of its publication. The arbitration award is
binding on all the parties to the agreement and all other parties summoned to appear in
the proceedings as parties to dispute. Before delivering the judgment, the arbitrator is
expected to follow due procedure of giving notice to parties, giving a fair hearing, relying
upon all available evidence and records and following the principles of natural justice.
Arbitration is effective as a means of resolving disputes because it is
1. established by the parties themselves and the decisions is acceptable to them, and
2. relatively expeditious with references to courts or tribunals. Delays are cut down and
settlements are speeded up.
Arbitration has achieved a certain degree of success in resolving disputes between the
labor and the management. However, it is not without its weakness. Some weaknesses
are
1. Arbitration is expensive. The expenditure needs to be shared by the labor and the
management.
2. Judgment becomes arbitrary if there is a mistake in selecting the arbitrator.
3. Too much arbitration is not a sign of healthy IR.

Issues to be handled by industrial Tribunal

An industrial Tribunal can adjudicate on the following matters
(a) Wages including the period and mode of payment;
(b) Compensatory and other allowances;
(c) Hours of work and rest periods;
(d) Leave with wages and holidays;
(e) Bonus, profit sharing, provident fund and gratuity;
(f) Shift working, otherwise than in accordance with the standing orders;
(g) Classification by grades;
(h) Rules of discipline;
(i) Rationalization;
(j) Retrenchment and closure of establishment; and
(k) Any other matter that may be prescribed.

5.5.2.2 Selecting the appropriate method

The method you use to resolve your dispute will depend upon your personal
needs and the nature of your particular dispute. You may want to consult with an
attorney to help diagnose which process best serves your particular situation.

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Considerations:

 Private and confidential or in a public court setting

 Informal setting and a more flexible process or one that is more formal and
has specific rules to follow
 Personal control or decision made by a judge or arbitrator
 Time
 Costs
 Maintaining relationships
 Dispute decided on questions of law, resolved with business principles or
a solution found through other fair, yet practical, means
 Binding and easily enforceable

Activity3: Arbitration & its types

Take about 10 minutes
 Describe the goals and types of arbitration

Comment: Arbitration 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. The goals of
alternative dispute resolution in general and arbitration in particular can safely be
deduced to be the following: Arbitration is a means by which the parties reduce the
transaction costs in terms of delays due to procedural rigidities as well as monetary costs
in terms of costs of protracted litigation. There are two types of Arbitration: 1. Voluntary
Arbitration 2. Compulsory Arbitration

Summary

The discipline revolves around the activities of a worker in an enterprise. Managers

aspire that these activities to be in compliance with the prescribed rules and
regulations of the organization where the workers work. Keeping this in front, the unit
portrays the salient causes of indiscipline, essentials of a good disciplinary system and
procedural measures of disciplinary action.

Employee dissatisfaction is the basic source of grievance. In the context of industrial

relations, grievance of the employee is meaningful in the sense that it induces the quality
of the labor-management relationships. More precisely, the foundation of any grievance
is the perceived injustice which needs immediate remedial measure. The unit, therefore,
puts stresses upon the causes of grievance and mechanism to handle the same.

Key words: Grievance, Dispute, Discipline, Counseling, Arbitration, Punishment

Self assessment questions

1. What is the difference amongst grievance, dispute and complaint?

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2. Discuss the procedures for grievance handing.
3. What is the difference between conciliation and arbitration?
4. Discuss the main causes for industrial dispute.
5. Discuss the objectives and types of disciplinary measures

Unit VI International Industrial Relations

Presentation content

6.0 Learning Objectives

6.1 Introduction
6.2 Definition of international law
6.3 Birth of the international labor law
6.4 Purpose of international labor law
6.5 The ILO Declaration on Fundamental Principles and Rights at Work
6.6 United Nations instruments
6.7 Regional instruments of international labor law
6.8 African instruments
6.9 Key Issues in International Industrial Relations

Summary

Key Terms

Self assessment questions

Unit VI International Industrial Relations

6.1 Learning Objectives

At the end of this unit students will be able to:

• Discuss the key issues in international industrial relations and the policies and
practices of multinationals
• Examine the potential constraints that trade unions may have on multinationals
• Outline key concerns for trade unions
• Discuss recent trends and issues in the global workforce context
• Union and the impact of opponents to globalization

6.2 Introduction

The advent of intensified forms of economic globalization has led to a situation where
relationships between employers, employees and their organizations and the state can no

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longer be thought of primarily in ways that are bounded by the nation-state. Although
national institutional patterns remain the primary concern for industrial relations scholars,
increased economic integration across national boundaries has engendered ‘heightened
complexity in terms of the connections between different types of actors across a variety
of national contexts, and the interdependent effects of their strategic actions across a
wider geographic scope’ (Jackson et al., 2013: 427). There is consequently a global
dimension to the changing character of work and employment relations – whether it be
through the influence of neoliberal ideology and governance (Brenner et al., 2010); the
re-composition of production and employment relations via complex chains or ‘networks’
of suppliers and contractors across space (Coe, 2013); the challenges posed by labor
mobility and migration (Ford, 2006); or the growth of a variety of forms of contract or
‘precarious’ work which have undermined many of the forms of security achieved by
workers under past employment regimes (Kalleberg, 2009).

This reconstitution of the world of work and the heightened complexity of relations
between actors it has brought has significant implications for the world’s labor
movements. Although the national scale remains the key locus of trade union activity, it
is poorly aligned with the structure of contemporary capitalist development and therefore
confining trade union activity to it is self-defeating. Recognizing this, trade unions have
begun to explore various means of moving beyond national boundaries, and thus beyond
the traditional scope of industrial relations systems. This has, in turn, prompted intense
debate within the disciplines of industrial relations and labor sociology about the capacity
of worker mobilization and collective representation to influence emerging patterns of
globalization. At the heart of this debate is scholars’ assessment of the challenges posed
by globalization – and especially by the increasingly transnational character of
competition, investment and production – to the labour movement. These challenges have
been tracked through many studies of specific geographic settings and institutional and
economic contexts. A related analytical concern has been the relative capacity of trade
unions to reinvent themselves through new forms of representation, action and
institutional engagement to rebuild bargaining power and social relevance in the
reformed global economy.

As some of these studies have asserted, a key concept in attempts to understand the
complexity and spatiality of industrial relations is scale. While this term is commonly
understood to denote a system of conceptual ordering and representation of space at
various geographic resolutions – local, regional, national and global – scale has been
understood by some scholars as a political construct ‘produced’ via economic structures
and social relations (Herod, 2009). Emphasis has been placed by these scholars on the
need to move away from the conceptualization of scale as something that is discrete,
bounded and hierarchical towards a more fluid and network-based understanding that
recognizes the interconnections between the local, national and so on (Herod, 2009).
These concepts have been increasingly invoked by scholars of employment relations,1
some of whom have used the term ‘multi-scalar’ to explain how trade unions can work at
multiple and overlapping geographic resolutions. Some, such as Tufts (2007: 2387), have
even suggested that multi-scalar trade union activity may in fact be crucial to labour
movement renewal.

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What catalyses shift in the repertoires of action of trade union bodies such that they seek
to engage in multi-scalar transnational labor organizing and representation? What
institutional agents are best placed to facilitate this? Arguably, among the most important
actors in attempts to ‘globalize’ industrial relations are the global union federations
(GUFs), which represent national sectoral federations in key industries. The GUFs are
distinct from national and local unions in that they have an identifiable mandate to think,
act and represent workers on a transnational basis (Evans, 2010). At the same time,
however – since the locus of union resources, authority structures and mobilization
remains local and national – their capacity to effect change and implement their strategic
goals is still largely dependent on their ability to identify effective union partners at local
and national scales and to play a facilitation and coordination role rather than dictating or
directing the implementation of strategy from ‘above’. This, we argue, points to the need
to think about GUFs as institutional industrial relations actors that have their own distinct
historical origins, organizational forms and internal governance and strategic goals and
methods, which determine the limits of their capacity to act. As an entry point to doing
so, this article reviews the growing literature on transnational industrial relations,
assessing various perspectives on the historical development of the GUFs, their core
repertoires of action and their impact on industrial relations practice both internationally
and within national boundaries.

The primary axis of international organization is shifting away from the national
subsidiary, which groups all business operations within a particular country, and towards
the international business division, within the same stream of business across different
countries. The International Labor Organization (ILO) is a United Nations agency
dealing with labor problems, particularly international labor standards, social
protection, and work opportunities for all.

6.3 Definition of international law

International labor law is one category of international law.

International law is the body of legal rules that apply between sovereign states and such
other entities as have been granted international personality by sovereign states.
Concerning labour law, the most important entity is International Labor Organization.

The rules of international law are of a normative character; that is, they prescribe
standards of conduct. They distinguish themselves, however, from moral rules by being,
at least potentially, designed for authoritative interpretation by an independent
judicial authority and by being capable of enforcement by the application of external
sanctions. These characteristics make them legal rules.

The law-creating processes of international law are the forms in which rules of
international law come into existence; i.e., treaties, rules of international customary law,
and general principles of law recognized by civilized nations. It is the merit of article 38

231
of the Statute of the International Court of Justice that this exclusive list of primary law-
creating processes has received almost universal consent.

International law means public international law as distinct from private international
law or the conflict of laws, which deals with the differences between the municipal laws
of different countries.

International law forms a contrast to national law. While international law applies only
between entities that can claim international personality, national law is the internal law
of states that regulates the conduct of individuals and other legal entities within their
jurisdiction.

International law can be universal, regional or bilateral. Although there is some

duplication between universal and regional labor law, the practical value of regional law
lies mainly in the possibility it offers to establish standards which are more progressive
than worldwide standards for dealing with the special problems of the region concerned;
to secure greater uniformity of law within a region; or to provide more extensive
reciprocal advantages. Bilateral law has a different purpose. Mainly, it determines the
conditions of entry and of employment in each contracting country for the nationals of
the other. This chapter deals only with universal and regional labor law.

The sources - instruments by which states and other subjects of international law, such as
certain international organizations - of international law are international agreements.
The agreements assume a variety of form and style, but they are all governed by the law
of treaties, which is part of customary international law.

A treaty, the typical instrument of international relations, is defined by the 1969 Vienna
Convention on the Law of Treaties as an "agreement concluded between States in written
form and governed by international law, whether embodied in a single instrument or in
two or more related instruments and whatever its particular designation".

6.4 Birth of the international labor law

The first moves toward international labor conventions date back to the beginning of the
19th century. Robert Owen in England, J.A. Blanqui and Villerme in France, and
Ducepetiaux in Belgium are considered precursors to the idea of international regulation
of labor matters. However, David Legrand, an industrialist from Alsace, put forward this
idea most systematically, defending it and developing it in repeated appeals addressed to
the governments of the main European countries from 1840 to 1855.

In the second half of the 19th century, the idea was first taken up by private associations.
Thereafter, a number of proposals to promote international regulation of labour matters
were made in the French and German parliaments. The first official initiative came from
Switzerland – where, following proposals made in 1876 and 1881 and in consultation
with other European countries, the Swiss government suggested convening a Conference
on the matter in Bern in May 1890.

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The establishment of an International Association for the Legal Protection of Workers,
the seat of which was in Basle, was followed by a congress held in Brussels in 1897. The
activity of this private organization led the Swiss government to convene international
conferences in 1905 and 1906 in Bern, where the first two international labour
conventions were adopted. One of these related to the prohibition of night work for
women in industrial employment, and the other to the prohibition of the use of white
phosphorus in the manufacture of matches.

During World War I, the trade union organizations of both sides, as well as those of
neutral countries, insisted that their voice be heard at the time of the settlement of peace,
and that the peace treaties contain clauses for improving the condition of workers. The
peace conference entrusted the examination of this question to a special commission
known as the Commission on International Labor Legislation. The work of the
Commission led to the inclusion in the Treaty of Versailles and the other peace treaties of
Part XIII, which dealt with labor matters. This section of the treaties provided for the
establishment of an International Labor Organization, which might adopt conventions
and recommendations in this field. Conventions would be binding only on those states
which ratified them. (See Constitution of the International Labor Organization, adopted
by the Peace Conference in April of 1919)

In October 1919, the International Labor Conference met in Washington to adopt the first
Conventions and to appoint the Governing Body. Since then, the International Labour
Conference has met regularly in general once a year, except during the Second World
War.

At the end of the Second World War, the International Labor Conference adopted in May
1944, in Philadelphia, a Declaration (Philadelphia Declaration), which defined again the
aims and purposes of the Organization. This Declaration reaffirmed in particular,

 that labor is not a commodity,

 that freedom of expression and of association are essential to sustained progress,
 that poverty anywhere constitutes a danger to prosperity everywhere and
 that the war against want requires to be carried on with unrelenting vigor 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, join them in free discussion and democratic decision with a view to
the promotion of the common welfare.

The Declaration affirmed that all human beings, irrespective of race, creed or sex, have
the right to pursue both their material well-being and their spiritual development in
conditions of freedom and dignity, of economic security and equal opportunity. It also
referred to the social aspect of economic and financial measures.

The Declaration then defined a number of specific objectives of the ILO, such as

 full employment and the raising of living standards,

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  facilities of training policies in regard to wages, hours of work and other
conditions of work calculated to ensure a just share of the fruits of progress to all,
 the effective recognition of the right of collective bargaining,
 the co-operation of management and labor in the continuous improvement of
productive efficiency, and
 the collaboration of workers and employer in the preparation and application of
social and economic measures, the extension of social security measures to
provide a basic income to all in need of such protection, and comprehensive
medical care, etc.

Apart from the ILO standards, an increasing number of bilateral and regional agreements
have been concluded in the field of labor.

The general trend of agreements has been the constant broadening of their scope, both as
regards the fields covered, the categories of persons protected and the framework within
which the matters are treated. Thus a number of these instruments go beyond the
traditional field of labor law and touch upon matters of civil liberties and penal law, of
property law etc.

6.5 Purpose of international labor law

Competition

Various arguments have been advanced over the years in support of international labor
law. The argument concerning international competition was used in its most extensive
form throughout the 19th and at the beginning of the 20th century. The argument was that
international agreements in the field of labor would help prevent international
competition from taking place to the disadvantage of workers, and would constitute a
kind of code of fair competition between employers and between countries.

This argument is generally given less prominence today, since it has been realized:

 that competition did not prevent the main industrialized countries of Europe from
adopting the first labor laws
 that the cost and the competitive value of products depend on many factors other
than labor costs (in fact, factors that increase labor costs, such as investments in
training, safety and health, etc., can increase competitive value)
 that countries that are the most successful in world markets are not those where
the conditions of work are the less favorable.

However, globalization (and especially trade liberalization) has again brought up

discussions on the relationship of competition to very poor working conditions in
developing countries and loss of jobs in developed countries.

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World peace

At the end of World War I a new argument appeared, namely that injustice in the social
field endangers peace in the world, and that action against such injustice therefore serves
the cause of peace.

It has been pointed out that measures of social justice – which provide, among other
things, for trade union rights – are bound to strengthen democratic regimes, which are
more likely than authoritarian governments to be peace loving. Social peace within
countries may also sometimes be related to international peace, inasmuch as internal
tensions may have repercussions abroad. Stress has equally been laid on the positive and
dynamic concept of peace, involving the establishment of stable, just and harmonious
conditions both within individual countries and between different countries. This would
be accomplished by eliminating, inter alia, rivalry on world markets arising out of too
great a disparity in labor conditions. It has also been claimed that the establishment of
international labor standards aimed at improving the condition of mankind develops a
common sense of solidarity internationally, and fosters a climate of mutual collaboration
and understanding that transcends racial and national differences.

Yet progress toward these goals is threatened by many forces. Extremism – religious,
ethnic, and political – is on the rise, often fuelled by growing disparities in levels of
development. Despite the growth of democratic forms of government, violations of
human rights continue in too many countries. The number of armed conflicts currently
under way is only slightly less than at the end of the Cold War. Although the threat of
nuclear war between the superpowers seems less likely, there is the frightening prospect
of nuclear weapons loosely controlled by weak governments.

Social justice

The driving force behind the idea of international labor law was the notion of social
justice. In the field of labor, the humanitarian concern originally appeared in the face of
conditions of great hardship imposed on the workers by industrialization. It was the
mainspring of the movement, the first achievement of which was the adoption on both the
national and international levels of measures to protect children from conditions of work
that had shocked the public conscience.

The expression "social justice" itself was introduced in 1919 in the course of the
discussions which took place at the peace conference, when the original Constitution of
the ILO was being drafted as part of the Treaty of Versailles. This notion has certainly
been the most powerful driving force in the development of international labor law.

It has often been stressed that economic growth does not automatically ensure social
progress. Nevertheless, there remains a widespread tendency to give economic
development precedence over social considerations. It is, therefore, the function of
international labor standards to promote balanced economic and social progress.

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Consolidation of national labor legislation

Even when the labor legislation or practice of a country has reached a certain level, it
may be desirable for the country to ratify a Convention that provides for a standard
corresponding to the existing national situation. This is because, even if no substantial
change is called for, ratification of the respective Convention could contribute to the
consolidation of national labor legislation by acting as a guarantee against backsliding.
There have been cases in which the existence of international commitments based on
ratified Conventions has prevented governments from adopting retrograde measures they
had contemplated, particularly in times of crisis.

As a result of the widespread economic, commercial, technological, social and even

cultural changes that have taken place in the past two decades, governments have been
amending their labor legislation to meet new needs and accommodate new circumstances.

Source of inspiration for national action

In addition to the international commitments to which they may give rise, international
labor standards can serve as a general guide and as a source of inspiration to governments
by virtue of their authority as texts adopted by an assembly composed of representatives
of governments, employers and workers of nearly all countries of the world. They may
also for that reason provide a basis for the claims of workers and guide the policy of
employers. International labor standards have thus developed into a kind of "international
common law". Their influence is in many ways similar to that found elsewhere in various
periods in the history of civil law – for example, the influence of Roman law, or of
certain later European legal codifications. Those in charge of social policies in various
countries have often highlighted this role of international labor law.

Activity 1 - globalization and unions

Take about 10 minutes

 What is the relationship between globalization and unions?

Comment: As globalization spreads, allowing corporations to play off workers in

different nations, it also promotes global unionism. In the process, a cross -- border
labor movement is beginning to add muscle to international unions.

6.6 Global Instruments of international labor law

6.6.1 ILO Instruments

ILO sources of international labor law can be found in the Constitution of the
Organization, and in its numerous Conventions and Recommendations. While the

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Constitution of the ILO mainly contains provisions relating to the functioning of the
Organization, it also lays down a number of general principles which have come to be
regarded in certain respects as a direct source of law. Such principles are contained in the
Preamble of the Constitution and in the Declaration concerning the Aims and Purposes of
the Organization, adopted by the Conference in Philadelphia in 1944 and incorporated in
the ILO Constitution in 1946.

ILO Conventions

Specific features of Conventions

Conventions are instruments designed to create international obligations for the states
which ratify them. In addition to its Conventions, the ILO has adopted a number of
Recommendations, which are different from the point of view of their legal character.
Recommendations do not create obligations, but rather provide guidelines for action.

Conventions have a number of specific features, which can be grouped under four main
ideas:

1. Conventions are adopted within an institutional framework. Thus, the adoption of

Conventions does not follow the type of diplomatic negotiation which is usual in
the case of treaties. They are rather prepared in discussions in an assembly that
has many points in common with parliamentary assemblies. This also partly
explains the fact that unanimity is not necessary for the adoption of Conventions.
For the same reason, only the International Court of Justice can interpret the
Conventions. The revision of Conventions is made only by the General
Conference, which is the legislative body of the Organization. (See overview of
supervisory system)
2. The International Labour Conference, which adopts Conventions, is constituted
by representatives of governments, employers and workers, each delegate being
entitled to vote individually.
3. A two-thirds majority is sufficient for the adoption of a Convention, and
governments should submit the Convention to their competent authorities for
ratification, i.e. as a rule to their parliaments. Also, the governments have the
obligation, when requested, to supply reports on various issues related to
Conventions. (See overview of supervisory system)
4. Some Conventions include flexibility clauses, because they are generally directed
towards countries with very different economic, social and political conditions, as
well as different constitutional and legal systems. The flexibility clauses comprise
options regarding the following:

A. obligations: possibility of choosing, at the time of ratification, by means of formal

declaration, the extent of the obligations undertaken. (f.ex. Social Security
Convention, No. 102)
B. scope: Governments may decide for themselves, subject to certain consultations,
what the scope of the Convention shall be (f.ex. Conventions of minimum wage

237
 fixing machinery, Nos. 26 and 29), or they may be permitted to exclude certain
categories of persons or undertakings (f.ex. Conventions on night work, Nos.41
and 89), or the definitions of persons covered may be based on a specified
percentage of the wage earners or population of the country concerned (f.ex.
many social security Conventions), or exceptions are allowed for a certain part of
the country (Various types of Conventions, f.ex. Nos. 24, 25, 62, 63, 77, 78, 81,
88, 94, 95, 96 etc.), or governments may themselves define a certain branch,
industry or sector (f.ex. Weekly rest Convention, No. 106)
C. methods: State which ratifies a Convention shall take such action as may be
necessary to make effective the provisions of such Convention, custom,
administrative measures or, in certain circumstances, collective agreements.

Core Conventions

While ILO Conventions are not ranked in terms of their order of importance, there is an
underlying hierarchy, which can be discerned. In the first category are Conventions
dealing with freedom of association and collective bargaining (Conventions Nos. 87 and
89), forced labour (Conventions Nos. 29 and 105), non-discrimination in employment
(Conventions Nos. 100 and 111) and child labour (Convention 138).

These core Conventions were identified and given prominence in the Conclusion of the
World Summit for Social Development in 1995 (See Copenhagen Declaration on Social
Development). In the second category are technical standards, which establish norms to
improve working conditions.

Freedom of Association and Protection of the Right to Organize Convention, 1948

(No. 87)
Establishes the right of all workers and employers to form and join organizations of their
own choosing without prior authorization, and lays down a series of guarantees for the
free functioning of organizations without interference by the public authorities. In
December 1997, 121 countries had ratified this convention.

Right to Organize and Collective Bargaining Convention, 1949 (No. 98)

Provides for protection against anti-union discrimination, for protection of workers' and
employers' organizations against acts of interference by each other, and for measures to
promote collective bargaining. In December 1997, 137 countries had ratified this
convention.

Forced Labour Convention, 1930 (No. 29)

Requires the suppression of forced or compulsory labour in all its forms. Certain
exceptions are permitted, such as military service, convict labour properly supervised,
emergencies such as wars, fires, earthquakes, etc. In December 1997, 145 countries had
ratified this convention.

Abolition of Forced Labour Convention, 1957 (No. 105)

Prohibits the use of any form of forced or compulsory labour as a means of political

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coercion or education, punishment for the expression of political or ideological views,
workforce mobilization, labour discipline, punishment for participation in strikes, or
discrimination. In December 1997, 130 countries had ratified this convention.

Discrimination (Employment and Occupation) Convention, 1958 (No. 111)

Calls for a national policy to eliminate discrimination in access to employment, training
and working conditions, on grounds of race, color, sex, religion, political opinion,
national extraction or social origin and to promote equality of opportunity and treatment.
In December 1997, 129 countries had ratified this convention.

Equal Remuneration Convention, 1951 (No. 100)

Calls for equal pay for men and women for work of equal value. In December 1997, 135
countries had ratified this convention.

Minimum Age Convention, 1973 (No. 138)

Aims at the abolition of child labor, stipulating that the minimum age for admission to
employment shall not be less than the age of completion of compulsory schooling, and in
any case not less than 15 years (14 for developing countries).  In December 1997, 59
countries had ratified this convention.

The ILO Declaration on Fundamental Principles and Rights at Work

The 86th International Labor Conference ( 1998) adopted by an overwhelming vote a

solemn ILO Declaration on Fundamental Principles and Rights at Work, committing the
Organization's member States to respect, to promote and to realize in good faith the right
of workers and employers to freedom of association and the effective right to collective
bargaining, and to work toward the elimination of all forms of forced or compulsory
labour, the effective abolition of child labour and the elimination of discrimination in
respect of employment and occupation. The Declaration underlines that all member
countries have an obligation to respect the fundamental principles involved, whether or
not they have ratified the relevant conventions.

The Declaration includes provision for follow up, in particular:

 annual follow-up concerning non-ratified fundamental Conventions , which will

cover each year the four areas of fundamental principles and rights specified in
the Declaration. It will be based on reports requested from governments which
have not ratified one or more of the fundamental Conventions, on any changes
which may have taken place in their law and practice . These reports will be
reviewed by the Governing Body. With a view to presenting an introduction to the
reports thus compiled, drawing attention to any aspects which might call for a
more in-depth discussion, the Office may call upon a group of experts appointed
for this purpose by the Governing Body.

 global report which will cover, each year, one of the four categories of
fundamental principles and rights in turn. The report will be drawn up under the

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 responsibility of the Director-General and will be submitted to the Conference for
tripartite discussion.

In his address to the conference, Michel Hansenne, Director General of the ILO, said that
"it was high time for the ILO to give itself the means to address the social consequences
of the globalization of the economy......I believe we can all be proud of the Declaration
that has been adopted ", adding that "the ILO can now proceed on the basis of a truly
global set of common social values."

It is a historic step", said Bill Jordan, General Secretary of the international

Confederation of Free Trade Unions ( ICFTU ) "and it establishes workers' fundamental
rights as the ground-rules of globalization .....The Declaration sends the ILO into the next
millennium well-placed to meet the challenge of globalization... Trade unionists world-
wide are going to use this new tool as a powerful instrument in defense of their
fundamental rights".

The Chairperson of the Workers’ Group of the Conference, Bill Brett , said that he was
pleased to note " that we have indeed created a powerful search- light which will
illuminate those areas that have previously remained in darkness. "

6.6.2 United Nations instruments

While the United Nations does not deal with labour matters as such, and recognizes the
ILO as the specialized agency responsible for taking appropriate action for the
accomplishment of the purposes set out in its Constitution, some UN instrument of more
general scope have also covered labour matters.

A number of provisions concerning labour matters are contained in the International

Covenant on Economic, Social and Cultural Rights and the International Covenant on
Civil and Political Rights, which are legally binding human rights agreements. Both were
adopted in 1966 and entered into force 10 years later, making many of the provisions of
the Universal Declaration of Human Rights effectively binding.

Because of their comprehensive nature, the Covenants are drafted in general terms, and
the various rights relation to labor, which they recognize are dealt with in a less precise
and detailed way than ILO standards.

The UN General Assembly has adopted also a number of legally binding Conventions
concerning labour matters. The most important ones are the Convention on the
Elimination of All Forms of Racial Discrimination (1969), Elimination of all Forms of
Discrimination against Women (1979), Rights of the Child (1989), Status of the Refugees
(1954) and Status of Stateless Persons (1960).

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 6.7 Regional instruments of international labor law

At the European level, a number of regional organizations that were created after the end
of World War II have adopted legal instruments on labor matters. In the Americas, only
few of the recently established regional organizations have adopted labor law
instruments. The North American Free Trade Area (NAFTA) has the North American
Agreement on Labor Cooperation, and the Caribbean Community and Common Market
(CARICOM) has an Agreement on Social Security. However, the instruments of the
Organization of American States (OAS) are still the main source of international labor
law in the region. In Asia, none of the regional organizations has adopted legal
instruments on labor matters – there are only recommendations, declarations and
programs dealing with these issues. In Africa, both of the recently established regional
organizations, the Southern African Development Community (SADC) and the Common
Market of Eastern and Southern Africa (COMESA), have human rights matters contained
in their treaties. The Organization of African Unity (OAU) also has legal instruments.

6.8 African instruments

The Organization of African Unity adopted in 1981 the African [Banjul] Charter on
Human and Peoples' Rights, which includes the right to work under equitable and
satisfactory conditions, the right to equal pay for equal work and the right to free
association. In 1990, OAU adopted the African Charter on the Rights and Welfare of the
Child, which provides that every child shall be protected from all forms of economic
exploitation and from performing any work that is likely to be hazardous or to interfere
with the child's physical, mental, spiritual, moral, or social development. States Parties
shall in particular provide through legislation, minimum wages for admission to every
employment; provide for appropriate regulation of hours and conditions of employment;
provide for appropriate penalties or other sanctions to ensure the effective enforcement of
this Article; promote the dissemination of information on the hazards of child labor to all
sectors of the community. Also, the Southern African Development Community (SADC)
has human rights provisions in the Treaty of Windhoek by which the community was
established, and the Common Market of Eastern and Southern Africa has the recognition,
promotion and protection of human and people's rights in accordance with the provisions
of the African Charter on Human and People's Rights as one of its objectives according to
The Treaty establishing COMESA.

6.9 Key Issues in International Industrial Relations

We have seen a growing curiosity about the issue of internationalization and best
practices adoption and its impacts on the convergence of employment relations. Before
we discuss about the key issues in international industrial relations, we should know what
is IR and IIR.

Industrial relations refers to a set of phenomena, both inside and outside the workplace,
worried about identifying and managing the employment relationship. International
Industrial Relations (IIR) handles the complicated associations between employers

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employing foreign nationals, employees of various nationalities, home and host country
governing bodies and trade unions of the organizations functioning in different nations
around the world in addition to their national & international federations.

Globalization and international trade has put stress on organizations to standardize

practices and policies. Globalization’s influences on Human Resource Management come
through the opening and penetration of economic systems to outside forces. This is
certainly a two-way procedure, with both local organizations and multinational
corporations embrace one another’s HRM practice.

What are the Key Issues in International Industrial Relations (IIR)?

Issue 1: Who should handle Labor Relations – Headquarter or the subsidiary in the
concerned country?

The national dissimilarities in economics, political, and legal systems create diverse
labor-relations system across countries, MNCs HQs typically delegate the control over
labor relations to their foreign subsidiaries. Having said that, the participation of the
MNC headquarters in host-country labor relations is impacted by 4 key elements:

1. In case there is a high level of inter-subsidiary production integration, the labor

relations function is centralized and is coordinated by the head quarter.
2. The nationality of ownership of the subsidiary has an influence on who should
take care of employee relations.
3. Furthermore, subsidiary character has a bearing on who should deal with
employee relations.
4. Finally, where a subsidiary is dependent more on its parent company for
resources, you will see a greater corporate involvement in labour relations.

Issue 2: Trade Union Tactics

Trade Unions make use of a number of tactics to deal with international business:
1. The most common one is ‘strike’. A strike is a concerted and temporary
suspension of work, intended to put pressure. Unions should be cautions prior
to resorting to a strike in international scenario because the bargaining power
of a union could possibly be threatened or weakened by the financial
resources of an MNC. This is specially evident where a multinational firm
uses transnational sourcing and cross subsidization of its products or parts
across different international locations.

2. Form International Trade Secretariats (ITSs): There are Fifteen ITSs who
help the exchange of information. Main objective of ITSs is to accomplish
transactional bargaining with the MNCs.

3. Lobbing for limited national legislations – Trade unions have for several
years lobbied for restrictive national legislation in the U.S. and Europe. Trade

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 unions pursue restrictive national legislation to avoid the export of jobs via
multinational investment policies.

4. Intervention from the global body like ILO, UNCTAD, EU, OECD: ILO has
issued guidelines which cover disclosure of information, competition,
financing, employment, industrial relations, taxation, science and technology.

Issue 3: Political

There is little doubt that national industrial relations (IR) systems continue to be greatly
different. There are 3 faces of industrial relations which the international union
movement encounters in the international environment, specifically social democracy,
neo-liberal and authoritarian. The dissimilarities in national industrial relations systems
are also mirrored in the structure, power and status of individual actors in the system. For
example trade unions maintain a comparatively strong position within the Scandinavian
IR model while their role is a lot more limited in the US context. The international labour
movement is usually prohibited direct access to robust intergovernmental establishments
like the WTO. So they have to depend on national government to represent their interests
to these institutions. Significantly, the interests of government might not always be
directly in-line with the union movement.

Issue 4: Social and Identity

A key problem with the international labor movement and specifically international
collective bargaining is the absence of identity that individual workers have with their
international associates. Additionally they see these peak associations to be a lot more
conservative than activists at the local level. Associated with this point, there is a
common lack of solidarity between actors at a national level. Additionally, there are
endemic cultural, social and language differences among individuals in different
countries resulting in lowering the degree of a shared identity between workers on an
international level.

Issue 5: Power and knowledge

While labor’s power continues to be local in scope, capital has grown to become more
global in nature and decisions effecting workers are increasingly being made at a supra-
national level. The locus of Multinationals decision making stretches beyond national
borders and key facts are seldom transparent or accessible to trade unions. Additionally
the well-rehearsed point that multinational organizations can counter the strength of local
unions by threatening to move manufacturing to another place so that they can
outmaneuver trade unions or following threats of industrial action is significant.

Activity 2: Role of ILO in industrial relation

Take about 10 minutes

 Explain the role of ILO in industrial relation

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Comment: As part of its mission, the ILO aims to achieve decent work for all by
promoting social dialogue, social protection and employment creation, as well as respect
for international labor standards.

Summary

In recent decades, trade unions have been challenged to attempt to develop new forms of
representation, action and institutional engagement in response to the increasingly
transnational character of production and service delivery. This has necessarily required a
shift in focus beyond national boundaries, and thus beyond the traditional scale of
industrial relations systems. Among the most important actors in these attempts to
globalize industrial relations have been the global union federations (GUFs), which
represent national sectoral federations in key industries. Over several decades, the GUFs
have sought to engage with multinational corporations through various strategies
including policy campaigns and the negotiation of Global Framework Agreements and
have provided support for workers and their unions in different national settings,
including emerging labor movements in the Global South. This article reviews the
growing literature on transnational industrial relations, focusing on the historical
development of the GUFs, their core repertoires of action and their impact on industrial
relations practice both internationally and within national boundaries. In doing so, it
identifies and assesses not only the opportunities for GUF interventions in international
industrial relations, but also the many obstacles – including resource constraints and
dependence on unions at other scales – that limit their reach and ability to achieve these
strategic goals.

Keywords: Global framework agreements, global unions, international industrial

relations, multi-national corporations, policy campaigns, union education and aid, union
networks

Self assessment questions

1. The objectives of the I.L.O are enunciated in the preamble to its Constitution,
supplemented by Article 427 of the Peace Treaty of Versailles, 1919; as well as by
the Philadelphia Declaration of 1944. Discuss these objectives.
2. Describe Conventions and Recommendations of I.L.O. in regard to Basic Human
Rights
3. What are African instruments of labor law?
4. State the Role of I.L.O on Labor Management Relations.

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