Indian industrial relations law: case for reform.

AuthorSaini, Debi S.
PositionBy Invitation - Abstract


Aneconomic growth model that a country adopts has to have a clear notion of the basic postulates of industrial relations (IR) as a facilitator. After attaining Independence, India adopted the statist, import-substitution model of economic development. Economic planning, licensing, foreign exchange rationing and regulation, and capital market regulation policies were followed strictly so as to be aligned with the national priorities. Economic growth was juxtaposed with "social justice" as an essential societal value. Trade unions were allowed to flourish and expand as instruments of promoting countervailing power of the working class subject to the above values. Simultaneously was preached the concept of responsible unionism; as adversarial collective bargaining was seen as the "law of the jungle." Especially during the 1960s and 1970s trade unions grew in strength. But this model ceased to be effective and resulted in what came to be labeled as "the Hindu rate of growth." Eventually, the model led into a deep crisis during the late eighties. Critics reminded the planners the virtues of Thatcherism and Reagonomics, and suggested the adoption of the globalization model as a savior. The new economic policy (NEP) adopted in July 1991 was symptomatic of a shift from the pursuit of values like socialjustice, status, and welfare state to efficiency, productivity, freedom of contract, market focus, competition and flexibility of work. The then finance minister, Dr. Manmohan Singh who later became Prime Minister during 2004-2014, promised labor law reform to facilitate the new paradigm. For addressing the systemic malaise of the earlier model, market was viewed as an instrument of delivering justice through the 'trickle down'.

The above policies of globalization eventually got reflected in a new kind of workplace order. Employers saw trade unions to be hindering operational flexibility without which (flexibility) they found it very difficult to compete in the chaotic economic environment. State became far less sympathetic to the cause of social justice and the resultant union crisis; this was still more so in the developing countries. The institution of trade unionism and collective bargaining came under heavy pressure so as to take a comprehensive care of all employees at work (Kochan et al., 1986). Cost became a concern due to the rising intensity of competition. Collective bargaining zones were getting squeezed; and employers found it difficult to be liberal in granting wage increases.

India has about 47 major pieces of central labor legislation and more than 100 pieces of state labor legislation that were intended to carry out the Constitutional vision of building a welfare state as envisaged in the Directive Principles of the State Policy. These directives have been described as the "soul" of Indian Constitution (Dhavan, 1989). Indian labor laws can be grouped into five major categories i.e. laws relating to: working conditions, wages and monetary benefits, industrial relations, social security and miscellaneous labor laws (Saini, 2011 for a detailed discussion). Some of these laws were already in existence at the time of Independence; more were added later.

The supporters of globalization have argued that many pieces of Indian labor legislation have lost their relevance due to changes in the global and Indian economic environment and the onset of the intense competition. Research exists to testify that perceived rigidities in Indian laborlaw have been negatively impacting the development of the Indian economy (Mitchell, Mahy&Gahan, 2012: 41). International institutions like the World Bank, IMF, and foreign investors have been waiting since long about fulfillment of the government's promise to make changes in labor law, and still more so in the IR law. The top most concern of industry is the belief that too much of job security promotes inefficiency and low productivity. It also reduces labor mobility that is a necessary condition for efficient working of firms in a competitive environment. The example of China is being cited to support this; as it has undertaken industrial re-structuring as per the needs of the investors and globalization. At the same time, there is plenty of literature to testify that the system is implemented such that there are severe problems in justice reaching the workers (Saini, 1997; Mitchell, Mahy&Gahan, 2012: 22).

In the above context, this paper examines the structure and working of Indian IR law and suggests areas of state action through reform. Towards this end, it discusses the framework of changes that need to be effected in them so as to be in sync with the contemporary global and Indian economic realities. It also analyses the new employee relations strategies that employers are following to stay ahead in the era of intense competition. On the basis of the analysis of the structure and working of the three main pieces of IR legislation in India, it has argued for a case of reform in many aspects of these three Acts. The paper also identifies areas of action for the trade unions, employers and the state.

The Indian IR Law: Structure & Working

Many alternative models of social and economic justice have been adopted in different parts of the world in the field of industrial relations (IR). These models range from powerful corporatism of Continental Europe to complete voluntarism of the type where labor law has been seen as only a footnote to collective bargaining (also named as the Classical Oxford School of IR in pre-Thatcher UK) to substantial legalism and state involvement in USA to almost no labor law in some parts of the developing world (Saini, 2003).Indian model is somewhere in between, upholding the freedom to unionize and promoting industrial peace through negotiation as well as state control of the industrial action. Globalization has, however, made its indelible impact on these models. And, there is a trend towards a greater degree of cooperation in IR.

India's IR law is enshrined in three pieces of legislation: the Industrial Disputes Act 1947 (IDA), the Trade Unions Act 1926 (TUA), and the Industrial Employment (Standing Orders) Act 1946 (IESOA). The Industrial Disputes Act 1947 (IDA) is the most important piece of IR legislation in the country. It has its roots in the Rule 81-A of Defence of India Rules that was promulgated by the British Indian Government in 1942 to control industrial unrest in the country, as the British were focusing themselves on fighting the Second World War and could not afford to have a rising curve of industrial disputes. This rule envisaged a system of compulsory adjudication of industrial disputes by government-appointed tribunals in case the disputant parties failed to resolve it bilaterally. Even after the War was over, it was found that Rule 81-A was successful in controlling the industrial unrest. Shortly before Independence in April, 1947, this rule was converted into a full-fledged Act in the form of IDA. The Act envisages a conciliation-adjudication-arbitration model of industrial disputes resolution. It empowers the "appropriate government", in its discretion, to refer an industrial dispute for adjudication either on failure of conciliation or even without any resort to conciliation. Among others, the Act provides for a dispute prevention mechanism in the form of works committee, conciliation officers, board of conciliation, and court of inquiry. After the failure of the dispute to get resolved through the preventive mechanism, it can be referred by the appropriate government, in its discretion, for adjudication to a labor court or industrial tribunal, depending upon the nature and type of the dispute.

Initially, only disputes espoused by a trade union or substantial number of persons were treated as industrial disputes, but later on, a provision for processing individual termination (including dismissal, discharge or retrenchment) disputes was inducted in the IDA, thus treating some individual disputes as industrial disputes. The 2010 amendment to the IDA is the latest. Among others, it has provided that for individual termination disputes the parties can directly approach the labor court, and no reference is required for the same. (1) There is a provision for entering into...

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