THE MANAGEMENT GUIDE TO ESCAPING LABOUR LAW
The present article aims to strike at the various ways in which the Management creates industrial disputes against workmen, avoids negotiations, and finds ways around facing labour laws.
One of the key legislations governing industrial relations in India is the Industrial Disputes Act, 1947, which although limited in its protection of workers against the victimisation by the Management, has been avoided, obfuscated and watered down by the Management.
The Industrial Disputes Act, 1947 (“ID Act”) has a long history in Independent India, which must be perused in order to understand both the strength and weaknesses in its provisions. In 1920, the first such law governing industrial relations between workmen and the management was enacted by the then British Government in India, called the Trade Disputes Act, 1920. This law established courts of inquiry, conciliation boards, and forbade strikes without 1 months’ notice in public utility services. This law also made sympathetic strikes as well as fraternal funds to workmen’s strikes illegal. However, it did not provide for a manner of settling industrial disputes and thus, it was eventually repealed and replaced with the Trade Disputes Act, 1929. Here began the Government’s intervention in negotiation and settlement of industrial disputes.
The 1929 law reiterated the prohibition on strikes (Section 16(1)(b) of the Trade Disputes Act, 1929). However, the new law also established ad hoc Boards of Conciliations, meant to bring about a settlement of the dispute, who may then draw up a memorandum of settlement signed by the parties and send a report. Through this, the “peaceful” settlement of industrial disputes was envisioned although in favour of the capital.
This law was amended in 1938 to make way for appointing conciliation officers, as admittedly the First National Commission for Labour stated that the law was not extensively used, as mostly the government policy was laissez faire and selective intervention.
Thereafter, the Second World War hit the country, leading to the promulgation of the Defence of India Rules in which the appropriate government was given the power to intervene in industrial disputes, enforce settlements, appoint tribunals and enforce awards. This was meant to be a speedy remedy to disputes, making awards legally binding, prohibiting strikes during pendency of conciliation, and contained a blanket ban on strikes not arising out of genuine trade disputes.
Once the war ended, the Industrial Disputes Act, 1947 was enacted which largely contained portions of the 1929 law and the Defence of India Rules, coming into effect on 1st April 1947. The ID Act as we know it was meant to ensure justice to the workmen, advance the welfare, and promote settlement of disputes. In essence, the ID Act was principled on “peaceful co-existence” through amelioration of the condition of workers through various means of settling disputes. Thus, it was meant to encourage conscionable negotiations, conciliations and adjudication. The law also had sufficient loopholes to circumvent it. The manner in which the Management and the government utilised this law is another story.
B. THE SCHEME OF THE ID ACT
Although the law is limited and favourable towards the Management, especially the “maintenance of industrial peace” which more formally refers to workers rights being trampled down for the sake of increased profits, the ID Act is one of the few laws remaining with workmen to compel the Management to limit the unfair labour practices.
Through the ID Act, settlement of industrial disputes was perceived through collective bargaining, mediation and conciliation, investigation, arbitration, adjudication and basic protections. These basic protections ranged from protecting union office bearers from victimisation, prohibiting changes in service conditions during pendency of disputes, prosecution for unfair labour practices, or prohibiting the employment of workmen as casual labour/badlis for longer periods merely to deny them the benefits of permanency.
The ID Act contains a short list of actions by the Management and Unions that are considered unfair labour practices. These prohibited practices include threatening workmen with dismissal for joining unions, establishing employer sponsored unions, dismiss a workmen by way of victimisation, disregard principles of natural justice in domestic enquiries, abolish work of regular nature to replace workmen with contract workers, show favouritism, and failure to implement awards, settlements or agreements.
In order to enforce these protections, outside of approaching the industrial courts, the ID Act allows workmen to initiate criminal prosecutions against the Management for engaging in unfair labour practices or for refusing to abide by the terms of settlements.
C. MANAGEMENT VS. ID ACT
In reality, the Management often enters into settlements to put an end to workers’ strikes and demonstrations and finds creative ways to avoid implementing the settlements. A settlement means a settlement arrived at in the course of conciliation proceeding and includes a written agreement between the employer and workmen arrived at otherwise than in the course of conciliation proceedings where such agreement has been signed by the parties thereto in such manner as may be prescribed (Section 2(p) ID Act).
Thus, the law envisions two types of settlements: one, that is entered into between the workmen and the employer during the conciliation proceedings, which is a tripartite agreement to which the conciliation officer is also a party; and two, a bipartite agreement between the workmen and the employer outside of conciliation proceedings in the prescribed manner and a copy of which is registered under the appropriate authority.
In fact, in case a dispute is in the conciliation proceeding, it is the duty of a conciliation officer to investigate the dispute and all matters affecting the merits, and to do all such things as the conciliation officer thinks fit to induce the parties to come to a fair and amicable settlement of the dispute (Section 12(2) ID Act).
A bipartite settlement arrived at in the course of conciliation proceedings is binding only on parties to the dispute while the tripartite settlement arrived at before a conciliation officer is binding on all parties in the factory.
In many instances of conciliation proceedings, workmen are often at the mercy of sympathetic conciliation officers, who are government officers, who often will refuse to summon witnesses, summon documents, record statements made by the management during conciliation, despite having the power to do so (Section 11(4) ID Act). They may not conduct inspections despite glaring unfair labour practices, and in several instances may not proactively push the management to adhere to the ID Act unless the workmen routinely follow up.
Most often, the Management refuses to appear for conciliation, or will appear and refuse to adhere to directions given by the conciliation officers and will not respect the conciliation process or the workmen. At the very outset, we must demand a radical change in the manner in which conciliations take place.
Then, the Management, often to stop strikes or growing unionization of the workmen, will sign and enter into settlements during conciliations, often recorded as the minutes of the conciliations. These settlements, as we have seen, are binding on all parties. However, the Management, across the board, use the following excuses to claim that these minutes / agreements are not binding settlements:
1. That the person who signed the agreement was not authorised to do so, hence the settlement is not binding. This is despite the Management having received the notice of conciliation proceedings and sending an authorised officer to the conciliation meetings. This claim is also despite Rule 37 of the ID Act (Central) Rules, 1957 stating that a party appearing by a representative shall be bound by the acts of that representative.
2. That the signing of conciliation proceedings does not amount to entering into a settlement with the workmen and hence, is not binding on the Management.
3. That there was no agreement / settlement entered into, as what was signed was merely an order sheet, letter, minutes of proceedings, acknowledgment of the proceedings, etc.
4. That, in the case of workers guised as contract workers through sham contractors, that there is no employer – employee relationship between the workmen and the Management, the Management was merely taking part in conciliation proceedings as notice was received of the same and hence, any conciliation proceedings signed are not binding on the Management.
5. That, on hyper technical grounds, that the settlement was not published or that a full report of the same was not sent by the Conciliation Officer to the Appropriate Government. This is despite judgments repeatedly holding that the ID Act is a beneficial legislation and must be interpreted to achieve its laudable purpose of social justice for workers.
6. That there has been a significant delay on the part of the workmen in seeking implementation or prosecution of the management for violation of the settlement. The law in Section 19(2) of the ID Act is then intentionally misinterpreted by the Management to state that even if there was a settlement, it was in force only for a period of 6 months from the date of signing and is no longer a valid settlement. However, this claim is despite the provision itself clarifying that the settlement continues to be in force even after 6 months until the 2 months’ notice of expiry in writing from the parties of their intention to terminate the settlement.
In judicial interpretation as well, this stance has no backing, as noted in Life Insurance Corporation of India v. DJ Bahadur (1980 AIR 2181) that the ID Act does not contemplate the creation of a vacuum, so that rights and benefits enjoyed under a settlement, which must be considered to have the same sanctity as an award, will continue to be in force until its express replacement by a subsequent settlement or award. Thus, the law as it stands is wilfully twisted by the Management to claim that even if a settlement existed, it is no longer in force. In fact, often the workmen are made to run from pillar to post and given various oral assurances that the settlement will be implemented, which causes the delay in approaching the authorities seeking prosecution of the Management. Further, workers have to operate in an atmosphere of fear of victimisation, as any initiation of prosecution of the Management leads to retrenchment, hoisting false charges and domestic enquiries, demotions and harassment.
This list is only indicative, and the Management often places creative excuses before the Courts to claim no liability arising out of settlements.
D. SETTLEMENTS IN THE INDUSTRIAL RELATIONS CODE, 2020
The Industrial Relations Code, 2020 (“IR Code”) is the new labour code introduced by the BJP regime to replace the Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946. As such, it reproduces the provisions relating to settlement of disputes, and fails to take into consideration the imperfections stated above in the conciliation process (Sections 53 ID Code). However, the IR Code places a two-year limitation period for raising a dispute before the conciliation officer, and a three-month period for filing an application in the Tribunal after the conciliation report. This is despite the settled law and judicial decisions that there is no limitation on raising an industrial dispute, so long as the dispute subsists. If there is a long delay, the court may mould the reliefs accordingly. Now, on the mere ground of delay, workers will be denied substantial rights to raise a dispute before the conciliation officer.
E. JUDICIAL INTERPRETATIONS
The above excuses employed by the Management are untenable, having also been held to be so by the constitutional courts of our country in several judgments.
Moreover, it is often the State which is meant to act as a model employer and protect as well as promote the rights of workers, is actually providing the above excuses, in various combinations, to avoid implementing or adhering to settlements.
It is pertinent to note here that the ID Act treats a settlement with the same sanctity as an award and provides an express penalty for breach of a settlement or award, attracting imprisonment upto six months, or fine, or both (Section 29 ID Act). Despite the same, there is a lack of respect or non-adherence on the part of the Management towards the settlement.
F. THE WAY FORWARD
The most significant tool at the disposal of the Management to avoid adhering to the ID Act is the prolonged litigation and delay. For example, the Management will often refuse to recognise protected workmen within 1 year of a Union submitting a request to recognise its office bearers as protected workmen, and thus, by delaying action or protracting conciliations, workmen effectively lose protected status for that year and are forced to submit another request for the next year (See Section 33 ID Act r/w Rule 61).
The Management will also often refuse notice from Conciliation Officers, refuse to produce documents, refuse to adhere to the advice of Conciliation Officers and drag workmen to Courts for decades until actual and real implementation of settlements becomes impossible.
This, we must rethink the refusal of the Management to implement settlements as not just a violation of the ID Act, but also as a failure of the ID Act to fully protect the rights of workmen. Arguably, the struggle of workmen is better placed outside the annals of the Courts, not being subject to creative interpretation.
Justice to Workers
1. In Harjinder Singh v. Punjab State Warehousing Corporation [AIR 2010 SC 6111], the Supreme Court clarified the manner in which laws such as the ID Act are to be interpreted, as follows:
“19.The preamble and various Articles contained in Part IV of the Constitution promote social justice so that life of every individual becomes meaningful and he is able to live with human dignity. The concept of social justice engrafted in the Constitution consists of diverse principles essentially for the orderly growth and development of personality of every citizen. Social justice is thus an integral part of justice in the generic sense…
Court’s Approach to Social Welfare Legislations
23. Of late, there has been a visible shift in the courts approach in dealing with the cases involving the interpretation of social welfare legislations. The attractive mantras of globalization and liberalisation are fast becoming the raison d'etre of the judicial process and an impression has been created that the constitutional courts are no longer sympathetic towards the plight of industrial and unorganized workers. In large number of cases like the present one, relief has been denied to the employees falling in the category of workmen, who are illegally retrenched from service by creating by-lanes and side-lanes in the jurisprudence developed by this Court in three decades.
..It need no emphasis that if a man is deprived of his livelihood, he is deprived of all his fundamental and constitutional rights and for him the goal of social and economic justice, equality of status and of opportunity, the freedoms enshrined in the Constitution remain illusory. Therefore, the approach of the courts must be compatible with the constitutional philosophy of which the Directive Principles of State Policy constitute an integral part and justice due to the workman should not be denied by entertaining the specious and untenable grounds put forward by the employer - public or private.”
In I.T.C. Ltd. Workers Welfare Association and Ors. Vs. The Management of I.T.C. Ltd. and Ors. [AIR 2002 SC 937], the Supreme Court recognised the sanctity of settlements:
“23. What follows from a conspectus of these decisions is that a settlement which is a product of collective bargaining is entitled to due weight and consideration, more so when a settlement is arrived at in the course of conciliation proceeding. The settlement can only be ignored in exceptional circumstances viz. if it is demonstrably unjust, unfair or the result of mala fides such as corrupt motives on the part of those who were instrumental in effecting the settlement. That apart, the settlement has to be judged as a whole, taking an overall view. The various terms and clauses of settlement cannot be examined in piecemeal and in vacuum.”
Role of the Conciliation Officer
In General Manager, Security Paper Mill, Hoshangabad Vs. R.S. Sharma and Ors. [AIR 1986 SC 954], the Supreme Court interpreted the role of a Conciliation Officer and a “settlement” as follows:
“5... Even though a Conciliation Officer is not competent to adjudicate upon the disputes between the management and its workmen he is expected to assist them to arrive at a fair and just settlement. He has to play the role of an adviser and friend of both the parties and should see that neither party takes undue advantage of the situation. Any settlement arrived at should be a just and fair one.
Party to Settlements
It is on account of this special feature of the settlement Sub-section (3) of Section 18 of the Industrial Disputes Act, 1947 provides that a settlement arrived at in the course of conciliation proceeding under that Act shall be binding on (i) all parties to the industrial dispute, (ii) where a party referred to in Clause (i) is an employer, his heirs, successors, or assigns in respect of the establishment to which the dispute relates and (iii) where a party referred to in Clause (i) is comprised of workmen, all persons who were employed in the establishment or part of the establishment as the case may be to which the dispute relates on the date of the dispute and all persons who subsequently become employed in that establishment or part. Law thus attaches importance and sanctity to a settlement arrived at in the course of a conciliation proceeding since it carries a presumption that it is just and fair and makes it binding on all the parties as well as the other workmen in the establishment or the part of it to which it relates as stated above…”
Responsibility of Implementation of a Settlement
In Chitradurga District Mazdoor Sangh v. Bhadra Sahakari Sakkare Karkhane Niyamita, [(2003) III LLJ 300 Kant], the Karnataka High Court applied the principle of promissory estoppel to fix the liability of the Management to implement a settlement. Promissory estoppel states that a party will be responsible to make good any damage that occurs as a consequence of her failing to keep her promise, on the basis of which the other party has acted. It held:
“38. In our considered opinion, this is a fit case where the Court should apply the doctrine of promissory estoppel. We find all ingredients to apply doctrine of promissory estoppel. Admittedly, under annexure A the management has made the promise to workmen. On the basis of that promise, the workmen acted and altered their position to their peril. Therefore, the management cannot be permitted to approbate and reprobate in order to thwart legitimate rights of workmen flowing from the solemn promise made by the management, which has been reduced into writing before the Minister of Sugar. There is no necessity for us to go into the question whether the settlement Annexure A could be regarded as a settlement arrived between the parties in the process of conciliation envisaged under the Industrial Disputes Act, 1947, or any other statute in view of our finding that the first respondent is a "State"... Be that as it may, even assuming that it is not a settlement in the course of conciliation under the Industrial Disputes Act but it is only a settlement arrived at between the parties in exercise of the executive power of the first respondent sugar factory, nevertheless, its action is required to be tested on touchstone of the postulates of Article 14 and if it is so tested, the inaction of the management of the sugar factory should be condemned as one tainted with irrationality and is totally unfair. The management must be rigorously, held to the promise made by it, and it must scrupulously perform its promise on pain of invalidation of an action in violation of it. Every activity of a state has a public element in it and must, therefore, be informed with reason and fairness, if the management promises to do certain thing as a responsible person but fails or refuses to do so, its action is liable to be tested for its validity on the touchstone of reasonableness and fairness.”
The Management Dishonouring a Settlement
In The Management of Agnigundala Lead Project Hindustan Zinc Ltd. and Ors. Vs. Hindustan Zinc Workers Union and Ors. [1989 (58) FLR 204], a Andhra Pradesh High Court judicially tested one of the excuses employed by the Management to avoid settlements, and rejected it as follows :
“3… This is a clear case where the management is guilty of dishonoring its commitments under a settlement, whether it is called the 'understanding' or the 'minutes of discussions". The management took full advantage of the terms of the settlement, in implementation of which, the workmen on their part called off the strike. The settlement was signed by responsible officers holding high ranks in the company, and it is too much for us to swallow the contention of the management that the officers who represented the management at the conciliation proceeding on 25th March 1983 had acted either without authorisation or in excess of the authorisation given to them. Are we to believe that the Chairman and the management were not apprised of the terms of the agreement pursuant to which the strike was called off by the Union ? We have absolutely no hesitation in rejecting the contention that it was without due authorisation that the management's representatives agreed to the terms of settlement, or that the Chairman and the management were not aware of the terms of the agreement…… This arrogant and arbitrary attitude of the management it not certainly praiseworthy, and is not conducive for the promotion and maintenance of industrial peace and harmony. The Union and the management are not equal in withstanding prolonged litigation; and other things being equal, to further the ends of justice, the court should normally lean towards the weak, namely, the workman.”
 Ministry of Labour and Employment and Rehabilitation, Report of the National Commission on Labour, 1969, accessible at: https://vvgnli.gov.in/sites/default/files/Report%20of%20the%20National%20Commissionon%20Labour_0.pdf.
 O.P. Malhotra’s “The Law of Industrial Disputes” by Dr. E.M. Rao, 2019, at pg. 2.