Revisiting the Industrial Disputes Act in the 21st Century

By Ashutosh Shukla

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Introduction

Six startup firms Byju’s, Ola, Blinkit, Lido, Unacademy and Vedantu laid off over 11,000 employees, over 60 per cent of the total around 18,000 sacked people. Labour and Employment Minister Bhupendra Yadav said any retrenchment and lay-offs are deemed to be illegal if not carried out as per the provisions of the Industrial Disputes Act, 1947. 

The Industrial Disputes Act, 1947 was enacted with the aim to settle the disputes arising between the employer and the employee. The preamble to the Act mentions that the objective is to “make provision for the investigation and settlement of industrial disputes, and for certain other purposes.” Therefore, this Act not only deals with the resolution of disputes but is also concerned with strikes and lock-outs, lay-off and retrenchment, unfair labour practices and other offences by companies and penalties for the same. This article will majorly deal with lay-offs and retrenchment and the dispute settlement mechanisms under this Act.  

But firstly, it is important to understand the meaning of ‘industry’ under this Act to know its applicability. Section 2(j) provides an inclusive definition of industry. A seven judges Bench of the Supreme Court, in the case of Bangalore Water Supply v. A. Rajappa, laid down a triple test to identify an industry. Accordingly, there is an industry in the enterprise “where there is

1. Systematic activity,
2. Organized by cooperation between the employer and employee,
3. For the production and/or distribution of goods and services calculated to satisfy human wants and wishes.” 

Provisions of Lay-offs and Retrenchment

Since January 2023, there have been a lot of reports about lay-offs in the US.  In India too tech and startup companies laid off employees citing overhiring, funding challenges and cost pressures. This has led to an increasing concern among employees and hence, it becomes important to revisit the provisions related to layoffs and retrenchment in the current scenario.

Lay-off means putting aside workmen temporarily. Section 2(kkk) of the Act defines lay-off as the inability of the employer to give employment to a workman for reasons such as shortage of raw materials, breakdown of machinery etc., which indicates reasons beyond the control of the employer.  The workman so deployed of employment must be someone whose name is borne on the muster rolls of the industrial establishment. This provision does not mention any time limit for the lay-off but as per my understanding, as soon as the situation comes back to the initial position, no more beyond the employer’s control, lay-offs should be revoked. In the case of Mervin Albert Veiyra v. C.P. Fernandes & Anr., the Bombay High Court states that lay-off is an obligation imposed on the employer when situations mentioned in the section arise rather than a right of the employer. However, the employer is not bound to pay full wages to them but only the compensation provided for in the Act. Receiving compensation is a right of the workmen who are laid off as per Section 25-C. But there are certain exceptions to this as mentioned under Section 25-E wherein the workman will not be entitled to compensation in 3 cases – (1) if they refuse to accept alternative employment when offered by the employer; (2) if they do not present themselves for work at the establishment at the appointed time during normal working hours at least once a day; (3) of the lay-off is due to strike or slowing down of production on the part of workmen. 

Retrenchment refers to the discharge of surplus labour or staff by the employer for any reason whatsoever. The reason for termination of employment must be anything other than by way of punishment or disciplinary action. Section 25-F lays down conditions precedent to the retrenchment of workmen. It includes giving a month’s notice indicating the reasons for retrenchment, payment of compensation to the workman at the time of retrenchment and serving of a notice on the appropriate government in the prescribed manner. 

Dispute Resolution Mechanism

Another major portion of the Act lays down the dispute resolution mechanism. There are three major stakeholders in an industry namely, the employer, the employee and the government. For, a successful working of industry, there should be a harmonious relationship between labour and management, however, it is common for a dispute to arise between them, especially between the employer and the employee. There are various causes for this which include the demand for higher wages and allowances, improved working conditions, occupational instability, the political nature of trade unions and strikes etc. It has a negative impact on productivity and production leading to an increase in the prices of commodities and restricting consumers’ choices. And hence, there is a need to develop a mechanism to resolve these disputes. 

Section 2(k) of the Act defines ‘industrial dispute’. This not only includes disputes between the employer and the workmen but also between employer and employer or workmen and workmen. This dispute could be connected to employment or non-employment or terms of employment or conditions of labour. The Supreme Court in the case of Shambu Nath Goyal v. Bank of Baroda stated that the term ‘industrial dispute’ connotes a real and substantial difference having some element of persistency and continuity till resolved and likely, if not adjusted, to endanger the industrial peace of the undertaking or the community. 

To resolve industrial disputes, the Act lays down 3 ways of dispute resolution mechanisms – voluntary arbitration, conciliation and compulsory adjudication. Section 10-A allows the parties to a dispute to refer it to arbitration and choose their arbitrator. This arbitrator can also include a Labour Court, Tribunal or National Tribunal. This is in contrast to Section 10 which provides for reference of an industrial dispute by the government and the arbitrator too is appointed by the government. 

Coming onto conciliation as another method to resolve disputes, the Works Committee, Conciliation Officer and the Board of Conciliation make use of this method. Thirdly, the Labour Court, Tribunal and National Tribunal adjudicate the disputes that are referred to them under the Act. 

Conclusion

To conclude, in the current situation where the establishments have been affected due to the covid-19 crisis leading to the recent trend of lay-offs and retrenchment, it is important that the workmen are aware of the related provisions. Furthermore, this could also lead to disputes between the employer and employee and hence, the Industrial Disputes Act, 1947 becomes important legislation to reduce employer-workmen conflicts which would result in the harmonious functioning of the industries.