Module 3

Industrial Dispute
Any dispute or difference
between employers and
employers or between
employers and workmen or
difference between workmen
and workmen which is
connected to employment is
called industrial dispute.

Causes of Industrial Dispute

Industrial factors
Managements attitude towards
workers
Role of Government Machinary

1. Industrial Factors:
o Grievances relating to work, wages,
bonus, hours of work, privilages etc.
o Attitude of workers
o Increasing demands of workers.
o Indiscipline & violence among workers.
o Workers resistance to introduce new
machinery and change of place of
factory etc.

 2. Managements attitude towards

workers:
o Disinterest of management to
discuss with workers.
o Managements unwillingness to
recognize trade unions.
o Not involving the workers in decision
making.
o Inadequate communication.

3. Role of Government Machinery:

o Not successful in implementing
labour law.
o Inability of members of labour
department to do its job and
management and workers losing
interest and confidence in that.
o Irrelevance of certain provisions of
labour laws.

4. Other causes:
o Application of trade unions for the
political parties, political leadership
and bringing pressure for accepting
their demands.
o Political instability.
o Outlook and attitude of parties
including management.

Types of Industrial Dispute:

1. Interest disputes:
o These are disputes that arise out of deadlocks
in the negotiations for a collective agreements.
o Also called as Economic dispute.
o Dispute originates from trade union demands
or proposals for improvement in wages, fringe
benefits, job security etc.
o These are normally made with a view to
conclude a collective agreement.
o The issues will be mostly compromisable.

2. Grievance or Rights dispute:

o. Disputes that arise from day-to-day
workers grievances.
o. Its also known as Legal dispute.
o. They involve individual workers or
group or workers in the same group.
o. Generally arise from day-to-day
working relations in the undertaking,
usually as a protest by the workers.
o. Collective bargaining is used to settle
this grievance.

3. Dispute over unfair labour

practices:
o Disputes that arise from acts of
interference with the exercise of the
right to organize or act.
o Attempts by management of an
undertaking to discriminate against
workers on the ground that they are
trade union members.
o Interference or oppose employees
when they join or assist an union.
o Hiring new people during strikes etc.

4. Recognition disputes:
o Dispute over the right of a trade
union to represent a particular class.
o This arise when management of an
organization refuses to recognize
trade unions for the purpose of
collective bargaining.
o Managements refusal may be based
on the grounds that the union
requesting may be small in number
or there are multiple unions in the
organization.

Prevention of Industrial Dispute and

settlement of industrial dispute
There are two machineries for prevention of dispute:
1. Statutory Machinery
2. Voluntary Machinery
3. Statutory Machinery:
a. Work Committees:
. This is useful in establishments where 100 or more
employees are employed.
. It is composed of equal number of representatives of
workmen and management who are chose with
consultation of trade unions.
. Its functions are to establish cordial relations and to resolve
differences of opinion on matters of common interest.

2. Conciliation officer:
A conciliation officer may be appointed by the government for
a specified industry.
The duty of the officer is to promote the settlement of
industrial disputes.
The officer in case of dispute can investigate the dispute and
induce the parties to come to an amicable settlement.
However, he cannot take the decision himself.
He has to send a report of the settlement to the government
irrespective of the settlements result. The report has to be
submitted within 14 days of commencement of conciliation
proceedings.
3. Board of Conciliation:
. The government may notify the constitution of the
conciliation board for promoting settlement of an industrial
dispute. Its role is also consultative as the conciliation officer.

4. Court of enquiry:
. The government may constitute a court of enquiry to
enquire into any matter connected with an industrial
dispute.
. In the case of board of conciliation, the object is to
promote settlement of an industrial dispute but in case
of court of enquiry, the object is to enquire into and
reveal the causes of an industrial dispute.
5. Voluntary arbitrations:
. It is a voluntary method of resolving dispute if dispute is
not solved by the negotiating parties.
. Here both parties are willing to go to an arbitrator of
their choice and submit to his decision. Arbitrators are
named by the parties in the written agreement.
. The number of arbitrators can be one or more than one.

6. Adjudication:
. The industrial dispute act provides for a three-tier system of adjudication of industrial disputes.
. The cases may be either referred to the court by the govt after the receipt of failure report
from conciliation officer or directly by any party.
. Labour courts and industrial tribunals may be constituted by the state govt while the national
tribunal is constituted by central govt.
i) Labour courts: Functions of labour courts relate to matters like:
) Legality of an order passed by an employer under the standing order.
) Application and interpretation of standing order.
) Discharge or dismissal of workman.
) Illegality or of a strike or lockout.
ii)
)
)
)
)
)
)
)
)
)
)

Industrial Tribunals: The functions:

All matters within the jurisdiction of labour courts.
Wages
Compensatory and other allowances.
Hours of work and rest intervals.
Leave with wages and holidays.
Bonus, provident fund and gratuity.
Shift working.
Classification of grades.
Rules of discipline.
Retrenchment and closure of establishment

iii) National Tribunals:

National tribunals shall be constituted by central government (only) when the undertakings in
more than one stage are affected by such industrial dispute and are of national importance
and matters related to functioning of labour and industrial courts.

7. Grievance Settlement Authority:

It is applicable to enterprises, where 50 or more
workers are employed. This is for settling of
individual grievances of employees. Individual
disputes are to be referred to the courts when not
settled at grievance settlement authority level.
8. Welfare Officer:
A welfare officer would be chosen under Factories
Act, 1948, if workers are 500 or more.
9. Standing Orders:
Certification of standing orders by enterprises
under the Industrial Employment Standing Orders
Act, 1946. These standing orders requires
enterprises to lay down uniform terms and
conditions for the employment of workers.

10.Central and State Industrial Relations Machinery:

Central Industrial Relations Machinery consists of the Chief
Labour Commissioner and Regional labour Commissioner
together with Labour Enforcement Officers.
Their Main functions are:
. Prevention, investigation and settlement of industrial
disputes in industries or enforcement of labour laws and
awards.
. Verification of union membership.
. Fixation of minimum wages etc,.
. Central implementation and evaluation machinery ensure
implementation of code of discipline, labour laws, awards and
settlements, take preventive action by settling disputes,
evaluate major strikes and lock-outs, labour laws and policy
decision and suggest measures to improve them.

In a nutshell, statutory preventive and settlement

machinery can be summarized as follows:
For consultation
1. Works Committee
2. Conciliation Officer
For conciliation
3. Board of Conciliation
4. Court of Enquiry
For Enquiry
5. Voluntary Arbitration
6. a) Labour Courts
For adjudication
b) Industrial tribunals
c)National tribunals
Settling individual
7. Grievance Settlement
grievances
8. Welfare Officers
9. Standing orders
10.Central and state industrial relations machinery

2. Voluntary Machinery:
Voluntary machinery for settlement of industrial disputes
is based on code of Discipline announced in 1958. The
code was approved by all central organizations of
workers and employers in 16th Indian Labour Conference
at the initiate of then labour minister, Shri G L Nanda.
a) Code of discipline: The code reflects the policy of the
government to build up an industrial democracy on
voluntary basis and is the sheet anchor of Mahatma
Gandhis philosophy of industrial relations. It aims at
preserving industrial peace with the help of employers
and employees. It represents a voluntary moral
commitment and is not a legal document.
Discipline in the relationship between workers and
employers can better be enforced if both the parties
accept their responsibilities and show a willingness to
discharge them.

The main elements of the code are:

1) The two parties agree to utilize the existing machinery for the
settlement of industrial disputes.
2) The parties shall not resort to strikes and lock-outs without first
exploring all avenues of settlement.
3) The parties accept, that the disputes not settled mutually shall be
referred to voluntary arbitration.
4) The code specifies the criteria for the recognition of trade union and
creates an obligation on employers to recognise the majority union in an
establishment or industry.
5) The two parties shall not resort to the unfair labour practices detailed in
the code.
6) Managements and trade unions agree to establish grievance procedures
on a mutually agreed basis.
Initially , by 1962, the code was accepted voluntarily by about 900
independent employers and trade unions. The number increased to
around 3000 by the end of 1967.

b) Tripartite Bodies:
. Indian Labour conference
. Standing labour committee
. Industrial committees
. Tripartite committee on International Labour Organization
Conventions, 1954
(Tripartism is a system of labour relations in which the
state, employers, and workers are autonomous yet
interdependent partners, pursuing common interests and
participating in decisions affecting them in a binding spirit
of mutuality and reciprocity. This can take place at either
or both macro and micro levels.)
c) Formation of joint consultative machinery for Central
Government Employees.
d) Collective bargaining to be encouraged.
e) Workers participation in Management scheme to be
introduced through Formation of Shop Councils and Plant
Council.

3. Working-Together
Machinery

These machineries have done a good

job in dispute resolution. But they are
not good enough to create an
atmosphere in which organizational
synergy can be unleashed for
competitive advantage. Therefore,
there is need for evolving collaborative
machineries, which facilitate
understanding of the needs and
aspirations of each other, foster teamspirit and commitment

Industrial Dispute Act

The objective of the Industrial Disputes Act is to secure industrial
peace and harmony by providing machinery and procedure for the
investigation and settlement of industrial disputes by negotiations.
The Industrial Disputes Act extends to whole of India and applies to
every industrial establishment carrying on any business, trade,
manufacture or distribution of goods and services irrespective of the
number of workmen employed therein. Every person employed in an
establishment for hire or reward including contract labour, apprentices
and part time employees to do any manual, clerical, skilled, unskilled,
technical, operational or supervisory work, is covered by the Act. This
Act though does not apply to persons mainly in managerial or
administrative capacity, persons engaged in a supervisory capacity
and drawing more than 1600 per month or executing managerial
functions and persons subject to Army Act, Air Force and Navy Act or
those in police service or officer or employee of a prison.

Conditions to Strikes and

Lockouts
There are two sorts of restrictions imposed on strikes and lockouts, one of the
which relates specially to public utility services and the other to industrial
establishments in general.
Section 22. Prohibition of strikes and lock-outs

(1) No person employed in public utility service shall go on strike in breach

of contract -

(a) without giving to the employer notice of strike, as hereinafter provide,

within six weeks before striking ; or

(b) within fourteen days of giving such notice ; or

(c) before the expiry of the date of lock-out specified in any such notice as
aforesaid; or

(d) during the pendency of any conciliation proceedings before a

Conciliation Officer and seven days after the conciliation of such proceedings.

(2) Employer carrying on any public utility service shall not lock-out any of
his workmen (a) without giving them notice of lock-out as hereinafter provided,
within six weeks before lock-out ; or
(b) within fourteen days of giving such notice ; or
(c) before the expiry of the date of lock-out specified in any such notice
as aforesaid ; or
(d) during the pendency of any conciliation proceedings before a
Conciliation Officer an seven days after the conclusion of such proceedings.
(3) The notice of lock-out or strike under this section shall not be
necessary where there is already in existence a strike or, as the case may
be, lock-out in the public utility service, but the employer shall send
intimation of such lock-out or strike on the day on which is declared, to
such authority as may be prescribed by the appropriated Government
either generally or for a particular area or for a particular class of public
utility services.
(4) The notice of strike referred to in sub-section (1) shall be given by
such member of persons to such person or persons and in such manner as
may be prescribed.
(5) The notice of lock-out referred to in sub-section (2) shall be given in
such manner as may be prescribed.
(6) If on any day an employer receives from any person employed by
him any such notice as are referred to in sub-section (1) or gives to any
persons employed by him any such notice as are referred to in sub-section
(2), he shall within five days thereof report to the appropriate Government

 23. General prohibition of strikes and lock-outs - No workman who is employed in any industrial
establishment shall go strike in breach of contract and no employer of any such workmen shall declare
a lock - out
(a) during the pendency of conciliation proceedings before a Board and seven days after the
conclusion of such proceedings;

(b) during the pendency of proceeding before a Labour Court, Tribunal or National Tribunal and two
months after the conclusion of such proceedings;

(bb) during the pendency of arbitration proceedings before an arbitrator and two months after
conclusion of such proceedings, where a notification has been issued under sub-section (3-A) of section
10-A; or

(c) during any period in which a settlement or award is in operation in respect of the matters
covered by the settlement or award.
24. Illegal strikes and lock-outs.

(1) A strike or a lock-out shall be illegal if (i) it is commenced or declared in contravention of section 22 or section 23 ; or
(ii) it is continued in contravention of an order under sub-section (3) of section 10or sub-section (4A) of section 10-A.

(2) Where a strike or lock-out in pursuance of an industrial dispute has already commenced and is in
existence at the time of the reference of the dispute to a Board, an arbitrator, a Labour Court, Tribunal
or National Tribunal, the continuance of such strike or lock-out shall not be deemed to be
illegal :Provided that such strike or lock-out was not at its commencement in contravention of the
provisions of this Act or continuance thereof was not prohibition under sub-section (3) of section 10 or
under sub-section (4-A) of section 10-A.
(3) A lock-out declared in consequence of an illegal strike or a strike declared in consequence of an
illegal lock-out shall not be deemed to be illegal.

25. Prohibition of financial aid to illegal strikes and lock-outs - No person shall knowingly expend or
apply any money in direct furtherance or support of any illegal strike or lock-out.

Conditions to Lay-off and

Retrenchment
RETRENCHMENT
Retrenchment means discharge of surplus
labour or staff in a continuing industry. It
means the removal of the dead weight of
uneconomic surplus. It is not necessary
that removal of surplus must only be
when the establishment run in losses. It
may operate at any level of profits.

 Essentials of Retrenchment
Termination of service on the ground of surplus labour
The terminated service must have been capable of being
continuedfFor any reason but should not be actuated by
any motive of victimisation or unfair labour practice
Termination must be of surplus labour in a continuing
industry; thus closure is not retrenchment
The termination must be for proper reason such as
economy, rationalisation, installation of labour saving
machinery, or any other industrial or trade reasons
Termination should not fall within the exclusion clause of
the definition.

 Unlike a layoff, corporate retrenchment doesnt necessarily mean a reduction in a

companys workforce. Retrenchment involves the reduction of corporate expenses.
When a company decides to implement corporate retrenchment, it usually means that
the company will cut or reduce any and all unnecessary spending, often by reducing
the size of the company by closing offices or by cutting back on the diversity of
products or services that it offers.
Companies can employ this tactic in two different ways. One way is to slash
expenditures by laying off employees, closing superfluous offices or branches, reducing
benefits such as medical coverage or retirement plans, freezing hiring or salaries, or
even cutting salaries. There are numerous other ways in which a company can employ
retrenchment. These can be non-employee related, such as reducing the quality of the
materials used in a product, streamlining the process in which a product is
manufactured or produced, or moving headquarters to a location where operating
costs are lower.
The second way in which a company may practice retrenchment is to downsize in one
market that is proving unprofitable and build up the company in a more profitable
market. If one market has become obsolete due to modernization or technology, then a
company may decide to change with the times to remain profitable.
States or governments may also use retrenchment as a means to become more
financially stable. In capitalist nations, retrenchment is effected by lowering taxes in
the hopes of pumping more money into the economy. This tactic is always healthily
debated throughout all levels of government. When applied to governments,
retrenchment may also refer to a state cutting cost by making jobs obsolete, closing
governmental offices, and cutting government programs and services. However, this is
not a classic example of retrenchment, because when expenses are cut in one area,
politicians tend to re-direct them to other areas.

Issues of retrenchment
i. Changing market conditions
ii. Growth beyond an entrepreneurs
iii. Merging of two or more firms.
iv. Economic crisis.
v. Change in Management.
vi. Owners ill-health.

 LAY-OFF AND RETRENCHMENT UNDER INDUSTRIAL DISPUTE ACT, 1947

Historical - The Industrial Dispute Act as enacted in 1947 was a piece of
legislation mainly concerned with the providing machinery for investigation and
settlement of industrial disputes. It has since then undergone frequent
modifications. The act as it stood up to October, 1953, had no provision for
payment of lay-off or retrenchment compensation to the workmen who were
laid off or retrenched in certain contingencies. Though some progressive
employers used to voluntarily pay and the industrial tribunals used awards, such
compensation, were influenced by considerations other than the difficulties of such
laid-off or retrenched workers. In the absence any norm laid down by the law,
adjudicators had to take various factors into consideration in awarding
compensation and in determining its quantum. The resulting adjudication therefore
was neither certain nor uniform.
The situation was precipitated in 1953, when as a result of accumulated stocks in
textile industry, textile mills were threatened with the consequences of the closure
of one or more shifts entailing lay-off or retrenchment of a large scale of workers
employed in the industry. The order, therefore, to avoid industrial unrest in the
country, the president of India promulgated the industrial disputes(Amendment)
ordinance,1953(ordinance 5 of 1953) with the effect from 24th October,1953,
making provisions for compensation for lay-off and retrenchment, setting a
common standard for all employers later this ordinance was replaced by the
Industrial (Amendment) Dispute Act, 1953.

 Section 25F provides the conditions precedent to

retrenchment:
According to this section the employer must satisfy the following
conditions before retrenching an employee employed for a period of
continuous period of not less than one year
(a) the workman has been given one months notice in writing
indicating the reasons for retrenchment and the period of notice has
expired, or the workman has been paid in lieu of such notice, wages
for the period of the notice:
(b) the workman has been paid, at the time of retrenchment,
compensation which shall be equivalent to fifteen days average pay
[for every completed year of continuous service] or any part thereof in
excess of six months; and
(c) Notice in the prescribed manner is served on the appropriate
Government [or such authority as may be specified by the appropriate
Government by notification in the Official Gazette].

 Section 25G lays down the procedure of retrenchment: Last come first go Rule
Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular
category of workmen in that establishment, in the absence of any agreement between the employer and the workman in this
behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for
reasons to be recorded the employer retrenches any other workman. The employer is also required to maintain a seniority list of
the workmen. The system of last in first out is to be followed in retrenching workmen.
When termination of service of one or more of workmen in an industry has to be made owing to abolition or reduction of post or
posts, the workmen who should be selected for retrenchment in a particular category must be the last appointed one. Where the
employer and the workmen have agreed between themselves to abide by certain procedures for retrenchment in their
establishment, then that agreement will prevail and the statuary procedure will not apply.
There are certain conditions which are to be satisfied by the employee before he can claim protection which are:
1. The person claiming protection of this section should be a workman within the meaning of S.2(s) of the Act;
2. He should be a citizen of India;
3. The industrial establishment employing such workmen should be an industry within the meaning of S.2 (j) of the Act;
4. The workmen should belong to a particular category of workmen in that industrial establishment;
5. There should be no agreement between the employer and the workmen contrary to the procedure of last come, first go.
The legal requirements with respect to termination of services are more onerous once a company employs more than 100
Employees. In terms of ID Act, if an industrial establishment employs more than 100 Employees, a company may not retrench,
that is, terminate the services of any Employee who has been in continuous service for not less than one year unless the
(i) Employee has been given three (3) months notice in writing indicating the reason for retrenchment and the period of notice,
and
(ii) The prior permission of the concerned state government has been obtained for the retrenchment. (Section 25N of the
Indian Dispute Act)
If the permission is not obtained, the retrenchment will be deemed to be illegal from the date on which the notice was given and
the Employee will be entitled to all the benefits under law as if no notice had been given to him. From a practical standpoint,
obtaining state governments approval for retrenchment is considered nearly impossible due to the implications of the resulting
unemployment.
Therefore, companies rarely apply to the state government for permission for retrenchment. Penalty for contravening the
aforesaid provisions on retrenchment is imprisonment up to one month or fine which may extend to Rs. 1000, or with both.
Assuming that the state government approval is obtained, the services of the Employees can be terminated upon provision of
three months prior notice and payment of 15 days average pay for each completed year of service in excess of six months.

 An Analysis
The industrial employer has no right to lay-off or retrench his workmen if such right is not provided
by any statutory provision or standing orders or the contracts of service between the employer and an
employee, that is, the right to lay-off or retrench has to be specifically provided for, so that employer
and the employee know that the employer has the right to lay-off or retrenchment.
The right to lay-off or retrenchment cannot be claimed as an inherent right of an employer if he
cannot provide work for his workmen for a particular day or days during the continuance of his
employment. This right has to be specifically provided for either by a statute or by the contract of
service.
Business owners usually dont envision a time when they may have to downsize their companies.
However, when the economy slows down, it can become difficult for a company to maintain business as
usual. When faced with this difficult situation, a company can either decide to reduce its workforce by
laying off employees or reduce its overall spending through corporate retrenchment. People often
wrongly assume that if theyre competent and hardworking employees that theyre less likely to be laid
off. Layoffs, however, are rarely related to employeejobperformance. When a company temporarily or
permanently terminates employees, its usually trying to reduce its expenses.
Retrenchment is not a punishment; it means discharge of surplus labour or staff by employer. It is not
by way of punishment. The retrenchment should be on basis of last in first out basis in respect of each
category, i.e. junior-most employee in the category (where there is excess) should be retrenched first.
[Section 25G].
If employer wants to re-employed persons, first preference should be given to retrenched workmen.
[Section 25H]
It is now settled law that that neither the definition of lay-off nor any provision in the act vests a right
on the employer to lay-off his workmen. But by a contract either in the standing orders or in a collective
bargaining agreement, an employer may get the rights to lay-off workmen on the happing of the
contingencies like shortage of coal, power or raw material etc. Termination of service on ground of
reduction in volume of business is also retrenchment. When retrenchment is held bad the worker is
entitled back wages

 CONCLUSION:
Closing the office door, looking straight into an
employees face, and telling him that he no longer has
a job is not an easy task.
Flexibility in hiring and firing is not the only problem.
India complex web of legislations, leads to a system of
dispute resolution that is incredibly slow.
Data from the ministry of labour reveal that in year
2000 there were 533,038 disputes pending in the
Indias labour courts and these 28,864 had been
pending for over 10 years, if India is to be vibrant
global economy then this has to be changed.
In, brief we need to move to a system that
I. Makes room for flexible contracts in the labour
market

 CONSEQUENCES OF RETRENCHMENT
Positive effects on the organization:
I. Reduction in the labour cost
ii. Enhanced corporate image
Negative effects on the organization:
i. Decrease in the employee morale
ii. Excessive pressure to perform
An organization in such cases requires
stimulus in the following form:
i. Offer workplace challenges
ii. Build team spirit
iii. Bring process innovation

 CONSEQUENCES ON EMPLOYEES
I. Existing employees will feel insecure about their job
ii. Terminated employees might spread wrong information about company in
Market.
WHAT HAPPENSAFTER RETRENCHMENT?
I. Loss of dignity
ii. Entrepreneurial skills
iii. Poverty
MEASURES TAKEN BY EMPLOYERS TO AVOID TERMINATION OF EMPLOYEES
To stop recruitment of new workers except for critical areas.
To limit overtime work.
To limit work on weekly rest days and public holidays.
To reduce weekly working days or reduce the number of shifts.
To reduce daily working hours.
To conduct retraining programmes for workers.
To identify alternative jobs and to transfer workers to other
Divisions /other jobs in the same company.
To implement temporary lay-off i.e. temporary shut down by offering fair salary and
to assist the employees affected in obtaining temporary employment elsewhere
until normal operation resumes.
To introduce pay-cut in a fair manner at all levels and to be implemented as a last
resort after other cost cutting measures have been carried out.