ESCUELA PROFESIONAL DE DERECHO

LABOUR LAW
COLLECTIVE II
 SESSION 12
THE COLLECTIVE WORKING
CONVENTION
Lecture outline

• Key themes
• Context
• The actors
• Representation in Indian industrial relations
• Agreement making
• Economic context for reforms
• Current issues in employment
• Labour law reform
• Conclusions
 Key themes
• Major economic reforms in the 1990s paved the way for high
economic growth in India and involved the considerable
liberalisation of the expansive labour laws.
• There is a large rural sector and a large ‘informal’ sector in
which unions and collective bargaining are rare.
• Trade union membership overall is low but membership and
collective bargaining coverage is higher in the public sector and
large enterprises.
• There are weak laws regarding trade union recognition and
representation and poor enforcement of labour laws and
collective agreement provisions.
• Current concerns include lack of protection for workers who
have been made worse-off by the market-based labour reforms,
poor growth prospects in key parts of the labour market, high
rates of contract and casual workers, increasing downsizing and
a low-value added IT sector.
Context
• The Indian industrial relations system is rooted in British
common law.
• The IR system also reflects India’s diverse population.
• The unionisation rate is low at 5% of the total workforce
due in part to large rural and informal sectors, which are
not unionised.
• Most unions are concentrated in large enterprises and
government-related sectors.
• After slow development during most of the 20th century,
economic growth has been high since the mid-1990s.
• Indian labour laws were liberalised as part of a broader
deregulation program in the 1990s, changing what was
one of the most protective labour law regimes in the
world.
 Trade unions in India 1
• Trade union movement emerged between 1850-1870 with
the emergence of early manufacturing in textiles, jute and
light engineering.
• The first national federation of trade unions, All India
Trade Union Congress (AITUC), was established in 1920 to
fight colonial rule and capitalism.
• The movement split into three major federations around
the time of independence from Britain in 1947: AITUC, the
Indian National Trade Union Congress (INTUC), and Hind
Mazdoor Sabha (HMS).
• Unions are closely affiliated with political parties. The
number of unions proliferated as more regional political
parties emerged after general election in 1967, some of
which set up their own trade union wing.
 Trade unions in India 2
• One of the largest union to have developed from a regional
political party is the Centre of Indian Trade Unions (CITU) which
is aligned with Communist Party of India—Marxist (CPI-M or
CPM).
• By the mid-2000s, there were over a dozen federations of trade
unions.
• There may be over 100 000 unions in India, but accurate figures
are not known because the government does not collect data on
unions.
• Prevalent form is the ‘union shop’, where union membership is
acquired by all employees after employment in an
establishment where a union is recognised by the employer.
• The ‘closed shop’ system (where only members of the union can
be employed) exists informally in wholesale markets and on
railway stations among manual workers.
 Trade unions in India 3
The Indian Constitution and freedom of association
• The right to belong or not to belong to a union is guaranteed
in the Indian Constitution (Article 19(c)).
• It is not compulsory for a worker to join a union, but it is
unconstitutional to prevent them from joining one.
• Trade union registration and recognition are not compulsory.
• In order to stop the proliferation of unions, the Trade Union
Act 1926 was amended in 2001 to require that 10% of workers
or 100 workers (whichever is less) at an establishment be
members for registering a union. 7 people are required to
form an unregistered union.
• The law is silent on whether unions are formed along craft,
employment category or other lines.
• Trade unions can pursue economic, political, social and
welfare objectives and can raise and maintain political funds.
 Trade unions in India 4
Trade unions and politics
• The trade union movement is closely linked with political parties, as
historically unions played a major role in the struggle against colonial
rule. Some leaders of the freedom struggle were also leaders of the
trade union movement.
• Following independence, this association resulted in welfare-state and
socialist policies involving the nationalisation of critical industries
combined with investments in large-scale public enterprises.
• The close association between unions and political parties has assured
politicians of votes from the working classes and enabled unions to
better defend their members’ interests. But the association also
creates problems: divisions in political parties lead to divisions in
unions; industrial relations issues become political issues in conflicts
between state and central governments of different persuasions; and
recently, unions have also struggled with their associated political
parties adopting neoliberal policies in order to encourage investment
and competition as these policies tend to be detrimental for workers.
Trade unions in India 5
National trade union centres
• Any union with a minimum of 500 000 members spread
over at least four industries and four states will be
recognised as a national trade union centre.
• There are five centres in India which fulfil this
criterion:
– the All India Trade Union Congress (AITUC)
– Bharatiya Mazdoor Sangh (BMS)
– Hind Mazdoor Sabha (HMS)
– the Centre of Indian Trade Unions (CITU)
– the Indian National Trade Union Congress (INTUC)
• There are at least 7 other national unions which the
government consults with.
Trade unions in India 6
Enterprise-level unions
• There are two kinds of enterprise-level unions: those
affiliated to national centres and those without any
affiliation to political parties.
• In some large organisations/enterprises, there are over a
hundred trade unions.
• Trade unions based on craft, occupational or employment
category, and caste are not uncommon in India.
• Within an enterprise there can be separate unions for
workers (on the shopfloor), staff (attendants, drivers,
clerks, typists etc), supervisory staff and
executives/officers.
Management and employers’ organisations
• The earliest employer associations were formed primarily in industries
such as jute, textiles and engineering in response to labour laws
enacted after independence from British rule.
• The principal umbrella organisation for Indian employers is the Council
of Indian Employers (CIE).
• Employer organisations proliferated after independence, and then their
structure was consolidated. CIE was formed when the Employers’
Federation of India (EFI) amalgamated with the All India Organisation
of Employers (AIOE) in 1956 .
• Public employers at both national and international levels originally
had a separate representative body called the Standing Conference on
Public Enterprises (SCOPE). SCOPE joined CIE in 1973.
• Chambers of commerce, industry associations and representative
organisations of the public sector are all members of these
organisations.
• CIE represents the interests of large-scale industry and represents
Indian employers at the International Council of Employers and at the
International Labour Organization.
 Representation 1
• Employers’ organisations in India play two
representative roles:
1. They nominate representatives of employers in voluntary or
statutory bodies set up to determine wages and conditions
of employment in a particular industry or sector and for
consultation on social and labour matters in the national and
global context.
2. They seek to redress the grievances of employers against
legislative or other measures by making submissions to the
authorities concerned.
• Employers’ associations also represent interests of
employers in various committees and institutions,
bipartite and tripartite fora, and serve as a forum for
information sharing, policy formulation and consensus
building on strategic issues.
 Representation 2
Non-union firms
• In contrast to the past, it has been increasingly common since the
1990s to find establishments with no union presence, for instance, in
software companies and in several car manufacturers.
• Employers have adopted union-avoidance tactics such as the use of
greenfield sites (which have high capital investment and technology
and lower labour intensity), offering above-average wages and
conditions, and asking employees to participate in anti-union activities

Collective bargaining
• Only about 2% of the total workforce, but over 30% of the workers in
the formal (organised) sector, participates in collective bargaining.
• In the public sector and the largest public and private sector
enterprises the figure is 70% or more.
• Legislation encourages government adjudication of disputes.
Representation 3
Historical context for industrial relations
• At the time of independence, the British gave India a legal
framework aimed primarily at dispute resolution.
• After independence, the Indian government adopted the
Soviet model of planned economic development and sought to
achieve a socialist society.
• Industrial harmony was considered a necessity for state-led
development.
• Several industries were nationalised in the early 1970s, and,
during the Emergency (1975-77), labour law changes restricted
employers’ ability to sack workers and close operations that
were no longer viable. Workers’ participation in management
was adopted as a directive principle of state policy.
• Prior to the 1990s reforms, two national commissions on
labour had recommended comprehensive reforms to labour
laws.
 Representation 4
Freedom of Association
• The constitution guarantees the fundamental right to freedom of
association.
• The right of collective bargaining is not extended to industrial workers in
government undertakings (e.g. railways, post, telecommunications).
Compensation for these workers is based on recommendations of pay
commissions appointed periodically by the government.
• National labour laws do not mandate employers to either recognise unions
or engage in collective bargaining, but some states have provisions
recognising trade unions.
• India has not ratified some ILO conventions concerning Right of Association.
Determination of a collective bargaining agent
• Determining a collective bargaining agent has been a controversial issue
historically.
• Some states have measures for recognising unions as agents in bargaining,
for example: a Code of Discipline which is common in the public sector;
secret ballots; a check-off system; and membership verification.
 Representation 5
Collective agreements and disputes
• An agreement with one trade union is not binding on members of other
unions unless arrived at during conciliation proceedings.
• This means that even if one union has an agreement, other unions can
raise an industrial dispute with an employer.
• A collective agreement is binding only for the workers who have
negotiated and signed the agreement, but a written settlement arrived
at in the course of conciliation proceedings is binding not only on the
actual parties to the industrial dispute but also on the heirs, successors
or assignees of the employer and all the present or future workers in
the establishment.
• Under the Industrial Disputes Act, disputes can be settled with or
without recourse to the government conciliation machinery. Arbitration
or adjudication follows failed conciliation.
• An ‘award’ can be an interim or final determination of an industrial
dispute by a Labour Court, Industrial Tribunal, National Industrial
Tribunal or an arbitrator. Awards are legally enforceable instruments.
• Collective bargaining is rare in the informal sector.
Representation 6
Unfair labour practices
• The Industrial Disputes Act defines the following as
unfair labour practices:
– refusal by the employer to bargain collectively in good
faith with recognised trade unions,
– refusal by a union to bargain in good faith with the
employer
– workers and trade unions engaging in coercive activities
against certification of a bargaining representative
• Breaching an industrial ‘settlement’ is punishable
under law.
• Employers use many tactics to undermine unions,
actions which are illegal but go largely
unprosecuted.
Levels of bargaining and agreements 1
National-level agreements
• Prior to the 1970s, wage boards appointed periodically
by the government set wages and conditions in some
industries.
• From the 1970s, sectoral bargaining at the national
level was prevalent mainly in government-dominated
industries (e.g. banking and coal) as well as steel,
ports and docks. This is largely still the case today.
• In pay determination, civil servants’ pay provides the
benchmark for the rest of the public sector, and public
sector pay is then the benchmark for unionised private
sector workers where collective bargaining tends to be
more adversarial and contentious.
Levels of bargaining and agreements 2
Firm/plant-level agreements
• While employers generally prefer bargaining at the
plant level, unions press for bargaining at higher levels
to increase their bargaining power.
Duration of agreements
• Duration of collective agreements increased during the
1970s and 80s, and again in the 1990s in the public
sector. Since 1997, the duration of public sector
agreements has been ten years.
• Most private sector collective agreements typically
last for three years. Public sector agreements can
have a much longer duration.
Levels of bargaining and agreements 3
Collective bargaining in practice
• In practice, most unions are highly politicised and the
government wields enormous discretionary power without
the commensurate responsibility.
• This leads to poor enforcement of the law and collective
agreement provisions, and frequently unions are co-opted
into the collective bargaining crisis by the government or
by management.
• As a result, union members do not have confidence in their
union or its ideology and do not hesitate to change unions.
Workers can choose a union to represent them without
belonging to it, can enjoy the benefit of collective
bargaining without joining a union, and unions can have
collective bargaining rights without workers’ support.
 Economic context for reforms
• There has been a paradigm shift to neoliberalism since the 1990s,
with emphasis on economic growth and foreign investment over
labour protection.
• While India was a major economic force in the 17th century, and
under British rule developed textiles, steel, engineering and other
industries, it followed import substitution policies in the 1970s and
did not partake in economic development at the same time as
other Asian economies.
• However, the information revolution in the 1980s afforded new
opportunities for economic development.
• In the last two decades, India has integrated significantly with the
global economy, but the majority of Indians remain poor.
• The country has achieved unprecedented GDP growth rates since
the mid-2000s and is improving its standing in global economic,
competitiveness and investment-attractiveness rankings.
• Education levels are poor and the government is investing heavily in
vocational skills and education.
 Current issues in employment 1
• A large majority of the workforce has suffered under the
neoliberal reforms, hence the need for a more interventionist
labour policy.
• There is over-dependence on agriculture and low prospects of
growth in manufacturing and in the organised sector.
• There is high incidence of contract and casual staff, who form
over half to three-quarters of the total workforce in some
large factories.
• There is much less employment in the public sector, which
historically has been an engine of economic growth.
• There is hope for increasing employment levels in the service
sector, but concerns over the low value that is added by IT
professionals compared with other countries.
Current issues in employment 2
Search for flexibility
• One of the catchcries of the reform movement since the 1990s has
been for greater flexibility in the labour market.
• Courts and state and national governments have responded to the
need for increased flexibility with various policy measures that also
attempt (often unsuccessfully) to maintain worker protection.
• The Consumer Protection Act 1986 prohibits worker action that
impinges on liberty and normal civic activities of citizens (so city-
wide freedom protests are not allowable if they interrupt normal
activities).
• Similarly, the right to collective bargaining was taken away from
insurance workers in the early 1980s as their agreement with their
employer was found to disadvantage the interests of policy-holders.
• Although some common law cases have also established limits on
industrial action by labour, other decisions have expanded labour
rights or their enforcement.
Agenda for labour law reform
• Most commentators believe further reforms to labour
law are needed to sustain the high growth rate
necessary to pull large segments of society out of
poverty.
• Some of the most significant areas for reform include
the need for:
– fewer laws with better enforcement
– the elimination of multiple definitions across different
legislations
– clear rules for termination of employment
– removing managerial functions from the scope of bargaining
– independent industrial relations dispute-settlement machinery
– skills development funds outside of direct government control
– a tripartite national wages council
 CONCLUTIONS

 Labour policy in India has been too narrowly focused on the 7% of the labour
force employed in the formal/organised sector.
 The challenge for the government is accommodating all workers and meeting
the plurality of needs in the labour market. The government is faced with the
paradox of having to moderate the at times excessive protection for workers
in the formal sector (forming 7% of the labour force) while enhancing
protection for workers in the informal sector (forming 93% of the labour
force).
 Improvements to education and vocational skills training are needed.
 The labour administration and judiciary lack the professional skills and
accountability to match their discretionary powers, so there is a need to build
a cadre of professionals in these areas.
 Improvements to the dispute resolution system also sorely needed.
 Tripartite negotiations on devising policies which achieve flexibility and job
security have stalled, and need to be restarted.