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Dynamics of New Industrial Relations and Postulates of Industrial Justice

Article  in  Indian Journal of Labour Economics · October 2003

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THE DYNAMICS OF NEW INDUSTRIAL RELATIONS AND POSTULATES
OF INDUSTRIAL JUSTICE
Debi S. SAINI

The developments resulting from globalization have led to the emergence of what is now
described as new industrial relations. The IR and HRM strategies are getting intertwined,
which has posed a serious challenge to trade unions almost globally, as it tends to
individualize IR through harsh as well as seemingly-soft approaches. In India too the
traditionally pluralist framework of IR is giving way to new IR in public and private sectors.
But especially in the private sector, IR frameworks are getting so structured at a covert level
that employers are finding it much easier to develop a unitarist workplace order, in spite of a
seemingly difficult IR-law framework. The notions on which the model of industrial justice in
India has been built are also under tremendous pressures of change. This paper discusses the
factors influencing changes in IR in the era of globalization; the impact that these changes
have made on people management; the contemporary position of employee collectives and
countervailing power in general; the postulates of the Indian labour-relations law framework
and the way they have been guarded or violated at a covert level or openly; and the desired
change in the role of social partners in the new scenario. It is argued that since labour
collectives can't survive without state support––and unionism is an accepted human right too–
–the Indian state needs to involve itself proactively in protecting an enlightened pluralism
along with facilitating the promotion of soft HRM philosophy by employers so as to promote
the concept of sustainable development of IR in the country. Unions too need to carve out a
change agenda by way of a compromise.

I. INTRODUCTION

As is too well known by now, in the new economy resulting from globalization policies the concern for
protectionism stands reduced to the minimum, and industry is increasingly exposed to the rationality of
global competitive forces. Employers constantly face pressure to achieve higher standards of
performance to survive in the environment that is competitive at the global level. The focus is on
getting more for less in manufacturing as well as service sectors. Generation of new knowledge, and
global implications of business operations are necessary aspects of the new economy. Capital, labour,
raw materials, management, information, technology and markets are organized on a global scale,
either directly or through a network of linkages between economic agents. These developments have
fundamentally questioned the basic premises on which industry was working in most parts of the world
before. But perhaps a greater area of concern all around is the fate of the industrial relations (IR)
frameworks that have been rooted in different types of protectionism in various parts of the world so
far. The most direct impact of the changed scene is the increased vulnerability of the workers’ interest
in the labour–management power dynamics. It reflects considerable shifts in the assumptions of
these relations. It is not a case of simple shift in power from labour to employers especially because
mortality of organizations in the new economic scenario is also on the rise. Power shift is taking place
at several levels, both covert and overt. This shift has its causal roots in the changes in various
contexts of industrial working in the new economy.

This paper discusses the factors influencing changes in IR in the era of globalization; the nature of
change taking place in the resultant IR agenda; the structural framework of IR law in India and its
–––––––––––––––––––––––––
* Professor of Human Resource Management, Management Development Institute, Gurgaon. .
compatibility with the new realities; and the dynamics involved in balancing the needs of efficiency
and social justice in the emergent scenario. It also foresees the likely impact these developments will
have on the power equilibrium in labour–management relations especially in the Indian private sector.
It is argued that since labour collectives can't survive without state support––and unionism is an
accepted human right too which too is on the agenda of all those wanting restoration of countervailing
power in society––third world countries need to involve themselves proactively in protecting the
institution of trade unions. This can be done simultaneously along with facilitating the employers’
attempts to promote HRM philosophy that they are adopting as one of the main strategies of building
organizational effectiveness.

II. KEY FACTORS INFLUENCING THE NEW INDUSTRIAL RELATIONS

Globalization can be understood in the context of several major international events which have
directly affected the organization of business as also the existence and strength of trade unions. Some
of these developments can be discussed as under:

1. Emergence of chaotic competition

The chaotic competition is one of the most obvious results of the globalization philosophy, which is
guiding nearly all business policies. Employer mortality is on the rise due to the acuteness of resultant
competition. This has led to formation of strategic alliances between major players in manufacturing
and service industries world over. Thus, mergers, acquisitions and takeovers are taking place at rapid
pace so as to secure strategic competitive advantage of oligopolistic situations in the market.
Competitive pressures also lead to attempts to switch operations to green-field sites (new locations) to
minimize costs. Being wholly new, these sites also offer management a high degree of discretion,
choice, flexibility and opportunity to introduce innovative work practices. Employers find it much
easier to influence individual and collective behaviour of employees at such sites, aimed to eventually
provide a competitive advantage to the employer.

Interestingly, in high-wage developed world, firms cope with pressures of international competition
by differentiating their products rather than by lowering wages. This results in high-wage and high-
value-added manufacturing in those locations. Such a strategy puts greater premium on employees’
skills, cooperation and involvement. Employers thus invest in their more efficacious management,
which itself in a way helps promoting fairness in employment relations. But labour in developing
countries has become more vulnerable to the competitiveness exigencies caused by the new economic
realities than is the case with workers in the developed world. That is how, these realities are the
principal determinants of the contemporary IR in India.

2. Privatization

Since public sector employees are believed to be restrictive in demonstrating initiative and commitment
in their working, its role in economic development is being minimized, eventually giving way to
privatization. For example, in the Indian context, it is now accepted as an unchallenged truth that
“over-regulation, protection, self reliance and policies of import substitution led to the neglect of
quality, cost, delivery/supply schedules and customer orientation” (Venkata Ratnam & Verma, 1998, p.
16). The adoption of these policies resulted in India becoming a high cost, low productivity economy;
which makes it more imperative to adopt the rationality of globalization. Privatization of the public
sector, however, involves complex social and economic implications. Perhaps, the main blow that it
gives is to the opinion-making class which justifies labour rights. This class is found more amongst the
2
public sector employees, who can seek a fairer compromise with the power of managerial prerogatives
of employers. This is due to the sheer reason of a sense of job security that they enjoy; this is essential
for exercise of any countervailing power. This factor surely facilitates at a moral level the strength and
organizational capability of workers in the private sector also. Further, privatization may also lead to
re-engineering and retrenchment. Especially in developing countries where unemployment is already a
menacing problem, this becomes a cause of grave social concern. Again, the potential of societal unrest
resulting from public sector employees becoming unemployed is higher for the similar reasons, which
helps in getting greater attention of the state agencies. Private sector employers invest heavily in de-
unionization activities. They covertly resort to unfair labour practices (ULPs) to weaken and break
unions, though attempting to uphold legal facades. Research involving the practice of IR in private
sector in the Indian context reveals such stories of labour disorganization process (Saini, 2003), thus
revealing greater vulnerability of labour in this sector.

3. Technological changes

In the present high-tech industrial society the adoption of new technology becomes one of the
strategic considerations of organizations. Greater demand for sophisticated and state-of-the-art
technology becomes widespread. It leads to resort to new developments in management of human
resources due to considerations of retrenchment, flexitime and teleworking. New technology may also
increase the need for organizational flexibility. In developing countries, trade unions have actively or
hesitantly shown opposition to the adoption of new technology for fear of its adverse impact on
employee solidarity. For, they fear loss of employment and also control over work processes.
However, recent literature reports that with the passage of time there is a change in their thinking in
this regard (Mamkoottam, 2003).

4. Changing work organization, flexibility exigencies and the contractualization syndrome

Large-scale changes are noticeable in work organization. One of the much-talked-about management
concepts is business process re-engineering (BPR). Hammer and Champy (1993), the originators of the
term BPR, write: “Reengineering is the search for new models of organizing work…Reengineering is
the new beginning.” Re-engineering is aimed to increase productivity and flexibility of the
organization; it also emphasizes multi-trade and flexible job. In order to fully utilize the labour
capacity, workers are trained in several skills. Various traditionally popular jobs, especially white-
collar ones, are now becoming redundant and are giving way to new roles based on reengineering.
Despite complexities involved in re-engineering dynamics, research reveals increasing labour–
management cooperation in industrial restructuring and trends towards negotiated flexibility at the
enterprise level (Venkata Ratnam, 2003).

Mass-production systems based on Taylorism and Fordism have ruled the industrial world in the
pre-globalization world. They emphasize division of labour and specialization. Customization is now
becoming the rule, giving way to what is referred to as Toyotaism or flexible specialization. This
concept is based on the principle of lean and mean production adjustable as per the needs of the
customer. Since customer is the king in the globalization era, product differentiation by employers has
substantially increased, resulting into lean customized production that forms part of Toyotaism.

Lean production also necessitates employers’ ability to engage contingent or peripheral labour
force as per their business exigencies so as to help them remain flexible. While core workers are
permanently needed in the organization for giving a kind of stability, periphery workers consisting of
ad hoc, casual, part-time, temporary and contract workers, are replaceable. They fulfill the contingent
3
business needs as and when new demands are made on the organization. Labour flexibility has become
more important today than ever before. Performance-related pay system, flexitime, and telecommuting
are also aspects of facilitating flexibility in work organization.

The flexibility management needs of business are often accompanied by adoption of unfair
procedures. In India, for example, this has led, among others, to a serious problem of lack of
implementation by employers of minimum standards of employment in case of vulnerable sections of
labour. Despite the existence of Contract Labour (Regulation & Abolition Act) 1970 (CLA), which
makes it very difficult to employ contract labour in permanent operations, a large number of employers
are resorting to employment of contract labour in several of their operations. They are doing so on a
permanent basis and not just to meet any contingencies as intended by the CLA. The justification
given by employers for this is the need for flexibility to cope with the onslaught of greater competition.

5. Emergence of new actors in industrial relations

The traditional notions of bipartism or tripartism of yester-years are giving way to IR becoming a more
composite issue. Trade unions and collective bargaining institutions are under pressure so as to take
care of all aspects concerning variegated people at work (Kochan et al., 1986); thus tending to make IR
as a multi-lateral power game. Consumers and general public are beginning to play a significant role in
these matters. Increasing concern is being shown to issues such as child labour, women’s problems,
environmental concerns, health and safety of employees and workers in the informal sector. There is
pressure for inclusion of issues such as social clause, social exclusion, social protection, social security
and social action to deal with all types of discrimination (Venkata Ratnam, 2001). The notions on
which this changed thinking is based include: faith in maintaining a power balance between social
partners, integrality, trust, and community interest. This can also be seen as a method of mustering
societal opinion in favour of the new policies by their ideologues. Thus there are attempts towards
evolving new concepts of income security, job security and social security.

III. HRM PHILOSOPHY AND SHIFTS IN INDUSTRIAL RELATIONS STRATEGIES

As can be discerned from the previous paragraph, there is tremendous pressure on the way industry
was managed in the pre-reforms era; new themes and issues have emerged to be debated and adopted.
Perhaps the most tangible impact of the emergent realities emanating from the above mentioned
developments is the primacy being put on development and management of the human resource. At the
macro level, competitive pressures in general have made governments more and more aware about the
need for investment in human capital in developing as well as developed countries (Saini, 2003a;
Zanko, 2002; Zanko and Ngui, 2003). HRD is being viewed critical to the goal of increased
productivity, competitiveness and reduced cost and even as an instrument of poverty alleviation.
Company-sponsored HRM practices are expected to play a strategic role in business performance. New
ways of working and organization restructuring are also being explored as aspects of larger HRM
strategies.

HRM is a Western term and carries a strategic connotation, quite different from traditional
personnel management; the latter is viewed as involving transactional or functional HRM (Storey,
1995; Saini, 2000; also see Legge, 1995 for a different perspective). A largely acceptable connotation
of HRM sees it as a “distinctive approach of employment management which seeks to achieve
competitive advantage through the strategic development of a highly committed and capable
workforce, using an integrated array of cultural, structure & personnel techniques” (Storey, 1995).
Thus in addition to traditional personnel management––also included as a part of HRM in the new
4
conception––this line of thinking is focusing on two additional areas i.e. structure and culture.
Voluminous resources are today being invested in developing a facilitative culture and change of
mindsets of employees in general. This is done to help employers in responding to the exigencies of
chaotic competition. But the term HRM is not a less-problematic one; it is highly contentious and is
being debated vigorously for its meaning as well as hidden purpose (see, e.g. Kamoche, 2000; Mabey
et al., 1998; Rao, 2000). In India the word HRD is largely accepted in place of HRM, though without
sufficient explanation. At the global level, HRM has come to be understood both in its hard and soft
connotations; while the former reflects a crude instrumentalism the latter signifies developmental
humanism (Saini, 2000; Price, 1997). Hard HRM––also known as the instrumental approach to HRM–
–underscores primacy on employee control, labour efficiency, and cost-minimization. In a soft sense––
also known as the empowerment model of HRM––greater emphasis is put on the practice of the new
themes in OB/HRM field. Much of contemporary HRM interventions involve the practice of these
themes. With the emergence of new themes in this area, the study and practice of HRM is increasingly
being dominated by psychologists and organization behaviour (OB) specialists. Some of the emergent
HRM themes that affect IR dynamics in organizations include: pursuit of new IR, management of
flexibility, employee involvement, behaviour modification, culture building, diversity management,
developing learning organization, transformational leadership and change management, and
empowerment. These themes are being practiced more in professionally managed organizations and
multinational corporations.

Due to the widespread practice of HRM in all its versions, the discipline of traditional IR has
perhaps got the most severe blow; so much so some scholars have begun writing its obituary due to its
potential of individualizing IR (Looise, and Riemsdijk, 2001). What is emerging is referred as the new
IR, the realization of which is considered as a part of the HRM strategy. The adoption of HRM strategy
by an organization often includes a mixture of hard and soft interventions, depending on the situation.
The new IR epitomizes a substantial attack on the basic postulates of pluralism in workplace
governance in most parts of the globe..

As is apparent from the literature, till about 15 years ago, the discipline of personnel management
and industrial relations (PM & IR), the predecessor of HRM, has been the stronghold of labour
economists, industrial sociologists and labour law scholars; psychologists have now been brought into
it by the super-ordinate goal of behaviour modification so as to secure consent of all concerned to the
management-sponsored change agenda. IR research in the PM & IR era has been mainly dominated
with issues such as class conflict, trade unions, collective bargaining, industrial disputes resolution,
labour welfare, social security, administration of labour laws and participative management. In the vast
unorganized sector, where cost-competitiveness through employment of casual and peripheral
employees is an important determining factor, HRM is practiced in its hard version. In this sense, new
IR reflects greater employer control as well as attempt to dilute class consciousness through
individualization of contract of employment. Some important questions that form part of the hard–soft
debate that is going on in the developed world include: what is the role of unionism and CB in the new
economy; how are values of freedom of association, CB, labour welfare, labour legislation and workers
participation in management (WPM) being seen in the new paradigm; and in what way is the changed
order being promoted in industrial organization. Literature is now replete with perspectives of
redefinition of the IR agenda. One of the key goals of the present HRM strategy is development of
cooperative CB. Newer ways of communication, empowerment and motivation of individual
employees are being used to promote union-disempowerment goals.

The practice of HRM agenda, which signifies merger of IR strategies in it, has led to revamping or
even marginalization of IR and CB. The literature reports a fairly steep decline in the incidence of
5
unionism in most parts of the globe. In the Indian case, only about 2 per cent of the total workforce is
able to derive benefits of any collective agreement; which s about 30 per cent of the workers in the
organized sector (Venkata Ratnam, 2003, p. 22); some others consider just one per cent (Mishra, 2001).
Whatever it may be, this is sure that the percentage has declined over the years, and is threatening to
decline even in absolute terms due to massive downsizing effected by most organizations, as also due
to a much slower growth in the organized sector employment. These realities help promoting
cooperative bargaining that has come to stay as a new IR agenda. We are going to witness an era of the
demise of adversarialism that is associated with the traditional CB of yester years. The analyses of
trends in CB show that cooperation has become as much the need of the employees as it is of the
employers.

IV. THE DE-UNIONIZATION AND COOPERATIVE-BARGAINING DYNAMICS IN THE

NEW SCENARIO

HRM strategies invariably act as de-unionization devices in almost all parts of the globe. In the
post-Reagan USA union membership dropped to below 16 per cent of the total labour force and to 12
per cent of the private sector labour force in 1994 (Kochan and Weinstein, 1994); it further dropped to
14 per cent in 1997 (D’Art and Turner, 2003, p. 229). Table 1 representing one of the most recent
union data in the Western world shows decline taking place in union density almost all over in 1997
compared to 1980, except some of the Scandinavian countries. In Scandinavian countries there exists
provision for automatic recognition of a union. Also, this has been supported by favourable political
climate for union legitimacy in these countries which is responsible for increase in union density.
There is tremendous pressure on union membership in the Indian case as well; presently a mere 7 per
cent of Indian workers are working in the organized sector (Saini, 2003a), and a major portion of them
belongs to public sector employees, which is facing the pressure of privatization. Membership of
unions that are submitting returns is still low; as per the latest estimates it is barely 2 per cent of the
total workforce in India. Over 47,000 unions in the country have a membership of 6,329,000. As per
the estimate of a former labour secretary of the central ministry of labour, the number of members
covered by collective agreements in the country is barely one per cent of the total work force (Mishra,
2001, 20).
––––––––––––––––––––––––––––
Table 1 about here
–––––––––––––––––––––––––––––––
India has not resolved the question of statutory union recognition despite a 55-year-debate on this
issue. Recognition is still largely guided by voluntarist procedure and is not justiciable by any quasi-
judicial forums, which I believe is also one of the reasons for low density of unions. The protagonists
of HRM claim that soft HRM strategies themselves have a great potential of rendering workplace
justice; they are also seen as becoming instrumental in a more efficacious realization of organizational
goals. Leading firms in the advanced world, therefore, have carved out such empowerment strategies of
managing the human resource as models of workplace justice. This eventually leads to
individualization of IR. The possibility of the use of empowerment strategies of HRM is, therefore,
brighter in such countries, even as some IR scholars have often labelled empowerment devices as part
of a “managerial propaganda offensive” (Hyman, 1999, p. 109). At the same time, researches in the
Western context have begun to question these claims, and have found that the projected claims of HRM
are suspect and the realized aims are those which are hidden (Mabey et al, 1998; Kamoche, 2000).

At reported by the John T. Dunlop Commission Report in the USA there is an increasing tendency
on the part of employers towards weakening or busting unions so as to promote organizational
flexibility and competitiveness (US Department of Labour, 1994). In developing countries like India
6
too, despite the existence of a comprehensive labour law framework its implementation in the private
sector leaves much to be desired (Saini, 1995). Both proactive and reactive methods are being used to
dilute union efficacy. This process is visible with much greater intensity after the failure of the Bombay
textile strike of 1982 which lasted more than a year, and officially has not been withdrawn even today.
After this defeat of labour, management in general has been able to bring about a sea change in the
concept of collective bargaining; it is now less and less on industry basis and more on unit basis
(Business India, 1998).

One device used to dilute legal protection to job holders in India is to re-designate their jobs so as to
take them out of the ambit of IDA, which is the principal central law for adjudicating interest as well as
rights disputes between labour and management. The new designations that are being used include:
officers, junior executives, supervisors, etc. Under the Indian labour laws non-workers don't enjoy
almost any legal protection against acts of unfair termination nor can they espouse disputes before the
disputes’ settlement machinery created by the IDA. Interestingly, the nature of work of these
employees remains the same as before.

Many employers have comprehensive human relations programmes touching every aspect of
workers’ lives and their families. This is typically known as the IBM model of union avoidance. This
model, of course is known to be a viable alternative model of industrial justice. Tata Steel has also
successfully used this type of paternalism in managing change at Jamshedpur, though along with union
sustenance. In India, among others, Jindal Aluminium Ltd. in Bangalore has successfully followed
IBM type of non-union policies (Patil, 1998).

As noted above, the incidence of unionism is declining. The number of strikes resorted to is much
less than the lockouts, (Business India, 1998; Mishra, 2001; Sen Gupta and Sett, 2000). These
developments have also reduced workers’ resistance to change to the new HRM initiatives. Still there
are some stories of working class success in resisting the individualization of IR through devices such
as HRM in the private sector (Ramaswamy, 2000, p. 219). But as revealed by some of the researches,
unions are increasingly cooperating in the change process both in the private and the public sectors
(Ramaswamy, 1994; Venkata Ratnam, 2003).

Though Indian Legislature has not brought about any of the oft-repeated changes to rationalize IR
laws so as to be in consonance with the new realties, changes are discernible in the government’s
attitude at the executive level. Many state governments have announced significant changes in their
labour policies, which henceforth appeared sacred cow in favour of workers. State governments are
showing greater concern for attracting industrial investment by giving tacit support to: hire and fire
policies; forbidding of bandhs as happened in the case of Kerala; and easing of requirements for labour
inspection, for example, in Rajasthan. West Bengal government (which is headed by a Marxist Party)
has cancelled registration of hundreds of unions for non-submission of returns to the Registrar of Trade
Unions, which is contrary to its earlier position. Also, a rising incidence of granting permission for
closure and retrenchment (as required under the IDA) is visible in many states including Tamil Nadu
(Venkata Ratnam, 2001).

Some evidence is available on the type of changes that have taken place due to the policies of new
IR on the incidence and type of unionism, the type of collective bargaining (CB) and the implications
that these changes will have on the shape of IR in India. Some micro-level studies have been carried
out by Indian scholars to analyze the post-liberalization scene of changes in the pattern of CB. Among
others, these studies include those by Mathur (1991), Mamkoottam (1999), Bengal Chambers of
Commerce (1998), and AITUC (2001). However, Venkat Ratnam’s (2003) recent study of 234
7
collective agreements in public and private sectors that were signed in 10 years following the new
economic policy gives a clearer larger picture that is emerging in the new IR. It unravels the
dynamics of the processes through which the adversarial bargaining of the welfare state era is giving
way to cooperative bargaining. It nutshell, he has analyzed the impact of negotiated changes on
restructuring, modernization, flexibility and productivity. Among others, his findings include some
important shifts taking place in the IR scene. These shifts are from centralized to decentralized
bargaining, collective to individual contracts, conjunctive bargaining to emphasis on productivity
bargaining, employee-focused agreements to consumer and community-oriented agreements, and 3 to 5
years agreements to 4 to 5 year agreements. While the salutary signal is that there is greater degree of
cooperation between labour and management and thus of industrial peace, but one needs to know more
fully the dynamics of dis-empowerment that has undergone in the above situations. Qualitative
research needs to be undertaken to unravel a fuller view of the structures and processes that are
bringing about the new results. This can facilitate evolution of a more articulate agenda of IR law
reform so as to be in consonance with the projected aims of the country’s labour policy and
international labour standards which India has endorsed formally or impliedly. Overall, however, the
signals are discouraging for the survival of the countervailing power in economy and society, even as
some scholars opine that HRM ideology and industrial pluralism can fundamentally survive together
(Storey, 1989). But that requires a proactive state involvement towards this end, like something that is
being expected of the Labour Government in the UK. For example, the Employment Relations Act,
2000 there provides for statutory procedure for union recognition, which is a shift from the earlier
voluntarist procedure and, I believe, will be good for the British working class solidarity (D’Art and
Turner, 2003, p. 228).

V. THE AMBIVALENT FRAMEWORK OF INDIAN LABOUR-RELATIONS LAW

Labour relations law in any country rests on the basic postulates of the notions of industrial or
organizational justice that are acceptable in a society. In developing countries one of the aims of IR law
that is frequently emphasized is ensuring industrial peace. The most basic labour right conferred by any
IR law is the workers’ freedom to organize into unions, and have the unions recognized by the
employer. After this first hurdle is over, the real strength of labour vests in its ability to exercise the
following rights: collectively bargain with the employer so as to secure for its members a just sharing
of the gains of industry; prevent employers to commit any unfair labour practices in dealing with them;
and secure fair labour standards and dignity of work life for its members. The degree and nature of
state involvement in IR differs very widely from country to country. A variety of models of industrial
justice have been adopted at the global level, which range from powerful corporatism in continental
Europe to voluntarism of the type of classical Oxford school of IR in pre-globalization UK to vigorous
legalism and state involvement in USA to almost complete absence of labour laws in some parts of the
developing world where authoritarian IR situation is the rule. In between find place most other
developing countries like India and others in South Asia which are industrializing in the face of
massive under-employment, but yet seek to confer bargaining rights to those who are capable of
exercising these rights.

The Indian IR model is marked by a comprehensive legal framework for labour in the organized
sector and almost negligible regulation in the unorganized sector even as the organized sector employs
only about 7 percent of total workforce in the country (Saini, 2003a). There is almost no social
security benefit for the unemployed. Other features of the system include: compulsory adjudication
system for interest as well as rights disputes through state involvement; collective bargaining in the
shadows of adjudication; widespread state presence in IR in the name of social justice dispensation;

8
high incidence of unfair labour practices by employers in collusion with state agencies mainly to
secure union avoidance or their weakening.

Unionism has been projectedly accepted as a fundamental societal value through the Trade Unions
Act, 1926 (TUA) and Article 19 (1) (c) of the constitution. The TUA should be understood as a
supplement to the Industrial Disputes Act 1947 (IDA). The IDA is the principal central law that
regulates industrial relations by providing a machinery for prevention and settlement of industrial
disputes, regulates strikes and lockouts, and envisages some social protection to workers in cases of
retrenchment, lay-off and closure. The TUA and the IDA are important legal instrumentalities that
shape the course and direction of IR in the country. As per the existing framework recognition can be
gained by a union only through a show of its strength, and can not be adjudicated by Tribunals or
Labour Courts constituted under the IDA. In the present conditions, a large number of unions get
wiped out in the process of seeking recognition, as a good number of unfair labour practices (ULPs) are
committed by the employers during the process of giving and denying recognition (Saini, 2003).

The IDA envisages compulsory adjudication of industrial disputes––both interest and rights––when
parties fail to agree and the government decides by way of a reference that the dispute should be
adjudicated. This law has now worked for more than half a century, and has promoted a state crutch for
unions, who have learnt to live in its protective shadows. This state paternalism has no doubt made
unions weak and susceptible to bureaucratic meddling, inertia and manipulations in IR (Saini, 1997).
As noted earlier, only a microscopic part of the total workforce enjoys the benefit of collective
bargaining, most of which is from the government and public sector.

The influence of the adjudication system is so overarching that voluntary arbitration in IR is almost
dead in the country. Collective bargaining, conciliation and arbitration of industrial disputes take place
in the dense shadows of the adjudication system. The time taken in adjudication of collective-demands
cases, on an average has been found to be between 37 to 49 months, which causes tremendous
disappointment to workers (Saini, 1997; Upadhyay, 1995). Unions, therefore, are much inclined to
settle at the employer’s terms rather than waging a struggle for their demands.

Industrial disputes resolution processes have shown a very high incidence of delay, formalism and
inaccessibility (Saini, 1997). Consequently, the projected goals of IR adjudication have been realized
only to a very limited extent. The system has not checked the commission of ULPs by the employers,
which take place on a grand scale. Nor has it been able to protect union leaders against unfair
dismissals by employers for indulging in trade union activities. Interestingly, instead of resolving
disputes an important role of labour tribunals, in effect, is providing legitimacy to the union-smashing
exercises of the employers (Saini, 1995). Unlike the projections made by this law, the IDA in actuality
has been helping the employers more than the workers. This result is also achieved through the resort
to ULPs by employers with the state overlooking them and through the use of legal consultants who
suggest as to how law could be molded to project impressions of fairness. To stem the rot, several
commissions appointed by the Government recommended replacement of the present IR law by one
envisaging autonomous multi-member Industrial Relations Commissions (IRCs) to facilitate
efficacious resolution of industrial disputes and promote collective bargaining, and to eventually
replace the former by the latter as a basic feature of the IR model (Government of India, 1969; 2002).
But the state has not done anything in this direction even after 50 years of debate; though there have
been failed attempts.

In the midst of poor implementation of IR laws countervailing power of unions already stood
weakened. On paper of course they appear pro-labour. But there have been cases where employers

9
found it difficult to impress upon strong unions the need to carry out changes in workplace governance
as per the needs of re-engineering and flexibility. While facilitating foreign direct investment (FDI) in
any country, which is one of the key objectives of globalization in the developing world, multinational
companies have shown hostility to seemingly archaic laws. Therefore, need for labour law reform is
being aired right since July 1991 when globalization policies were adopted or even earlier.
Considerable pressure came on diluting the efficacy of labour laws so as to give way to the needs of
organizational flexibility. While on the one hand a serious problem from workers point of view is the
non-enforcement of labour laws due to acts of collusion between employers, bureaucracy, labour law
consultants, and even union leaders especially in the private sector (Saini, 1995), on the other hand,
comparative progressive employers have been asking for adapting these laws to the needs of the
changed times. Interestingly, even with more than a decade of globalization, the Government could not
affect changes in labour laws. This has perhaps been due to the fragile political configurations at the
central government level and a deep intertwining of the trade unionism with political parties (Saini,
2001). However, through its executive power in IR the state policy has taken a reverse turn––from
pursuit of social justice to promotion of organizational flexibility. This is more at a covert level even as
the Government continues to speak of globalization with a human face. But this remains full of
uncertainty for professionally-minded employers who do not want to indulge in shenanigans and
illegalities.

The change in Government attitude should be understood in the context of a switchover of the
development model from import substitution to one of export promotion. These developments have
given signals of the winding up of a debate on methods of strengthening collective bargaining that had
been going on for more than 50 years. Collective bargaining in the private sector has already been
weak in view of the dense shadows of the adjudication system; but as noted in the previous paragraph it
has been further declining, far more steeply, in the post-globalization phase. The real question is how
to adjust the traditionally unresolved IR issues such as making the IR law framework more autonomous
through evolution of forums like Industrial Relations Commissions (IRCs) with fresh IR issues like
win–win negotiations; more responsible unionism to facilitate rationalities of globalization; and
preventing erosion of union density. This will necessitate articulating the context in which the two sets
of issues are being debated. More particularly, this would mean compromising demands of equity and
productivity issues, which is discussed in the following section.

VI. BALANCING EFFICIENCY AND LABOUR JUSTICE IN THE INDIAN SCENARIO

Since Independence the development of Indian industry has been marked by controls and directions
exercised as per the statist philosophy. The IR law framework was also a kind of regulatory framework
though for securing social justice. In that scenario, the main actors in IR have been the employers,
unions and the state. In the sphere of economic development the model did facilitate in securing several
fundamental benefits in different spheres. Overall, however, the statist model resulted in bureaucratic
corruption, lack of competitiveness in the world market, insufficient attention to quality, rigid mindsets
and resistance to change on the part of labour, and waste of national resources through losses by public
sector organizations. Overall, Indian business has remained much below world class; several factors
have contributed to this scenario. These include: lack of aspiration to be world class, lack of vision,
lack of professionalism, lack of process sensitivity, sense of collective paralysis, lack of cost
consciousness, little respect for time, among others (Prahlad, 1999; Saini and Budhwar, 2003). Most
enlightened employers were aware of these limitations. They also realized a greater need to tackle the
problem of outdated technology, excessive workforce, inadequacy of skills, and lack of concern for
customer satisfaction, and unsatisfactory levels of productivity. Tackling these problems necessitated
reorienting management systems and processes apart from bringing about attitudinal changes amongst
10
employees in general. The government also sought to help labour affected by the NEP by promising
the setting up of a skill-development programme through establishment of a National Renewal Fund
(NRF). This can be seen as an attempt for empowering labour in the new scene; but NRF was mainly
utilized to finance voluntary retirement scheme (VRS) in the public sector; and skill enhancement
promise has not been treated with any systematic priority (Saini, 2003a). These hard macro realities
have co-existed along with programmes of HRD at the individual enterprise level in public as well as
private sectors. In today’s economic environment skill upgradation should therefore be viewed as an IR
issue due to its importance for a well developed HRD programme.

When we juxtapose the issues of IR law goals of securing social justice to the working class with
needs of efficiency as per the demands of globalization exigencies, some of the most controversial
issues that come to be debated relate to chapter V-B of the IDA. Among others, it asks all employers
employing more than 100 workers in factories, mines and plantations to seek permission from the
Government in matters of lay-off, retrenchment, and closure. Section 9-A of this Act is another area of
debate. Technological updation and rationalization leading to change in service conditions of workers
need prior notice to be given to them as per this section, which has resulted in their resistance to such
moves. These provisions are difficult to sustain in an economy exposed to global competition and need
to be repealed. Today’s world belongs to the major economic players––a syndrome referred to a
“triadization” i.e. economic exchanges and interrelationships involve the three most developed regions
of the world: Western Europe, North America and Japan and the South-East Asian newly industrialized
countries. This concept excludes from the global economy countries of Africa, most parts of Latin
America and Asia and substantial parts of Eastern Europe and the former Soviet Union as they have a
very low share of the foreign direct investment (Leisink, 1999, p. 6; Szell, 2001). The real problematic
issue is adapting the IR law frameworks of these countries to the needs of changing times, and
without being pedantic about the projected goals of labour legislation of yesteryears. Thus the goal of
reforming IR law so as to promote adversarial collective bargaining in these countries is surely
Utopian, and should be admitted to be written off. The future reform agenda is bound to be written in
terms of developing win–win approaches in IR. It is a real challenge as to how to salvage unionism in
this dispensation.

It is also interesting to ask, how the social partners have reacted to the new developments in the IR
scenario and where we are heading. India as a democracy has hard-earned the internalization of values
of association and countervailing power in its politico-economic framework. These values have been
looked as important human rights and not just as mere democratic rights. Academics in the West have
forecast possibility of major social tensions in the coming decades if industrial pluralism declines at
the current speed (Towers, 1997; Szell, 2001). The activation of the World Social Forum remind us
these possibilities. Replacing workplace pluralism by superimposing cooperation values through HRM
may perhaps work more successfully if we have a major chunk of workforce as gold-collared. The non-
union IBM model of industrial justice dispensation, therefore, is more palatable in case of high
technology–high wage situations that are found to be practiced in countries who have been the biggest
beneficiaries of the emergent global economic policies. Especially, the USA and the UK are believed to
be in this category of countries. But this is unlikely to be the case in developing countries such as India,
given the state of the technological level of the country.

The present priorities of the Government of India are well-known. It puts supremacy on success of
the reform agenda above anything else. In the terms of reference of the second National Commission
on Labour, there was no mention of some of the core issues in Indian IR which have been debated for
decades. There is also no reference in it to the place of pluralist institutions in industrial relations
(Government of India, 2002). In fact, the debate on IR law reforms on the lines projected thus far itself
11
is tending to die down despite scholars wishing to identify its existence (See, for example, Sen Gupta
and Sett, 2000).

It thus appears to be paradoxical to talk of reconciling the traditional postulates of industrial justice
with the new realities of workplace functioning. The moot question now is which model of industrial
justice, and to what extent, can preserve the “dignity of labour in its own right and whether the quality
of social life can be prevented from deteriorating in the ongoing process of global integration”
(Breman, 1995); and if middle path is a necessity in evolving a suitable model of IR what should be its
basic features to guide its detailed framework.

VII. IN VIEW OF A CONCLUSION: POINTERS TOWARDS A COMPROMISE

The discussion in this paper leads towards a dismal scenario for labour in general in the new economy,
and still more dismal in developing countries including India. All out efforts are visible at various
levels to dilute or even take away the countervailing power of labour collectives––openly as well as
covertly. But in the Indian context, it is important to remember that it is the largest democracy in the
world; and pluralism in IR in such countries should be seen as aspects of development of democracy in
general. In view of the contemporary political realities, it is also apparent that the Indian state cannot
take revolutionary steps in changing the pre-reform framework of labour laws to suit the needs of
employers lest it appears anti-labour. And we have seen, the pro-labour projections of the present
framework of labour laws, in actuality, has worked out to be more a myth than a reality in most cases.
Yet the projected irrationalities have to be resolved to give clear signals of seriousness to the different
players in the globalizing world, which may have to wait till the fragility in the political configurations
at the central level is tackled.

At the same time, the working of the reform process has to be adjusted to give way to these higher
order priorities and not just to the rationality of market forces. As has been rightly observed, India
needs to “strike a balance between Western (North America and West Europe) and eastern (China,
Japan, South-East Asia and Far East) models of industrial relations with a view to developing the so-
called ‘middle path’ that marries the imperatives of globalization” (Venkata Ratnam, 2001, p. 73).

Keeping in view the compulsions of globalization exigencies, India needs to make its labour law
framework realistic. There is a need to suitably amend the IDA provisions related to retrenchment and
lay-off in Chapter V-B and section 9-A so as to facilitate a realistic introduction of change in employee
service conditions. The framework of laws like the CLA also needs to be re-examined so as to focus on
ensuring adherence to minimum standards of employment rather than total denial of employment of
contact labour. The IR law discourse should focus on salvaging unionism and strict enforcement of
minimum labour standards. The plight of contact labour is pitiable not because of the absence of labour
law framework but due to the lack of willingness on the part of the state and its agencies to enforce
them. If the labour laws are reasonable and practicable, their implementation will be easier. We need to
think of evolving a system where collaborative efforts are needed for stopping the dehumanization of
work by employers in collusion with state agencies. Not just the trade unions but the NGOs, self-help
groups and even consumer organizations too have to play an important role. For example, in the
Western world they have been able to pressurize multinationals like Nike, Reebok, Levi Strauss to
observe labour codes, to respect the right to organize, to ban child labour and to ensure payment of
minimum wages (Leisink, 1999, p. 22).

The globalization syndrome places trade unions in a tight spot. To cope with the situation they have
to redefine their structures and role. It is being advocated that there may develop a new style of global
12
social movement unionism (Lambert, 1999). In this regard, it is also argued that in order to retain
bargaining power, unions have no choice but to “put consumers’ interests first, company’s interest
second and their members’ interest third” Venkat Ratnam (2003, p. 246). They have to engage
themselves in internal dialogue and elaborating worker-oriented meanings of concepts such as
“flexibility, security and opportunity” that are being shown to workers as methods of promoting the
trickle down (Hyman, 1999). Unions also need to understand the changed realities for employers. The
decline in unionism in USA is steep due to their continued hostility towards employers in the new
economy (Mamkoottam, 2003, p. 145). In India since unions are oligarchic, hierarchical and highly
politicized, adjustment to their new role is going to be a complex process. To be effective in the new
economy, they have to learn to work more as network organization to cope with the new challenges,
making use of new modes of information and communication. In fact, considerable thought process is
needed in terms of viable suggestions to the three social partners to adapt themselves to the new
realities. Building an enlightened society is to remain supplementary to any model of economic
working. This essentially requires reconciling the goals of adapting to the changing global business
environment and salvaging unionism as a countervailing force.

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15
 Table 1: Trends in Union Growth & Decline 1980-1997
Approach Country Union Density Union Density % Change
1980 1997 1980 to 1997
––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––––
UK 51 33 -18
Voluntarist
approach Ireland 60 50 -12

Australia 50 30 -20

New Zealand 48 23 -25

Statutory USA 20+ 14 -6

union
recognition Canada 38 34 -4

Scandinavian Sweden 78 86 +8
Model
Denmark 79 76 -3

Finland 69 78 +9

Norway 55.2 54.8 -0.4

(The density figures reported here refer to the employment density of union membership, that is trade
union membership as a proportion of employees at work)
Source: Art and Turner (2003).

16

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