Critical analysis of managerial prerogative

- Manal Naseem
20181BAL0028
Introduction

The terms "employer prerogative" and "managerial prerogative" are freely used by employers
and trade unions. The management of an enterprise may, for instance, refuse to bargain about a
particular matter with a trade union on the ground that it forms part of "management's
prerogative". A trade union may demand that management bargains with it over a particular
matter as, according to the union, it does not form part of "management's prerogative.

The term "prerogative" denotes a right or privilege which belongs to a particular institution,
group, or person. The term is commonly used in labour law and constitutional law. In the sphere
of labour and employment, "prerogative" is usually taken to refer to the "right to manage" an
organization. It refers to the right to make decisions regarding the aims of the organization and
the ways in which it will achieve these aims.1

Meaning of managerial prerogative

A doctrine that says every employer has the inherent right to regulate, according to his own
discretion and judgment, all aspects of employment including rights like

 The right to hire

 The right to dismiss
 The right to transfer
 The right to promote and demote
 The right to discipline
 The right to lay down policies
 The right to establish working hours
 The right to organize and reorganize
 The right to reasonable return on investment

1
https://www.mcser.org/journal/index.php/mjss/article/view/3750
  The right to expansion and growth

Managerial prerogatives are rights or privileges of the management of an enterprise to take and
act upon the decisions affecting the running of an enterprise and therefore, there are certain kind
of rights flowing from the employee to the employer –

1) to assign and direct workforce,

2) to discipline employees for just cause,

3) to increase / reduce workforce in support of the firm and based on available money,

4) to decide products availability, price, method.

The manner of effectuating rights of management has significantly transformed with recognition
of trade unions and legitimate and binding character of collective bargaining.

FOUR RECOGNIZED FORMS of rights and obligations flow between an employee and
employer.

1. Employer's right to select an employee.

2. Employer's right to pay wages or other remuneration.

3. Employer's right to control the method of doing the work, and

4. Employer's right of suspension or dismissal or transfer of the employee2

Why is this prerogative given to managers?

This is a right provided to employer or management because the employers have right to return
of investment, also the employers right to control and manage its enterprise effetely and the
employers right to expect from its employees not only good performance, adequate work, and
due diligences, but also good conduct and loyalty.

2
https://en.wikipedia.org/wiki/Managerial_prerogative
 Managerial Prerogative or Management Rights can be said to be the employer's right to take
decisions in furtherance of operational objectives and to determine how these objectives will be
executed. Such privilege arises on grounds of –

• the management’s discretion of the method of generation of revenue;

• from the business danger in regards to the operation of the endeavour; or,

• from the coordination of the specialist in the "work social order of the endeavour.

• The managerial prerogative lies in the lower rank of the sources forming the labour
relationship. Its limits are derived not only from the labour contract, but also from the
remaining sources of labour law. The managerial prerogative must not be worked out
abusively.

• Its exercise, having a functional nature, should serve the objective interest of the
undertaking and exercise of such prerogatives must be in good judgment. It must serve as
a mechanism to co-ordinate the skills, effort and activities of its members so as to attain
its goals.

• According to the good faith principle the employer must consider the interests of all
stake holders - along with the interest of the undertaking, the interests of the workers, and
also should respect the equal treatment principle. 3

What is the need of managerial prerogative?

The need for some form of managerial prerogative is based on the fact that in any organization or
enterprise a mechanism must exist to co-ordinate the skills, effort and activities of its members
so as to attain the goals of the organization or enterprise. Some person or body of persons within
the organization or enterprise must have the power to decide which methods are going to be
utilized to achieve its purpose, to allocate functions and duties to members of the organization
and to supervise their activities. Where such powers have been afforded to more than one person,

3
https://www.researchgate.net/publication/
270941816_The_Concept_of_Managerial_Prerogative_in_South_African_Labour_Law
this body of persons will usually exercise its powers within the limits imposed by the
hierarchical structure of the organization. 4

Trade Unions Perspective on managerial prerogative

Trade unions views on the extent or scope of employer prerogative differ from those of
employers as they have other interests to protect and advance.

A trade union's prima function is to protect and further the interests of its members, the
employees, whereas an employer seeks to promote the enterprise's and owner’s interests. It
appears that most trade unions hold a pluralist view of industrial relations and that they regard
collective bargaining as the factor which restricts employer prerogative. They seem to accept that
the business or economic sphere of the business should be left to management but insist that
matters which concern the employment relationship such as wages, job security, job safety and
health, scheduling of shifts, job content and the transfer of workers must be subject to collective
bargaining.

The major difficulty which employers and trade unions experience during negotiations is to
reach agreement on the scope or range of matters which form part of the employ relationship and
consequently should be subject to collective bargaining. Some trade unions have insisted that
certain aspects which are generally regarded as part of the business sphere of an enterprise
should be subject to collective bargaining where they impact on employees and the employment
relationship.

Although most trade unions hold a pluralist view of industrial relations, there are a substantial
number which hold a so-called radical view. From a radical perspective, pluralist values are seen
as reflecting merely a more sophisticated mode of maintaining an unacceptable system which
witness’s wealth and ownership increasingly concentrated in the hands of employers at the
expense of the employees who do not receive wages commensurate with the wealth they
produce. Unions which subscribe to the radical view, demand to bargain in respect of both
spheres of an enterprise. They argue that the imbalance in power will not be restored as long as

4
http://ijlljs.in/wp-content/uploads/2014/10/K.pdf
they are prevented from bargaining collectively over issues which belong to the economic or
business sphere of the business5

What are the limitations on the exercise of management prerogative?

1. It must be exercised in good faith.

2. It must not be tainted with unfair labor practice.
3. The exercise of management prerogative must be within the limitations set by law.
4. It must be within the limitations set by the Collective Bargaining Agreement.
5. The exercise must be consistent with the principles of fair play and justice.6

Sections that put restrain on managerial prerogative

The industrial dispute act 1947 contains some provisions which restrict the managerial
prerogative. The provisions under section 11 A, 33 AND 33-A contains provision related to
restriction on managerial prerogative.

Sec 11 A talk about relief in case of industrial dispute relation to dismissal or discharge where
the court can set aside dismissal or discharge if dismissal is not justified or can even ask for
awarding lesser punishment in regards of dismissal and discharged.

Sec 33 talks about during the pendency of any industrial dispute the condition of service ae to
remain unchanged here condition of service means and condition that effect the employee
negatively.

Sec 33(1) applies during the pendency of any proceeding before conciliation officer and
conciliation board or arbitrator or labor court or tribunal or national tribunal

Sec 33(1) (a) the employer shall not alter the conditions of service to the prejudice of the
employee, Condition of service may be alter if in favor of workmen and only those matter which
are connected with the dispute cannot be altered other matter can be altered.( the matter should
be pending in court)

5
https://www.researchgate.net/publication/
270941816_The_Concept_of_Managerial_Prerogative_in_South_African_Labour_Law
6
https://heinonline.org/HOL/LandingPage?handle=hein.journals/cllpj30&div=24&id=&page=
Sec 33(1) (b) the employer shall not discharge or dismiss or punish for misconduct connected
with the dispute any workmen concerned in such dispute

Sec 33 A if other employer contravenes the provision of sec 33 an employee aggrieved by such
contravention may make a complaint in writing.

Restraints on managerial prerogative.

Managerial prerogative are the special rights or discretions powers enjoyed by the employers in
relation to their employees. The employer being the principal of the organization has the right to
manage its employees in a way which it think are necessary to achieve their objective.

But managerial prerogative like any other right is not absolute and have some exceptions to
restrict the employees from using the rights in a manner detrimental to the interest of the
workmen.

The management hotel imperial v. hotel worker’s union7

There was a dispute between the hotel imperial and their 22 workmen. The dispute was left
pending. After a disciplinary inquiry set up by hotel management the workmen are held guilty
and later an application was filled asking for permission for the dismissal of the workmen. While
the application was still in process the hotel suspends the workmen.

The issue that arose is whether any suspension allowance was at payable to the suspended
workmen during the pendency of permission u/s 33 to dismiss them? And Whether the industrial
tribunal was competent to grant interim relief to suspended workmen?

It was held by the court that a Contract of employment have to be considered. If employer has
held a proper enquiry and came to the conclusion of his dismissal, then he has the power to
suspend the employee without diving him any suspension allowance. Logic was No work, no
wage. But the industrial tribunal can grant interim relief to the suspended employee because the
tribunal has the power to beyond the relationship of master and servant.

After this decision the second case of Fakirbhai Fulabhai Solanki v. Presiding Officer 8 the court
held the following in similar matter. If employers have the right to suspend then the employees

7
 1959 AIR 1342, 1960 SCR (1) 476
8
AIR 1986 SC 1168, 1986 (52) FLR 688, 
also have the right to suspension allowance. During suspension, the relationship between master
and servant don’t end. Suspension allowance is required to enable the employee to maintain
himself and his family and meet litigation expenses. If it is not paid, then it will lead to violation
of principles of natural justice

In case of Ram lakhan v. Presiding Officer9 the court held that, there is no conflict between the
decisions given by court in hotel imperial case and fakirbhai Case. Employer has the right to
suspend and employee has the right to get suspension allowance/Subsistence Allowance.
Subsistence means a minimum livelihood. Management can afford to wait for the disposal but an
employee can’t. if employer fails to pay the subsistence allowance his application is liable to be
rejected.10

Conclusion and suggestions

According to major industrial relations writers both employers and trade union regard collective
bargaining as one of the most important factor which have but certain restriction on managerial
preoperative although there are exceptions like Allan Flanders who also regard the law as an
important restricting factor. The labour law exponents, however, consider both collective
bargaining and the law as important restricting factors of managerial preoperative.

There is no doubt that Collective bargaining undoubtedly plays an extremely important role in
the restriction of managerial preoperative, particularly where trade unions and employers hold a
diverse view of industrial relations. But inextricably linked to collective bargaining and its
effectiveness in the restriction of managerial preoperative is economic power.The stronger the
economy, the stronger trade unions' bargaining power, the greater the impact on employer
prerogative. The law also plays an extremely important role. Although the legal basis for
employer prerogative is the contract of employment, the contract itself may also restrict
prerogative. This will occur where the parties agree to terms which effectively restrict the
managerial preoperative.

9
Civil Appeal No. 6566 of 1999 (Arising out of SLP(C) No. 11912 of 1995) Decided On, 17 November 2000

10
https://link.springer.com/article/10.1007/BF01714891
In addition, the common law also restricts the employer's prerogative in a number of ways. The
employer may not, for example, unilaterally alter the terms and conditions of employment
stipulated in the contract of employment. Certain statutes also restrict employers' prerogative
regarding their employees. Legislature's concern for the plight of employees who are generally in
a much weaker bargaining position than their employers; they reflect the legislature's social
awareness and conscience, which, in turn, is largely shaped by public policy.

There are also statutes which restrict managerial preoperative in a more indirect manner. 5, for
instance, curtails employers' prerogative indirectly through its provisions which promote
collective bargaining and employee participation in decision-making in the workplace. The Acts,
for example, provides a right to freedom of association and protection when employees exercise
this right.

It affords trade unions and employees organizational rights and structures for collective
bargaining. These provisions are indicative of the fact that the legislature also holds a pluralist
view of industrial relations. From the foregoing discussion, it is apparent that managerial
preoperative is made up of those decisions which the law allows them to make about their
businesses and which trade unions are content to leave to the employers' sole discretion or have
been unable to subject to collective bargaining. 11

11
https://core.ac.uk/