Closed shop

Closed shop, in union-management relations, an arrangement whereby an employer agrees to

hire—and retain in employment—only persons who are members in good standing of
the trade union. Such an agreement is arranged according to the terms of a labour contract.
By the 1930s the closed shop had become a commonly negotiated agreement meant to protect
labour organizations. This and other methods became known as “union security.” Less
extreme than the closed shop is the union shop, in which the employer may hire a worker
who is not a union member if the new employee joins the union within a specified time.
Agreements for the maintenance of membership provide that all employees of a company on
a specified date who are then members of a union and who do not resign their membership
within an “escape period” must remain members of the union for the duration of the
agreement; otherwise, they will be dismissed from their jobs. Even more open than the union
shop is an agency shop: although employees are required to pay funds equal to union dues,
they are not required to join the union. There are many detailed variations of these union
arrangements in the United States.

In the United Kingdom and, to a lesser extent, in all other industrial nations, a closed-shop

provision is seldom found in a written contract, but it is understood in some industries that
union members will walk off the job before they will work alongside nonunionists. This is so
commonly assumed among printers, dockworkers, and miners in Britain that employers
rarely attempt to employ nonunion workers. Throughout the nations of northern Europe,
labour-management agreements are usually made between large industrial segments and a
number of unions. In Britain, where union membership is taken for granted, the closed shop
has not been as controversial as in the United States. Indeed, British government boards and
commissions traditionally expect unions to represent all employees in an industry.

Although closed shops were declared illegal in the United States under the Taft-Hartley
Act of 1947, they continue to exist in practice; however, they are not written into contracts.
They are used by employers who depend on unions for hiring or by industries that employ
workers for only a short period of time (e.g., dockworkers and construction workers). In such
cases employers might seek job applicants by contacting union hiring halls, but they remain
free to recruit elsewhere.

Union shop
Union shop, arrangement requiring workers to join a particular union and pay dues within a
specified period of time after beginning employment—usually 30 to 90 days. Such an
arrangement guarantees that workers will pay for the benefits of union representation. A
union shop is less restrictive than a closed shop, which prevents employers from hiring
outside the union.

In most countries, union shop agreements are uncommon because one union seldom
gains exclusive bargaining rights for all of a particular employer’s workers. In Japan, where a
single union does customarily represent all the employees in a company, union shop
agreements are both legal and common. (See enterprise unionism.) In the United States, a
single union may be chosen by majority vote to represent all the workers; however, under
Section 14(b) of the Taft-Hartley Act, a state may outlaw union shop provisions in labour
contracts by passing right-to-work laws, which prohibit requiring union membership as a
condition of employment.
The status of a union shop may also be challenged by its members. This happens when a
majority of union employees vote to terminate the union shop provision in their contract—
thus removing a union’s most desired form of security. Lacking a union shop or a closed
shop, workplaces are defined as either agency shops (which require employees to contribute
funds equal to union dues but not join the union) or open shops (which require neither
membership nor dues payment). Employees in open shops who benefit from the gains that
unions achieve through collective bargaining, without sharing the expenses, are sometimes
called “free riders.”

 “closed” and “open” shops are union shops. In a closed shop, joining the union is a required
condition of employment. An “open shop” has both union members and non-members
working together.

A closed shop is a workplace with a contract requiring that only people who are already
members of a labor union be hired by an employer. This was outlawed with the Taft-Hartley
Act of 1947.

A union shop is a workplace where the employer may hire anyone, but the workers must join
the union within a certain time period in order to remain employed. The Taft-Hartley Act
didn’t ban this, but gave states the right to ban this within their borders. (This is sometimes
known as a “guild shop,” usually when the labor union has the word “guild” in its name.

Duration & enforcement of Bi-partite agreement: (bi-partite agreement is achieved via

collective bargaining b/w the two parties, i.e. employer & employees & sec 18 & 19 lays
down parties on whom its binding & till when)

18. Persons on whom settlements and awards are binding.-

(1) A settlement arrived at by agreement between the employer and workman otherwise than
in the course of conciliation proceeding shall be binding on the parties to the agreement.

(2) 3 Subject to the provisions of sub- section (3), an arbitration award] which has become
enforceable shall be binding on the parties to the agreement who referred the dispute to
arbitration.]

(3) 4 ] A settlement arrived at in the course of conciliation proceedings under this Act 5 or an
arbitration award in a case where a notification has been issued under sub- section (3A) of
section 10A] or 6 an award 7 of a Labour Court, Tribunal or National Tribunal] which has
become enforceable] shall be binding on--
(a) all parties to the industrial dispute;

(b) all other parties summoned to appear in the proceedings as parties to the dispute, unless
the Board, 5 arbitrator,] 8 Labour Court, Tribunal or National Tribunal], as the case may be,
records the opinion that they were so summoned without proper cause;

(c) where a party referred to in clause (a) or clause (b) is an employer, his heirs, successors or
assigns in respect of the establishment to which the dispute relates;
(d) where a party referred to in clause (a) or clause (b) is composed of workmen, all persons
who were employed in the establishment or part of the establishment, as the case may be, to
which the dispute relates on the date of the dispute and all persons who subsequently become
employed in that establishment or part.

19. Period of operation of settlements and awards.-

(1) A settlement 1 shall come into operation on such date as is agreed upon by the parties to
the dispute, and if no date is agreed upon, on the date on which the memorandum of the
settlement is signed by the parties to the dispute.

(2) Such settlement shall be binding for such period as is agreed upon by the parties, and if no
such period is agreed upon, for a period of six months 2 from the date on which the
memorandum of settlement is signed by the parties to the dispute], and shall continue to be
binding on the parties after the expiry of the period aforesaid, until the expiry of two months
from the date on which a notice in writing of an intention to terminate the settlement is given
by one of the parties to the other party or parties to the settlement.

(3) 3 An award shall, subject to the provisions of this section, remain in operation for a period
of one year 4 from the date on which the award becomes enforceable under section 17A]:
Provided that the appropriate Government may reduce the said period and fix such period as
it thinks fit: Provided further that the appropriate Government may, before the expiry of the
said period, extend the period of operation by any period not exceeding one year at a time as
it thinks fit so, however, that the total period of operation of any award does not exceed three
years from the date on which it came into operation.

(4) Where the appropriate Government, whether of its own motion or on the application of
any party bound by the award, considers that since the award was made, there has been a
material change in the circumstances on which it was based, the appropriate Government may
refer the award or a part of it 5 to a Labour Court, if the award was that of a Labour Court or
to a Tribunal, if the award was that of a Tribunal or of a National Tribunal] for decision
whether the period of operation should not, by reason of such change, be shortened and the
decision of 6 Labour Court or the Tribunal, as the case may be] on such reference shall, 7 be
final.

(5) Nothing contained in sub- section (3) shall apply to any award which by its nature, terms
or other circumstances does not impose, after it has been given effect to, any continuing
obligation on the parties bound by the award.

(6) Notwithstanding the expiry of the period of operation under sub- section (3), the award
shall continue to be binding on the parties until a period of two months has elapsed from the
date on which notice is given by any party bound by the award to the other party or parties
intimating its intention to terminate the award.

(7) 1 No notice given under sub- section (2) or sub- section (6) shall have effect, unless it is
given by a party representing the majority of persons bound by the settlement or award, as the
case may be.
Pressurization:

Go-slow/ slow-down:
Another form of strike is when the employees decide to go slow on work and not give their
full efficiency to work. Although, the economic implications are very serious of these kinds
of strikes like the cost of production goes up, delivery schedule gets upset and very often, raw
material and machinery are adversely affected. This is primarily because no cessation of work
takes place which has been stated as an essential under the definition of strikes under the
relevant act. Go Slow tactics is not like an ordinary strike which has been recognized as a
lawful weapon under certain circumstances. It is not a legitimate weapon in the armoury of
lab our in the process of collective bargaining. 

In the case of Bharat Sugar Mills Ltd. v. Jai Singh the labour tribunal held that go – slow
tactics are far more serious then the normal strikes because the employees get full wages
while giving a very less output. The employees in some cases are also successful through this
kind of a strike like in the case of Fine Knitting Company Ltd. the labour tribunal held that
since the work was not stopped at any time there was no strike declared.

With regard to go – slow tactics the researcher is of the opinion that since it is not a
recognized form of strike in the first place, therefore the question of the right to strike being
fundamental or not does not arise. Although, the owners of the industry and the
administration will be the appropriate authority to detect go slow tactics. The administration
is free to take an appropriate decision for the workers who are pursuing go slow tactics with
work as the productivity and efficiency of the industry shall be affected. The workers are free
to adopt these tactics on their own volition and risk. The legal mechanism has very little or no
role to play with regard to these tactics.

Gherao:
The expression “Gherao” in its etymological sense means to encircle. It is comparatively a
new form of demonstration which is being largely resorted to by the lab our in this
country. Gherao is a physical blockade of a target, either by encirclement intended to block
the exit or entry from and to a particular office, of even residence or forcible occupation. The
target may be a place or person, usually the managerial or supervisory staff of an
establishment. Some of the offences under this category are cruel and inhuman, like
confinement in a small place without lights, fans and for long periods without food or
communication with the outside world. The object of “Gherao” is to compel those who
control the establishment to submit to the demands of the workers without recourse to
machinery provided for by law and in wanton disregard of it. It is more of a mechanism
which uses violence as an approach to get their demands met. 

It is of the opinion that “Gherao” should be completely banned and no kind of a statutory or
fundamental right should be awarded to this kind of a strike. On the contrary, this kind of a
strike is violent in nature and therefore should be treated as a criminal offence under the
Criminal legislations of the country.

Work-to-rule:
Work-to-rule is an industrial action in which employees do no more than the minimum
required by the rules of their contract, and precisely follow all safety or other regulations,
which may cause a slowdown or decrease in productivity, as they are no longer working
during breaks or during unpaid extended hours and weekends (checking email, for instance).
[1][2]
 Such an action is considered less disruptive than a strike or lockout, and obeying the rules
is less susceptible to disciplinary action. Notable examples have included nurses refusing to
answer telephones, teachers refusing to work for free at night and during weekends and
holidays, and police officers refusing to issue citations. Refusal to work overtime, travel on
duty, or sign up to other tasks requiring employee assent are other manifestations of using
work-to-rule as industrial action.

Sometimes the term "rule-book slowdown" is used in a slightly different sense than "work-to-
rule": the former involves applying to-the-letter rules that are normally set aside or
interpreted less literally to increase efficiency; the latter, refraining from activities which are
customary but not required by rule or job description, but the terms may be used
synonymously.

Work-to-rules can be misconstrued as malicious even when it is only a removal of good-will,

such as employees insisting on taking all legally entitled breaks, or refusing a request to work
unpaid overtime.

Sometimes work-to-rule can be considered by employers as malicious compliance as they

pursue legal action against workers. While not legally enforceable under minimum statutory
law, employers may enforce customized employment contract terms that the employee agreed
to:

 Overtime is waived in part, in whole, or converted to time-in-lieu

 Breaks are set by management
 Job description includes "ad-hoc task" or "as assigned"
 Termination for any reason
They may also take standard forms of action especially where custom terms were not
negotiated during the offer:

 Warning and noting employee file for professional misconduct or insubordination

 Reassigning employee to insignificant, routine, or mundane tasks

Collective Bargaining (a.k.a Bipartite Agreement)

Collective bargaining has been defined by the Supreme Court (“SC”) as “the technique by
which dispute as to conditions of employment is resolved amicably by agreement rather than
coercion”.10 It is a process of discussion and negotiation between employer and workers
regarding terms of employment and working conditions. Workers are generally represented
by trade unions with respect to expressing their grievance concerning service conditions and
wages before the employer and the management. Refusing to bargain collectively in good
faith with the employer is considered to be an unfair labour practice as per the provisions of
the Industrial Disputes Act, 1947 (“IDA”) .
This is generally an effective system as it usually results in employers undertaking actions to
resolve the issues of the workers. However, the legal procedure for pursuing collective
bargaining in India is complicated.

A. Charter of Demand: Typically, the trade union notifies the employer of a call for
collective bargaining negotiations. However, in certain cases the employer may also initiate
the collective bargaining process by notifying the union(s). The representatives of the trade
union draft a “charter of demands” through various discussions and consultations with union
members. The charter typically contains issues relating to wages, bonuses, working hours,
benefits, allowances, terms of employment, holidays, etc. In an establishment with multiple
unions the employer generally prefers a common charter of demands, but in principle, all
unions may submit different charters.

B. Negotiations: As a next step, negotiations begin after the submission of the charter of
demands by the representatives of the trade union. Prior to such negotiations, both the
employer and the trade unions prepare for such negotiations by ensuring collection of data,
policy formulation and deciding the strategy in the negotiations. After such preparation, the
negotiations take place wherein the trade unions and the employer engage in debates and
discussions pertaining to the demands made by the trade unions.
In the event that such demands are rejected, the trade union may decide to engage in strikes.
The collective bargaining process obviously takes long where the employer has to engage
with multiple unions. In the public sector, it may take months or even years. For example, the
Joint Wage Negotiating Committee for the Steel Industry, covering workers in four large
unions, took more than three years from the date of the submission of the charter of demands
to the Steel Authority of India Ltd. (SAIL).

C. Collective Bargaining Agreement: Next, a collective bargaining agreement will be

drawn up and entered into between the employer and workmen represented by trade unions.
These may be structured as bipartite agreements, memorandum of settlements or consent
awards.
D. Strikes: If both parties fail to reach a collective agreement, the union(s) may go on strike.
As per the IDA, public utility sector employees must provide six weeks’ notice of a strike,
and may strike fourteen days after providing such notice (a ‘cooling off period’). Under the
IDA, neither side may take any industrial action while the conciliation proceeding is pending,
and not until seven days after the conclusion of conciliation or two months after the
conclusion of legal proceedings.
E. Conciliation: A conciliation proceeding begins once the conciliation officer receives a
notice of strike or lockout. During the ‘cooling off period’, the state government may appoint
a conciliation officer to investigate the disputes, mediate and promote settlement. On the
other hand, it may also appoint a Board of Conciliation which shall be appointed in equal
numbers on the recommendation of both parties, and shall be composed of a chairman and
either two or four members. No strikes may be conducted during the course of the
conciliation proceeding. Conciliation proceedings are concluded with one of the following
recommendations: (i) a settlement, (ii) no settlement or (iii) reference to a labour court or an
industrial tribunal.
F. Compulsory Arbitration or Adjudication by Labour Courts, Industrial Tribunals
and National Tribunals:
When conciliation and mediation fails, parties may either go for voluntary or compulsory
arbitration. In the case of voluntary arbitration, either the state or central government appoints
a Board of Arbitrators, which consists of a representative from the trade union and a
representative from the employer. In the case of compulsory arbitration, both parties submit
the dispute to a mutually-agreed third party for arbitration, which is typically a government
officer. Arbitration may be compulsory because the arbitrator makes recommendations to the
parties without their consent, and both parties must accept the conditions recommended by
the arbitrator.
Section 7A of the IDA provides for a labour court or industrial tribunal within each state
government consisting of one person appointed to adjudicate prolonged industrial disputes,
such as strikes and lockouts. Section 7B provides for the constitution of national tribunals by
the central government for the adjudication of industrial disputes that involve questions of
national interest or issues related to more than two states. In such a case, the Government
appoints one person to the national tribunal and can appoint two other advisers.
If a labour dispute cannot be resolved via conciliation and mediation, the employer and the
workers can refer the case by a written agreement to a labour court, industrial tribunal or
national tribunal for adjudication or compulsory arbitration. A final ruling on the industrial
dispute must be made within six months from the commencement of the inquiry. A copy of
the arbitration agreement signed by all parties is then forwarded to the appropriate
government office and conciliation officer pursuant to which the government must publish
the ruling in the Official Gazette within one month from receipt of the copy.
In India, collective bargaining typically takes place at three levels:
1. National-level industry bargaining is common in core industries such as banks, coal,
steel, ports and docks, and oil where the central government plays a major role as the
employer. In these industries, the CTUO do not typically provide any guidelines on a charter
of demands, including an increase of wage or improvement of working conditions; instead,
both sides – the government and trade unions – set up a “coordination committee” to engage
in the collective bargaining proceedings. Collective bargaining in the public sector generally
suffers if the position of the state government is different from that of the central government.
Pay scales for government employees at the national level are revised by Pay Commissions,
and wage increases are determined by Wage Boards for several industrial sectors, such as
journalists and other newspaper employees. Wage Boards are tripartite organizations
established by the government to fix wages. They include representatives from workers,
employees and independents. The SC recently upheld the Majithia wage board’s
recommendations to raise salaries for journalists and non-journalists in print media,
dismissing challenges by the management of various newspapers.
2. Industry-cum regional bargaining is peculiar to industries where the private sector
dominates, such as cotton, jute, textiles, engineering, tea plantation, ports and docks.
Bargaining generally occurs in two stages: company-wide agreements are formed, which are
then supplemented with regional (i.e. plant-level) agreements. Basic wage rates and other
benefits are usually decided at the company level, while certain allowances, incentives etc.,
are decided at the regional or plant level, taking into account the particular circumstances,
needs etc., of the employees. However, such regional agreements are only binding on
company management if the employers’ association authorizes it in writing to bargain on its
behalf.
3. Enterprise or plant-level bargaining practices differ from case to case because there is
no uniform collective bargaining procedure. Typically, the bargaining council (or negotiating
committee) is constituted by a proportional representation of many unions in an
establishment. It is therefore easier for the management to negotiate with one bargaining
agent if multiple unions at the company can form such a single entity.
If not, the management will then have to negotiate individually with each registered union. In
the private sector, employers generally press for plant-level bargaining because uniformity of
wage negotiation can be ignored and the bargaining power of trade unions can be reduced.
Also, trade unions insist on plant-level bargaining because the payable capacity of the
company is much higher and because labour issues can be resolved more quickly and easily.
Trade unions can typically face a dilemma in decentralized plant-level bargaining if the
business is having a managerial crisis from market failures or the management is reluctant to
negotiate with the unions.

Types of Collective Bargaining:

In India, collective bargaining agreements are divided into three classes:

1. Bipartite (or voluntary) agreements are drawn up in voluntary negotiations between the
employer and the trade union. As per the IDA, such agreements are binding. Implementation
is generally non-problematic because both parties reached the agreement voluntarily.
2. Settlements are tripartite in nature, as they involve the employer, trade union and
conciliation officer. They arise from a specific dispute, which is then referred to an officer for
reconciliation. If during the reconciliation process, the officer feels that the parties’
viewpoints have indeed been reconciled, and that an agreement is possible, he may withdraw
himself. If the parties finalize an agreement after the officer’s withdrawal, it is reported back
to the officer within a specified time and the matter is settled. However, it should be noted
that the forms of settlement are more limited in nature than bipartite agreements, because
they must relate to the specific issues referred to the conciliation officer.
3. Consent awards are agreements reached while a dispute is pending before a compulsory
adjudicatory authority, and incorporated into the authority’s award. Even though the
agreement is reached voluntarily, it becomes part of the binding award pronounced by the
authority constituted for the purpose.
 Contents of Collective Bargaining Agreement
As a part of collective bargaining mechanism, employers and workmen represented by trade unions
enter into collective bargaining agreements typically structured as memorandum of settlements
which enumerate the various clauses that govern the relationship between the workmen
represented by trade unions and employers. The IDA, under section 18(1) of the IDA, provides that
such settlements entered into between workmen represented by trade unions and employers would
be binding upon the parties.

Typically, clauses in the memorandum of settlement pertain to the following:

1. Term / Duration of the memorandum of settlement as may be agreed between the parties

2. Settlement terms which, typically, may be with respect to wages, benefits, allowances, arrears
with respect to payment to workers, concessions, works hours, overtime etc.

3. Conditions with respect to strikes and lockouts by trade unions and employers respectively

4. Obligations of workmen

5. Obligations of employer

6. Penalties with respect to non-compliance of the obligations of workmen and employers

7. Dispute resolution

8. Miscellaneous clauses including severability, notice, etc.

Doctrine of Hire & Fire

The theory of “Hire and fire” which found free scope under the old doctrine of laissez faire no longer
holds good, rather the doctrine has undergone quite a change. India has a slew of laws and rules
that shape the labour market, regulating the terms of work, hiring and firing, and the working
conditions. While the regulations are meant to enhance the welfare of workers, companies say they
often have the opposite effect by encouraging them to stay small or hire contract workers to
circumvent legal restrictions. The laws benefit only a fraction of the workforce, as 93 percent of
workers are employed in informal sectors who lack any form of job or social security.

The Centre has proposed fixed-term contract hiring across sectors, providing companies the
flexibility to hire and fire according to their business needs.

Various acts have certain provisions ensuring that security of jobs/ employment. For instance, in the
Maternity Benefits Act, 1961 to give the woman employee security of service during the period she
is drawing benefit of maternity leave, it is provided that if a woman absents herself from work in
accordance with the provisions of the Act, it shall be unlawful for her employer to discharge or
dismiss her during, or on account of, her absence, or to give notice of discharge or dismissal on such
a day that the notice will expire during such absence, or to vary to her disadvantage any of the
conditions of her service. Moreover, any discharge or dismissal of a woman at any time during her
pregnancy shall not have the effect of depriving her of the maternity benefit or medical bonus
otherwise payable to her under the Act.
Gratuity benefit Apart from the statutory provident fund and pension schemes provided for under
the aforesaid Act, demands had often been made by the workmen covered under the Industrial
Disputes Act, 1947, for additional benefit of gratuity in cases of retirement or premature termination
of their service, or even resignation after putting in a certain minimum period of service.

The services of an employee may also be dispensed with by the employer on reaching the age of
superannuation, provided there is a provision in that behalf in the contract of employment or service
rules or the certified standing orders. The tribunals set up under the Industrial Disputes Act are,
however, competent, and very often have either laid down the age of retirement for the first time,
or modified the age of retirement fixed under the contract of employment or service rules or even
under the certified standing orders. In deciding such disputes, the tribunals are mostly guided by
what has come to be termed 'the industry-cum-region basis' or 'the region-cum-industry basis'. The
gratuity was, however, determined by the court.

Hiring:

Legal Requirements As to the form of Agreement Except for some State specific requirements by
which an employer is expected to issue a letter covering certain aspects of employment, there are
no stipulated legal requirements as to the prescribed form of an employment agreement. The
prevailing practice is either that the employer issues an appointment letter listing the terms and
conditions of employment, which is then signed by the employee; or the employer and employee
enter into a bilateral written agreement. An employment agreement can be in oral form. The
acceptance of such contract must be absolute and unqualified, be expressed in some usual and
reasonable manner as provided under the Indian Contract Act, 1872.

However, a written employment agreement is preferred to avoid disputes at a later stage. Generally,
for blue-collar employees, it used to be common for there to be no employment agreement
executed between the employer and employee, but instead, appointment letters were issued.
However, it is now increasingly common to produce formal employment agreements with the
employees.

Mandatory Requirements

Trial Period : There is no legal requirement to provide for a trial period or a period of probation, in
the case of white-collar employees or blue-collar employees. Notwithstanding the above, depending
upon the applicability of Industrial Employment Standing Orders Act, 1948, the initial period of
probation, in case of blue-collar employees, could be three months. As a matter of practice
companies do have probation period and extension of probation period if required either in the
Handbook/ Company Policy or in the Letter of Appointment.

Hours of Work:

White-Collar Employees: The hours of work of any employee are ordinarily governed by the terms of
the employment agreement. Such employment agreements should conform with the Shops and
Establishments Acts enacted by individual states in India (or the Factories Act 1948, if an employee
works from an office located within a factory premises). As a result, conditions such as hours of work
may differ from state to state and also depending upon the nature of establishment. The
requirement of overtime, over a certain number of hours, may also change based on the Shops and
Establishments Acts, etc, as applicable. For instance, the Bombay Shops and Establishments Act 1948
stipulates the maximum hours of work as 9 hours per day and 48 hours per week in shops,
commercial establishments, residential hotels, restaurants, eating houses, theatres or other places
of public amusement or entertainment.

Blue-Collar Employees: For blue collar employees working in non-manufacturing establishments the
hours of work will be governed by the State specific Shops and Establishments Act.

For blue collar employees working in manufacturing establishments, the Factories Act 1948
stipulates that an adult employee may be required to work for a maximum period of 9 hours per day
and 48 hours per week, excluding overtime, and 10 hours a day and 60 hours a week, including
overtime. Overtime work is subject to a maximum of 50 hours in any quarter. A child or adolescent
will not be allowed to work beyond a maximum period of 4½ hours per day.

Earnings:

White-collar employees: Earnings are mutually agreed upon by the employer and employee and this
clause forms an essential term of the employment agreement. Indian law entitles employees to
twice the ordinary rate of wages in respect of overtime work.

Blue-Collar Employees: The Central or State Government fixes the minimum rates of wages payable
to employees under the Minimum Wages Act 1948 and reviews such minimum rates of wages every
5 years. For instance, depending upon the area of operation, the minimum rates of daily wages may
range from (or more): The Payment of Bonus Act 1965 entitles employees in establishments (having
20 or more employees) to payment of a bonus on the basis of profits, production or productivity.
The Payment of Wages Act 1936 prescribes a time-limit within which wages payable to employees
must be disbursed by the employers and ensures that no un-authorized deductions are made by
employers.

Holidays / Rest Periods

White-collar employees: Depending upon where a person is working, the holiday entitlement is
generally governed by the holidays announced by the relevant State. Generally, an employee would
be entitled to mandatory weekly holiday, (eg. Sundays), national holidays (such as Independence
Day, Republic Day etc.) and State holidays.

In addition, employees may be entitled to paid leave for a number of days as stipulated in the Shops
and Establishments Acts of each state or Factories Act, as applicable. Rest periods are also
prescribed by the Factories Act or Shops and Establishments Acts, as applicable. For instance, the
Bombay Shops and Establishments Act 1948 stipulates that every shop and commercial
establishment shall remain closed on one day of the week, and a maximum of 5 hours of work
followed by an interval of at least one hour for rest and a maximum of 3 hours of overtime.

Blue-Collar Employees: For blue collar employees working in non-manufacturing establishments, the
holidays/rest periods will be governed by the State specific Shops and Establishments Act (and also
Industrial Employment Standing Orders Act, 1948, depending upon its applicability). For blue collar
employees working in manufacturing establishments, the Factories Act 1948 provides for a
mandatory weekly holiday, compensatory holidays and specifies that no person will be required to
work for more than ten days consecutively without a holiday. This act further stipulates intervals of
rest of at least half an hour following a maximum of five hours of work and provides for annual leave
with wages. The Weekly Holidays Act 1942 provides for the grant of a weekly holiday to blue-collar
employees in shops, restaurants and theatres without any deduction or abatement of wages.
Minimum/Maximum Age

White-collar employees: The minimum age for employment in any establishment is 15 years of age
in certain trades. However, in practice employees who are considered suitable for such employment
are at least 20 years old.

Blue-Collar Employees: Any child who is younger than 14 years of age is statutorily barred from
employment. Adolescents aged between 15 and 18 require a certificate of fitness to be employed in
certain trades. The maximum age for employment of white collar or blue-collar employees is
whatever age is stipulated by the employer. Illness/Disability In case of illness, an employee (white-
collar or blue-collar employee) is entitled to paid sick leave, the duration of which varies from
industry to industry or state to state.

Alternatively, white-collar employees are entitled to paid sick leave as specified in their employment
agreement or as per the Shops and Establishment Act or Factories Act, as applicable to an
establishment (factory or commercial establishment) and the jurisdiction where the establishment is
located, whichever is more beneficial to the employee. The Persons with Disabilities (Equal
Opportunities, Protection of Rights and Full Participation) Act 1995 provides for encouragement of
employment of persons suffering from specified disabilities.

Location of Work/Mobility

Location of work and mobility are mutually agreed by the employer and employee (white collar or
blue-collar employee) verbally or in the terms of the employment agreement.

Types of Agreement

Fixed-Term employment agreements: which have a fixed duration and expire on a designated date
or on completion of a project.

Full-time employment agreements: which contain compulsory terms governing employees who
work on a full-time basis.

FIRING THE EMPLOYEE

Procedures for Terminating the Agreement

White-Collar Employees: The procedure for terminating employment will be governed by the terms
of the employment agreement. Such provision has to conform to the Shops and Establishment Acts
of each state. Generally, the Shops and Establishment Acts require a notice in writing, or wages in
lieu of such notice, to be given to the employee. For example the Bombay Shops and Establishment
Act requires at least 14 days’ notice to be given in writing, (in case of an employee who has been in
continuous employment for at least 3 months) or 30 days’ notice in writing (in case of an employee
who has been in continuous employment for at least a year) or wages in lieu of such notice.

Blue-Collar Employees: No employee who has been employed for less than one year (240 days in a
year) can be fired unless he is given one or three months’ notice (as applicable depending upon an
establishment having up to 100 or more such employees) or payment in lieu thereof and
compensation as per the Industrial Disputes Act 1947. There may also be a requirement to notify the
government authorities, or to obtain prior government approval (depending upon an establishment
having less than 100, 100 or more than 100 such employees, respectively). The employer may also
be required to comply with the last-in-first-out rule.

In both the cases, whether white-collar or blue collar employees, in case the terms of appointment
letter or employment contract provide longer notice period or better severance compensation, then
such terms of appointment letter or employment contract would prevail over law.

Instant Dismissal

White-Collar Employees: Dismissal of such employees will be governed by terms of the employment
agreement. In cases of a major breach of disciplinary rules, the employment of whitecollar
employees may be terminated without notice provided it is not prohibited by the appointment
letter, employment agreement or company policy. Some state laws may require an inquiry before
such termination without notice.

Termination on Notice

White-Collar Employees: The law requires an employer to give notice in writing or pay salary in lieu
of such notice if he wishes to dismiss an employee. Such clauses are recorded in the employment
agreement but the employer could also follow the statutory right even if certain aspects are not
covered in the agreement.

Blue-Collar Employees: The Industrial Disputes Act, 1947 provides that no employee in any industry,
who has been in continuous service for not less than one year, can be dismissed unless one month’s
notice or payment in lieu of such notice is given.

Termination By Reason Of The Employee’s Age

The Employees’ Pension Scheme 1995 (applicable to blue-collar employees and white-collar
Government employees) states that superannuation or retirement benefits will be payable to an
employee on attaining the age of 58. The retirement age for white-collar or blue-collar employees
engaged in the private sector is not stipulated by law but by company policy.

Automatic Termination In Cases Of Force Majeure

White-Collar Employees: Automatic termination in cases of force majeure is possible if provided for
in the employment agreement.

Blue-Collar Employees: No employee can be automatically dismissed. As per the Industrial Disputes
Act 1947 where an undertaking is closed down on account of circumstances beyond the control of
the employer (and not by reason of financial difficulties, losses, expiry of lease or license) every
workman who has been in continuous service for at least one year will be entitled to compensation
of a maximum of 3 months’ average pay.

Termination by Parties’ Agreement: The employment of any white-collar or blue-collar employee

may be terminated at any time by mutual agreement (in writing or verbal) between the employer
and employee.