The Trade Union Act, 1926

Trade Union [Sec. 2(h)]: Trade Union means any combination, whether temporary or permanent, formed
primarily for the purpose of regulating the relations between workmen and employers or between workmen
and workmen or between employers and employers for imposing restrictive conditions on the conduct of
any trade or business and includes any federation of two or more Trade Unions.

Provided that this Act shall not affect –

(i) any agreement between partners as to their own business;

(ii) any agreement between an employer and those employed by him as to such employment; or
(iii) any agreement in consideration of the sale of the goodwill of a business or of instruction in any
profession trade or handicraft.

The law relating to the registration and protection of the Trade Unions is contained in the Trade Unions Act,
1926 which came into force with effect from 1st June 1927. The Act extends to the whole of India except
the State of Jammu and Kashmir.

In common parlance, Trade Union means an association of workers in one or more occupations. Its object is
the protection and promotion of the interests of the working class. Trade Unions have a home grown
philosophy based on workers' experience and psychology. It grows out of the workers' day-to-day
experience.

                    
The Trade Union Act, 1926
Objectives:
Trade union is a voluntary organization of workers relating to a specific trade, industry or a company and
formed to help and protect their interests and welfare by collective action. Trade union are the most suitable
organisations for balancing and improving the relations between the employees and the employer. They are
formed not only to cater to the workers' demand, but also for imparting discipline and inculcating in them
the sense of responsibility.
They aim to:-
 Secure fair wages for workers and improve their opportunities for promotion and training.
 Safeguard security of tenure and improve their conditions of service.
 Improve working and living conditions of workers.
 Provide them educational, cultural and recreational facilities.
 Facilitate technological advancement by broadening the understanding of the workers.
 Help them in improving levels of production, productivity, discipline and high standard of living.
 Promote individual and collective welfare and thus correlate the workers' interests with that of their
industry.
 to take participation in management for decision-making in connection to workers and to take
disciplinary action against the worker who commits in-disciplinary action.

Well known Central Trade Union Organizations in India:

o All India Trade Union Congress (AITUC)
o Bharatiya Mazdoor Sangh (BMS)
o Centre of Indian Trade Unions (CITU)
o Hind Mazdoor Kisan Panchayat (HMKP)
o Hind Mazdoor Sabha (HMS)
o Indian Federation of Free Trade Unions (IFFTU)
o Indian National Trade Union Congress (INTUC)
o National Front of Indian Trade Unions (NFITU)
o National Labor Organization (NLO)
o Trade Unions Co-ordination Centre (TUCC)
o National Mazdoor Union (NMU)

June 2012: The National Mazdoor Union (NMU) gave a strike notice to APSRTC ( Andhra Pradesh
State Road Transportation Corporation) Managing Director with nearly 36 demands. In case
management fails to react, union members have decided to strike from following month.
 National Mazdoor Union (NMU) said the 36 demands, four were most important. "Abolition of
contract system in APSRTC, regularisation of nearly 22,000 contract drivers and bus conductors,
constitution pay commission were among these.

June 2012: one of the unions of Visakhapatnam steel plant, Indian National Trade Union Congress
(INTUC), has demanded rupees 1 crore ex-gratia ( compensation) for the families of the victims of the
explosion had occurred at the 'oxygen control unit' near the Steel Melting Shop-II at Visakhapatnam steel
plant which claimed the lives of 20 persons on 12-june-2012. Visakhapatnam steel plant had already paid 20
lakh rupees to each of the families of the deceased workers and officers. The union also demanded a
permanent job for the Kin of the victims. The deceased include Deputy General Manager (Construction) L
Srihari and Deputy General Manager (instrumentation) P V Karunakar.

Definitions

Appropriate Government [Sec. 2]: In relation to Trade Unions whose objects are not confined to one state
'the appropriate Government' is the Central Government. In relation to other Trade Unions, the 'appropriate
Government' is the State Government.

Executive [Sec. 2(a)]: Executive means the body of which the management of the affairs of a Trade Union
is entrusted.

Trade Dispute [Sec. 2(g)]: A trade dispute means any dispute between the employers and workmen, the
workmen and workmen and the employers and employers which is connected with the employment or non-
employment, or the terms of employment, or the conditions of labour of any person. 'Workmen' mean all
persons employed in trade or industry whether or not in the employment of the employer with whom the
trade dispute arises.

Trade Union [Sec. 2(h)]: Trade Union means any combination, whether temporary or permanent, formed
primarily for the purpose of regulating the relations between workmen and employers or between workmen
and workmen or between employers and employers for imposing restrictive conditions on the conduct of
any trade or business and includes any federation of two or more Trade Unions.

Provided that this Act shall not affect -

(i) any agreement between partners as to their own business;
(ii) any agreement between an employer and those employed by him as to such employment; or
(iii) any agreement in consideration of the sale of the goodwill of a business or of instruction in any
profession trade or handicraft.

5. Registered Trade Union [Sec. 2(e)]: A registered Trade Union means a 'Trade Union' registered under
the Act.

[Sec 14] CERTAIN ACTS DO NOT APPLY TO TRADE UNIONS

Below mentioned acts will not apply to any registered Trade Union, had the registration of any such Trade
Union under any such Act shall be void.

1. The Societies Registration Act, 1860.

2. The Cooperative Societies Act, 1912.
3. The Companies Act, 1956

Trade Unions can be registered only under the Trade Union Act, 1926.

REGISTRATION OF TRADE UNIONS

[Sec 3] Appointment of Registrars. 

 The government will appoint a person to be a Registrar.
 The government will appoint required number of person as the Addition and deputy Registrar of the
Trade Unions. These office will be under the Registrar of the Trade Union.

[Sec 4] Mode of registration

Minimum Requirement of Registration of Trade Union (2001 amendment)

(1) Any seven or more members of a trade union may, by subscribing their names to the rules of the trade
union and by otherwise complying with the provisions of this Act with respect to registration, apply for
registration of the trade union under this Act.

Provided that no Trade Union of workmen shall be registered unless at least ten per cent. or one hundred of
the workmen, whichever is less, engaged or employed in the establishment or industry with which it is
connected are the members of such Trade Union on the date of making of application for registration:

Provided further that no Trade Union of workmen shall be registered unless it has on the date of making
application not less than seven persons as its members, who are workmen engaged or employed in the
establishment or industry with which it is connected .''.

(2) Where an application has been made under sub-section (1) for the registration of a trade union, such
application shall not be deemed to have become invalid merely by reason of the fact that, at any time after
the date of the application, but before the registration of the trade union, some of the applicants, but not
exceeding half of the total number of persons who made the application, have ceased to be members of the
trade union or have given notice in writing to the Registrar dissociating themselves from the application.

Commentary:
 It is understood that for the purpose of registration a minimum of seven members are necessary to
form a trade union. the reason for fixation of minimum seven members is to encourage formation of
more trade unions so that the trade union would grow.
 under the trade union act 1926, employers can register their trade unions.

[Sec 5] Application for Registration.

Every application for registration of a trade union shall be made to the Registrar and shall be accompanied
by a copy of the rules of the trade union and a statement of the following particulars, namely-

(a) the names, occupations and addresses of the members making application;
(aa) in the case of a Trade Union of workmen, the names, occupations and addresses of the place of work of
the members of the Trade Union making the application;''.
(b) the name of the trade union and the address of its head office; and
(c) the titles, names, ages, addresses and occupations of the 8[office-bearers] of the trade union.

If Trade Union has already been existing for one year or more, for its registration the members should
submit all the details such as general statement of the assets and liabilities of the Trade Union going to be
registered by the Registrar of Trade Union.

[sec. 6] Provisions to be contained in the rules of a Trade Union (2001 amendment)

For registration of the Trade Union, provision or rules mentioned below should be followed by the member
for registration of the Trade Union according to this act.

a) The name of the Trade Union.

b) The object of the Trade Union.

c) General funds of the Trade Union by its members should be properly used for Lawful purpose.
d) Maintenances of list of members in the Trade Union and their facilities to be provided.

e) Half of the members of the trade union must be the member who actually engaged in an industry with
which trade union is connected.

(ee) the payment of a minimum subscription by members of the Trade Union which shall not be less than—

(i) one rupee per annum for rural workers;

(ii) three rupees per annum for workers in other unorganized sectors; and

(iii) twelve rupees per annum for workers in any other case;

f) Disciplinary action against member of the Trade Union and procedures in imposition of fines on
members.

g) the manner in which the rules shall be amended, varied or rescinded;

h) the manner in which the members of the executive and the other of the Trade Union shall be elected and
removed

(hh) executive members and other office bearers should be elected for the period of maximum 3 years..

i) Funds of the Trade Union should be safe guarded, annual audit is necessary, and account books should be
maintained for the purpose of inspection if necessary.

j) Procedure how to wind up the Trade Union

Power to call for further particulars and to require alteration of name. [Sec 7]
 If Registrar is not satisfying with information provided by the members of the Trade Union going to
be registered, Registrar is having power to call its members for submitting the additional and
required information for registering the Trade Union.

 If the Name of the Trade Union is already existed or similar to other Trade Unions names, registrar is
having power to order for changing of the name.

Registration [Sec 8]
All the documents submitted with details and information is correct by the members of the Trade Union
going to be registered, the Registrar will register the Trade Union.

Certificate of Registration. [Sec 9]

The Registrar registering a Trade Union under Section 8, shall issue a certificate of registration in the
prescribed form which shall be conclusive that the Trade Union has been duly registered under this Act.
Minimum requirement about membership of a Trade Union. [Sec 9A]
A registered Trade Union of workmen shall at all times continue to have not less than 10% or 100 of the
workmen, whichever is less, subject to a minimum of seven, engaged or employed in an establishment or
industry with which it is connected, as its members.

Cancellation of registration [sec. 10] (2001 amendment)

Registrar of the Trade Union can cancel the registration of the Trade Union in following circumstances

1. When Trade Union registration certificate has been obtained by fraud or other illegal means.
2. Disobey the rules and regulation of Trade Union act.
3. All the provision contained in section 6 of this act not followed by the members of the Trade Union.
4. When there are no minimum required numbers of members in the Trade Union.

Appeal [Sec 11]

 If Registrar of the Trade Union stops registration of the Trade Union or withdrawal of the
registration, members can appeal to Labor Court or an Industrial Tribunal, with in jurisdiction.

 Court may dismiss the appeal, or pass an order directing the Registrar to register the Union and to
issue a certificate of registration under the provisions of Section 9 or setting aside the order for
withdrawal.

[Sec 13] Features of Registered Trade Union.

 Registered Trade Union will have perpetual succession (will no stop after the death of the members
of the Trade Union.
 Every registered Trade Union will have common seal.
 Every registered Trade Union can acquire and hold both movable and immovable property.
 Every registered Trade Union can sue others.
 Every registered Trade Union can sued by others also.

RIGHTS AND LIABILITIES OF REGISTERED TRADE UNIONS

A registered Trade Union has the right to maintain

(a) a general fund, and

 (b) a separate fund for political purposes

But the Unions are bound to utilize the funds only for the purposes specified in the Act.

OBJECTS ON WHICH GENERAL FUNDS MAY BE SPENT [Sec. 15]

The following are the purposes for which the general funds of the Union may be spent: 
1. Payment of salaries, allowances, etc., to the office bearers of the Union.
2. Payment of expenses for the administration of the Union including other expenses spent on
defending any legal proceedings by or against the Union.
3. Settlement of trade disputes.
4. Special allowances to the members (including dependants) of the Trade Union on account of death,
sickness or accidents, etc.
5. Compensation to members for loss arising out of trade disputes.
6. Providing educational, social and religious benefits to the members.
7. Issue of assurance policies on the lives of members and also against sickness, accidents,
unemployment, insurance, etc.
8. Providing for publication of periodicals for the use of which is intended for the members benefit.
9. Any other object that may be notified by the appropriate Government in the Official Gazette. 

If funds are spent for any purposes other than the above, such expenditure is treated as unlawful and the
Trade Union can be restrained by the Court for applying its funds in any other purposes.

Construction of separate fund for political purposes [sec. 16]

Apart from the primary objects, a Trade Union may have certain other political objects. As per Sec. 16 a
registered union may constitute a separate fund in addition to the general fund and the payment of such a
fund shall be utilized for serving civic and political interest of its members. The fund can be utilized for the
following purposes:

 Holding of any meeting or distribution of any literature or document in support of any candidate for
election as a member of legislative body constituted under the constitution or of any local authority.

 For maintenance of any person who is a member of any legislative body constituted under the
constitution.

 For convening of political meeting of any kind or distribution of political literature or documents of
any kind.

 The registration of electors for selection of a candidate for legislative body.

The funds collected for political purposes shall not be clubbed with the general fund. No workman is
compelled to contribute in this fund and the nonpayment in this fund cannot be made a condition for
admission to the Trade Union.

Immunity from Punishment for Criminal Conspiracy [Sec. 17]:

No office bearer or member of a registered Trade Union will not be punished under the Sec .120B
punishment of criminal conspiracy of the Indian Penal Code (Conspiracy cases are defined as cases in which
two or more persons agree to commit a crime or to commit an illegal act.) regarding the matters of the
spending the general funds for proper purpose.

Immunity from civil suit to certain cases [Sec 18]:

No suit or other legal proceeding shall be maintainable in any Civil Court against any registered Trade
Union in the following activities and circumstances.

 Delay in the matters relating to the member of the Trade Union regarding the trade disputes like
‘contract of employment’, (is an agreement between an employer and an employee which sets out
their employment rights, responsibilities and duties.)

 Trade Union or its members showing interest or interfering in matters of the trade or business.

 Trade Union or its members showing interest or interfering in matters of the employment of the
persons.

 Trade Union or its members showing interest or interfering in matters of the removal of labour.

 Trade Union or its members showing interest or interfering in matters of compensating or

remunerating the employees.

 Registered Trade Union shall not be liable in any suit or other legal proceeding in any Civil Court for
the tortious act (wrongful act) committed by the agent of the Trade Union.

 Registered Trade Union is not liable for the vicarious liability (if agent commits mistake
intentionally without the knowledge of the Trade Union, agent is liable but not the Trade Union)

Right to inspect books of Trade Union. [Sec 20 ]

The account books of a registered Trade Union and the list of members thereof shall be open to inspection
by office-bearer or member of the Trade Union at such times as may be provided for in the rules of the
Trade Union.

Rights of minors to membership of Trade Unions.[Sec 21]

Any person who has attained the age of 15 years may be a member of a registered Trade Union and enjoy all
the rights of a member.

Disqualifications of office-bearers of Trade Unions. [Sec 21A]

person shall be disqualified for being chosen as, and for being member of the executive or any other office-
bearer of a registered Trade Union if—

 he has not attained the age of 18 years;

 he has been convicted by a Court in India of any offence involving moral turpitude and sentenced to
imprisonment, unless a period of 5 years has elapsed since his release.

Change of name [Sec 23] - Any registered Trade Union may, with the consent of not less than 2/3rd of the
total number of its members can change its name.
AMALGAMATION OF TRADE UNIONS

[Sec 24] Any 2 or more registered Trade Unions may become amalgamated together as one Trade Union
with or without dissolution or division of the funds of such Trade Unions or either or any of them, provided
that the votes of at least one-half of the members of each or every such Trade Union entitled to vote are
recorded, and that at least 60% of the votes recorded are in favor of the proposal.

[Sec 25]

 in case of change in the name of the Trade Union, written notice of the change of name must be
signed by secretary and 7 member of the Trade Union are required to sent to registrar of the Trade
Union.

 in case of an amalgamation of the Trade Union, written notice of an amalgamation must be signed by
secretary and 7 member of the Trade Union are required to sent to registrar of the Trade Union.

 Trade Union name should not match with the other Trade Union names.

 If Registrar satisfies with all requirements provided by the members of Trade Union, Registrar will
change the name and the same entered in the register.

 If Registrar satisfies with all requirements provided by the members of Trade Unions, Registrar will
validate amalgamation and entered in the register.
Dissolution of Trade Union [sec. 27]

 notice of dissolution signed by secretary and 7 member of the Trade Union, should be sent to the
Registrar of the Trade Union within 14 days from the date of the dissolution of the Trade Union.

 If registrar satisfies with provisions and rules followed by the members of the Trade Union for
dissolution, he will confirm the dissolution.

 Funds shall be divided by the Registrar among its members if there is no rules mention by the Trade
Union in distribution of the funds.

RETURNS TO THE REGISTRAR

Every registered Trade Union shall have to submit annually to the Registrar a general statement of all
receipts and expenditures during the year ended the 31st day of December. Such a statement shall be
accompanied by another statement containing assets and liabilities of Trade Union as existing on 31st
December each year.
COLLECTIVE BARGAINING:
Definition of Collective Bargaining:
Industrial disputes between the employee and employer can also be settled by discussion and negotiation
between these two parties in order to arrive at a decision.

This is also commonly known as collective bargaining as both the parties eventually agree to follow a
decision that they arrive at after a lot of negotiation and discussion.

According to Beach, “Collective Bargaining is concerned with the relations between unions reporting
employees and employers (or their representatives).

It involves the process of union organization of employees, negotiations administration and interpretation of
collective agreements concerning wages, hours of work and other conditions of employees arguing in
concerted economic actions dispute settlement procedures”.

According to Flippo, “Collective Bargaining is a process in which the representatives of a labor organization
and the representatives of business organization meet and attempt to negotiate a contract or agreement,
which specifies the nature of employee-employer union relationship”.

“Collective Bargaining is a mode of fixing the terms of employment by means of bargaining between
organized body of employees and an employer or association of employees acting usually through
authorized agents. The essence of Collective Bargaining is bargaining between interested parties and not
from outside parties”.

According to an ILO Manual in 1960, the Collective Bargaining is defined as:

“Negotiations about working conditions and terms of employment between an employer, a group of
employees or one or more employers organization on the other, with a view to reaching an agreement.”

It is also asserted that “the terms of agreement serve as a code defining the rights and obligations of each
party in their employment relations with one another, if fixes large number of detailed conditions of
employees and during its validity none of the matters it deals with, internal circumstances give grounds for a
dispute counseling and individual workers”.

Collective Bargaining Involves:

(i) Negotiations

(ii) Drafting

(iii) Administration

(iv) Interpretation of documents written by employers, employees and the union representatives
(v) Organizational Trade Unions with open mind.

Forms of Collective Bargaining:

The working of collective bargaining assumes various forms. In the first place, bargaining may be between
the single employer and the single union, this is known as single plant bargaining. This form prevails in the
United States as well as in India.

Secondly, the bargaining may be between a single firm having several plants and workers employed in all
those plants. This form is called multiple plants bargaining where workers bargain with the common
employer through different unions.

Thirdly, instead of a separate union bargaining with separate employer, all the unions belonging to the same
industry bargain through their federation with the employer’s federation of that industry. This is known as
multiple employer bargaining which is possible both at the local and regional levels. Instances in India of
this industry-wide bargaining are found in the textile industry.

The common malady of union rivalry, small firms and existence of several political parties has given rise to
a small unit of collective bargaining. It has produced higher labour cost, lack of appreciation, absence of
sympathy and economic inefficiency in the realm of industrial relationships. An industry-wide bargaining
can be favourable to the economic and social interests of both the employers and employees.

Essential Pre-Requisites for Collective Bargaining:

Effective collective bargaining requires the following prerequisites:
(i) Existence of a strong representative trade union in the industry that believes in constitutional means for
settling the disputes.

(ii) Existence of a fact-finding approach and willingness to use new methods and tools for the solution of
industrial problems. The negotiation should be based on facts and figures and both the parties should adopt
constructive approach.

(iii) Existence of strong and enlightened management which can integrate the different parties, i.e.,
employees, owners, consumers and society or Government.

(iv) Agreement on basic objectives of the organisation between the employer and the employees and on
mutual rights and liabilities should be there.

(v) In order that collective bargaining functions properly, unfair labour practices must be avoided by both
the parties.

(vi) Proper records for the problem should be maintained.

(vii) Collective bargaining should be best conducted at plant level. It means if there are more than one plant
of the firm, the local management should be delegated proper authority to negotiate with the local trade
union.

(viii) There must be change in the attitude of employers and employees. They should realise that differences
can be resolved peacefully on negotiating table without the assistance of third party.

(ix) No party should take rigid attitude. They should enter into negotiation with a view to reaching an
agreement.

(x) When agreement is reached after negotiations, it must be in writing incorporating all term of the contract.

It may be emphasised here that the institution of collective bargaining represents a fair and democratic
attempt at resolving mutual disputes. Wherever it becomes the normal mode of setting outstanding issues,
industrial unrest with all its unpleasant consequences is minimised.

Main Features of Collective Bargaining:

Some of the salient features of collective bargaining are:
1. It is a Group Action:
Collective bargaining is a group action as opposed to individual action. Both the parties of settlement are
represented by their groups. Employer is represented by its delegates and, on the other side; employees are
represented by their trade union.

2. It is a Continuous Process:

Collective bargaining is a continuous process and does not end with one agreement. It provides a mechanism
for continuing and organised relationship between management and trade union. It is a process that goes on
for 365 days of the year.

3. It is a Bipartite Process:

Collective bargaining is a two party process. Both the parties—employers and employees— collectively take
some action. There is no intervention of any third party. It is mutual given-and-take rather than take-it-or-
leave-it method of arriving at the settlement of a dispute.

4. It is a Process:
Collective bargaining is a process in the sense that it consists of a number of steps. The starting point is the
presentation of charter of demands by the workers and the last step is the reaching of an agreement, or a
contract which would serve as the basic law governing labour-management relations over a period of time in
an enterprise.

5. It is Flexible and Mobile and not Fixed or Static:

It has fluidity. There is no hard and fast rule for reaching an agreement. There is ample scope for
compromise. A spirit of give-and-take works unless final agreement acceptable to both the parties is
reached.

6. It is Industrial Democracy at Work:

Collective bargaining is based on the principle of industrial democracy where the labour union represents
the workers in negotiations with the employer or employers. Industrial democracy is the government of
labour with the consent of the governed—the workers. The principle of arbitrary unilateralism has given
way to that of self-government in industry. Actually, collective bargaining is not a mere signing of an
agreement granting seniority, vacations and wage increase, by sitting around a table.

7. It is Dynamic:
It is relatively a new concept, and is growing, expanding and changing. In the past, it used to be emotional,
turbulent and sentimental, but now it is scientific, factual and systematic.

8. It is a Complementary and not a Competitive Process:

Collective bargaining is not a competitive process i.e., labour and management do not coopt while
negotiating for the same object. It is essentially a complementary process i.e., each party needs something
which the other party has, namely, labour can put greater productive effort and management has the capacity
to pay for that effort and to organise and guide it for achieving the enterprise’s objectives.

The behavioural scientists have made a good distinction between “distributive bargaining” and “integrative
bargaining”. The former is the process of dividing up the cake which represents what has been produced by
the joint efforts of management and labour.

In this process, if one party wins something, the other party, to continue the metaphor of the cake, has a
relatively smaller size of the cake. So it is a win-lose’ relationship. The integrative bargaining, on the other
hand, is the process where both the parties can win—each party contributing something for the benefit of the
other party.

9. It is an Art:
Collective bargaining is an art, an advanced form of human relations.

Means of Collective Bargaining:

Generally, there are four important methods of collective bargaining, namely, negotiation, mediation,
conciliation and arbitration for the settlement of trade disputes. In this context R.F. Hoxie said that
arbitration is often provided for in collective bargaining under certain contingencies and for certain
purposes, especially when the parties cannot reach agreement, and in the interpretation of an agreement
through negotiation.
Conciliation is a term often applied to the art of collective bargaining, a term often applied to the action of
the public board which attempts to induce collective bargaining.

Mediation is the intervention usually uninvited, of some outside person of body with a view of getting
conciliation or to force a settlement, compulsory arbitration is extreme mediation. All these things are aids
or supplement to collective bargaining where it breaks down. They represent the intervention of outside
parties.

Constituents of Collective Bargaining:

There are three distinct steps in the process of collective bargaining:
(1) The creation of the trade agreement,

(2) The interpretation of the agreement, and

(3) The enforcement of the agreement.

Each of these steps has its particular character and aim, and therefore, each requires a special kind of
intellectual and moral activity and machinery.

1. The Creation of the Trade Agreement:

In negotiating the contract, a union and management present their demands to each other, compromise their
differences, and agree on the conditions under which the workers are to be employed for the duration of the
contract. The coverage of collective bargaining is very uneven; in some industries almost all the workers are
under agreement, while in others only a small portion of the employees of the firms are covered by the
agreement.

The negotiating process is the part of collective bargaining more likely to make headline news and attract
public attention; wage increases are announced, ominous predictions about price increase are reduction in
employment are made.

2. The Interpretation of the Agreement:

The administrative process is the day-to-day application of the provisions of the contract to the work
situation. At the time of writing the contract, it is impossible to foresee all the special problems which will
arise in applying its provisions. Sometimes, it is a matter of differing interpretations of specific clause in the
contract, sometimes; it is a question of whether the dispute is even covered by the contract. Nevertheless,
each case must somehow be settled. The spirit of the contract should not be violated.

3. Enforcement of the Agreement:

Proper and timely enforcement of the contract is very essential for the success of collective bargaining. If a
contract is enforced in such way that it reduces or nullifies the benefits expected by the parties, it will defeat
basic purpose of collective bargaining. It may give rise to fresh industrial disputes. Hence, in the
enforcement of the contract the spirit of the contract should not be violated.

However, new contracts may be written to meet the problems involved in the previous contract.
Furthermore, as day-to-day problems are solved, they set precedents for handling similar problems in future.
Such precedents are almost as important as the contract in controlling the working conditions. In short,
collective bargaining is not an on-and-off relationship that is kept in cold storage except when new contracts
are drafted.

Theories of Collective Bargaining:

There are three important concepts on collective bargaining which have been discussed as follows:
1. The Marketing Concept and the Agreement as a Contract:
The marketing concept views collective bargaining as a contract for the sale of labour. It is a market or
exchange relationship and is justified on the ground that it gives assurance of voice on the part of the
organised workers in the matter of sale. The same objective rules which apply to the construction of all
commercial contracts are invoked since the union-management relationship is concerned as a commercial
one.

According to this theory, employees sell their individual labour only on terms collectively determined on the
basis of contract which has been made through the process of collective bargaining.

The uncertainty of trade cycles, the spirit of mass production and competition for jobs make bargain a
necessity. The trade union’s collective action provided strength to the individual labourer.

It enabled him to resist the pressure of circumstances in which he was placed and to face an unbalanced and
disadvantageous situation created by the employer. The object of trade union policy through all the maze of
conflicting and obscure regulations has been to give to each individual worker something of the
indispensability of labour as a whole.

It cannot be said whether the workers attained a bargaining equality with employers. But, collective
bargaining had given a new- relationship under which it is difficult for the employer to dispense without
facing the relatively bigger collective strength.

2. The Governmental Concept and the Agreement as Law:

The Governmental Concept views collective bargaining as a constitutional system in industry. It is a
political relationship. The union shares sovereignty with management over the workers and, as their
representative, uses that power in their interests. The application of the agreement is governed by a weighing
of the relation of the provisions of the agreement to the needs and ethics of the particular case.
The contract is viewed as a constitution, written by the point conference of union and management
representative in the form of a compromise or trade agreement. The agreement lays down the machinery for
making executing and interpreting the laws for the industry. The right of initiative is circumscribed within a
framework of legislation.

Whenever, management fails to conform to the agreement of constitutional requirements, judicial machinery
is provided by the grievance procedure and arbitration.

This creates a joint Industrial Government where the union share sovereignty with management over the
workers and defend their group affairs and joint autonomy from external interference.

3. The Industrial Relations (Managerial) Concept as Jointly Decided Directives:

The industrial relations concept views collective bargaining as a system of industrial governance. It is a
functional relationship. Group Government substitutes the State Government. The union representative gets
a hand in the managerial role. Discussions take place in good faith and agreements are arrived at. The union
joins with company officials in reaching decisions on matters in which both have vital interests. Thus, union
representatives and the management meet each other to arrive at a mutual agreement which they cannot do
alone.

To some extent, these approaches represent stage of development of the bargaining process itself. Early
negotiations were a matter of simple contracting for the terms of sale of labour. Developments of the latter
period led to the emergence of the Government theory. The industrial relations approach can be traced to the
Industrial Disputes Act of 1947 in our country, which established a legal basis for union participation in the
management.

Importance of Collective Bargaining:

The collective bargaining advances the mutual understanding between the two parties i.e., employees and
employers.

The role of collective bargaining may be evaluated from the following point of view:
(1) From Management Point of View:
The main object of the organisation is to get the work done by the employees at work at minimum cost and
thus earn a high rate of profits. Maximum utilization of workers is a must for the effective management. For
this purpose co-operation is required from the side of the employees and collective bargaining is a device to
get and promote co-operation. The labour disputes are mostly attributable to certain direct or indirect causes
and based on rumors, and misconceptions. Collective bargaining is the best remedial measure for
maintaining the cordial relations.

(2) From Labour and Trade Union Point of View:

Labour has poor bargaining power. Individually a worker has no existence because labour is perishable and
therefore, the employers succeed in exploiting the labourers.

The working class in united form becomes a power to protect its interests against the exploitation of the
employers through the process of collective bargaining.

The collective bargaining imposes certain restrictions upon the employer. Unilateral action is prevented. All
employees are treated on equal footings. The conditions of employment and rates of wages as specified in
the agreement can be changed only through negotiations with labour. Employer is not free to make and
enforce decisions at his will.

Collective bargaining can be made only through the trade unions. Trade unions are the bargaining agents for
the workers. The main function of the trade unions is to protect the economic and non- economic interests of
workers through constructive programmes and collective bargaining is one of the devices to attain that
objective through negotiations with the employers, Trade unions may negotiate with the employer for better
employment opportunities and job security through collective bargaining.

(3) From Government Point of View:

Government is also concerned with the process of collective bargaining. Government passes and implements
several labour legislations and desires it to be implemented in their true sense. If any person violates the
rules and laws, it enforces them by force.

Collective bargaining prevents the Government from using the force because an amicable agreement can be
reached between employer and employees for implementing the legislative provisions. Labour problems
shall be minimised through collective bargaining and industrial peace shall be promoted in the country
without any force.

Collective bargaining is a peaceful settlement of any dispute between worker and employers and therefore it
promotes industrial peace and higher productivity resulting an increase in the Gross National Product or the
national income of the country.

Main Hindrances for Collective Bargaining:

The main objective of developing collective bargaining technique is to improve the workers-management
relations and thus maintain peace in industries. The technique has developed in India only after India got
independence and got momentum since then.

The success of collective bargaining lies in the attitude of both management and workers which is actually
not consistent with the spirit of collective bargaining in India. There are certain problems which hinder the
growth of collective bargaining in India.
The following factors or activities act as hindrances to effective collective bargaining:
(1) Competitive Process:
Collective bargaining is generally becoming a competitive process, i.e., labour and management compete
each other at negotiation table. A situation arises where the attainment of one party’s goal appears to be in
conflict with the basic objectives of the other party.

(2) Not Well-Equipped:
Both the parties—management and workers—come to the negotiation table without doing their homework.
Both the parties start negotiations without being fully equipped with the information, which can easily be
collected from company’s records. To start with, there is often a kind of ritual, that of charges and counter
charges, generally initiated by the trade union representatives. In the absence of requisite information,
nothing concrete is achieved.

(3) Time to Protest:
The immediate objective of the workers’ representatives is always some kind of monetary or other gains,
accrue when the economy is buoyant and the employer has capacity to pay. But in a period of recession,
when demand of the product and the profits are falling, it is very difficult for the employer to meet the
demands of the workers, he might even resort to retrenchment or even closure collective bargaining is no
answer to such a situation.

(4) Where Prices are Fixed by the Government:

In industries, where the prices of products are fixed by the Government, it becomes very difficult for the
employer to meet the demands of workers which would inevitably lead to a rise in cost of the products
produced. Whereas the supply price to the consumers cannot be increased. It will either reduce the profits of
the firm or increase the loss. In other words, it will lead to closure of the works, which again is not in the
interest of the workers.

(5) Outside Leadership:
Most of the Indian trade unions are led by outsiders who are not the employees of the concerned
organisations. Leader’s interests are not necessarily to be identical with that of the workers. Even when his
bonafides are beyond doubt, between him and the workers he leads, there cannot be the degree of
understanding and communication as would enable him to speak on behalf of the workers with full
confidence. Briefly, in the present situation, without strong political backing, a workers’ organisation cannot
often bargain successfully with a strong employer.

(6) Multiplicity of Trade Unions:

One great weakness of collective bargaining is the multiplicity of trade unions. In a multiple trade union
situation, even a well recognised, union with long standing, stable and generally positive relationship with
the management, adopts a militant attitude as its deliberate strategy.
In Indian situation, inter-union rivalries are also present. Even if the unions combine, as at times they do for
the purpose of bargaining with the employer they make conflicting demands, which actually confuse
employer and the employees.

(7) Appointment of Low-Status Executive:

One of the weaknesses of collective bargaining in India is that the management deputes a low-status
executive for bargaining with the employees. Such executive has no authority to commit anything on behalf
of the management. It clearly indicates that the management is not at all serious and the union leaders adopt
other ways of settling disputes.

(8) Statutory Provisions:
The constraints are also imposed by the regulatory and participative provisions as contained in the Payment
of Wages Act, the Minimum Wages Act, and Payment of Bonus Act etc. Such provisions are statutory and
are not negotiable.

(9) Fresh Demands at the Time of Fresh Agreement:

At the time when the old agreement is near expiry or well before that, workers representatives come up with
fresh demands. Such demands are pressed even when the industry is running into loss or even during the
period of depression. If management accepts the demand of higher wages and other benefits, it would prefer
to close down the works.

(10) Agreements in Other Industrial Units:

A prosperous industrial unit in the same region may agree with the trade unions to a substantial increase in
wages and other benefits whereas a losing industry cannot do that. There is always pressure on the losing
industries to grant wages and benefits similar to those granted in other (relatively prosperous) units in the
same region.

Scope of Collective Bargaining:

Collective bargaining broadly covers subjects and issues entering into the conditions and terms of
employment. It is also concerned with the development of procedures for settlement of disputes arising
between the workers and management.

A few important issues around which collective bargaining enters in this developing country are as
follows:
“Recognition of the union has been an important issue in the absence of any compulsory recognition by law.
In the under-developed countries in Asia, however, on account of the tradition concept of management
functions and the immaturity of the industrialist class there is much resistance from the employers to
recognise the status of the unions.”
Bargaining upon wage problems to fight inflation or rising cost of living and to resist wage cuts during
depression has resulted in several amicable agreements. But, no statistics are available for such amicable
settlements. Therefore, Daya, points out, “It has been customary to view collective bargaining in a pattern of
conflict; the competitively small number of strikes and lock-outs attract more attention than the many cases
of peaceful settlement of differences.”

Another issue on which bargaining takes place is seniority, but in India, it is of less importance than in
western countries. But, in India, lay-off, retrenchment, dismissal, rationalisation and participation in the
union activities have been important issues for collective bargaining.

Regarding bargaining on hours of work, it has recognized that “in one form or another subject of working
time will continue to play an important part in collective bargaining; although the crucial battles may be well
fought in the legislative halls.”

Overtime work, holidays, leave for absence and retirement continue to be issues for bargaining in India,
although they are not regarded as crucial.

The union security has also been an issue for collective bargaining, but it could not acquire much importance
in the country, although stray instances are found. The Tata Workers union bargained with M/s Tata Iron
and Steel Co. Ltd., Jamshedpur, on certain issues, one of which was union security and in the resulting
agreement some of the union security clauses were also included.

The production norms, technical practices, details of working rules, standards of performance, allowance of
fatigue, hiring and firing, protection of life and limb, compensation for overtime, hours of work, wage rates
and methods of wage payments, recognition of unions, retrenchment, union security, holidays and
competence of workmen form the subjects of negotiations and agreements through collective bargaining.
Customary practices are evolving procedures to extend the area of collective bargaining. Collective
bargaining has been giving official sanction to trade experiences and agreements.

Collective bargaining, thus, covers the negotiation, administration, interpretation, application and
enforcement of written agreement between employers and unions representing their employees setting forth
joint understanding, as to policies and procedures governing wages, rates of pay, hours of work and other
conditions of employment.
Collective Bargaining in the Post- Independence Period:
Before Independence, the collective bargaining as it was known and practised was virtually unknown in
India. It was accepted, as a matter of principle, for usage in union management relations by the state.

Though it was emphasised in the First Five Year Plan that the State would encourage mutual settlement,
collective bargaining and voluntary arbitration; to the utmost extent and thereby reduce number of
intervention of the state in union management relations.
However, because of the imperatives of political and economic factors, the State was not prepared to
encourage voluntary arbitrations and negotiations and the resulting show of strength by the parties. The
State, therefore, armed itself with the legal powers which enabled it to refer disputes to an arbitrator or an
adjudicator if the two parties fail to reach a mutually acceptable agreement.

This move of compulsory arbitration and adjudication was opposed by several labour leaders because they
believed that this would destroy the picture of industrial relations in India. Dr. V.V. Giri expressed his views
on this point at the Indian Labour Conference in 1952, “Compulsory arbitration” he declared, “has cut at the
very root of trade union organisation…If the workers find that their interests are best promoted only by
combining, no greater urge is needed to forge a band of strength and unity among them. But compulsory
arbitration sees to it that such a band is not forged… It stands there is a policeman looking out for signs of
discontent, and at the slightest provocation, takes the parties to the court for a dose of costly and not wholly
satisfactory justice.”

Despite this controversy, collective bargaining was introduced in India for the first time in 1952, and it
gradually gained importance in the following years. The information, however, on the growth of collective
bargaining process is very meager, and the progress made in this respect has not been very conspicuous,
though not negligible. The data released by the Labour Bureau show that the practice of determining the
rates of wages and conditions of employment has spread to most of the major segments of the national
economy.

A sample, study covering the period from 1956 to 1960 conducted by the Employer’s Federation of India
has revealed that collective bargaining agreements have been arrived in respect of disputes ranging from 32
to 49 percent. Most of the collective bargaining agreements have been entered into at plant level. In this
connection, the National Commission on Labour has thrown ample light on the progress of collective
agreement.

In its own words, “Most of the collective bargaining (agreements) has been at the plant level, though in
important textile centres like Bombay and Ahmedabad industry level agreements have been (fairly)
common… Such agreements are also to be found in the plantation industry in the South, and in Assam, and
in the coal industry. Apart from these, in new industries—chemicals, petroleum, oil refining and
distribution, aluminium and electrical equipment, automobile repairing—the arrangement for the settlement
of disputes through voluntary agreements have become common in recent years. In the ports and docks,
collective agreements have been the role at individual centres. On certain matters affecting all the ports, all
India agreements have been reached. In the banking industry, after the series of awards, employers and
unions have, in recent years, come closer to reach collective agreements. In the Life Insurance Corporation
(LIC) with the exception of the Employer’s decision to introduce automation which has disturbed industrial
harmony in some centres, there has been a fair measure of discussion across the table by the parties for the
settlement of disputes.”
The collective bargaining reached has been of three types:
(1) Agreement arrived at after voluntary direct negotiations between the parties concerned. Its
implementation is purely voluntary;

(2) Agreements between the two parties, though voluntary in nature, are compulsory when registered as
settlement before a conciliator; and

(3) Agreement which have legal status negotiated after successful discussion between the parties when the
matter of dispute is under reference to industrial tribunal/courts.

Many agreements are made voluntarily but compulsory agreements are not negligible. However, collective
bargaining and voluntary agreements are not as prominent as they are in other industrially advanced
countries. The practice of collective bargaining in India has shown much improvement after the passing of
some legislation like The Industrial Disputes Act 1947 as amended from time to time. The Bombay
Industrial Relations Act 1946 which provided for the rights of workers for collective bargaining. Since then,
a number of collective bargaining agreements have been entered into.

Issues Involved in Collective Agreements:

A study conducted by the Employer’s Federation of India revealed that out of 109 agreements, ‘wages’ was
the most prominent issue in 96 cases (88 percent) followed by dearness allowance (59 cases) retirement
benefits (53 cases), bonus (50 cases) other issues involved were annual leave, paid holidays, casual leave,
job classification, overtime, incentives, shift allowance, acting allowance, tiffin allowance, canteen and
medical benefits.

A study of various collective agreements entered into in India, certain trends in collective bargaining are
noticeable.

These are:
(i) Most of the agreements are at plant level. However, some industry-level agreements are also there;

(ii) The scope of agreements has been widening now and now includes matters relating to bonus,
productivity, modernisation, standing orders, voluntary arbitration, incentive schemes, and job evaluation;

(iii) Long term agreements ranging between 2 to 5 years, are on increase;

(iv) Joint consultation in various forms has been provided for in a number of agreements; and feasible and
effective.

Reasons for the Growth of Collective Bargaining:

The growth of collective bargaining in India may be attributed to the following factors:
(1) Statutory Provisions:
Which have laid down certain principles of negotiations, procedure for collective agreements and the
character of representation of the negotiating parties?

(2) Voluntary Measures:
Such as tripartite conferences, joint consultative boards, and industrial committees at the industry level have
provided an ingenious mechanism for the promotion of collective bargaining practices.

(3) Several Governments Measures:

Like schemes for workers’ education, labour participation in management, the evolution of the code of Inter-
union Harmony, the code of Efficiency and Welfare, the Code of Discipline, the formation of Joint
Management Councils, Workers Committees and Shop Councils, and the formulations of grievances
redressal procedure at the plant level— have encouraged the collective bargaining.

(4) Amendments to the Industrial Disputes Act:

The Amendments to the Industrial Disputes Act in 1964 provided for the termination of an award or a
settlement only when a proper notice is given by the majority of workers. Agreements or settlements which
are arrived at by a process of negotiation on conciliation cannot be terminated by a section of the workers.

(5) Industrial Truce Resolution:

The Industrial Truce Resolution of 1962 has also influenced the growth of collective bargaining. It provides
that the management and the workers should strive for constructive cooperation in all possible ways and
throws responsibility on them to resolve their differences through mutual discussion, conciliation and
voluntary arbitration peacefully.

Government Policy to Encourage Collective Bargaining:

Ever since independence, it has been the declared policy of the Central Government to encourage trade
unions development and the settlement of differences in industry by mutual agreement.

Article 19 of the constitution guarantees for all citizens the right to form associations or unions, only by
reserving to the state powers in the interest of public order to impose reasonable restrictions on the exercise
of this right.

The Industrial policy Resolution of 1956 declared that, “in a socialist democracy labour is a partner in the
common task of development”, thus following out the resolution of the Lok Sabha of 1954 which set India
on the path towards a “‘socialistic pattern of society.”

The Second Five Year Plan in 1956 was more specific and declared:
“For the development of an undertaking or an industry, industrial peace is indispensable; obviously, this can
best be achieved by the parties themselves. Labour legislation and the enforcement machinery set up for its
implementation can only provide a suitable framework in which employees and workers can function.”
Has Government Discouraged Collective Bargaining?
It is obvious, that the declared policy of the government laid emphasis on the voluntary settlement of
differences in industry. But industrial legislation since independence and government intervention to
establish various standards of working conditions and machinery for compulsory arbitration of disputes have
limited the scope of collective bargaining.

The areas that are covered by labour legislation are mainly physical working conditions and terms of
employment, and to the extent that these are prescribed by law the scope of collective bargaining is limited.

The Industrial Employment (Standing Order) Act, 1948 makes compulsory the drawing up conditions of
employment relating to methods of paying wages, hours of work, over time, shifts, holidays, termination of
employment and disciplinary action, but not through joint negotiation. There is no statutory requirement that
employer should discuss the draft standing orders with the union.

The Minimum Wages Act, also passed in 1948, has given statutory power to appropriate government to fix
minimum wages in certain scheduled employments. The object of this legislation was to secure a minimum
in those occupations or industries where the worker were not sufficiently organised to be able to negotiate
reasonable wages for themselves.

If the government was committed to support the principle of collective bargaining, why no attempt was
made to encourage it by legislation? The Trade Union Amendment Act, passed in 1947, did not in fact
provide for the compulsory recognition by the employers of representative trade unions, but this act was
never notified and so never came into force.

It is arguable that some legislative action to compel recognition of the more stable unions might have helped
to create a better climate for encouragement of voluntary settlement in industry.

The attitude of the management and unions was commonly “Let the issue go to the tribunal”, with the result
that little real effort was made towards mutual settlement and conciliation officers found little response to
their efforts at meditation. References to the adjudication piled up, the industrial tribunals were
overwhelmed with cases, and lengthy delays and general frustration resulted.

From the above facts, it looks that the Government has discouraged the Development of Collective
Bargaining in India. But the truth is that, the Government intention has never been to discourage it. In fact,
the labour in India is not very well organised and it is not expected that it would be able to get its due share
through collective bargaining.

Hence, the government has tried to protect in the interests of labour by passing the various acts such as the
Factory Act of 1948. Employees State Insurance Act, 1948 and Minimum Wages Act. Hence, the cases
involving industrial disputes should be to compulsory arbitration.
Khandubhai Desai, the then Labour Minister, stated in July 1956 that voluntary agreement to refer questions
to arbitration was the best solution. But he added complete laissez-faire is out of date. Society cannot allow
workers or management to follow the law of jungle. Therefore, as a last resort, the government has taken
powers to refer disputes to adjudication.

It has, further, been argued that in a planned economy, the relations between the labour and management
have also to be on planned basis.

They cannot be allowed to upset the production target just because one of the parties would not like to settle
the disputes in fair manner.

Therefore, the Government of India under Industrial Disputes Act 1947 has created the following
seven different authorities for the prevention and settlement of disputes:
1. Workers Committees.

2. Conciliation Officer.

3. Board of Conciliation.

4. Court of Enquiry.

5. Labour Courts.

6. Industrial Tribunals.

7. National Tribunals.

The important characteristic of the above machinery for the prevention and settlement of disputes is that,
there is full scope for the settlement of dispute through collective bargaining and if it is not settled by Works
Committees, Conciliation Officer, Board of Conciliation, only then, it is referred to Court of Enquiry and
Labour Courts. The decision of the Labour Courts, Industrial Tribunal and National Tribunal is binding on
both the parties.

Advantages of Collective Bargaining:

Perhaps the biggest advantage of this system is that, by reaching a formal agreement, both sides come to
know exactly what to expect from each other and are aware of the rights they have. This can decrease the
number of conflicts that happen later on. It also can make operations more efficient.
Employees who enter collective bargaining know they have some degree of protection from employer
retaliation or being let go from the job. If the employer were dealing with just a handful of individuals, he
might be able to afford to lose them. When he is dealing with the entire workforce, however, operations are
at risk and he no longer can easily turn a deaf ear to what his employees are saying.
Even though employers might need to back down a little, this strategy gives them the benefit of being able to
deal with just a small number of people at a time. This is very practical in larger companies where the
employer might have dozens, hundreds or even thousands of workers on his payroll. Working with just a
few representatives also can make the issues at hand seem more personal.
Agreements reached through these negotiations usually cover a period of at least a few years. People
therefore have some consistency in their work environment and policies. This typically benefits the
company’s finance department because it knows that fewer items related to the budget might change.
On a broad scale, using this method well can result in more ethical way of doing business. It promotes ideas
such as fairness and equality, for example. These concepts can spill over into other areas of a person’s life,
inspiring better general behavior towards others.
Disadvantages of Collective Bargaining:
A major drawback to using this type of negotiation system is that, even though everyone gets a say in what
happens, ultimately, the majority rules, with only a few people determining what happens too many. This
means that a large number of people, particularly in the general workforce, can be overshadowed and feel
like their opinion doesn’t really matter. In the worst case scenario, this can cause severe division and
hostility in the group.
Secondly, it always requires at least two parties. Even though the system is supposed to pull both parties
together, during the process of trying to reach an agreement, people can adopt us-versus-them mentality.
When the negotiations are over, this way of looking at each other can be hard to set aside, and unity in the
company can suffer.
Collective bargaining can also be costly, both in terms of time and money. Representatives have to discuss
everything twice—once at the small representative meetings, and again when they relay information to the
larger group. Paying outside arbitrators or other professionals quickly can run up a fairly big bill, and when
someone else is brought in, things often get slower and more complex because even more people are
involved.
Some people point out that these techniques have a tendency to restrict the power of employers. Employees
often see this as a good thing, but from the company’s perspective, it can make even basic processes
difficult. It can make it a challenge to deal with individual workers, for example.
The goal of the system is always to reach a collaborative agreement, but sometimes tensions boil over. As a
result, one or both parties might feel they have no choice but to muscle the other side into giving up.
Workers might do this by going on strike, which hurts operations and cuts into profits. Businesses might do
this by staging lockouts, which prevents members’ of the workforce from doing their jobs and getting paid,
negatively effecting income and overall quality of living.
Lastly, union dues are sometimes an issue. They reduce the amount of take-home pay a person has, because
they usually are deducted right from his paycheck. When things are good in a company and people don’t
feel like they’re getting anything from paying the dues, they usually become unhappier about the rates.
The idea of collective bargaining emerged as a result of industrial conflict and growth of trade union
movement and was first given currency in the United States by Samuel Crompers. In India the first
collective bargaining agreement was conducted in 1920 at the instance of Mahatma Gandhi to regulate
labour management relation between a group of employers and their workers in the textile industry in
Ahmadabad
Is minimum wage law justified?
Minimum wage law creates issues like unemployment. Yet most countries of the world have minimum wage
law.
The minimum wage law is justified on the following grounds:
(i) First, the problem of unemployment that might erupt is slight exaggeration. Practically labour supply is
heterogeneous consisting of unskilled, skilled, highly specialized and educated labour. All other categories
of labour – other than unskilled and unorganized labour – are paid wages much higher than the minimum
wage fixed by the law.
Therefore, the negative unemployment effective of the minimum wage law is confined to the category of
unskilled labour. Therefore, the minimum wage law of protecting the interest of the weaker section of labour
is not as high as projected above.
(ii) Second, the negative employment effect that minimum wage law may create is moderated by the
positive employment effect of higher wage earnings. Higher wage incomes lead to higher consumption.
Increase in demand for consumer goods, increases demand for labour and also open up new opportunities
for employment. There is, therefore justification of minimum wage law.
(iii) Third, Inflation erodes the real income and real wage. The existence of minimum wage law provides an
opportunity and need for upward revision of the wage rate.
(iv) Fourth, one major purpose of the minimum wage law is to promote social equity through a more
equitable distribution of income.

What are Standing Orders?

 
Section 2(g) “Standing orders” means rules relating to matters set out in the Schedule;

‘Standing Orders’ means rules of conduct for workmen employed in industrial establishments.

The object of the Act is to require employers in industrial establishments to formally define conditions of
employment under them.

THE SCHEDULE
MATTERS TO BE PROVIDED IN STANDING ORDER UNDER THIS ACT

1. Classification of workmen, e.g. whether permanent, temporary, apprentices, probationers, or badlis.

2. Manner of intimating to workmen periods and hours of work, holidays, pay-days and wage rates.
3. Shift working.
4. Attendance and late coming.
5. Conditions of procedure in applying for, and the authority which may grant, leave and holidays.
6. Requirement to enter premises by certain gates, and liability to search.
7. Closing and re-opening of sections of the industrial establishment, and temporary stoppages of work and
the rights and liabilities of the employer and workmen arising therefrom.
8. Termination of employment, and the notice thereof to be given by employer and workmen.
9. Suspension or dismissal for misconduct, and acts or omissions, which constitute misconduct.
10. Means of redress for workmen against unfair treatment or wrongful exactions by the employer or his
agents or servants.
11. Any other matter, which may be prescribed.

[section 1(3)].  Applicability of the Act - The Act is applicable to all ‘industrial establishments’ employing
100 or more workmen.
Provided that the appropriate Government may, after giving not less than two months’ notice of its intention
so to do, by notification in the official Gazette, apply the provision of this Act to any industrial
establishment employing such number of persons less than one hundred as may be specified in the
notification.
‘Industrial establishment’ means (i) an industrial establishment as defined in section 2(i) of Payment of
Wages Act (ii) Factory as defined in section 2(m) of Factories Act (iii) Railway (iv) Establishment of
contractor who employs workmen for fulfilling contract with owner of an industrial establishment. [section
2(e)].

The term ‘industrial establishment’ includes factory, transport service, construction work, mines, plantation,
workshop, building activity, transmission of power etc.
Nothing in this Act shall apply to.

(i) Any industry to which the provisions of Chapter VII of the Bombay Industrial Relations Act, 1946
(Bombay Act II of 1947) apply; or

(ii) Any Industrial establishment to which the provisions of the Madhya Pradesh Industrial Employment
(Standing Orders) Act, 1961 (Madhya Pradesh Act 26 of 1961 apply:
Provided that notwithstanding anything contained in the Madhya Pradesh Industrial Employment (Standing
Orders) Act, 1961 (Madhya Pradesh Act, 26 of 1961), the provision of this Act shall apply to all industrial
establishments under the control of the Central Government.]
Section 14. Power to exempt

The appropriate Government may, by notification in the official Gazette, exempt conditionally or
unconditionally, any industrial establishment or class of industrial establishment from all or any of the
provisions of this Act.
“Wages” and “workman” have the meanings, respectively assigned to them in  Sec. 2 of the Industrial
Disputes Act, 1947 (14 of 1947).

Section 13B. Act not to apply to certain Industrial establishments

Act not to apply to certain Industrial establishments. Nothing in this Act shall apply to an industrial
establishment in so far as the workmen employed therein are persons to whom the Fundamental and
Supplementary Rules, Civil Services (Classification, Control and Appeal) Rules, Civil “Services
(Temporary Service) Rules, Revised Leave Rules, Civil Service Regulations, Civilians in Defence Service
(Classification, Control and Appeal) Rules or the Indian Railway Establishment Code or any other rules or
regulations that may be notified in this behalf by the appropriate Government in the official Gazette, apply.]

Approval of Standing Orders - Every employer covered under the Act has to prepare ‘Standing Orders’,
covering the matters required in the ‘Standing Orders’. Five copies of these should be sent to Certifying
Officer for approval. [section 3(1)]. ‘Certifying Officer’ means Labour Commissioner and any officer
appointed by Government to be ‘Certifying Officer’. [section 2(c)].

The Certifying Officer will inform the Union and workmen and hear their objections. After that, he
will certify the ‘Standing Orders’ for the industrial establishment. [section 5].  Till standing orders are
certified, ‘Model Standing Order’ prepared by Government will automatically apply. [section12A].

Standing order should be displayed in English and local language on special notice boards at or near
entrance of the establishment. [section 9]. Modifications of Standing Order shall be done by following
similar procedure. [section 10].

Once the ‘Standing Orders’ are certified, they supersede any term and condition of employment, contained
in the appointment letter. If there is inconsistency between ‘Standing Order’ and ‘Appointment Letter’, the
provisions of ‘Standing Order’ prevail - Eicher Goodearth Ltd. v. R K Soni - (1993)

Standing orders are binding on employer and employee. These are statutorily imposed conditions of
service. However, they are not statutory provisions themselves (meaning that the ‘Standing Orders’ even
when approved, do not become ‘law’ in the sense in which Rules and Notifications issued under delegated
legislation become after they are published as prescribed.) - Rajasthan SRTC v. Krishna Kant - AIR 1995

Model Standing Orders - The Act has prescribed Model Standing Orders. These are automatically
applicable till employer prepares his own ‘Standing Orders’ and these are approved by ‘Certifying Officer’.
[section 12A].

Disciplinary Action - The most important use of ‘Standing Orders’ is in case of disciplinary action. A
workman can be punished only if the act committed by him is a ‘misconduct’ as defined under the ‘Standing
Orders’. The ‘Model Standing Orders’ contain such acts like insubordination, disobedience, fraud,
dishonesty, damage to employer’s property, taking bribe, habitual absence or habitual late attendance,
riotous behaviour, habitual neglect of work, strike in contravention of rules etc. as misconducts. The
‘Certified Standing Orders’ may cover other acts as ‘misconduct’, if approved by ‘Certifying Officer’.
Subsistence Allowance – Where a workman is suspended by employer pending investigation or enquiry into
complaints or charges of misconduct against him, the workman shall be paid subsistence allowance equal to
50% of wages for first 90 days of suspension and 75% of wages for remaining period till completion of
disciplinary proceedings. [section 10A(1)]. - - ‘Wages’ has same meaning as under section 2(rr) of Industrial
Disputes Act. [section 2(i)].

Adjudication

Adjudication means a mandatory settlement of Industrial Disputes by labour courts, Industrial Tribunals or
National Tribunals under the Act or by any other corresponding authorities under the analogous state
statutes. By and large, the ultimate remedy of unsettled dispute is by way of reference by the appropriate
government to the adjudicatory machinery for adjudication. The adjudicatory authority resolves the
Industrial Dispute referred to it by passing an award, which is binding on the parties to such reference.
There is no provision for appeal against such awards and the same can only be challenged by way of writ
under Articles 226 and 227 of the Constitution of India before the concerned High Court or before the
Supreme Court by way of appeal under special leave under Article 136 of the Constitution of India.

However before the provisions of the Act, 1947 may become applicable certain pre-requisite conditions
must exist.

1. The dispute must relate to an ‘Industry’;

2. Section 2(j) of the Industrial Dispute Act gives a comprehensive definition of ‘industry’. The definition of
industry in this clause is both exhaustive and inclusive and is quite comprehensive in its scope. It is in two
parts, the first part says that ‘it means any business, trade, undertaking, manufacture or calling of
employees and then goes on to say that it, includes any calling, services employment, handicraft or
industrial occupation or avocation or workmen. Thus one part of the definition defines it from the standpoint
of the employer; the other from the standpoint of the employees.

This definition has undergone variegated judicial interpretation. In case of Bangalore Water Supply and
Sewage Board Vs. A. Rajagappa [(1978) 1 LLJ 349] a 7 judges bench of the Supreme Court has given the
widest possible meaning of the term ‘industry’ which virtually covers almost all organized activities under
the ambit of the term ‘industry’. After the decision of the Supreme Court in Bangalore Water Supply and
Sewage Board case the question to be asked is not what is an industry, but what is not an industry.
Further, even after the Bangalore Water Supply and Sewage Board decision there is much left to be
desired with the interpretation of industry and the need for legislative reforms has been accentuated by all
concerned. A very sensible and pragmatic definition of the term ‘industry’ has been attempted in the
Industrial Relations Bill of 1978. With the dissolution of the Parliament in 1979 the Bill lapsed.

The definition has been amended by the Parliament in the Industrial Disputes (Amendment) Act, 1982 with
new definition of industry in Section 2(j). However the amendment has yet to be brought into force. There is
an urgent need for a comprehensive and practical definition of the ‘industry’.

3. Under this Act an Industrial Dispute can be raised only by ‘workman’ employed in an ‘industry’.

4. The dispute must be an ‘Industrial Dispute’. Section 2(k) of the Act defines ‘Industrial Dispute’ and only
disputes covered under the definition can be referred for conciliation or adjudication under the Act. The
definition of ‘Industrial Dispute’ in section 2(k), can be divided into two parts viz :

1. Dispute or difference

i. between employer and employers

ii. Between Employer and workman
iii. Between Workman and workman

2. Subject matter of dispute.

 i. Connected with the employment or non-employment
ii. The terms of employment
iii. With the condition of labour.

Strikes and lockouts

Workers have the right to strike, even without notice unless it involves a public utility service; employers
have the right to declare lockout, subject to the same conditions as a strike. The parties may sort out their
differences either bilaterally, or through a conciliation officer who can facilitate but not compel a settlement,
which is legally binding on the parties, even when a strike or a lockout is in progress. But if these methods
do not resolve a dispute, the government may refer the dispute to compulsory adjudication and ban the strike
or lockout. However in recent times the Higher Courts have deprecated the tendency to go on strike quite
frequently. Furthermore, the Supreme Court of India has also held that government employees have no
fundamental right to go on strike.

Hire and Fire

Where an employer hires employees on temporary basis with an understanding that there is no job security
in such employment, meaning whereby that the people so employed can be dismissed at the drop of a hat,
the arrangement is known as the policy of ‘hire and fire’ in general parlance.

Such arrangement is normally practiced in private sector.

However, even government departments hire people on ad hoc basis and dismiss them when the work is
over. The expression ‘hire and fire’ does not mean a policy or right where an employer ‘can’ dismiss a
worker forthwith, for that right is available to all employers alike.

The only difference is that to dismiss a workman the employer has to have a reason in normal circumstances
but in case of ‘hire and fire’ the person can be dismissed simply because the employer does not need him
anymore. There is no livelihood-related obligation on the employer towards the workman.