On December 12 last year, thousands of workers ransacked machinery worth crores at a plant near Bengaluru run by Wistron India. Wistron, which set up the plant in 2019 amid much fanfare from the Karnataka Government, is a major contract manufacturer of Apple products. Naturally, this fiasco deeply worried the Union government. Its main concern, as noted in a statement put out by the Department for Promotion of Industry and Internal Trade (DPIIT), was to “ensure that the investor sentiment is not affected due to such one-off incidents”.
In addition to voicing this concern, the DPIIT went on to direct the Karnataka government to “look into the wages and labour related matters there”. But that query smacks of an afterthought. A more pertinent question might be “What sort of systemic failure resulted in thousands of workers deciding that ransacking their “place of work is a viable option?”
Initial reports suggest that Wistron had promised engineering graduates a salary of Rs 16,000 per month, which was then cut to Rs 12,000. They also allegedly changed working hours from 8 hours to 12+ hours without overtime pay, violating several other labour laws in the process. It is also alleged that Wistron did not even pay these diminished salaries on time due to what they have termed a “software glitch”.
Fortunately, the wheels of justice seem to be rolling along smoothly. In accordance with DPIIT instructions, over 150 of these dastardly workers running around hurting investor sentiment are now in jail. Wistron, on the other hand, has asked one VP in charge of India operations to look for alternate employment. It may also need to pay a small fine for its alleged labour law violations.
While violence cannot be condoned, the Wistron incident shows that all is not well with serious underlying problems affecting labour in sunny, investor-friendly India. Looking to the future, a crucial question to ask is: “Are we fixing our labour grievance redressal systems so that these sorts of events do not happen again?”
The new Industrial Relations Code, 2020 (IRC) has made drastic alterations to this labour grievance redressal process. This law was passed by Parliament in September after just three hours of debate, over deafening opposition from nearly all stakeholders and pan India protests. The Union government intends to enact into law with effect from April 01, 2021.
While the IRC contains several deeply problematic provisions, this piece focuses solely on how it effectively nullifies labour’s most powerful grievance redressal tool – the strike.
Individual employees normally have a weak bargaining position. Collective bargaining, a collective strike, or the threat of a strike which can shut down production has the potential to strengthen their negotiating ability significantly.
The present law on strikes, the Industrial Disputes Act, 1947 (IDA), places restrictions on striking only on industries that are “public utility services” since public utilities are crucial for societal functioning.
For those that aren’t employed with a public utility service, the strike process under the IDA is relatively straightforward. Here’s a simplified flowchart on how it works:
As the chart illustrates, the main challenge that an employee would face is in persuading her colleague that going on strike is the best available option. Once this is accomplished, the IDA allows employees to proceed with a strike. In case the government believes that the issue would be better resolved through other means, it can order the parties to approach a government-appointed conciliation officer, or litigate their issue before a labour court, during which time striking is not allowed.
By going on strike, employees risk upsetting their relationship with management. But this is precisely the point - employees take this risk only when their employment situation is difficult enough that going on strike is their only viable option. The IDA at the very least gives employees the freedom to make this decision. Because there is a legitimate possibility of production halting due to a strike, companies also have the incentive to come to a compromise when employees have major issues.
Needless to say, this framework isn’t fool-proof; employers have identified several neat loopholes in the IDA to minimise this risk. For example, instead of directly hiring employees, employers can go through a contractor, who acts as a middleman. In such a situation, employees are less likely to unionise or go on strike (as they don’t directly work for the employer), and contractors are more willing to act unscrupulously when dealing with errant employees. Reportedly, our friends at Wistron had contracted nearly 85% of their total workforce of 10,000 through a contractor.
Despite the existence of such loopholes, an employee’s right to strike is more or less protected under the IDA.
The IRC has not technically banned the strike. What it has done instead is made the process so mind-bogglingly complicated that most people would not be able to understand the procedure, let alone follow it. The (again, simplified) process of going on strike now is as follows:
The chart above shows how the IRC has made the striking process considerably more convoluted. First, striking employees need to send at least 14 days’ clear notice to the employer and three separate governmental authorities. However, since the draft rules framed under the IRC permit only members of a trade union to send this notice, these employees need to either be a part of a trade union or form their own trade union before they can send the aforementioned notice. Forming a trade union is a long and complicated process with no fixed maximum time frame.
Once the notice period has elapsed, employees are mandatorily required to attempt conciliation with the employer. While the conciliation process is required to be completed in 14 days, the IRC prescribes no consequences whatsoever if this period is exceeded. In effect, this gives employers a major incentive to delay conciliation indefinitely and thereby stall a potential strike. If, during or after conciliation, 60 days have passed since the notice of strike was originally sent, the IRC requires a fresh notice to be sent and the entire process must be repeated.
If conciliation fails, the employer can apply for formal adjudication of the dispute before the Industrial Tribunal to be created under the IRC. The (presumably) underpaid employees, now have to hire and pay lawyers to fight their case. Bear in mind that they are also not permitted to strike either during the notice period, the conciliation period, the adjudication period, or for two months after the adjudication is complete.
The IRC has both made the procedure of going on strike unnecessarily complex and expensive and has extended this procedure to every industry, as opposed to just public utilities under the IDA. Nobody is sure why this has been done. The Parliamentary Standing Committee set up to look into the IRC found “no plausible reason for expanding the ambit of this provision indiscriminately to all the industrial establishments as restrictions should not apply to all strikes and demonstrations which are meant to assure freedom of industrial actions”.
Individuals with the courage to try and follow this process would soon find themselves in a web of notices, conciliation procedures, and litigation before they ever have the opportunity to actually go on strike. Since there is no real threat of a strike which can halt production of a company, collective bargaining loses most of its effectiveness. In a country with as much of a labour surplus as India, nullifying the possibility of a strike, the foundation of collective bargaining also removes incentives for companies to improve working conditions.
If employees choose to ignore this convoluted process and strike anyway, they will have committed an "illegal strike", which attracts a minimum fine of Rs. 10,000 which may go up to Rs. 50,000, and potentially imprisonment. Besides these consequences, there is a very real loss of legitimacy with committing “illegal strikes”. Regardless of how valid the grievances of employees are; the IRC has made it that much easier to treat anyone who does not follow this process as a miscreant breaking the law.
Employers will likely use the excessive red tape brought about by the IRC to their advantage, and experiences regarding labour rights from the United States has supported this view. Professor Jake Rosenfeld, an expert on economic inequality, in his book “What Unions No Longer Do” notes how US companies found it cheaper and simpler to delay the formal processes and skirt the rules governing employee disputes. They then priced the resulting fines imposed on them simply as a cost of fighting unionisation. Coincidentally, the fine that can be imposed on employers under IRC for “unfair labour practices”, such as threatening employees who try and join a trade union ranges from Rs. 10,000 to Rs. 2,00,000.
From the perspective of an employer, the cost of engaging lawyers, delaying legal proceedings, and paying meagre fines is pitifully insignificant compared to the costs of paying fair wages and providing adequate work conditions and benefits to employees. The fines are also a meagre percentage of the turnover of most companies, so it is unlikely to affect the sentiment of investors either. It is also far lower than the loss of profit and output that they could suffer during a strike, which could have otherwise acted as the incentive to reach an agreement with their employees.
Looking at the bigger picture, there are massive threats against the goal of every working-age Indian being able to obtain fair and dignified work. Rising levels of automation, lack of proper education and training, and increasing employer expectations all pose a threat to adequate employee rights. The only weapon that employees have in their arsenal to counteract these forces is their ability to negotiate with their labour. By denying them the right to withhold this labour, the IRC will inevitably make them powerless. Regardless of what investor sentiment may be, employees must have this power.
Studies by both the International Monetary Fund and the Organisation for Economic Co-operation and Development have noted the strong correlation between bargaining power and the rise or decrease of inequality. The weaker the bargaining power, the higher the inequality in the country. For collective bargaining to have any hope in India, it is crucial that the strike, a cornerstone of bargaining power and the collective bargaining process, not be brushed aside by an inveterate and insidious bureaucracy.
Darren Tony Lobo is a lawyer who works on employee welfare and labour relations issues. He can be contacted at darren.tony.lobo@gmail.com.
Views are the author's own.