Labour Law Reforms: Shift from Labour Market to Industrial Relations is the Key!

K.R. Shyam Sundar

Violence-laced industrial conflicts and long, sustained and costly industrial conflicts have taken place in the 2000s as they did in the 1970s and the 1980s primarily on the trade union recognition issue, though the complementary labour flexibility strategies followed by the employers in the post-reform period has been additionally responsible for the conflicts.

Consequent to reforms relating to the product market both domestically and on the external front since 1991 the industry leaders and others have been loudly and insistently clamouring for reforms of certain clauses of labour laws (core labour law reforms) and of the labour governance system.  They demand labour flexibility in terms of freedom to hire contract labour without the fear of prohibition, retrench workers and close down undertakings without the compulsion of prior government endorsement and enjoy the freedom to introduce technological changes having loss of employment implications.  Further, they want a liberal labour inspection system and a rational and modern system of records compliance.  The employers may have a case here or there in these demands. 

But there are other compelling issues which hurt industrial relations governance at the plant level the cure of which would, along with the aforementioned demands – granting their economic rationale for a moment – enhance the competitiveness of the firms.  One of the core issues is the absence of provisions in the central trade union law providing for mechanism for determination of collective bargaining agent, resolution of intra-union disputes by labour judiciary and allied aspects such as unfair labour practices as they do in some state labour laws like in Maharashtra.  These measures would surely pre-empt and prevent the incidence of a significant share of the industrial conflicts and provide a basis for building sound industrial relations governance.  The labour flexibility and governance issues have disproportionately dominated the debates on the labour law reforms and this issue has not been mentioned in them.  

In the given legal context, the multiple unions fight for recognition by the employers and the inter-union rivalries vitiate the industrial relations at the workplace.  Even if an employer wishes to negotiate with the trade union, in a multiple trade union set-up with which union does he negotiate? What is the basis on which the bargaining agent status be granted as several methods such as membership verification, check-off and secret ballot compete for attention?  The trade unions are divided over the method of determination.  In the absence of a law on union recognition even a minority union could raise industrial disputes and affect industrial relations.  The intra-union disputes especially over the election of office-bearers are taken up for resolution in the civil court which as is well-known lead to excessive litigation.  Even if the employer enjoys labour flexibility, these issues would lead to worsening of the industrial relations governance and labour flexibility often becomes counterproductive. 

As archaic as any other labour law is the Trade Unions Act, 1926 and it is of limited use unlike most labour laws.  Cast in the colonial period and constructed along the lines of the then extant British law it merely provides for voluntary registration of trade unions, affords certain protections and regulates rather severely the internal affairs of the trade unions.  With a rather liberal eligibility condition of seven members for formation of a trade union and given the splintered nature of Indian society and polity, these fostered unbearable multiplicity of trade unions resulting even in intra-union splits.  It took exactly 75 years to cure this malady! In 2001, the law was amended to raise the eligibility conditions for formation of trade unions.  The protective clauses of the law were rendered technically superfluous once the Constitution of India assured the fundamental right of association.  

Despite the incidence of bloody industrial conflicts in Tamil Nadu (e.g. Simpson strike, the TVS strike) and the Bombay textile industry strike and despite the recommendations of several high profile commissions, the Central government has remained unshaken.  It has kept the central law as tepid as possible.  It blamed the trade unions for not coming to an agreement on the choice among the competing methods of determining the bargaining agent.  The dominance of INTUC and its political mentor, Congress’ long rule helped to sustain the stalemate.  

State level laws and voluntary code of discipline were considered sufficient to deal with this crucial issue!  Maharashtra led the show by enacting the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act [MRTU (PULP) Act] in 1971.  Several state governments like Madhya Pradesh, Rajasthan, Kerala, Bihar have either legislated rules or made regulations for determination of collective bargaining agent.  The long industrial conflict in MRF Company’s plant in Tamil Nadu in 2009 over the recognition of trade union further exposed the inadequacies in the central law on trade unions and revealed the imbalances in the legal structure on the same subject in the country.

The absence of a national legislation providing for determination of collective bargaining agent exposes the irrationality on the part of the central/state governments.  The governments and others persistently cite the need to provide labour flexibility to capital to precisely attract foreign productive investment into the country.  Labour flexibility is necessary to manage the labour market factors efficiently.  But workplace governance is even more important as cordial labour relations are essential for productivity and progress which can be ensured only by sound industrial relations governance.  The invite to [foreign] capital is inadequate as there is no law on union recognition.  The foreign firms complain that even if they desire to – an ambitious thought given the recent trends! – negotiate with trade unions they need to know with which trade union should they negotiate among the several that crowd the negotiating table.  As industrial conflicts thanks to these inadequacies play spoilsport, the government and others are unduly preoccupied with securing labour flexibility as if it is the only magic wand that would ensure competitiveness of a firm or the economy.  It is another matter that India unlike its neighbours in South Asia has not ratified the Fundamental ILO Conventions on freedom of association and the right to collective bargaining even after 65 years of their adoption. 

The dormancy on the part of employers and trade unions on this issue is striking.  Even if the employers did not make the demand for recognition law, the trade unions purely to make themselves attractive in these adverse times should demand legal mechanisms to set their distraught house(s) in order. 

The government, the employers and the trade unions need to apply their minds on this crucial even basic issue of union recognition before or along with effecting other reform measures to ensure efficient and equitable outcomes.

K.R. Shyam Sundar

XLRI

17 September 2014

krshyams@xlri.ac.in