An Overview of Indian Labor Law and Policy

June 14, 2010 Posted by India Briefing Reading Time: 5 minutes

By Vikas Srivastava

MUMBAI, Jun. 14 – The Constitution of India provides that the central government as well as the state government be vested the power to enact and amend rules and regulations related to labor policy in the country.

Regulations that address labor and safety in mines and oil fields and Union agencies and institutions for vocational are governed by the central government whereas laws and regulations on trade unions; industrial and labor disputes are governed by central as well as state laws.

Trade union formation requirement

A trade union can be formed by any group of nine or more persons. But a worker’s trade union can only be registered if all the workers are member of trade union.

Age limit for trade union membership

The minimum age limit for membership to a trade union is 15 years old unless the rules of a particular group require a higher minimum age limit. However, for a member to become an officer the person must be above 18 years of age.

Trade union and right to strike

Today, most of the emerging economies are heavily dependent upon foreign direct investment especially India. Therefore it is mandatory to safeguard the rights of laborers as well as prevent the foreign companies from the effects of work strikes and lock outs. Strikes are defined as a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal under a common understanding of any number of persons who are or have been so employed to continue to work or to accept employment while lock outs are defined as temporary closing of a place of employment, or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him.

The basic difference between the right to protest and right to strike under Indian law is that the right to protest is a fundamental right enshrined under the Indian Constitution whereas the right to strike is not a fundamental right but a legal right.

The right to strike always has a statutory restriction and is governed by Industrial dispute Act, 1947. The trade union Act, 1926 for the first time provided limited right to strike by legalizing certain activities of a registered trade union in furtherance of a trade dispute which otherwise breach of common economic law. Nowadays, a right to strike is recognized only to limited extent permissible under the limits laid down by the law itself, as a legitimate weapon of trade unions.

General prohibitions for strikes and lock out

No person employed in a public utility service shall go on strike, in breach of contract:

Without giving to the employer notice of strike, as hereinafter provided, within six weeks before the scheduled start of a strike; or
Within fourteen days of giving such notice; or
Before the expiry of the date of strike specified in any such notice as aforesaid; or
During the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings

No employer carrying on any public utility service shall lock out any of his workman:

Without giving them notice of lock-out as hereinafter provided, within six weeks before locking-out; or
Within fourteen days of giving such notice; or
Before the expiry of the date of lock-out specified in any such notice as aforesaid; or
During the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings

Right of workmen laid-off for compensation

Whenever a workman, other than a casual worker, whose name is on the roster of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid- off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid-off, except for holidays. Compensation shall be equal to fifty percent of total of basic wages and dearness allowance that would have been payable to him had he not been laid-off.

Dearness allowance is calculated as a percentage of basic salary that is then added to the basic salary along with house rent allowance to get the total salary.

Workmen not entitled to compensation in certain areas

No compensation shall be paid to a workman who has been laid-off in the following cases:

If he refuses to accept any alternative employment in the same establishment from which he has been laid-off, or in any other establishment belonging to the same employer located in the same town or village or situated within a radius of five miles from the establishment to which he belongs, if, in the opinion of the employer, such alternative employment does not call for any special skill or previous experience and can be done by the workman, provided that the wages which would normally have been paid to the workman are offered for the alternative employment also

If he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day

If the lay-off is due to a strike or declining production on the part of workmen in another part of the establishment

Compensation to workmen in case of transfer of undertakings

Where the management ownership of a company is transferred, whether by agreement or by operation of law, from the employer in relation to a new employer, every workman who has been in continuous service for not less than one year before such transfer shall be entitled to notice and compensation in accordance with the provisions of related laws as if the workman had been retrenched.

Sixty day’s notice to be given prior to company closure

An employer who intends to close down a company shall serve a notice of at least sixty days before the date on which the intended closure is to become final to local authorities stating the cause for closure. The above mentioned provision shall not apply to an undertaking in which:

Less than fifty workmen are employed, or
Less than fifty workmen were employed on an average per working day in the preceding twelve months,
An undertaking set up for the construction of buildings, bridges, roads, canals, dams or for other construction work or project
The appropriate government, may if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or the like it is necessary so to do, by order; direct as per the provision of Industrial Dispute Act shall not apply in relation to such undertaking for such period as may be specified in the order.

Compensation to workmen in case of company closure

Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that company immediately before such closure shall, subject to the provisions of Industrial Dispute Act, be entitled to notice and compensation in accordance with the provisions of Industrial Dispute Act, as if the workman had been retrenched. This is provided in instances wherein the company was closed down on account of unavoidable circumstances beyond the control of the employer; compensation to be paid to employees as per the provisions of Industrial Dispute Act shall not exceed his average pay for three months.

Vikas Srivastava is a legal associate with Dezan Shira & Associates in Mumbai. For advice in doing business in India, please e-mail india@dezshira.com.