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PROJECT: LABOUR LAW

COMPARATIVE ANALYSIS OF THE LABOUR PROTECTION IN THE IT SECTOR


WITH REFERENCE TO THE AIRLINE INDUSTRY IN INDIA

SUBMITTED BY: AHKAM KHAN

ENROLMENT CODE: 160101012

SUBMITTED TO: MR. PRASENJIT KUNDU

FACULTY OF: LABOUR LAW

DR. RAM MANOHAR LOHIYA NATIONAL LAW UNIVERSITY, LUCKNOW


TABLE OF CONTENTS

TABLE OF CONTENTS.........................................................................................................2

ACKNOWLEDGEMENT.......................................................................................................3

BACKGROUND......................................................................................................................4

THE RELEVANT CONCEPTS: LAY-OFF AND RETRENCHMENT............................6

LABOUR LAW SITUATION IN THE AIRLINE INDUSTRY..........................................7

LACK OF EMPLOYEE PROTECTION IN IT SECTOR: HIGHLIGHTS.....................9

PROBLEMS FACED BY EMPLOYEES IN IT SECTOR................................................11

LABOUR LAWS APPLICABLE TO THE IT SECTOR..................................................12

A SITUATION OF CONFLICT: IT PROFESSIONALS AS WORKMEN?..................14

CONCLUSION.......................................................................................................................16
ACKNOWLEDGEMENT

First of all, I would like to thank Ms. Prasenjit Kundu for giving me this opportunity to
make the project on such an interesting topic and all the support and guidance that I have
received from him, without which this project could not have turned into a reality. I would
also like to thank all my colleagues and seniors for providing me support, and material data
related to this topic. Last but not the least; I would like to thank my parents for providing me
appropriate guidance and support to prepare the project. All the aforementioned people
whole-heartedly helped me to compile this project in the present shape.
BACKGROUND

As digitisation and automation become the new normal, IT biggies like Infosys, Cognizant

and Tech Mahindra are seeing a spate of layoffs and this trend may continue for the next 1-2

years, say experts. Pink slips are being handed out to thousands of employees as part of their

performance appraisal process, but it is believed that these are directed more towards cost

control amid pressure on bottom line due to a rising tide of protectionism in most target

markets.

Indian software exporters in particular are facing headwinds in business environment and

stricter work permit regime in countries like the US, Singapore, Australia and New Zealand.

Moreover, with newer technologies in artificial intelligence (AI), robotic process automation

and cloud computing, which help complete the job with less manpower, software companies

are now having to reconsider their strategies. “It’s a situation wherein the available talent

haven’t kept up with the pace at which the industry was evolving and hence, many of them

find themselves redundant”1, said Rituparna Chakraborty, TeamLease Services Executive

Vice-President and co-founder.

Executive search organisation GlobalHunt MD Sunil Goel said “This rationalisation does

happen in every 3-5 years in the industry through new-age technologies, but this has

impacted it more this time as the US also has changed policies for foreign IT workers ”.2 Goel

further noted that “the consolidated trend may continue for the next 1-2 years”, but sees it as

an opportunity for IT professionals to upgrade themselves and get into the new-age

technologies where demand is going to be huge.3

Pink slips are likely for jobs in manual testing, technology support and system administration

since these are increasingly going to be managed by AI and robotics process automation

based systems.

1
BD Majumdar, ‘Employment hand-in-hand with technology?’ (Economic Times, 25 March 2016).
2
Anupam Shivhare, ‘Changing the industry for employees’ (Livemint, 28 October 2010).
3
Id.
However, there is surge in demand for latest and innovative technologies like data science,

artificial intelligence and digital domain specific skills. “It is a painful transitory phase.

However, things would look up in the next two quarters as each of the IT services company

successful steers towards a stable growth phase”, Chakraborty said.

Talent management solutions provider KellyOCG India Country Director Francis Padamadan

said, “We will continue to see some amount of rationalisation happening among IT

companies though it is difficult to put a number”.4

Japanese brokerage firm Nomura, in a research note, said that the job cuts of 2-3 per cent of

the overall headcount of nearly 7,60,000 by Infosys, Cognizant, Tech Mahindra and Wipro

are not material. However, this kind of rationalisation is likely to be a continuing

phenomenon until the workforce realignment towards digital skills is complete.

“Here, retrenchment is not viewed the way it is in the West. There is a social taboo attached

to job loss", says K. Raghavendra, vice-president and head, human resources, Infosys BPO

Ltd. The company has identified around 440 surplus employees in the last three months but

has not let them go because of several such reasons.5

“Severance is a complicated issue. There are legal, human and cultural aspects to it and,

therefore, it is virtually impossible to execute an ideal severance"6, says Anoop Narayanan,


partner, Majmudar and Co., a Mumbai-based law firm. The law firm has been engaged by a

large US manufacturing company to retrench the staff of a loss-making unit of its Indian

subsidiary. This will result in 200 employees losing jobs.7

The employer-employee relationship in India is very different from that in the rest of the

world, say most human resource experts. Not only is there an emotional element involved,

but our intricate social structure and the lack of a legal framework that could protect both

employer and employee in such situations makes the process extremely complex.

4
Aparna Singh, ‘Changing landscapes in IT Employment’ (Financial Times, 3 June 2016).
5
‘Layoff in Indian IT sector may continue’ (The Hindu, 17 May 2017).
6
‘IT Sector hit by employment lows’ (Business Manager, 1 November 2017).
7
‘Foreign Companies leaving Indian Employess in a fix’ (Quint, 15 June 2016).
THE RELEVANT CONCEPTS: LAY-OFF AND RETRENCHMENT

LAY-OFF RETRENCHMENT
Retrenchment is defined in Section 2 (oo) of
Lay off is defined in section 2 (kkk) of the
the Industrial Disputes Act, 1947
Industrial Disputes Act, 1947

Retrenchment is permanent. They may


It is temporary
again be appointed in appropriate cases.
In lay-off the employer is compelled to
In retrenchment, the employer lessens over-
refuse employment under certain
burdened employees under circumstances,
circumstances, viz. shortage of raw
viz. Government policies, loss in some
materials, power finance, etc., which arise
departments, etc.
temporarily in the industry.
When the employer declares lay-off, the While the process of retrenchment is going
industry stops its function. on the industry does not stop its function. It
continues to function.

In lay-off, all the employees or a group of


employees is refused employment. In retrenchment, the last come first goes.

The conditions precedent are to be followed


The conditions precedent is not necessary in in case of retrenchment, viz notice to the
case of lay-off. concerned employee, notice to government
in the prescribed manner, etc. (sec. 25-f)
The laid off employees are paid laid-off The retrenched employees are paid
compensation. The payment of Gratuity retrenchment compensation plus payment of
does not arise in a lay-off. gratuity.

All of the laid off employees should be Re-employment of retrenched workmen


taken back in their usual posts, as soon as also takes place in certain circumstances.
the lay-off is lifted out. But it is not mandatory that all the
retrenched workers should be re-employed
(sec. 25-h)

LABOUR LAW SITUATION IN THE AIRLINE INDUSTRY

Section 2(s) of the Act defines ‘workman’, which means any person employed including an
apprentice, in any industry to do any skilled, unskilled, manual, clerical, supervisory or
technical work for hire or reward, whether the terms of employment be expressed or implied.
The definition of workman under the Act also includes any person who has been dismissed,
discharged or retrenched in connection with or as a consequence of any dispute. In India even
the Pilots and Engineers of aircraft have been covered under the definition of workman
although in terms of their salary and wages and authority they exercise, by no stretch of
imagination, they can be equated with labour and working force of the industry.

Indian Airline industry has always felt the need to adhere to strict labour law compliances.
Therefore, in a situation where an airline wants to lay-off or retrench several employees at a
go for financial reasons or otherwise, such a step has faced has faced huge government
intervention through guidance and notices to the airlines to follow the rules. The best
example would be where Jet Airways had to retrench 1100 employees, including a host of
pilots, technical crew, ground-staff because the economic viability of the industry had been
severely affected by the record high fuel prices and most recently due to the crisis of the
financial markets globally and the downturn in traffic . Jet Airways had undertaken a series
of initiatives to enhance the economic performance, efficiency and productivity for the long-
term health of its business.8 The government pressure forced them to make do with letting go
15-16 pilots in 3-4 steps, even which met with strict resistance, not only naturally from
employees as well as from the government. 9 Further, under government pressure, a
newspaper published “India’s leading private carrier Jet Airways has reinstated 800 sacked
flight attendants, its chief said on Thursday, following protests in cities and demands for a
probe by politicians.”10 The job losses and protests had struck in an industry at the heart of
India’s economic modernisation, with millions of middle-class Indians taking to the skies and
carriers employing thousands of young men and women. The airlines had therefore asked the
government to bail them out.

8
‘Jet Airways to lay-off 1100 more employees’ (The Indian Express, 16 October 2018).
9
‘Jet Airways layoffs: Airline fires 16 more people to cut cost’ (Economic Times, 26 Nov 2018).
10
‘India’s Jet Airways reinstates sacked employees’ (Reuters, 17 October 2018).
Another instance would be where Air India was drawing up a proposal to offer voluntary
buyouts to just over a third of its 40,000 employees, a senior company official said, one of
the largest such offers in India's state sector, as the carrier slashes cost ahead of a 2018
sale. This included a report on how a Voluntary Retirement Scheme (VRS) could be
offered to about 15,000 of Air India's 40,000 staffers, including contractors. Civil Minister
Suresh Prabhu on Monday ruled out retrenchment among employees in public sector Air
India and blamed rising fuel prices as the reason behind the present crisis in the aviation
sector. "I have categorically denied that there will be any retrenchment in Air India," he told
reporters here after the inauguration of the Rs 1808-crore Chennai airport expansion and
modernisation project.11

Most of such disputes have not even thus reached courts in light of settlement negotiations
with the government seeking beneficial allowances in exchange of strict labour law
compliance for the effective working of the airline industry, which might be on the top of
priority list for the government with respect to employee protection. The airlines are
however, even more interested now in seeing relaxation of labour laws in India. When Indian
Airlines and Air India merged under the Dharmadhikari Committee Report to revive the
airline, seeing 25% wage cut, there was contention on applicability of section 9A of Industrial
Disputes Act on pilots. While employees can continue to remain workmen, the law allows for
exemption under section 9A and this requires notifying service regulations of an organisation
in a government gazette notification. In fact, the Maharashtra government had issued
notification in 1960 exempting Air India employees from section 9A of the Act. However, in
2015 Bombay High Court ruled that section 9A Industrial Disputes Act was applicable to Air
India employees.12

In 2013, the Labour Ministry had issued a notification, under the advice of Air India
executives, excluding pilots from the definition of workmen under the Industrial Disputes
Act. However, it met with strong resistance and was revoked because of pressure from Air
India employees. According to the notification issued by Air India, the "responsibilities of
'pilot in command' are of managerial and administrative nature which may not fall in the
definition of the "workman" under Section 2(s) of the Industrial Disputes Act 1947. Either
the government will have to amend the Industrial Disputes Act or a court will have to rule
that commanders do not fall in category of workman. “The wording in this notification

11
‘No retrenchment in Air India’ (The Economic Times, 21 October 2018).
12
5/9 vs Air India Limited, WP No. 1606 of 2013.
suggests the government is not sure itself. The opinion of government has no force in law;
law is made by parliament and interpreted by courts and government only has to implement
it”, suggested a labour lawyer.

LACK OF EMPLOYEE PROTECTION IN IT SECTOR: HIGHLIGHTS

 Larsen & Toubro, India’s biggest engineering firm, has shed 14,000 employees,
majorly in its IT setup or 11.2% of its total workforce, in one of the biggest corporate
retrenchment exercises in recent times. The $16-billion diversified conglomerate said
on Tuesday the step was an attempt to ‘right size’ its strength in the face of business
slowdown. Digitisation of operations also caused redundancies that led to downsizing.
“The company has taken a lot of initiative to right size staffing in various businesses.
The digitisation and productivity enhancement initiatives taken by us boiled down to
redundancies of roles and we have been able to shed as a group 14,000 in the six
months to September”, Chief Financial Officer R Shankar Raman said. 13
 Even as the economy grows, job layoffs continue to remain a "commonplace" with
the automation prone information technology industry employees experiencing more
pain than the others, a report said today. The report comes amid fears of 'jobless
growth' being witnessed in the country at present. "Even as the economy improves,
layoffs - due to cost cutting, reducing redundancies after a merger or acquisition, and
restructuring events due to changes in the industry - remain commonplace", career
transition company Risesmart said in a report after interviewing 1,000 executives.
“The survey concluded that employees in the IT sector experienced more layoffs in
comparison to employees in other industries", a statement said.14
 The layoffs underway in India’s $154-billion ITES sector are leaving behind a mass
of people—56,000 this year alone, according to a speculative report by a business
publication— with skills that are no longer relevant. According to another recent
report by McKinsey, more than half of the 3.9 million people employed in the IT
sector will become obsolete in the next three to four years. A few lines of automation
code are edging those at the lower end of the skills spectrum out. Others will be
dispensed with as part of necessary cutbacks to make way for quality hires with
digital-age skills. Pink slips and attrition are central to this industry of high risks and
13
Rachita Prasad, ‘In one of India's biggest-ever layoffs, L&T sheds 14,000 employees from its workforce’ (ET
Bureau, 23 November 2016).
14
‘Lay-offs still commonplace in India, IT Sector worst hit’ (Economic Times, 13 April 2018).
rewards, but the alarm over job cuts by Indian IT majors like Wipro and Tech
Mahindra has never been this shrill.15
 Cognizant has laid off some 200 senior employees at the director level and above this
year in a bid to align its talent pool to the newer digital requirements. The employees
have been given a severance payout of four months. The process would cost the
company a sum of $35 million, as per a recent report. The industry won’t be surprised
if the next batch of “involuntary senior IT retirees” came from lead player TCS, a top-
heavy firm, said a senior source at the company. 16 In 2017, Cognizant’s employee
count in India declined by almost 8,000 to 180,000, perhaps for the first time ever in
such a scale while it added 2,900 more people in the US to 50,400 and 2,300 in
Europe to close at 13,800. Despite adding people the US and Europe, the company’s
overall headcount at end of 2017 actually remained flat at 260,000 as compared to
260,200 in 2016, a marginal increase of just around 200.
 The Indian tech sector has already started reporting a large number of casualties at
senior level due to digital mainstreaming. Worse, more job losses are on the anvil.
Top HR sources say many league players are expected to join Cognizant and
announce mass exits of senior talent in the next couple of quarters.17
 For the last few quarters, employee count at most of the offshore-centric and Indian
IT services companies in fact has either shrunk or increased marginally, a far cry from
what they used to hire until two years ago. Take the example of Infosys – In the
December 2017 quarter, the company added 3200 employees while the headcount in
September quarter had actually dipped by 113 over the previous quarter. In case of
Wipro, the December 2017 headcount stood at 162,553, a drop of 1206 over the
previous quarter. Tata Consultancy Service, the largest Indian player in IT services
space, just added 1667 people in the December quarter QoQ, perhaps the slowest
headcount additions by the company in the recent past. HCL Technologies which has
been showing steady growth bucking the trend added only 250 employees in the
December quarter.18

15
‘Lay-offs in India’s IT Sector’ (OpenTheMagazine, 4 August 2017).
16
‘Digital Bloodbath may lead to more IT lay-offs’ (The Financial Chronicle, 11 October 2018).
17
‘Lay-offs still commonplace in India, IT Sector worst hit’ (Economic Times, 13 April 2018).
18
‘Cognizant’s shrinking workforce an alarmbell for India IT’ (Business Standard, 1 March 2018).
PROBLEMS FACED BY EMPLOYEES IN IT SECTOR

There are a number of problems, which an employee of an IT Industry has to face. The
problems arise because the IT industries are not following the general rules, which have been
formulated, by the state and the central governments regarding the working hours and the
other standards of employment. The labour laws of the country shall govern the IT Industries
and it is not being executed in a proper sense.

The fields in which the labour laws of the country are being violated are:

 The employees are working more than the prescribed working hours but are still
not getting any overtime payment.
 Many call centres and other ITES companies are forcing the employees to work
frequently in night shifts without any extra payment or compensation which is an
utter violation of the law which very clearly specifies that a person cannot be
allowed to work in night shifts for more than a prescribed period of time.
 If any employee tries to raise his or her voice against the working hours of the
company then he is rusticated from his job, which is a violation of the fundamental
right of the person.
 Any attempt to form a union is penalized by removing the employee from his or
her job, which is a violation of the Fundamental Right to form a Union under
Article 19(1)(c) of the Indian Constitution.
 The IT and ITES industries are openly violating the law regarding the conditions
and environment which is to be created by the industries for its employees.
 The IT and ITES industries try their best to exempt their employees from the
definition of workers or labours which gives them their rights. In many cases the
industries give employment to the workers informally, that is, no paper or
document is presented to them which could prove that they were working for the
company which gives them the freedom to terminate their employees as and when
they like.
 Many of the IT and ITES Industries do not give maternity benefits to women
which have been provided by law to them.
LABOUR LAWS APPLICABLE TO THE IT SECTOR

 Almost all the labour laws, which are applicable to any other industry, are also
applicable to IT Industry.
 This is true that the Factories Act, 1946, the Industrial Disputes Act, 1947 and
certain State labour laws do not apply to IT Industries but apart from that, all the
other labour laws are applicable to IT Industries as well.
 The state governments have been given the power that they can exempt any
particular industry from the laws, which are made by the Central Government
regarding the labour, or industrial laws under section 14 of the Indian Employment
Standard Orders Act, 1946.
 The state government using this power do exempts the IT Industries from the
Industrial Employment Standard Order Act, 1946.
 The IT industries do not include their employees under the definition of
“workman” stated in the Indian Industries Act, 1965 in order to get exempted from
the liabilities which arise after that.
 The Trade Unions Act, 1926 was passed with the objective to make the
establishing and functioning of the trade unions proper and systematic. The
formation of trade unions is also covered under the fundamental right prescribed in
section 19(1)(c) of the Indian Constitution. A misconception that the workers of an
IT Industry cannot form a trade union. The right to form a union is a fundamental
right, which even the state, cannot take away from the citizens.19
 The payment of wages Act, 1936 applies to the IT Industries. The Act states that
there shall be no discrimination regarding the payment of wages based on caste,
colour, creed, sex etc. Both men and women must be paid equally for equal work.
The Act deals with the illegal deduction and non-payment or late payment of
wages. The Act makes sure that there is no violation of labour rights regarding
wages.20

19
The Trade Unions Act, 1926.
20
The Payment of Wages Act, 1936.
 The Minimum Wages Act, 1948 makes sure that a minimum amount of payment is
given to the workers, who are working under the company. The Act tries to
minimize the risk of exploitation of the employees in the company. The minimum
wages, which must be given to the employees, are specified and changed by the
central government from time to time.21
 The Payment of Gratuity Act, 1972 is the law, which governs the gratuity, which
is to be paid to every employee, and worker who has worked for a period of not
less than 5 years. The gratuity is given to the employees after they have left the job
by way of either resignation or retirement or superannuation or have died or
become disabled, which renders them unable to continue. In a case of death or
disability, it is not necessary that the person should have worked for more than 5
years.22
 The Maternity Benefit Act, 1961 was passed by the legislature with the sole
motive to make sure that the working women are not forced to continue their work
even when they should not as they are pregnant or are expecting a baby. The Act
makes sure that the women are given appropriate holidays of 6 months as
maternity leave and also sees that no industries is trying to discriminate on the
basis of gender.23
 The Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act,
2013 has been formulated after the Supreme Court in the case of Vishaka v State
of Rajasthan24 gave directions to the Executive regarding the necessity to legislate
an Act that could deal with the problem of sexual harassment which a woman face
while working under any Institution.25

21
The Minimum Wages Act, 1948.
22
The Payment of Gratuity Act, 1972.
23
The Maternity Benefit Act, 1961.
24
Vishaka v State of Rajasthan, AIR 1997 SC 3011.
25
The Sexual Harassment of Women (Prevention, Prohibition and Redressal) Act, 2013.
A SITUATION OF CONFLICT: IT PROFESSIONALS AS WORKMEN?

IT professionals challenging their termination have made headlines in Newspapers in recent


times. In one such news, it was reported the Additional Labour Court at Chennai directed the
reinstatement of the petitioner employee with continuity of service and to pay full back wages
and all other benefits from the date of dismissal to the date of reinstatement.

In a case between Selvinth Gnanesh Joshua Vs Labour Officer26 before the Madras High
Court, it was contended the concerned petitioner being a Project Assistant Consultant is a
workman since his main duties and responsibilities are technical in nature. It was also prayed
that the Company being an Industry was also within the purview of the ID Act and hence the
termination was contrary to the provisions of the ID Act. Without getting into the merits the
High court directed the Conciliation Officer to decide on the issue and if the concerned
employee is found to be a workman and Company to be industry to conciliate the matter as
per the provisions of the Industrial Dispute Act.

When the matter went up in appeal before the Division Bench, their Lordships set aside the
judgment of the Learned Single Judge mainly on the ground that the Conciliation Officer
under the ID Act is not competent to settle a dispute. Whether the concerned employee is a
workman as per meaning provided in the Industrial Disputes Act can only be adjudicated by
the Industrial Tribunal or Labour Court having adjudicatory power.

It was reported that this Learned Court has inter-alia observed the following:

"It cannot be denied that the job of an engineer in a software company involves skills and
technical knowledge. Therefore it can be concluded that the job of a software engineer can
be termed as the skilled or technical one." It was further observed by the Learned Judge that
"any person doing a skilled job is a workman under the definition of that term. So I conclude
that the petitioner is a workman."

Besides, the government of Tamil Nadu in India has recently issued a circular clarifying that
employees of the IT Sector are covered under the ID Act, 1947 and have the right to form
trade unions. This development has caused consternation in industry circles, which believed
that the IT Sector was outside the ambit of this Act. Obviously, for some reason, the IT
Sector has been misinformed of the correct position under the law.

26
Selvinth Gnanesh Joshua Vs Labour Officer, WP No 1336 of 2015 (Mad).
In the current state of the controversy it is necessary to illumine the rights of the employees
and correct legal position. Except for supervisory or managerial level employees, all other
employees are considered as "workmen" under the ID Act if they perform any manual,
skilled, unskilled, technical, operational and clerical work. Even as recently as 2016 the
Supreme Court in Raj Kumar v Director of Education27 re-iterated that its leading judgement
in H.R Adyanthaya v Sandoz (India) Ltd28 in 1994 is decisive on the issue of who is a
"workman". The Court succinctly re-stated the ratio that "a person to be workman under ID
Act must be employed to do the work of any of the categories, viz., manual, unskilled, skilled,
technical, operational, clerical or supervisory. It is not enough that he is not covered by any
of the four exceptions to the definition. We reiterate the said interpretation."

Hence, from our above discussion the overview is that it will be utterly wrong to straight
jacket all IT professionals as workmen under section 2 (s) of the Act as because they are
performing either technical nature of job or not falling within the four exceptions to the
definition of the Act. Their status as workmen will be determined by their Job description,
responsibilities, creativeness required to perform the job and the kind of training they had to
undergo for performing the job. However, nothing can be said with certainty till a case is put
to judicial scrutiny as each case will be determined by its own merits.

27
Raj Kumar v Director of Education 2016 SCCOnline SC 317.
28
HR Adyanthaya v Sandoz (India) Ltd AIR 1994 SC 2608
CONCLUSION

The industrial or labour laws of the country are also applicable to the IT Industries, but not all
the laws. The IT industries have been exempted from many labour laws which are applicable
to other industries. The IT industries try their level best to avoid the obligations which are
imposed on them by the law, but no one is above the law and the fundamental rights of a
worker or an employee cannot be violated in any case by anyone.

Clearly, no detailed argument is necessary to establish the proposition that an IT Professional


performs a skilled function and is a workman. Only IT employees employed in supervisory or
managerial roles would be exempt from the application of this Act. No doubt, there are
decisions of the Supreme Court, which were decided on the unique facts of the case and have
caused some confusion on the issue, hence the need to re-state the Court's latest reiteration of
the law to dispel any doubt that the IT Sector enjoys no exemption from the law. Therefore,
to avoid litigation and much acrimony with employees, lay-offs, retrenchments and
terminations of employees must be in compliance with the requirements of the ID Act.

“Retrenchment is very common in the IT sector and with increasing use of artificial
intelligence (AI), the trend will only increase. That's why the companies are apprehensive",
says an executive with an IT firm. Many in the legal fraternity feel that with the rise in
employees' awareness about their rights, the litigation cost of technology companies might go
up. To counter this, companies should step up their focus on employees' welfare, and provide
better learning and growth opportunities within the firm. To comply with the standing orders,
companies must disclose details, including working hours, shifts, job cuts, wages, leave and
attendance, grounds for termination and definition of misconduct to the authorities.

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