Industrial Relations – Session 2

Looking Back at Session 1

 Interrogating the Purpose of Labour Law

o Addressing inequality of bargaining power
o Protecting workers against the vulnerability caused by the relationship of subordination and control
o Facilitating efficiency in labour market

 Reflecting on the Formal and Informal Sector Divide

o Close to 90% of workers in India are not covered by prominent labour laws at all
o Recognising the Overwhelming dominance of Informal Work
o Factors explaining the dominance of informal work
o Regulatory challenges posed by informal work
 Overview of Industrial and Labour Laws in India

S. No. Thematic Focus of the Name of the Legislation New Labour Code
Legislation

1 Collective Bargaining, Trade Unions Act 1926 IR Code 2020

Employment Relations and
Dispute Settlement Industrial Disputes Act, 1947

Industrial Employment (Standing Orders) Act 1946

2 Occupational Safety, Health Factories Act 1948 OSH Code 2020

and Decent Conditions of
Work Mines Act 1952

Plantations Labour Act 1951

Beedi and Cigar Workers (Conditions of Employment) Act, 1966

Cine-Workers and Cinema Theatre Workers (Regulation of Employment) Act, 1981

Motor Transport Workers Act, 1961

The Working Journalists and Other Newspaper Employees (Conditions of Service)

and Miscellaneous Provisions Act, 1955

Dock Workers (Regulation of Employment) Act, 1948

Mines Act 1952

Building and Other Construction Workers (Regulation of Employment and Conditions

of Service) Act, 1979
 Sales Promotion Employees (Conditions of Service) Act, 1979

Contract Labour (Regulation and Abolition) Act 1970

Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service)

Act, 1979

Industrial Employment (Standing Orders) Act 1946

Shops and Establishments Laws of States

3 Wages and Monetary Minimum Wages Act, 1948 Wage Code 2019
Benefits
Payment of Wages Act, 1936

Equal Remuneration Act, 1976

Payment of Bonus Act 1965

Factories Act 1948

4 Social Security Employees’ Compensation Act 1923 Social Security Code

2020
Employees’ State Insurance Act 1948

Employees’ Provident Funds and Miscellaneous Provisions Act 1952

Payment of Gratuity Act 1972

Maternity Benefit Act 1961

Unorganised Workers Social Security Act 2008

Industrial Disputes Act 1947

5 Prohibition/Regulation of Contract Labour (Regulation and Abolition) Act 1970 OSH Code 2020
 Offensive Work or Inter-State Migrant Workmen (Regulation of Employment and Conditions of Service)
Protection of specially Act, 1979
vulnerable workers
Bonded Labour System (Abolition) Act 1976

Child and Adolescent Labour (Prohibition and Regulation) Act 1986

Prohibition of Employment as Manual Scavengers and their Rehabilitation Act 2013

6 Non-Discrimination Equal Remuneration Act 1976

Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal)

Act 2013

 Unit 3: Interface of Constitutional Law and Labour Law in India

o Distribution of Powers Between Centre and States on Labour and Industrial Law
o Recognition of Labour Rights in Part III and IV of the Constitution

o Reliance on Directive Principles in Shaping the Labour Law Regimes

o Use of Fundamental Rights for Protection of Labour Rights

Distribution of legislative power

Under the constitutional scheme in India, Labour is a subject in the concurrent list in Seventh Schedule which gives both the Central
and respective State Governments the power to enact legislations.

Union List Concurrent List

Entry 55: Regulation of Labour and Safety in Mines and Entry 22: Trade Unions, industrial and labour disputes
Oilfields

Entry 61: Industrial Disputes Concerning Union Employees Entry No. 23: Social Security, insurance employment and unemployment

Entry 65: Union Agencies and Institutions for Professional, Entry No. 25: Vocational and Technical Training of Labour
vocational or technical training

Article 246 (2): “Parliament…and…the Legislature of any State also, have power to make laws with respect to any of the matters
enumerated in List III in the Seventh Schedule (in this Constitution referred to as the Concurrent List)”

Article 254 (2): Where a law made by the Legislature of a State with respect to one of the matters enumerated in the concurrent List
contains any provision repugnant to the provisions of an earlier law made by Parliament or an existing law with respect to that matter,
then, the law so made by the Legislature of such State shall, if it has been reserved for the consideration of the President and has received
his assent, prevail in that State:
 Recognition of Labour Rights in the Constitution

Recognition of Labour Rights as Directive Principles of State Policy - Part IV of the Constitution

Article 39. Certain principles of policy to be followed by the State.—

The State shall, in particular, direct its policy towards securing—

(a) that the citizens, men and women equally, have the right to an adequate means of livelihood;

(b) that the ownership and control of the material resources of the community are so distributed as best to subserve the common good;

(c) that the operation of the economic system does not result in the concentration of wealth and means of production to the common
detriment;

(d) that there is equal pay for equal work for both men and women;

(e) that the health and strength of workers, men and women, and the tender age of children are not abused and that citizens are not forced by
economic necessity to enter avocations unsuited to their age or strength;

[(f) that children are given opportunities and facilities to develop in a healthy manner and in conditions of freedom and dignity and that
childhood and youth are protected against exploitation and against moral and material abandonment.]

Article 41. Right to work, to education and to public assistance in certain cases.—The State shall, within the limits of its economic capacity
and development, make effective provision for securing the right to work, to education and to public assistance in cases of unemployment, old
age, sickness and disablement, and in other cases of undeserved want.
Article 42. Provision for just and humane conditions of work and maternity relief.—The State shall make provision for securing just and
humane conditions of work and for maternity relief.

Article 43. Living wage, etc., for workers.—The State shall endeavour to secure, by suitable legislation or economic organisation or in any
other way, to all workers, agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a decent standard of life and full
enjoyment of leisure and social and cultural opportunities and, in particular, the State shall endeavour to promote cottage industries on an
individual or co-operative basis in rural areas.

Article 43A. Participation of workers in management of industries.—The State shall take steps, by suitable legislation or in any other way, to
secure the participation of workers in the management of undertakings, establishments or other organisations engaged in any industry.]

Significance of DPSPs

Article 37: Application of the principles contained in this Part: The provisions contained in this Part shall not be enforceable by any court,
but the principles therein laid down are nevertheless fundamental in the governance of the country and it shall be the duty of the State
to apply these principles in making laws

Shaped the legislative agenda of the Parliament – turned into enactments

 Minimum Wages Act 1948

 Factories Act 1948
 Employee’s State Insurance Act 1948
 Maternity Benefit act 1961
  Equal Remuneration Act 1976

Informed the interpretation of the fundamental rights

 Olga Tellis v BMC (1984)

o Pavement dwellers live close to their place of work – if evicted, livelihood would be affected

o Read Art. 21 with Art 39 – ambit of the fundamental right to life – will be shaped by DPSPS -right to livelihood as part of right to
life
 No person shall be deprived of his life or personal liberty except according to procedure established by law.

 Manushi Sangathan v Union of India (2009) –

o Challenge to Municipal rules that imposed restrictions on Rickshaw-pullers
o Delhi HC - article 19-21 were interpreted in light of Art 39

Interpretation of Labour Statutes

If there are two alternative interpretations possible, the courts will follow an interpretation in consonance with DPSPS, Preamble, Fundamental
Rights
 Air India Statutory Corpn. v. United Labour Union (1997) 9 SCC 377

The founding fathers of the Constitution, cognizant of the reality of life wisely engrafted the Fundamental Rights and Directive Principles
in Chapters III and IV for a democratic way of life to every one in Bharat Republic, the State under Article 38 is enjoined strive to promote
the welfare of the people by securing and protecting as effectively as it may, a social order in which justice, social, economic and political
shall inform all the institutions of the national life and to minimise the inequalities in income and endeavour to eliminate the inequalities
in status...

The judicial function of a Court, therefore, in interpreting the Constitution and the provisions of the Act, requires to build up continuity
of socio-economic empowerment to the poor to sustain equality of opportunity and status and the law should constantly meet the
needs and aspiration of the society in establishing the egalitarian of the society in establishing the egalitarian social order.

Therefore, the concepts engrafted in the statute require interpretation from that perspectives, without doing violence to the
language. Such an interpretation would elongate the spirit and purpose of the Constitution and make the aforesaid rights to
the workmen a reality lest establishment of an egalitarian social order would be frustrated and Constitutional goal defeated.

Explicit Mention of Labour Rights as Fundamental Rights

Article 23 Prohibition of traffic in human beings and forced labour

(1) Traffic in human beings and begar and other similar forms of forced labour are prohibited and any contravention of this provision shall be
an offence punishable in accordance with law
(2) Nothing in this article shall prevent the State from imposing compulsory service for public purpose, and in imposing such service the State
shall not make any discrimination on grounds only of religion, race, caste or class or any of them

Article 24: Prohibition of employment of children in factories, etc

No child below the age of fourteen years shall be employed to work in any factory or mine or engaged in any other hazardous employment.

Other Fundamental Rights extensively invoked in labour matters

Art 14 –Equality before law.—The State shall not deny to any person equality before the law or the equal
protection of the laws within the territory of India.

Equal Remuneration Act 1976 – gender discrimination

Article 19 - Protection of certain rights regarding freedom of speech, etc.—(1) All citizens shall have the right—
(a) to freedom of speech and expression;
(b) to assemble peaceably and without arms;
(c) to form associations or unions 2[or co-operative societies];
(d) to move freely throughout the territory of India;
(e) to reside and settle in any part of the territory of India;
(g) to practise any profession, or to carry on any occupation, trade or business –

Article 21: Protection of life and personal liberty.—No person shall be deprived of his life or personal liberty except according to procedure
established by law.

Use of Fundamental Rights for Enforcement of Labour Statutes

 Asian Games case (PUDR v Union of India 1982 – SC used the Fundamental rights to monitor the enforcement of the
statute)
 Complaint of violation of laws on child labour, equal remuneration and migrant labour and contract labour and
Minimum Wages law
 Court held that violation of major labour laws like the Inter-state Migrant Workmen Act (ISMWA) and Contract
Labour (Regulation and Abolition) Act were a violation of right to life
 These statutes guaranteed dignity of work – basic conditions – conditions at the workplace confirm to human
dignity
 Violation of these Acts = violation of right to life – Art 21
 Violation of Minimum Wages Act? -is also a violation of a FR
 Non-payment of minimum wages – is a violation of article 23 – prohibits forced labour
 Economic necessity – forced by economic compulsion
 Force = economic compulsion
 Non-payment of minimum wages – is a form of forced labour

ERA is being violated – article 14 is being violated

CLRA/ISMWA - provide dignified conditions of work – Article 21
Child labour – Article 24
MWA – Article 23

Use its powers under Article 32 – to monitor enforcement of statutes

Article 32 – writ can be maintained before the SC for a violation of FR

 Bandhua Mukti Morcha case - petition for implementation of Bonded Labour System Abolition Act 1976 – non-
implementation of BLSAA seen as a violation of Article 23
  Use of Fundamental Rights for Creation of Regulatory Norms
o Visakha v Union of India – directions – guidelines – absence of a law violates Article 14, 19 , 21
o Asbestos case – Consumer Educational and Research Centre v Union of India (1995) – guidelines on occupational safety
o Absence of occupational safety amounts to violation of article 21 – right to life includes the right to a safe workspace

 Use of Fundamental Rights for Recognition of Principles of Natural Justice for Workers – under Article 14 – Equality also means that no
govt action can be arbitrary
o Uptron India v Shammi Bhan – AWOL – immediate and automatic termination without notice and fair process – would be
violative of Article 14

 Use of Fundamental Rights to Challenge constitutionality of statutes

o Minimum Wages Act, Industrial Disputes Act – challenged on grounds of violation of freedom of trade and business

o Excelwear – violation of right to freedom of trade and business

Excelwear v Union of India (1978)

 Section 25-O of the Industrial Disputes Act - amended and introduced in 1976 - prohibited any closure without govt permission - govt
did not need to provide any reason
 No Appellate mechanism
 No time line for the govt to respond
 Was an unreasonable restriction – invalidated section 25-O
o Right to carry on trade includes the right to close an existing business
 o The restriction on closure must be reasonable
o Restrictions in section25-O were not substantively or procedurally reasonable
o Section 25-O was unconstitutional

Later, Section 25-O was amended

Charu Khurana v Union of India (2014)

Act – provides the broad framework and delegates the power to frame rules to the ‘Appropriate Government’

Rules – framed to fill in the minutiae not provided for in the Act

Even for central legislation, the rules of the state government may be authoritative, in cases where the state government is the appopriate government

INTERFACE BETWEEN LAW OF CONTRACTS AND EMPLOYMENT LAW

Three major ways in which general principles of law of contract affect the trajectory of labour and employment law relate to

a) recognition of implied duties of employers and employees in a contract of employment

b) application of the doctrine of unconscionability in contracts of employment and

c) application of the doctrine of restraint of trade to restrictive covenants in employment.

General Duties of Parties to Employment Contract Implied in Common Law of Contract

Common law courts have recognised that employment contracts carry certain general duties that are implied in law.

such general duties are implications recognised by law as inherent to contract of employment. Much like how certain warranties are recognised
by law in contracts for sale of goods and tenancy contracts, these duties are implied by law in employment contracts.

In Crossley v. Faithful and Gould Holdings Ltd (2004), Dyson LJ observed: “

it is relevant to consider the changes which have taken place in the employer-employee relationship, with far greater duties imposed on the
employer than in the past, whether by statute or by judicial decision, to care for the physical, financial and even psychological welfare of the
employee."

The duties that have recognised as implied terms include:

Duties of employers
 Employer has a duty to provide work
o Lord Denning in Langston v. Amalgamated Union of Engineering Works (1974) ICR 180
 Not given work but on full pay
 “A skilled man takes a pride in his work. He does not do it merely to earn money. He does it so as to make his
contribution to the well-being of all. He does it so as to keep himself busy and not idle. To use his skill and to improve it
to have the satisfaction which comes of a task well done. Such as Long fellow attributed to The Village Blacksmith :
'Something attempted, something done, has earned a night's repose ....' To my mind, therefore, it is arguable that in these
days a man has, by reason of an implication in the contract, a right to work.”

 The employer will not require the employee to do any unlawful act
 [Gregory v Ford [1951 1 All ER 121]
o the employee said he would not take on the road a vehicle not covered by third party insurance
o dismissed
o held that direction was a breach of contract

 The employer shall provide his/her employees safe premises [Mathews v Kuwait Bechtel Corp [1959] 2 Q.B. 57]
o Went to Kuwait as part of employment to carry on his duties under the contract, when, unfortunately, on the May, he met with
an accident by falling into a trench when he was engaged in some work on the construction of a pump. He seems to have fallen
into the trench because he stepped back into it and he stepped back into it because he was trying to avoid a load swinging from
a crane which was coming towards him.

 He/she will take reasonable care not to endanger the employee’s health
 [Johnstone v Bloombsury Area Health Authority [1992]]
o Dr Johnstone, a junior doctor at University College Hospital was required under his employment contract to work 40 basic hours,
and to be available on call for a further 48 hours per week. He worked over 88 hours for several weeks and became ill as a result.
He brought an action seeking a declaration that he should not have to work more than 72 hours per week, and damages in
negligence for an alleged failure to take reasonable care of his safety in the workplace.
  The employer and employee owe each other a duty of trust and confidence.
 [Malik v BCCI (1997)]
o After collapse of Bank of Credit and Commerce International S.A. in the summer of 1991. Thousands of people around the world
suffered loss. Depositors lost their money, employees lost their jobs. Two employees who lost their jobs were Mr. Raihan Nasir
Mahmud and Mr. Qaiser Mansoor Malik. They were employed by B.C.C.I. in London. They claim they lost more than their jobs. They
claim that their association with B.C.C.I. placed them at a serious disadvantage in finding new jobs.

 Employer has a duty to treat employees with civility, decency, respect .

 Lloyd v. Imperial Parking Ltd., [1997] 3 W.W.R. 697 (Can.). ]
o Bullying by the employer
o Employee forced to resign
o Court held it to be a breach of employer’s duty

 Employer has a duty to take action against harassment and abuse of employees by coworkers.
 [Haggarty v. McCullogh, [2002] 309 A.R. 315 (Can.).]
o The plaintiff quit her employment because of a colleague’s abusive treatment of her. She sued McCullogh, the employer.
o Failure to chastise and correct the conduct of an employee who harassed a co-worker constituted a breach of contract.

Duties of employees

 The employee will serve diligently, loyally, and with reasonable competence. [Lister v Romford Ice & Cold Storage Co Ltd [1957] AC 555]
  Employee will indemnify his/her employer against liabilities incurred by the employer as a result of his wrongful acts [American S. Ins. v.
Dime Taxi Serv., 275 Ala. 51, 55, 151 So. 2d 783, 785 (1963) [US]]

 Employee will conduct himself with such decency and propriety. [Murmanill Corp. v. Simkins, 251 F.2d 33, 35 (5th Cir. 1958); Twentieth
Century-Fox Film Corp. v. Lardner, 216 F.2d 844, 850 (9th Cir. 1954) [US]]

The notion of implied duties being recognised in India too

(i) Dattatraya Shankarrao Kharde (ii) Arun Tukaram Wankhede Versus Executive Engineer, Chief Gate Erection Unit No.2 Nagpur & Anr. (1994) 1
LLJ 395

the trend of modern decisions as to the contract of service is markedly in the direction of developing and applying a certain doctrine which can
conveniently be styled as the Doctrine of “implied terms”….

The terms such as competence, obedience, fidelity, confidential information, accounting were held to be implied terms to be observed by the
servants, whereas certain terms particularly for their protection such as reasonable notice for terminating their services, where no such provision
was expressly incorporated in the contract of work was implied against the employer.
Unconscionable Contracts in Employment Law

The Doctrine of Unconscionability refers to the well-established principle that Courts will not enforce and will, when called upon to
do so, strike down an unfair and unreasonable contract, or a clause in the contract.

Delhi Transport Corporation vs D.T.C. Mazdoor Congress AIR 1991 SC 101

The Indian Supreme Court has ruled that “an unconscionable bargain or contract is one which is irreconcilable with what is right or
reasonable or the terms of which are so unfair and unreasonable that they shock the conscience of the Court.”

Central Inland Water Transport v Brojo Nath Ganguly AIR 1986 SC 1571

“there might be myriad situations which result in unfair and unreasonable bargains between parties possessing wholly
disproportionate and unequal bargaining power.”

SC ruled that a clause in the service rules that allowed termination of employment without any notice whatsoever was “wholly
unconscionable.” The Court also alluded to the fact that the contract had been “entered into between parties between whom there
is gross inequality of bargaining power.”
Linked the doctrine of unconscionability to Article 14 of the Constitution – state employer cannot act arbitrarily

Restrictive Covenants in Employment Law

Restrictive covenants such as non-complete clauses, confidentiality, non-disclosure and non-solicitation in employment contracts
are intended to restrict the employees.

Bonds

Generally, such a covenant is made part of employment contract as a restriction against an employee from either competing against
the employer or joining a competitor with the purpose of protecting the employer's trade secrets or other proprietary materials.

Illustration of a non-compete clause

“In order to protect the company's legitimate business interests, including (without limitation) its interests in the Proprietary Information,
it's substantial and near permanent relationships with customers, and its customer goodwill, I agree that during my employment by the
company, I will not solicit the business of any client or customer of the company (other than on behalf of the company) with whom I had
contact during my employment and (ii) will not, nor will I assist another person to, directly or indirectly, as an officer, director,
employee, consultant, owner, partner, or in any other capacity engage in, participate in, invest in, provide or attempt to provide
conflicting services anywhere in the United States or India”
Restrictive covenants often can get contentious as they are seemingly in conflict with Section 27 of the Indian Contract Act which
states that any agreement which restrains a person from exercising a lawful profession, trade or business of any kind is, to that
extent, void.

Distinction between Restrictive Covenants During Employment and Post-Employment

Superintendence Co. of India Ltd. v. Krishan Murgai, AIR 1980 SC 717

it has been held that restraint can be enforced only when the employee is in the service of the employer and not after the employee
leaves the service of the employer. This is irrespective of whether the employee leaves voluntarily or as a result of the employer
terminating their services. The only restrictions that an employer can enforce through courts after the termination of employment
would be non-disclosure of confidential information and non-solicitation.

Niranjan Shankar Golikari v Century Spinning and Mfg Co. AIR 1967 SC 1098

“considerations against restrictive covenants are different in cases where the restriction is to apply during the period after the
termination of the contract than those in cases where it is to operate during the period of the contract. Negative covenants operative
during the period of the contract of employment when the employee is bound to serve his employer exclusively are generally not
regarded as restraint of trade and therefore do not fall under section 27 of the Contract Act. A negative covenant that the employee
would not engage himself in a trade or business or would not get himself employed by any other master for whom he would perform
similar or substantially similar duties is not therefore a restraint of trade unless the contract as aforesaid is unconscionable or excessively
harsh or unreasonable or one sided”

Ordinarily, a restriction that operate Post-employment will generally be considered void

Percept D’ Mark (India) Pvt. Ltd. v. Zaheer Khan & Anr. AIR 2006 SC 3426
o a restrictive covenant which extends after termination of the contract is void and not enforceable.

Exceptions for Trade Secrets, Confidential Information

Mu Sigma Business Solutions Pvt ... vs Sagar Balan [Karnataka HC – 2019]

a Negative Covenant that restricts the employee from divulging or sharing or using such trade secrets is enforced and an employee
injuncted even after the term of employment from either divulging or sharing or misusing the trade secrets.

The other kinds of Confidential Information viz., client base, client information and other data, which could be a compilation in a
particular method and for a particular purpose, distinct from Trade Secrets, would be a different category. This kind of Confidential
Information is protected and injunction granted against an employee even after the tenure of employment, from soliciting clients/
customers. But, the employer must demonstrate/establish that such Confidential Information was shared with the confidence that
the employee would use such Confidential Information only for the benefit of the employer and maintain strict fidelity in using such
Confidential Information.

Non-compete during employment

· Gujarat Bottling v. Coca Cola Co AIR 1995 SC 2372
o employer can restrain an employee from joining any other employer during the subsistence of employment contract.
A negative covenant, which prevents an employee from engaging in a business or trade or stops him from getting
employed at some other organization in similar capacity, cannot be said to be in restraint of trade unless the contract
is “unconscionable or expressly harsh or unreasonable or one-sided”.

· Gopal Paper Mills v. Ganesh Das Malhotra AIR 1962 Cal 61,
o the defendant was employed by plaintiff for a period of twenty years during which defendant was prohibited from
working elsewhere. Moreover, the increase in salary was very less and the employer had unconditional power to
terminate the services of defendant without serving any notice. The Calcutta High Court while ruling the contract as
restraint of trade stated that the contract was one sided and extremely harsh. Therefore, the negative covenant which
was operative only during the employment was not enforced by the court.

Training Bonds
· Toshniwal Brothers Pvt. Ltd. v. E. Eswarprasad & Ors. MANU/TN/0511/1996
o the defendant employee resigned after fourteen months despite the contract providing for a period of three years.
The court allowed the company to recover liquidated damages from the defendant employee such damages were
 reasonable in light of facts and circumstances of that case. Further, the court held that it is not necessary for employer
to suffer any damages post breach of contract. An employer is only required to prove that the defendant employee
was in receipt of some concession or training at the expense of the employer either wholly in part and there has been
breach of covenant by the beneficiary employee. In such a scenario, the breach on its own results in legal injury to the
employer.

· Satyam Computer Services Ltd. v. Ladella Ravichander MANU/AP/0416/2011

o the defendant employee left the employer before the expiration of term in training bond and was asked to pay
specified damages of Rs. 2,00,000 along with stipend charges and expenses incurred by the employer. However, the
court held that no damage or loss was incurred by the plaintiff as result of defendant’s actions and hence it would not
be reasonable to ask defendant to pay such huge amount. The court fixed amount of Rs 1,00,000 as a reasonable
amount taking into account facts and circumstances of the case.