Management Consultancy
Bharat Gera
Principal Hr Consultant
Insolvency N Gst Professional
Nagarkar Vinayak L

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A Case on Noble Paper
Industry Noble Paper industry is situated in a backward zone of Raigad district. It employs about six hundred employees. The firm was founded in 1988. Throughout the first six years from its foundation, it did neither make any profits and nor did it pay any statutory bonus. But to sustain with other neighbouring firms, this firm paid an ex-gratia payment once every year to its employees at a flat rate oft 2,000 per employee. The firm began to pay statutory bonus since the payment of Bonus Act become applicable. Additionally, the firm decided to stop the practice of ex-gratia payment. Employees, through the trade union, started protesting.
After an extensive round of discussions when the union realised that the management was determined on not giving ex-gratia it suddenly, announced a strike. Officers were threatened and the employees behaved with them violently. Production had completely stopped. The firm suffered heavy losses. The Management approached Labour Court and requested to declare strike as illegal. The Court declared the strike as illegal since 14 days' notice was not given.
Some attempts were made by the local leaders to resolve the dispute, but the management was not agreeable now. The Management decided to remove the recognition that was accorded to the Union. as per the provisions under the related law. As a result of this step, the doors of negotiations and compromise between Management and Union were permanently closed. Further, the deadlock has deteriorated as some of the office bearers of the Union have threatened the Management of terrible consequences, unless they fulfil the Union's demand instantly.
1. Comment on the role Played by the Union in insisting on exgratia payment in addition to bonus.
2. Evaluate the Union's action of declaring sudden strike especially when the Management was willing to negotiate with it.
3. Is the step of de-recognising Union by the Management appropriate as seen from the angle of maintaining smooth industrial relations? Explain in detail the reasons for proper or improper demon of the Management.

From India, Pune
Oxford Dictionary defines ex gratia as ‘(with reference to payment) done from a sense of moral obligation rather than because of any legal requirement’. It is derived from Latin meaning ‘from favour’. It is generally used in legal context. It defines the characteristics of voluntary, kindness or grace. It is a sum of money with no attachments of obligation or liability to pay the money.Also The employees have no right to demand exgratia unless it is agreed upon in a settlement between employer and employee.
Unions act of declaring strike and behaving threateningly is not in order and naturally management will hit back.
The unions need to understand that they cannot blackmail the management into making more and more payments.
Industry has to run on profit for people to get bonus.
They need to review their aggressive actions and come back to negotiation table.
Workers will be the looser if factory shuts down totally.
Role of the union in demanding ex gratia and Bonus is a pressure tactics and trying to be seen as pro worker and that we are trying to get maximum for members.But can factory afford and are they bound legally is yet another aspect.
Aggression may not win and have negative efforts.
Trade unions need to be realistic in demands and thinks of duties also and not only rights.

From India, Pune
Dear Friend,
This topic can be discussed from different angles but we would discuss only upon the querry made by you.
The industry was paying Ex-gratia till they paid bonus during moratorium period. The union in an "amprehension" of non-payment of exgratia called for a strike and went violent result of which the work of the factory disrupted completely.
QA1. The demand for exgratia in addition to bonus by union is illegal and have no sanctity in eye of law. The exgratia payment is nothing but a mercy of the management. The call of demand would have locus standi if there would have an agreed charter between union and the management or if exgratia payment is a statutory one.
QA2. This type of call for strike by union is treated unfair and illegal. The union can call for strike when agraived by the decission of the management or management did not go by the direction by labour department. In the instant case both the approach was missing for which the call for strike by union is un constitutional.
QA3. The decission to de-recognition of Union by the management is justified and management should have approached for de-registration of this union.
The union is forrum to act for the well being of the workmen and to fight for injustice caused to workemen, not that union go for injustice. The wrong practice of the union put 2000 dependents family into starvation for no reason.

From India, Mumbai
It needs no reiteration that there is no real winner in a strike situation and the long term loss is for the industry in particular. Already the legal position is explained in the comments above, so I refrain from adding to it. But the problem in strike situations is that the larger picture is missed. Who is justified and is not justified is a matter of relativity and though the union was legally incorrect in insisting on ex-gratia when the industry was complying with the Payment of Bonus Act. But then the question comes what was the management doing when the situation was getting hot. Now that the doors of negotiation are closed, the position has become too rigid and win-win situation for both is out of sight. Both the parties are treating it as a war situation, albeit everything is fair and is traveling along the path of confrontation. The end result is protracted strife situation, production loss consequently wage-cut and may ultimately result in closure of industry itself if the situation prolongs. To avoid that situation the right thinking individuals shall join hands, take initiative and break the logjam so that normalcy is restored. The alternate solution to confrontation could be worked out like 8.33% + some advance to be recovered after three months etc as per the affordability of the company. In fact the trade union leaders would be more concerned on how to end the strike as the situation is going towards a point of no return and they could be persuaded to accept an honourable way out for which they are a lot to be blamed.
From India, Mumbai
Dear HR colleague,
The union's insistence on paying ex-gtatia in addition to statutory bonus is nothing but high-handedness. It should have realised that the company was gracias enough to have paid ex-gratia despite it was making losses in the initial phases.
It's going on sudden strike without giving notice is blatantly illegal and unjustified as is evident from the court ruling. I presume wages must not have been paid for the period of illegal strike.
As the doors of negotiations have to be kept open all the time, the steps taken to derecognize the union may boomerang and deepen the deadlock further unless there springs another union claiming majority.
In IR situation like this , the solution lies in maintaining dialogue with the representative body of the union either present one or another.
Vinayak Nagarkar

From India, Mumbai
"In IR situation like this , the solution lies in maintaining dialogue with the representative body of the union either present one or another."
Being in dialogue is always good.
But sometimes unions behave in high handed manner,especially if they have locl political support and management is not that well connected.
This kind of pressure results in the factory/establishment get into tight fincial situation, eventually running in losses and winding up.Loosers will be bulk of workers, as most union leaders do become rich enough during the course of leadership.

From India, Pune
Dear Sreemoy 24,
I have gone through your post twice and few questions arise in my mind which need to be understood before embarking on advice vehicle. I do not wish comment on morality, right, wrong etc.
1. When you started paying ex gratia, was there an existing trade union?
2. Did any discussion/negotiations took place with the union, if yes, minutes of the meeting must have been recorded. can you share those minutes on this Forum?
3. When you started it some announcement through notice might have been made, what is there in the notice, can you share that?
4. Unless above mentioned information is available, proper advice can not be extended.
5. Now coming to legality of strike, there is a process given in chapter VB of the ID Act, if they have not followed it, they will be in trouble.
6. Considering that for paying ex gratia, no meeting took place with the union and there is no minutes reorded, the ex gratia payment made by the company will be treated as service condition as you paid it for few years. For withdrawing it you should have also followed the process under section 9A of the ID Act. If you have not followed it, your are on the wrong foot.
7. For withdrawing the recognition, company must have taken advice form some learned and intelligent person, if they have followed due process of law in this regard then legally no problem will ensue. It appears to be hasty and unwise action resulting in precipitation of problem.
8. Lastly, you may be legally correct but practical aspect you may be incorrect. There is always two sides of a picture.
9. Please note that the workmen are as much part of the company as the management is. management earns profit on their contribution of hard work. Many managers may come and go but the workmen shall stay with the company till they retire so their stakes are higher.
Warm Regards
Bharat Gera
HR Consultant

From India, Thane
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