Understanding 18(1) and 12(3) Settlements: Time Frames and Disciplinary Actions?

Hello! I'm here to ask quite a few doubts.

Is there any time frame for 18(1) or 12(3) settlement? Is there any minimum number of years that the settlement should be signed for?

What would be the necessity for a tri-party settlement?

Can disciplinary action/proceedings be executed for a workman when they are covered under an 18(1) settlement, and the company follows only the model standing orders?

Settlement Duration and Disciplinary Actions

Unless otherwise provided for in the settlement, a settlement will be in force for six months. A disciplinary action need not be clubbed with the settlement. If an employee covered under the settlement is found involved in any act of misconduct, you can initiate action against him. There cannot be any provision in the settlement that says the persons on whom the settlement is binding can engage in anything illegal or against the company rules and decorum. You need not link it to standing orders either.

Model Standing Orders

Model Standing Orders are only a model that can be adapted temporarily once the company has become covered under the Standing Order Act. Normally, once covered, you are expected to have a certified standing order of your own within six months, and until then, you can use the Model Standing Order.

Regards, Madhu.T.K

We have signed an 18(1) settlement with our workmen, and it's been one year. As agreed, every year, the base 2001 VDA points average is computed and added to their basic, inclusive of their grade pay! Now, the trade union leader raises a dispute, saying that the VDA increase is very low, and he didn't understand the settlement. He demands the settlement to be in the regional language and requires the labor officer to sign the settlement as well. He is asking why we didn't sign a tri-party settlement?

Your inputs/suggestions are appreciated.

Thanks,
Abhinav

Tri-party settlement is required only when no settlement is arrived at between the employer and the employees, and when conciliation by a third party is necessary. A settlement that has already been signed cannot be questioned. Once the term of the settlement is over, a demand notice can be sent to ask for settlement. At that time, you can consider involving a conciliation officer and proceed with a 12(3) settlement.

Madhu.T.K

To start with, let me make it clear that a settlement under 12(3) of the Industrial Disputes Act, 1947 is a tripartite settlement, which is signed by the parties in the presence of a Conciliation Officer. On the other hand, a settlement under 18(1) of the Act is signed by the parties otherwise than in the course of conciliation proceedings. These settlements shall be binding on the parties for the period agreed upon, and if no such period is agreed upon, it shall be binding for a period of six months from the date it is signed. It shall continue to be binding until one of the parties representing the majority of the workmen gives a notice in writing of its intention to terminate the settlement.

A tripartite settlement signed during the conciliation proceeding shall be binding on the (i) parties to the dispute, (ii) parties summoned during the proceedings, (iii) an employer, his heir, successor, or assignee, and (iv) all the present employees or those who are subsequently employed.

There is no link between the settlement and disciplinary action against a union official or a workman. Disciplinary actions against workmen are normally dealt with under certified standing orders under the Industrial Employment (Standing Orders) Act, 1946, if the Act is applicable to the establishment and the same has been certified by the Certifying Officer. Until the standing orders are certified, the model standing orders as envisaged under the Act shall apply to the establishment.

Regards, BS Kalsi

Please check whether the Union leader, who has raised the dispute, represents the majority of the workmen. Intra-Union rivalry is normal in an organization. If one union signs the settlement, the minority union will always raise some issues to gain popularity or attention from the workers. If the earlier settlement had a clause relating to VDA, and the same is resolved and being followed, it is perfectly in order and cannot be agitated. If such a leader thinks the VDA increase is low, he can certainly raise a fresh dispute before the concerned Conciliation Officer and request him to conciliate. Once the issue is resolved, he can ask the officer to sign the settlement in the regional language.

Regarding his query on why the settlement was signed under Section 18(1) instead of Section 12(3) of the Industrial Disputes Act, 1947, only the parties involved in resolving the issues can best explain.

Regards, BS Kalsi

Thank you for the inputs, sir. So, the trade union leader can send a notice, and the settlement can be converted into 12(3) with the presence of the labor officer. The existing 18(1) can be translated into a regional language without any changes. Will the labor officer initiate changes when insisted by the union leader during the conversion of 18(1) into 12(3)? Can changes, entitlements, or benefits be entertained during the conversion progress?

Understanding Settlements Under Section 18(1) and Section 12(3)

Sorry for the interruption. With the permission of BS Kalsi, let me say that a settlement under Section 18(1) is also a binding and enforceable settlement. If the Union sends it to the labor officer to make it a settlement under Section 12(3), the management can oppose it. Moreover, the labor officer cannot simply make a bipartite settlement a settlement under Section 12(3) without conciliation and hearing the parties to the settlement.

A settlement under Section 18(1) is binding on the parties to the settlement, whereas a settlement under Section 12(3) is binding not only on those who have signed the settlement but also on workers who may join the company later on. The settlement under Section 12(3) has wider coverage, whereas the former will be binding only on those who have signed the agreement. Therefore, the management may not be interested in making it a Section 12(3) settlement under normal circumstances, and the management should not make or convert a settlement already made under Section 18(1) into Section 12(3). If the Union leader has just now become aware of the VDA factor, let him wait until the present agreement is over.

Regards, Madhu.T.K

Thank you, sir. So, while a biparty settlement is in effect, the union cannot raise a dispute in terms of the settlement until the settlement period falls due, correct? If they wish to do so, it must be carried out in the form of 12(3) after the existing settlement period ends.

Dear Madhuji,

I appreciate your expert comments on my thread. I fully agree with you on your contentions. Normally, an employer doesn't like the involvement of a third party in local issues disputes and prefers settlement under 18(1) of the ID Act, 1947.

BS Kalsi
Member since August 2011

You should ask the Union to wait until the current settlement is in force. Even if the Union issues a notice of termination of the settlement following section 19(6), you will have two months' time. An organization cannot operate solely based on the directions of the trade union. If the union had objections, they should have raised them when you signed the settlement. Now, after signing the settlement, they cannot insist that it should be finalized in the presence of a Labour officer.

Regards, Madhu.T.K