How Should Noble Paper Handle Union Demands and Sudden Strikes? Let's Discuss!

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 not make any profits, nor did it pay any statutory bonus. But to sustain with other neighboring firms, this firm paid an ex-gratia payment once every year to its employees at a flat rate of 2,000 per employee. The firm began to pay a statutory bonus since the Payment of Bonus Act became 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 realized that the management was determined not to give ex-gratia, it suddenly announced a strike. Officers were threatened, and the employees behaved violently towards them. Production had completely stopped, and the firm suffered heavy losses. The management approached the Labour Court and requested to declare the 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 with terrible consequences unless they fulfill the union's demand instantly.

Questions:
1. Comment on the role played by the union in insisting on ex-gratia payment in addition to the bonus.
2. Evaluate the union's action of declaring a sudden strike, especially when the management was willing to negotiate with it.
3. Is the step of de-recognizing the union by the management appropriate as seen from the angle of maintaining smooth industrial relations? Explain in detail the reasons for the proper or improper action of the management.

Understanding Ex Gratia Payments

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 favor’. It is generally used in a 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 ex gratia unless it is agreed upon in a settlement between employer and employee.

Union Actions and Management Response

Unions acting by declaring a 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 bonuses. They need to review their aggressive actions and come back to the negotiation table. Workers will be the losers if the factory shuts down totally.

Role of Unions in Ex Gratia and Bonus Demands

The role of the union in demanding ex gratia and bonuses is a pressure tactic, trying to be seen as pro-worker and that they are trying to get the maximum for members. But can the factory afford it, and are they bound legally, is yet another aspect. Aggression may not win and can have negative effects. Trade unions need to be realistic in demands and think of duties also, and not only rights.

Discussion on Ex-Gratia and Union Actions

This topic can be discussed from different angles, but we will focus only on your query. The industry was paying ex-gratia until they paid a bonus during the moratorium period. The union, in an "apprehension" of non-payment of ex-gratia, called for a strike which resulted in violence, disrupting the work of the factory completely.

Legality of Ex-Gratia Demand

QA1. The demand for ex-gratia in addition to a bonus by the union is illegal and has no sanctity in the eyes of the law. The ex-gratia payment is nothing but a mercy of the management. The call for demand would have locus standi if there had been an agreed charter between the union and the management or if ex-gratia payment is a statutory one.

Union's Call for Strike

QA2. This type of call for a strike by the union is treated as unfair and illegal. The union can call for a strike when aggrieved by the decision of the management or if the management does not comply with the directions of the labor department. In the instant case, both approaches were missing, making the call for strike by the union unconstitutional.

Management's Decision to De-Recognize the Union

QA3. The decision to de-recognize the union by the management is justified, and the management should have approached for the de-registration of this union. The union is a forum to act for the well-being of the workmen and to fight against injustice caused to workmen, not for the union to perpetrate injustice. The wrongful practices of the union put 2,000 dependent families into starvation for no reason.

The Impact of Strikes on Industry

It needs no reiteration that there is no real winner in a strike situation, and the long-term loss is particularly significant for the industry. The legal position has already been explained in the comments above, so I will refrain from adding to it. The problem in strike situations is that the larger picture is often missed. Determining who is justified and who is not is a matter of relativity. Although the union was legally incorrect in insisting on ex-gratia payments when the industry was complying with the Payment of Bonus Act, the question arises: what was the management doing when the situation was escalating?

Now that the doors of negotiation are closed, the position has become too rigid, and a win-win situation for both sides is out of sight. Both parties are treating it as a war situation, and everything is considered fair as they travel along the path of confrontation. The end result is a protracted strife situation, leading to production loss, consequent wage cuts, and ultimately, the closure of the industry itself if the situation persists. To avoid this outcome, right-thinking individuals should join hands, take initiative, and break the logjam so that normalcy is restored.

Alternative Solutions to Confrontation

An alternate solution to confrontation could be worked out, such as offering 8.33% plus some advance to be recovered after three months, based on the affordability of the company. In fact, trade union leaders should be more concerned about how to end the strike, as the situation is heading towards a point of no return. They could be persuaded to accept an honorable way out, for which they deserve a lot of blame.

Dear HR colleague,

The union's insistence on paying ex-gratia in addition to the statutory bonus is nothing but high-handedness. It should have realized that the company was gracious enough to have paid ex-gratia despite making losses in the initial phases. Its sudden strike without giving notice is blatantly illegal and unjustified, as evident from the court ruling. I presume wages must not have been paid for the period of the illegal strike.

As the doors of negotiations need to be kept open all the time, the steps taken to derecognize the union may backfire and deepen the deadlock further unless another union claiming the majority emerges. In an IR situation like this, the solution lies in maintaining a dialogue with the representative body of the union, be it the present one or another.

Regards,
Vinayak Nagarkar HR Consultant

Maintaining Dialogue in Industrial Relations

In an industrial relations situation like this, the solution lies in maintaining a dialogue with the representative body of the union, whether it is the current one or another. Being in dialogue is always beneficial. However, sometimes unions behave in a high-handed manner, especially if they have local political support and the management is not well-connected. This kind of pressure can result in the factory or establishment getting into a tight financial situation, eventually leading to losses and winding up. The real losers will be the majority of workers, as most union leaders tend to become wealthy during their leadership tenure.

Dear Sreemoy 24,

I have gone through your post twice, and a few questions arise in my mind that need to be understood before embarking on advice. I do not wish to comment on morality, right, wrong, etc.

1. When you started paying ex gratia, was there an existing trade union?
2. Did any discussions/negotiations take 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 the above-mentioned information is available, proper advice cannot be extended.
5. Now, coming to the legality of the 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 are no minutes recorded, the ex gratia payment made by the company will be treated as a service condition as you paid it for a 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, you are on the wrong foot.
7. For withdrawing the recognition, the company must have taken advice from 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 a hasty and unwise action resulting in the precipitation of a problem.
8. Lastly, you may be legally correct, but practically you may be incorrect. There are always two sides to a picture.
9. Please note that the workmen are as much a part of the company as the management. Management earns profit on their contribution of hard work. Many managers may come and go, but the workmen shall stay with the company until they retire, so their stakes are higher.

Warm regards,

Bharat Gera
HR Consultant
[Phone Number Removed For Privacy-Reasons]