Navigating Strikes in India: Can You Hire Permanent Replacements Legally?

Replacement of striking workers in the US

In the U.S., as established in the National Labor Relations Act, there is a legally protected right for private sector employees to strike to gain better wages, benefits, or working conditions, and they cannot be fired. Striking for economic reasons (i.e., protesting workplace conditions or supporting a union's bargaining demands) allows an employer to hire permanent replacements. The replacement worker can continue in the job, and then the striking worker must wait for a vacancy. However, if the strike is due to unfair labor practices (ULP), the strikers replaced can demand immediate reinstatement when the strike ends. Does the same law exist in India?

Is the replacement of striking workers allowed in India?

We have an ongoing strike by union workers who earn 2-3 times the minimum wages. The company has decided not to accept their demand for further increases until market uncertainty is over in our product line and a certain stable turnover is achieved. Hence, we have hired new permanent employees and are running the plant smoothly. Are there any restrictions on hiring replacement workers (as claimed by the union)?

Is it compulsory to give employment to striking workers if there is no vacancy?

Now, as and when the striking workers end the strike, we shall have double manpower. In this situation, do we need to remove newly appointed employees (who have already completed 6 months) or ask striking workers to wait until further vacancies are available? Which is the legally correct strategy?

Indian laws on strikes

Indian laws are not so explicit in covering all types of strikes. There are different rules for government and quasi-government establishments and public utilities. Certain sectors fall under the Trade Union Act. Government and industries providing essential services, such as aviation, railways, postal services, communication, road transport, electricity, water, milk, and other essential commodities, have statutory protection under the Essential Services Acts enacted by central and state governments.

In the case of these establishments, courts may issue orders declaring strikes illegal, leading to disciplinary actions against the employees involved under the respective rules. Instances of workers being dismissed for participating in strikes or being absent from work are rare. Usually, strike days are considered as absences, resulting in no wages being paid. However, there are also cases where striking workers, even if initially dismissed, are reinstated with back wages or without a break.

Most strikes are aimed at demanding better wages, amenities, bonuses, etc. In all such instances, the decisions of the courts will prevail.

Thanks for your inputs. But the question is, if a strike is called for increasing wages (considering our striking workers already earn between Rs. 25,000 to Rs. 35,000 per month), which the company cannot afford, what choices does the management have?

1. Close the company since workers are on strike.
2. Run the company by hiring new employees, if available at a lower cost, in place of the striking employees.

If we opt to operate the factory with new employees, they will become permanent after the statutory period of employment with us. If the strike is called off by the striking workers, how can we accommodate both sets of workers? If we dismiss the new workers, they may take legal action seeking justice.

Please comprehend the situation thoroughly and provide your advice.

Addressing Strike Situations

It appears to me that your query stems from a negative approach. I couldn't guess what drives your workers to go on strike. Have they issued any strike notice? If so, was any wage negotiation initiated by you, and did it fail? Why are you considering an extreme decision like closure? If you have not initiated any negotiation so far and a revision is due, you should commence it. A wage revision directly impacts the company's financial condition and how it can sustain the resultant recurring expenditure in the future. If your company lacks resources to implement a reasonable revision, you should explain the difficulties in agreeing to a substantial revision and try to convince them. You may also seek the help of experts or a conciliation officer. In the worst-case scenario, you should agree to a proforma revision, a token revision that may not cripple operations. Believe that you can run the company without a revision; it is possible, and strikes can be overcome with tactical moves and decisions. I strongly advocate sparing them their jobs. I also hope employees will realize the situation and extend cooperation not only to run but also to improve your bottom line.

Legal Considerations for Employee Replacement

I don’t think you should try to employ anyone new by removing older ones. Legally, it’s almost impossible to keep the same entity going unless you close the existing ones and fully settle them. Closure is possible only under certain legal conditions.

Building Trust with Employees

If your existing employees have faith in your frankness and your figures tell the truth, who knows, they might extend cooperation to help you overcome your problems.

Possibility of Strike Withdrawal

When you said "if the strike is withdrawn," do you really believe there is such a possibility? Then why are you considering the closure option? There are many entities running without even granting normal or annual increments, let alone a periodical wage revision. It’s possible to run an entity without agreeing to a wage revision for existing employees.

Role of Conciliation and Legal Processes

The interference of an appropriate conciliation process and the court's role cannot be ruled out under any condition or at any time.

Union Strike Situation

Answers to your queries are:

1. The union has given strike notice and is legally on strike.

2. We have started negotiations before the union declared a strike and are continuing weekly meetings in front of the labor commissioner, with both parties sticking to their stance.

3. Workers are uneducated and come from farmer families in surrounding villages. They are guided by union leaders and local politicians.

4. They could continue the strike since they have side incomes from family farms and side businesses that enable their families to survive without wages from employment. Many of them have taken other low-paying temporary jobs. Many want to return to work, but the mob, local pressure, and threats from the union are preventing them from doing so.

5. If we don't recruit new employees, the only option is to stop production.

6. Although union leaders understand our position, the workers themselves are adamant and resorting to violence, not allowing non-striking older and new employees to attend duty.

7. The police are cautious with our complaints due to local political pressure.

8. Workers don’t care about police cases due to their local influence.

9. Workers are essentially blackmailing with the belief that we cannot leave since we have already invested in the plant.

10. They genuinely believe that an annual raise is their legal right, even though we cannot afford it given the current market conditions. We feel compelled to agree, as we have always done in our 32 years of existence. However, many employees have only been with us for 6 years and do not yet have family responsibilities.

11. For your information, the average CTC of new and old employees is Rs. 22,500 per month.

12. The strike will be withdrawn if we negotiate and agree to their demands. In that case, we would essentially have two sets of employees: those newly recruited during the strike period (who become permanent due to their service period) and the old employees.

Legal Options and Resources

I was surfing the internet and came across the following links:

- https://corporate.findlaw.com/law-li...realities.html
- https://www.bipc.com/permanent-repla...at-will-status

These links discuss US legal options where companies can hire replacement workers, possibly at lower wages, to continue production in the event of a strike by existing workers. Upon the withdrawal of the strike, striking workers would have to wait for employment until further vacancies are created. However, I find no such provision in Indian law. In this case, employers can be essentially blackmailed by unions. We are confused about our legal options and would appreciate your advice, Sir.

Understanding the Situation in India

Sorry, I just now realized the situation you are in. This type of complex situation is not new to Indian conditions. I understand the problems as we faced a similar issue in a project located in a remote village, employing mostly locals. We had to deal with legal issues for more than 10 years before we finally closed this project under Section 25(O) of the ID Act with the support of BIFR/SICA, both of which have now been replaced/subsumed into a new set of Acts/Tribunals.

Evaluating Your Firm's Status

Coming to your scenario, isn't your firm a 'sick' unit or a potential 'sick' company as of now? Or are you suffering only due to a lack of cash or current assets to meet the additional burden from the impending wage revision? Are you struggling with supply commitments to your clients? Could you sustain the idling for many years? US laws are not applicable in India, and therefore you have no option.

Options for Restarting Operations

It's nearly impossible to avoid either agreeing to retain a sizable number of older employees along with accepting new hires if you wish to restart operations. I presume your plant has stopped production and is idle. It's better to settle all the old employees and go for fresh recruitment if possible. This will, in a way, avoid being saddled with past liabilities. Have you studied legal options? Of course, there is no tailor-made solution to this complex problem.

Dear Colleague,

In the present context and prevailing strike situation, consider the possibility of declaring a lockout with the guidance of an expert labor lawyer and present it to the government labor authorities under the ID Act.

Simultaneously, maintain open channels of formal and informal communication for a potential settlement.

Regards,
Vinayak Nagarkar
HR Consultant

Managing Wage Bill and Employee Retention

We are not a sick unit, but with a high wage bill compared to our competitors, we want to control it as a preventive measure for the future since the market is becoming too competitive. We have commitments to our foreign clients, and a lock-out is the last option we want to try. Since we don't have legal options as US companies do, we shall be saddled with two sets of employees. In that case, our lawyer advises us that we shall have to retrench new employees for lack of work and pay their legal dues, such as a one-month notice and retrenchment allowance. Actually, all new employees are educated—engineers or at least diploma holders—as opposed to uneducated older employees. They are more productive and resourceful, and we prefer to retain them.

Voluntary Retirement Scheme (VRS) and Legal Advice

In that case, our lawyer advised declaring a VRS scheme to old employees, but the strikers are not ready to accept. We have asked the labor commissioner to issue 'failure reports' and allow our case to go to the labor court. Our lawyer says the labor court does not have jurisdiction to decide on wage revision since we are already paying above minimum wages and other legal dues. Furthermore, wage revision is subject to market forces, balancing our need for experienced labor and the labor's need to continue in the job. Hence, further wage revision is left to market forces even though we are not a sick unit and are managing to make some profits (even after a large wage bill compared to competitors, just because of some better technologies), so that future competitiveness is planned.

Legal Framework and Market Forces

Does the advice of the lawyer make sense? In any case, Indian law needs revision so that blackmailing by workers and unions can be countered. Otherwise, workers can go on strike and withdraw at their will, leaving the employer at their mercy and saddled with responsibilities to negotiate and settle with them somehow. The links provided in my previous post are self-explanatory, showing that a similar situation in the US forced the government to amend the law a few decades ago, allowing employers to hire replacement workers.

Your view, please. Thanks

Dear Colleague, your workers are on strike, and with the help of replacement workers, you are running your production. The plus point is that the striking workmen are not threatening or preventing the replacement workers.

Legal Strategy for Handling Strikes

You have to fight this mainly on two fronts. Legally, you should approach the labor court to get this strike declared as illegal (although prior notice is given, you can contest the legality) and unjustified. As regards the charter of demands on which negotiations have failed and conciliation also failed, let it be referred to adjudication by the government. Once it is referred to the Industrial Tribunal under the ID Act, the strikers cannot continue with the strike, and they will have to resume duties.

Handling Striking Workers and Replacement Workers

As per Indian laws, you cannot dispense with the services of striking workers without following due process of disciplinary action, unlike in the US. At most, they will lose wages if the strike is declared illegal or unjustified. Regarding replacement workers, if the strike is withdrawn or workers resume work, they will have to be terminated if you had taken precautions to recruit them on a temporary basis. Otherwise, on the grounds of strikers returning to work, you can convince them for termination.

You can continue taking production through replacement workers as long as you can, pending court proceedings. While apparently there is no merit in the demand for higher wages, as you are currently paying far better wages, you need to keep the doors of communication open for some possible solutions.

Regards, Vinayak Nagarkar HR-Consultant

Thanks for suggesting practical possibilities. Please note that:

Unsuccessful VRS Attempt

1. An unsuccessful Voluntary Retirement Scheme (VRS) was tried once. We had offered 70% of wages (at the current rate of wages) for the balance service period of each worker. We shall try it once again by improving on it. Any suggestions on what generally the industry practice is for an attractive and successful VRS offer?

Issues with Striking Workers

2. Striking workers are preventing non-striking and new recruits from attending duties, making the union and workers guilty of unfair labor practices.

3. We have already filed police complaints against a few of them, mainly instigators and leaders managing the strike, for stopping the company bus, threatening employees not to attend duties, catching employees alone and threatening dire consequences if they continue to attend duty, and going to the homes of managerial staff in a big mob and asking them not to attend duties to support their strike. We have issued show-cause notices, charge-sheeted, and conducted inquiries following due procedure of natural justice, and a few of them have already been terminated. But they believe that the mob and union support shall force us to withdraw their terminations.

Legal Actions and Labor Commissioner Involvement

4. We have asked the labor commissioner to declare the strike as illegal since the union is guilty of unfair labor practices. But the labor commissioner is following due diligence and wants to avoid an explosive situation. Can the labor commissioner make such a decision, or do we need to approach the labor court for such a request?

5. We have requested the labor commissioner to declare the failure of negotiation, but he is withholding the decision, maybe due to the pressure of the powerful union. Now, I wonder if our dispute eventually lands in labor court, non-terminated workers have to join the duty, and the union shall fight for their demands in court.

Queries on Court Decisions

Now, I have a few questions:

1. You said the decision of the court may not go in our favor. Under what circumstances may this happen? I believe the court has no reason to decide against us unless raising the living standards of workers is a constitutional compulsion as mentioned earlier in previous posts. Please give me a reference to this constitutional clause.

2. Can the court force us to revise wages even though we are quite above minimum wages? I believe the court does not have this jurisdiction and allows us to follow the principle of market forces. But a lawyer says that India is a socialist country and this is not the way Indian law thinks. Indian law may force us to share profits with workers, if we are making profits, by revising wages by declaring an award.

3. Can the court force us to pay wages during the strike period? I believe the court shall follow the principle of 'No work, No pay' as per our appointment letter.

I think I have too many queries above. I would appreciate your views on a suitable VRS scheme as well as possibilities of court verdicts and the constitutional need to improve the living standard of workers continuously even though they are much above industry standards.

Thanks

It is also a peculiar situation in India that unions can call for or withdraw strikes at their whims, and there is no way to punish them for unjustified strikes and interrupting manufacturing activity, leading to huge losses and business interruptions for the company.

U.S. Legislation on Strikes

U.S. legislation has adopted the right approach by allowing the appointment of replacement workers if they are available at lower wages. In that case, unjustified demands of workers are severely punished. This makes workers think twice before actually starting a strike.

Employers should advocate for such legislation.

As you are aware, it's not possible to predict exactly what the verdict of any court will be in a contentious matter. The status of the court, whether it be a labor court, an Appellate Tribunal, a High Court, or the Supreme Court, does not change the fact that it's the prerogative of the deciding authority to spell out the verdict. If the verdict comes after a very long and drawn-out process, nobody is going to compensate for the losses sustained since the damage is already done.

No work, no pay

You mentioned the concept of "No work, No pay," which exists, but no one can take it for granted. There are instances where courts have awarded revision with back wages as well as reinstatement after termination. We don't know the manpower and educational levels of the individuals involved.

Causes of termination

In your case, what could be the causes of termination if you are going to consider this situation seriously? Mass terminations without valid reasons pose a danger. Selective terminations may be possible if existing employees do not have enough skills and knowledge to operate advanced technology or machinery if and when they are introduced. Simply wishing to replace older employees with new/freshers to save on wage costs may not be a valid reason to lay off some or all employees.

Perhaps you could run the plant for some time with the help of contract labor or temporary workers. However, what if they are also influenced to join the strike? My previous email briefly explains the grounds for different wages and their revision.

I'm afraid we cannot have our cake and eat it too. If the situation warrants, you should prepare grounds to secure a verdict declaring the strike as 'illegal,' which would provide you with better grounds to proceed further.

Legal Considerations in Handling Strikes and Worker Replacement

You had not stated all the facts right from the start and came with undisclosed facts and queries. Regarding VRS, I believe the timing is wrong as the matters are heated up. Maybe at a later stage. Right now, the battle has to be fought on the legal front. The Labour Commissioner has no authority to declare a strike legal and unjustified; the powers lie with the court. Let the matter reach the court, and you can use your clout for reference in both the strike and COD.

As rightly stated, the labor courts are empowered to award higher wages based on region-cum-industry basis and capacity to pay. However, you can always challenge the court's judgment in the Apex courts. In view of violence, threats, and intimidation to loyal workers, staff, and replacement workers, in my opinion, it is a fit case to hit back by declaring a lockout by building up the case through proper notices containing factual events and appeals to resume work. The timing of this decision is for you to decide, but you certainly need to take strong action.

Remember that during the notice period of a lockout, resort to the suspension of operations. Any lockout followed by an illegal and unjustified strike (as declared by the court) is legal and justified.

Regards,
Vinayak Nagarkar
HR Consultant

I am sorry that I have to pour the facts as the subject evolved with your detailed responses to my queries, which I felt may not get to start with.

Wow... What educative responses from Mr. S. Kumar and Mr. Nagarkar. I greatly appreciate and thank you. You have given us grounds and legal vision to take forward the negotiation with the union, both at the negotiation table and in court, if it lands there. The Supreme Court verdict is self-explanatory.

We shall prepare data on the elasticity of our product line (uncertainty in sales volumes and the compulsion of introducing new products every year due to continuous changes in the pharma industry), our industry standard for spending on the wage bill as a percentage of sales, and the unsuitability of uneducated workers in the newly emerged regulated environment of the pharma industry.

We have been putting out notices asking to attend the duties immediately with copies to authorities. At the same time, we are taking disciplinary actions on union members who are following unfair labor practices by preventing others from attending duties.

I shall keep you posted as the situation evolves.

Thank you very much for your support, Sir. I am obliged.

Another thing, can we go to court to unregister the union at our unit for following unfair labour practices by preventing the running of our production? Currently, we are conducting inquiries and terminating employees who have participated in such activities.

De-recognition of the union

De-recognition union is the correct term. I shall mention it to the union and the labor commissioner and check the response. I will also ask my HR to submit our request to the labor commissioner with all supporting proofs of unfair labor practices undertaken by union members.

I shall get in touch with you after our planned meeting with the union on 22nd October at the labor commissioner's office.

Appreciation and advice

I understand your warning and appreciate it. We have possible options to keep supplies to our clients alive. Advisory notes from experienced individuals have added solid dots in our thought process, which shall connect as and when the situation demands.

We are facing such a dynamic scenario for the first time, and we do not have much idea about the legal status of a few issues. Your advice has certainly been very helpful to advance negotiations and our action plan.

Thanks,

Dr. Shrikant Karwa

[Phone Number Removed For Privacy-Reasons]

Thank you. Your objective at this crucial time, in my view, should be to get matters of both the illegality of the strike and COD referred to the legal authorities (Industrial Tribunal/Labour Court under the ID Act). Once the reference is made, no strike can be continued, and workers will have to resume work. So, make this your top priority.

The issue of re-engaging replacement workers (as you find them far better qualified and capable compared to the oldies) can be taken up after VRS is successfully implemented. If and when present workers resume work, the replacement workers will have to go, but for the time being, their issue and VRS have to be kept on the back burner.

Once the courts are seized with the strike and COD, you will hopefully get a breather to make preparations to strengthen your case by mustering all data and facts on the total business scenario in terms of SC judgments. In both matters, your side appears to be more convincing on merits. But it decidedly depends on how our labor lawyers effectively present it and how effectively briefed they are by the HR.

After the reference and during the pendency of matters before courts, hopefully, normalcy in production and workflow will be restored, and you can calmly work out your further strategies to continue to confront or compromise and buy long-lasting peace through an amicable settlement.

Wish you good luck and success.

Regards, Vinayak Nagarkar HR Consultant

Dear Dr. Karwa,

Here are a few judgments and notes on 'Strikes' and 'de-recognition' which I hope might help you in understanding the provisions of law and its application.

Thank you for your concern about our ongoing strike. We could demonstrate to the labor commissioner that the Union's demands are unjustified based on the Supreme Court judgment given by Mr. S. Kumar. However, the Union has raised a new objection. According to the MRTU Act, Schedule IV for unfair labor practices by employers, point 8 states that "To recruit new employees until the strike is declared illegal." This situation is challenging for us as we had to recruit new employees to run the plant. Once again, we find ourselves in a difficult position.

Managing Production During a Strike

I am curious about how other companies manage production by hiring new employees when most of their workforce is on strike. I would appreciate it if you could shed some light on whether it is legally permissible to hire new recruits in this scenario. If not, our only option would be to halt operations at this plant and consider establishing a new setup.

Comparative Practices: India vs. US

In such circumstances, unions in India can potentially exert pressure on management, whereas in the US, employing replacement workers at a lower cost is permitted. I still believe there must be a solution to this peculiar limitation on employers in India as well. I am looking forward to hearing your opinion.

Regards, Dr. Karwa

Recruitment vs. Strike Management

Things are narrowing down to some clarity. I was somewhat skeptical about recruiting new employees as opposed to resorting to a strike to run the plant. It's not practically possible to employ new individuals to replace existing employees unless and until they are relieved or settled. As you know, this would open up another front to tackle if and when the strike is called off. Of course, it's a vexed problem facing shutdowns at the plant. However, the 'hire and fire' policies of the US have no place in India. If the striking employees are open to negotiations, the next step would be a 'lockout'. Would any temporary stoppage of production or shutdown cause irreparable damage to the work-in-process and other installations?

Exploring Temporary Workforce Solutions

If it works out, in the event that you could find a contractor who could employ their own workforce to run the plant (on a lease basis) temporarily without any commitment to either continue the arrangement or retain the workers based on a fixed percentage of share in the surpluses. Alternatively, you could search for a labor contractor to supply workers for a limited period under a fixed-value contract. Meanwhile, explore the possibilities for declaring the strike as 'illegal' and implementing a 'lockout' if negotiations fail.

Since agency law has been amended, handing over manufacturing to a third party is not possible. Our lawyer has taken a stand that the strike is called by the Union, and the Company has declared it illegal. Hence, the Union has the responsibility to get their strike declared legal by the court to attract Sch IV (8) clause of MRTU & PULP (which says that recruiting new employees during a legal strike is unfair labor practice). Therefore, there is no legal breach in appointing new employees who can be retrenched once striking employees return to work.

We are presenting this stand before the authorities. Please comment.

Time Frame and Planning

1. Please assess what could be the overall time frame and prepare a PERT chart and a CPM in consultation with your advocate.

Recruitment Challenges

2. Could the recruitment of new employees work? Are you confident that you'll find the right candidate with the proper mix of talent and skills? What if they are also obstructed by striking workers using force? I assume these new hires must be from outside the local area, and there is a possibility of conflict between locals and outsiders.

Intelligence and Strategy

3. Do you have intelligence reports on who (possibly local leaders, politicians) may be behind them, providing strategic support? It's even possible that some local police might be involved. Your counteraction should take a multi-pronged approach to address these challenges.

Employment Terms and Retrenchment

4. When moving towards employing new staff with a conscious plan of potentially laying them off in a short period, it may be appropriate to include a clause specifying a definite duration as purely temporary, subject to termination by the end of the agreed-upon period. If necessary, this can be extendable with mutual consent for further duration with the same or modified terms and conditions. Also, define what the retrenchment compensation would entail.

More or less, we have done our homework. Whatever you said about politicians and police has happened. We approached the highest police authorities in the district who are aware of the union maniac and are in favor of stopping striking members from taking the law into their own hands. It seems the administration is also worried about the bad effects of union blackmailing tactics on the industry and wants them to play by the rulebook. We are offering fixed-term employment (as introduced) by the government in recent amendments. We shall keep you updated.