Facing a Strike and Lockout: Can Management Terminate the Contract and What Are Our Obligations?

In one of our units in Chennai, the contract workmen are represented by a trade union. The contractor and the said union enter into periodical settlements providing for wage increases and other benefits. For the past few years, the settlement of wages has not been resolved, and the contract workmen are indulging in a strike even after the written advice by the Joint Labor Commissioner to withdraw the strike. The union has not called off the strike. On the other side, the failure report for the demand from 2018-2022 is awaiting adjudication (it is signed by the Government for adjudication). Fresh demands for the period of 2018-2022 have also not been concluded due to the obstinate attitude of the union.

The management has declared a lockout of its establishment due to industrial unrest just outside the gate and is practically facing other issues also due to the standstill of allied activities. However, the management has decided to pay salaries and wages to its employees even for this lockout period.

Questions Regarding Contract Termination and Government Orders

Now, my questions are:
- Whether the management can terminate the contract at this time? I would like to clarify that the contractor does not have any contract with any other establishment.
- Whether the Government authority can pass an order to pay the contract workmen?
- Whether, as a principal employee, we should attend the conciliation meeting? We have attended one meeting as a second party and clarified our views.

I would be happy to receive the expert's view on the same.

With Regards,
Ranjan Kumar Dixit

Your queries are answered below:

1. Can management terminate the contract now?

You are entitled to terminate the contract as per the agreed contract terms. Obviously, there is a breach of contract, and as a consequence, you can terminate the contract. The contractor's employees cannot challenge the contract termination as they are not a party to the contract.

2. Can the Government authority pass an order to pay for contract workmen?

They may do so out of political compulsion, but you can challenge it before the High Court and obtain a favorable interim order against it.

3. Should we, as a principal employee, attend the conciliation meeting?

Having made your stand clear, it is better to stay away from the conciliation meeting. Give a written reply to this effect if you have been invited to the meeting. The conciliation officer, in his quest to find a settlement, would force you to concede unnecessarily. At the same time, have a clear understanding with the contractor on what he can agree with and what he should disagree with, totally as well as partially. However, keep in touch with the conciliation officer otherwise and give your constructive suggestions to resolve the differences.

For the betterment of the industry, keep the doors open for a mutually acceptable solution rather than a confrontation to the hilt approach.

I think the view expressed by KK is more than enough, and there cannot be any different view on it. So long as the contract is genuine, the dispute is between the contractor and his workmen. If the assigned work is disrupted, the contract can be terminated. However, this will create a law and order issue in the area that has to be tackled carefully. The workers know that they have no right to disrupt the operations of the principal employer, but they also know that a solution will be found only when there is disturbance to the public.

I would like to invite Umakanthan Sir, who had handled such kinds of issues in Tamil Nadu itself as a conciliation officer when he was in service, to share his views as well.

With reference to the above, it is to be noted that due to a strike-lockout, we have not processed the wage bill of the contractor. As a result, the contractor has not paid wages to his workmen. We have issued a notice to the contractor, with a copy to the conciliation officer, stating that since bills and attendance are verified from the unit itself, under the current situation, we would neither be able to reimburse nor be able to pay the wages of the contract workmen.

However, our staff's and workmen's salaries are being prepared by the corporate office based on the electronic attendance system, hence they have been paid. Now, the conciliation officer of that area is pressuring the contractor and principal employer to pay the wages for the period during which the work was done. Are we legally obligated to pay out the wages even during a strike/lockout? (In my opinion, we should pay once the plant is operational.)

Can they compel us under the current circumstances, considering if there is indeed a practical issue present?

Payment Obligations During Strike and Lockout

For the period the laborers worked, you cannot forfeit or withhold any salary on the grounds that their continued service is not available. Nonpayment of wages pertaining to the period the workers worked is illegal. Therefore, you should pay the bill for that period.

For the period the workers have not worked, obviously, since you have not received any service, no payment needs to be made.

Can we engage a new contractor at this point in time while conciliation is ongoing?

Can the new contractor mobilize and engage willing workers in his role?

Do the old workers have to resign and join the new contractor, or can they be appointed by the new contractor without resigning?

Regards

Avoiding Disruption During Conciliation

When a conciliation is ongoing, it is better to avoid placing another contractor and workmen in the same location, as it could disrupt the situation and potentially escalate into a law and order issue in the area. Legally, a principal employer can do so, but I don't believe it is practical. The old workers resigning from the contractor's employment and joining a new contractor could further exacerbate the situation. It is advisable to expedite hearings and facilitate faster conciliation.

Conciliation is happening on a day-to-day basis, but the union is not backing down, and their demands seem illogical. They are currently receiving compensation equivalent to that of permanent employees. Therefore, in my opinion, the only viable option is to hire a new contractor. If you have any suggestions on how to resolve this situation, please inform us.

Regards

You may discuss with the conciliation officer and decide. The matter being referred for adjudication, appointing a new contractor will not be feasible. Moreover, striking workers will not permit the new workers to enter the premises; they will create a law and order issue. Therefore, discuss the issue with the JLC and proceed.

Dear Experts,

With reference to the above, an Industrial Dispute has been referred by the government of Chennai to the Labour Court, Chennai for adjudication. The Labour Court has registered the case and issued notices to the parties, directing the workmen to file their Statement of Claim. It is to be noted that the workmen have been on strike since 29th June 2023 and are still continuing the strike despite the matter being referred for adjudication.

Under this situation, please advise if there are any legal remedies available to prohibit the strike.

Dear Experts,

With reference to the above, an industrial dispute has been referred by the government of Chennai to the Labour Court, Chennai for adjudication. The Labour Court has registered the case and issued notices to the parties, directing the workmen to file their Statement of Claim. It is to be noted that the workmen have been on strike since 29th June 2023 and are still continuing the strike despite the matter being referred for adjudication.

Under this situation, please advise if there are any legal remedies available to prohibit the strike.

Illegal Strikes and Employer Responsibilities

A strike while a dispute has been referred for adjudication is illegal. However, for the striking people, it is an act of protest against the law. You can mark the days of the illegal strike as absent days; no wages need to be paid. But you cannot force the workers to rejoin work.

Employer Arrogance and Legal Advice

In many disputes leading to the closure of organizations, you can find the arrogance of the employers. They don't get proper advice but receive plenty of wrong ideas. If you examine some of the cases that have reached the Supreme Court, this becomes evident. It may be a situation favoring the workers in all respects, but the employer defends before the Labour Officer, then before adjudication, the High Court, and finally the Supreme Court. All these occur due to improper advice.

Legal Process and Lawyer Influence

Lawyers, when approached for advice, will never let the employer go without the mindset that they should fight it in court. When one court rejects it, the lawyer will advise proceeding to the next level. It becomes an intoxication, even for silly issues. Anyway, that is not our discussion for the day, but I would say that other than marking the days of the illegal strike, you cannot do anything. You may declare the strike as illegal now.

Thank you, sir, for your valuable advice. Here, I would like to mention that a strike occurred while the conciliation process was ongoing. Upon receipt of the strike notice, the conciliation officer in that area advised not to proceed with the strike; however, the workers went ahead with it.

For adjudication, we received a Government Order (GO) and a court notice just two days ago. According to the conciliation officer in Tamil Nadu, during the conciliation process, a strike by the workers would only be considered illegal when the matter is before the conciliation board. In this scenario, going on strike cannot be deemed illegal.

Conversely, in other states, particularly in northern and eastern India, if the matter has been admitted to conciliation and the workers strike thereafter, it is deemed illegal.

I am interested to know whether this type of strike would be considered legal or illegal.

Regards,
Ranjan Dixit

I don't know if there is any rule specific to Tamil Nadu. When Section 10(3) of the ID Act states that the Appropriate Government shall declare the strike to be prohibited once the matter has been referred to adjudication, what is preventing them from issuing those 10(3) orders?

Umakanthan Sir, please comment...