The Industrial Disputes Act, 1947

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The Industrial Disputes Act, 1947 regulates the Indian Labour Law whether they are trade unions or rights of an individual working in any organization in India. This act was passed before the Indian Independence Act of 1947. This is one of the most important acts in the history of Indian Labour Law. All the details are described further related to Indian Labour Law.

Objectives of the Industrial Disputes Act of 1947

The major objective of drafting this act was to make the provisions for settlement and investigation of industrial disputes and to maintain industrial harmony by providing a structure for the investigation and settlement of disputes in the industry. 

This act was majorly passed with the key objective of “ Maintaining a peaceful working environment and culture in the industry” under Statement of Objects and Reasons. 

This act majorly lay down:

1. The provision of full and final settlement or payout to the workmen on closure or retrenchment of an employee from the organization.

2. The procedure of seeking permission from Government authorities for laying off or retrenching the workers from their job position. 

3. The legal actions to be taken on account of unfair labour practices in the business.

Features of The Industrial Disputes Act, 1947

Here are some features of this act:

  • The amount of compensation to be paid to the workers was also covered under this act
  • When any organization or entity lays off employees due to downsizing they are required to pay compensation to the affected employee
  • Various agencies and committees were established to resolve the industrial disputes such as the Board of Conciliation, Labour Court or Tribunal
  • If any emergency arises in the state the competent authority may declare the iron, steel or coal industries under Industrial Disputes Act for six months
  • Organizing strikes and lockouts was declared as unethical or illegal activity when mediation and adjudication were underway
  • By consent of both the parties involved or by the State government, any industrial dispute can be referred to as an industrial tribunal

Controversy regarding the Industrial Disputes Act, of 1947

This act was majorly implemented to provide standard guidelines to solve disputes in the industry irrespective of the size and sector. This act has provisions for situations like layoffs, retrenchment (downshifting the employee count) or closure of industry due to unforeseen circumstances.

A controversy arises due to this clause particularly as per Chapter V-B. Multiple amendments have been made over the years to this clause. The chapter states the following things:

1. If an organization or company employs more than 50 persons it needs to provide a 60-day notice period citing reasons for closing down the firm to the government. Later this period was extended to 90 days in 1982.

2. If the organization employs more than 300 employees it must take prior approval from the appropriate authority for layoff, retrenchment or closure. Later this limit was lowered to 100 employees in the 1982 amendment. 

The above-mentioned two provisions are interpreted as rigidity in the labour market. The foremost objective was to ensure that employees couldn’t be fired from their jobs at the will of the employer. To do so they are required to take permission from the labour commissioner. This subject is also under the current list due to which the individual states have made strict rules and conditions so that layoff, retrenchment and closure becomes an even more difficult process. 

Problems that arises in labour market

This results in the following problems in the labour market:

1. Lower output by labour– This provision results in lower output by individual labour as they took advantage of the provision in an unfair manner.

2. Low labour productivity– Lower output by the labour results in low overall productivity.

3. Hesitation in hiring–  Nowadays employers or industries hesitate to hire new employees as there are stringent laws regarding their termination, layoffs or retrenchment. 

4. Decrease in investments– The urge and risk-taking capacity of businesses to invest have lowered from time to time. 

5. Lower overall manufacturing performance– The overall manufacturing performance has dipped or decreased in a few years.

6. Foreign investors think twice before investing in India– Investors have to think twice before investing in India due to stringent and typical labour laws. Businesses or employers don’t want to indulge in legal complications.

Wrapping up

Apart from the provisions of Chapter V-B, Section 9A is also a major cause of concern. According to this section, employers are modifying the wages and other allowances provided to the employees to be updated with the labour commission a notice of 21 days in advance. 

The major demand of the industry is to rationalize as per the demand of the current globalization era. The complexity of this act is responsible for the fact that only 6% of the total labour workforce is working in the organized manufacturing sector and the remaining is employed in the unorganized sector. 

The major challenge for the government is to make an efficient balance between labour welfare and industry welfare.

FAQs (Frequently Asked Questions)

The provision for payment of compensation to the workman on account of closure or lay off or retrenchment.

There are 40 sections in the Industrial Disputes Act, 1947.

The causes of industrial disputes include disparity in wages, disputes between the labour Union and the Industry, unfulfillment or disregard of the rights of the labour, etc.

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