DHR 10
INDUSTRIAL RELATION AND LABOUR LAW
Assignment-I
Assignment
Code: 2017DHR10B1 Last Date of
Submission: 15th November 2017
Maximum Marks: 100
Attempt all the questions.
SECTION – A (25 marks for each question)
1.
Explain the dispute resolution
machinery under Industrial Disputes Act, 1947. Explain the difference between
Strikes and Lockouts. Explain the provision of Strikes and Lockouts in
Industrial Disputes Act, 1947.
2.
“The wages in an industry are
determined by wage laws and industry’s capacity to pay.” Examine the statement.
Explain the various types of fringe benefits or employee benefits provided to
the employees in a large scale enterprise?
Section-B
(50 Marks)
Case Study
Philips India - Labor Problems at Salt Lake
“They (unions) should realize that they are just one of the stakeholders
in the company and have to accept the tyranny of the market place.”
– Manohar David, Director, PIL in 1996.
SELLING BLUES
The 16th day
of March 1999 brought with it a shock for the management of Philips India
Limited (PIL). A judgment of the Kolkata High Court restrained the company from
giving effect to the resolution it had passed in the extraordinary general
meeting (EGM) held in December 1998.
The resolution was to seek the shareholders’ permission to sell the
color television (CTV) factory to Kitchen Appliances Limited, a subsidiary of
Videocon. The judgment came after a long drawn, bitter battle between the
company and its two unions Philips Employees Union (PEU) and the Pieco Workers’
Union (PWU) over the factory’s sale.
PEU president Kiron Mehta said, “The company’s top management should
now see reason. Ours is a good factory and the sale price agreed upon should be
reasonable. Further how come some other company is willing to take over and
hopes to run the company profitably when our own management has thrown its
hands up after investing Rs.70 crores on the plant.”
Philips sources on the other hand refused to accept defeat. The
company immediately revealed its plans to take further legal action and
complete the sale at any cost.
SOURING TIES
PIL’s
operations dates back to 1930, when Philips Electricals Co. (India) Ltd., a
subsidiary of Holland based Philips NV was established. The company’s name was
changed to Philips India Pvt. Ltd. in September 1956 and it was converted into
a public limited company in October 1957. After being initially involved only
in trading, PIL set up manufacturing facilities in several product lines. PIL
commenced lamp manufacturing in 1938 in Kolkata and followed it up by
establishing a radio manufacturing factory in 1948. An electronics components
unit was set up in Loni, near Pune, in 1959. In 1963, the Kalwa factory in
Maharashtra began to produce electronics measuring equipment. The company
subsequently started manufacturing telecommunication equipment in Kolkata.
In the wake of the booming consumer goods market in 1992, PIL
decided to modernize its Salt Lake factory located in Kolkata. Following this,
the plant’s output was to increase from a mere 40000 to 2.78 lakh CTVs in three
years. The company even expected to win the Philips Worldwide Award for quality
and become the source of Philips Exports in Asia. PIL wanted to concentrate its
audio and video manufacturing bases of products to different geographic
regions. In line with this decision, the company relocated its audio product
line to Pune. In spite of the move that resulted in the displacement of 600
workers, there were no signs of discord largely due to the unions’ involvement
in the overall process.
By 1996, PIL’s capacity expansion plans had fallen way behind the
targeted level. The unions realized that the management might not be able to
complete the task and that their jobs might be in danger. PIL on the other hand
claimed that it had been forced to go slow because of the slowdown in the CTV
market. However, the unconvinced workers raised voices against the management
and asked for a hike in wage as well. PIL claimed that the workers were already
overpaid and under productive. The employees retaliated by saying that said
that they continued to work in spite of the irregular hike in wages. These
differences resulted in a 20-month long battle over the wage hike issue; the
go-slow tactics of the workers and the declining production resulted in huge
losses for the company.
In May 1998, PIL announced its decision to stop operations at Salt Lake and production was halted in June 1998. At that point, PWU members agreed to the Rs 1178 wage hike offered by the management. This was a climbdown from its earlier stance when the union, along with the PEU demanded a hike of Rs 2000 per worker and other fringe benefits. PEU, however, refused to budge from its position and rejected the offer. After a series of negotiations, the unions and the management came to a reasonable agreement on the issue of the wage structure.
In May 1998, PIL announced its decision to stop operations at Salt Lake and production was halted in June 1998. At that point, PWU members agreed to the Rs 1178 wage hike offered by the management. This was a climbdown from its earlier stance when the union, along with the PEU demanded a hike of Rs 2000 per worker and other fringe benefits. PEU, however, refused to budge from its position and rejected the offer. After a series of negotiations, the unions and the management came to a reasonable agreement on the issue of the wage structure.
SELLING TROUBLES
In the mid-1990s, Philips decided to follow Philips NV’s worldwide
strategy of having a common manufacturing and integrated technology to reduce
costs. The company planned to set up an integrated consumer electronics
facility having common manufacturing technology as well as suppliers’ base.
Director Ramachandran stated that the company had plans to depend on
outsourcing rather than having its own manufacturing base in the future. The
company selected Pune as its manufacturing base and decided to get the Salt
Lake factory off its hands.
In tune with this decision, the employees were appraised and severance
packages were declared. Out of 750 workers in the Salt Lake division, 391
workers opted for VRS. PIL then appointed Hong Kong and Shanghai Banking
Corporation (HSBC) to scout for buyers for the factory. Videocon was one of the
companies approached.
Though initially Videocon seemed to be interested, it expressed
reservations about buying an over staffed and underutilized plant. To make it
an attractive buy, PIL reduced the workforce and modernised the unit, spending
Rs 7.1 crore in the process. In September 1998, Videocon agreed to buy the
factory through its nominee, Kitchen Appliances India Ltd.
The total value of the plant was ascertained to be Rs 28 crore and
Videocon agreed to pay Rs 9 crore in addition to taking up the liability of Rs
21 crore. Videocon agreed to take over the plant along with the employees as a
going concern along with the liabilities of VRS, provident fund etc. The
factory was to continue as a manufacturing center securing a fair value to its
shareholders and employees.
In December 1998,
a resolution was passed at PIL’s annual general meeting (AGM) with a 51% vote
in favor of the sale. Most of the favorable votes came from Philips NV who held
a major stake in the company. The group of FI shareholders comprising LIC, GIC
and UTI initially opposed the offer of sale stating that the terms of the deal
were not clearly stated to them.
They asked for certain amendments to the resolutions, which were
rejected by PIL. Commenting on the FIs opposing the resolution, company sources
said, “it is only that the institutions did not have enough time on their hands
to study our proposal in detail, and hence they have not been able to make an
informed decision.”
Defending the company’s decision not to carry out the amendments as
demanded by the financial institutions, Ramachandran said that this was not
logical as the meeting was convened to take the approval of the shareholders,
and the financial institutions were among the shareholders of the company.
Following this, the FIs demanded a vote on the sale resolution at an EGM. After
negotiations and clarifications, they eventually voted in favor of the
resolution.
The workers were surprised and angry at the decision. Kiron Mehta said,
“The management’s decision to sell the factory is a major volte face considering
its efforts at promoting it and then adding capacity every year.” S. N. Roy
choudhary of the Independent Employees Federation in Calcutta said, “The sale
will not profit the company in any way. As a manufacturing unit, the CTV
factory is absolutely state-of-the-art with enough capacity.
It is close to Kolkata port, making shipping of components from Far
Eastern countries easier. It consistently gets ISO 9000 certification and has
skilled labor. Also, PIL’s major market is in the eastern region.”
The unions challenged PIL’s plan of selling the CTV unit at ‘such a low
price of Rs 9 crore’ as against a valuation of Rs 30 crore made by Dalal
Consultants independent valuers. PIL officials said that the sale price was
arrived at after considering the liabilities that Videocon would have along
with the 360 workers of the plant.
This included the gratuity and leave encashment liabilities of workers
who would be absorbed under the same service agreements. The management
contended that a VRS offer at the CTV unit would have cost the company Rs 21
crore. Refuting this, senior members of the union said, “There is no way that a
VRS at the CTV unit can set Philips by more than Rs 9.2 crore.”
They explained that PIL officials, by their own admission, have said that
around 200 of the 360 workers at the CTV unit are less than 40 years of age and
a similar number have less than 10 years work experience. The unions also
claimed that they wrote to the FIs' about their objection.
The workers then approached the Dhoots of Videocon requesting them to
withdraw from the deal as they were unwilling to have Videocon as their
employer. Videocon refused to change its decision. The workers then filed a
petition in the Kolkata High Court challenging PIL’s decision to sell the factory
to Videocon.
The
unions approached the company with an offer of Rs 10 crore in an attempt to
outbid Videocon. They claimed that they could pay the amount from their
provident funds, cooperative savings and personal savings. But PIL rejected
this offer claiming that it was legally bound to sell to Videocon and if the
offer fell through, then the union’s offer would be considered along with other
interested parties.
PIL said that it would not let the workers use the Philips brand and
that the workers could not sell the CTVs without it. Moreover the workers were
taking a great risk by using their savings to buy out the plant. Countering
this, the workers said that they did not trust Videocon to be a good employer
and that it might not be able to pay their wages.
They followed it up with proofs of Videocon's failure to make payments
in time during the course of its transactions with Philips. In view of the
rejection of its offer by the management, the union stated in its letter that
one of its objection to the sale was that the objects clause in the memorandum
of association of Kitchen Appliances did not contain any reference to
production of CTVs.
This makes it
incompetent to enter into the deal. The union also pointed out that the deal which
was signed by Ramachandran should have been signed by at least two responsible
officials of the company. As regards their financial capability to buy out the
firm, the union firmly maintained that it had contacts with reputed and capable
businessmen who were willing to help them.
In the last week of December 1998, employees of PIL spoke to several
domestic and multinational CTV makers for a joint venture to run the Salt Lake
unit. Kiron Mehta said, “We can always enter into an agreement with a third party.
It can be a partnership firm or a joint venture. All options are open. We have
already started dialogues with a number of domestic and multinational TV
producers.”
It was added that the union had also talked to several former PIL
directors and employees who they felt could run the plant and were willing to
lend a helping hand. Clarifying the point that the employees did not intend to
takeover the plant, Mehta said, “If Philips India wants to run the unit again,
then we will certainly withdraw the proposal. Do not think that we are
intending to take over the plant.”
In March 1999, the Kolkata High Court passed an order restraining any
further deals on the sale of the factory. Justice S.K.Sinha held that the
transfer price was too low and PIL had to view it from a more practical
perspective. The unrelenting PIL filed a petition in the Division bench
challenging the trial court’s decision.
The company further said that the matter was beyond the trial court’s
jurisdiction and its interference was unwarranted, as the price had been a
negotiated one. The Division bench however did not pass any interim order and
PIL moved to the Supreme Court. PIL and Videocon decided to extend their
agreement by six months to accommodate the court orders and the worker’s agitation.
JUDGMENT DAY
In December 2000, the Supreme Court finally passed judgment on the
controversial Philips case. It was in favour of the PIL. The judgment dismissed
the review petition filed by the workers as a last ditch effort.
The judge said that though the workers can demand for their rights, they
had no say in any of the policy decisions of the company, if their interests
were not adversely affected. Following the transfer of ownership, the
employment of all workmen of the factory was taken over by Kitchen
APPLIANCES WITH IMMEDIATE EFFECT
Accordingly, the services of the workmen were to be treated as
continuous and not interrupted by the transfer of ownership. The terms and
conditions of employment too were not changed. Kitchen Appliances started functioning
from March 2001.
This factory had been designated by Videocon as a major centre to meet
the requirements of the eastern region market and export to East Asia
countries.
The Supreme Court decision seemed to be a typical case of ‘all’s well
that ends well.’ Ashok Nambissan, General Counsel, PIL, said, “The decision
taken by the Supreme Court reiterates the position which Philips has maintained
all along that the transaction will be to the benefit of Philips’
shareholders.”
How far the Salt
Lake workers agreed with this would perhaps remain unanswered.
Case Questions:
1.
‘Changes taking place in PIL made workers feel
insecure about their jobs.’ Do you agree with this statement? Give reasons to
support your answer.
2.
Highlight the reasons behind PIL’s decision to sell
the Salt Lake factory. Critically comment on PIL’s arguments regarding not
accepting the union’s offer to buy the factory.
3.
Comment on the reasons behind the Salt Lake workers
resisting the factory’s sale. Could the company have avoided this?
DHR 10
INDUSTRIAL RELATION AND LABOUR LAW
Assignment-II
Assignment
Code: 2017DHR10B2 Last Date of
Submission: 15th November 2017
Maximum Marks: 100
Attempt all the questions.
SECTION – A (25 marks for each question)
1.
“The wages in an industry are
determined by wage laws and industry’s capacity to pay.” Examine the statement.
Explain the various types of fringe benefits or employee benefits provided to
the employees in a large scale enterprise.
2.
Explain the concept of
Collective Bargaining. Explain the essentials of a good collective bargaining
process. Discuss the trend and practice of Collective Bargaining in India.
Section-B (50 Marks)
Case Study
Reliance Textile Industry
at Naroda
The plant of Reliance textile spread over 120
acres and with assets of over Rs.300 crores, was established in 1966 by
Dhirubhai Ambani at Naroda Industrial Estate. According to the World Bank, it
is India’s ‘most modern textile complex. Company posted its highest ever
turnover of over USD 44 billion and its net profit increased to USD 3.6 billion
in the year 2012. Inspite increased profits, workers find their lives not
improving and worsening day by day. On 2nd February 2012, Reliance Textile
workers had been on strike due to highly exploitative wage structure and
dreadful working conditions. They formed a new, independent union as the most
of approx 1100 permanent and approx 4000 contract workers assert their rights
and continue their strike which started from the second shift on 2nd February
2012. According to the workers, since 20 years company’s profits increased
ten-fold though the wages for the workers and karigars has more or less been
the same, but the salary of the staff increased many times. While the permanent
workers earn a paltry Rs. 5000-6000 per month, the contract workers are paid
Rs.85-100 per day. No legality of payment in terms of pay slips is maintained,
only a voucher is signed. Overtime is paid in single rate, while strict
surveillance is maintained and late entry is severely punished. Workers now
organized as Reliance Employees Union submitted a 16-point demand list to the
management during the strike, The list includes a 60% hike in wages and
regularization of contract workers, besides double rate overtime, a workers to
Rs. 200 per day, renewal of fixed salary system, uniform rights for wage board,
tea-snacks in the canteen, no fine for 10 minute late entry, to fill accident
forms according to procedure, an end to harassment of workers, and an assurance
that striking workers will not be fired and no deduction of wage for the strike
period is made. The company meanwhile responded with police deployment,
intimidation, arrest of workers’ leaders and a media campaign which says that
the workers have only been miffed for not being allowed to carry mobile phones
inside the factory. Declaring the strike to be illegal, and arresting the
leaders, police has posted itself in the factory gate. The workers, fed up of
both these Unions’ corrupt practices, say how they act as “extended office of
the management”. Every three years, a settlement is brokered between these two
Unions’ officials and the management, but workers are kept out of it and do not
even get to know of the deal brokered. No notice is put up. Four years back,
both these Unions even agreed to accept that there will be no recess hour for
the workers to have tea. So the workers were henceforth forced to have tea on
the way to the bathroom, and in the location of work in an unhygienic and dirty
atmosphere, so that work is not disturbed and time ‘better managed’.
Questions:
1. What
are the workers concerns?
2. How
did the Company respond and identify the weaknesses in redressal?
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