Mr. Anurag Sinha,

Jamnalal Bajaj Institute of Management & Studies, Mumbai

Recent clash between the Labour and Management of Honda Motors and Scooters India in Gurgaon has again brought back the bogey of strikes of socialist era. Everyone including MNCs, government, economist and employers are skeptical of resurgence of Labour movement. If labour Movement gets a new life, it can give a severe jolt to Indian economy. Therefore, it is necessary to analyze the reason behind these events and curb the nip in the bud.

A Labour unrest is a social phenomenon of enormous complexity and it is very difficult to give any complete explanation of this phenomenon. Considering the nearing period of labour unrest with the recent cases of Honda and Maruti, it is the time to do root cause analysis and find out what are the possible reasons which lead to labour unrest so as to address these issues and untide the tide of labour unrest.


Honda says its 50 workers who were suspended for indiscipline will not be reinstated pending an independent inquiry - an issue that caused bloody clashes between its workers and police on Black Monday. Dismissing four employees, 13 more were suspended without reason in May, followed by suspension notices to 37 others a month later. HONDA took a stand of not allowing the suspended workers into gates until the third party inquiry is completed and management gets the report. Management decided to take a call on their reinstatement based on the inquiry's findings. But in any case, four employees who had caused the initial disruption of work will not be taken back under any circumstances.

The trouble at the group's two-wheeler unit began when some 2,000 workers protested a lockout of the factory and dismissal of some colleagues. This was followed by clashes with the police that left scores wounded after some irate workers vandalized civic facilities, police vehicles and shops.

But it stresses the need to study and find out the reasons for the labour unrest at Honda.

The misgivings between the Honda management and employees find roots in the demand for a union to protect workers' interests. Though the demand for a union did not go well with the management, the government and other companies in Gurgaon, the workers applied for registering the union. And even after the union was registered, there was a lot of pressure from the management, which finally dismissed four employees in the first two weeks of May.

To conclude, an idea of forming union did not go well with the management of HMSI. This finds the root in Industrial Dispute Act (IDA), 1947 which restrict the labour market flexibility. Had IDA included sections allowing labour market flexibility, HONDA would not have taken action against employees forming a union. It necessitates the changes in labour laws and calls for labour reforms in such a way to protect the interests of both employers and employees.


It is a principal legislation dealing with the core labour issues like investigation and settlements of industrial disputes, regulation of strikes, lockouts, lay-offs, retrenchment, and other related matters. According to the chapter VB of ID Act it is compulsory for any industrial establishment employing more than 100 workers to seek permission before resorting to lay-off, retrenchment or closure. Employers and some political leaders have been arguing for a change in this provision.

Employers want that the limit for the application of Chapter VB should be raised to 1000. NDA government, during its tenure had expressed its willingness through various statements to amend ID Act to free employers from the restrictions on them in the chapter. It was proposed to give an additional retrenchment compensation of 45 days wages for every completed year of service. But trade unions are very much opposed to it, as almost every unit would come under this limit, giving employer's unrestrained right to close their units.


In this case, the interest of the trade unions and the employers are conflicting on the issues of managerial control at the workplace. The freedom to retrench people would construe to significantly higher managerial control of employers at the workplace. Unions are unlikely to agree to such scenario.

  • One way to maintain the balance of control at the workplace between the employers and the trade unions would be to develop well specified procedures to retrench employees. Such procedures do not provide flexibility to the employers to retrench arbitrarily. Hence, it could protect the balance significantly.
  • Some mechanism could be developed whereby, the company retrenching the employees should take an undertaking that whenever it needs to diversify or need more manpower, it shall give preference to the workers it is retrenching at present.
  • Companies could also opt for unconventional problem solutions:
  • Cutting working hours of workers to avoid possible retrenchments, transfer or redeployment of labour from excessive labour to labour deficient units.
  • Labour can be given three to six weeks break and encouraged to go in for skill enhancement. It will lead to a two way gain: personal growth for the employee and employer can put to use worker's enhanced skills.
  • Amendments under Industrial Relations Bill of 1982 should be implemented as it contains many provisions that would attend to the current concerns like setting up of a time-bound grievance redressal, fixing a time limit for the adjudication of individual and collective disputes.


One of the major constraints in making our labour laws flexible has been absence of an adequate and broad based safety net for the country's workforce.

India has two main social security schemes for workers in operation since 1950s in the organized sector. These are Employees Provident Fund Scheme and Employees State Insurance Scheme. The former provides social security like provident funds, pension on superannuation etc. to about four crore employees while the later caters to the medical care needs of specific group of workers particularly in the unorganized sector.

Despite being among the largest social security schemes in the world, the two main schemes mentioned above cater to not more than 8 to 9 per cent of the country's total work force. Secondly, these schemes don't have built-in mechanisms to neutralize/compensate for the adverse fall out of globalization like closures, retrenchments etc.

The closure of industrial Units and bankruptcies are normal feature in the developed economies all over the world. The workers of such unit do not feel adverse impact as they are covered by well-established social security system.

Most of the developed countries where the majority of jobs are contacts have elaborate and effective system of social security. Even in China, to quote an instance, there are stringent laws on social security system that takes care of worker's income and requirements at least for two or three years of transition or unemployment. In India we don't have such provisions. There is a need of Unemployment Insurance. Let every worker in the organized worker pay a certain amount per month into an unemployment insurance fund, and let every employer make a matching contribution.


It must be recognized that labour market reforms are not going to be easy in a situation where employment opportunities have been shrinking. Also there is a larger question of providing social security to the workers employed in the organized sector. The vast unorganized labour force, which constitutes over 90 per cent of the total, is denied fair wages and even modest levels of social security. Hence, labour market flexibility must be accompanied by some kind of insurance and social security to the vast unorganized labour force in the country. Government should make all possible efforts to dispel the fears of trade unions by enlarging the scope and coverage of the social security net.