labour unrest in honda

8/2/2019 Labour Unrest in Honda

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LABOUR UNREST IN HONDA (INDIA)

EXECUTIVE SUMMARY

Recent clash between the Labour and Management of Honda Motors and Scooters India inGurgaon has again brought back the bogey of strikes of socialist era. Everyone including

MNCs, government, economist and employers are skeptical of resurgence of Labourmovement. 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 thebud.

Globalization and Liberalization has forced government to give a serious thought to our

anarchic labour law, which makes our companies uncompetitive globally and discouragesforeign companies from investing in India. Indian labour laws are among the most rigid in

the world. Some recent data compiled by the World Bank collate the level of rigidity of

hiring and firing rules in different nations -100 being the score of the highest conceivablerigidity. India is among the most rigid countries with a score of 48. China has a score of 30,

Korea 34, Norway 30; Singapore closes to 0. Therefore this crisscrossing network ofchaotic, strangulating, overlapping and often- contradictory laws need an overhaul. The

single most important labour law is arguably the Industrial Disputes Act (IDA), 1947. Thiswas enacted a few months before India's independence and guides the hiring and firing

rules of the industrial sector and is a good example of a well-meaning policy that is founded

on antiquated economics and a handsome misunderstanding of the way markets function.The IDA makes it very hard for firms to fire workers. This law has probably done more tohold back the growth of India's manufacturing sector than any other policy.In this scenario, Government recognized the need for increased flexibility in Labour market,

but they can not bring the policy of hire and fire approach, more so, since the institutions of

social security, particularly unemployment insurance are not well developed in our country.

Therefore structural reforms in labour laws must ensure the welfare of workers. Reforminglabour laws will boost industry and create more jobs.Besides Government, it is the responsibility of the employer to develop some well specifiedprocedure that must not create undue unrest among workers and whenever they need more

manpower ,they should a give preference to the workers it is retrenching at present. Theyshould also introduce some Unemployment Insurance schemes made by the contribution ofemployees and employer.

The fact that the less rigid nations also have more efficient economies, higher wages and asmaller share of laborers who are long-term unemployed is not a matter of coincidence.

Given that the reform of labour laws is, contrary to popular perception, in the interests ofthe workers, what government needs to do is have this topic debated and explained so thatworkers, instead of opposing such reform, become its advocate.

INTRODUCTIONAre the labour unions back? The riot that followed the labour management dispute inGurgaon over the Honda Motorcycle and Scooter India spat could be the first major sign ofthings to come. After a decade-and-a-half of market friendly policy changes, the union

seems to be sticking their neck out again to ensure they are being heard. Some says the


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left parties in power are the force behind this resurgence, the central unions disagree. They

see the UPA government in the Center as a major conducive environment for their woes to

be heard. For now, the battleground has been cleared and the soldiers are back home. Apeace pipe is being passed around and the warring factions appear momentarily happy totake a drag as they put behind them the images of mayhem that hit the industrially

flourishing Gurgaon-Manesar region in Haryana. But behind the wall of silence, tremors can

still be felt. The question on everyone's mind is how to ensure that what happened on BlackMonday in Gurgaon does not happen again.Research has revealed that labour strikes globally hit once in eight to 10 years. That periodis now nearing. "The Honda incident should be taken as early warnings of a big wave of

labour militancy in the future." The All India Trade Union Congress (AITUC), which has just

claimed a conquest by bringing Honda Motorcycle & Scooter India's workers' union into itsfold, has now trained its guns on Maruti Udyog Ltd, the leading producer of passenger cars

in the country pertaining to the dismissal of 92 employees during a labour trouble at Maruti

in 2000-2001 and several hundreds opting for a voluntary retirement scheme, which, it isalleged, is not exactly voluntary.

These are the clear signs of tide of labor unrest to come.

LABOUR UNREST

A labour unrest is a social phenomenon of enormous complexity and it is very difficult togive any complete explanation of this phenomenon. It is a matter of controversy whetherthe predominant factors underlying labour unrest are economic or non-economic. It has

been concluded that so long as income remained the all important means for satisfyinghuman wants and needs, wage would continue to be major consideration in labour unrest.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 leadto labour unrest so as to address these issues and untide the tide of labour unrest.STATISTICS OF THE LABOUR UNREST


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ROOT CAUSE ANALYSIS

From the study of some of the strikes and lockouts over last 10 years, we concluded that allthe possible reasons can be classified into five major heads. As specific problems are

branched out from the major effect area, the result appears to look something like afishbone diagram. The potential problems can then be researched to find the root cause andcorrect it. The five heads are as follows:

Monetary Political Legal Job Specific Others

FISHBONE DIAGRAM FOR ROOT CAUSE ANALYSIS

All the causes mentioned above have some impact on the labour dissatisfaction which may

eventually lead in Labour Unrest depending on the intensity of the problem. But the studydone for the last 10 years led to conclude that major reasons for the strike and lockouts areas follows:

Wages


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Retrenchment of labour which calls for sorting out the differences betweenemployers and employees regarding Industrial Disputes Act, 1947.

Management's decisions to go for contract labours without giving them permanentjob security and denying fair wages. This issue can be adderessed by bringingconsensus between trade unions, employers, government and political parties inContract Labour Act, 1947 based on their interests.

In order to bring down Labour unrest, there is need to cater for these issues separately.

UPGRADE LABOR SKILLS TO JUSTIFY HIGHER WAGES

Workers will not be happy to sacrifice on wage and job security. So long as incomeremained the all important means for satisfying human wants and needs, wage would

continue to be major consideration in labor unrest. Government official warned that failureto upgrade labor skills in a globally integrated economy will make it more difficult forunskilled and low-skilled workers to demand higher wages. This situation, in turn, may

worsen labor unrest.

As the economy globalizes, it would be difficult to increase wages for unskilled or low-skilledlaborers. Companies need to continue improving their training programs to meet the criticalskills needed in a globalizing economy, which can be identified through industry signals.Improving labor skills would effectively solve labor unrest in the country, as it will result in

higher wages and, therefore, better quality of lives for the people.

A shortage in skilled labor would discourage investors from putting up factories or

companies in the country. They might opt to transfer to other neighboring countries whoselabor skills are comparative to those of the Philippines yet require less pay. So managersand factory owners should invest in people and machines in order to compete globally.

HONDA CASE

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 withoutreason in May, followed by suspension notices to 37 others a month later. HONDA took astand 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 hadcaused 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 alockout 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, policevehicles and shops.

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

The misgivings between the Honda management and employees find roots in the demandfor 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


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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 twoweeks 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 nothave 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 employersand employees.

EFFECT OF LIBERALIZATION AND GLOBALIZATION ON LABOUR MARKET

Liberalization of the Indian economy is almost a decade and a half old. Of all the economicliberalization reforms, labour market reforms have gained maximum attention. It is widelyargued by many economists that in the open economy and liberalized trade, the country can

no longer afford to carry on labour market rigidities. The employers (industrialists) havebeen vehemently pressing for labour reforms on the plea that these are necessary for

making Indian industry globally competitive and for attracting more of foreign directinvestment. The existing laws, it is contended by employers, slow down growth and job

creation. They say that under the existing labour laws the churning of new skills is slower,companies lose cost cutting flexibility and ability to bounce out of recession quickly. Theemployers further contend that Labour Market will become more flexible with the

amendments; more workers can be hired legitimately and can ask for better benefitsincluding better work conditions, safety standards, welfare measures and health benefits.

The structural analysis of Labour ReformAny change or reform in labour law will depend on the four competitive forces: Trade Union,

Employer, Political parties and Government. In these forces, Trade Union and Employer takediametrically opposite stand on any issue. Employer wants more flexibility in retrenchment

policy to become competitive, whereas Trade Union primary concern is on Job security andtheir influence on workers, which determines their bargaining power with Management.

Political parties want vote bank from workers as well as financial support from businessmen.Whereas Government is keen to bring the labour reforms in order to keep Country on thefast track of development but don't want to create unrest among the workers.


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LABOUR REFORMS IN INDIALabour laws need to be amended to suit the changing economic scenario. However, differentstakeholders like Employers, trade unions and political parties seem to differ on the issue.

For e.g. the political parties in the ruling coalition of the Central Government possess

contradicting ideologies on labour related matter. Leaders of the Communist Party of India

(CPI), an important party of the coalition, have been opposing the flexibility to industry onlabour related matters. The congress has been arguing for "labour reforms" to attract

Foreign Direct Investment in the country. However, the journey for labour reforms seems tobe difficult owing to inherent contradictions among the stakeholders involved in the process.The trade union opposes the Employer's demand saying that any loosening of governmentcontrol over the industry by way of labour reforms would throw workers out of job safetynet. They want among other thing strengthening of social security for the workers,

extension of social security benefits to workers in the organized sector, and participation ofworkers in the management.THREE ISSUES THAT NEED TO BE ADDRESSED

Industrial Disputes Act, 1947 Contract Labour (Regulations and Abolition) Act, 1970 Social security net

INDUSTRIAL DISPUTE ACT (ID ACT), 1947

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 anyindustrial establishment employing more than 100 workers to seek permission beforeresorting 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 variousstatements 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 theirunits.

POSITIONS AND INTERESTS OF DIFFERENT STAKEHOLDERS ON THISLEGISLATION

Trade Unions: They oppose the increase of limit specified in Chapter VB from 100.

Behind this stance they want to safeguard some interest:

* Unions' influence at the workplace will decrease by this amendment

* Their bargaining power will be reduced* Loss of job will be a major threat to workers


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* It may affect Worker's economic welfare

* It will boos Union's identity as savior of worker's right

Employers: They support the idea of increasing the limit specified in Chapter VB up to

1000. They expect following favorable effects from this change. It will provide the flexibility at work. It will help in cutting cost They will gain global competence They will have favorable exit policy There will be less legal battles They will have better management control

Political parties: There is lack of consensus among different key personnel amongpolitical parties regarding this amendment. They face following threats and advantage bybringing the changes in law.

They might lose the political support of worker

They will get financial support from employers to meet election expenses.

Government: Every government talks about bringing the requisite change in the law. It is

necessary to bring change in our archaic Labour law if government wants to attract huge

amount of Foreign Direct Investment. But they don't have the enough political will to takesuch concrete step, as it can adversely affect their chances in election. So they also talksabout revival of sick units to protect employment. But such a step will only ensure the

locking of huge fund in unproductive work, which could have used in more wealth creationand employment generation.


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SUGGESTIONS FOR IMPROVEMENT IN LEGISATION

As seen from the above list of interests, the ruling political parties carry a dilemma as tohow to balance their interests regarding political support of the workers, financial support of

the employers and attracting foreign investments. Clearly 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 ofemployers at the workplace. Unions are unlikely to agree to such scenario.

One way to maintain the balance of control at the workplace between the employersand the trade unions would be to develop well specified procedures to retrenchemployees. Such procedures do not provide flexibility to the employers to retrencharbitrarily. Hence, it could protect the balance significantly.

Some mechanism could be developed whereby, the company retrenching theemployees should take an undertaking that whenever it needs to diversify or needmore 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, transferor 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 theemployee and employer can put to use worker's enhanced skills.

There are a number of companies for e.g. Volkswagen, who have successfully used thesemethods to steer themselves out of the economically tough situations without opting forconventional means like freezing recruitments, going in for retrenchment or lay off etc.

Amendments under Industrial Relations Bill of 1982 should be implemented as itcontains many provisions that would attend to the current concerns like setting up ofa time-bound grievance redressal, fixing a time limit for the adjudication of individualand collective disputes.

Contract Labour (Regulations and Abolition) Act, 1970

For some time past there has been growing agitation for the abolition of employment ofcontract labour, as it was realized that the execution of work on contract through a

contractor, who as an employer of the employed labour, was primarily to deprive of its due

wages and various privileges of labour laws. It was also realized that certain work by theirvery nature can conveniently be executed by contractors through contract labour, or bylabour on contract basis. In this regard, the matter of abolition and regulation of contract

labour, caught attention of law makers. According to the Section 10 of the Act "Notwithstanding anything contained in this Act, the appropriate Government may, afterconsultation with the Central Board or, as the case may be, a State Board prohibit, by

notification in the official Gazette, employment of contract Labour in any process, operationor other work in any establishment ".

On the current status, union leaders are of the opinion that a reference to labour reforms in

the current context of economic liberalization can only mean a freedom to the employers toresort to a policy of 'hire and fire' as opposed to some what sheltered environment that the


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labour enjoys with the stringent norms on retrenchment, lay-offs and closure of industrialestablishments under the present regulatory framework.

The law may forbid retrenchment or closure, but in practice employers simply stop paying

salaries or running mills. Owners prevented from downsizing see no point in putting any

more money or effort into a revamp. Instead they strip the assets of their ailing companies.

Industrial sickness has been growing and many workers in the sick industries haveemployment security only in the theory. Employers search for escape routes has led to

greater use of casual and contract workers. The growing casualisation of labour is reflectedthrough employer's preference to outsource drivers, gardeners, canteen staff etc.

POSITIONS AND INTERESTS OF DIFFERENT STAKEHOLDERS ON THISLEGISLATION

Trade Unions: According to the Trade Union Section 10 should not be amended to thedisadvantage of contract workers. It will ensure following favors for workers.

Ensure due wages to workers. Job security Get benefits of labour laws.

Employers: Employers want amendment in Section 10 to facilitate of activities without anyrestrictions. It will help them in

Reducing costs. Getting more flexibility at work place Power and control at work place. Saving from legal battles. More flexibility leads to better outputs and a more competitive working environment.

Political parties: There is lack of consensus among different key personnel in politicalparties. They have to make balance between the two diametrically opposite interests,

Political support of workers Financial support of employers to meet election expenses.

Government: It varies with the political party in power; NDA government seemed more

inclined to allow outsourcing and engaging workers on contract. It is the responsibility ofgovernment to bring requisite amendment in this act so that more money can flow in Indiain form of Foreign Direct investment.

POSSIBLE ALTERNATIVE SUGGESTIONS

Though there are significant conflicts in the interests of the trade unions and employers, thecontact workers are quite freely changed by employers owing to high vulnerability of those

workers. The high job insecurity and unemployment in the country virtually forces thecontract workers to insure compliance to employers. It enhances the control of the

employers at the workplace. Hence, the trade unions are keen to develop strict norms of

employing least number of contract labour and higher number of regular employees. Insuch scenario, it is a challenge to both the employers and trade unions to reach to acommon ground to get solution to the present situation.


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SOCIAL SECURITY NET

There is an urgent need to revisit our labour policies and other labour related issues, if Indiaas a country has to remain competitive and in fact has to assume its legitimate share in

global economy, give the country's size and resources. But 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 theorganized sector. These are Employees Provident Fund Scheme and Employees State

Insurance Scheme. The former provides social security like provident funds, pension onsuperannuation etc. to about four crore employees while the later caters to the medical careneeds of specific group of workers particularly in the unorganized sector.

Despite being among the largest social security schemes in the world, the two mainschemes 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/compensatefor the adverse fall out of globalization like closures, retrenchments etc.

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

Cover during Unemployment

The advocate of the 'hire and fire' also wants to bring about a fundamental change in the

nature or perception of employment. They want employment to be on the basis of contracts

for stipulated periods- a total departure from the current system in vogue in most kind ofemployments.

Most of the developed countries where the majority of jobs are contacts have elaborate andeffective 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 suchprovisions. There is a need of Unemployment Insurance. Let every worker in the organizedworker pay Rs.10 per month into an unemployment insurance fund, and let every employer

make a matching contribution. Rs.10 is a small sum but if 28 million workers contribute

Rs.10 each, that means 28 crores per month. With matching contributions from employers,the sum rises to Rs.56 crores per month. Even allowing for the some defaults, that is

sufficiently large and sustainable to take care of retrenchment compensation.

Unemployment insurance can provide retrenched workers with 100 per cent of basic wagesfor six months, failing to 75 per cent, 50 per cent and 25 per cent in the next three six-month periods that will support workers for up to two years while find fresh jobs.

CONCLUSION

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 ofproviding 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 fairwages and even modest levels of social security. Hence, labour market flexibility must be


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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 oftrade unions by enlarging the scope and coverage of the social security net.

Hence no solution can be reached if the stakeholders continue to take extreme positions.

There has to me a meeting ground to address everyone's interests, to the extent possible.

The immediate challenge in bringing about the desired labour reforms is to resolve the anti-labour stand in the employer's mindset, and labour prejudices. They have to realize that

employer and employee are not separate entities but two faces of the same coin. Theyequally need each other and the relationship between the two can only be harmonious ifthey work towards defending each other's interest rather than contesting the same. Hence

employers should pay more attention to human resource development and capacity building

of their employees. Industrial bodies have to take up workers education. Workers on theother hand realize the importance of 'no work no wages come'.

There should be a general consensus on the labour reform ideology among the major

political parties. Political leaders should look beyond their narrow interests and developconsensus for the larger benefits of the Indian economy. It demands to bring in a balanced

view whereby concerns of all the stakeholders, especially the trade unions and theemployers are addressed. This may further be strengthened through a wider debate

involving academicians, legal experts, policy makers and public at large. All thestakeholders should arrive at some consensus so that there is something for everyone.

Once such consensus is developed; it may be coupled with good and clean corporategovernance.

REFERENCES

Abdul Aziz, Labour Problems of a Developing Economy D.N. Vohra, Law Relating to Strikes and Lockouts Babu Mathew, A Brief Note on Labour Legislation in India. Asian Labour Update,

Issue No.46, January to March 2004. Labour Reforms are here, Saturday, March 10, 2001 Chandigarh Workers' Participation in Management, Paradigm, July Dec.04 Wages of downsizing, Business Standards, 2nd August, 2005 Identity Crisis, Academy of Management Labour Reforms, Oct., 2003 Supriya Roy Chowdhary, Globalization and Labour, Economic & Political Weekly,

January, 2004

T.K.Rajalaxmi, Conflicting Class Interests, Frontline, Vol.19, Oct., 2002 To Legalize Exploitation, Frontline, Vol.20, Aug., 2003 BBC News South Asia website Ministry of Labour website P.Arya, Labour Management Relation

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