Industrial relations challenges in context of COVID-19
labour_law

Industrial relations challenges in context of COVID-19

The Government of India announced a lock down from 25 March 2020 under The Disaster Management Act, 2005 initially for 21 days. The lockdown in phases got extended so as to reduce the spread of the coronavirus disease 19 (COVID-19) amongst the citizens of the country and also to improve the preparedness of the various states and districts in the country medically for tackling the pandemic.

The lock down has impacted the working of every enterprise, depending upon the sector in which it operates, cash liquidity of the enterprise, profitability of the enterprise,demand for the product, availability of the work force and location (i.e. zone) of the enterprise. People working for micro, small, medium and also large enterprises got impacted by the lock down, and looked forward to receiving their wages for the first three phases of the lockdown period, based on the notification from The Ministry of Home Affairs, Government of India under The Disaster Management Act, 2005.

Enterprises depending upon the product were in a phased manner permitted by the appropriate Government to operate during the lockdown and thereafter. However, the scale at which each enterprise operated differs depending upon the stock of the input material, permissibility of workforce to be employed coupled with availability of the work force , physical location (i.e. green, orange, red zone or the non-containment zone) of the enterprise, demand for the product, overcoming difficulties of supply and demand chain for the product.

In case of enterprises, where working from home by employees was feasible, were impacted to a lesser extent, as the activities could continue or commence in a shorter time period, and this mode of working was also safe for the employees, though this was easier to undertake for enterprises in the service sector. It is also observed that working from home though encouraging in trend, does induce some fatigue in employees mentally and physically. Probably, a mix of physical and virtual office in intervals will be the work model for the future especially in the service sector.

John T Dunlop’s System Model

Most of us are well conversant with John T Dunlop’s “System Model”, which considers Industrial Relations (IR) as a subsystem of society, distinct from, but overlapping with other subsystems. John T Dunlop suggested that IR system could be divided into four interrelated elements comprising of certain actors, certain context, an ideology which binds the IR system together and a body of rules created to govern the actors at the workplace and this model is still valid.

IR at national level

When we look at IR at the national level in the context of COVID-19, we find that:

(i) The actors traditionally are the central/state governments, national level trade unions, national level employer organisations. Also, technology platforms and media became another actor with respect to the problems faced by interstate migrant labour.

(ii) The context is the lockdown that was announced by the central/State governments and the COVID-19.

(iii) The ideology of the actors could differ, though the country has become an open economy from 1991.

(iv) The new legislation that have entered presently, are those framed under The Disaster Management Act, 2005 asking employers to pay wages to all the employees working with the enterprises and ensuring that none of them loose their employment arising due to the lockdown. Also, certain State Governments (i.e. Gujarat, Madhya Pradesh, Himachal Pradesh, Uttar Pradesh, Haryana, Rajasthan, Punjab, Uttarakhand, Maharashtra, Odisha, Assam, Bihar and Karnataka) relaxed certain provisions of existing labour laws, suspended certain labour laws through ordinances or executive orders for a certain time period and also permitted hours of work each day from 8 to 12 hours for a certain time period , though some of these were withdrawn/amended later.

(v) The approach adopted by the actors towards resolving the issues that have come up were: (a) for the wages to be paid for the first three phases of the lockdown period ; this has been challenged by the Employer Organizations at the Supreme Court; (b) with reference to the relaxation of certain provisions of existing labour laws plus suspension of certain labour laws by the State Governments through ordinances or executive orders, the same was contested by the ten central trade unions (i.e. INTUC, AITUC, HMS, CITU, AIUTUC, TUCC, SEWA, AICCTU, LPF and UTUC) asking for intervention by the Director General of International Labour Organization (ILO) , whose office responded by writing to Government of India; and (c) with reference to the inter state migrant labour the technology platforms and media became another actor with respect to the problems faced by the interstate migrant labour for travelling to their home state , which led to the highest court intervening suo moto in the matter and issuing directives to theGovernment.

(vi) The Government of India decided to amalgamate 44 labour laws into four codes (i.e. on wages, industrial relations, social security and safety, health and working conditions) and this was announced by Government of India prior to the lock down which commenced on 25 March 2020. The labour code on wages was approved by the Parliament,while the other three labour codes were referred to The Parliamentary Standing Committee, which has submitted its report and probably these four labour codes may become laws in 2020.The 10 central trade unions (i.e.INTUC, AITUC, HMS, CITU, AIUTUC, TUCC, SEWA, AICCTU, LPF, UTUC along with various sectoral independent federations and associations)participated in an All India Strike called ‘Bharat Bandh' on 08 January 2020 opposing the four labour codes, as they allege that these four labour codes have not considered the views of the Central Trade Unions and the changes in the labour code once they become acts can be undertaken through executive orders.

(vii) We can clearly see at the national level, IR in the context of COVID-19 is, that each actor has acted independently. The approach towards resolution of the issue is to either approach the highest court of the country, or to take the matter to an international body deemed fit.Calling for nationwide strike by the Trade Unions in the present COVID-19 situation is probably not going to be the approach.

IR at sectoral level

When we look at IR at the sectoral level in the context of COVID-19 we find that:

(i) There are certain sectors of the Indian economy which have been badly impacted by the COVID-19 plus lockdown and these are aviation, travel and tourism, hotels, restaurants, automobile, passenger transport, goods transport, capital goods, film production, movie theatre, entertainment, trade fairs, event management, malls, real estate, etc., sector because of a substantial fall of demand, hence they as well as their supply and distribution chain will have a problem both in terms of continuing employment plus paying existing wages to employees that are workers and non-workers (i.e. officers).

(ii) Each enterprise in this sector will have to innovate how to get back their revenue and profitability in the shortest possible time while reducing fixed and variable expenses to prevent becoming not only sick but also prevent insolvency.

(iii) The transitory period for most enterprises in these sectors, is likely to witness IR problems, as managements in these sector will be compelled to take tough decisions which could involve reduction of wages as well as reduction of number of persons to be continued in employment (both at the executive and non-executive i.e. worker level plus contract workers). Enterprises in the sectors mentioned above will have absence of revenue leading to a liquidity problem, as there is a substantial reduction of demand. Some managements of enterprises in this sector are likely to adopt innovative strategies in dealing with the problems cited above. However, these tough decisions of the management, if and when taken are likely to create IR issues for employees that are workers and also contract workers. It is also going to be tough for trade unions to bargain in the present situation on the likely tough decisions of the managements of enterprises in these sectors.Only enterprises in these sectors having high cash reserves, low debt may not have to take these tough decisions.

(iv) Enterprises in this sector defaulting to make payments to the banks, lenders and employees could get dragged by the concerned parties to the National Company Law Tribunal (NCLT) under The Insolvency and Bankruptcy Code, 2016, wherein the promotors could lose control and ownership of the enterprise, if there are buyers for the enterprise. The enterprises in these sectors have received a one-year moratorium presently from the Government of India against bankruptcy.

My perception is enterprises in the sectors cited above have a possibility of becoming sick, unless they are able to innovate and reestablish their revenue, profitability and cash flow, as presently there are no sectoral financial stimulus / benefits package from The Government of India or any other agencies. In pre 1980 era the Government of India had nationalised and taken over large size sick enterprises, to save jobs of employees, but that is not the present-day approach of the Government.

In India we also have sectoral long-term wage settlements like (i) In cement sector, The Cement Manufacturers Association (CMA) negotiates the wage increase on behalf of its member enterprises with the central trade unions. (ii) In the banking sector, The Indian Banks’ Association (IBA) negotiates the wage increase on behalf of its members i.e. nationalised banks with the United Forum of Bank Unions (UFBU). (iii) in the plantation sector, The United Planters Association of South India (UPASI) negotiates the wage increase on behalf of its member enterprises with Estate Staffs Union of South India (ESUSI).

These are just examples, at the same time there are not many sectors of the Indian economy, where the practice of sectoral agreements is prevalent.In these sectors both the employer organisations and the trade unions for over decades have been bilaterally settling the wage increase issue though most of them sign the settlement in conciliation making the Government a party to the settlement. My perception is that IR challenges in cement, banking, plantation sectors in the context of COVID-19 will be that the increase in wages in the long-term settlements cannot be higher than the past, as has been the approach of the trade unions. However, the two parties (i.e. employer organisations and trade unions) through mutual dialogue would be in a position to settle, without much of turbulence, as member enterprises in these sectors will be impacted in revenue, profitability but to a certain extent.

IR at enterprise level

Each enterprise has a history of IRand knowledge of the same, facilitates in understanding the IRclimate specific to an enterprise. Some items of historical background which are specific to the enterprise are listed below

(i) Approach of top management on handling IR issues

(ii) Approach and style of functioning of union and the methods deployed by them on handling IRissues of the organisation

(iii) Applicable relevant labour laws, contract of employment, rules and regulations of the enterprise

(iv) Past agreements reached between the management and the trade union and turbulence if any in achieving them

In the context of COVID-19, we need to understand, what are the likely IR issues that will emerge, and what has been the approach of the management in communicating with the employees and their families plus the trade union during the lockdown and later. We also need to understand the approach of the trade union in communicating with the management and also with their members during the lock down period and thereafter.

The lock down as well as COVID-19 has adversely impacted the financial working of every enterprise. Even the large enterprises that have a profitable product portfolio, but an exempted Provident Fund scheme for the benefit of their employees, have a problem with the investments of the Provident Fund money, as the valuation of certain investments have fallen, thus compelling the enterprise to make provisions for the eroded value of the investments of the exempted Provident Fund money thus negatively impacting the bottom line.

Also, each person whether directly employed by the enterprise or through a contractor / service provider is worried of getting infected by COVID-19 while travelling to and from place of work, as well as at the place of work. Hence, health and well being will be another major dimension across all enterprises and each of them will have to handle it ensuring the medical safety of employees. Wherever cases of COVID-19 amongst the employees has come up the local administration has asked the enterprise to be closed for few days and the facility to be sanitised.

Due to physical distancing norms and restriction of employment, deployment of people in an enterprise could be a challenge, this could to some extent impact output and productivity and capacity utilisation. Employees for commuting to place of work in metropolitan cities heavily depend on public transport, the problem gets compounded even if company transport is arranged, because of the physical distancing norms. All the above have an impact on expense either to the enterprise or to the employee. Also, customer sentiment has changed and any expense that is construed as not essential or perceived as a luxury will be postponed, hence revenues of enterprises are bound to be impacted.

Given below is not a checklist , however these are issues under IR, which could come up in context of COVID-19depending upon the size of the enterprise, sector in which it operates, type of business model, type of employment model, cash availability, profitability, debt, demand of product, and the zone in which the enterprise operates.

(i) Reduction in the existing monthly wage

(ii) Delay in payment of monthly wages

(iii) Desire to reduce benefits under existing long-term settlement including annual bonus.

(iv) Reduction in number of persons to be employed.

(v) Ensuring safety of all employees working at the work place from being infected with COVID-19.

(vi) Full/part wages to employees when the local administration directs enterprise to be closed for few days and the facility to be sanitised, because of cases of COVID-19 amongst the employees.

(vii) Financial support plus arrangements for treatment to employees including contract labour plus their family members if impacted by COVID-19.

(viii) Financial compensation to family of employee who dies because of coronavirus disease 19 COVID-19.

When the issues mentioned above come up, then IRscenario at the enterprise level will be impacted.The possibility of confrontation seems low, and managements of enterprises will need to engage with the workforce actively. Some measures could be to have:

1. Open and two-way communication to address anxiety and insecurity of the employees with reference to their job. Explain

  • What’s happened

  • The known impact on the business (so far)

  • What can be expected in the immediate future

  • What employees can do at the current moment (if anything)

This helps in reducing some of the uncertainty and rumors.

2. Build Trust - in any crisis employeestend to immediately think the following:

  • Is the company safe?I

  • Is my job secure?

  • How do I fit into the new landscape?

  • What’s the demand for my skill set?

  • If the worst happens, how will I pay my bills and provide for my family?

  • Will I be needed anywhere else?

employee rights
employee rights

My perception is that in the present COVID-19 situation,most trade unions are not likely to adopt direct confrontation approach of the past on the emerging IR issues cited above. However, for issues involving reduction of wages or loss of jobs, trade unions are likely to seek reliefs through actions under the relevant labour laws or directly talk and negotiate with the management. In states like Maharashtra, where The Maharashtra Recognition of Trade Unions & Prevention of Unfair Labour Practices (MRTU PULP) Act, 1971 is prevalent, trade unions could move the labour court and obtain ex-party stay orders and litigate, at the same time negotiate with the management.

There are also enterprises in the country that have been able to successfully operate during the lock down period and thereafter, as they had adequate demand for their products, and were able to get the required permission from the local authorities and also had the requisite workforce, hence may not have any IR issues with their workforce or the trade union.

Since the IR climate and relationship between the management and trade union is enterprise specific, the approach on resolving IR disputes will differ on a case to case basis, I do see a higher trend towards dialogue and collaboration, rather than confrontation, because COVID-19 has created a shrinking pie for most enterprises where it is presently becoming a question of survival of the enterprise.

Conclusion

Presently there is no vaccine to prevent the spread of the COVID-19 epidemic. While research on the vaccine is progressing, it is probable that a vaccine availability may take another 12 to 18 months to be available for the benefit of people.Enterprises will have to learn how to operate the business while the COVID-19 continues, which could be for another 18 to 24 months. Hence, managements, trade unions and employees will have to understand and respect each others difficulties, and collaborate with each other in finding solutions, so that the enterprise survives in these turbulent times.

It is not only enterprises that will be negatively impacted on revenue in the financial year 2020-21. Also, the central and state Governments of India are likely to have a substantial fall in revenue in the financial year 2020-21, and hence they will have difficulties in meeting expenses of various establishments including wages of employees during this period. However, the Government can do deficit financing, but enterprises do not have that option. We all need to work in a direction of moving ahead and finding solution to the IR challenges in the context of COVID-19.

Dr Rajen Mehrotra is Past President of Industrial Relations Institute of India (IRII), Former Senior Employers’ Specialist for South Asian Region with Internation.al Labour Organization (ILO) and Former Corporate Head of HR with ACC Ltd. and Former Corporate Head of Manufacturing and HR with Novartis India Ltd. E-Mail: rajenmehrotra@gmail.com

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