Strikes and Lockouts: A Contemporary Analysis Through a Real Life Case

Introduction

This article tries to look at the implications of lockouts and strikes on the major stakeholders in an Industrial relations set-up viz. the employer, the union and the government. An analytical perspective to the issue of lockout and strike is given, highlighting the transfer of power from employer to workers in the case of declaration of a strike and vice-versa in the case of declaration of a lock-out. The article first talks about the legal status of lock-out/strike and their implications on the major stakeholders. A real life case is presented to highlight the situations in which the employer and the union resort to such actions. In conclusion, an alternative course of action, which the employer could have followed, is suggested.

Lock-out

Legal status

Lockout is defined in section 2(L) of the Industrial disputes Act, 1947 as

“the temporary closing of a place of employment or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him”

The mention of temporary in the definition of lockout differentiates it from closure. In Mgmt of Express Newspapers Ltd, Gajendragadkar J mentions that in case of a closure, the employer does not merely close down the place of business; he closes the business itself. It is also mentioned that lockout is often used by the employer as a weapon in his armoury to compel the employees to accept his proposals [1] .

The second part of the definition talks about the refusal by the employer to continue to employ any number of persons. This implies that the employer might refuse employment only to a certain number of employees and might allow the others to work. However, this does not mean that lockout and layoff are similar. Layoff and lockout is both temporary and in both cases, some employees might not get employment. The big difference between layoff and lockout is elaborated by the Supreme Court in Kairbetta Estate v Rajamanicham. The Supreme Court clarifies that the employer can resort to lay off only in one of the cases mentioned in Section 2(kkk) of ID Act whereas there is no such requirement in case of a lockout. Also, in case of lay off the employer may be liable to pay compensation whereas in case of lock out there is no such liability.

A lockout in contravention of sec 10(3), Sec 10A (4A) i.e. declaration of lock-out when an industrial dispute has been referred, is an illegal lockout. Also, a lockout in contravention of sec 22, 23 i.e. issuing a notice before lockout, is an illegal lockout (Sec 24(1)). However a lockout declared in consequence of an illegal strike is legal (Sec 24(3)). A legal lockout can become a strong tool in the hands of the employer in critical situations.

The other important consideration in the context of lockout is whether the employer-employee relationship is maintained during the lockout or not. In Feroz Din v WB, the Supreme Court held that “refusal to employ” does not amount to discharge like how a strike does not mean that the employee has severed his relationship with the employer [2] .

Implication of lockout on the employer

Lockout is an employer’s action, it has some positive implications for the employer and hence an employer might be interested in such an action. However, like the negative implications of a strike on the workmen, there are negative implications of lockout for the employer too.

Positive Implications (Benefit)

A lockout declared because of the poor financial condition of the company has an obvious advantage for the employer because it lets him cut his financial losses. During this period, an employer does not have to pay the labour costs and other variable costs.

A lockout declared in response to a strike is an interesting case. A strike has already been declared by the employees and hence the production is already stalled, atleast partly. The action of the employer is to ensure that he has control, and not the striking workers. When the employer announces this lockout, there is a transfer of right from the striking workers to the employer i.e. the employer decides the period when the striking workers are going to come back to work. Even if the striking workers decide to end their strike, the employer has to end the lockout for the striking workers to return to work. This sends a strong signal to the striking union and workers. Also, a lockout in response to the illegal strike is legal and hence such a lockout has legal credibility also. This means that the employer has taken a strong action being on the positive side of law whereas the workers/union has taken an action on the wrong side of law.

Negative Implication

A lockout is the last step an employer would take. This is because a lockout means loss of production, which in turn means financial losses for the company. So except it is a case of financial distress, the employer would like to continue working.

A lockout also means deterioration in the relationship between the employer and the union/workmen. If the workmen decide to contest the reasons on which the employer has declared a lockout, there are chances that the employer might have to end up paying wages for the period of lockout along with other benefits which will have a huge financial implication on the company.

Implication of lockout on the union

A lockout has a much larger impact on the union than a strike would have on an employer. This is because when a strike is declared, the implication on the employer is majorly financial whereas the declaration of a lockout makes the union weak as an organization. The union thrives on the fact that it is a collective set of workers who have the bargaining power because they are together. A declaration of a lockout implies the employer has not recognized the bargaining power or has disregarded it. This disturbs the basic foundation on which the union is formed and starts creating doubts in the minds of workers about their association with the union, job security. There are several examples where a lockout ends up solving an industrial dispute and weakens the union in the process. A strike generally leads to more unity among workers and the union whereas a lockout has a reverse effect.

Implication of lockout on the government/Political set up

Given the tripartite set up of industrial relations in the Indian context, the government plays a very important role in the case of a lockout. Reference of the industrial dispute for adjudication is the step taken by the government which ensures that there are no legal strikes or lockouts. A declaration of a lockout leaves the workers unemployed and creates an environment of instability. This has political ramifications and is often exploited by political institutions to their advantage. Hence, in the case of a lockout, the government pressure on management to allow production would be much more than the government pressure on union to resume work in case of a strike.

Strikes

Legal Status

Section 2 (q) of the ID act defines strikes as

“Strike means a cessation of work by a body of persons employed in any industry acting in combination or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment”

Section 22 of ID Act prohibits strikes in Public Utility Services and Section 23 puts a general prohibition on strikes in any industrial establishment. Hence strikes are generally illegal. However, Section 24(3) provides that a strike called in response to an illegal lock out will not be illegal. Besides, there are other situations when a strike can become legal. Section 20(1) provides for commencement of conciliation proceedings when the notice is received by the conciliation officer or on the date of the order the dispute is referred to the Board. Until the dispute gets referred to the conciliation officer or the Board as the case may be, the conciliation does not start. Thus, in the time window between 14 days after notice of strike is issued and before the lapse of six weeks from the same date, a legal strike can take place in PUS, provided the dispute is yet to be referred.

Another occasion when a strike becomes legal is as follows. If a fresh notice of strike is issued on the same agenda as the previous dispute on which the conciliation officer had submitted a failure report on, the union can go forward with a legal strike after the mandatory 14 day cooling off period, if the government does not refer it to the Labour Court or Industrial Tribunal. The failure of conciliation proceedings last time on same grounds will be considered for the fresh strike notice as well.

Also, in non-PUS, no such time window is applicable. Unless otherwise prohibited or regulated by the Standing Orders of the establishment or any existing negotiation or conciliation proceeding is going on, workmen can go for a “lightning strike”. A question may arise as to the fact that there is general prohibition on strikes in any industrial establishment vide Sec. 23. The answer to this lies in the fact that it is prohibited only if it is in breach of contract.

Justification of strike

Justification of a strike is a question of fact and has to be determined for each case. Justification means “whether the reason for which the strike was called was serious enough or had enough potential to significantly affect the conditions of labour or terms of employment or employer employee relationships”. However, use of coercion or violence during a strike negates whatever justification a strike may have.

Payment of wages and punishment (if entitled) during a strike:

Strike

Legal

Illegal

Justified

Wages and no punishment

No wage and punishment under Section 26 of ID Act

Unjustified

No wages & no punishment

No wage and punishment under Section 26 of ID Act

Is strike a fundamental right?

Though right to form union and right to freedom of speech and expression are guaranteed under the Constitution via Articles 19(1) (c) and 19(1) (a) respectively, the right to strike is not derived out of it. However peaceful demonstrations are allowed.

Implication of strike on the union

Positive Implications (Benefit)

A strike signals the transfer of power from the employer to the union. While the employer has a right to employ and retrench workers, in the case of a strike, the right to not come to the place of work is with the union. This transfer of right also means higher bargaining power for the union.

A strike is also used by the union to unite its members and send a strong signal to the management. In this case, strike also becomes an effective tool for the union to regain any lost support among the workers.

Negative Implication

The most direct implication of a strike on the workers is the non-payment of wages during the strike period. As explained earlier, the wages might be paid at a later date only if the strike is both justified and legal. However, during the strike period, the workers have to survive without pay.

Hence, as the strike period keeps increasing, the bargaining power of the union starts to decrease again and might go to levels lower than the pre-strike period.

Implication of strike on the Employer

Strikes directly affect the bottom line of a company. During the initial period of strike, the bargaining power of the union is very high and employer’s need to compromise is also high. The financial implication of every additional day of strike is huge and there is immense pressure on the employer to ensure an end to the strike. However, an end to the strike would generally mean some additional financial burden. Hence, for the employer, a strike is generally a lose-lose situation.

Implication of strike on the government/political setup

Strikes have a huge implication on the government as well as the political set up in the area of strike. The political parties use strikes to strike an emotional chord with the workers to maintain or enhance their vote-bank. This also puts added pressure on the government, which has to ensure that the employer is not at a disadvantage by compromising while at the same time the workers have to be satisfied.

The Case

A plant of an MNC in Western India, manufacturing auto components had workmen comprising of permanent workmen and trainees who got absorbed after two years of internship. That customary practice had to be broken when there was a downturn in 2008-09. The company wanted to cut costs and gave termination notice to the trainees about to complete the two year period. Junior trainees were retained. The existing employees union was replaced by a new union which promised to redress this grievance in addition to other demands like wage parity with other plants of the company, full exemption from work of the union office holders etc. Promptly, a COD was placed and notice of strike was issued. Multiple rounds of talks between the management and the union failed to bear any fruit and the union went on strike on notified date.

Union’s Action

The union camped outside factory gates in protest. Despite a sincere appeal made by JLC, the union refused to call off the strike. The JLC thus submitted a “failure report” to the state government as per Section 12(4) of the ID Act. Some of the workers attacked a consignment leaving the factory. Despite a Government order under section 10(3) of the Industrial Disputes Act, 1947 prohibiting the strike and asking the union to call it off and asking management to restore normalcy, the union did not relent.

Management’s Action

In response to the strike notice the management decided to keep the plant functional using the “management and supervisory staff” (M&SS). Thus quite a few critical customers’ requirements could be met through this production.

There were repeated conciliation meetings between union and management, but no results emerged. The management appealed to the labour commissioner for the prohibition of strike as per section 10(3) of the ID Act. In response to the attack on consignment trucks, an indefinite lock out was called, when the union did not relent even after the government order. The management sent a message to union that it is now management who will decide when the workmen will rejoin the plant whether or not they continue with the strike.

The management obtained injunction orders against the union to safeguard the passage of its consignments. But due to politically volatile environment at that time, the police did not pay attention to its enforcement.

How the impasse got solved

The impasse continued for nearly two months. Gradually, both parties started understanding each other’s views better. The parties came to a mutually agreeable solution to all issues raised by the union and management. A tripartite settlement was signed between the parties to this effect. Post the settlement, the union tendered an apology and called off their strike unconditionally. Management then lifted the lockout within a couple of days.

In the light of the discussion regarding strikes and lockouts we propose the following recommendations.

Our recommendation

The management should have immediately called a lock out after the declaration of the strike. At best, some warnings could have been provided. As explained, the management could have thus sent a strong message across staying well within its legal rights. The impasse continued for close to two months, of which, more than a month was between the declaration of strike and that of lock out. This time could have been shortened due to the tough stance taken by way of the lockout. Once the right to resume work shifted to the management, it could have been leveraged to push through the policy of termination of trainees and permanency of trainees the exception rather than the norm.

Conclusion

Though lockout appears as the employer’s counterpart to strike, in reality the implication of a lockout on the various stakeholders is very different from that of a strike. The employer can use a lockout as a strong weapon; at the same time, such a move can harm the growth prospects of the organization. Also, the employer does not use lockout in the same way as the union would use a strike. The union, as an institution, gets affected during a lockout. This effect is exactly the reverse of the effect of strike on the union. The government’s role in the case of lockout is very different from that of a strike. The government would want to ensure that a lockout is stopped at the earliest; the pressure from its side would be more because of the political ramifications of a lockout. Also, it is in the employer’s interest to call a lockout whenever an illegal strike is declared. The lockout does not necessary mean that all production is stopped; however it ensures several benefits to the employer.