Category: Law School

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• No exemptions to charitable institutions are available if there is an industry in the enterprise considering the nature of the activity, and the employer-employee basis bears resemblance to what is found in trade or business.
• This takes into the fold of industry, undertakings, callings, services and adventures analogous to the carrying on of trade or business. Absence of profit motive or gainful objective is irrelevant for “industry”, be the venture in the public, joint, private or other sector. The true focus is functional and the decisive test is the nature of the activity with special emphasis on the employer-employee relations.
• If the organization is a trade or business it does not cease to be one because of philanthropy animating the undertaking e.g. NGOs
• Charitable institutions fall into three categories: (a) those that yield profit but the profits are siphoned off for altruistic purposes; (b) those that make no profit but hire the services of employees as in any other business, but the goods and services which are the output, are made available at a low or at no cost to the indigent poor; and (c) those that are oriented on a humane mission fulfilled by men who work, not because they are paid wages, but because they share the passion for the cause and derive job satisfaction from their contribution.
• Which of these three do you think are industries, and why?
• The first two are industries but not the third, on the assumption that they all involve co-operation between employers and employees.

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• Is a hospital an industry?
• What if it is a government-run hospital that charges no money for treatment?
• It is the character of the activity in question that decides the question as to whether it is an “industry” or not. It is immaterial as to who conducts the activity and whether it is conducted for profit or not.
• What about a charitable hospital?
• All these are institutions run by the Government and they are no more than places where persons can get treated. They are being run as part of the function of the Government and as government departments.
• Therefore, hospitals run by the government with the sole object of providing free service are no an industry.
• All other hospitals, whether private, public or charitable, would be an industry provided that they satisfy the triple test.

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• If a department of a municipality discharged many functions, some pertaining to “industry” and other non-industrial activities, the predominant function of the department shall be the criterion for the purposes of the Act (Corpn. of City of Nagpur v. Employees, AIR 1960 SC 675).
• Sovereign functions: Sovereign functions strictly understood alone qualify for exemption, not the welfare activities or economic adventures undertaken by Government or statutory bodies.
• Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable then they can be considered to come within Section 2(j).
• Following Departments of the municipality were held, to be “industry” (i) Tax (ii) Public Conveyance (iii) Fire Brigade (iv) Lighting (v) Water Works (vi) City Engineers (vii) Enforcement (Encroachment) (viii) Sewerage (ix) Health (x) Market (xi) Public Gardens (xii) Education (xiii) Printing Press (xiv) Building and (xv) General administration.

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• Criteria for determining dominant nature of undertaking
• The Supreme Court, in Bangalore Water Supply case laid down the following guidelines for deciding the dominant nature of an undertaking:
  • Where a complex of activities, some of which qualify for exemption, others do not,
  • involves the employees in undertaking, some of whom are not “workmen” or some departments are not productive of goods and services if isolated,
  • nature of the department will be the true test.
  • The whole undertaking will be “industry” although those who are not “workmen” definition may not be benefit by the status.

• Even in departments discharging sovereign functions, if there are units which are industries and they are substantially severable, then they can be considered to come within Section 2(j).

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• The Industrial Disputes Act, 1947 makes provisions for the investigation and settlement of industrial disputes.
• It contributes to progress of industry by facilitating harmony and cordial relationship between the employers and employees.
• This Act extends to whole of India.
• To understand the Act, it is crucial to understand the concepts of
  • “industrial dispute”
  • “workmen”
  • “industry”

These terms carry specific meanings under the Act which have been developed by the judiciary through case-rulings. The applicability of the Act will depend on whether a certain enterprise and the persons working there fall within the scope of these terms.

• “Industry” means any business, trade, undertaking, manufacture or calling of employers and includes any calling service, employment, handicraft, or industrial occupation or avocation of workmen. [Section 2(j)]
• The term “industry” has been defined by the Supreme Court in the landmark case of Bangalore Water Supply and Sewerage Board A. Rajiappa (AIR 1978 SC 548)
• Tests for determination of “industry”
  • To determine whether an activity is covered by the definition of “industry” or not, the SC has laid down a “triple test”. Where there is
  • a systematic activity
  • organised by co-operation between employer and employee
  • for the production and / or distribution of goods and services calculated to satisfy human wants and wishes there is an “industry” in that enterprise

• Does absence of a profit motive make a difference to this determination?
  • profit motive or gainful objective is irrelevant
  • professions, clubs, educational institutions, co-operatives, research institutes, charitable projects etc., if they fulfil the triple test, will not be exempted from the scope of an “industry”
• How about an enterprise that carries on more than one activity, where some qualify for exemption and some do not?
• For that purpose, the SC has laid down a test that relates to the “dominant nature” of an undertaking.
• Bangalore Water Supply has a wide sweep because the triple test along with dominant nature criteria will cover almost the entire labour force in the country.

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• The big-ticket issues that labour law strives to address are –

• Working conditions
• Employment terms
• Minimum wages
• Equality of wages
• Hours
• Health and safety
• Dismissal
• Child labour

• The basic feature of labour law in almost every country is that the rights and obligations of the worker and the employer are mediated through a contract of employment between the two.
• Many contract terms and conditions are covered by legislation or common law.
• The most fundamental employment terms include compensation, holiday and illness rights, notice in the event of dismissal etc.
• The contract is subject to various law provisions. An employer may not legally offer a contract that pays the worker less than a minimum wage. An employee may not agree to a contract that allows an employer to dismiss them for illegal reasons.
• In the U.S. for example, the majority of state laws allow for employment to be “at will”, meaning the employer can terminate an employee from a position for any reason, so long as the reason is not explicitly prohibited
• Many jurisdictions define the minimum amount that a worker can be paid per hour. The minimum wage is set usually higher than the lowest wage as determined by the forces of supply and demand in a free market and therefore acts as a price floor.
• Each country sets its own minimum wage laws and regulations, and while a majority of industrialised countries has a minimum wage, many developing countries do not.
• Minimum wages are regulated and stipulated in some countries that lack explicit laws. In Sweden minimum wages are negotiated between the labour market parties (unions and employer organizations) through collective agreements that also cover non-union workers and non-organised employers.
• “Living wage” – The living wage is higher than the minimum wage and is designed that a full-time worker would be able to support herself and a small family at that wage.
• Convention no. 158 of the International Labour Organization states that,  an employee “can’t be fired without any legitimate motive“; and “before offering him the possibility to defend himself“

• These are administrative law principles.
• Discrimination – racial, gender based
• Health and safety – mandatory safety measures specified by law for safety on premises, specified standards for working conditions, specified mandatory contributions towards health insurance,
• The maximum number of hours worked per day or other time interval are set by law in many countries. Such laws also control whether workers who work longer hours must be paid additional compensation.
• Before the Industrial Revolution, the workday varied between 11 and 14 hours. With the growth of industrialism and the introduction of machinery, longer hours became far more common, reaching as high as 16 hours per day.
• The eight-hour movementled to the first law on the length of a working day, passed in 1833 in England. It limited miners to 12 hours and children to 8 hours.
• Trade unions are organized groups of workers who engage in collective bargaining with employers. Some countries require unions and/or employers to follow particular procedures in pursuit of their goals. For example, some countries require that unions poll the membership to approve a strike.
• Laws may govern the circumstances and procedures under which unions are formed.
• Strike action is the worker tactic most associated with industrial disputes. In most countries, strikes are legal under a circumscribed set of conditions.
• Workplace statutes in many countries require that employers consult their workers on various issues. Industrial democracy extends the concept to require worker approval of specific workplace changes.
• In certain jurisdictions, workers have the right to be represented on their companies’ boards of directors. For instance, Germany requires that half of the board of directors are appointed by the company trade union. This is another manner in which the workers’ rights are protected – by sharing decision making powers with them directly.
• The labour movement has long been concerned that economic globalisation would weaken worker bargaining power, as their employers could hire workers abroad to avoid domestic labour standards.
• The International Labour Organization and the World Trade Organization have been a primary focus among international bodies for regulating labour markets. Conflicts arise when people work in more than one country.
• ILO’s primary role has been to coordinate international labour law by issuing Conventions. ILO members can voluntarily adopt and ratify the Conventions.
• India
  • Over fifty national and many more state-level laws govern work in India. These are one of the critiques of the framework as set out in the Reading.
  • In 2008, the World Bank criticized the complexity, lack of modernization and flexibility in Indian regulations.
• The World Bank report says that “India’s labor regulations are among the most restrictive and complex in the world – have constrained the growth of the formal manufacturing sector where these laws have their widest application. Better designed labor regulations can attract more labor- intensive investment and create jobs for India’s unemployed millions and those trapped in poor quality jobs. Given the country’s momentum of growth, the window of opportunity must not be lost for improving the job prospects for the 80 million new entrants who are expected to join the work force over the next decade.”
• Where do India’s problems lie?
  • Domestic workers
  • Unorganized sectors
  • High unemployment rates – makes the workmen desperate
  • No social security framework in India
  • Women workers
• This was the social perspective of looking at labour laws. How workmen as a class are placed in the society and their interests need to be protected.
• What is the other perspective from which labour laws can be looked at?
• Economics
• There are views that argue that Indian labour laws need a complete overhaul. The extant laws form a crisscrossing network of chaotic, strangulating, overlapping and often-contradictory laws.
• The single most important labour law is arguably the Industrial Disputes Act (IDA), 1947.
• This was 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.
• In fact an amendment made to the IDA in the mid-1980s requires that any firm employing more than 100 workers needs to get permission from the state government before retrenching workers (and in practice that permission is seldom given).
• This law has probably done more to hold back the growth of India’s manufacturing sector than any other policy.
• Why is that a problem from an economic perspective?
• Some economists argue that the existing laws prevent free-contracting
• Higher wage – short notice period; low wage – job security; volatile markets; hesitance in hiring in the first place – adding to unemployment
• However, there is also a contrary view that says that a well-rounded framework of labour laws contribute to an efficient market
• We have a Ministry of Labour & Employment
• It is one of the oldest and important Ministries of the Government of India.
• We hope that the economy will continue to grow and certainly it appears that an overhauling of labour laws have to be a part of it.

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• Labour law (or employment law) mediates the relationship between,
  • workers (employees)
  • Employers
  • trade unions; and
  • the government.

• Collective labour law relates to the tripartite relationship between employee, employer and union.
• Individual labour law concerns employees’ rights at work and through the contract for work.
• Employment standards are social norms (in some cases also technical standards) for the minimum socially acceptable conditions under which employees or contractors are allowed to work.
• Government agencies enforce labour law.
• Labour law arose in parallel with the Industrial Revolution as the relationship between worker and employer changed from small-scale production studios to large-scale factories
• Workers sought better conditions and the right to join (or avoid joining) a labour union
• Employers sought a more predictable, flexible and less costly workforce
• The state of labour law at any one time is therefore both the product of, and a component of struggles between various social forces
• As England was the first country to industrialise, it was also the first to face the often appalling consequences of capitalist exploitation in a totally unregulated and laissez-faire economic framework.
• Laissez-faire is an economic environment in which transactions between private parties are free from government restrictions, tariffs, and subsidies, with only enough regulations to protect property rights.
• Over the course of the late 18th and early to mid-19th century the foundation for modern labour law was slowly laid, as some of the more egregious aspects of working conditions were steadily ameliorated through legislation. This was largely achieved through the concerted pressure from social reformers.

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• Overview
• Key Issues
• Industry – Industrial Disputes Act, 1947
  • ‘Dominant Nature Test’
  • ‘Sovereign Function’
  • Is ‘Educational Institution’ an industry?
  • Is ‘Hospital’ an industry?
  • Are ‘Charitable institutions’ industry?
  • Are ‘Clubs and Universities’ industry?
  • Is ‘Professional Firm’ industry?
  • Voluntary Services
  • Amended Definition
  • Physical Research Laboratory vs K.G. Sharma (Supreme Court, 1997)
  • Coir Board, Ernakulam, Cochin v. Indira Devi 1998
  • All India Radio v. Santosh Kumar (Supreme Court, 1998)
  • Agricultural Produce Market v. Shri Ashok Harikuni (Supreme Court, 2000)
  • Primer on Case Laws on ‘Industry’
• Workman
  • Dharangadhara Chemical Works (SC, 1957)
  • D. C. Dewan Mohideen Sahib v. The Industrial Tribunal, Madras (SC, 1964)
  • Workmen of Nilgiri Cooperative Marketing Society v State of Tamil Nadu (2004) 3 SCC 514
  • Hussain Bhai v. Alath Factory Employees Union (1978) 4 SCC 257
  • SK Maini v. M/S Carona Sahu Company Ltd. (1994) 3 SCC 510
  • Workmen of the Canteen of Coates of India Ltd. v. Coates of India Ltd. (2004) 3 SCC 547
• Industrial Dispute
  • Workmen Dharampal Premchand (AIR 1966 SC 182)
• Strikes Lock-outs Lay-offs
  • Meaning of “lay-off”
    • Workmen of Firestone Tyre and Rubber Co. v The Firestone Tyre and Rubber Co. (1976) I LLJ 493 (SC)
    • Is there a common law right or a statutory right to lay-off?
  • Lay-off v. lock-out
    • Management of Kairbetta Estate v. Rajamanickam AIR 1960 SC 893
  • Employer’s ability to recover compensation
    • Rohtas Industries v Union (1976) 2 SCC 82
• Trade Unions
  • Registration
    • Rangaswami v. Registrar of Trade Unions (1962 Madras High Court)
  • Membership
    • Bokajan Cement Corpn. Employees’ Union v. Cement Corpn. of India Ltd. (2004 SC)
  • Recognition
    • Balmer Lawrie Workers Union, Bombay v. Balmer Lawrie & Company (1984 SC)
    • Bharat Kumar v State of Kerala AIR 1997 Ker 292
    • Kameshwar Prasad v State of Bihar AIR 1962 SC 1166
  • The Equal Remuneration Act, 1976
    • State of AP v. G. Sreenivasa Rao 1989 SCR (1)1000
    • Mackinnon Mackenzie v. Audrey D’Costa 1987 AIR 1281
  • The Minimum Wages Act, 1948
    • Kamani Metals & Alloys Ltd. v. Their Workmen (SC 1967)
    • Hydro (Engineers) Pvt. Ltd. v. The Workmen (1968 SC)
  • “Gherao” – Jay Engineering case
    • Excel Wear Etc vs Union Of India (SC 1978)
  • Constitutionality of Labour Legislations
    • PUDR v Union of India (1982 SC)

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