A Critical Analysis of The Trade Union Recognition (Central) Rules, 2021

K R Shyam Sundar

This article analysing the recently published Industrial Relations (Central) Recognition of Negotiating Union or Negotiating Council and Adjudication of Disputes of Trade Unions Rules, 2021, points out issues with the criteria for recognition of a union in a single-union context, and the method for determining the negotiating agent/council and its procedures, offering suggestions to improve the same. It further points out that by choosing the employer as the regulating authority for conducting a secret ballot for trade union elections and limiting the matters to be covered in collective bargaining, the rules further whittle away the bargaining power of trade unions, disempower unions, and magnify some of the faults of the Industrial Relations Code, 2020.

Collective bargaining constitutes a vital and throbbing cog of industrial democracy that fits well into the larger scheme of a pluralistic democracy. It is one of the principal routes to enable trade unions to achieve their industrial objectives.

Trade unions have earned through numerous, often bloody struggles, the right to organise and collectively negotiate terms of employment, along with the legal right to strike in modern India.  Institutional landmarks such as collective bargaining and the right to strike, at least to some extent, address the inequalities in a capitalistic system.

Even though several stakeholders, from the Planning Commission, to the several subject-specific working groups and committees (including two national commissions on labour in 1969 and 2002), along with many academics in India, advocated for bipartism and collective bargaining, there was a legal void at the national level, as the central labour laws did not provide for trade union recognition. The Constitutional guarantee of freedom of association under Article 19(1)(c), and limited legalization of trade unions and strikes in the labour laws did not have much impact as a multiplicity of trade unions and the resultant union rivalries had posed vexatious issues even to the few employers who wished to engage with trade unions.

The troubles did not end with this fundamental issue. There were other questions over whether there should be a sole bargaining agent (monopoly unionism), or a bargaining council comprising of multiple unions, as also over the method of recognizing a trade union (there are three methods to choose from: membership verification, check-off and secret ballot).  To make matters worse, the Central Trade Unions (CTUs) were divided over the choice of a method among them.

These issues remained unsolved at the national level from independence, irrespective of the political parties in power at the Centre. In this light, it is not surprising that India has not ratified the ‘twin’ Fundamental International Labour Organization (ILO) Conventions: the Freedom of Association and Protection of the Right to Organise Convention, 1948 (No. 87) and Freedom of Association and the Right to Organise and Collective Bargaining Convention, 1949 (No. 98).

Industrial Relations Code, and rules framed thereunder

The current National Democratic Alliance regime, after substantial protests, inserted provisions for trade union recognition in the Industrial Relations Code (IRC) that was passed last year by the Parliament. Tellingly, the draft IRC released in 2015 did not provide for trade union recognition.

The Union Government had published draft rules under the IRC on October 29, 2020, for securing comments from stakeholders and citizens. 

One of the points I had emphasised is that the Union government has left it to the state governments to make rules relating to trade unions. Even though this federal arrangement is fine, I had argued that the Union government should have framed the rules relating to the recognition of trade unions by two agencies, the employers (at the firm and industry levels) and the Union government, as the IRC provides for (through its sections 14 and 27).

However, the Union government took more than six months to frame the rules regulating the recognition of trade unions, publishing them on May 4, 2021, viz. the Industrial Relations (Central) Recognition of Negotiating Union or Negotiating Council and Adjudication of Disputes of Trade Unions Rules, 2021 (shortly, the Draft Recognition Rules).

The Draft Recognition Rules cover five aspects: (i) criteria for recognition of a union in a single-union context, (ii) the method for determining the negotiating agent/council and its procedures, (iii) scope of collective bargaining, (iv) facilities to be provided to the negotiating agent/council, and (v) the trade union disputes.

I assess these rules in two parts. In the first part, I discuss the preliminary issues relating to the deficits in the procedures in framing regulations and the rules by the State relating to (i) and (ii).  In the second part, I cover the issues relating to the scope of collective bargaining, and the substantive and procedural issues missed out in the Rules.

Scrutinizing the Draft Recognition Rules on trade union recognition

The Draft Recognition Rules suffer from many shortcomings and repeat the same institutional blunder as the earlier draft rules by continuing its policy of ‘make regulations first and then consult the stakeholders’, which is a clear violation of the essential principles and procedures that characterize social dialogue.  Many trade unions have alleged that the government, by not effectively consulting with them, has violated the ILO Convention Tripartite Consultation (International Labour Standards) Convention, 1976 (No. 144), which India has ratified.

It is another matter that many trade unions boycotted the consultation proceedings, justly though, in a sense.  However, it is the institutional and moral duty of trade unions to actively engage with the government, notwithstanding the latter’s indifference.

One fails to understand the absence of realization of the simple truth within the government that pre-consultation with the stakeholders and possibly the experts, however inconclusive, would provide richer inputs for framing the regulations.  The absence of social and federal dialogue, and not drawing on the expertise available with ILO is incomprehensible in a pluralistic and democratic society like India.  

There exists rich historical material on the subject of trade union recognition. Apart from the voluntary tripartite instrument called the Code of Discipline at the national level, which is widely implemented in the central sphere, there are laws and regulations in place in place in some states like MaharashtraKerala and West Bengal. These provide rich material, both in terms of their contents and their implementation experiences. In this sense, national dialogue and some additional research would have been beneficial.

Even though the Union Government announced that all the four Codes would be implemented in the country from April 1, 2021, they were not eventually implemented. This is due to state governments not having framed the rules in time for their administrative segment, that is, the state sphere.

Criteria in case of a Single Union Context

Section 14(2) of IRC provides for recognition of a union in an industrial establishment where there is a single union, and leaves the criteria for it to the Rules.

Rule 4 of the Draft Recognition Rules requires the employer to recognize the trade union having “not less than thirty percent” of the total workers in the industrial establishment as the sole negotiating union.  In all likelihood, the Union Government has borrowed this 30% threshold from the Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (MRTU&PULPA).

However, in the MRTU&PULPA, 30% is the eligibility threshold for applying for recognition, and not the threshold for actual recognition.  30% is too low or liberal a threshold for a union, even if for a single union to represent the entire workforce while leaving out the other 70%. This threshold is, in fact, inconsistent with the 51% criteria specified in IRC for the sole negotiating union in the case of multiple trade unions [vide its section 14(3)].

Thus, the Draft Recognition Rules must bring about parity in recognition arithmetic and increase the threshold from 30% to 51%.  Such threshold will ensure institutional legitimacy for the trade union to represent the workers. 

It may be noted that the Bharatiya Mazdoor Sangh, one of the CTUs, has demanded at least 70% membership as a criterion, which other CTUs may not support.

Manner of Verification of Membership of Trade Unions

The IRC provides for negotiating union or negotiating council in the case of both single and multiple unions. As averred by me earlier on The Leaflet, the Union Government has, for inscrutable and illogical reasons, left the manner of verification to the rules.

There are three methods to determine the negotiating agent in case of multiple unions, viz. the membership verification process (provided by the MRTU&PULPA), a check-off system (recommended by the Second National Commission on Labour, 2002) and secret ballot (provided by the regulations in Kerala and West Bengal).  The Draft Recognition Rules has chosen ‘secret ballot’ as the method.  But there are problems with the stated regulations concerning this method.

Preconditions for Recognition and Secret Ballot

There must be in place rules providing for minimum eligibility conditions for an applicant union for recognition and the secret ballot exercise.  Such rules exist in all the relevant state regulations. Broadly, there are two aspects, viz. preconditions for an applicant trade union for recognition and those for voters in the secret ballot.

The Draft Recognition Rules provide two conditions: it must be a live registered trade union either under the Trade Unions Act, 1926 or in the IRC, and membership of the union must be confined to the particular industrial establishment only. One is not clear as to whether the recognition would be limited by establishment, or industry, or regions. There is also a lack of clarity over whether it pre-empts multi-employer bargaining.

Recognition is always as per the bargaining unit.  The union recognition regulations at the state level usually clarify whether recognition would be considered at the establishment level or the class of industry in a local area. They also mention other conditions, viz. the membership must be open to all the workers in an establishment or class of industries as the case may be, and that the registration must be at least six months old, among other things.

The government must seek to address this since CTUs have raised concerns as to whether the verification process includes casual and temporary workers.

Regarding the question of voting eligibility, according to the Draft Recognition Rules, all workers on the muster roll of the industrial establishment on the date of reckoning shall be eligible to vote. The moot point is whether the non-standard and flexi-workers like casual and temporary workers, and trainees would be included under this category.

It is easy to imagine that contract workers (workers supplied by labour supply contractors and workers employed under a contract for service) would be excluded, even though their share in the workforce is high and rising.

To make the voter identity more credible and lend accountability to the democratic process, West Bengal and Kerala provide voter rights to those employed for at least 120 days in the previous twelve months and aged at least 18 years.

Who Should be the Regulatory Authority?

The Union Government has completely relied on the employer as the authority to initiate and conduct secret ballot procedures.  According to the Rules on Union Recognition, the employers shall (a) appoint the “verification officer”; (b) bear all expenses and make arrangements in connection with the verification; (c) receive the application for recognition from the trade union(s); (d) prepare the voter list. Thus, the employer regulates the entire verification process in various ways.

This is ironic, to say the least. In the extant neo-liberal times wherein employers save the progressive ones at best avoid unions and at worst bust unions, vesting the employer with the responsibility to conduct union recognition procedure is a fiendish, if not infernal, strategy.    

Regulations in West Bengal and Kerala appoint the Registrar as the regulatory authority to initiate and coordinate the entire recognition processes, including the appointment of the Returning Officer.  Additionally, the  Maharashtra Recognition of Trade Unions and Prevention of Unfair Labour Practices Act, 1971 (MRTU&PULPA) has empowered the Industrial Court to deal with matters relating to the recognition of trade unions.

The Supreme Court, in its judgment in the case of Food Corporation of India Staff Union v. Food Corporation of India and Others (1995 (1) SCR 96), held that it is the Chief Labour Commissioner who must appoint the returning officer, who shall be a government official, to conduct the election with the assistance of the company (in this case, Food Corporation of India).  The employer does not figure in any of the aforementioned regulations nor the judgment.

In fact, the West Bengal Regulations vest the Registrar with wide powers.  The existing laws, such as the Trade Unions Act, 1926 (TUA) and the Industrial Relations Code, 2020 (IRC) extend merely administrative and not quasi-judicial powers to the Registrar. The latter is little more than a crowned bureaucrat who could at best register or deregister a trade union.  The civil courts in the TUA and the Industrial Tribunal in the IRC adjudicate trade union disputes.

The secret ballot process also involves various officials like an assistant returning officer, a presiding officer, a polling officer, polling agents, counting agents, and so on. In the Draft Recognition Rules, the employer and the verification officer together perform the functions of these officials. The verification officer eventually submits the verification process results to the employer. On that basis, the employer recognizes a trade union as a negotiating union or a negotiating council, as the case may be, for the prescribed tenure in the IRC.

Thus, the Draft Recognition Rules miss a lot of details, misallocate the duties and responsibilities to the employer, and over-burden the verification officer.  This is neither efficient nor just nor equitable.

Scope of Collective Bargaining Whittled

Since the IRC states that the Rules would prescribe the “matters” to be covered in collective bargaining, Rule 3 of the Draft Recognition Rules specifies the same. This very clause is contestable, though it has become law.

It is contestable because of three reasons. One, this legal intervention is incompatible with the very dominant orthodoxy of ‘neo-liberalism’ which advocates the least State regulation and which the governments in the post-reform period, irrespective of the parties in power, have embraced.

Two, the dynamics of globalization are such that it would be futile to regulate the “scope of collective bargaining” and those should be left to the parties concerned.  By delimiting the scope of collective bargaining, the Draft Recognition Rules do not provide any radical relief to either party.  

Three, the trade unions or the employers adopt “industrial sanctions” to induce or coerce (as the case may be) the other party to accept “issues” for collective bargaining, and may even resort to legal action in that regard. For example, in 1998, the trade union in Philips India Ltd. tried in vain to negotiate with its management on the issue of the sale of its plant to Videocon, and later, on the issue of reduction of the workforce (the matter ultimately reached the Supreme Court in the case of Sunil Kumar Ghosh and Others vs K. Ram Chandran and Others, (2011) 14 SCC 320). Of course, it is a contestable issue whether the company policy decisions are “proper issues for negotiation”.  But the same should be left to the institutional processes and not be constrained by law.

Incomplete Exercise

There are several other deficiencies manifest in the Draft Recognition Rules. For one, the Union government could have used this opportunity to frame rules on all the pending clauses in the IRC. It could have provided the arithmetic of representatives in the negotiating council as per one for every 20 percent and calculating “for the remainder after calculating the membership on each twenty percent.” (vide section 14(4) of the IRC).

Secondly, in the negotiations by the negotiating council “a majority of the representatives” is required to reach a collective agreement under the Code.  The Draft Recognition Rules should have defined what constitutes a majority: 51% or 66% or some other figure?

Thirdly, while the TUA, a central law, concretely mentions the objects for which the general and the political funds should be spent, the IRC does not.  To have homogenous regulations, the Union government should have included them at least in its rules.

Fourthly, the Draft Recognition Rules have not provided regulations regarding recognition of central trade unions by the Union government. This smacks of ad-hocism.  Perhaps, the Union government will come out with another set of rules to provide for recognition of trade unions by it while the state governments would do so at their level.

Since the IRC does not contain clauses relating to the “rights, privileges, responsibilities and liabilities” of the recognized unions and the council nor did it mention that the rules would prescribe these, as in the case of facilities to be provided to them (see section 14(7) of the IRC), the Draft Recognition Rules do not specify the rights, privileges, responsibilities and liabilities of the recognized unions. On the other hand, these are naturally defined in the corresponding legislations by Maharashtra, Kerala and West Bengal.  This is a grave slip and a huge void.  Perhaps one must wait for the next session of the Parliament for these clauses to be inserted in the IRC.

To sum up, we see another exercise by the State, though very late in the day, which is not comprehensive due to the faults in the source (the IRC), and lack of attention to details. Ad-hoism, a lack of active coordination by the Union government with state governments and union territories, and the absence of social dialogue cause inordinate delay in the implementation of even the deficient Codes.

The legal void is perhaps suitable to the industrial firms given the economic slow-down (in the form of, for instance, non-determination of the statutory national floor-level minimum wages and minimum wages at the state levels). At any rate, the governments are fighting far more urgent battles relating to COVID-19 management. One expects that the State would adopt expansionary fiscal policies to provide far-reaching measures such as direct benefit transfers to millions of informal workers who are untouched by its labour codes. The State and other social partners must do at least these in a competent and comprehensive manner.

This article first appeared on The Leaflet as a two-part series titled Trade Union Recognition (Central) Rules, 2021 – A Critical Analysis and Some Recommendations- Part I and Part II on May 8 2021 and May 13 2021 respectively.

About the Author

K R Shyam Sundar

Dr. K R Shyam Sundar is Professor, HRM Area, XLRI, Xavier School of Management, Jamshedpur.

Picture courtesy, CITU’s Facebook page