What is an Industrial Dispute ? - Industrial Relations Management

The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing machinery and procedure for the investigation and settlement of industrial disputes by negotiations.

Various studies indicate that Indian labour laws are highly protective of labour, and labour markets are relatively inflexible. These laws apply only to the organised sector. Consequently, these laws have restricted labour mobility, have led to capital-intensive methods in the organised sector and adversely affected the sector’s long-run demand for labour. Labour being a subject in the concurrent list, State-level labour regulations are also an important determinant of industrial performance. Evidence suggests that States, which have enacted more pro-worker regulations, have lost out on industrial production in general. -- The Industrial Disputes Act (IDA) of 1947. Particular attention has been paid to its Chapter V-B, introduced by an amendment in 1976, which required firms employing 300 or more workers to obtain government permission for layoffs, retrenchments and closures. A further amendment in 1982 (which took effect in 1984) expanded its ambit by reducing the threshold to 100 workers. It is argued that since permission is difficult to obtain, employers are reluctant to hire workers whom they cannot easily get rid of. Job security laws thus protect a tiny minority of workers in the organised sector and prevent the expansion of industrial employment that could benefit the mass of workers outside. It is also argued that the restriction on retrenchment has adversely affected workplace discipline, while the threshold set at 100 has discouraged factories from expanding to economic scales of production, thereby harming productivity. Several other sections of the IDA allegedly have similar effects, because they increase workers’ bargaining strength and thereby raise labour costs either directly through wages or indirectly by inhibiting work reorganization in response to changes in demand and technology.

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