Reflections: Employee Relations (Part 2): Industrial Unrest In 2014

This is the second part of a three series of blog-posts. I have divided this note according to subject. The earlier blog post spoke of strikes and lockouts in 2014 and this one features stories of industrial unrest.

We begin with the story of ING Vysya.

ING Vysya - Kotak Mahindra Bank Merger Deal

On January 7, while the deal was to be presented for shareholder approval, the unions, which represent 35% of the employees, were intending to go on strike. Why? The fear was obvious. They wanted an agreement to be signed between the two corporates and the union protecting the employees’ interests.

Kotak Mahindra Bank has been extensively outsourcing work, so the ING Vysya employees are afraid that their future may not be bright. But the union has clarified that they are not opposing the merger, they just want to ensure that their interests are protected.

The news report says, “All protection related to employees have already been captured in the scheme of amalgamation which upon approval by RBI, Kotak Mahindra Bank shall fully standby and are obligated to comply with including sections relation to employees job security, wages, pension, gratuity etc."

In a letter, KMB's Joint Managing Director Dipak Gupta has written to ING Vysya Bank's Chief Executive designate Uday Sareen saying that KMB will be honouring all IBA settlements and bi-partite agreements.

But the issue is one of job security.

For ER specialist the issue of ‘Successor-in-interest’ is of great relevance here. This doctrine is ordinarily applied to determine obligations when one Corporate Entity is replaced by another. In my opinion the ‘doctrine of continuing employer’ will apply here. I invite the knowledgeable readers to opine on this issue.

Will Kotak Mahindra respect the agreements with the unions? They have already said ‘Yes’ to it. Quite obviously that is not the issue. The real issue is job security. Because every M&A sees ‘rationalisation.’ That is the hard reality. Let us see how the events unfold. Those who are not workmen under the ID Act have no protection, and are therefore vulnerable. Whether [and how many among them] have ‘marketable skills’ is also often the issue. The attitude of ‘victor and vanquished’ takes the toll in M&A cases.

Whatever the outcome, we should expect more reports of friction in this M&A. So, as they say, “stay tuned.”

Coal India’s Burning Problem

Coal India Unions have a problem on hand. The Government has decided to sell shares to the extent of 10%. This will fetch the Government about Rs. 23000 Cr. Overall plan is to sell stakes in some other PSUs too raising about Rs. 44000 Cr all together.

The unions are threatening strike. They do not want the Government to sell stakes. Why? They fear loss of jobs. Because this is what happens with any divestment or restructuring.

Unions had earlier in 2010 resisted the IPO too, they had campaigned against employees buying and had fallen flat on their face. Employees lost a good amount, which they could have gained, had they invested in shares of their company.

After the strike notice, BMS union backed out. So the Coal India unions called off the strike. That was in the last week of November. Exactly one month later they decided to go on strike again – from January 6 for a period of five days.

The Government had earlier promulgated an ordinance in October which, apart from facilitating auctioning of the cancelled coal blocks, allowed private players to mine coal and sell it in the open market. This has fanned the fire again.

So yet again a strike notice was served. What’s next? Conciliation will begin. Let us hope that the parties will reach some agreement. I guess this kind of friction is inevitable. Let us see how this Government manages it.

One of the issues raised in Coal India and ING Vysya-Kotak Mahindra cases is common. How to carry the employees who stand to lose and will be adversely affected by the proposed moves. On one hand such changes are inevitable, but on the other hand there are livelihood of employees in question. No easy answers here!

Mercy Killing by Pfizer

Sometimes when an establishment ‘dies’, people want an explanation – they want to know why it died. Like in Air Asia case, some guess-work is done from what comes on radar. But the public awaits the Black Box to be found and the ‘real’ explanation to be uncovered.

Hopefully this will happen someday. The case of GSK in Thane was no different. The company [GSK] shut down a profit making plant. Their union says that they got the compensation that was asked for, but they do not know why it was closed. There are of course theories that explain the mysterious closure of GSK [read my blog post covering this], and there will be theories about the closure of Pfizer plant in Thane as well.

One such theory mentions that Wyeth-Pfizer merger has something to do with it. And then there is the other theory – applied to all closures in Mumbai-Navi Mumbai belt – it is all really about real estate. The workers say the Company has been discussing wage increase for the last six years. The Company says ‘it has become impossible for the management to continue with the operations of the Plant in a peaceful and productive manner.’ The reason given is extreme indiscipline of employees.

The plant in theory is under lockout, not closure, but we know the shape of things to come. The official statement to BSE says ‘The above lock-out notice will have no impact on the business operations of the Company. The Company has in place a robust business continuity plan which will ensure that its medicines are available to the patients at all times.’

You know what it means, and what is in store, right?

Read this excerpt from a Frontline article:

Workers fear that the plan may be to sell the plot to a real estate company. This is not an uncommon strategy with large companies. In 2007, Pfizer sold its property in Chandigarh to CSJ Infrastructure for Rs.278 crore. In 2004, GlaxoSmithKline Pharmaceuticals sold its Mumbai plot at Worli for Rs.107 crore to I-Ven Realty Ltd, a joint venture between ICICI Venture Funds Management Company Ltd and Oberoi Constructions. In 2012, Bayer CropScience sold its Thane land for Rs.1,250 crore to the Kalpataru group.

My erstwhile colleague Salil Chinchore points out that ER experts expect a spate of closures. The Pfizer plant employed 225 people. If the Government allows units employing up to 300 to close without permission [as required in the ID Act], then possibly it may happen.

Bosch Deal

This is what the news reports say:

“Bosch said on Tuesday that an indefinite strike by its employees here since September 16 ended after conclusion of a wage settlement for 2013-16 with the union. Bosch's Bengaluru plant reached the settlement with the Workmen Union-Mico Employees' Association (MEA) on December 8 and, with this, the prolonged "illegal" strike called by the union comes to an end.”

The Workmen Union has agreed to accept the company's last offered wage and benefits proposal that would enable the earning potential - the monthly cost-to-company (CTC) - of an average workman to increase from Rs. 64,000 to Rs. 86,000, subject to working as per industrial engineering standards for 7.5 hours of work in an eight-hour shift.

With this mutually agreed wage settlement, the Bengaluru plant will continue to be one of the best paymasters in the manufacturing domain and other comparable industries, the company said in a statement.

We know that even the Pune plant had a prolonged strike. While we know some facts, we don’t know all. So more about it later.

L&T Hazira falls in Comparison Trap

The wage dispute at Hazira factory of L&T dragged on for a long time. More than 3 moths. Why?

An L&T Kamdar Union official said that the company had offered a Rs. 6,750 increase to workers in Powai, but that Hazira employees were only offered a Rs. 4,500 rise. While the average monthly salary at Powai is Rs. 45,000, Hazira employees only receive Rs. 25,000 ($US410). L&T told media that it will not increase its offer to the Hazira workers and, in a veiled threat to strikers, said it had the option of hiring replacement workers to maintain production.

Nobody will accept the Union’s stance. The Courts also will not support the union The union leaders played on the emotions of employees, and it is a cruel game. They say that ‘the Chairman gets a 35% increase, then why can’t we?’ Well, such statements can be scripted by Salim-Javed duo but reality does not accept. You may like to watch the video here on YouTube.

The point to note is the huge and widening gap between the rich and the poor. Between the highest paid and the lowest paid employee of any given organization. The latter thinks he has missed the bus. Sharing prosperity of an organization is important, and must be done. But simultaneously managers also have to be alive to the fact that there is a minima and maxima for any product or service. There is a range. Nobody will work for you for less than a certain minima [this seems to be minimum wage unfortunately] and no employer will pay more than a certain limit. The trouble is that it is the individual’s judgment where the line is. Therefore it must be negotiated, and a balance reached. That is the skill of managing industrial relations.

So this was about the industrial unrest in 2014.

Before we stop here, in this second part of the blog series, here is some food for thought: Anthony Robbins says, "The quality of your life is the quality of your relationships."

And we will reach out to you in the third part to continue this review.


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