The Industrial Employment (Standing Orders) Act, 1946 | Labour and Industrial Law - CLAT PG PDF Download

Introduction

• The Industrial Employment (Standing Orders) Act, 1946 was enacted to ensure that employers in industrial establishments clearly define and communicate the conditions of employment to their workers.
• The Act aims to eliminate confusion and uncertainty regarding the terms of service by requiring employers to lay down and publicize these conditions with precision.

Application of the Act

• Title and Scope: The Act is known as the Industrial Employment (Standing Orders) Act, 1946, and applies to the whole of India.
• Coverage: The Act applies to every industrial establishment employing 100 or more workmen. However, the appropriate government can extend its provisions to establishments with fewer than 100 workers after giving two months' notice.
• Exclusions: The Act does not apply to certain industries under the Bombay Industrial Relations Act, 1946, or to establishments covered by the Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961. However, it does apply to industrial establishments under the control of the Central Government.

Objective of the Standing Order

• Prior to the enactment of the Industrial Employment (Standing Orders) Act, 1946, there was a lack of uniformity in the conditions of service for workers, leading to conflicts between workers and management.
• The Act aims to provide clarity and transparency in the terms and conditions of employment, ensuring that industrial workers are aware of the rules they are expected to follow.
• Standing Orders go beyond organizational HR policies, outlining specific terms of employment such as entry and exit procedures, work hours, wage rates, shift schedules, leave policies, misconduct provisions, and termination processes.
• By regulating conditions of employment, grievances, and misconduct, Standing Orders help prevent unresolved grievances from escalating into industrial disputes.
• Including classifications of employees such as Temporary, Casual, Permanent, Badli, and Probationary in the draft Standing Orders can facilitate smoother appointments and avoid challenges for the establishment.
• Employers in industrial establishments are required to submit draft Standing Orders to the Certifying Officer for certification under Section 3 of the Act.
• The Certifying Officer can modify or add to the draft to ensure it meets the certification criteria.
• Draft Standing Orders must be accompanied by a statement detailing the particulars of the workmen employed, including information about any trade union.
• The Appropriate Government is responsible for setting out model Standing Orders, and employers should align their draft Standing Orders with these models as much as possible.
• Model Standing Orders are temporarily applicable to industrial establishments until their Standing Orders are finally certified.
• Employers who fail to submit draft Standing Orders or violate certified Standing Orders may face penalties as specified in Section 13 of the Act.

Definition of Standing Order: Sec 2 (g)

• Standing Orders are defined in the Industrial Employment Act, 1946, as rules related to specific matters outlined in the Schedule.
• Employers must draft standing orders for submission to certifying officers regarding the matters prescribed in the Schedule.
• The Schedule includes various matters that should be covered in the standing orders of an industrial establishment.

Definition of Employer: Sec 2(d)

• Employer refers to the owner of an industrial establishment covered by the Act. In a factory, it includes the person designated as the factory manager under the Factories Act, 1948.
• In industrial establishments controlled by the government, the employer is the authority appointed by the government or the head of the department if no authority is appointed.
• In other industrial establishments, the employer is the person responsible for supervising and controlling the establishment on behalf of the owner.

Definition of Industrial establishment: Sec 2(e)

• Industrial establishment includes various types of entities such as those defined in the Payment of Wages Act, 1936, factories as per the Factories Act, 1948, railways under the Indian Railway Act, 1890, and establishments employing workmen to fulfill contracts with industrial establishments.

Definition of Workman: Sec 2(i)

• Workman includes any person employed in an industry to perform skilled or unskilled manual, supervisory, technical, operational, or clerical work for hire or reward, regardless of the terms of employment.
• It also includes apprentices and persons dismissed, discharged, or retrenched in connection with an industrial dispute.
• However, it excludes individuals subject to military or police service, those employed in managerial or administrative roles, and certain supervisory positions with high wages.

Certifying Officer: Sec 2 (c)

• Certifying Officer refers to a Labour Commissioner, Regional Labour Commissioner, or any officer designated by the appropriate Government through official notification to carry out functions of a Certifying Officer under the Act.

Procedure for certification of Draft Standing order

Submission of draft standing orders:

• According to Section 3 of the Act, within six months of its applicability to an industrial establishment, the employer must submit five copies of the proposed draft standing orders to the Certifying Officer for adoption.
• The draft should include provisions for every applicable matter in the Schedule and, where Model standing orders exist, should align with them as much as possible.
• The submission must be accompanied by a statement detailing the workmen employed in the establishment, including the name of their trade union, if any.
• A group of similar industrial establishments may submit a joint draft standing order under certain prescribed conditions.
• The Karnataka High Court, in the case of S.K. Sheshadri v H.A.L and others (1983), ruled that as long as the Standing Orders comply with the Schedule to the Act, they are valid regardless of additional provisions not found in the Model Standing Orders (MSOs).
• The MSOs serve as a guideline for framing the Standing Orders.
• In the case of Hindustan Lever v Workmen (1974), the issue of 'transfer of workmen' was emphasized, stating that the Manager has the discretion to transfer workmen between different departments as long as the terms of employment remain unchanged.
• The burden of proving an invalid transfer lies with the workmen in dispute.
• In Management of Continental Construction Ltd. v Workmen of Continental Construction (2003), the employer's right to terminate a probationary employee's service was acknowledged, emphasizing that the employer has the inherent power to terminate during or at the end of the probationary period.
• However, the employer's actions must still adhere to fairness and principles of natural justice, even when following the Certified Standing Orders (CSO).

Conditions for certification of standing orders

• Standing orders can be certified under the Act if they include provisions for all applicable matters in the Schedule and comply with the Act's requirements.
• The Certifying Officer or appellate authority is responsible for determining the fairness or reasonableness of any standing order provisions.

Different set of Standing Orders

• Once certified, standing orders become binding conditions of service for management and employees, applicable to all current and future employees.
• Differentiated standing orders for various groups of workmen or employers are not permitted, as this would undermine the Act's intent and create ambiguity in employment conditions.

Certification of standing orders

• The procedure for certifying Standing Orders, outlined in Section 5 of the Act, involves three steps.
• The Certifying Officer sends a copy of the Draft Standing Order to the workmen or trade union, inviting objections within 15 days.
• After considering objections, both the employer and workmen are given a chance to be heard, leading to the Certifying Officer's decision on modifications.
• Finally, the Certifying Officer certifies the Standing Order and sends a copy with the modification order within seven days.

Appeals:

• Any party aggrieved by the Certifying Officer's order can appeal to the 'appellate authority' within 30 days.
• The appellate authority's decision to confirm or amend the Standing Order is final.
• The appellate authority must send copies of the amended Standing Order to the parties within seven days.

Date of operation of standing orders:

• Standing orders come into effect either 30 days after authenticated copies are sent, or 7 days after the appellate authority's order if an appeal is made.

Register of standing orders:

• Certifying Officer must file a copy of all certified standing orders in a register and provide copies to applicants upon payment of a fee.

Posting of standing orders:

• Employers must prominently post certified standing orders in English and the majority language of workers at entrances and departments where workers are employed.

Modification or Alteration in 'Standing Orders'

Introduction

• Standing orders that have been certified under the Industrial Employment (Standing Orders) Act, 1946, can only be modified after a period of six months from the date they came into effect, unless there is an agreement between the employer and the workmen or their representatives.
• The process for applying for modifications involves submitting a formal request to the Certifying Officer, along with necessary documentation.

Key Points

• Time Limit for Modification: Standing orders certified under the Act cannot be modified for six months unless there is an agreement between the employer and the workmen or their representatives.
• Application for Modification: Any party (employer, workman, trade union) can apply to the Certifying Officer for modifications, submitting proposed changes and, if applicable, a certified copy of the agreement.
• Judicial Precedents: Court cases have varied in their interpretation of the binding nature of standing orders. In some cases, certified standing orders are binding on both parties, while in others, they are not.
• Binding Nature of Standing Orders: The Supreme Court has clarified that once standing orders are certified, they bind all current and future employees, ensuring uniformity in conditions of service.
• Payment of Subsistence Allowance: When a workman is suspended pending investigation, they are entitled to subsistence allowance at specified rates. Disputes over this allowance can be referred to the Labour Court.
• Powers of Certifying Officers: Certifying Officers and appellate authorities have civil court powers for evidence gathering and document production. Mistakes in orders can be corrected by the Officers or their successors.

Misconduct and Domestic Enquiry

• Definition of Misconduct: Misconduct refers to inappropriate or improper behavior by an employee that violates the established rules or expectations of conduct within an organization. It is essential for standing orders to clearly outline the acts or omissions that constitute misconduct to ensure transparency and fairness in disciplinary proceedings.
• Conduct of Domestic Enquiries: Domestic enquiries should be conducted fairly, without adhering to the strict technicalities of criminal trials. The principles of natural justice and fair play must guide the process, ensuring that the accused employee has a fair opportunity to defend themselves against the allegations.
• Role of Enquiry Officer: The enquiry officer plays a crucial role in ensuring the fairness and integrity of the domestic enquiry. If the officer has witnessed the alleged misconduct, it is advisable to appoint another officer to conduct the enquiry to maintain impartiality and avoid bias.
• Evidence Presentation: In domestic enquiries, the employer should present evidence against the charged employee first, allowing them to cross-examine the evidence before providing their explanation. This sequential approach helps maintain fairness in the proceedings.
• Binding Nature of Findings: Findings from fairly conducted domestic enquiries are generally not subject to re-examination by industrial adjudication unless they are deemed perverse, unreasonable, or unsupported by evidence. This principle emphasizes the importance of conducting domestic enquiries with diligence and fairness.
• Staying Domestic Enquiry: If an incident leading to a charge against a workman is also being tried in a criminal court, it is advisable for the employer to stay the domestic enquiry until the criminal case is resolved. This ensures consistency and avoids conflicting outcomes.