India: Workers Protest ‘Contractualization,'Seek Unionization

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By Madhur Singh

March 1—The increasing “contractualization” of India's workforce—replacing regular employees with temps hired through agencies—is pushing a drive toward unionization and fueling labor unrest, exemplified most recently by a strike at Honda Motorcycle & Scooter India's Tapukara, Rajasthan plant.

Workers struck Honda Feb. 16 following a fracas whose details are contested but which led to police action against striking employees. A company spokesperson told Bloomberg BNA via e-mail Feb. 29 that the workers are pressuring management to reinstate four workers terminated for indiscipline. Worker representative Suraj Mal Kumwat, however, told Bloomberg BNA on the phone from Tapukara Feb. 29 that the issue is much larger and stems from management's opposition to the workers' efforts to form a union.

According to Kumwat, the tussle began in August 2015 when workers tried to get a union recognized by management and registered with state government authorities. Other workers opposed this by filing a writ in court, which Kumwat says was a management ploy to scuttle union formation that could improve workers' collective bargaining strength. An important issue for employees seeking to unionize is management's reluctance to regularize contractual employees—who form the majority of workers at the plant—because contractual employees are easier to lay off and are paid less than regular employees.

Honda management denies any efforts to block unionization, saying workers' internal rivalries are preventing union formation and that the issue is being “politicized.” Beyond that, Honda's spokesperson refused to comment on the company's view of the employees' demand for recognition of a union, saying the matter is under judicial consideration.

On Feb. 29, Honda reported that 70 percent of the 2,300 workers at the Tapukara plant had resumed work and that production was at 80 percent capacity despite ongoing agitation by a group of workers who claim to be fighting for their right to unionize.

Trend Toward Contractualized Labor Accelerates

Practitioners and experts have long warned against the pitfalls of increasing contractualization of the workforce, as employers increasingly replace directly employed workers with those employed through contractors. Data from the government's Annual Survey of Industries and such other studies as the November 2011 ILO working paper on show that the absolute number of directly employed workers declined considerably in the years following liberalization of the economy starting in 1991, while the absolute number of contract workers rose. In the organized factory sector, under which the automobiles sector falls, the percentage of contract workers increased from about 13 percent in 1993-94 to 30 percent in 2006-07. A study conducted by the University of Manchester's Research Programme Consortium on Improving Institutions for Pro-Poor Growth (funded by the U.K. Department for International Development) found that in the industrialized states of West Bengal and Gujarat 60-70 percent of workers are contract laborers.

Some of the opponents of contractualization claim the practice violates several provisions of the Contract Labour Act 1970 intended to protect contract workers, in particular Section 10 that says contract workers cannot be hired to perform core functions (i.e., those sufficient to employ a considerable number of full-time workers and done ordinarily through regular workers), and Rule 25(v)(a) of the Contract Labour (Regulation & Abolition) Central Rules of 1971, which say a contract worker performing the same or similar work as a regular worker is entitled to the same wages and other service conditions as the regular worker.

“Practically, however, we have seen that contract labor are paid at a lower rate than the regular employees,” Ajay Raghavan, partner at law firm Trilegal, told Bloomberg BNA by e-mail Feb. 26. "Separately, contract labor are typically not a part of trade unions, and thus dilute the trade unions from both the perspective of representation and in their bargaining capability in the event of disputes. However, it is also the case sometimes that contract labor and regular employees work together to agitate for rights.”

Raghavan cited as an example an infamous incident at a Maruti Suzuki facility in Manesar near Gurgaon in 2011, where there had been a combined push from both regular employees and contract labor for regularization of employment, but simmering discontent had resulted in an altercation in which a manager had been killed.

Honda's workers also claim that contract and permanent employees are working together to form a joint union.

Legal Reform Favors Employers

Practitioners point out that on the whole, labor unrest has been on the decline in India. According to Raghavan of Trilegal, there are several reasons for this “from increased job mobility that employees (especially the younger ones) enjoy, which means they are less willing to persist in a job and agitate for rights, to an increase in the use of contract labor and availability of an alternate workforce. Another reason would be the increased growth of the service sector, especially the IT/ITES industries, which do not have the strong sense of unionization that the manufacturing industries possessed in the 1970s and 1980s.”

Professor Debi S. Saini, chairperson of Human Resource Management at MDI, Gurgaon, who authored a seminal case study on an outbreak of violence at HSMI's Gurgaon plant in 2005, points out that while contract workers' numbers are increasing, they continue to live in a state of job insecurity and under a socioeconomic and legal framework that does not adequately support them.

“This situation justifies increasing state role in ensuring a just treatment to contract labor through legislative amendment,” Saini told Bloomberg BNA via telephone Feb. 26.

Legislation proposed thus far, however, mostly aims at making it easier to lay off workers and more difficult for workers to protest.

The Labor Code on Industrial Relations 2015, for example, which would consolidate three of the most important industrial laws—the Industrial Disputes Act of 1947, the Trade Unions Act of 1926 and the Industrial Employment (Standing Orders) Act of 1946—would enable businesses employing fewer than 50 workers to lay off workers without providing a minimum of one month’s notice and severance at the time of retrenchment and make taking of casual (personal) leave by 50 percent or more of employees on any given day a “strike.”

The country's powerful trade unions—many of them allied with left-leaning political parties and others affiliated with the leading political parties, the ruling Bharatiya Janata Party and the Congress Party, which has ruled the country for a majority of the period since Independence—have announced they will oppose reforms along these lines. Ahead of a countrywide strike in September 2015, the unions put forward a charter of 12 demands, including stopping the contractualization of permanent, perennial work and guaranteeing payment of the same wage and benefits for contract workers as regular workers.

Vikram Shroff, who heads the HR Law practice at Nishith Desai Associates, told Bloomberg BNA via e-mail Feb. 25 that if some of these conditions were met, “it could check the abuse of contract labor and these incidents [of protest, violence or strikes] may have been avoided.” Shroff added that “while there will always be divergent views in relation to policy matters, any proposal for labor law reform should ensure that workers’ interests and welfare are not compromised in any way, since the large workforce of our country are a critical part of India’s ecosystem.”

To contact the reporter on this story: Madhur Singh in Chandigarh at

To contact the editor responsible for this story: Rick Vollmar at

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