The Tamil Nadu government’s clarification that the information technology employees in the state can form trade unions to redress their grievances by invoking the Industrial Disputes Act 1947 is a bold pro-labour step that not even its Communist neighbour Kerala could take all these years.
Such an announcement that allows employees to join hands for their rights if treated unfairly breaches the invincibility that the IT companies in India have enjoyed for years. Three years ago Karnataka had tried to lift the decade-long exemption from the Industrial Employment (Standing Orders) Act (1946) that it had granted the IT industry for more than a decade; but it had to retreat within a few months under pressure. The CITU in Kerala has been asking for an entry into the IT sector, but the response from successive governments and employees has been less than lukewarm.
Given its potential for wealth creation and employment generation, both central and state governments had justifiably gone out of their way to please the IT industry. The biggest protection, in addition to tax sops and cheap land, they offered was exemption from labour laws.
It has been all hunky-dory all these years with the industry registering double-digit growths in both revenue and employment with practically no retrenchment, except for the voluntary drop-outs, till last year when employees of TCS complained that they had been laid off in large numbers. Although the real figures were never made public, employees and labour unions alleged that about 25,000 people were sent home without adequate notice or compensation by the end of February 2015. Contesting the allegations, TCS had said that there was nothing extraordinary and it was only part of its “workforce optimisation”.
The retrenched employees and their supporters went to social media with details of the lay-offs and it clearly appeared that in an environment protected by labour laws, things couldn’t have been that easy. Had it been in any other industry, there could have been serious unrest.
The law that could have come to the rescue of the retrenched employees was the Industrial Disputes Act (1947) under which both the employer and labour have legal recourse to settle any disagreement between them on wages, working conditions and other issues. The Act stipulates specific procedures to redress grievances and hence offer substantial protection to the employees while not being unfair to the employers. It provides for settlement through collective bargaining, voluntary arbitration and adjudication in a labour court or local and national tribunals. Had the Act been in force in the IT industry, the TCS employees who lost their jobs could have had a reasonable chance of fighting their case.
The present announcement of the Tamil Nadu government arises from the impasse the TCS employees had been in and hence busts the myths surrounding the industry that its labour doesn’t need protection. An organisation called NDLF (New Democratic Labour Front) came to the support of employees who had been laid off and petitioned the government, which chose to keep quiet for a long time - probably not to displease the industry. The NDLF then went to the Madras High Court, which asked the government to clarify. In the end, the government had no choice, but to say that the employees do have a right.
The IT industry’s reaction to the news is not surprising because it has been operating in an environment that is legally sterile and filled with exemptions and concessions. In many states, the industry indeed needed pampering and protection even as they paid back in terms of not only wealth and employment, but also international glory. For instance, Chennai is the second largest IT exporter in India and has been named as the best destination for offshore services in the country. It’s also home to some of the biggest campuses of IT majors. Hence, to say that any labour right protection will discourage IT companies and that they will leave the state is hyperbolic.
A consistent voice against the recognition of labour rights in the industry has been that of Mohandas Pai, the former HR honcho of Infosys. According to him, companies would think twice before expanding in TN. He says that IT companies need exemption from “unnecessary regulations” because they cater to a global market. “If you don’t have proper legal protection for work to be done in 24 hours and you are susceptible to several demands from employees, then, it is going to be troublesome.”
This sounds like very bad HR and poor labour environment.
What Pai seems to be advocating for are enclaves within India where the country’s rule of law doesn’t operate. It might have made sense during the years of incubation, given its potential for growth; but should it be granted in perpetuity? Don’t the employees also have a right, now that the industry is mature, stable and rich?
In fact, the plight of the TCS employees was a wake-up call because many of them had put in several years of service and had been suddenly left in the lurch. Pai says that employees don’t need protection because there are enough jobs in the industry (his interpretation of the 15-20 per cent attrition rate), but most of the retrenched TCS employees couldn’t find an appropriate job immediately because they were laid off in their 30s and 40s.
With automation kicking in, the simple logic of high attrition translating into an abundance of jobs may not be correct. Media reports show that the industry will hire 20 percent fewer numbers than last year because many jobs would be replaced by machines. Wouldn’t it lead to some employment volatility that calls for labor protection?
India’s IT industry is worth about $143 billion today and it’s been co-created by about 25 million employees. So far, they have been relatively untroubled by uncertainty, but forecasts on growth and technology-adaptation do indicate difficult situations. It’s time to think about their protection too.