Overview of the Industrial Disputes Act, 1947
The Industrial Disputes Act, 1947 (ID Act) is one of India's most important labour legislations. It provides the machinery and procedure for the investigation and settlement of industrial disputes and regulates the conditions under which employers can lay off, retrench, or close down their establishments. The Act seeks to balance the interests of workers and employers while maintaining industrial peace.
The Act covers all “workmen”—every person employed in any industry to do manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward. It specifically excludes persons employed in managerial or administrative capacity and those drawing wages above ₹10,000/month (for certain provisions).
Understanding the ID Act is essential for every employer in India, as it governs how workers can be separated from employment, the legality of strikes and lockouts, and the dispute resolution machinery available to both parties.
Dispute Resolution Machinery
The Act establishes a multi-tiered system for resolving industrial disputes, progressing from conciliation to adjudication:
1. Works Committee (Section 3)
Establishments with 100+ workmen must constitute a Works Committee with equal representation from workers and management. Its function is to promote measures for securing and preserving amity and good relations.
2. Conciliation Officer (Section 4)
Government-appointed officers who mediate disputes. When a dispute exists, the Conciliation Officer investigates and tries to bring about a settlement. Proceedings must conclude within 14 days (or 21 days for public utility services).
3. Board of Conciliation (Section 5)
A tripartite body with an independent chairman and equal representatives of employers and workers. Appointed by government for specific disputes. Must submit report within 2 months.
4. Labour Court / Industrial Tribunal (Sections 7–7A)
Labour Courts adjudicate matters in the Second Schedule (discharge, suspension, legality of strikes). Industrial Tribunals handle matters in the Second and Third Schedule (wages, bonus, hours). National Tribunals handle disputes of national importance.
Strikes & Lockouts
Strike Restrictions
- • Public utility: 14 days’ written notice mandatory; no strike within 14 days of notice or during pendency of conciliation
- • Non-public utility: No strike during conciliation/adjudication proceedings or within 7 days of their conclusion
- • Illegal strikes can result in imprisonment (up to 1 month) and/or fine (₹50)
- • Workers participating in illegal strikes are not entitled to wages for strike period
Lockout Restrictions
- • Public utility: 14 days’ notice required; no lockout during conciliation
- • Chapter VB (100+ workmen): Prior government permission required for lockout
- • Illegal lockout: employer liable to pay wages for lockout period
- • Employer also faces imprisonment (up to 1 month) and/or fine (₹1,000)
Lay-off, Retrenchment & Closure
| Action | Chapter VA (<100 workmen) | Chapter VB (100+ workmen) |
|---|---|---|
| Lay-off | 50% wages for 45 days; no prior permission needed | Prior government permission required |
| Retrenchment | 1 month notice or pay in lieu; 15 days’ pay per year of service | Prior government permission + same compensation |
| Closure | 60 days’ notice; 15 days’ pay per year of service | 90 days’ notice + prior government permission |
Important: Under Chapter VB, government permission must be obtained before lay-off, retrenchment, or closure. Failure to obtain permission makes the action illegal and the employer must pay full wages.
Settlements & Awards
Section 18 Settlements
Settlements reached during conciliation proceedings are binding on all parties and all workmen (present and future) for the specified period.
Binding period: As specified in settlement, or 6 months from date of settlement (whichever is later).
Awards
Awards by Labour Courts and Tribunals become enforceable 30 days after publication. They bind all parties to the dispute.
Binding period: As specified in award, or 1 year from publication date (whichever is later).
Key Compliance Points for Employers
- ✓ Constitute Works Committee if establishment has 100+ workmen
- ✓ Follow “last in, first out” principle for retrenchment
- ✓ Obtain government permission before lay-off, retrenchment, or closure (if 100+ workmen)
- ✓ Give 14 days’ notice before lockout in public utility services
- ✓ Maintain Standing Orders under the Industrial Employment (Standing Orders) Act, 1946
- ✓ Pay retrenchment compensation: 15 days’ average pay for every completed year of continuous service