Assessing the Role of the State in Collective Bargaining by Trade Unions

This article acknowledges that inequality in the bargaining power in employer-employee relationships still subsists. However, Dushyant Kishan Kaul proposes that there need not be a trade-off between equity and efficiency.

  • Dushyant Kishan Kaul


Ensuring the welfare of workers is one of the primary constitutional goals and has been entrusted on the state. 1 Over time, however, the strength of trade unions has substantially diminished as employers seek to reduce costs and augment profit margins. 2 In the wake of the free-market wave, this paper favors a shift from market reliance to more state interference in the form of minimum wage and employment protection laws. It is imprudent to look at the free market as a panacea purely in isolation. The interaction of legal rules with the conditions at hand can is required for ‘socio-economic development’ 3. 4

After giving a brief overview of what industrial relations were like earlier, Kamala Sankaran 5 points to the changes to the existing framework of the labor law regime in South Asian countries, that have dominated discourses on the subject in the last two decades. The problem of multiplicity of laws exist owing to labor being a concurrent subject in the Constitution of India. Moreover, the current framework exacerbates the concern regarding the lack of uniformity in laws.

1. See Articles 38 and 43A of the Constitution of India
2. Dhanaraj, P Prince (2001),“Impact of Trade Unions, Employment and Technology on Wages: A Study of Cotton Textile Mills in Madurai District”,Economic and Political Weekly, Vol. 36, No. 52, p.4850
3. Thakur, C.P. (1976), “Trade Unions and Social Science Research in India”, Indian Journal of Industrial Relations Vol.12, No.1, p.19
4. Deakin, Simon (2009), “The Evidence-Based Case for Labor Regulation”, Paper prepared for the ‘Regulating Decent Work’ Conference, ILO, Geneva, p.16
5. See Sankaran, Kamala (2007), “Labor Laws in South Asia: The need for an inclusive approach”, International Labor Organization, International Institute of Labor Studies, Geneva

However, this is outweighed by greater concerns. India has experienced many twists and turns in its economic development policies since independence. 6 State influence in this mixed economy is needed to promote efficiency and protect the rights of workers simultaneously. The Tenth Five Year Plan (2002-07) and the Industrial Policy Statement of 1977 are instances of the state has attempting to lay down policies for the same. 7 The vast informal sector has led to sharp dips in employment rates for long spells. 8 In the process, however, even policies for the formal sector are not enforced due to the small coverage of those laws. The principal argument of this paper is that labor laws, despite their limitations, need not be seen as a hindrance to the development of a free market economy, but one of the foundational constituents of industrial relations. 9

In this regard, the updated story presented by scholars like Guy Davidov 10 buttresses this fundamental argument by saying that labor law and inefficiency cannot be equated in all situations, and that the divide is less dramatic than what is portrayed in the ‘old story’ (I and II). The involvement of the state, despite its problems, can also result in efficient outcomes when markets mechanisms fail. In such cases, correction of these failures to promote security and trust and thereby increase productivity and foster growth is necessary.

Hindrances to the ‘Collective Bargaining’ Powers of Trade Unions

The biggest problem is that qualified protections are only given to registered trade unions 11. Unregistered unions cannot engage in litigation; acquire, hold and enjoy property; and are not seen as separate legal entities. 12

6. Mukherji, Rahul (2009), “The State, Economic Growth, and Development in India”, India Review, Vol. 8, pp.81-106
7. Mishra, R.K. (2014), “Role of State-Owned Enterprises in India’s Economic Development”, Workshop on State-Owned Enterprises in India’s Economic Development, Organization for Economic Cooperation and Development, pp.5-8
8. Shah, Hemal (2014), “Transition to Labor Law Reform: State-Level Initiatives & Informal Sector Labor Relations”, The Indian Journal of Industrial Relations, Vol.50, pp. 34-36
9. Deakin, Simon (2014), “Labor Law and Inclusive Development”, Center for Business Research, Working Paper No. 458, University of Cambridge
10. Davidov, Guy (2007), “Notes, Debates and Communications: The (changing?) idea of labor law”, International Labor Review, Vol. 146, pp. 314-316
11. This is despite the voluntary nature of registration under Section 4(1) of the Trade Unions Act, 1926 (TU Act)
12. See Section 13 of the TU Act

The significance of recognition has been underscored in Balmer Lawrie Workers’ Union, Bombay and Anr. v. Balmer Lawrie & Co. Ltd. &Ors. 13, where the court noted that in effect, recognized trade unions represented all workers in the industry. They are indispensable channels of collective bargaining. In fact, the synergy of employers and employees has resulted in higher employee wages with sustainably high output. If the state can check labor law infringements, it can play a pivotal role in increasing the role of unions topromote dialogue based on mutual trust and cooperation. 14

In general, trade unions (whether registered or not) cannot gain de facto recognition. One must not divorce this statutory protection from the social realities of “excessive fragmentation” and “inter-union warfare”. The schism along due to politically divergent ideologies also cannot be overlooked (since the demands of unions are only heeded when there is political pressure upon employers 15). Since bargaining strength is measured by members, unions fight to represent the same set of workers, thereby diluting their efficacy. 16 Exploitation through “dual unionism and political manipulation” 17 due to a lack of knowledge 18 needs to be curbed. This exigency requires democratic methods of union recognition, such as executing the suggestion of compulsory recognition. 19

The appalling disparity among employers and employees cannot be gainsaid. Their concerns are disregarded by the employers, who argue that they need to be ‘disciplined’ in order to ensure industrial growth. Meagre incomes, along with woeful work conditions, are often the result of this obsession with augment the yield. Continued misuse will only further this chasm and exacerbate tensions. 20

13. AIR 1985 SC 311
14. Sodhi, J.S. (2013), “Trade Unions in India: Changing Role and Perspective”, Indian Journal of Industrial Relations Vol.49, No.2, pp.180-181. Also see Maira, Arun (2014), “Rethinking Labor Law Reforms”, Indian Journal of Industrial Relations, Vol. 50, No. 1, at pp.29-30
15. “Report on Labor Laws in India”, (2009) Amarchand Mangaldas, pp.44-45
16. Mahmood, Zaad (2016), “Trade Unions, Politics and Reform in India”, Indian Journal of Industrial Relations, Vol. 51, No. 4, pp.536-540
17. James, Ralph (1958), “Politics and Trade Unions in India”, Far Eastern Survey, Vol.27, No. 3, p.42
18. Id.
19. Davala, Sarath Chandra (1989), “Question of Union Recognition”, Economic and Political Weekly, Vol.24, No. 47, pp.2592-2594.
20. Chaulia, Sreeram (2012), “Industrial Democracy”, The Asian Age

How the State Must Come to the Rescue of Employees

There have been several cases of gross misuse of state power. A glaring instance of this was the Maruti incident, where an altercation (resulting from the hurling of caste-based slurs at an employee) resulted in his suspension. This unfairness led to a confrontation between the management and the trade union, ultimately escalating into a conflagration at the plant site. In the aftermath, the state police arbitrarily detained the remonstrating workers, resulting in an atmosphere of fear coupled with indignation. 21The sudden closure of the Nokia factory in the Special Economic Zone, the reallocation of coal blocks through an electronic auction [by passing the Coal Ordinance (Special Provisions) Bill, 2014] and hikes in disinvestment and foreign direct investment 22; are other notable instances. While state-led employment generation through industrialization is laudable, the absence of accountability in regulation policies means that private players can exploit workers according to their vested interests with impunity. 23 Such instances do not inspire confidence, and only give rise to more resentment and consequent mobilization.

With the state being complicit with the management in exploiting beleaguered workers to some extent; - two main reasons for this growing mistrust among workers are(1) non-acceptance of globalization reforms by workers (such as the creation of Export Promotion Zones, where law enforcement is weak) coupled with (2) failure of unions to fight against anti-labor practices. 24

Thus, the argument does not deny that problems do exist. There needs to be a uniformity among laws, for instance, in erasing any ambiguity in the scope of terms like ‘industry’, ‘industrial dispute’ and ‘workman’ that have beset the courts. 25 The multiplicity of laws confers excessive powers on the state and forecloses alternate means of dispute resolution. State participation is also required to alleviate the misery of informal workers, who constitute more than two-thirds of the population.

21. Rakhi Sehgal, ‘Maruti Workers Are the Villains’? Truth or Prejudice, 47 Economic and Political Weekly (No. 4) (2012) – pp.312-315
22. “India: Trade Unions and Collective Bargaining”, (2019) Nishith Desai Associates
23. Dutta, Madhumita (2016), “The Nokia SEZ Story: Economy of Disappearances”, Economic and Political Weekly Vol. 51, No. 51, pp.43, 50
24. Sodhi, supra note 14, at pp.169-178
25. Kaul, B.K. (2008),“‘Industry’, ‘Industrial Dispute’ and ‘Workman’: Conceptual Framework and Judicial Activism”, Journal of the Indian Law Institute, Vol. 50, No.1, pp.48-50.

The dangers of non-ratification of any of the two “fundamental ILO Conventions” 26 [International Labor Organization (ILO) Conventions (No. 87 and 98)] by India have manifested in the form of draconian laws like the Essential Services Maintenance Act, 1968. This law not only disallows the expression of problems but also empower the state to arrest workers without a warrant.

Hence, the state is needed to achieve ‘social justice’, preserve ‘human rights’ and dispel inequalities. For reform, consolidation and simplification of laws is needed. In addition, expeditious resolution using alternative adjudication and settlement forums would go a long way. 27

Despite their exasperation, informal workers are recognizing state help in non-traditional employment relationships (seen from the rise in the number of central trade unions 28). In embracing their vulnerability, they are actively seeking protection from exploitation. In doing so, they are calling for the application of labor legislations from otherwise excluded categories of persons. Essentially, they demand state-based welfare. In addition, this definition of the state also includes the courts, where public interest litigations have been filed. In fact, construction and domestic workers have succeeded in the numerous claims that they have approached the judiciary with. As a result, pressing issues of otherwise marginalized informal workers have come to the fore. 29

Within the regime of state control, changes can definitely be brought forth. For instance, significant political will can help move ‘labor’ from the concurrent list to the state list, thereby reducing the problem of multiplicity of laws and encouraging de-centralization. 30 Reducing the layers of dispute resolution is pivotal to combat pendency. Effective implementation of existing legislations, social security schemes and other reforms can help the state fulfill its role as the primary vehicle to amend the archaic and rigid laws in India today. 31

26. Brown, Drusilla K. et al. (2002), “Pros and Cons of Linking Trade and Labor Standards”, Discussion Paper No. 477, Research Seminar in International Politics, School of Public Policy, University of Michigan, p.8
27. Sankaran, supra note 5, at pp.6-16
28. Hensman, Rohini (2011), Informal Labor: The Struggle for Legal Recognition in Workers, Unions and Global Capitalism: Lessons from India, Columbia University Press, p. 205
29. Agarwala, Rina (2019), “Using Legal Empowerment for Legal Rights in India”, The Journal of Development Studies, Vol.55, No.3, pp.409-416
30. Shah, supra note 8, at pp. 38-43
31. “Report of the Working Group on Labor Laws and Other Labor Regulations”, (2006) Working Group No. 11, Planning Commission, Government of India, pp.1-28

3233Advocates of state control propose strong regulation of the private sector and a dominant role of the state in the public sector. It draws labor and capital into collaborative engagements. 34 However, this has its fair share of problems, as there will be impediments in this enforcement. When compared with a number of European countries, India is seen as one of the most protective countries. The hierarchical nature of society, its limited application to the unorganized sector and poor enforcement constitute these impediments. 35

Another problem is the amount of resistance to government policies has been put forth by unions, who have their respective political affiliations. As a result, the central government has, instead of passing laws to regulate the activities of such organizations, merely passed the responsibility on to the concerned state government. They are also unwilling to implement any policy moves that may be antagonizing for their trade union wing. 36 Political motives aside, most of the labor regulations have focused on increasing employment only in large firms, as a result of which small-sized firms get neglected. 37

The retention of powers with the state (for instance, juridification of disputes) has been done to resolve such disputes at the conciliation stage, and prevent unnecessary litigation. 38 However, the nature of this protection has to change, in that the plethora of laws need to make accurate categorizations into the sub-aspects of labor law, having a direct target group for it to be effective. Moreover, the current framework is largely protective of individual rights, as collective rights continue to be under threat.

32. “Suggested Labor Policy Reforms”, Federation of Indian Chambers of Commerce and Industry, pp.3-5 (2014)
33. Shah, supra note 8, at pp. 46-47
34. Mitchell, Richard et al. (2012),“The Evolution of Labor Law in India: An Overview and Commentary on Regulatory Objectives and Development”, Working Paper No. 18, Workplace and Corporate Law Research Group, pp.25-26
35. Id., at p. 27
36. Rajesh, S. and Dr. Manoj P.K. (2014), “Politicization Of Trade Unions And Challenges To Industrial Relations In India: A Study With A Focus on Northern Kerala”, International Journal of Business and Administration Research Review, Vol. 1, p.46
37. Hoda, Anwarul and Durgesh K. Rai (2015), “Labor Regulations and Growth of Manufacturing and Employment in India: Balancing Protection and Flexibility”, Working Paper No. 298, Indian Council for Research on International Economic Relations, pp.13-14
38. Industrial Disputes Act 1947, ss.6, 7A and 7B

Collective bargaining and recognition of trade unions prove to be notable instances. 3940 Studies have also shown how policies with pro-employer provisions experience high employment and output than those that lack such policies. Thus, this focus on protecting workers, though important, has to be implemented in light of the basic principle of harmonizing relations between employers and employees. 41

An area of concern has been the flexibility in the manipulation of labor laws despite the rigid state control that exists over the field due to poor enforcement and implementation. Efforts have been made to legislate on the informal sector, but to little avail.

It is not contended that labor laws in are only applied to certain sectors of the economy. Due to the conditions precedent to the application of these laws to a majority of the workforce, its scope has not been far-reaching. For instance, casual workers are excluded from its scope due to their status of not being technically ‘employed’ and not fulfilling the minimum eligibility period. 42 Another issue is that the majority of the workforce is a part of the unorganized sector, and hence are not entitled to a minimum wage. Along with unsafe conditions of work, child labor and debt-bondage, these create an urgent need for the state to provide decent work opportunities.

Advocating A Paradigm Shift

Despite this, the law has a limited application and is inconsequential in the case of informal workers, who are not covered by the law whatsoever. 43 It is worth considering the role of the state in reforming the labor system setup. Whether it be a promoting information symmetry or reducing transaction costs and monopolistic tendencies, the promises of minimum wage assurances and job security through an active state role is conducive to labor law. 44

39. Deakin, Simon et al. (2007), “The Evolution of Labor Law: Calibrating and Comparing Regulatory Regimes”, International Labor Review, Vol.146, p.133; see Mitchell et al., supra note 34, at p.61; also see Anderson, G. (2011), “The Evolution of Labor Laws in New Zealand: A Comparative Study of New Zealand, Australia and Five Other Countries”, Comparative Labor Law and Policy Journal, Vol.33, p.137
40. Mitchell et al., supra note 34, at pp.30-34
41. Aghion, P. (2003), “The Unequal Effects of Liberalization: Theory and Evidence from India”, Working Paper No. 12031, National Bureau of Economic Research
42. Report of the Study Group on Globalization and its Impacts (2002), “Globalization: A fair opportunity for all”, International Labor Organization, pp.20-21
43. Mitchell, Richard et. al. (2014), “The Evolution of Labor Law in India: An Overview and Commentary on Regulatory Objectives and Development”, Asian Journal of Law and Society, Cambridge University Press, Vol. 1, p.432,438
44. Davidov, Guy (2007), “The (Changing) Idea of Labor Law”, International Labor Review, Vol. 146, No.3-4, p.315

Since many trade unions are not recognized 45, private players tend to evade regulation through corrupt practices such as - the use of capital-intensive technologies, outsourcing, exploiting lax supervision by splitting up into smaller entities and charging higher prices. 46 In lieu of this, removing the bottlenecks of doing business through employer flexibility is important. An overhaul both the structure of organization of labor laws and the social security apparatus is key. Most importantly, an active state role in improving working conditions and the issue of wages can unite unions by instilling confidence. 47

State involvement is necessary to take measures if strikes violate the public order norms or lead to violence and other forms of damage. It cannot automatically be assumed that the employees are at fault. At the same time, safeguards should be present to ensure that workers have the freedom to voice grievances. Only the synergy of trade unions and the state by means of collective bargaining can result in harmonious relations between the two. 48 Strong, bona fide union leadership will help shed focus on a wide array of labor issues based on a morally correct outlook and value-system. 49


This paper proposes that a macro-approach must be adopted to highlight the problems with market forces, so that the importance of welfare state institutions can be recognized. To some extent, labor law is coterminous with the emergence of market forces. Redistribution of power relations ought to be carried out by states, particularly in former colonies. Their contribution to economic coordination and mitigating the adverse effects of market risks must be recognized. 50

45. This was contrary to the recommendations of the Report of the National Commission on Labor (1969). Also see Shyam Sundar, K.R. (2014),“Institutional Framework of Industrial Relations in India: Still & Muddy Waters”, Indian Journal of Industrial Relations, Vol. 50, No.2, p.198
46. Warnecke, Tonia and Alex De Ruyter (2012), “The Enforcement of Decent Work in India and Indonesia: Developing Sustainable Institutions”, Journal of Economic Issues, Vol.46, No.2, pp.397, 400
47. Shah, supra note 8, at pp.34, 39, 46
48. Servais, Jean Michel (2009),“The ILO law and the freedom to strike”, Paper presented to the University of Toronto Symposium, p.5
49. Millen, Bruce H. (1968),“Report on Trade Unions in India: Examining the course of political unionism in a developing country”, Monthly Labor Review, Vol. 91, No.12, p.16
50. Deakin, supra note 9, at pp..4-10

On issues of gender inequality of labor laws, the efforts of acknowledging voluntary work in households by the state has been well-accepted. There is an attempt to bring women within this fold through special provisions, for instance, on issues of night work. The Committee for the Elimination of Discrimination against women (CEDAW) has noted that a purely formal or programmatic approach is not what is required to achieve woman’s de facto equality with men at work places. To achieve such results there is a need for intervention so that it leads to an enabling environment. Actions to create enabling environment usually takes place at macro or meso levels through the adoption of policies, legal and regulatory frameworks and these frameworks according to CEDAW has to be devised primarily by the Government. 51 In India the government can issue mandatory policies for the employers to ensure the safety of their women employers, particularly during night shifts by providing for their transport from the factory to their respective places of accommodation and charge very little (if at all charge is required) in the process. To balance the cost of transport the government may grant subsidies to such industries if they deem it to be necessary.

The ILO paradigm has been fundamental in encouraging domestic laws to align with the recognized standards and principles of work. The general consensus is thus to encourage simplification of laws, broadening of the modes of labor adjudication. However, the state must play a dominant role in ensuring the same.

The shrinking role of the state (more as a facilitator rather than a protector) has done more harm than good. 52 Workers are financially vulnerable and require governmental support. With a robust legislative framework, implementation 53 of policies becomes key. Relations can improve only if all affected grassroot stakeholders are recognized. Once this foundation is at place, the state can play an influential role in increasing the powers of collective bargaining of trade unions.

51. “Enhancing Participation of Women in Development through an Enabling Environment for Achieving Gender Equality and the Advancement of Women”, (November 8-11, 2005) Expert Group Meeting of the Division for Advancement of Women, United Nations Department of Economic and Social Affairs, available at -
52. Agarwala, supra note 29, at p.379
53. Kaufman, Bruce E. (2014),“Reform in India: Insights from Tangled Legacy of Sidney & Beatrice Webb”, Indian Journal of Industrial Relations, Vol. 50, No. 1, p.19
DUSHYANT KISHAN KAUL is a student of law at Jindal Global Law School, Sonipat. He is also an Assistant Editor with India Law Journal and can be reached at