Maruti Suzuki’s Labor Issue, Law Violation, Disciplinary Action and Trade Unionism

Amrit Mohanty

Brief History and Basic Problem

Maruti Suzuki Limited has been founded and incorporated in 1983. Maruti Suzuki India Limited is one of the subsidiary organizations of the Suzuki Motor Corporation, Japan. The company was renowned for its efficient, affordable and reliable cars so that it has been the leader of the Indian car market for over the past two and half decades. Companies Manufacturing Facilities are located in Gurgaon and Manesar which is accounted for over 45% of the domestic car market. The company produces and sells more than a million cars annually. Company’s annual exports are 50,000 cars and it offers 14 brands and over 150 variants ranging from people using Maruti Alto 800 to hatchback Ritz.

Company had certain problems in labor relationship. With the changed ownership, Maruti came under government control and the problem has been started. Labor problem was started under the management of Indian government. In 2000, a major IR issue began and employees of Maruti went on indefinite strike, demanding major revisions of their wages, incentives and pensions and perks. Employees used slowdown in October to press a revision in their incentives-linked pay. The cold war between union and management continued through 2001. The management refused to pay heed to the union demands because of increased competition in the automotive sector and lower profit margins. The increased competition in India due to the entry of global automotives, as well as increased local and import costs, Maruti Suzuki was gradually feeling the threat expulsion from its comfort zone hence it was pushing workers by continuously making demands to increase their productivity by increasing workloads. The workers remained more or less in the same place as far as wages were concerned and a huge disparity in salary between contract and permanent workers existed. The central government prevailed and privatized Maruti Udyog in 2003. Suzuki of Japan becomes the majority owner of Maruti Udyog Limited with 51% share with the public holding 12.5%. In late 2011 and early 2012, labor unrest started in the Manesar Plant with Sonu Gujjar a local labor leader demanding right to establish an alternative labor union due to non alignment of a large section of workers with the existing union. The problem was solved in a rather sneaky way by sending off Sonu Gujjar and twelve others with a Golden Handshake scheme which lacked transparency. On 18th July 2012, Maruti’s Manesar plant was hit by violence as workers at one of its auto factories attacked supervisors, engineers and other management personnel and they also burnt and killed a senior HE executive, injured 100 managers including two Japanese expatriates. The Haryana Chief Minister promised a fast-track probe into the Manesar incident and appointed K.T.S Tulsi as the public prosecutor. He also mentioned that this violence will be treated under criminal proceedings and not under industrial unrest.

Manesar Incident

On 18th July 2012 at Maruti’s labor Plant, the industrial disputes has been broken out when workers became aggressive and around 96 staff members were injured while and violence also leading to the death of a human resource manager. More than two third of employees were indulged in the strike which in turn lead to lose about 75 Cr in revenue and 8cr in operating profit daily. Maruti’s production line faced a loss of around 1200–1400 units daily.

The company already knew that the trouble has been brewing; they knew that some workers are planning to register a separate union and the company had already prepared legal documents for Permanente expulsion of workers from premises. Maruti only backs a single union and that is Maruti Kamgar Union for both Gurgaon and Manesar plant. These unions are set up by forces close to management after the lock out at Gurgaon plant in 2000/2001. On third June eleven leaders of the workers were in Chandigarh to meet the labor department to complete the formalities regarding registration of our union on June 3 2011. On that morning labor department officials faxed the news of the application to the management. On morning of June 4 2011, through struggle some blank signed paper from the management has been retrieved. In the afternoon it was clear that management was using all tricks to break our unity. After that employees went on strike from afternoon of June 4, 2011. In 4th June around 2000 workers stop work and remain in factory. During the Initial stage workers raised various issues and demands like low wages, incentive cuts, Few Breaks. They have also demanded that those workers should be given preference for permanent posts in new departments. The main cause of the initial level strike was difference in salary pay, worse conditions, existing union only voice for Permanente employees, also they had a demand for new union.

Workers Demand

1. There should be fivefold increase in basic salary.
2. A monthly convey allowances of 10,000.
3. A laundry allowance of Rs 3000.
4. A gift must be given after every new car launch
5. Cheaper home loans must be provided those who wants to build new houses
6. A house for every workers
7. 4 paid week vacation must be increased to 7 weeks.
8. Each workers must be given 40 days allowance of sick and casual leaves. For total of 75 days of leaves must be given.

Law Violated in the Initial Stage

Reducing of wage bill and hiring and firing of employees violates India’s archaic labor law and that also prevents companies from easily hiring and firing employees. Since the company put pressure on employees to increase its productivity the amount of pay must also proportionate the amount of work load. Here the wage structure is up to half a monthly pay is based on productivity. So minimum wage has to be revised according to the minimum wage act. Even taking a sick leave also cost workers a quarter of his dispensary pay. Rule of scientific management is also violated during tea and launch break. There is lack of adequate rest time for tea, meals, launch and bathroom breaks. Minimal time has been allocated during these breaks. The rule of leave policy was also violated because employees are entitled to work 6 days and no leaves get approved during marriage and other emergence. Employee enhancement program was also not been conducted for contract employees. Basic facilities of employees like pick and drop also terminated. There is a huge disparity in price between permanent and contract employees. Contract employees are paid only 7500 after marking attendance every day. Permanent workers are paid more than twice than contract worker. A large amount of monthly income of contract workers was spent on house rent, which was shared by four people. Other expenditures included the cost of food, medicines and toiletries; the remaining balance was sent to their families .It completely violates the minimum wage act in comparison to index number. Also there were no concessions for any illness or any unproductive absence which completely violates the contract labor act. The physical and psychological strains have been put on associate to produce one car in approximately 45 seconds. An average of two hours unpaid overtime a day. Company has more reliance on contract workers and around 75% of the workers are contract labor, trainee or apprentices. These workers are paid dramatically less than full time workers those who have no job security or benefits. So here contract labor act as well as minimum wage act has been violated clearly. Here also company is intentionally trying to stop forming a union which is illegal according to industrial dispute act.

Manesar Incident Subsequent Causes

1. The floor supervisor who was rude and slapped the employee had been rewarded with promotion but when a labor dares to reply was issued a notice on grounds of disciplinary action.
2. Foods serve to employee was in a worse condition and cockroaches and dead files are found in the food.
3. In the tea break tea has served without tea leaves or sugar.
4. Company doctor applies heavy does for instant medicines on minor compliant so that disruption in work might be prevented.
5. One days wage cut of Rs.1500, two days 2200, Three days cut of 7–800 was implemented so almost the total wages is cut.
6. One second late punching card entry results to one days wage cut, but they have to give full production for that day too.
7. Workers are forced to fill a undertaking form which means workers are not allowed to raise any objections against management.
8. Unhappy workers are disrupted the ongoing work by creating serious defect in quality of cars and that would fail the compulsory vehicle inspection test.
9. Workers deliberately attempted to reduce the output and compromised the customer interests.
10. Workers refused to sign good conduct for ensuring the good quality products.
11. Employees are also charged with sabotage for causing quality problems in the cars produced.

Basic Cause of this Problem

1. Lack of communication between HR people and labor
2. Lack of Coordination between labor union and HR Department.

Disciplinary Action Taken By Management

1. Clear cut suspension of 10 workers.
2. Discontinued the services of six trainees.
3. Also management has suspended four workers for “instigating indiscipline” a week before.
4. Another four workers have been suspended later for mishandling and misbehaving supervisors.
5. Sabotage has been charged for causing quality problems in the cars produced.
6. On 14th August 2012 police force of 500 has been sent to occupy and possess the factory to prevent violent activities.
7. The company has terminated 11 workers and suspended 38 on August 29th and 30th on false charges demanding the good-conduct bond” with state police, administration, the media.
8. 13 Employees get life term imprisonment.
9. 18 ex-workers had been convicted on other offences like violence, rioting, murder and four have been given a sentence of 5 years
10. 14 other convicts would be released after paying a fixed amount of 2500 as fine.
11. 14 accused get jail term of four and half year.

Solution to the issue and New Trade Union

1. Maruti Suzuki Employee Union (MSEU) is demanding as an immediate measure, the withdrawal of charge sheet, termination, suspension of the 49 workers. The workers are sitting day-and-night at the factory gate, peeling off the layers of Maruti Suzuki’s way of life.
2. Solution to this problem is the establishment of a separate union for Manesar Plant.
3. Members of the trade union must have to be nominated with consent of both workers and management.
4. The leaders of this union should be appointed by the management.
5. Separate trade union must coordinate properly between management and workforce.
6. If they will not agree to the issue then management would move to the plan B and that is technology oriented operations which will reduce the demand of man power.
7. Union and management need to properly coordinate with each other.
8. There should be proper rule for indiscrimination in salary.
9. Management also need to control the public poker.
10. Management should try to understand the labor issue.
11. Also a proper hygienic condition needs to be maintained at workplace to reduce employee’s dissatisfaction.

Necessary Changes done after the Event

1. Company adopted a policy of hiring contract workers through Company HR and mediation of contractor for hiring this thing has been eliminated
2. Reopened of the plant with 300 workers
3. There is a fresh recruitment of permanent workers
4. Termination of services of 500 permanent workers those who are involved in violence.

Controversy on Maruti’s removal of 500 permanent workers (is it dismissal or retrenchment) (Expert and stakeholder Verbatism)

The dismissal of 500 permanate workers on “disciplinary grounds” had created confusion whether it was indeed a case of dismissals or retrenchment.

Retrenchment of workers is possible under the industrial dispute act, subject to the approval of the state government and dismissal is only possible under Industrial employment standing order act, which does not require the state approval. Company is seeing the dismissal case itself as case of disciplinary action under the industrial employment standing orders act, some others see it as veiled retrenchment which must be addressed under Industrial disputes act.

As per Maruti COO all legal processes were followed by the company. According to him 33 dismissals under both the Industrial Disputes Act and the Standing order Act and rest dismissals are under the standing order act on ground of loss of confidence.

But here the management does not able to clarify further on the legal process, whether state approval has been sought or received, the company in its dismissal letter issued to workers says its disciplinary action. According to general secretary of centre of trade unions Mr. Tapan Sen it is contradicted in the next part of letter which announces compensation for the “dismissed” workers. Here the compensation is according to what is given to retrenched workers”.

Every worker has been given three month’s salary and also they are given for 15 days for every working year. So, a worker who put in five years stood to get salary for five and a half month. A dismissed worker gets nothing at all says Sen.

According to Dr Prabhu Mahaptra it is a retrenchment since it says the difference in salaries paid to contract and permanate workers.

Labor law academic Dr Karnala Shankaran does not see the line between retrenchment and dismissal blurring. When we talk of retrenchment it is about surplus staff for which permission is required. In this case it was a disciplinary action, for which company needs to follow its own standing orders modeled after the standing Orders Act she says.

According to Sen if it is dismissal then workers should be charge sheeted and given an opportunity to defend themselves. Besides the police had named 55 in the FIR and arrested about 100, four times that number has been dismissed, says Sen.

Strike after court order

According to Maruti Suzuki Mazdoor Sangh, an umbrella organization of workers in the plants, workers were convicted due to false witness produced by the government and administration and they went for strike from 9pm to 10pm against court verdict. Work in all six plants remains shut down for one hour.

Employee Rights in Manesar

1. A minimum wage rate has to been maintained for contract employees.
2. A minimum piece rate should be maintained.
3. A non discrimination in pays at workplace.
4. There should be local hiring of employees.
5. There must leave provided without wages.
6. There should be proper working hours, holidays and overtime.

Labor law tweaked by Management

1. Enforcement of labor laws was not followed properly
2. There is a differentiation in salary pays
3. There is an unhygienic working condition
4. Lack of proper negotiation between management and union.

Approach of management towards contract workers after Manesar Event

1. Management had decided that it would not hire contract workers for production jobs and continued to do so.
2. Contract workers are going to be hired directly not through any contractors
3. Contract workers are getting more benefits such as free meals, insurance and provident fund than in past.
4. Current salary of contract employee is 17000 and salary of permanate employee’s varies between 1700 and 50,000 depending upon work experience.
5. Company had taken a decision of stop hiring of contract workers in production department and started to convert contract workers into permanate ones. This move was taken to avoid Industrial unrest.
6. At Maruti the contract workers are directly hired from Industrial Training Institute and they are then trained for several shop floor jobs.
7. After Manesar Violence Maruti has increased the pay scale of both permanate and contract workers in a regular basis.