CASE STUDY MODULE 11
INDUSTRIAL LAW

Summary Of The Case Study
Lanka Fashions Leather Products Company has been running a profitable business for the past several years. At the beginning there was no trade union for the company but about six months ago the workers of the company has formed a branch union of a registered trade union sponsored by a political party with radical views. after the formation of the union they requested several opportunities to meet the management to discuss about factors affecting the member attached to the company. however the management has turned a blind eye to the request made by the union to give an opportunity to discuss the matters.
The union informed the management in writing that in the event management failing to grant an opportunity to discuss the matters effecting within 14 days the union will be compelled to resort to strike action. As there was no response from the management they extended there mandatory period for a further period of two weeks. Management continued to be indifferent towards the union's request, and the union ultimately launched a strike. the union had a membership of nearly 75% of the total workforce of the company and almost 70% of the membership joined the strike.
Even after the commencement of the strike the management refrained from having an dialogue with the union.
Two weeks after the commencement of the strike the management wrote to all the strikers individually by registered post to their home address that they would be treated has having vacated the position if they fail to report within 7 days. employees ignored the ultimatum and continued to take part in the strike.
After the lapse of the ultimate date given the employees were informed in writing that they had been treated as having vacated their posts.
Labor commissioner who gets to know the situation summoned both parties to his office and attempted to settle the dispute, but fails. He refers this incident to the minister who instructed for compulsory arbitration.
As a result of the compulsory arbitration the union called off the strike and returned to work but they were refused to enter the factory by the security on instructions from the management on the grounds that they had already been treated as having vacated their posts.
The workers have complained to the Labor department and the commissioner of labour instituted action against the directors of the company in the magistrates court on two counts under the provisions of the Industrial Provisions Act.

Questions
1. Whether it is necessary to notify the employer before forming a trade union?
It is not legally binding to inform the management when forming an trade union. For a union to be legally accepted it should have a minimum of 40% of the employers membership.
2. Should the employer have given an opportunity to the union to discuss these matters with management? Is it a legal requirement?
Management should have given an opportunity for the union to discuss the matters with them, the union was very democratic in their approach. management refuse to discuss with management even without knowing what their demands are.
It is legal requirement to bargain with a union who's membership is over 40% of the employees. A new chapter as "Part V A" was introduced to the industrial dispute act by amending act No.56 of 1999 introducing a list of " Unfair labour practices" in which it was, inter alia, enacted that " No employer shall refuse to bargain with a trade union which has in its membership not less than 40% of the workmen on whose behalf such trade union seeks to bargain." Any employer or directors of any limited liability company who contravenes this provision shall be liable on conviction after summary trial before a magistrate to fine of LKR 20,000-
3. Was the employer under a legal obligation to deduct the union membership fees from the salaries of member employees?
There is no legal obligations from the employer's point of view. But it is done by most employers for the betterment of industrial relations and mutual benefit.
4. What are the demands which the employer was bound to grant under the law? what are the situations where the employer had acted contrary to law as alleged by the union?
Please refer annexure 1
5. Are there any demands in the list submitted by the union which you consider as unreasonable?
Please refer annexure 1
6. Is it lawful for the employer to have sent " Vacation Of Post" (VOP) letters to the striking employees?
No, mere participation in a strike does not justify dismissal because it is a right given by law. under Industrial Disputes Amendment Act No.56 Of 1999 the following are indentified as Unfair Labour Practices of Trade Unions, Worker Organizations and Workers.
1. Participating in or organizing a strike without giving 7 days notice in writing to the employers and the Department of Labour.
2. Participating in or organizing a strike whilst the matter is pending conciliation under the Industrial Disputes Act provided that such conciliation proceedings have not exceeded a period of 30 days after the dispute arose.
3. Causing willful damage to the property of the employer or other employees of the Company.
4. Causing injury to any employee of the Company and/or causing wrongful restraint of persons or forcible occupation of Company premises.
5. Participating in or organizing a strike in contravention of a provision of a Collective Agreement.
6. Causing sabotage to plant and machinery of the employer or to equipment or goods belonging to customers of the employer.
7. Refusal to provide essential services to prevent deterioration or destruction of perishable items at the time of a strike which is otherwise legal in terms of (1) and (2) above.
8. Failure to achieve accepted production norms and targets or to ‘go slow’ in the performance of duties.
9. Exerting pressure or undue influence on fellow workers to join a trade union or any other organizations.
10. Causing disruption to work and dissension amongst workers by conducting in the manner set out in (9) above
Source http://www.employers.lk/labour-law-reforms/32-industrial-disputes-amendment-act-no56-of-1999
None of the above unfair labour practices have been practice by the company union in the company.
7. Was the final letter sent to the union by the HR manager legal?
It is not legal. Section 40 of industrial dispute act prohibits termination or any punishment of an employee on a matter which is pending in an industrial court or arbitration.
08. what do you think are the two offences the employer would have committed under the industrial dispute act for the commissioner to have instituted legal action against the directors of the company?
No employer shall refuse to bargain with a trade union which has in its membership not less than 40% of the workmen on whose behalf such trade union seeks to bargain." Any employer or directors of any limited liability company who contravenes this provision shall be liable on conviction after summary trial before a magistrate to fine of LKR 20,000-.
It is not legal. Section 40 of industrial dispute act prohibits termination or any punishment of an employee on a matter which is pending in an industrial court or arbitration.
09.As the company was an independent institution registered under the companies act is it lawful to have instituted action against the directors without instituting action against the company?
In the eyes of law the company is a separate legal entity, but after case's like Salomon v A Salomon & Co Ltd it was decided that that the liability will extend even up the personal assets of the directors. presently even though many cases are filed against the companies, the directors are the people who are paying the price.
Collapse of Ceylinco Group, mostly the action was taken against Mr J L B Kothalawala

10. Was there possibility of avoiding this unfortunate situation if the employer had been more flexible with the union? If so what do you think the company should have done ?
Yes, for the trade union point of view they have acted very democratically, the management has refuse to bargain with a trade union who represents more than 40% of the employees which is contrary to section32A(g) of industrial dispute act.
The management should have in the first place listened to what the demands of the union, according to the list provided in the case study there are some unreasonable demands but the most important thing that company has overlooked some of the requirements laid down by statute for which the company could be sued.
Company should have signed a collective agreement after considering what is possible to give based on the company's financial standing giving priority to the demands which are mandatory by statute. Collective agreement is given its legal effect by publishing in the government gazette, and the parties to the agreement are legally bound by the terms and conditions of the agreement.
11. Sudden decision of the union officials to call off the strike which was carried on for a long time was considered by certain members as a betrayal of the union struggle. what is your opinion?
All along this case study it was evident that the union was following a very democratic approach, the main aim of the union was to force the management to discuss about the demands of the employees.
As a result of the above conflict the Labour Minister referred the case