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Unit 2 of 4 · MBA Sem 3

Unit 2: Dispute settlement and labour laws

Employee Relations notes · PTU syllabus (MBA 932-18)

3 min read6 topics10 exam questions
On this page
  1. Unit summary
  2. Anatomy of industrial disputes
  3. Dispute settlement machinery
  4. Adjudication vs arbitration
  5. Sexual harassment at the workplace
  6. Lay-off, retrenchment and closure under the ID Act
  7. Voluntary retirement schemes
  8. Key terms
  9. Quick revision
  10. Important questions

Unit summary

Disputes are inevitable, but the law provides machinery to settle them and limits on lay-offs and closures. This unit covers the anatomy of industrial disputes, dispute settlement machinery — conciliation, adjudication and arbitration — sexual harassment at the workplace, and the provisions of the Industrial Disputes Act 1947 on lay-off, termination, retrenchment, closure and VRS.

After this unit you can

  • Explain the anatomy of industrial disputes
  • Explain conciliation, adjudication and arbitration
  • Explain the law on sexual harassment at the workplace
  • Explain the ID Act provisions on lay-off, retrenchment, closure and VRS

PTU syllabus topics

  • Anatomy of industrial disputes
  • dispute settlement machinery — conciliation
  • adjudication
  • arbitration
  • sexual harassment
  • Industrial Disputes Act 1947 provisions on lay-off/termination/retrenchment/closure/VRS
ComparisonLay-off vs retrenchment vs closure
Meaning
Employment

Lay-off

Temporary inability to give work

Continues; compensation paid

Retrenchment

Termination of surplus staff

Ends; notice and compensation

Closure

Permanent shutdown

Ends for all

1

Topic 1

Anatomy of industrial disputes

An industrial dispute (Industrial Disputes Act, 1947) is any dispute between employers and workers connected with employment, non-employment, terms of employment or conditions of labour. Causes: wages and bonus, working conditions, retrenchment, discipline, union recognition, and political factors.

ClassificationForms of industrial conflict
Industrial conflict

  • Strike

    Workers stop work collectively

  • Lockout

    Employer closes the workplace

  • Gherao

    Workers surround managers

  • Go-slow and work-to-rule

    Deliberately reduced output

  • Absenteeism and turnover

    Unorganised conflict

2

Topic 2

Dispute settlement machinery

ProcessDispute settlement machinery
  1. 1Bipartite negotiation

    Collective bargaining

  2. 2Conciliation

    Conciliation officer or board helps parties agree

  3. 3Court of inquiry

    Investigates and reports

  4. 4Voluntary arbitration

    An arbitrator chosen by both parties decides

  5. 5Adjudication

    Labour court, industrial tribunal, national tribunal

Conciliation procedure: the conciliation officer holds meetings, tries to bring the parties to a settlement and, if successful, a settlement is signed; if not, a failure report is sent to the government, which may refer the dispute to adjudication.

3

Topic 3

Adjudication vs arbitration

ComparisonAdjudication vs arbitration
Adjudication
Voluntary arbitration

Referred by

Government (compulsory)

Both parties voluntarily

Decided by

Labour court or tribunal

Arbitrator chosen by the parties

Nature

Judicial, binding award

Binding award, less formal

Speed

Slower

Usually faster

4

Topic 4

Sexual harassment at the workplace

  • Law: Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 (POSH Act), following the Supreme Court's Vishaka guidelines (1997).
  • Sexual harassment includes unwelcome physical contact, demands for sexual favours, sexually coloured remarks, showing pornography and other unwelcome conduct of a sexual nature, including implied promises or threats about employment.
ProcessComplaint process under the POSH Act
  1. 1Complaint in writing within 3 months (extendable by 3 months)
  2. 2Internal Committee (IC)

    Every employer with 10+ employees; presiding officer a senior woman, at least half the members women, one external member

  3. 3Conciliation if the complainant requests (no monetary settlement)
  4. 4Inquiry completed within 90 days
  5. 5Report within 10 days; employer acts within 60 days
  • Local Committee at district level for workplaces with fewer than 10 employees or where the complaint is against the employer.
  • Employer duties: safe workplace, display of penal consequences, awareness programmes, annual report; penalty up to ₹50,000 for non-compliance.
5

Topic 5

Lay-off, retrenchment and closure under the ID Act

ComparisonLay-off vs retrenchment vs closure
Meaning
Compensation

Lay-off

Temporary inability to give work due to shortage of materials, power, breakdown

50% of basic wages and DA for the days laid off (up to 45 days a year)

Retrenchment

Termination for any reason other than punishment, retirement, ill health or contract expiry

15 days' average pay for each completed year, plus one month's notice

Closure

Permanent closing of the place of employment

15 days' average pay per completed year, plus notice

  • Conditions for retrenchment (Section 25F): one month's notice or wages in lieu, retrenchment compensation, notice to the government; last come, first go (Section 25G); re-employment preference (Section 25H).
  • Chapter V-B: prior government permission for lay-off, retrenchment and closure — 100+ workers under the ID Act, raised to 300+ under the IR Code, 2020.
  • Termination: discharge or dismissal for misconduct requires a fair domestic inquiry (principles of natural justice).
6

Topic 6

Voluntary retirement schemes

  • VRS: employees opt to retire early in return for compensation — used to reduce surplus staff without retrenchment.
  • Typical package: compensation of 3 months' salary for each completed year of service or salary for the remaining months of service, whichever is less (the limit set by Section 10(10C) and Rule 2BA of the Income-tax Act, 1961, carried into the Income-tax Act, 2025; tax exemption up to ₹5 lakh).
  • Issues: best employees may leave, cost, morale of those who remain; requires careful design and communication.

Key terms

Industrial dispute
Dispute between employers and workmen about employment terms
Conciliation
Third party helps parties reach agreement
Adjudication
Compulsory settlement by labour courts or tribunals
Internal Committee
Body to inquire into sexual harassment complaints
Retrenchment
Termination of surplus workers other than as punishment

Quick revision

  • Causes and forms of disputes; strikes and lockouts.
  • Machinery: works committee, conciliation, courts of inquiry, labour courts, tribunals, arbitration.
  • POSH Act 2013: definition, IC, Local Committee, 90-day inquiry.
  • Lay-off (50%), retrenchment (15 days per year), closure; Chapter V-B thresholds.
  • VRS: features and issues.

Important exam questions

Practice questions written to the PTU exam pattern for this unit's syllabus: short answers (Section A style) and long answers (Sections B and C style).

Short-answer questions

  1. Q1.Define an industrial dispute.
  2. Q2.Distinguish conciliation and arbitration.
  3. Q3.What are the Vishaka guidelines?
  4. Q4.Who must constitute an Internal Committee?
  5. Q5.Distinguish lay-off and retrenchment.
  6. Q6.What is VRS?

Long-answer questions

  1. Q1.Explain the causes and forms of industrial disputes.
  2. Q2.Explain the machinery for settlement of industrial disputes.
  3. Q3.Explain the provisions of the POSH Act, 2013.
  4. Q4.Explain the provisions of the Industrial Disputes Act on lay-off, retrenchment and closure.

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