Industrial Disputes Act, 1947 - Section 10(2)
1. This industrial dispute between J. Walter Thompson Company (Private), Ltd., Bombay, and the workmen including clerical staff employed under it has been referred to me as industrial tribunal under Sub-section (2) of S. 10 of the Industrial Disputes Act, 1947 (XIV of 1947), by the Deputy Commissioner of Labour (Administration), Bombay (empowered under S. 39 of the said Act by the Government of Bombay as per Labour and Social Welfare Department Notification, No. IDA. 3557, dated 8 May 1957, by his order No. AJJ. 42, dated 23 October 1958. The dispute relates to a demand for gratuity, leave and other matters mentioned in the schedule to the said order.
2. J. Walter Thompson Company (Private), Ltd., Bombay, is a company of long standing. It is a subsidiary of J. Walter Thompson Company, Ltd., of New York. The Bombay office it appears was started about thirty years ago to conduct business in the eastern countries of the world. The company's main business is that of advertising and publicity. The company acts as advertising agents and consultants on a commission basis. The company maintains an art department for preparing designs, sketches, photographs, layouts, etc., a production department, a scheduling department, a media department and billing and accounts departments. The company employs about 250 workmen including artists, clerks, peons, sepoys, etc. There have been several previous adjudications between this company and its workmen and several awards have been made in respect of this company either as a result of settlement or otherwise. For the first time, however, the company has taken a preliminary objection, namely, that the provisions of the Industrial Disputes Act, 1947, do not apply to this dispute and that the reference is incompetent inasmuch as the company is not engaged in any industry within the meaning of the said Act but is engaged in a professional undertaking to which the provisions of the said Act do not apply. Sri Russel who appeared for the company has mainly relied upon a decision of the High Court of Bombay in Special Civil Application No. 2789 of 1958 in the National Union of Commercial Employees and another v. Sri M. R. Meher and others , and has submitted that the company carries on the profession of consultants regarding merchandising and advertising. In the case relied upon, the principal question that had to be decided was whether the profession of a solicitor can be said to be an 'industry' within the meaning of the Act. After considering various definitions their lordships have observed at p. 41 as follows :-
'The word 'calling' is however very wide. According to its dictionary meaning it means one's usual occupation, vocation, business or trade. Both the words 'business' and 'calling' are therefore words of wide connotation. If, therefore, the ordinary dictionary meaning is to be given to them, it will be difficult to hold that the practice of the profession of a solicitor is not an industry. In fact it would not be easy to conceive of any profession, which would not then fall within the definition of this expression. This could not be the object of the legislature : The words 'business' and 'calling' must be read in their context and in conjunction with other words, which are used in the same definition and from which they must take their colour. The word 'calling' is followed by the words 'of employers.' The latter part of the definition contains the words 'occupation or avocation of workmen.' The words 'employer' and 'workmen' necessarily import the relationship of employer and employee. An essential requisite of industry is therefore the existence of relationship of master and servant. This was so held in Province of Bombay v. Western India Automobile Association (supra) in which it was observed that what is really emphasized in the definition of 'industry' is the relationship of employers and workers.
This relationship of master and servant or employer and employee, must, however, exist in the industry itself. In other words, only that business, trade, undertaking or calling can be held to be an industry which requires the co-operation of both the employer and the employees for carrying on that business, trade, undertaking or calling. This is also the ordinary concept of the word 'industry.' In Webster's dictionary this word is defined as :-
'any department or breach of art, occupation or business, especially one which employs much labour and capital and is a distinct branch of trade.'
Another definition given in the same dictionary is :
'systematic labour or habitual employment; especially human exertion employed for creation of value regarded by some as species of capital or wealth, labour.'
In its ordinary meaning 'industry,' therefore, imports the conception of co-operation between the employer and the employed. In order that an enterprise may constitute an industry, it must, therefore, be one for the carrying on of which, it is necessary to employ labour. In other words, it must be one which requires the joint effort of both the employer and the employed.'
They further go on to observe :
'In any case the basic concept of industry has always been held to be that there must be co-operation between the employer and the employees, either in producing wealth or in rendering services. In other words, what comes out of the industry must be the result of combined effort of both ...'
In the same judgment their lordships have observed as follows :-
'... Mr. Gokhale has contended that rendering of services may by itself be sufficient to make an organization an industry. We are inclined to accept this argument particularly having regard to the fact that the second part of the definition includes any service within the term 'industry.' But as I will point out presently, in the same case, for a service to be regarded as industry, Isaacs, J., himself considered co-operation between employer and employees as being a necessary requisite.
The pursuit of a learned profession like that of a solicitor does not require any co-operation of labour. A solicitor offers his own personal services, or to put it in different words is paid for the legal advice and legal assistance given by him personally. His staff cannot do this work or give legal aid to his clients. The money which he earns is for work done by him personally. Its quality depends on his personal qualifications, his brains, his knowledge of law, and the labour put in by him personally.
The remuneration earned by him depends upon his personal reputation and the kind and quality of of work done by him personally. His staff performs what may be called ministerial functions by typing his opinions, or the documents prepared by him or by maintaining accounts of his income and expenditure. There is no co-operation between or joint effort of the employer and the employee in this profession, nor is such co-operation or combined effort indispensable for carrying on the profession. An essential requisite of the concept of industry is therefore, wanting. Consequently, such a profession cannot be said to be an industry within the meaning of the Act.'
It is thus clear that the word 'calling' is not to be understood in its dictionary meaning, but the meaning is to be restricted; that in order to constitute 'industry' the essential requisite is the existence of the relationship of master and servant; that business, trade undertaking or calling can be held to be an industry only if it requires the co-operation of employer and employees for carrying on that business, industry or calling; that if the staff perform only ministerial functions like merely the typing of opinions or documents prepared, or maintain accounts of income and expenditure, this kind of work cannot be considered to fulfil the requisite of joint effort required to constitute 'industry.' The test, therefore, is whether the co-operation or combined effort of the employer and employee is indispensable for carrying on the particular profession or not.
3. The company had examined Mr. Richard Hubbard Arroll, its secretary-treasurer, and he was cross-examined at length by Sri Dudhia. It is difficult to say whether what this company it carrying on is the profession of consultants or the business of advertising consultants. But that is not really material. There can be hardly any doubt in my mind in the present instance that this concern is rendering certain type of service and that service does not depend entirely upon the personal skill of the managing director or the directors alone but on the combined effort of a large number of employees of this concern. In this connexion what the company has stated in its written statement is very material; Para. 3 thereof reads as follows :-
'The company carries on the profession of consultants regarding merchandising and advertising. In its practice as consultants, it provides the services of planning and carrying on of advertising and other sales promotion activities. The company is generally remunerated for these services on the basis of a 15 per cent commission upon the clients' expenditure made through it in respect of such activities. To assist the executives in the campaign so created and planned, the company maintains a copy department for the writing of press advertisements, booklets, radio and film scripts, etc., an art department for laying out and illustrating advertisements; a media department for the gathering of statistical information on newspapers and other forms of advertising media, a production department for the supervision of physical production of press advertisements and printed matters; a scheduling of 'department' or the scheduling advertisements in the press and distribution thereto of materials from which the advertisements are printed, a 'checking department for the checking of correct' appearances, a billing department for the billing of work of clients and an accounts department for the general keeping of the company's accounts. The company employs a total of 250 persons in its office in Bombay including 21 executives and certain other employees who are not 'workmen'.'
From the oral evidence of Sri Arrol it appears that the company has 6 copy writers and about 55 persons in the art department, though all those 55 are not necessarily artists. There are at least 35 to 40 artists of various degrees of skill. In the media department it employs about 12 persons. The total number of persons employed including the subordinate staff are 254 in Bombay, of which 70 are in the accounts department which serves all branches of the company. From the nature of its business or profession, from what is stated in the written statement and the oral testimony of Sri Arrol, the secretary of the company, it is quite clear that this business or profession cannot be carried on alone by the directors themselves and that it requires the active assistance of a large number of employees employed in the various departments referred to above. It also appears that the directors themselves hardly do any art work, besides being extremely critical of the work of others and giving some kind of broad guidance to them. I am, therefore, convinced that the test laid down by their lordships, viz., that in order that an enterprise may constitute an industry, it must be one for the carrying on of which it is necessary to employ labour, or in other words, it must be one which requires the joint effort of both the employer and the employed, has been fully satisfied. I may also mentioned that although there have been several references in the past, this is the first time that such a contention has been taken by the company.
4. I shall now deal with the demands on merits. Demand 1 is as follows :-
Gratuity at the rate of one month's salary for each year of service and proportionately for portion of a year shall be paid to all workmen including clerical staff in the event of death, physical or mental disability to continue further in service, retirement or resignation after ten years of service or termination of service for any cause whatsoever as the case may be.
(i) Salary for the purpose of calculating gratuity shall be the last substantive salary payable to the workmen concerned.
(ii) Gratuity shall not be paid to a workman who is dismissed for gross misconduct such as causing damage to the company's business or property.
5. At present the company has a scheme of gratuity which was agreed to both by the workers and the company sometime in 1951 and in terms of which an award has been made by Sri K. C. Sen. That scheme is as follows :
Gratuity. - The company agrees to adopt the Government of India rules with regard to gratuity from such time as they are made compulsory by law. In the meantime, and until such legislation comes into force, the company agrees to give a gratuity as hereinafter defined to any employee who is retrenched or discharged save that no gratuity will be payable to any employee who leaves the company in order to take up other employment or who is dismissed for misconduct and no gratuity will be payable in the case of the company having to retrench personnel for reasons beyond its control such as an international crisis which directly affects the business of the company or the existence of extraordinary circumstances of which the company will be required to satisfy the representatives of the union -
For continuous service of less than five years, no gratuity.
For continuous service of more than five but less than ten years, one-half month's salary for each year of service.
For continuous service of more than ten years but less than fifteen years, three quarters of one months' salary for each year of service.
For continuous service of more than fifteen years, fifteen months' salary.
For the purpose of this scheme 'salary' will be the average monthly consolidated salary drawn by an employee during his total service with the company.
The union desires that the scheme of gratuity should be substantially revised. It has submitted that time has elapsed since the said settlement in 1951; that the company has become more prosperous and the living standard of employees has gone up; that gratuity scheme under the said settlement is inadequate and should therefore be revised. The company has on the other hand submitted that it has not capacity to meet the demand of the union; that there has been no material change of circumstances since the award of 1951; that the scheme of gratuity is full and adequate. It has pointed out that in addition to a scheme of gratuity the company has a scheme of provident fund which was introduced as early as in 1945 with a rate of contribution of 5 per cent which was thereafter increased in 1951 to 8 1/3 per cent, and in April 1957 to 10 per cent; that its provident fund is substantially higher than what is given in other concerns and therefore no scheme of gratuity should be awarded. The company has further pointed out that its employees are covered by insurance against death while in employment and would be entitled to one year's salary. It appears that the rate of payment, so far as provident fund and the insurance scheme referred to are concerned, are calculated on the basic salary of the employees which until 1957 was consolidated. The company has therefore submitted that the provisions contained in the present gratuity rules of the company together with the provident fund scheme and the insurance are full and adequate benefits comparing favourably with retirement benefits in force in other commercial concerns and therefore no alterations should be made in the existing gratuity scheme.
6. It is usual for reasons into which I need not go to award two retirement benefits in the case of the large and more flourishing concerns. This is one of those concerns, where in my opinion normally two retirement benefits could be awarded. The question however is whether existing retirement benefits are not sufficiently high as to compare favourably with two retirement benefits usually awarded in other concerns. There is no doubt that provident fund was introduced in this company as early as in 1945 nearly 14 years back and the contribution even then was 5 per cent, of the consolidated salary. This was revised to 8 1/3 per cent, and then to 10 per cent on 1 January 1957. This certainly is a much higher benefit than what is normally awarded. The company has also in addition a scheme of gratuity which in certain respects is far more generous than schemes prevailing in other concerns : Thus in case of death what they would be entitled to would be based on their total salary and not on basic wages only. There is also an insurance scheme under which the employees would receive 12 months' salary. There is also a provision in case of retrenchment which is equally generous. This provision however is conditional upon their retrenchment for reasons beyond the control of the company such as international crisis which directly affects the business of the company or the existence of extraordinary circumstances of which the company will be required to satisfy the representatives of the union. There is however a certain amount of vagueness so far as this condition is concerned. However, the union did agree to these terms and it does not appear to me fair to remove certain unfavourable portions of the scheme while retaining the more advantageous ones. There is one class of employees who will be completely left out of the scheme and they are those who retire by reason of superannuation or resign after 15 years' service. There is also no doubt that the provision in respect of provident fund is sufficiently generous since the year 1957 and there is no need of awarding any gratuity after 1957. However, it does appear to me that there should be a small provision in respect of the period prior to 1957 for persons who may retire. I therefore direct that in addition to the existing scheme of gratuity in cases of superannuation or resignation after 15 years' service, the workers shall be paid one-fourth month's salary per year of service subject to a maximum of 5 months for the period prior to November 1957, such salary to be calculated in the manner in which salary is calculated for gratuity payments under the existing gratuity scheme. No directions for payment of gratuity in cases of permanent disability are given in view of the company's assurance that in such cases gratuity is paid.
Demand 2 is as follows :-
The following leave with full pay and allowances shall be granted to all workmen with effect from 1 January 1958 :-
Nature of leave Quantum Accumulationper year (a) Privilege ... Threeleave ... One month months. (b) Sick leave ... 15 days ... Six months. (c) Casual leave ... 10 days ... Nil. (d) Maternity leave ... Two months ... .. (i) Casual leave shall be allowed up to 4 days at a time.
(ii) Any kind of leave shall be allowed to be prefixed or suffixed to Sundays and holidays.
(iii) Privilege leave and sick leave shall be allowed to be availed of in conjunction with each other.
(iv) No medical certificate shall be insisted for sick leave of 3 days or less.
7. In support of the demand the union has submitted that at present the company gives privilege leave of 21 days per year of service with accumulation up to 42 days, 14 days sick leave with full pay per year of service subject to accumulation of 56 days and that there are no fixed rules regarding casual leave which is at the discretion of the company; that the company does not give any maternity leave and does not permit the workers to prefix and suffix leave to Sundays and holidays. It has therefore submitted that the existing rules as to leave are not very satisfactory and should therefore be revised; that generally in commercial establishments privilege leave is allowed up to one month for every 11 months' service and accumulation up to 3 months and sick leave is allowed between 15 to 30 days with full pay per year of service and accumulation up to one year and casual leave is allowed between 10 to 15 days per year; that maternity leave is also allowed in case of female employees; that the present leave rules were arrived between the parties as per the settlement in 1951, when the union was in its infancy and desired to maintain harmonious relations and that sufficient time has elapsed since the said settlement and therefore the leave rules should now be brought in line with those existing in other commercial establishments. The company has taken the stand that its present leave provisions are quite adequate and should not be varied. It has submitted that leave facilities given to the employees are generous and better than what is provided by the Bombay Shops and Establishments Act. The company has further submitted that it works only five days in a week, with the result that employees enjoy Saturdays and Sundays as holidays in each week and that as employees already enjoy adequate leave no further increase in leave facilities is called for or warranted by the circumstances.
8. As regards the leave provisions I agree with the company that they are quite generous. Unlike other commercial establishments this company works for only five days and observes Saturdays and Sundays as holidays. In view of this it appears to me that the demand for privilege leave beyond what is actually granted is not justified. However, the period of accumulation is less and should therefore be increased to 63 days and I direct accordingly. As to sick leave the provision of 14 days appears satisfactory as also accumulation. As regards casual leave, the agreement provided that existing practice of the company to allow casual leave in certain cases and not in others be continued in its discretion. It is true that casual leave is being awarded as a rule. In the case of this concern also casual leave is being granted though subject to certain conditions. No instances of refusal and hardships caused have been brought to my notice. The company also remains closed for two days in a week. In view of this the demand for casual leave is rejected. The company shall however continue to grant casual leave as before.
9. The workers have further asked that any kind of leave shall be allowed to be prefixed or suffixed to Sundays and holidays. It is not clear whether workers are allowed to prefix or suffix Sundays and holidays to their leave. However if they are not, I direct that Sundays and holidays shall be allowed to be prefixed or suffixed to any kind of leave.
10. Next the workers have asked that privilege leave and sick leave shall be allowed to be availed of in conjunction with each other. If the company is not already allowing the workers to do so, I direct that privilege and sick leaves shall be allowed to be availed of in conjunction with each other subject of course to such proof as to sickness that may be required by the company.
11. Part (iv) of the demand is that no medical certificate shall be insisted for sick leave of 3 days or less. I direct that the company shall not insist on a medical certificate for sickness of 2 days or less.
12. This completes the reference.