Industrial Employment (Standing Orders) Act, 1946: Key Features, Applicability

Overview of Industrial Employment (Standing Orders) Act, 1946

Among the employment contracts that are regulated in India, the regulation involves significant government involvement, which is rare in developed countries. The Industrial Employment (Standing Orders) Act 1946 requires employers to have terms, including working hours, leave, productivity goals, dismissal procedures, and worker classifications, approved by a government body.

The general principles of the Contract Act applicable to an agreement between two persons having the capacity to contract are also applicable to a contract of industrial employment. Still, the relationship so created is partly contractual in the sense that agreement of service may give rise to mutual obligations (e.g. obligation of the employer to pay wages and that of the workman to render services), and, partly non-contractual, as the States have already, by legislation, prescribed positive obligations for the employer towards his workmen, as, for example, terms, conditions and obligations prescribed by the Payment of Wages Act, Industrial Employment (Standing Orders) Act, Minimum Wages Act, etc.”

“To achieve industrial harmony and peace, the Industrial Employment (Standing Orders) Act, 1946, was enacted. The Act aimed at achieving a transition from mere contracts between unequals (Employer and Employee) to the conferment of “Status” on workmen through conditions statutorily imposed upon the employers by requiring every industrial establishment to frame “Standing Orders” in respect of matters enumerated in the Schedule appended to the Act. The Standing Orders are required to be certified by a Certifying Officer. Upon certification, the orders become binding upon both parties. Thus, the underlying object was to introduce uniformity in conditions of employment of workmen discharging similar functions in the same industrial establishment under the same management and to make those terms and conditions widely known to all the workmen before they could be asked to express their willingness to accept the employment” [Uptron India Ltd. V. Shammi Bhan AIR 1998 SC 1681].

The practice of not defining conditions of service by the employers, the advent of trade unions, and collective bargaining created problems for maintaining industrial peace. It was felt necessary to enact an Act to provide for the framing of ‘standing orders’ in all industrial undertakings employing one hundred or more workers. Standing orders refer to the rules and regulations relating to conditions of recruitment, discharge, disciplinary action, holidays, leave, etc.

The Industrial Employment (Standing Orders) Act, 1946, requires employers in industrial establishments to define precisely the conditions of employment under them (Standing Orders/Service Rules) and make them known to their workmen. These rules, once certified, are binding on the parties for a minimum period of six months.

The Standing Orders are to be certified by the Certifying Officer appointed under this Act. The detailed procedures for certification of the Standing Order are given. The conditions for certifying Standing Orders are given in Section. 4 of the Act. “The List of Matters” to be provided in Standing Orders under this Act is given in Schedule I of this Act. In all, it is must to provide provisions regarding the Rules in 11 matters given in this Schedule.

Applicability of the Industrial Employment (Standing Orders) Act, 1946

The Act extends to the whole of India. The Act applies to every industrial establishment wherein 100 or more workmen are employed or were employed on any day of the preceding 12 months. The Act does not apply to:

Any industry to which The Bombay Industrial Relations Act, 1946 applies.
Any industry to which The Madhya Pradesh Industrial Employment (Standing Orders) Act, 1961 apply.

The Centre and State Governments are empowered to extend the provisions of this Act (by notification in the Official Gazette) to any establishment employing less than 100 workmen. Now generally, all establishments employing more than 50 workmen are covered by this Act. But the appropriate Government must give a notice of not less than two months of its intention to do so. However, the provisions of the Industrial Employment (Standing Orders) Act, 1946, shall apply to all industrial establishments under the control of the Central Government.

The Act came into force on April 23, 1946. It has been amended from time to time.

Purpose of the Industrial Employment (Standing Orders) Act, 1946

The Preamble of the Act states, “An Act to require employers in industrial establishments formally to define conditions of employment under them.”

The Act aims to protect the workmen from unlawful exploitation.

The object of the Act is to require the employers in industrial establishments to define the conditions of employment under them and make the conditions known to workmen employed by them before they accept the employment.
To maintain uniformity in terms and conditions of employment in respect of workmen belonging to the same category. The rules made regarding these conditions are called Standing Orders.

The object of the Act is to have uniform Standing Orders providing for the matters enumerated in the Schedule to the Act, that it was not intended that there should be different conditions of service for those who are employed before and those employed after the Standing Orders came into force finally. Once the Standing Orders come into force, they bind all those presently in the employment of the concerned establishment as well as those who are appointed thereafter. [Agra Electric Supply Co. Ltd. vs. Alladin (1969) 2 SCC 598; U.P. Electric Supply Co. Ltd. v. Their Workman (1972) 2 SCC 54].

In Avery India Ltd. v. Second Industrial Tribunal, W.B. (AIR 1972 SC 1626), held that the provisions as to the age of retirement in the standing orders of an establishment would apply to all employees who joined the service before or after the coming into force of the standing orders even though there was no such provision in the past.

Features of the Industrial Employment (Standing Orders) Act, 1946

The following are the main features of the Act:

Submission/ modification of draft standing orders: The employer of every industrial establishment is required to submit to the Certifying Officer draft standing orders proposed by him for adoption in his industrial establishment for certification (Sec. 3). Certifying Officer is empowered to modify or add to the draft as is necessary to render the draft standing orders certifiable under the Act. The draft standing orders submitted shall be accompanied by a statement giving prescribed particulars of the workmen employed in the industrial establishment, including the name of the trade union, if any, to which they belong.
Joint standing orders by group of employers: A group of employers in similar industrial establishments may submit a joint draft of standing orders for certification (Sec. 4).
The government may set out model standing orders: The appropriate Government may set out model standing orders for the Act. The draft standing orders framed by an employer should, as far as practicable, conform to model standing orders. Any establishment can also accept the Model Standing Orders. These Model Standing Orders are temporarily applicable to an establishment which comes under the provisions of this Act and whose Standing Orders are not finally certified.

Certifying officers and appellate authorities to have powers of Civil Court: Every Certifying officers and appellate authority shall have all the powers of a Civil Court to receive evidence, administering oaths, enforcing the attendance of witness and compelling the discovery and production of documents (Sec. 11). No oral evidence having the effect of adding to or otherwise varying or contradicting standing order as finally certified under this Act shall be admitted in any court (Sec. 12).
Penalties: An employer who fails to submit draft standing orders or an employer who does any act in contravention of the standing orders finally certified under the Act shall be punishable with a fine as specified in Sec 13 of the Act.
Power to Exempt: The appropriate Government may, by a Gazette notification, exempt any establishment or class of establishments from any of the provisions of the Act.
Powers to make Rules: The appropriate Government may, after previous publication, by notification in the Official Gazette, make rules to carry out the purposes of the Act (Sec. 15).

Interpretation of Key Terms under the Industrial Employment (Standing Orders) Act, 1946

In this Act, unless there is anything repugnant in the subject or context-

(a) “Appellate authority” means an authority appointed by the appropriate government by notification in the Official Gazette to exercise in such area as may be specified in the notification the functions of an appellate authority under this Act:

PROVIDED that, about an appeal pending before an Industrial Court or other authority immediately before the commencement of the Industrial Employment (Standing Orders) Amendment Act, 1963, that court or authority shall be deemed to be the appellate authority.

(b) “appropriate government” means, in respect of industrial establishments under the control of the Central Government or a Railway administration or in a major port, mine, or oil-field, the Central Government, and in all other cases, the State Government:

(c) “Certifying Officer” means a Labour Commissioner or a Regional Labour Commissioner, and includes any other officer appointed by the appropriate government, by notification in the Official Gazette, to perform all or any of the functions of a Certifying Officer under this Act.

(d) “employer” means the owner of an industrial establishment to which this Act for the time being applies, and includes- (i) in a factory, any person named under clause (f) of sub-sec. (1) of Sec. 7 of the Factories Act, 1948, as manager of the factory; (ii) in any industrial establishment under the control of any department of any Government in India, the authority appointed by such Government in this behalf, or where no authority is so appointed, the head of the department; (iii) in any other industrial establishment, any person responsible to the owner for the supervision and control of the industrial establishment.

(e) “industrial establishment” means- (i) an industrial establishment as defined in Sec. 2(ii) of the Payment of Wages Act, 1936; or (ii) a factory as defined in Sec. 2(m) of the Factories Act, 1948; or (iii) a railway as defined in Sec. 2(4) of the Indian Railways Act, 1890; or (iv) the establishment of a person who, to fulfil a contract with the owner of any industrial establishment, employee’s workmen.

(f) “Prescribed” means prescribed by rules made by the appropriate government under this Act. (g) “Standing orders” means rules relating to matters set out in the Schedule. (h) “Trade union” means a trade union for the time being registered under the Indian Trade Unions Act, 1926. (i) “wages” and “workman” have the meanings respectively assigned to them in clauses (rr) and (s) of Sec 2 of the Industrial Disputes Act, 1947.

Standing Orders under the Industrial Employment (Standing Orders) Act, 1946

These orders aim to remove flexibility from the employer in terms of job, hours, timing, leave grant, productivity measures, and other matters. The standing orders mandate that the employer classify its employees, state the shifts, payment of wages, rules for vacation, rules for sick leave, holidays, rules for termination, among others.

Matters to be provided in Standing Orders. According to the Schedule, the following matters should be provided in Standing Orders:

Classification of workmen, e.g., whether permanent, temporary, apprentices, probationers, or badlis.
Manner of intimating to workmen periods and hours of work, holidays, paydays, and wage rates.
Shift working.
Attendance and lateness.
Conditions of, procedure in applying for, and the authority that may grant leave and holidays.
Requirement to enter premises by certain gates, and liability to search.
Closing and reporting of sections of the industrial establishment, temporary stoppages of work, and the rights and liabilities of the employer and workmen arising therefrom.
Termination of employment, and the notice to be given by the employer and workmen.
Suspension or dismissal for misconduct, and acts or omissions that constitute misconduct.
10. Means of redress for workmen against unfair treatment or wrongful exactions by the employer or his agents or servants.
11. Any other matter which may be prescribed.

In Glaxo Industries (P) Ltd. v. Labour Court Meerut (1984) 1 LLJ 16 (SC), punishment for an act which is not enumerated as misconduct in the standing orders of the establishment is wholly illegal. In Uptron India Ltd. v. Shammi Bhan AIR 1998 SC 1681, held that a clause in the certified standing orders providing for automatic termination of service of a permanent employee, not directly related to “Production” in the factory or industrial employment, would be void if it does not provide an opportunity of being heard to the employee.

In Co-op. Cr. Bank v. Industrial Tribunal, Hyderabad AIR 1970 SC 245, it was held that in case of conflict between statutory conditions of employment contained in Standing Orders and special terms contained in the contract, the terms of the former shall prevail over the latter. The employer and workman cannot enter into a contract overriding the statutory conditions as embodied in the certified Standing Orders. The Standing Order is also a contract between the employer and the workmen [Western India Match Co. v. Workmen AIR 1973 SC 2650].

In Behar Journals v. Ali Hasan, AIR 1959 Pat 431, the probation period provided by the standing orders was for 3 months only. But the employment letter of the respondent workman provided a probation period of 6 months. Held that the certified standing orders have statutory force. Therefore, the probation period could not be for a period longer than 3 months.

“The right to contract in industrial matters is no longer absolute, and statutes dealing with industrial matters abound with restrictions on the absolute right to contract. The doctrine of hire and fire is completely abrogated both by statutes and by industrial adjudication, and even where the services of an employee are terminated by an order can be challenged in Industrial Tribunals. These restrictions on the absolute right to contract are imposed because security of employment is more and more regarded as one of the necessities for industrial peace and harmony. If reasons for discharging an employee are furnished to the employee concerned, he not only has the satisfaction of knowing why his services are dispensed with but it becomes easy for him in appropriate cases to challenge the order on the ground that it is either not legal or proper which in the absence of knowledge of these reasons, it may be difficult if not impossible for him to do” [S.S. Light Railway Co. Ltd. v. S.S. Railway Workers Union AIR 1969 SC 513]. Read also this article: Community of Interest in Industrial Dispute: Key Case Laws & Legal Principles

Certification Process of Standing Orders under the Industrial Employment (Standing Orders) Act, 1946

Conditions for certification of standing orders (Sec. 4) Standing orders shall be certifiable under this Act if- (a) provision is made therein for every matter set out in the Schedule which applies to the industrial establishment, and (b) the standing orders are otherwise in conformity with the provisions of this Act, and it shall be the function of the Certifying Officer or appellate authority to adjudicate upon the fairness or reasonableness of the provisions of any standing orders.

Certification of standing orders (Sec. 5)

Copy of the draft standing order to be sent to trade union or workmen: On receipt of the draft, the Certifying Officer shall forward a copy to the trade union, if any, of the workmen, or where there is no such trade union, to the workmen, in the prescribed form requiring objections, if any, which the workmen may desire to make to the draft standing orders to be submitted to him within fifteen days from the receipt of the notice.
After giving the employer and the trade union or representatives of the workmen an opportunity of being heard, the Certifying Officer shall decide whether or not any modification or addition to the draft submitted by the employer is necessary to render the draft standing orders certifiable under this Act, and shall make an order in writing accordingly.
The Certifying Officer shall thereupon certify the draft standing orders, after making any modifications, and within seven days send copies of the certified standing orders to the employer and the trade union or other prescribed representatives of the workmen.

The Act does not say that on such certification, the Standing Orders acquire statutory effect or become part of the statute. It can certainly not be suggested that by virtue of certification, they get metamorphosed into delegated/subordinate legislation. Though these Standing Orders are undoubtedly binding upon both the employer and the employees and constitute the conditions of service of the employees, it appears difficult to say, on principle, that they have statutory force [The Rajasthan State Road Transport Corporation v. Krishna Kant AIR 1995 SC 1715].

In Rohtak and Hissar District Supply Co. Ltd. v. State of U.P. (AIR 1966 SC 1471), the Supreme Court has held that the employer cannot insist upon adding a condition to the Standing Order which relates to a matter which is not included in the Schedule. It was further held that provision may be made in the Standing Order concerning the rights and liabilities of the employer and the employees and their enforcement by an internal arrangement between the employer and his employees.

Appeals and Operation of Certified Standing Orders

Any employer, workman, trade union or other prescribed representatives of the workmen aggrieved by the order of the Certifying Officer within 30 days from the date on which copies are sent by the certifying officer, appeal to the appellate authority, and the appellate authority, whose decision shall be final, shall by order in writing confirm the standing orders either in the form certified by the Certifying Officer or after amending the said standing orders by making such modifications or additions as it thinks necessary to render the standing orders certifiable under this Act. The appellate authority shall, within seven days of its order, send copies of the Certifying Officer, to the employer and the trade union or other prescribed representatives of the workmen.

In the Badrapur Power Engineers Association. v. Deputy Chief Labour Commr. (1993) I LLJ 991 (Del), the certified standing orders were dispatched on 7th January, 1991, and the appeal was filed on 6th February, 1991. Held that the appeal was filed within the prescribed limitation period of thirty days because January 7 was to be excluded, given Sec. 9(1) of the General Clauses Act.

Date of Operation of Standing Orders (Sec. 7) Standing orders shall, unless an appeal is preferred, come into operation on the expiry of thirty days from the date on which authenticated copies are sent or where an appeal is preferred, on the expiry of seven days from the date on which copies of the order of the appellate authority are sent.

Register of Standing Orders (Sec. 8) A copy of all standing orders as finally certified under this Act shall be filed by the Certifying Officer in a register in the prescribed form maintained for the purpose, and the Certifying Officer shall furnish a copy to any person on payment of the prescribed fee.

Duration, Modification, and Payment of Subsistence Allowance

The certified standing orders shall be prominently posted by the employer in English and in the language understood by the majority of his workmen on special boards maintained for the purpose at or near the entrance through which the majority of the workmen enter the industrial establishment and in all departments where the workmen are employed.

Duration and Modification of Standing Orders (Sec. 10) Certified standing orders shall not, except on agreement between the employer and the workmen or a trade union or other representatives of the workmen be liable to modification until the expiry of six months from the date on which the standing orders or the last modifications thereof came into operation.

An employer or workman or a trade union or other representative body of the workmen may apply to the Certifying Officer for the modification and such application shall be accompanied by five copies of the modifications proposed to be made, and where such modifications are proposed to be made by agreement between the employer and the workman or a trade union or other representative of the workmen, a certified copy of that agreement shall be filed along with the application.

No modification in standing orders is permissible when a settlement of standing orders raising the age of superannuation from 58 years to 60 years was held to violate settlement as this demand was not agreed upon in the course of the settlement, and this modification would throw additional financial burden [Bararhi Refineries P.S.P. v. Indian Oil Corpn. Ltd. (1991) I LLJ 46 (SC).

An application for modification of standing orders would ordinarily be made in the following cases: (a) Where a change of circumstance has occurred; or (b) Where the standing order has resulted in inconvenience, hardship, anomaly, etc.; or (c) Where some fact was lost sight of at the time of certification; or (d) Where the applicant feels that modification will be more beneficial; and (e) Once a standing order is modified it can be further modified if new circumstances have arisen since the last modification [S.S. Light Railway Co. Ltd. v. S.S. Railway Workers Union AIR 1969 SC 513].

In Ghaziabad Engineer Co. v. Certifying Officer, AIR 1978 SC 769, the workers demanded six days’ casual leave and applied for modification of the standing orders accordingly. The Certifying Officer, Kanpur, granted modification of the standing orders providing for six days’ casual leave on a paid basis after taking into account the prevalent practice in the neighboring industries and the financial position of the appellant’s undertaking. The Supreme Court upheld the order of the Certifying Officer.

Payment of Subsistence Allowance (Sec. 10A)

(1) Where any workman is suspended by the employer pending investigation or inquiry into complaints or charge of misconduct against him, the employer shall pay to such workman subsistence allowance— (a) at the rate of fifty per cent of the wages which the workman was entitled to immediately preceding the date of such suspension, for the first ninety days of suspension; and (b) at the rate of seventy-five per cent of the such wages for the remaining period of suspension if the delay in the completion of disciplinary proceedings against such workman is not directly attributable to the conduct of such workman.

Temporary Application of Model Standing Orders (Sec. 12A)

Notwithstanding anything contained in Sections 3 to 12, for the period commencing on the date on which this Act becomes applicable to an industrial establishment and ending with the date on which the standing orders as finally certified under this Act come into operation under Section 7 in that establishment, the prescribed model standing order shall be deemed to be adopted in that establishment, and the provisions of Sec. 9(2), Sec. 13 and Sec. 13A shall apply to such model standing orders as they apply to the standing orders so certified.

Penalties and Procedure (Sec. 13)

(1) An employer who fails to submit draft standing orders as required by Sec. 3, or who modifies his standing orders otherwise than by Sec. 10, shall be punishable with fine which may extend to five thousand rupees, and in the case of a continuing offence with a further fine which may extend to two hundred rupees for every day after the first during which the offence continues.

(2) An employer who does any act in contravention of the standing orders finally certified under this Act or his industrial establishment shall be punishable with fine which may extend to one hundred rupees, and in the case of a continuing offence with a further fine which may extend to twenty-five rupees for every day after the first during which the offence continues.

(3) No prosecution for an offence punishable under this section shall be instituted except with the previous sanction of the appropriate government.

(4) No court inferior to that of a Metropolitan Magistrate or Judicial Magistrate of the second class shall try any offence under this section.

Interpretation, etc. of Standing Orders (Sec. 13A) If any question arises as to the application or interpretation of a standing order certified under this Act, any employer or workman or a trade union or other representative body of the workmen, may refer the question to any of the Labour Courts constituted under the Industrial Disputes Act, 1947, and specified for the disposal of such proceeding by the appropriate government by notification in the Official Gazette, and the Labour Court to which the question is so referred shall after giving the parties an opportunity of being heard, decide the question and such decision shall be final and binding on the parties.

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