Employee Trade Union In Information Technology Sector


What law says?

Industrial Disputes Act, 1947[1],

“The objective of the Industrial Disputes Act is to secure industrial peace and harmony by providing machinery and procedure for the investigation and settlement of industrial disputes by negotiations.”

“The provision for payment of compensation to the workman on account of closure or lay off or retrenchment”

  1. “The procedure for prior permission of appropriate Government for laying off or retrenching the workers or closing down industrial establishments”
  2. “Unfair labor practices on part of an employer or a trade union or workers”
  3. “The Industrial Disputes Act extends to whole of India and applies to every industrial establishment carrying on any business, trade, manufacture or distribution of goods and services irrespective of the number of workmen employed therein”
  4. “Every person employed in an establishment for hire or reward including contract labor, apprentices and part-time employees to do any manual, clerical, skilled, unskilled, technical, operational or supervisory work, is covered by the Act”
  5. “This Act though does not apply to persons mainly in managerial or administrative capacity, persons engaged in a supervisory capacity and drawing > 10,000 p.m. or executing managerial functions and persons subject to Army Act, Air Force and Navy Act or those in police service or officer or employee of a prison”

Government of India Union Ministry of communications says, Information Technology (IT) companies are functioning well and hence local state law will have to be used.

But, each state has varied views when it comes to unionizing IT sector. For many states till now, the IT sector has been completely against forming employee union in IT sector as against with the manufacturing industry

Tamil Nadu, Karnataka, Telangana states houses majority of IT companies employing over 4.5 Million people in India.

In Karnataka, which is the country’s largest technology hub, the state prohibits unionization at these companies. Also, IT sector will not come under industrial employment Act 1946. IT sector will be treated on par with “essential services”.


Tamil Nadu state has been under assumption that IT sector is not covered under trade union until things started to change after January 2015. Tata Consultancy Services (TCS) said it would give pink slip to non-performers. This created unrest. Industry experts and employees said TCS planned to sack more than 25,000 workers. But TCS media person’s statements said that it will send home not more than 3,000 as part of its yearly “workforce restructuring”.

Beginning of the year 2016, New Democratic Labour Front (NDLF), came forward and filed a PIL with Madras High Court requesting action to prevent such illegal practices by IT companies.

trade union

While responding to the court, Tamil Nadu government confirmed that the IT industry has not been exempted from the provisions of Industrial Disputes Act, 1947.

Kumar Jayant, principal secretary in the labour and employment department said[2],

“All the labour welfare legislations are applicable to all the IT and ITeS companies and they are being monitored by the enforcement officials for proper implementation of labour legislations and thereby ensures the welfare of the employees,” in a letter of May 30, 2016, addressed to Karpagavinayagam, organiser of NDLF.

“The IT company employees also are free to form trade unions and can redress their grievances through evoking the provisions of Industrial Disputes Act 1947.”

“In case of any contravention of the provisions of the Act, IT employee may approach the concerned conciliation officer through their union and file an industrial dispute against the erring employer,”

“The inspectors of labour department are inspecting the IT companies on a routine basis.”

This put off all the unrest as NDLF helped to get the clarification from Tamil Nadu government on forming trade union in IT sector.


For the past two plus decades, the IT sector corporates have been very hard on its employees. Prevailing pain areas in this industry such as illegal firing practices, denied right to form trade union, and long irregular working hours, Compensation Related Issues, Appraisal & Promotion Issues, Job Insecurity, High Stress Levels, unrealistic work load, and No Transparency.

Brining IT sector under provisions of Industrial Disputes Act 1947, and forming employee trade unions, the employees can reach out to the conciliation officers to address their problems any applicable grievances.


This blog has been created for education purpose only with high level information. This blog is not a comprehensive article which details about all natty gritty aspects of this case and the law. Hence there might be any unintentional missed out information in the article.


[1] https://en.wikipedia.org/wiki/Industrial_Disputes_Act,_1947
[2] http://www.financialexpress.com/economy/tn-says-labour-norms-applicable-to-it-industry-staff-free-to-form-union/277981/

A Statement of Work Contract Fiasco @ Information Technology Company – A Fictional Story Analysis

What Indian Contract Act Says[1]?


  1. Free Consent (Section 13): “two or more persons are said to be consented when they agree upon the same thing in the same sense (Consensus-ad-idem).”
  2. Fraud (Section 17): “Fraud” means and includes any act or concealment of material fact or misrepresentation made knowingly by a party to a contract, or with his connivance, or by his agent, with intent to deceive another party thereto of his agent, or to induce him to enter into the contract.”
  3. Misrepresentation (Section 18): ” causing, however innocently, a party to an agreement to make a mistake as to the substance of the thing which is the subject of the agreement”.
  4. Mistake of fact (Section 20): “Where both the parties to an agreement are under a mistake as to a matter of fact essential to the agreement, the agreement is void”.

A Made-up Story:

The Senior Management team of an Information Technology (IT) company presented a statement of work (SOW) contract proposal to an existing client whom they are serving for last 10 years. This new statement of work contract is for the upcoming multimillion dollar project which is very critical to the client. The project scope of work involves testing the newly developed software applications.

The statement of work contract contained the following,

  1. Overview and audience
  2. Scope
  3. Term
  4. Location
  5. Quality Improvements
  6. Connectivity and infrastructure
  7. Information security
  8. Transition
  9. Personnel Plan
  10. Charges

The SOW also documented service level agreements (SLA) to be met as part of this contract. To highlight a few (not limited to), software testing efficiency to be maintained at 99%, and software defect leakage rate to be most 5%. The contract also specified that, if at all there is a SLA not being met, there will be a penalty of 50% of that corresponding project cost.

The client signed the contract and chose this IT company to test all the applications being developed in-house.

After a few applications been tested, the client requested the IT company to present the SLA metrics for the completed applications. IT team then noted that their SLA metrics are way out of the what is promised in the SOW contract. IT company then fudged the SLA metrics meet up with the number as promised in the SOW contract. IT company calculated the SLA metrics by normalized value of all projects and showed the numbers in line with what has promised in the SOW.

break(great for any design)

The client found out that, the data has been fudged. The client also found out that, calculating SLA with individual project, SLA metrics are way out of the what is promised in the SOW contract. Client consider this as Fraud and Misrepresentation of data and considers that the contract should be voided and a penalty of 50% of project cost for not meeting the SLA and 50% of project cost for the loss of free consent in the contract. Client also decided not to provide any new future project contract to that IT company.

During arbitration, the IT company argued that, it has not specified the way it will calculate the SLA in the SOW contract. It further argued that, this is mere innocence of Misrepresentation from both the party which cannot make this contract void.

The client replied that, it is a deliberate mistake of the fact from the IT company and as per the Indian contract act, this agreement stays void. This makes IT company to lose multimillion dollar contract and its reputation in the market.


Business managers should have a fair knowledge on legal background of running a business. Especially in this article, if business manages were aware on how to write contracts with complete information, a lot of hardships faced due to the implication of business activity can be avoided. Especially, in this article, the IT company has lost a 10-years loyal client, and most importantly its reputation in the market.

When Business manages have the functional knowledge on the legal system (irrespective of whether an organization has dedicated legal team or not), the person would have spotted this problem mentioned in the article upfront and mitigated the same during the contract designing stage. Also, the business manager would have discussed about calculation methods of SLA, upfront with the client during Statement of Work contract presentation. But here in this article, the IT company were doing more of damage control rather than delivering the quality project.

Disclaimer: This is a pure fictional (Made-up) article to highlight the importance of a Business Manager awareness towards Legal aspects of running/managing a business/organization. The views and opinions expressed in this article are those of the author’s imaginations and do not necessarily reflect any real time events/business/persons/activities.

Non-Copyrighted Images / Pictures Used in this Article Courtesy (Reference):

  1. Featured Image: https://management-forum.co.uk/product/details/2227/contract-law-2016
  2. Contract Image: http://blog.ipleaders.in/wp-content/uploads/2016/06/Cantract-Law.jpg
  3. Void Contract (Hand Shake Break) Image: https://scoirl.files.wordpress.com/2015/03/breach-of-contract.jpg