Strike at Auto Manufacturer Demonstrates Complexity of India Labor Relations

December 02, 2020

Clashing with India’s recent efforts to attract foreign investment though labor reforms, a union-led strike at a major automotive plant in Karnatake, India, persists despite a government back-to-work order.  The strike, which came on the heels of a productivity increase at the plant, underscores the careful considerations for CHROs and global HR professionals doing business in India.   
 
Strike Snarls Production at Toyota Karnatake Plant Despite Local Government Intervention.  After a union leader was suspended for questioning a productivity increase at the plant, some 3,500 union members engaged in an on-premises sit-in.  Toyota subsequently locked the employees out.  
 
Shortly thereafter, the local India state government prohibited the strike and asked the company to end the lockout.  Despite the company’s intent to resume operations, however, the union ignored the local government’s back-to-work order and refused to sign the agreement with management.  The stalemate caused the plant to once again halt operations, resulting in 10 days of lost production over a two-week period.  As of last week, stalemate continued.        
 
Union’s Reluctance Will Not Sit Well with Indian Government.  With the recent labor law changes, Indian President Modi and the ruling party have worked to send a clear message – India is a more at tractive global production hub than China.  The strike drew sharp condemnation from Karnatake’s Deputy Chief Minister, who noted “The whole world is looking at India as an alternative to China, […]. Under such a situation, there should not be any talk of strikes and lockouts.” 
 
The need for India to demonstrate stability in its labor and operation environment is pivotal, particularly after the country’s decision to withdraw from the recently signed Regional Comprehensive Economic Partnership (RCEP), the biggest trade deal in the Asia-Pacific region.  Further, prior strikes at Japanese automaker facilities have caused massive street violence and media backlash.
 
Given all the factors at play, India’s government is likely to keep the pressure on to get the union back to work.  
 
Is the Toyota strike legal under India’s new labor reforms? Probably not.  As we have written about previously and mentioned above, India recently published major revisions to its labor codes.  These labor code updates will be effective next year and would prohibit employee strikes and company lockouts in all industrial establishments without at least 60 days of notice.  Neither the company nor the union complied here.  
 
More importantly, perhaps, the labor reform changes themselves continue to face stern opposition.  On Nov 26th, a national general strike, led by India’s biggest trade unions and left-leaning political parties, attracted approximately 25 million protesters.  One of the strikers’ demands was to revise the labor code’s provision restricting workers’ right to strike.  It’s unlikely that Modi’s government will consider such a proposal, but the controversy put the enforceability of the provision in question once the new labor law is in effect. 
 
Outlook: As India grows and transforms, global companies with Indian operations face challenges understanding its labor landscape changes or complying with its labor legislations and regulations. HR Policy in India will continue following the developments of labor law reform and how it will affect the dynamics of labor relations in the nation.