Every time there is an announcement about the Information Technology or IT-enabled services sector coming under the ambit of labour laws, there is ruckus about the industry becoming less competitive and employment declining because of the prospect of unionisation.

The recent clarification by the Tamil Nadu government that the IT/ITES industry is covered by the Industrial Disputes Act, 1947 has created a similar uproar.

The argument against the need for unionisation is that this sector designs human resource policies that maximise commitment to the organisation, emphasise individual contracts rather than collective bargaining, uses employee involvement techniques, increases flexibility in working arrangements and promotes teamwork.

Yet, the issue of addressing workers’ voices in organisations remains a concern.

Sophisticated mechanisms

Not surprisingly, the position of the National Association of Software and Services Companies, widely known as Nasscom, an IT industry trade association, is that unions are irrelevant to this sector as sophisticated HR strategies look after employee interests. The IT/ITES industry provides employees room to negotiate aggressively and scope for higher compensation and career advancement.

Most employers try to create work environments of international standards. The IT/ITES sector is also often applauded for providing exceptionally good grievance redressal procedures via open-forum meetings, open-door policies and intranet discussion for counselling and suggestion schemes, in addition to non-hierarchical structures, an informal work culture, merit-based promotions, career growth through tie-ups with educational institutions and gender equality.

As a result, many employers also contend that labour laws are irrelevant to this sector and unions are better suited to blue-collar occupations and low-wage service work.

There is a complete disdain for labour laws in the sector and newspaper reports quote pro-industry commentators arguing that the industry thrives because of the absence of regulatory hurdles posed by antiquated labour legislation meant for the 19th century rather than the unfolding digital 21st century.

However, those advocating a voice for employees through a collective underscore that the industry has been resorting to hire and fire – frequent recruitments and dismissals – under the guise of non-performance. Further, they argue that employers often blacklist employees who disagree, impose deadlines constantly, deny the right to form trade unions, adopt discriminatory rating systems and force staff to work irregular hours – issues which cannot be addressed by an employer-driven grievance handling system.

On all these parameters, the IT/ITES industry fares worse than comparable jobs in other sectors, making it difficult for employers to retain talented professionals. The class action suits brought against the Indian IT companies for irregularities with regard to labour issues, especially in the US, is a case in point.

Righting the wrongs

The applicability of labour laws to this sector has been shrouded in ambiguity and members of the industry have vociferously argued against it.

Members of Parliament in India first sought clarification on this in 2007.The then labour minister Oscar Fernandes said IT/ITES organisations were covered under existing labour legislation and the state governments were the “appropriate government” vested with powers to deal with violations of these laws. Thus, there is nothing new about the Tamil Nadu government’s clarification.

However, media reports confound the issue on three accounts:

One, labour laws will impact employment generation in the years to come. In this regard, in it worth nothing that the role of the IT/ITES industry towards mitigating unemployment in India is miniscule and will be even lesser in the future – not because of unionisation, but due to automation.

Second, the IT/ITES industry argues that the application of labour laws is a retrograde step, creating an unfavourable investment climate. However, attributing the flight of capital to the implementation of labour laws in India fails to explain the present growth of the industry in the Philippines and newer destinations.

Third, the assumption that since the clarification was issued by the Tamil Nadu government, the Industrial Dispute Act 1947 would not be applicable to other IT hubs such as Hyderabad or Bengaluru seems absurd.

A case that points to the potential relevance of such unions is the layoffs by IT giant Tata Consultancy Services in January 2015. After thousands of employees were fired on grounds of “non-performance” . While the company said this was a routine move and only about 3,000 employees countrywide had been let-off, agitating employees claimed that there had been more than 25,000 layoffs. Several cases were filed by disgruntled employees in various labour courts across the country, invoking Industrial Dispute Act 1947.

Fourth, most reports said the applicability of Industrial Dispute Act 1947 allows the formation of unions. In reality, this Act is not related to unions. The freedom to form an association has been provided for in Article 19 of the Constitution of India and enabled by the Trade Unions Act, 1926, though this does not include the right for the union to be recognised by the employer. Further, the formation of the union need not lead to strikes and, in fact, is a function of employer-employee relations.

Earlier initiatives to form such associations, such as the Union for ITES, or UNITES Professional in 2005 and West Bengal Information Technology Services Association in 2006, were not entirely successful.

However, the large-scale retrenchment of employees last year seems to have become a turning point.

A Hyderabad court recently ruled against the dismissal of an IT professional at HCL Technologies Limited stating that a software engineer is a workman as his job involves skills and technical knowledge. Such judgements indicate that hiring and firing of IT/ITES employees could become increasingly difficult in the future.

While it can’t be denied that the sector has provided its employees good salaries and working conditions, thereby creating a professional identify that is averse to unions – defining such professionals as workmen may indicate a shift in identity that could make union formation a possibility in the future. Nonetheless, unless employees see themselves as belonging to a class afflicted by similar circumstances, any group formation is still a far cry.

Ernesto Noronha and Premilla D’Cruz are professors at the Indian Institute of Management, Ahmedabad.