Withdrawal of employee privilege held illegal

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Withdrawal-of-employee-privilege-held-illegal

The Supreme Court recently held that the unilateral withdrawal of an order raising the age to access employee superannuation, which is temporary in nature, amounts to the contravention of section 9A of Industrial Disputes Act, 1947 (ID Act), and such an act of the employer is illegal.

In Paradeep Phosphates v State of Orissa, Paradeep Phosphates (PP) was a wholly owned public sector undertaking (PSU) of the central government with a corporate and registered office in Bhubaneswar. Due to the deteriorating financial position of some PSUs, the government in May 1998 decided to temporarily raise the retirement age of all central public sector employees from 58 years to 60 years.

When the financial position of the PSUs did not improve, the government decided in August 2001 that all central PSUs, including PP, should roll back the age of retirement of their employees to 58 years. PP withdrew the earlier office order in July 2002 and restored the retirement age to 58 for all employees. The trade union disputed this action and the Industrial Tribunal, Bhubaneswar, and later Orissa High Court invalidated the action of PP rolling back the retirement age due to contravention of section 9A of the ID Act, which provides that prior notice be given to the employees by the employer. The employer had intentionally omitted to give it in this case.

In the Supreme Court, PP contended that although the benefit had been given to superannuate on attaining the age of 60 years instead of 58 years for a period of four years i.e. 1998 to 2002, it did not replace the age of superannuation as provided in the service rules or the certified standing orders applicable to the workmen, which stipulate a condition of accessing superannuation on attaining the age of 58 years.

The Supreme Court observed that the age at which people can access superannuation is an integral part of the service conditions of the employee. From the moment when the superannuation age was raised, although temporary in nature, it amounted to employee privilege since it was a special right granted to them. Hence, any unilateral withdrawal of such privilege amounts to contravention of section 9A of the ID Act and is illegal.

The dispute digest is compiled by Bhasin & Co, Advocates, a corporate law firm based in New Delhi. The authors can be contacted at lbhasin@bhasinco.in or lbhasin@gmail.com. Readers should not act on the basis of this information without seeking professional legal advice.