Notice of Change in Conditions of Service

Effect a change means to bring it into operation, not merely to decide on it. The section prohibits effecting, so an employer may plan and announce without offending it.

Workers likely to be affected is the class entitled to notice. It is not the whole workforce and not only those certainly affected.

Emergent situation means one that has arisen suddenly and requires immediate action.

Casual, in item 11 of the Third Schedule, means occasional or irregular, as opposed to a settled increase or reduction in numbers.

Rationalisation means reorganising work or processes to make them more efficient, which typically means with fewer people.

Section 40: the prohibition, and its two limbs

No employer, who proposes to effect any change in the conditions of service applicable to any worker in respect of any matter specified in the Third Schedule, shall effect such change,

(i) without giving to the workers likely to be affected by such change a notice in such manner as may be prescribed of the nature of the change proposed to be effected; or

(ii) within twenty-one days of giving such notice.

Take the elements one at a time.

"Proposes to effect any change". The section bites on a proposal to change, so it applies to alterations of an existing position and not to the terms on which a new worker is engaged.

"In the conditions of service applicable to any worker". Any worker, so a change affecting one person is within the section as much as one affecting a department.

"In respect of any matter specified in the Third Schedule". This is the gateway, and it is a closed list. A change outside the eleven items needs no notice under section 40.

Limb (i): the notice. It goes to the workers likely to be affected, in the prescribed manner, and it must state the nature of the change proposed to be effected. It is not enough to announce that something will change; the notice must say what.

Limb (ii): the wait. The change may not be effected within twenty-one days of giving the notice.

The two limbs are cumulative and that is the commonest error. An employer who gives a perfect notice and implements the change the following morning has complied with (i) and broken (ii). The prohibition is against effecting the change without notice or within twenty-one days of it, so both requirements must be met.

The Third Schedule: the eleven matters

Section 40 operates only on these, and MU can ask for the list.

• 1. Wages, including the period and mode of payment.
• 2. Contribution paid or payable by the employer to any provident fund or pension fund, or for the benefit of the workers under any law in force.
• 3. Compensatory and other allowances.
• 4. Hours of work and rest intervals.
• 5. Leave with wages and holidays.
• 6. Starting, alteration or discontinuance of shift working otherwise than in accordance with standing orders.
• 7. Classification by grades.
• 8. Withdrawal of any customary concession or privilege, or change in usage.
• 9. Introduction of new rules of discipline, or alteration of existing rules, except in so far as they are provided in standing orders.
• 10. Rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workers.
• 11. Any increase or reduction, other than casual, in the number of persons employed or to be employed in any occupation or process or department or shift, not occasioned by circumstances over which the employer has no control.

Read the list in four groups and it becomes memorable.

Money: items 1, 2 and 3. Wages and how they are paid, employer contributions to provident and pension funds, and allowances.

Time: items 4, 5 and 6. Hours and rest intervals, leave with wages and holidays, and shift working.

Status and rules: items 7, 8 and 9. Grading, the withdrawal of a customary concession or privilege, and new or altered rules of discipline.

Jobs: items 10 and 11. Rationalisation likely to lead to retrenchment, and any non-casual increase or reduction in the number of persons employed.

Two items carry qualifications that are themselves examinable.

Items 6 and 9 both carve out standing orders. A change of shift working made in accordance with standing orders is outside item 6, and a disciplinary rule already provided in standing orders is outside item 9. The logic is that those matters have already been through certification under Chapter IV, where the workers were noticed, heard, and could appeal. Chapter V does not require the process twice.

Item 11 carries two qualifications. The change must be other than casual, so a temporary fluctuation is outside; and it must not be occasioned by circumstances over which the employer has no control, so a reduction forced on him by something outside his control is outside as well.

And item 10 is the early-warning provision. Rationalisation or improvement of plant or technique likely to lead to retrenchment requires notice at the point when it is proposed, which is well before anybody is actually retrenched under Chapter IX.

The proviso: when no notice is needed

No notice is required for effecting a change:

• (a) where the change is effected in pursuance of any settlement or award;
• (b) where the workers likely to be affected are persons to whom the Fundamental and Supplementary Rules, the Civil Services (Classification, Control and Appeal) Rules, the Civil Services (Temporary Service) Rules, the Revised Leave Rules, the Civil Services Regulations, the Civilians in Defence Services (Classification, Control and Appeal) Rules, the Indian Railway Establishment Code, or any other rules or regulations notified by the appropriate Government, apply;
• (c) in case of an emergent situation which requires change of shift or shift working, otherwise than in accordance with standing orders, in consultation with the Grievance Redressal Committee;
• (d) if the change is effected in accordance with the orders of the appropriate Government or in pursuance of any settlement or award.

Each exception has an obvious rationale and a student should give it.

(a) and (d) overlap on settlements and awards, and the reason is the same: the change has already been through a process in which the workers were represented. A settlement is an agreement to which they were party; an award is a decision after a hearing. Requiring notice of a change the workers themselves agreed to, or that a Tribunal ordered, would be pointless.

(b) is the same exclusion that appears in section 28(2) for standing orders: people governed by published civil service rules already have a settled and public code of conditions.

(c) is the only exception with a condition attached, and the condition matters. An emergent change of shift is permitted without notice, but only in consultation with the Grievance Redressal Committee. So the workers' voice is not removed; it is compressed from twenty-one days into a consultation. This is the one place in Chapter V where the section 4 committee is given an operational role, and it is a favourite short question.

Section 41: the power to exempt

Where the appropriate Government is of opinion that the application of section 40 to any class of industrial establishments or to any class of worker employed in any industrial establishment affects the employers so prejudicially that such application may cause serious repercussion on the industry concerned, and that public interest so requires, it may, by notification, direct that section 40 shall not apply, or shall apply subject to such conditions as may be specified, to that class.

The test has two limbs and both must be satisfied. A serious repercussion on the industry, and the requirement of the public interest. It is not enough that compliance is inconvenient.

And the exemption may be partial. The Government may disapply the section or apply it subject to conditions, and it operates by class rather than by individual establishment.

A worked example

The facts. A packaging plant in Wada, 1,200 workers, with certified standing orders and a Grievance Redressal Committee. Its management proposes six things in one month. Notice under section 40 is required for which of them?

One: reduce the night-shift allowance from 300 rupees to 200 rupees. Notice required. Item 3, compensatory and other allowances. Notice to the workers likely to be affected, and no change for twenty-one days.

Two: move the general shift from 9 a.m. to 8 a.m., which the certified standing orders permit the employer to do. No notice required. Item 6 covers the starting, alteration or discontinuance of shift working otherwise than in accordance with standing orders. This change is in accordance with them, so it is outside the item.

Three: introduce a new rule that mobile telephones may not be carried on the shop floor, a matter on which the standing orders are silent. Notice required. Item 9, introduction of new rules of discipline, except in so far as they are provided in standing orders. They are not.

Four: pay wages by bank transfer instead of in cash. Notice required. Item 1 covers wages including the period and mode of payment, and the mode is exactly what is changing.

Five: install automated sealing machines that will make forty jobs unnecessary. Notice required. Item 10, rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment. The notice is due now, when the change is proposed, not later when the workers are retrenched. And item 11 may also be engaged by the consequent reduction in numbers, which is neither casual nor occasioned by circumstances outside the employer's control.

Six: a boiler fails at 2 a.m. and the night shift must be sent home and the morning shift started three hours early. No notice required, by clause (c) of the proviso: an emergent situation requiring a change of shift or shift working, otherwise than in accordance with standing orders. But the exception is conditional: it must be done in consultation with the Grievance Redressal Committee.

Now the timing trap. On proposal one, the employer posts a proper notice on 1 April stating the nature of the change, and pays the reduced allowance in the wages for April, paid on 7 April. He has broken the section. Limb (ii) forbids effecting the change within twenty-one days of giving the notice, and only six days had passed. Both limbs must be satisfied.

And a question of scope. The employer says the allowance change affects only the 260 night-shift workers, so he need not notify the rest. He is right. Section 40(i) requires notice to the workers likely to be affected by such change.

What this does NOT mean

It does not mean the employer needs consent. Section 40 requires notice and a wait. It does not give the workers a veto, and it does not require agreement.

It does not mean twenty-one days is an alternative to notice. The two limbs are cumulative: no change without notice, and no change within twenty-one days of it.

It does not mean every change needs notice. Only a change in respect of a matter specified in the Third Schedule, which is a closed list of eleven items.

It does not mean a shift change always needs notice. Item 6 excludes a change made in accordance with standing orders, and clause (c) of the proviso excuses an emergent change made in consultation with the Grievance Redressal Committee.

It does not mean notice goes to the whole workforce. It goes to the workers likely to be affected.

It does not mean an exemption under section 41 can be given to one employer because compliance is awkward. The section requires an opinion that the application affects employers so prejudicially that it may cause serious repercussion on the industry concerned, and that the public interest so requires, and it operates by class.

Limits, criticism and amendments

The protection is procedural and modest. Three weeks and a piece of paper do not prevent a change the employer is determined to make; they only prevent him making it silently. That is the point, but it is also the limit.

The Third Schedule is a closed list, so a change in conditions of service that Parliament did not think of needs no notice at all. Item 11's own qualifications, "other than casual" and "not occasioned by circumstances over which the employer has no control", leave real room for argument.

Clause (c) of the proviso is the most open-textured exception, because "emergent situation" is not defined and the employer is the person who decides in the first instance whether one exists. The requirement of consultation with the Grievance Redressal Committee is the only check, and section 4(7)'s decision rule does not apply to a consultation.

And section 41's exemption power is broad, resting on an opinion about serious repercussion and public interest, with no procedure prescribed for hearing the workers before a class exemption is notified.

Quick revision

• Section 40: no employer proposing a change in conditions of service in respect of a Third Schedule matter shall effect it (i) without giving the workers likely to be affected a notice of the nature of the change, or (ii) within twenty-one days of giving it. Both limbs.
• Third Schedule, eleven items. Money: wages including period and mode; provident or pension fund contributions; compensatory and other allowances. Time: hours of work and rest intervals; leave with wages and holidays; shift working otherwise than in accordance with standing orders. Status and rules: classification by grades; withdrawal of a customary concession or privilege; new or altered rules of discipline except as provided in standing orders. Jobs: rationalisation, standardisation or improvement of plant or technique likely to lead to retrenchment; any non-casual increase or reduction in numbers not occasioned by circumstances beyond the employer's control.
• Proviso, no notice needed: change in pursuance of a settlement or award; workers governed by the civil service and comparable rules; an emergent situation requiring a change of shift or shift working otherwise than in accordance with standing orders, in consultation with the Grievance Redressal Committee; or a change in accordance with the orders of the appropriate Government.
• Section 41: the appropriate Government may, by notification, disapply section 40 or apply it subject to conditions, to a class of establishments or workers, where application affects employers so prejudicially as to cause serious repercussion on the industry and the public interest so requires.

Test yourself

1. State the requirement in section 40 and identify the trap in it. No employer who proposes to effect any change in the conditions of service applicable to any worker in respect of a matter specified in the Third Schedule shall effect that change without giving the workers likely to be affected a notice, in the prescribed manner, of the nature of the change proposed, or within twenty-one days of giving such notice. The trap is that the two limbs are cumulative: an employer who gives a faultless notice and then implements the change before twenty-one days have run has still broken the section.

2. List the matters in the Third Schedule. Wages, including the period and mode of payment; contribution paid or payable by the employer to any provident fund or pension fund or for the benefit of the workers under any law in force; compensatory and other allowances; hours of work and rest intervals; leave with wages and holidays; the starting, alteration or discontinuance of shift working otherwise than in accordance with standing orders; classification by grades; withdrawal of any customary concession or privilege or change in usage; introduction of new rules of discipline or alteration of existing rules, except in so far as they are provided in standing orders; rationalisation, standardisation or improvement of plant or technique likely to lead to retrenchment of workers; and any increase or reduction, other than casual, in the number of persons employed or to be employed in any occupation, process, department or shift, not occasioned by circumstances over which the employer has no control.

3. In what circumstances is no notice required? Under the proviso to section 40: where the change is effected in pursuance of any settlement or award; where the workers likely to be affected are persons to whom the Fundamental and Supplementary Rules, the Civil Services (Classification, Control and Appeal) Rules, the Civil Services (Temporary Service) Rules, the Revised Leave Rules, the Civil Services Regulations, the Civilians in Defence Services (Classification, Control and Appeal) Rules, the Indian Railway Establishment Code or other notified rules apply; in an emergent situation requiring a change of shift or shift working otherwise than in accordance with standing orders, in consultation with the Grievance Redressal Committee; and where the change is effected in accordance with the orders of the appropriate Government or in pursuance of a settlement or award.

4. An employer installs new machinery that will make thirty jobs unnecessary. When must he give notice? When he proposes to effect the change, not when the workers are eventually retrenched. Item 10 of the Third Schedule covers rationalisation, standardisation or improvement of plant or technique which is likely to lead to retrenchment of workers, so the notice obligation is triggered by the proposal itself. Item 11 may also be engaged by the resulting reduction in the number of persons employed, that reduction being neither casual nor occasioned by circumstances beyond the employer's control. The change may not be effected within twenty-one days of the notice.

5. Why do items 6 and 9 carve out standing orders? Because those matters have already been through certification under Chapter IV, in which the workers were given notice, invited to comment, heard, and given a right of appeal, and in which the certifying officer adjudicated on the fairness and reasonableness of the provisions. A change of shift working made in accordance with certified standing orders, or a disciplinary rule already provided in them, has therefore already been the subject of a process, and Chapter V does not require it to be repeated.

6. When may the appropriate Government exempt an establishment from section 40? Under section 41, where it is of opinion that the application of section 40 to a class of industrial establishments, or to a class of workers employed in an industrial establishment, affects the employers so prejudicially that such application may cause serious repercussion on the industry concerned, and that the public interest so requires. It then acts by notification, and may direct either that the section shall not apply or that it shall apply subject to specified conditions. Both limbs of the test must be satisfied, and the power operates by class rather than for a single employer.