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Foxconn India’s Plant Shutdown: Workers - Unions - Management Deadlock

CASE STUDY, HUMAN RESOURCE MANAGEMENT
ET Cases, 10 pages

Case Preview

Foxconn India’s Plant Shutdown: Workers – Unions – Management Deadlock

 

“We are not able to give jobs to all the workers, since we don’t have orders... Since the management has declared a holiday for the factory, workers are asked not to come to the factory.”1

- Foxconn Management’s Notice on Suspension of Production

“The Labour Department also asked them not to deny work to the employees, since it is against the law.”2

- A Soundararajan, Honorary President, Foxconn India Employees Union

A Week after December 11th 2014

Locked factory gates, police forces and company security personnel deployed, protests, hunger strikes, union leaders’ speeches, workers trying to barge into the factory premises, arrests, groups of workers with a look of despair on their faces (Exhibit I) – this was the volatile and eruptive situation at the factory gates of Foxconn India in Sriperumbudur, Tamil Nadu, as the company announced its lockout from December 24th 2014.

Exhibit I: Closure and Protests at Foxconn India
......................................................

The sudden closure of the Foxconn India’s plant created quite a stir in the region, involving the workers, trade unions, company management and the Tamil Nadu Government’s Labour Department. While the management insisted on keeping the facility closed citing the reasons of no production orders (from Nokia) and unnecessary costs, the trade unions quoted several reasons, including the illegality of the closure, for keeping the factory functional. Who was right/wrong in this scenario and to what extent? What are the relevant legal provisions (as enshrined in relevant Acts) applicable to either party in this particular case? Was there an amicable solution that could be applicable to this scenario under the purview of law and acceptable by both the parties?.........................

 



1“Foxconn workers to conduct hunger strike in Chennai on January 23”, http://www.business-standard.com/article/companies/foxconnworkers-to-conduct-hunger-strike-in-chennai-on-january-23-115011201028_1.html, January 12th 2015 (accessed date: February 20th 2015)
2“Foxconn workers held for trying to make forced entry”, http://www.business-standard.com/article/companies/foxconn-workers-heldfor-trying-to-make-forced-entry-114122900279_1.html, December 30th 2014 (accessed date: February 20th 2015)

Teaching Note Preview

Foxconn India’s Plant Shutdown: Workers – Unions – Management Deadlock

 

Synopsis

This case study primarily highlights how the employment prospects of the employees working for a company can be severely hampered due to the unintended consequences arising out of the a major business partner’s (in this case Nokia India) closure. This case study can be used to highlight how (or how not to) within the purview of relevant laws can the management contract for a plant’s closure.

This case study discusses the applicability of various provisions to the actions of Foxconn India and its employees under of the various Acts such as Factories Act, 1948 and Industrial Disputes Act, 1947, etc. On December 11th 2014, Foxconn India announced the suspension of production from December 24th 2014, because of a change in its customer base – Nokia’s closure. Since December 22nd 2014, two days before the announced date, all its employees were placed under paid-holiday-leave status. However, the employees and the trade unions were not ready to accept the status quo and went on to protest against the suspension of manufacturing and termed it as ‘illegal’ as the company had not given a notice period of 90 days before the announcement. The company’s management, on the other hand, was adamant on keeping the gates closed since allowing workers without providing work would incur unnecessary costs to the company and instead offered Voluntary Retirement Scheme.

The workers’ plight became more volatile with surcharged atmosphere due to protests, hunger strikes, union leaders’ speeches, workers trying to barge into the factory premises, arrests, etc. It took more than eight rounds of tripartite talks – including the three trade unions, management representatives and Tamil Nadu Government’s Assistant Labour Commissioner – to come up with a solution. However, there still exists a major group of employees and their related trade union that is not satisfied with the outcome and demand provision of jobs rather than settlement package. The case study allows the participants to understand the broader provisions of the relevant laws and helps to discuss whether the management and the workers can resort to such actions. Who was/was not right under the purview of the related Acts? How should have both parties dealt with their respective issues under the provisions of the Indian Laws and Acts?

Prerequisite Conceptual Understanding (PCU)/Before the Classroom Discussion

  • •Gary Dessler and Biju Varkkey, “Labor Relations and Collective Bargaining”, Human Resource Management, 12th Edition (Indian Adaptation), Pearson Education, Inc., 2011 – To understand the role of trade unions, and collective bargaining in case of industrial disputes between the workers and the management of a company and the instruments used by the unions to bargain
  • •Trade Unions Act, 1926 and Industrial Disputes Act, 1947 – To understand the principles/basic tenets of the company’s closure/shutdown/lock-out, strikes/protests and collective bargaining from the provisions of the Acts
  • •Syed Abdul Samad and Dr. Nagendra V Chowdary, “Nokia India Exits Economic Zone: Employees Enter ‘Collective’ Conflict Zone”, www.etcases.com, February 3rd 2015 – A prior discussion of this case study would help set the stage for discussing Foxconn’s exit

 

Case Positioning and Setting

This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Human Resource Management course:

  • •Labor Relations and Collective Bargaining – To understand the role of the Laws and Acts in preventing the disputing parties from taking wrong actions and facilitating a meaningful collective bargaining advantage
  • •Trade Unions Act, 1926 and Industrial Disputes Act, 1947 – To sensitize the participants to the right and wrong of the actions like closure, strikes and collective bargaining as interpreted from the Acts

 

Assignment Questions

  • I. What were the contributing factors that led to the unilateral shutdown of Foxconn India’s manufacturing plant at Sriperumbudur? How did the shutdown  disturb the manufacturing ecosystem in the TSEZ and the employment scenario in the region?
  • II. Was Foxconn right in announcing the closure from its business perspective as well as in the light of the provisions of the relevant and appropriate law? Or as the trade unions termed, was it illegal?
  • III. Do you think the trade unions and workers had the right to protest and barge into the factory premises as the case facts highlight? Applying the relevant provisions from the Trade Unions Act, 1926 and Industrial Disputes Act, 1947, what is your assessment of the legality of the respective parties’ (Foxconn’s management, workers & trade unions) actions?
  • IV. ....................

 

Suggested Orchestration

The classroom discussion and analysis was facilitated under three broad sections [Exhibit (TN)-I]..............

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Abstract


Set in the backdrop of Foxconn's shutdown of its Indian operations, this case study sensitizes the participants to the circumstances that led to the closure of its Indian operations and whether Foxconn was right in the way it contracted its closure. The participants can discuss and debate on the actions of the workers and unions at Foxconn India, using the relevant legal provisions governing such actions and the possible recourse for the aggrieved employees. Citing the reason of 'no orders from Nokia' all the Foxconn employees were placed under paid-holiday-leave status, from December 22nd 2014. The trade unions and Assistant Labour Commissioner termed the lockout 'illegal' as the company did not follow the legal procedures before announcing the closure. Employees, under the guidance of their trade unions, resorted to protests, hunger strikes and forced entry into the factory premises. Under the provisions of the Industrial Disputes Act, 1947, can the management and the workers resort to such actions? How should both parties deal with their respective issues under the provisions of relevant Acts?



Pedagogical Objectives

  • To understand how Foxconn's operation in TSEZ/Nokia SEZ contributed to and affected the manufacturing and employment ecosystem
  • To understand the factors contributing to Foxconn's shutdown of Indian operations and the resultant labor unrest and the unified agitations from Trade Unions
  • To discuss and debate whether Foxconn's reasoning for shutting down it Indian operations was justified
  • To examine the efficacy of actions taken by Foxconn's management, unions and employees
  • To understand the relevant provisions of lock-out/closure, lay-offs and strikes as enshrined in the Industrial Disputes Act, 1947 and Trade Unions Act, 1926 and examine the efficacy of the actions taken by Foxconn and its employees

Case Positioning and Setting

This case study can be used in either MBA or Executive MBA or Executive Development Programs, for the following modules/topics in the Human Resource Management course:

  • Labor Relations and Collective Bargaining To understand the role of the Laws and Acts in preventing the disputing parties from taking wrong actions and facilitating a meaningful collective bargaining advantage
  • Trade Unions Act, 1926 and Industrial Disputes Act, 1947 To sensitize the participants to the right and wrong of the actions like closure, strikes and collective bargaining as interpreted from the Acts



This Case Pack Includes:
- Abstract
- Case Study
- Teaching Note (**ONLY for Academicians)
$4.22
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