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

CASE STUDY, HUMAN RESOURCE MANAGEMENT
ET Cases, 10 pages
AUTHOR(S) : Syed Abdul Samad and Dr. Nagendra V. Chowdary

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.”

- 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.”

- 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.

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?.........................

Foxconn

In 1974, Terry Gou established Hon Hai Precision Industry Company Ltd. (traded as Foxconn Technology Group (FTG)) in Tucheng, New Taipei, Taiwan. It was a vertically integrated manufacturing services provider and catered to the B2B market world-wide. With intent to supply electronic products at lowest-cost, it had partnered with global consumer electronics companies for joint-design, joint-development of products, manufacturing, assembly and after-sales services..........

Foxconn in India

Foxconn’s plant in India was incorporated in 2007. The Indian facility of Foxconn was engaged in the manufacture, processing and sale of connectors, cable, enclosures, wired/wireless communication products, optics products, power supply modules, printed circuit boards, telecom components and assemblies. Foxconn International Holdings India Private Limited (Foxconn), earlier known as Foxconn India Private Limited, operated as a subsidiary of FIH Mobile Limited (Exhibit III)..........

Nokia’s Closure – Foxconn India’s Loss of Business

On November 1st 2014, Nokia India Private Limited5 (Nokia) had shutdown its mobile manufacturing factory in the TSEZ at Sriperumbudur, Tamil Nadu. This came as a blow to all the big and small companies located in and around the TSEZ. Many of them were the VIs, component manufacturers and supporting businesses like logistic and packaging providers, etc...........

Foxconn’s Forced Closure?

By the end of the year, on December 11th 2014, Foxconn too followed suit and announced its plans to suspend its production. Foxconn, which had invested over $100 million6 in its Sriperumbudur plant, had decided to suspend its operations from December 24th 2014. “We can confirm that our India operation, FIH India Private Ltd., will be suspending all operations at our manufacturing facility in Chennai effective December 24,” said a company spokesperson...............

The Deadlock

After the talks failed to make any headway, and since the management was against allowing workers into the plant, on December 22nd 2014, Soundararajan along with the workers assembled in front of the Nokia SEZ and forcibly tried to open the chained gate. Nearly 250 workers along with the union leaders were arrested and released later that evening (Exhibit V)............

The Impact of Closure

An entire generation of workers had left their family vocations (farming, masonry, hair-cutting, carpentry, electrical, plumbing, etc.) to join firms like Nokia and Foxconn for a regular salary. Most of the employees had just completed their 10th or 12th standards before getting recruited in these factories. The closures resulted in loss of jobs and livelihood. For some of them, these closures meant loss of face.............

The Last Nail

The end of Foxconn in India might not have come as a surprise to many, as its fortunes were directly linked to Nokia’s business fortunes. Experts opined that, “With Nokia India’s shutdown, Foxconn did not have much of a choice.”..................

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. ........................

Exhibits

Exhibit I: Closure and Protests at Foxconn India

Exhibit II: Foxconn’s Global Presence

Exhibit III: Foxconn’s Holding Company

Exhibit IV: CITU Leader A. Soundararajan Addresses Agitating Foxconn Employees

Exhibit V: Face-off Union Leaders, Police and Foxconn Security Personnel and Arrested Foxconn Employees

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]..............

Rs 0
Product code: HRM-1-0025, HRM-1-0025A

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



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