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What is Alter Ego in Labour law?

Alter ego is a Latin term for ‘another you'. An alter ego firm crops up when the same director or group of managers reopens a similar venture introducing a new trade name. This article let us obtain in-depth knowledge about alter ego companies.

Alter Ego is originally a Latin phrase that translates as “Other I”. Colloquially, we can understand this term as a second self or clone. We all know that a private or public limited enterprise happens to be a different legal entity that is legally set apart from its directors and shareholders. This widespread legal principle protects the shareholders and Board members from being considered liable for all company’s illegal trade activities and commercial debts. On the other hand, the doctrine concerning an alter ego speaks for an alternative to this established rule.

Therefore this doctrine reveals the corporate ambiguity between the shareholders/directors and the company. Both are treated as a single entity in this case. The principle of alter ego has been structured on the consideration that the enterprise and the share owners and the Board representatives are all alter egos of one another. They all represent alternative sides of a coin. The courts, therefore, approve the principles of the alter ego doctrine whenever the jurisdiction discovers that there remains a thin opportunity of variability among the directors/shareholders and their collaborative enterprise; this condition even holds for an LLC or limited liability corporation in the U.S.

Common Phrases or Words Used in Labour Relations

  • Arbitration: This term refers to a dispute settlement process involving an impartial party (not a part of the corporation entirely) who renders a statement on a problem put forward by the members. This can further be discussed in several classes. Grievance arbitration is a pre-agreed contractual process implemented to address grievances. This method includes applying past practices or terms defined in the collective bargaining declaration. A neutral entity supervises the procedure. Read more about the Arbitration in labour laws
  • Advisory arbitration: is proposed by an arbitrator and is in the range of recommendations that either party is not forced to accept. The next one is binding arbitration, where the members have no choice but to follow the regulations designed by the arbitrator, as the court plays a vital role in this activity.
  • Interest arbitration: It is closely related to grievance arbitration, but both of them are different based on some grounds. The former principle is designed to resolve bargaining deadlocks that comprise firefighters and police personnel. A neutral entity is preferred by the Board members or designated by the administrative body, very much similar to other classes of arbitration.
  • Bergenfield Letter: This is a statement dispensed before or at the time of negotiations which infers that a council of education’s bargaining unit is specifically cloaked with the administration to secure a tentative deal. Also, the administration is ready to reject or promote the agreement after setting up an advisory session with the full corporate board.
  • Collective Bargaining Agreement: An agreement that includes the takeaways of a negotiation between two or more parties. This textual instrument establishes the regulations and clauses of employment, procedures of grievance settlement and other related accords that are likely to crop up from collective bargaining. This document is also referred to as the ‘agreement of contract’. Both ways, approval is mandatory from the sides of the employer and the employees; without this thing affirmed, there is no chance to amend the policies stated in the collective bargaining agreement.
  • Confidential employee: This term stands for all the workers whose operational knowledge or duties at the job are directly involved in the associated negotiations. Thus their membership, if approved in the union, will convert the unit’s notion incompatible if compared with their laid-out responsibilities. Confidential employees have separate job functions, which are clarified in the exclusive job description handed over to them in person. To be entitled as a “confidential employee”, a particular company’s ongoing disputes should dictate the employer’s advanced awareness of the negotiations terms and bargaining strategies.
  • Major Representative: This term recognises an employee unit that has been certified or approved to speak for most of the working professionals enrolled in a formal bargaining unit. An agent is entrusted with the duties of a major representative to process grievance cases and manage collective bargaining for all workers in the unit. At times an exclusive representative also represents the non-member workers and puts forward their demands with equal priority. An individual worker gets a chance to present his grievance.
  • Merit Pay: Employees are motivated to work more productively when the provisions of extra payouts are linked based on their performance over a set period. Outstanding workers who are assets to an organisation are appreciated for their consistent hard work through merit pay. Merit pay is negotiable as a nature of compensation.
  • Recognition: The textual acceptance from the end of a public employer addressing an organisation employee who belongs to a core unit is termed recognition. It is a crucial strategy leading to the foundation of a mutual collective bargaining relationship. Under certain situations, employers are also eligible to voluntarily recognise a firm without issuing certification or any form of election.

Alter Ego in Labor Relations

In India, the Supreme Court cleared the principles of the doctrine involving “alter ego” in the popular judgement of the CBI v Sunil Mittal case. The court took action against the company directors. The court overruled the verdict of the judge, noticing that the Justice had applied the notion of alter ego, then the reverse judgement would have been declared. The Special judge disapproved of the factual information that interpretation of the enterprise’s alter ego would positively resist the principles of Indian labour law and come under criminal charges.

The persons found as law breakers were entrusted with the firms’ business operations. They had controlling powers, and thus the company’s course of action was well under their supervision round the clock. Considering all these aspects, the court announced that the organisation’s execution was completely based on the guilty party’s state of mind. As a consequence, the concerned individuals went to set up their own alter egos.

Conclusion

Alter ego agencies are formulated to avoid the employees’ union obligations deliberately. The employers who resort to such actions rarely gain profit from their illegal activity. We often get confused with the terms reading as a joint employer, alter ego and successor employer; one should note that they are distinct from one another. To know more on legal matters related to labour laws, check the latest and most celebrated blogs of Vakilsearch on this topic.

We look forward to viewers’ feedback so that further refinements are possible.

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