LAY-OFF

2(kkk) "lay-off1" (with its grammatical variations and cognate expressions) means the failure,
refusal or inability of an employer on account of shortage of coal, power or raw materials or
the accumulation of stocks or the break-down of machinery 39[or natural calamity or for any
other connected reason] to give employment to a workman whose name is borne on the
muster rolls of his industrial establishment and who has not been retrenched;

Explanation : Every workman whose name is borne on the muster rolls of the industrial
establishment and who presents himself for work at the establishment at the time appointed
for the purpose during normal working hours on any day and is not given employment by the
employer within two hours of his so presenting himself shall be deemed to have been laid-off
for that day within the meaning of this clause:

PROVIDED that if the workman, instead of being given employment at the commencement

of any shift for any day is asked to present himself for the purpose during the second half of
the shift for the day and is given employment then, he shall be deemed to have been laid-off
only for one-half of that day:

PROVIDED FURTHER that if he is not given any such employment even after so

presenting himself, he shall not be deemed to have been laid-off for the second half of the
shift for the day and shall be entitled to full basic wages and dearness allowance for that part
of the day;]

 The relation between the employer and employed during lay-off is only suspended and
employees continue to be on the muster roll of the employer and they have to be reinstated as
soon as normal work is resumed. It is neither temporary discharge nor suspension rather it is
temporary unemployment within the industry.

 “For any other reasons”.- The words ‘for any other reasons’ in Section 2(KKK) do not
mean for any reason whatsoever, or for whatever be the reason. They covey to mean for some
reason analogues to the reasons specified in the section, and not for any other reason of
whatever character.

Any other reason to which the definition refers must be a reason which is allied or analogous
to the reasons already specified and if there is a strike or slowing down of production in one
part of the establishment and if lay-off is the consequence, the reason for which lay-off has
taken place, would undoubtedly be similar to the reason specified in the definition.
(Karibetta Estate v Rajamanickam) 1960

The words “for any other reason in section 2(KKK)” must be considered ejusdem generis
with the words that precede them, and the circumstances which would justify a lay-off must
be integrally connected with production. A lay-off merely on ground of financial depression
of the employer is not comprehended by the definition. A lay-off declared mala fide by the
employer or to victimize the workmen or for some other ulterior purpose is not lay-off
contemplated by Section 2(KKK) of the Act. The device of lay-off cannot be invoked to
victimize workers. (Tatanagar Foundry v Workmen) 1962
1
2(q) "lay-off" (with its grammatical variations and cognate expressions) means the failure, refusal or inability
of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the
break-down of machinery or natural calamity or for any other connected reason, to give employment to a worker
whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched;
 If the employer has deliberately and maliciously brought about a situation culminating in the
declaration of lay-off then it will not be covered by the definition as it is mala fide lay-off.
For the same reasons a lay-off declared to victimise the workmen or for some other ulterior
purpose would not come within the definition.

 It will not be open for the Tribunal to inquire as to whether the employer could have avoided
the lay-off by being more diligent, more vigilant or more farsighted.

 Lay-off differs from Lock-outs.- The Supreme Court in Kairbetta Estate v Rajamanickam
(1960),discussed the concept of lay-off and lock-out and observed that both are different. The
main points of difference between them are:-

i) That lay-off generally occurs in a continuing business whereas lock-out is a closure of the
business even though temporarily.

ii) In case of lay-off the employer is unable to give employment due to the reasons specified
such as shortage of coal, power, raw materials, or accumulation of stock or break down of
machinery, etc. In lock-out the employer deliberately closes the place of business and lock/-
outs the whole body of workmen for reasons which have no relevance to the causes
applicable to lay-off

iii) In the case of lay-off employer is liable to pay compensation whereas in lock-out no such
liability is imposed upon the employer if the lock-out is justified and legal.

iv) Lock-out is resorted to by the employer as a weapon of collective bargaining whereas lay-
off is invariably caused by economic and trade reasons.

v) The Act imposes certain prohibition and penalties against lock-out whereas lay-off does
not have such thing.
25A. Application of sections 25C to 25E2

(1) Sections 25C to 25E inclusive 125[shall not apply to Industrial Establishments to which
Chapter VB applies, or]-

(a) to industrial establishments in which less than fifty workmen on an average per
working day have been employed in the preceding calendar month; or

(b) to industrial establishments which are of a seasonal character or in which work is

performed only intermittently.

2
65. (1) Sections 67 to 69 (both inclusive) shall not apply to industrial establishments to which Chapter X
applies; or
(a) to industrial establishments in which less than fifty workers on an average per working day have been
employed in the preceding calendar month; or
(b) to industrial establishments which are of a seasonal character or in which work is performed intermittently.
(2) If a question arises whether an industrial establishment is of a seasonal character or whether work is
performed therein only intermittently, the decision of the appropriate Government thereon shall be final.
Explanation.—In this section and in sections 67, 68 and 69, industrial establishment shall mean a—
(i) factory as defined in clause (m) of section 2 of the Factories Act, 1948; or
(ii) mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952; or
(iii) plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951.
 (2) If a question arises whether an industrial establishment is of a seasonal character or
whether work is performed therein only intermittently, the decision of the appropriate
government thereon shall be final.
126
[Explanation: In this section and in sections 25C, 25D and 25E, "industrial establishment"
means-

(i) a factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948); or

(ii) a mine as defined in clause (j) of section 2 of the Mines Act, 1952 (35 of 1952); or

(iii) a plantation as defined in clause (f) of section 2 of the Plantations Labor Act, 1951 (69 of
1951)]

 “Seasonal Character, intermittently”.-The above expressions are not to mean the same.
They are distinct to mean seasonal or otherwise intermittent. The term intermittent denotes no
continuity. Seasonal character are when there are breaks or when the work is not regular in
nature. “Seasonal” implies dependence on season or nature and hence neither the employer
nor the employee in the particular industrial establishment has any control.

 Government decides “Seasonal Character” intermittence- Clause 2 of Section 25-A

empowers the appropriate Government to decide the “Seasonal Character” or the
“intermittent” nature of work in the industrial establishment, it that becomes a point of
dispute. The decision of the Government on this will be final. Tribunal has no such
jurisdiction.

 The power endowed with the appropriate Government is quasi-judicial in nature as there are
two contending parties and a point of dispute. Therefore, the Government is bound to give
opportunity to both the contending parties to make their representation and further that all
relevant factors must be taken into consideration and that the decision should not be based on
irrelevant factors.(Associated Cement Co. v Workmen)1960.

 The source of Power to Lay-Off must be found out from the terms of contract of service or
the standing orders governing the establishment. Where there are no Standing Orders by
reason of non-application of the Act of 1946, nor was there any term of contract of service
conferring any right of lay-off, the workmen must be held to be laid off without any authority
of law or the power in the management under contract of service. Such a case goes out of
Chapter VA. Ordinarily and generally the workmen under such circumstances are entitled to
their full wages.(Workmen v Firestone Tyre & Rubber Co.) 1976

25B. Definition of continuous service3

3
66. In this Chapter, continuous service in relation to a worker, means the uninterrupted service of such worker,
including his service which may be interrupted on account of sickness or authorised leave or an accident or a
strike which is not illegal or a lock-out or a cessation of work which is not due to any fault on the part of the
worker.

Explanation 1.—For the purpose of this section, where a worker is not in continuous service for a period of one
year or six months, he shall be deemed to be in continuous service under an employer—
(a) for a period of one year, if the worker during a period of twelve months preceding the date with reference to
which calculation is to be made has actually worked under the employer for not less than—
(i) one hundred and ninety days in the case of a worker employed below ground in a mine; and
For the purposes of this Chapter,-

(1) a workman shall be said to be in continuous service for a period if he is, for that period, in
uninterrupted service, including service which may be interrupted on account of sickness or
authorized leave or an accident or a strike which is not illegal, or a lock-out or a cessation of
work which is not due to any fault on the part of the workman;

(2) where a workman is not in continuous service within the meaning of clause (1) for a
period of one year or six months, he shall be deemed to be in continuous service under an
employer-

(a) for a period of one year, if the workman, during a period of twelve calendar
months preceding the date with reference to which calculation is to be made, has
actually worked under the employer for not less than-

(i) one hundred and ninety days in the case of a workman employed below
ground in a mine; and

(ii) two hundred and forty days, in any other case;

(b) for a period of six months, if the workman, during a period of six calendar months
preceding the date with reference to which calculation is to be made, has actually
worked under the employer for not less than-

(i) ninety-five days, in the case of a workman employed below ground in a

mine; and

(ii) one hundred and twenty days, in any other case.

Explanation: For the purposes of clause (2), the number of days on which workman has
actually worked under an employer shall include the days on which-

(i) he has been laid-off under an agreement or as permitted by standing orders made under the
Industrial Employment (Standing Orders) Act, 1946 (20 of 1946), or under this Act or under
any other law applicable to the industrial establishment;

(ii) he has been on leave with full wages, earned in the previous year;
(ii) two hundred and forty days, in any other case;
(b) for a period of six months, if the worker during a period of six months preceding the date with reference to
which calculation is to be made has actually worked under the employer for not less than—
(i) ninety-five days in the case of worker employed below ground in a mine; and
(ii) one hundred and twenty days, in any other case.

Explanation 2.—For the purpose of Explanation 1, the number of days on which a worker has actually worked
under an employer shall include the days on which—
(i) he has been laid-off under an agreement or as permitted by or under this Code or any other law applicable to
the establishment for the time being in force; or
(ii) he has been on leave on full wages earned in the previous years; or
(iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his
employment; or
(iv) in the case of a female, she has been on maternity leave, so however, that the total period of such maternity
leave does not exceed the period as specified in the Maternity Benefit Act, 1961.
 (iii) he has been absent due to temporary disablement caused by accident arising out of and in
the course of his employment; and

(iv) in the case of a female, she has been on maternity leave; so, however, that the total period
of such maternity leave does not exceed twelve weeks.

 The employer must be one and the same. But, it is not necessary that the workman should
work in the same capacity during the required period in order to earn ‘continuous service’ as
defined in this section.

 Ramakrishna Ramnath v Labour Court (1970) These provisions of law do not show that a
workman after satisfying the test under Section 25B has further to show that he has worked
during all the period he has been in the service of the employer for 240 days in the year.

 Surendra Kumar Verma v CGIT-cum Labour Court (1981) Under Section 25B, it is not
necessary that a workman should have been in the service of the employer for one whole
year. Even if not so, he shall be deemed to have been in such ‘continuous service’ for a
period of one year if he has actually worked under the employer for 240 days in the preceding
period of twelve months.

 Workmen of American Express IBC v Management (1985) Supreme Court held that the
expression ‘actually worked under the employer’ cannot mean only those days when the
workmen works with hammer and sickle or pen, but must necessarily comprehend all those
days during which he was in the employment of the employer and for which he had been paid
wages either under express or implied contract of service or by compulsion of statute,
Standing Orders, etc. Accordingly the Court held that Sundays and other Holidays would be
comprehended in the words ‘actually worked’.

 Chairman ONGC Ltd. V SC Bhowmik (2006) Burden of proof is on claimant workman to

show that he had worked for 240 or 120 days, as the case may be, in a year. For this the
general principles of Evidence Act can apply.

25C. Right of workmen laid-off for compensation4

4
67. Whenever a worker (other than a badli worker or a casual worker) whose name is borne on the muster rolls
of an industrial establishment and who has completed not less than one year of continuous service under an
employer is laid-off, whether continuously or intermittently, he shall be paid by the employer for all days during
which he is so laid-off, except for such weekly holidays as may intervene, compensation which shall be equal to
fifty per cent. of the total of the basic wages and dearness allowance that would have been payable to him, had
he not been so laid-off:

Provided that if during any period of twelve months, a worker is so laid-off for more than forty-five days, no
such compensation shall be payable in respect of any period of the lay-off after the expiry of the first forty-five
days, if there is an agreement to that effect between the worker and the employer:

Provided further that it shall be lawful for the employer in any case falling within the foregoing proviso to
retrench the worker in accordance with the provisions contained in section 70 at any time after the expiry of the
first forty-five days of the lay-off and when he does so, any compensation paid to the worker for having been
laid-off during the preceding twelve months may be set-off against the compensation payable for retrenchment.

Explanation.—For the purposes of this section "badli worker" means a worker who is employed in an industrial
establishment in the place of another worker whose name is borne on the muster rolls of the establishment, but
 Whenever a workman (other than a badly workman or a casual workman) whose name is
borne on the muster rolls of an industrial establishment and who has completed not less than
one year of continuous service under an employer is laid-off, whether continuously or
intermittently, he shall be paid by the employer for all days during which he is so laid-off,
except for such weekly holidays as may intervene, compensation which shall be equal to fifty
per cent, of the total of the basic wages and dearness allowance that would have been payable
to him had he not been so laid-off:

PROVIDED that if during any period of twelve months, a workman is so laid-off for more
than forty-five days, no such compensation shall be payable in respect of any period of the
lay-off after the expiry of the first forty-five days, if there is an agreement to that effect
between the workman and the employer:

PROVIDED FURTHER that it shall be lawful for the employer in any case falling within
the foregoing proviso to retrench the workman in accordance with the provisions contained in
section 25F at any time after the expiry of the first forty five days of the lay off and when he
does so, any compensation paid to the workman for having been laid off during the preceding
twelve months may be set off against the compensation payable for retrenchments

Explanation: "Badli workman" means a workman who is employed in an industrial

establishment in the place of another workman whose name is borne on the muster rolls of
the establishment, but shall cease to be regarded as such for the purposes of this section, if he
has completed one year of continuous service in the establishment.

 Even in case of an agreement between the workmen with regard to period of compensation
for the lay-off of workmen, it cannot override Section 25-C. But where a workman is entitled
to more favourable benefits under the Provisions of any other Act or Rules, or Orders or
Notifications issued thereunder or under any Standing Orders or under any award, contract of
service or otherwise than those to which he would be entitled under this Act, the former will
have the priority over the latter.

 Payment of compensation is not a condition precedent to lay-off - Payment of

compensation on should not precede the declaration of lay-off. On the contrary, declaration
of lay-off may be effected first and this will impose a liability on the employer to pay and a
right on the workmen to recover lay-off compensation. It has been held that compensation for
lay-off cannot be awarded in advance of actual lay-off and on grounds of social justice.

25D. Duty of an employer to maintain muster rolls of workmen5

Notwithstanding that workmen in any industrial establishment have been laid-off, it shall be
the duty of every employer to maintain for the purposes of this Chapter a muster roll, and to
provide for the making of entries therein by workmen who may present themselves for work
at the establishment at the appointed time during normal working hours.

shall cease to be regarded as such, if he has completed one year of continuous service in the establishment.
5
68. Notwithstanding that workers in any industrial establishment have been laid-off, it shall be the duty of
every employer to maintain for the purposes of this Chapter a muster roll, and to provide for the making of
entries therein by workers who may present themselves for work at the establishment at the appointed time
during normal working hours.
 25E. Workmen not entitled to compensation in certain cases6

No compensation shall be paid to a workman who has been laid-off-

(i) if he refuses to accept any alternative employment in the same establishment from which
he has been laid off, or in any other establishment belonging to the same employer situate in
the same town or village or situate within a radius of five miles from the establishment to
which he belongs, if, in the opinion of the employer, such alternative employment does not
call for any special skill or previous experience and can be done by the workman, provided
that the wages which would normally have been paid to the workman are offered for the
alternative employment also;

(ii) if he does not present himself for work at the establishment at the appointed time during
normal working hours at least once a day;

(iii) if such laying-off is due to a strike or slowing-down of production on the part of

workmen in another part of the establishment.

 In Associated Cement Co v Workmen18, the Supreme Court had occasion to interpret the
term “part of the same establishment” used in Section 25(E)(ii). The companies owned
cement works and limestone quarry, both in Bihar. The cement works depend solely on the
quarry for its limestone. The quarry workers struck work. Therefore, some parts of the
cement works were closed down by the company. Subsequently, the strike in the quarry was
withdrawn. Therefore, the closed down parts of the cement works started functioning.
However, the workers in the closed down parts claimed lay-off compensation. On reference
the tribunal held that quarry is not part of the cement works. On appeal Supreme Court
reversed it. The court said that the Industrial Disputes Act is silent regarding the test to decide
“what is one establishment.” Geographical proximity, unity of ownership, functional
integrity, general unity of purpose, can be the tests. The real purpose of these tests is to find
out the true relation between the parts, branches of units. If in their true relations they
constitute one integrated whole then they can be said to be one establishment.

In the instant case the quarry and cement factory constituted one establishment within the
meaning of Section 25(E)(iii). The lay-off in the factory was due to non-supply of limestone
by reason of the strike in the limestone quarry and the strike was decided by the same union
which consisted of workmen of the cement factory and the quarry. Thus, section 25(E)(iii)

6
69. No compensation shall be paid to a worker who has been laid-off—

(i) if he refuses to accept any alternative employment in the same establishment from which he has been laid-
off, or in any other establishment belonging to the same employer situate in the same town or village or situate
within a radius of eight kilometres from the establishment to which he belongs, if, in the opinion of the
employer, such alternative employment does not call for any special skill or previous experience and can be
done by the worker, provided that the wages which would normally have been paid to the worker are offered for
the alternative employment also;

(ii) if he does not present himself for work at the establishment at the appointed time during normal working
hours at least once a day;

(iii) if such laying-off is due to a strike or slowing-down of production on the part of workers in another part of
the establishment.
clearly applied and the workmen of the closed down cement factory are not entitled to claim
lay-off compensation.