Introduction 

Layoff and retrenchment are talked about in the Industrial Disputes Act of 1947.
Layoff refers to the removal of employees by the employer for reasons other
than the employee’s fault. A layoff is temporary in nature as it indicates the
incapability of an employer to continue the employment of the workers for a
short period. Retrenchment refers to a situation where the employer removes his
employees to increase profits and decrease losses. Even in retrenchment, there
is no fault of the employee that results in the termination of the employment.
Through this article let us analyse the terms layoff and retrenchment put forth
under the Industrial Dispute Act, 1947 in detail. 

Understanding the concept of lay-off under the Industrial Disputes Act, 1947

Section 2 (kkk) of the Industrial Disputes Act, 1947 defines the term ‘Layoff’’
as the inability, failure, or refusal of the employer to provide employment to a
workman whose name is mentioned in the muster roll of his industrial
establishment and who is not retrenched due to the lack of power, coal, raw
materials, accumulation of stocks, breakdown of machinery or natural calamity
for any other relevant reason.  

Conditions essential for a lay-off

 There must exist an inability, failure or refusal from the employer’s

side to provide employment to the workmen.

 Such inability, failure or refusal must be due to lack of power, coal,

raw materials, accumulation of stocks, breakdown of machinery or
natural calamity for any other relevant reason.
  The name of the workman must be mentioned in the muster roll of the
employer’s industrial establishment.

 The workman must not have been subjected to retrenchment.

A layoff is a measure that is used only in continuing businesses. If the employer
decides to permanently shut down his industrial establishment then layoff is of
no use. Layoff must adhere to the conditions provided in Section 2 (kkk) of the
Industrial Disputes Act, 1947 or else it will not be considered right as per the
law. Layoff means there will be immediate removal of the employees, however,
such unemployment is temporary in nature so it does not result in the
termination of the already existing employer-employee relation and leads to no
alteration of the terms of such employment.

A workman whose name is mentioned in the muster roll of the employer’s

industrial establishment and who is present for work during the working hours
of any day is not employed within two hours of him being present for work is
said to be laid-off for that particular day. Similarly, if the workman is asked to
work during the second half of his shift and is employed then he is said to be
laid off for half of the day. In case he is not employed even after being present
for work during the second half of the day, then he is considered to be laid-off
for the whole day.

Section 25A of the Industrial Disputes Act, 1947: non-applicability of

compensation on industries

As per Section 25A, the compensation accrued from the layoff provisions

mentioned in the said Act shall not apply to the following kinds of industrial
establishments :
  Such industrial establishments where less than 50 workmen worked on
an average during each working day in the preceding calendar month.

 An industrial establishment where work is done seasonally or

occasionally.

 An industrial establishment that comes under the aegis of chapter V-B

as included by the Industrial Disputes Amendment Act of 1976.

Section 25B of the Industrial Disputes Act, 1947: continuous service

As per Section 25B, a workman is said to render continuous service if he has

worked for at least one year without any interruption. He shall be eligible for
compensation if he has rendered a minimum of one year of continuous service.
The interruption of such continuous service is not affected by reasons such as an
accident, authorized leave, sickness, legal strikes, a lock and the termination of
work that is not due to the fault of the workmen.

There are two exceptions where even if a workman is not in continuous service
shall be deemed to be in continuous service – they are –

 If the workman was employed for the preceding 12 calendar months

from the date on which such calculation is being made.

 If the workman during such 12 months had rendered his services for
190 days or more in the case of being employed in a mine and 240
days in any other employment.

Conditions precedent for providing compensation to a laid-off workman 

As per Section 25C of the said Act, the workman who is laid off is entitled to
compensation that is equivalent to half of the total wages and allowance given
for the said period of lay-off.

However such compensation is subject to the following conditions –

 The workman is not a badli or a casual worker.

 The workman’s name must be mentioned in the muster roll of the

industrial establishment.

 The workman must have rendered at least one year of continuous

service under such an employer.

Conditions for non-applicability of compensation on workmen 

Section 25E states when a workman shall not be entitled to layoff compensation

–

1. If the workman is absent from the establishment during the required

working hours at least once a day.

2. If the workman is laid off for slowing down the efficiency of workmen
in another part of the establishment or due to the reason for a strike.

3. If the workman expresses his refusal towards the alternative

employment being given to him, provided that:

 Such employment is given in the same establishment he has been laid

off from.
  Such employment is given in any other establishment under the same
employer within 5 miles radius from the establishment to which he
belonged.

 Such employment as per the employer does not require any previous
experience or special skills as compared to the work that the workman
can do

 Such employment provides the same wages to the workman as his

previous employment did.

Prohibition of lay-off under Industrial Disputes Act, 1947 

An employer is subjected to certain restrictions while laying off workers as

per Section 25M (Chapter VB added to the Industrial Disputes Act of 1947 by
the Industrial Disputes Amendment Act of 1976). These restrictions apply to
those industrial establishments which are not seasonal in nature and where there
more than 100 workmen. An employer cannot lay off a workman whose name is
mentioned in the muster roll of his industrial establishment except when the
reason for such layoff is lack of power or a natural calamity. If the work is
regarding a mine then the reasons can also be fire, explosion, excess of
inflammable gas or a flood.

An employer can lay off the workmen after acquiring the permission of the
concerned authorities specified by the government or the government itself. For
this purpose, an application shall be made by the employer stating the reasons
for such lay-off and a copy of the same application shall be provided to the
workmen who are subjected to such lay-off. After receiving an application, the
concerned authority or the government can inquire about such lay off. After
such inquiry, the order of the concerned authority or the government must be
communicated to the employer and the employees being laid off. The order of
the concerned authority or the government shall be considered as final and will
be binding for a period of one year from the date of such order.

If the concerned authority or the government does not communicate its order
regarding its grant or refusal to grant permission for such lay off within 60 days
from the date of application then such application for permission shall be
considered as granted. The order of the concerned authority or the government
can be referred to a tribunal for adjudication or reviewed either in its own
motion or through an application made by an employer or any workman.  

In case any lay off occurs even after the permission to do so is refused then such
lay off will be considered illegal and the workmen laid off will be entitled to the
benefits of the law. However, an employer will not be considered to have laid
off a workman if he provides alternative employment to such workman.

Next one

Layoffs and Laid off are the nomenclatures that convey the same meaning that
is temporary refusal by an employer to give employment to an employee who is
already employed. Many people get confused about the difference in between
two terms but they are one and the same. The only difference is, Laid off is used
in passive voice and its Past participle of Lay off. for an example:

Active voice: In this year, company lay off 100 employees.

passive voice: In this year,100 employees are laid off by the company
Meaning

Termination of employment (with or without notice) by the employer or

management. Layoffs are not caused by any fault of the employees but by
reasons such as lack of work, cash, or material. Permanent l h layoff is called
redundancy. But in view of the Industrial disputes act, 1947 (India), layoff
means temporary removal of employees because of deficit and shortage of
inputs which are related to productivity, breakdown of machinery or effect of
natural calamity. Layoff of employees does not mean that they are terminated
from the job, such employees could be reinstated after revivifying of deficit or
shortages which effected productivity.

Layoff Definition:

According to [section 2 (kkk)] of Industrial disputes act, 1947

"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
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;

Dictionary meanings

when someone stops employing someone, sometimes temporarily, because there

is no money to pay them or because there is no work for them. - Cambridge

Temporary or permanent discharge of a worker or workers: -Oxford

Dictionary

Layoff (in British and American English), also called redundancy in the UK, is
the temporary suspension or permanent termination of employment of an
employee or (more commonly) a group of employees for business reasons, such
as when certain positions are no longer necessary or when a business slow-
down occurs. Originally the term layoff referred exclusively to a temporary
interruption in work, as when factory work cyclically falls off. The term
however nowadays usually means the permanent elimination of a position,
requiring the addition of "temporary" to specify the original meaning.

Layoff

Non-applicability of layoff provisions to certain establishments

According to section 25A of chapter VA of Industrial Dispute Act 1947, certain

establishments do not have any provisions relating to layoff of the employees by
the employer. In such circumstances, layoff would be considered without any
authority of law.

Such establishments are:


1. Industrial establishments in which less than 50
workmen are employed, on an average per working day.
2. Industrial establishments which are of a seasonal
character and in which work is performed only intermittently.

Employees employed in the above said establishments do not have right for
laid-off compensation. However if there is any agreement between employer
and employee for that purpose or on the grounds of social justice, laid-off
competition can be paid.

In South India Corporation Ltd. v. All Kerala Cashewnut Factory Workers'

Federation the Court held that if any establishment is not covered within the
scope of this Chapter V-A, the Tribunal has no right to grant relief on the basis
of any fanciful notions of social justice.

Except above said industrial establishments, all other industrial establishments (

50 workmen and above industrial establishments which are not of seasonal
character) have provisions relating to lay off of the employees by the employer.

Right of Compensation by workmen laid-off

[Right of workmen laid-off for compensation] Industrial Disputes Act,1947

Section 25-C

workman has right to lay-off compensation subject to the following conditions,

they are:

 1. Workman name should be borne on muster rolls of the
establishment and he/she is not a badli workman or a casual
workman; and
2. The workman should have completed not less than
one year continuous service as defined under Section 25-B;
and
3. The workman should have laid-off, continuously or
intermittently;
4. Then the workman shall be entitled to lay-off
compensation for all days during which he was so laid-off;
5. However, the workman shall not be paid lay-off
compensation for such weekly holidays as may intervene the
period of lay-off.
6. The lay-off compensation is equal to 50% of the total
of the basic wages and dearness allowance that would have
been payable to him, if he had not been so laid off.

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.

In Vijay Kumar Mills v. Labour Court, the Madras High Court held that the
badli workman is one whose name is not borne on muster rolls of the
establishment. If his name is found on the muster roll, even if he is a badli
workman, he is entitled to lay-off compensation.

Maximum days allowed to Layoff of employee by employer

According to section 25C of Industry and dispute Act 1947, maximum days
allowed to Layoff of employee by employer is 45 days, for those days,
employee who is laid-off is entitled for compensation equal to 50% of the total
of the basic wages and dearness allowance that would have been payable to
him, had he not been so laid off.

However, if this contingency is prolonging beyond a reasonable time, say 45

days, it would be matter of serious concern. both to the employer and to the
workmen because both of them are put to a loss of 50% wages i.e. The
employer is required to pay lay-off compensation without extracting work from
workmen and workmen too, would be losing 50% wages which he would have
earned had he not been so laid-off. Therefore the parties can enter into an
agreement not to continue lay-off after a period of 45 days in a year.

Compulsory permission from competent authority by employer to lay off of

workmen

Section 25M of Industrial Dispute act 1947 (Amendment in 1984)

For Industrial establishments in which not less than 100 workmen are
employed, on an average per working day and are of not being seasonal
character and in which work is performed only intermittently, have to seek prior
permission from competent authority by the employer to layoff workman. if the
employer does not apply to seek prior permission or where such permission is
refused by the competent authority specified above, to effect lay-off, such lay-
off shall be considered as illegal and the workmen laid-off shall be entitled to all
benefits as if they have not been laid-off.

Can an employer avoid the lay-off compensation?

Section 25A of Industrial Dispute act 1947

Following establishments can avoid lay off compensation according to the

Section 25E

1. Industrial establishments in which less than 50
workmen are employed, on an average per working day, but
not to industrial establishments in which more than 100
workmen are employed.
2. Industrial establishments which are of a seasonal
character and in which work is performed only intermittently.

Workmen not entitled to compensation in certain cases [Section 25E] of

Industrial Dispute act 1947

(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.