ASSIGNMENT

LAID OFF WORKMEN AND THEIR RIGHTS: CRITICAL EVALUATION

Submitted to: Submitted by:

Dr. Ruchi Gupta Vikram Sharma

(Assistant Professor of Law) (1020181927)

HIMACHAL PRADESH NATIONAL LAW UNIVERSITY

GHANDAL, SHIMLA, P.O. SHAKRAH, SUB-TEHSIL DHAMI
DISTRICT SHIMLA, HIMACHAL PRADESH-171014
Ph. 0177-2779802, 0177-2779803, Fax: 0177-2779802
Website: http://hpnlu.ac.in
 DECLARATION

The work embodied in this Assignment titled “Laid off workmen and their rights : Critical
Evaluation” has been done by me and not submitted elsewhere for the award of any other
degree/certificate. All ideas and references have been duly acknowledged.

Vikram Sharma, (1020181927)

B.A.LL.B. Xth Semester
(Batch: 2018-19)

2
 TABLE OF CONTENT

1. INTRODUCTION...................................................................................................4
2. LAY OFF...............................................................................................................4-5
3. CONTINUOUS SERVICE......................................................................................6
4. COMPENSATION................................................................................................7-8
5. PROHIBITIO.N....................................................................................................8-9
6. CRITICAL EVALUATION...............................................................................9-10
7. CONCLUSION..................................................................................................10-11
8. BIBLIOGRAPHY..................................................................................................11

3
INTRODUCTION

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. Lay off is an temporary unemployment of the
workers due to lack of resources, raw materials or breakdown of machinery, or even due to
natural calamity. The employer cannot give work to the employees due to aforesaid reasons.

A lay-off occurs only in a continuing business and not if an industrial establishment is closed
permanently. This does not end the employer-employee relationship. A person would be laid-off
for an entire day or half a day if there is no work for him at the particular time.

LAY OFF

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.

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 establishments1:

 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.

1
Section 25A, I D Act, 1947

4
Condition 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.

Central India Spinning, Weaving and Manufacturing Co. Ltd. Nagpur v. State Industrial
Court, 2 held that the words, “failure, refusal, or inability” are the key to the definition and
means that the unemployment is due to the a cause independent of any action or inaction of the
workmen.

2
AIR 1959 Bom 225

5
Continuous Service

It is important to note that workmen are entitled to compensation only if they have been in
continuous service. Section 25 B of the Act defines continuous service as follow:

A workman is said to be of continuous service if he provides uninterrupted service, which

includes interrupted service due to sickness, accident, strikes which are not illegal, lock out or
cessation of work not due to the fault of the workman. In other words, the duration when the
workman is out of the office on account of illness is not excluded while computing continuous
service3.

The service is construed as continuous for a period of one year if the workman works in the
previous year for:

 190 days- below the ground in a mine

 240 days- in any other jobs.

The service is construed as continuous for a period of six months if the workman works in the
preceding six months for:

 95 days- below the ground in a mine

 120 days- in any other job.

In Sur Enamel & Stamping Works Ltd. v. Their Workmen4, the Supreme court held that before
a workman can be considered to have completed “one year of continuous service” in an industry,
it must be shown that he was employed for a period of at least twelve calendar months and
during those twelve calendar months he had worked at least two hundred and forty days.

In Industrial Employees’ Union, Kanpur v. J.K. Cotton Spinning and Weaving Mills
Company5 , it was held that offering unskilled work to a skilled worker does not amount to
compensation. The workmen are entitled to compensation if and only if he/she has been in
continuous service. Continuous service is defined as providing uninterrupted service (including
interrupted service due to sickness or accidents) for at least a year.

3
Section 25B, I D Act 1947
4
(1963) 2 LLJ 367, 379 (SC)
5
1956 1 LLJ 325.

6
COMPENSATION FOR LAY OFF

A person who is laid off is entitled to compensation which is equivalent to fifty percent of his
wages as given under Section 25C. However, there are certain conditions for the compensation:

 A casual or a badli worker is not entitled to such compensation. A worker who is

employed in place of another worker for a short period of time is a badli worker.

In English Electric Co. of India Ltd. v. Industrial Tribunal Madras6 it was held that, however,
if a “badli” workman has completed one year of continuous service in the industrial
establishment, he will be treated as a permanent workman for all purposes.

 The worker’s name should be on the muster rolls.

 The worker should have completed one year of service under the employer.

The compensation cannot be paid for more than forty-five days. If the lay-off period extends the
prescribed time then, the employer can continue paying the compensation or can be retrenched.
The lay-off compensation is provided to overcome unemployment pains that are not under
employers control. A lay- off can be declared only in unforeseeable situations and not to
victimise the worker7.

There are certain situations where the worker is not entitled to lay-off compensation8:

 He will not be entitled to compensation if he refuses to accept alternative employment

provided in the same establishment or another establishment of the same employer which
carries the same wages and skills as the previous work.

 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.

6
(1987) 1 LLJ 141
7
Section 25C, I D Act,1947
8
Section 25E, I D Act, 1947.

7
  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.

 If he is not present at the establishment for work at least once a day he will not be entitled
to the compensation.
 Lay off due to strikes will not be entitled to compensation.

The Burden of proof is on the employer to show that the workman is disentitled to claim
compensation because his case falls under the purview of section 25E.

The Court in Anusuyabai v. Mehta9 case held that, it is clear that the lay off does not terminate
or bring to an end to the contract of employment. The employees continue to be on the master
roll of the employer, and they have to be reinstated as soon as normal work is resumed.

PROHIBITION OF LAY OFF

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

9
1959 (2). LLJ 742.

8
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.

CRITICAL ANALYSIS

The rights of laid-off workmen under the Industrial Disputes (ID) Act, 1947 have been a subject
of critical analysis. Let's examine some key aspects and criticisms related to the rights of laid-off
workmen under the ID Act:

1. Inadequate Compensation: One of the primary criticisms is that the compensation provided
to workmen during the period of layoff is often considered inadequate. The Act stipulates that
workmen should receive compensation at the rate of 50% of the total wages, but this may not
sufficiently address the financial hardships faced by laid-off workers and their families.

2. Limited Coverage: The ID Act applies only to workmen who have completed at least one
year of continuous service. This exclusion leaves temporary, contractual, and casual workers
without adequate protection during layoffs. Critics argue that all categories of workers should be
entitled to equal rights and compensation during layoffs.

3. Lack of Clear Definition: The ID Act does not provide a clear and comprehensive definition
of layoff. This ambiguity can lead to disputes and inconsistent interpretations, affecting the rights
and entitlements of workmen. Critics argue for a more precise and explicit definition of layoff to
avoid confusion and ensure consistent application of the law.

9
4. Challenges in Enforcement: Despite the provisions in the ID Act, there are challenges in
enforcing the rights of laid-off workmen. The delays in legal proceedings and the backlog of
cases in labor courts and tribunals can hinder workmen's ability to seek timely redressal and
compensation.

5. Insufficient Rehabilitation Support: The ID Act does not explicitly address rehabilitation or
reemployment support for laid-off workmen. Critics argue that there should be provisions to
assist workmen in finding alternative employment, acquiring new skills, or accessing social
security benefits during periods of unemployment.

6. Need for Modernization: The ID Act was enacted over seven decades ago and has not
undergone substantial updates to address the changing nature of work and emerging employment
practices. Critics contend that the Act should be modernized to account for gig work, contract
employment, and other evolving employment relationships.

7. Lack of Deterrents for Unfair Layoffs: Some critics argue that the ID Act does not impose
significant deterrents on employers engaging in unfair layoffs. They argue for stronger
provisions to discourage employers from resorting to layoffs as a means of circumventing their
obligations or as a tool for unfair labor practices.

CONCLUSION

To address these critical aspects, there is a need for a comprehensive review of the ID Act,
including the compensation structure, coverage of different categories of workers, clear
definitions, improved enforcement mechanisms, provisions for rehabilitation support, and
alignment with contemporary employment realities.

Efforts should be made to strike a balance between the interests of employers and the protection
of workmen's rights, ensuring that laid-off workmen are provided with adequate compensation,
support, and opportunities for reemployment or rehabilitation.

In conclusion, while the lay off provision in the Industrial Disputes Act of 1947 aims to address
temporary work suspensions, there are critical aspects that require attention. Addressing the

10
ambiguity in the definition, revisiting the compensation structure, introducing reasonable time
limits, and improving the efficiency of the dispute resolution process would enhance the
effectiveness of the lay off provisions in protecting the rights and interests of workmen.

BIBLIOGRAPHY

1. BOOKS

 "Impact of I.L.O. Standards on Indian Labour Law" by Dr N Maheshwara Swamy

 "Labour Regulation in Indian Industry in 10 Vols 2009: Institute for Studies in Industrial
Development" by T S Papola
 "Demographic Dividend or Disaster: Indian Labour in the 21st Century" by Agrawal
Chetan
 "Impact of ILO Conventions on Indian Labour Legislation" by Sunitha Kanipakam

2. ACTS

 Industrial Disputes Act, 1947

 Industrial Relation Code, 2020

3. Websites

 https://legalreadings.com/an-overview-on-lay-off-retrenchment-and-closure/
 https://www.legalserviceindia.com/legal/article-137-special-provisions-relating-to-lay-
off-retrenchment-and-closure-under-industrial-disputes-act.html
 https://legalserviceindia.com/legal/article-8299-lay-offs-under-ir-act-2020.html
 https://www.livelaw.in/know-the-law/lay-off-retrenchment-industrial-relations-code-
labour-rights-189044

11