UNIT 3 LABOUR LAW

Q1. Various types of strikes mentioned in the industrial disputes Act.

Ans.
INTRODUCTION

What is a Strike?
A strike is a collective action taken by a group of workers, often organised by a labour union or
worker association, to stop working in protest against their employer’s policies, working conditions
or other labour-related issues.

Strikes are a way for employees to exert pressure on their employers to address their grievances,
negotiate better terms and improve working conditions.

Strikes can be of various types in Labour Law, including a complete halt to work, a slowdown in
work output, adhering strictly to workplace rules or even occupying the workplace in protest. The
success of a strike depends on factors like how well-organised the striking workers are, public
support for their cause and the bargaining strength of the employer.

While strikes can effectively lead to better working conditions, they can also have downsides for
both workers and employers. They can result in lost wages, disrupted production and harm to a
company’s reputation. Employers may respond to strikes by hiring replacement workers or pursuing
legal action against striking employees.

Definition of Strike
According to Section 2(q) of the Industrial Disputes Act, 1947:

A strike is ―”a cessation of work by a body of persons employed in any industry acting in
combination or a concerted refusal under a common understanding of a number of persons who are
or have been so employed to continue to work or to accept employment.”

11 Types of Strike in Labour Law

The various types of strike are:

General Strike
A general strike is when workers come together with a shared understanding and stop working,
causing significant disruption to their employer’s operations.

These types of strike in Labour Law strikes are often used to demand improvements in economic
aspects such as basic pay, bonuses, leaves and holidays. They are commonly seen in industries like
Railways, the Post and Telegraph Department and among government employees.

Mass Casual Leave

Mass casual leave is another method used by workers to express their grievances. In this approach,
all employees take leave simultaneously, in contrast to the rules stated in their employment
guidelines.

Normally, employees are allowed to take leave based on established procedures, but workers use
mass casual leave as a way to pressure management into addressing their demands and entering into
discussions.
Stay in, Sit Down, Pen Down Strikes
In this type of strikes, workers gather at their workplace but refrain from working or leaving the
premises. This situation can become complicated legally when workers refuse to vacate the
workplace, essentially squatting on the premises. This can be considered a form of criminal
trespass. Strikes, especially in banks, are sometimes intended to undermine the bank’s reputation in
the market. Prolonged strikes can harm the employer’s reputation and even lead to negative
incidents.

In the case of Bank of India v. T.S. Kelavala, it was noted that labourers, often in a vulnerable
position, engage in battles against powerful management. While industrial legislation acknowledges
the right to strike, it also imposes limitations and conditions for a strike to be legal. Engaging in an
illegal strike may not result in direct disciplinary action, but workers may lose their wages for the
duration of the strike.

The loss of wages during a strike is a consequence of the workers withholding their labour. If they
do not work during the strike, the employer has no obligation to pay them for that period.
Therefore, it is not reasonable for workers to expect payment for the time they have not worked
during a strike.

Go-Slow
A “go-slow” strike involves workers intentionally slowing down the production process while
pretending to be engaged in their work. This is considered a harmful practice that dissatisfied and
disgruntled workers may resort to. It can be seen as a form of dishonesty because it results in
delayed production, reduced output and often causes machinery to operate at a lower speed, which
can be detrimental to the equipment.

Despite this deliberate slowdown, workers are still entitled to their full wages, benefits and other
conditions of service that they would normally receive. However, management does not achieve the
expected level of production for the salaries they pay in these types of strike.

Token Strike
Token strikes are such types of strike where it is staged as a symbolic protest against specific
grievances that workers have. These strikes are typically of short duration, but they still meet the
criteria to be considered a strike, as defined in section 2(q) of the relevant legislation.

Lightning or Quick Strikes

As the name suggests, lightning or quick type of strikes happen suddenly and swiftly. They are
staged without prior notice, aiming to convey the message of an immediate strike to all workers.

Typically, workers provide notice before going on strike and then follow through with their action.
However, in lightning strikes, workers strike first and then begin negotiations. Since there is no
advance notice given for such strikes, they are considered illegal from the outset.

Sympathetic Strikes
Sympathetic strikes are organised to show support for another union that is already on strike against
their management. In these strikes, the workers do not have grievances of their own; instead, they
are expressing solidarity with another union’s cause.

However, it’s important to note that in this kind of strikes, the management is still required to pay
salaries to workers who do not have their own grievances. These strikes are not justified and are
also illegal, as they do not meet all the criteria outlined in section 2(q) of the Industrial Disputes Act
of 1947.
Hunger Strike
A hunger strike is a form of protest in which the striking workers refrain from eating and also stop
working. Mahatma Gandhi’s hunger strike, known as ‘satyagrah,’ aimed to achieve noble goals
related to truth. However, hunger strikes by other workers are typically a means to attain monetary
objectives.

It’s important to note that individuals participating in a hunger strike may be liable under section
309 of the Indian Penal Code, which deals with attempted suicide. Not all strikes lead to penalties,
but if the strikers reach a stage where there is a clear risk of suicide, section 309 may apply.

Work-to-Rule Strike
This is a relatively new kind of strike in Labour Law used by dissatisfied workers to exploit
loopholes in the regulations governing their employment conditions. In a work-to-rule strike,
striking employees adhere strictly to the existing service rules in a way that causes inconvenience to
the general public.

They intentionally interpret the rules in a manner that results in public inconvenience rather than
assisting the public, leading to a slowdown in work. Such strikes are typically organised in public
utility services with the objective of indirectly inconveniencing the public to exert pressure on the
government to meet the workers’ demands.

Mass Resignations
Mass resignations are another type of strike in which all the workers employed in an industry
collectively submit their resignations to the management.

This tactic puts significant pressure on the management because accepting all the resignations
would effectively bring the industry to a standstill. The workers use mass resignations to compel the
management to agree to their demands.

Gherao
“Gherao” is a term of vernacular origin and refers to the practice of confining a person to a specific
location where they are not allowed to move freely. It essentially involves physically blocking a
target, which could be a manager, managing director or anyone from the management. During a
gherao, the victim is encircled by workers to prevent them from entering or leaving a particular
place, such as a workshop or factory. This type of strike involves an element of wrongful restraint
and wrongful confinement.

In some cases, gheraos take a troubling turn where the victim is subjected to cruel and inhuman
confinement without basic amenities like water and fans. Sometimes, the victim is even denied food
or the ability to communicate with the outside world. This extreme form of strike may involve
physical abuse, humiliation and a denial of basic human needs. The victim becomes entirely at the
mercy of those conducting the gherao. Gheraos often involve a disregard for the law.

In a legal context, it was discussed in the case of Jay Engineering Works Ltd. and State of West
Bengal and Others, where the origin of the term “gherao” was examined. The judges mentioned
that “gherao” can be found in some Bengali dictionaries and is derived from the Hindi word
“ghirao” or even from the Sanskrit word “ghiri,” which means “to cover or encircle.” In simple
terms, “gherao” means encircling a target and not allowing them to move in any direction.

Conclusion
Types of strike are General Strike, Mass Casual Leave, Go-Slow, Token Strike, Hunger Strike, Mass
Resignations and Gherao. Strikes take various forms, each serving as a means for workers to
express grievances, demand change or protest. These diverse strategies can disrupt operations,
compel negotiations and create a range of legal and ethical challenges for both workers and
management within industrial disputes.

Q2. Explain provisions relating to prohibition of strike and lockout

GENERAL MEANING OF STRIKES AND LOCKOUTS

Strikes are mass refusal to work by a group of employees or by a trade union. A refusal is a form of
protest demanding the employer or employers to fulfill their request. The request might vary from
wage increase to other working conditions. In contrast, lockouts are refusal by the employer to
continue to employ the employees. Lockouts are temporarily shut down of the industry as a
response to a labor dispute. Lockouts are the antithesis of Strikes. Both tools are used as last resort
as they can create affect both the employer and the employee financially.

DEFINITION OF STRIKE AND LOCKOUT UNDER THE ACT

Section 2(q) of the Industrial Disputes Act of 1947 defines “strike” as “a cessation of work by a
body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal
under a common understanding, of any number of persons who are or have been so employed to
continue to work or to accept employment.”[1]

The following are the essentials of a strike:

 Cessation or stoppage of work.

 The stoppage of work must be due to the common understanding of the employees.
 The establishment should be an ‘industry’ within the meaning of the Act.

In the case of Standard vacuum oil co. Madras V Gunaseelam M. G[2], the company’s
employees wanted to observe “May Day.” They requested that day be declared as a holiday by the
employers. They were also willing to work on a Sunday to make up for the losses. The workforce as
a whole took leave after the company failed to recognize “May Day” as a holiday. The court
determined that the employees’ collective decision to apply for casual leave did not constitute a
strike and there was neither stoppage of work nor concerted refusal to work.

According to Section 2(l) of the Act, “lock-out” means the temporary closing of a place of
employment or the suspension of work, or the refusal by an employer to continue to employ any
number of persons employed by him.”[3]

The following are the essentials of a lockout:

 It should not be a permanent dismissal or termination or discharge or retrenchment.

 Refusal to employ is temporary in nature.
 Not a closure of the industry
 Employees get back their jobs after the completion of the lockouts.

In the case of Tata Iron and Steel Company, Ltd. vs Its Workmen and Ors[4]; it was held that it
is true that a simple refusal to hire someone may not constitute a “lockout” unless it was done to
force the employees to accept the employer’s demands and see things from his perspective through
coercion. A lockout is the opposite of a strike and is a tool in the hands of the employer used to
enforce a demand.

RIGHT TO STRIKE

In Kameshwar Prasad v. The State of Bihar[5], the Apex Court has held that the right to strike is not
implicitly covered under Article 19(1)(c) and is not a fundamental right. Also, in T.K. Rangarajan v.
Government of Tamil Nadu[6], the court held that the Government employees do not have any legal
or moral rights to go on strikes. A strike is an effective measure of collective bargaining and a
statutory right[7].

RIGHT TO LOCKOUT

In AP Electrical Equipment Corporation v. Their Staff Union[8], held that the provisions of the
Industrial Disputes Act that grant power and impose restrictions on the employers to carry out
lockout would become meaningless if the petitioner’s right to lockout is deemed to be a
fundamental right.

PROHIBITION OF STRIKES AND LOCKOUT

Strikes and lockouts are effective tools that employers and employees use to negotiate collectively.
Nevertheless, they cause deterrence to industries in that they hamper production, manufacturing,
and the output of the industries negatively. Strikes and lockouts are therefore subject to certain
restrictions under the Act to minimize their potential impact on the economy. Section 22 of the Act
puts forth the conditions to be met while carrying out Strikes and Lockouts in public utility services
(Section 2(n) defines public utility services[9]).

Section 23 of the Act provides for the general prohibition of strikes and lockout to minimize the
convenience the public will experience. The Section provides that the employees shall not conduct
any strike by breaching the contract of services. The employee shall give notice prior to 6 weeks of
the Strike and shall not commence the strike within 14 days of the issuance of the notice or after the
expiry of the notice. A strike shall not be commenced when the matter is before the conciliation
officer or after 7 days of such conciliation. A similar procedure should be followed by the employer
during and before the declaration of the lockout.

GENERAL PROHIBITION OF STRIKES AND LOCKOUT

While Section 22 is exclusively applicable to industries of public utility services; Section 23 is

applicable to all industries including public utility services. Section 22 states that neither employee
nor employer shall commence strike or lockout during the following scenarios:

(a) when the matter is before the conciliation board or Labor Court Tribunal or National Tribunal or
before Arbitration Board.

(b) also, 7 days after the completion of the proceedings before the Conciliation Board or 2 months
after the completion of the proceedings before the Labor Court Tribunal or National Tribunal or
before the Arbitration Board.

(c) also, during the period of any kind of settlement or award in operation.

The same levels of a strike were also emphasized in the case of Management, Essoripe Mills Ltd v.
Presiding Officer, Labor Court[10]. In the case of Mineral Minister’s Union v. Kudremukh Iron Ore
Co Ltd,[11] the court held that a fresh notice of strike has to be issued to the employer after the
expiry of the given notice on the failure of the conciliation and settlement. The notice served should
be within the prescribed format under Labor Court (Practice and Procedure) Rules, 1975 and it is
immaterial whether the notice is served through post or by hand; the main essential is to serve the
notice[12].

Q. ILLEGAL STRIKE AND LOCKOUT

Section 24 of the Act enlists illegal strikes and lockouts. The circumstances below shall be
considered illegal strike/lockout.

(a) any strike or lockout held in contravention of Sections 22 and 23

(b) continual the strike/lockout in contravention of the order made under Section 10(3).

(c) any ongoing strike/lockout existing before referring the dispute to the Conciliation Board or
Arbitrator or Labor Tribunal or National Tribunal given such strike/lockout is in accordance to law.

(d) Any strike/lockout in response to illegal strike/lockout.

Prohibition for financial support: Section 25 of the Act enunciates that no individual shall
financially aid an illegal strike/lockout knowingly. In Jayanth Bhagwantrao Satram v. State of
Maharashtra[13], the court held that Strike commenced after 14 days of notice but before 6 weeks
of giving notice would be considered an illegal strike.

PENALTY FOR ILLEGAL STRIKE AND LOCKOUT (Section 26 - 31)

Chapter VI of the Act furnishes the penalty with matters related to strike and lockout.

PENALTY FOR ILLEGAL STRIKES AND LOCKOUTS: Section 26 specifies that any employee
involved in an illegal strike will be punishable, which may be increased to one month or a fine of 50
rupees or both.

PENALTY FOR INSTIGATION: any person instigating or inciting an illegal strike/lockout shall be
punishable with a term which may be extended up to 6 months or with a fine of thousand rupees or
shall be punishable with both, according to Section 27. In Deshpande v. Ferro Alloy Corporation,
[14] in order to attract Section 27 it should satisfy two conditions: firstly the strike should be illegal
and secondly the person inciting the strike to his knowledge should be illegal.

PENALTY FOR GIVING FINANCIAL AID TO ILLEGAL STRIKES AND LOCKOUTS: any
person infringing Section 25 of the Act will be punishable for a period which might be extended to
6 months or with a fine of a thousand rupees or with both.

PENALTY FOR BREACH OF SETTLEMENT OR AWARD: any person who violates the
settlement conditions shall be punishable for 6 months or a fine or punishable with both. The court
might impose a fine of rupees 200 in continuance of the violation of terms even after imposing a
penalty. The fine might be given as compensation to the aggrieved party upon the Court’s direction.

JUSTIFIED AND UNJUSTIFIED STRIKES

Strikes carried out to press the employees right or as a result of illegal lockout are justified. Any
strike to intimidate the employer or for any unreasonable grounds. In Model Mills v. Dharma
Das[15], the court held that the law does not provide for any classification such as justified and
unjustified strike except for the classification as a legal and illegal strike. Further, the court held that
an illegal strike cannot be justified.

JUSTIFIED AND UNJUSTIFIED LOCKOUTS

Lockouts as a result of illegal strikes, concerted refusal of work, and during go slow strikes are
justified. Whereas, in the case of India Marine Service Pvt Ltd v Their Workmen[16], it was held
strike that a strike conducted by the employees in response to the demand of additional work in
contravention to the law will not amount to strike. Thus, lockout in response to it will be an illegal
lockout and the employees will be eligible for the wages.

CONCLUSION

Though strikes and lockout are a tool for negotiation between employer and employee; other
peaceful measures such as conciliation and arbitration are encouraged under the statute. The
Industrial Disputes Act, 1947 is now subsumed under the new Industrial Relations Code, 2020. In
summary, the strike and lockout provisions under the law are important because they provide a legal
framework for resolving disputes between employers and employees, protect the rights and interests
of both parties and prevent disruption to the economy and society.

Q3. What is retrenchment/ Valid requirements

Meaning of retrenchment
The meaning of retrenchment is to terminate employees or workmen by the employer for economic
reasons. This termination of their services is not done as a punishment or disciplinary action but on
the ground of surplus labour or the financial position of the business or company. This removal or
discharge of a worker from work by the employer is known as retrenchment. It denotes the end of
the employer-employee relationship.

Definition of retrenchment
Retrenchment is defined in Section 2(oo) of the Industrial Dispute Act, 1947. According to the
definition, retrenchment means the termination of the service of a workman by an employer for any
reason whatsoever, other than as a punishment inflicted by way of disciplinary action’. There are
certain factors that do not fall under the definition of retrenchment, which are as follows:

 If the workman or employee voluntarily retires.

 If the workman or employee retires after reaching the age of superannuation because of a
provision of an agreement relating to superannuation that was made between the employer
and the employee at the time of his employment.
 If the termination of employment of the workman or employee took place due to the non-
renewal of the employment agreement.
 If the termination of employment occurs due to the continuous ill-health of the workman or
employee.

Therefore, retrenchment is considered an employee’s end of service due to financial or business

constraints, restructuring of the company, advancements of technologies, downsizing,
discontinuation of a specific unit, and so on.

Requirements for a valid retrenchment in Labour Law

The requirements of valid retrenchment in labour law are mentioned in Section 25F of the Industrial
Dispute Act, 1947. These conditions are applicable only when the employee has completed one year
of his service on the job. The prerequisites for valid retrenchment in labour law are as follows:

Notice to the employees: Before retrenching the employees from their services, it is necessary to
issue a written notice at least one month before the retrenchment comes into force. The notice must
contain the reason for retrenchment. The employees can be removed only after notice has been
provided to them and not before that.
No requirement of notice if an agreement already specifies the date of termination: In case,
there exists an agreement that already mentions the date of termination of employment for the
employees, it is not required to give notice to them before retrenchment from their services.

Compensation for retrenchment: In case, the employer fails to send the retrenchment notice to the
employees, he will be liable to pay compensation to the employees for this failure. The
compensation should be given on the basis that it is equal to fifteen days’ earnings for each year of
continuous employment, or any portion of it longer than six months.

Notice to be served on the appropriate authority: Before retrenching the employees from their
jobs, it is necessary to notify the appropriate government or authority. The notification must be
served in the prescribed manner, as stated in the official gazette.

Adherence to notice regulations: The notice that has been provided to the employees must be in
accordance with the provisions of Rule 76 of the Industrial Disputes (Central) Rules, 1957, as it
governs the notice of retrenchment in Labour Law.

While retrenching the employees from their services, the employer must act within the limitations
imposed by the law, which are as follows:
 The intention should be bona fide.
 The employees must not be victimised.
 The law in force should not be violated by the employer.

Q. Procedure for retrenching employees

The procedure for retrenching employees from their services is based on the concepts of ‘first come,
last go’ and ‘last come, first go’. This principle is mentioned in Section 25G of the Industrial
Disputes Act, 1947. There are certain factors based on which the employee can seek procedural
protection, which are as follows:

Prescribed qualification: An employee who wants to seek protection must have the appropriate
qualification as prescribed in Section 2(s) of the Act.

Citizenship: The employee needs to be a citizen of India. Indian citizenship is an important factor.
Employment of the employees in an industry: The employee must be an employee of an industry. In
other words, he must be employed in an establishment in accordance with the provisions of Section
2(j) of the Act.

Specific category of workforce: The employee needs to be a member of a particular workforce in

an establishment.

Non-existence of a retrenchment contract: The employee who wants to seek protection under
Section 25G must not have a prior retrenchment agreement with the employer of that industry.
If the above conditions are satisfied, the employee will get procedural protection under this section
of the Act.
Ethical standards for retrenchment in Labour Law
It is the responsibility of the employers to handle the retrenchment ethically. So the employer does
that in the following ways:

By fairly retrenching the employees: It is the ethical responsibility of the employer to ensure that
the retrenchment of employees is done in a fair way without any biases. The employees should be
retrenched from their services in accordance with operational necessities or performance metrics,
not personal prejudices.

By keeping it transparent: It is the ethical responsibility of employers to communicate the reasons

for retrenchment to employees. They should do that in such a way that the employees understand
the rationale behind the decisions made. It is their duty to follow the principles of ‘first come, last
go’ and ‘last come, first go’.

By sending advance notice: It is the ethical responsibility of employers to send advance notice so
that employees get appropriate time to prepare themselves both physically and mentally. The
employer must support them by giving them a heads up, softening the blow of a sudden loss of their
job.

By offering severance and support: It is the ethical responsibility of employers to offer employees
support and severance packages. They must be provided with counselling or outplacement services
that will help them in their transition. The employers must support them by looking after their well-
being.

By offering opportunities for retraining: It is the moral responsibility of employers to help

retrenched employees by giving them various opportunities to retrain or re-skill themselves. They
can equip them for a particular role and invest in the betterment of the employees’ future.

Q. Compensation to the employees during retrenchment

Rights of employees at the time of retrenchment

The employees are equipped with various rights during the retrenchment process to protect them
from exploitation by their employers. They are protected against the arbitrary actions of their
employers. To ensure fairness, the following rights are given to the employees:

To get prior notice: It is the right of employees to get prior notice and compensation in lieu of
notice, which depends on the employment agreement made between employers and employees.

To receive counselling and support: In case of the retrenchment of a large number of employees
from a company, they should be given support services like counselling or assistance for job
placement.

To get severance pay: In case there is an employment agreement where the terms of the contract
say that the retrenched employees will get severance pay, the employees are entitled to get
retrenchment compensation or severance packages.

Representation and consultation: In many regions or localities, the employees or their

representatives have the right to consultation regarding the process of retrenchment.

To know the reason for retrenchment: The employees have the right to know the reason for their
retrenchment. They must be given the justification and rationale for the retrenchment decision.
To get access to grievance mechanisms: The employees must be given the right to challenge the
retrenchment decision if they think that they are being retrenched in an unfair way. They are
removed in an arbitrary manner, and their rights have been violated.

Retrenchment without personal biases: The employees must be retrenched based on fair and
justified grounds. No kind of personal bias or discrimination will be involved while retrenching the
employees by the employers.

To get re-employment opportunities: If employers think of employing individuals for a post, they
should give priority to the retrenched employees. They should be provided with re-employment
opportunities or retraining opportunities within the company.

Average pay of retrenched employees

The average pay or the amount of compensation to be paid to the retrenched employees depends
on the nature of the retrenchment and the terms of the employment agreement. It is basically of two
kinds, which are as follows:

 Retrenchment of the employees due to the closure of the establishment.

 Retrenchment of the employees due to the non-closure of the establishment.

In both the above two situations, the compensation to be paid to the retrenched employees by the
employer will be decided on the basis of each year of continuous employment, or any portion
thereof, that exceeds six months and will be paid at a rate of fifteen days’ average wage. The
average pay is calculated by taking into consideration the employee’s wages earned in the last
twelve months of his job in that industry. The employer can pay more if he thinks it is reasonable to
do so, but he cannot pay less than the minimum amount of compensation as stated in the Act.

Essential requirements of retrenchment compensation

As mentioned above, it is necessary to pay compensation to the retrenched employees who have
completed one year of continuous work. While paying the retrenchment compensation, the
employer should keep the following essential requirements in mind:

 The retrenched employee should be given half of their average monthly salary for each
completed year of his continuous service in the establishment, or any portion thereof that
exceeds six months.
 If the employer wishes, he can also pay additional compensation to the retrenched
employees. The additional compensation will depend on the company’s nature, size,
financial status, as well as the number of retrenched employees. This amount should be
greater than the basic compensation that is to be paid to them.
 If the employer wants, he can give the employees extra benefits by paying them bonuses,
gratuities, and any other unpaid wages or dues.

Re-employment of retrenched workers

Section 25H of the Industrial Dispute Act, 1947, says that if an employer is retrenched from the
service on the ground of surplus labour, that employee must be given the first opportunity to return
to work in case the employer decides to employ additional employees in the establishment. This
section imposes a duty on the employer, which is to give a chance to the retrenched employees to
apply for re-employment in case of any employment opportunities that arise in the industry. To
apply for re-employment, the employees must fulfil the following conditions:
Re-employment opportunity: If the employees of a company are retrenched due to the financial
position of the company or surplus labour, the retrenched employees must be provided with the
opportunity to return to their services if employment of additional employees is required.

Notice to be given to the retrenched employees: If the employer finds a post empty and thinks of
appointing someone, it is their duty to give that notice to the retrenched employees who have the
potential to do the work.

Citizenship: The employee needs to be a citizen of India.

Re-employment in the same establishment: In the case of re-employment of the retrenched

employees, the place of work in the industry must be the same as it was before their retrenchment.

Preferences must be given to the retrenched employees: When the employer of an establishment
decides to employ new workers in the service, the retrenched employees must be given preference
over the other individuals.

The above mentioned re-employment opportunities are available to only those employees who were
retrenched from their services. The employees who were discharged, dismissed from their jobs, or
retired due to superannuation have no right to claim the benefits under Section 25H of the Act.

Q. Write short note on closure of an industry./ Explain the provisions relating to closure of an
undertaking under Industrial Disputes Act, 1947.

INTRODUCTION
The significance of closure in labour law, as delineated by the Industrial Disputes Act, 1947, lies in
establishing a fair and regulated framework for both employers and workmen. These procedures,
demanding prior permission for closure, ensure a thoughtful and consultative approach.

By balancing the interests of employers and workmen, these regulations on Closure in Labour Law
foster a harmonious industrial environment, preventing arbitrary actions and promoting stability.
Ultimately, the structured closure process serves as a cornerstone for maintaining equity, justice and
order within the realm of labour law.

Definition of Closure in Labour Law (Section 2(cc))

“Closure” means permanently shutting down a workplace or a part of it.

According to Industrial Disputes Act, 1947, “Closure” is when a workplace or part of it is

permanently shut down. The employer must follow a specific process outlined in the law when
closing the establishment.

However, Closure in Labour Law procedures do not apply to projects for building construction, like
buildings, bridges, roads, canals, dams or other construction work.

Application of Closure in Labour Law

If an employer plans to close their establishment, they must apply at least ninety days in advance to
the appropriate government. They also need to give a copy of the application to the workers’
representatives.

The government will review the application, providing a fair chance for both the employer and
workers to be heard. After the review, the government may approve or deny the closure. If there’s
no response within sixty days, permission is considered granted and there’s a provision for a review
of the decision.

Provisions of Closure in Labour Law

Section 25(O) of the Industrial Disputes Act, 1947 allows the closure of a business without prior
permission if certain conditions are met. Here are the key points:

Conditions for Closure in Labour Law:

An employer can close a business without seeking prior permission if it has less than 50 workers
and compensates the workers with 15 days’ average pay for each completed year of service.

Notice to Authorities and Workers:

The employer must notify the government authority and workers at least 60 days in advance or
provide wages instead of notice.

Compensation Procedure:

Compensation must be paid at the time of closure or within 15 days from the notice, whichever
comes first.

Penalty for Non-compliance:

Failure to comply with Section 25(O) can result in imprisonment for up to six months, a fine of up
to Rs. 5,000 or both.

Note: Section 25(O) applies only to businesses with less than 50 workers. For those with 50 or
more, prior government permission is needed under Section 25(N) of the Industrial Disputes Act.

Undertakings Covered under Section 25(O)

According to Section 25(O) of the Industrial Disputes Act, 1947, an employer can shut down a
business without needing permission from the government if it meets these conditions:

-The business has fewer than 50 workers.

The employer provides compensation to the workers equal to 15 days’ average pay for each
completed year of continuous service.
This means that only businesses with less than 50 workers fall under the scope of Section 25(O). It’s
crucial to understand that the term ‘workmen’ includes not only permanent employees but also
contractual, casual and temporary workers who have worked for more than one year in the
establishment.

-Additionally, it’s worth noting that certain types of businesses are exempt from the Industrial
Disputes Act and therefore, they are not covered by Section 25(O). For instance, establishments
involved in agricultural or horticultural operations, fishing or animal husbandry are exempt.
Similarly, government-owned or controlled establishments are exempt unless they are engaged in
commercial activities.

Procedure for Closure of an Undertaking

The steps for closing an establishment under the Industrial Disputes Act, 1947, depend on the
number of workers employed and the reason for closure. Here are the general procedures:
Closure with Less Than 50 Workers (Section 25(O))
Less than 50 workers: If the establishment has fewer than 50 workers, the employer can close it
without government permission. However, the employer must pay compensation equal to 15 days’
average pay for each completed year of service.
Notice: The employer must inform the appropriate government authority and workers at least 60
days in advance.

Closure with 50 or More Workers (Section 25(N))

50 or more workers: If there are 50 or more workers, the employer needs prior permission from the
government. Notice to the government and workers is required 60 days in advance. The government
decides based on the employer’s reasons and worker interests.

Voluntary Retirement Scheme (VRS)

The employer may propose a VRS, offering a package with compensation, pension and benefits.
Both parties must agree and terms are formalised in an agreement.

Conciliation Process
If disputes arise, the Industrial Disputes Act allows a conciliation process. A conciliation officer
may be appointed to mediate and reach a settlement.

Undertakings Excluded from Prior Permission

Certain establishments are exempt from obtaining government permission before Closure in Labour
Law. Here are the exclusions:

Less than 100 workers (Section 25FFA): Establishments with fewer than 100 workers can close
without prior government permission. A 60-day notice to the government and workers is required.

Natural disasters: In Labour Law, Closure due to natural calamities, like floods or earthquakes,
can occur without prior government permission. Prompt notice to the government and workers is
essential.

Financial challenges: Closure due to financial difficulties is allowed without prior government
permission. Compensation must be paid and a 60-day notice to the government and workers is
required.

Seasonal Work (Exempted from Industrial Disputes Act)

Seasonal work: Establishments engaged in seasonal work, such as agriculture, are exempt from
Industrial Disputes Act provisions. They don’t need prior permission but must comply with notice
and compensation requirements.
Important Note: Even if exempt, establishments must follow notice and compensation rules
specified in the Industrial Disputes Act.
Grant and Refusal of Permission for Closure in Labour Law
According to the Industrial Disputes Act, 1947, if an employer intends to close down an
establishment with 50 or more workers, prior permission from the government authority is required.
Here’s the process for granting or refusing permission:

Grant of Permission of Closure in Labour Law

Approval Criteria: The government authority reviews the reasons provided by the employer for
Closure in Labour Law. If satisfied and if the employer complies with all Industrial Disputes Act
requirements, permission may be granted.
Notice Requirement: The employer must notify the government authority and workers at least 60
days in advance if permission is granted.

Refusal of Permission of Closure in Labour Law

Denial Criteria: If the government authority is unsatisfied with the reasons or if the employer
doesn’t comply with Act requirements, permission may be refused.
Legal Recourse: In case of refusal, the employer can seek resolution through the Labour Court or
Industrial Tribunal. These bodies may either support the government’s decision or order the
employer to reinstate workers with back wages.
In summary, the grant or refusal of closure permission is at the discretion of the government
authority. It depends on the employer’s reasons and consideration of workers’ interests. Employers
must follow Industrial Disputes Act procedures to protect workers’ interests during Closure in
Labour Law.

Deemed Grant of Permission of Closure in Labour Law

According to the Industrial Disputes Act, if an employer wants to close an establishment with 50 or
more workers, they must seek prior permission from the government authority. If the government
authority does not respond within specified time limits, the permission is deemed to be granted.
Here are the time limits:

Establishments with Less Than 100 Workers

Decision within 60 days: For establishments with less than 100 workers, the government must
communicate its decision within 60 days of receiving the application.

Establishments with 100 or More Workers

Decision within 90 days: For establishments with 100 or more workers, the government must
communicate its decision within 90 days of receiving the application.

If the government authority fails to communicate its decision within these time limits, permission
for Closure in Labour Law is deemed to have been granted. However, it’s crucial to note that even if
permission is deemed, the employer must still adhere to notice and compensation requirements
outlined in the Industrial Disputes Act.

Appeal Against Closure in Labour Law

Under the Industrial Disputes Act, 1947, if the government authority denies permission for closing
an establishment, the employer can appeal to the Labour Court or Industrial Tribunal within 60 days
of receiving the order. This appeal is also applicable if permission is granted but with unacceptable
conditions. Here’s the appeal process:

Filing of Appeal

The employer must submit an appeal to the Labour Court or Industrial Tribunal within 60 days from
receiving the government authority’s order. The appeal should follow the prescribed format and
include necessary documents.

Notice to Other Party:

The employer needs to notify the other party (workmen or their representatives) within 7 days of
filing the appeal.

Appeal Hearing on Closure in Labour Law

The Labour Court or Industrial Tribunal is required to conduct the appeal hearing within 45 days of
filing. Both the employer and the workmen or their representatives have the chance to present
their cases and provide evidence.

Decision:

The Labour Court or Industrial Tribunal can either uphold the government authority’s decision or
order the employer to reinstate workmen with back wages. The decision is final and binding on both
parties.

Illegal Closure:

An illegal closure occurs when an employer shuts down an establishment without following
procedures outlined in the Industrial Disputes Act, 1947. This is a serious violation with legal
consequences:

Reinstatement with Back Wages

Workmen affected by an illegal closure are entitled to reinstatement with full back wages. The
Labour Court or Industrial Tribunal may order the employer to reinstate the workmen.

Penalties:

The employer may be liable to pay a penalty if found guilty of illegal closure. This penalty can be
up to three months’ wages of the affected workmen.

Criminal Prosecution:

In severe cases, the employer may face criminal prosecution for an illegal closure. Penalties for
such offences may include imprisonment and/or fines.

Illegal closures have serious consequences, emphasising the importance of complying with the
Industrial Disputes Act’s procedures and requirements to ensure fair treatment of workmen.

Conclusion
Closure in labour law refers to the permanent shutdown of a workplace or part thereof. It is
governed by the Industrial Disputes Act. The law establishes specific procedures for closure based
on the number of workmen employed and the reasons behind the closure. If an establishment has 50
or more workmen, the employer must seek prior permission from the appropriate government
authority.

The closure process includes provisions for grant and refusal of permission, with an avenue for
appeal. Illegal closure, without adherence to mandated procedures, carries severe consequences.
Closure in labour law is pivotal for maintaining a balance between employer interests and the rights
of workmen, ensuring a fair and regulated approach to workforce management.

Q. Notice of change under section 9A.

In today’s competitive scenario, change has become an integral as well as inevitable aspect of
an organization. However important change and its implications may be, any sort of change
requires a prior notice of 21 days and adherence to processes as laid down in Section 9A of
Industrial Disputes Act, 1947. All matters pertaining to terms and conditions of service are to
be provided under Industrial Employment (Standing Orders) Act, 1946 section 2(g) and 2(2).
Any change thereof attracts provisions of Section 9A.
● Any changed which adversely affects employees or workmen
● Notice of such proposed change need to be served in advance
● Such formality is not just on paper, in reality need to be followed
● This is to avoid unilateral changed of any conditions by management or employers
● Notice must be in writing to such employees likely to be affected or trade unions if any.

The Fourth Schedule lists the following circumstances require notice of change:
1. Wages, including the period and mode of payment;
● Period – Daily, Weekly, Fortnightly or Monthly
● Mode of payment – In current coins through Cheque, Credit into bank or Electronic
mode

2. Contribution paid, or payable, by the employer to any provident fund or pension fund or
for the benefit of the workmen under any law for the time being in force;
● Percentage of contribution towards Provident Fund or Pension Fund.

3. Compensatory and other allowances;

● Change in compensation structure
● In view of change in proposition, any social security benefit is impacted
● Withdrawal of any variables perks etc.

4. Hours of work and rest intervals; Change in Working Hours (eg. 8 hours or 8 ½ hours or 9
hours)Relays (Shifts) (cancellation or introduction of new shifts)Shift timings
(commencement/end of shift timings)Change in rest intervals (30 minutes or 45 minutes or
1 hour etc). Besides including such rest intervals within the working hours or rest intervals
are in addition to the working hours.

5. Leave with wages and holidays;

● Change in number of types of leave
● Change in process of applying/availing leave
● Change in weekly-off (for all or for specific group of persons or for persons from specific
shifts)

6. Starting, alternating or discontinuance of shift working otherwise than in accordance with

standing orders;

● Any change in Shift/timings which is new or not mentioned in Certified Standing Order

7. Classification by grades;
● Clubbing or de-merging or introduction of new – grades / levels

8. Withdrawal of any customary concession or privilege or change in usage;

● Amenities, Facilities, welfares
● Food, Change in charges on Food

9. Introduction of new rules of discipline, or alteration of existing rules except insofar as they
are provided in standing orders

10. Rationalization, standardization or improvement of plant or technique which is likely to

lead to retrenchment of workmen
11. Any increases or reduction (other than casual) in the number of persons employed or to
be employed in any occupation or process or department or shift not occasioned by
circumstances over which the employer has no control.
Where any change is being proposed for a workman or group of workmen, who shall be
impacted upon such change, then the employer needs to give a written notice and wait for 21
days and then act upon such changes.
Usually, any alteration in conditions of service which has adverse effect on the workman or
group of workman will be raised in the appropriate forum, if it is not informed in writing.
Besides, if such alteration is not favouring the workman or group of workmen in accordance
with the terms of contract of the appointment order of the workman concerned as well as of
the provisions of the standing orders of the company in case of change for the entire group of
workmen, then it may fail before the appropriate forum.

● There are instances where few affected parties have gone to the highest court in
challenging the change/ alteration in service condition even after it is duly followed with
the process of provisions under the Industrial Disputes Act.