Layoff,Retrenchment and

Closure
Labour and Industrial Law-I
Lay -Off
-Definition of ‘lay-off’ (Section 2 (kkk))

-period during which a workman is temporarily discharged.

-lay-off means -to discontinue work or activity to dismiss or discharge temporarily.

-also means temporary suspension of a workman from his contract of service.

-Duration of layoff should not be for a period longer than period of emergency.
-employer -employee relationship does not come to an end but is merely
suspended during the period of emergency.
Lay-Off
-the relation between 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.

-In the failure to give employment is due to any reason not specified in the
definition then it will not be comprehended by the defintion.

-The expression in the definition- “for any other reason” in the definition of “lay-off”
should be construed to mean reasons similar or analogous to the receding
reasons as specified in Section 2 (kkk).
Lay-Off
Essential Features of Lay-Off:

(1) There must be (i) failure (ii) refusal or (iii) inability of the employer to give
employment to a workman
(2) The names of the workmen laid off must be on the muster rolls of the
industrial establishment on the date on which they have been laid off.
(3) The failure, refusal or inability to give employment must be on account of one
or more of the following reasons:(a) shortage of coal (b) shortage of power ©
shortage of raw materials (d) accumulation of stocks (e) break down of
machinery or (f) natural calamity or for any connected reason.
(4) The workman in question must not have been retrenched.
Lay -Off
-Classification of Lay-Off

-Lay-Off for the full day

-Lay-Off for the half-day

-Lay-Off for more than a day

-Duties of employer in connection with lay-off

-(1) Duty of an employer to maintain muster rolls of workmen (section 25 D) -the

duty imposed -mandatory-non compliance debars the employer to take advantage
of section 25E (ii).
Lay-Off
-(2) The employer should declare lay off which must be justified lay off affected
bonafide and not mala fide i.e. under the circumstances laid in section 2 (kkk) but
not to victimise the workers.

-(3) the stoppage of work if resorted to during working hours must be notified by
notice put on the notice board and must be in accordance with the standing
orders.

(4) laid off workers must be informed of the following : (i) whether the employees
laid off are to remain on place of work or leave it.

(ii) when work may be resumed

Lay -Off
(iii) the time when the workmen are to present themselves for work during normal
working hours.

(5) where it is not possible to specify the period of lay-off the employer should give
three weeks time to rejoin duty when work is resumed

(6) if the unemployment caused by lay off is for short period, the employer should treat
as leave either with wages or without wages.

(7) If the lay off is for an indefinitely long period, the employer may terminate the
services by due notice.

(8) the employer must pay compensation to the laid off workers at the rate specified in
Section 25 C of the Act.
Lay -Off
-whether the employer has a right to lay off ?

-Veiyre vs. Fernandes (1966) 1 LLJ 547 (Bom)

-Looking at the scheme of Chapter V-A it is implicit that legislature has conferred the
power upon the employer to lay off his employees. The Courts have admitted that the
employer has the right to lay-off his employees.

-Illegal Lay-Off : Section 25 M (8)

- Prohibition of lay-off (Section 25 M)

-Circumstances in which a workman is not deemed to be laid off under section 25 M of

the Act : Explanation to Section 25 M
Lay-Off
-Compensation to the laid off workman (Right of workmen laid off for
compensation)

-A laid off workman should be paid compensation according to the provisions of

Action 25 C of the Act

-Procedure for Lay Off (Method of Lay Off)

(1) Application of Compensation for laid off workmen under Chapter V-A (Section
25A)
(2) Continuous service required for payment of compensation under Chapter V-A
(Section 25 B)
Lay-Off
-(3) Making entry in Muster Roll of workmen maintained by the employer to get
compensation under Chapter V-A (Section 25 D)

-(4) Payment of Compensation for laid off workmen under Chapter V-A (Section 25
C)

-(5) Disentitlement of Compensation under Chapter V-A (Section 25 E)

-Penalty for lay off without previous permission (Section 25 Q)

Retrenchment
-Definition of retrenchment (section 2 (00)

-simple definition of retrenchment : termination of services of surplus labour in a continuing business.

New Haven Steel Ball Corp. Ltd vs. Ram Narayan Kera Yadav [1998 Lab 1C 3141 (Bom)]

Hari Prasad vs. A.D. Diaker [(1957) LLJ 233]

-Essentials of retrenchment

-Exclusion from retrenchment

(1) A punishment inflicted by way of disciplinary action

(2) Voluntary retirement of the workmen (section 2 (oo) (a)
(3) Retirement on reaching superannuation age (section 2(oo) (b)
(4) Termination on non -renewal of service contract or on expiry of fixed terms contract (section 2(oo) (bb)
(5) Continued ill-health (section 2(oo)(c)
Retrenchment
(1) A punishment inflicted by way of disciplinary action

-such as- discharge for inefficiency, suspension for dishonesty, termination for behaviour
prejudicial to the concern, termination on the ground of misconduct

- State of Punjab vs. Jagir Singh [2004 LIC 3740 SC]

(2) Voluntary retirement of the Workmen [Sec.2(oo) (a)]

-voluntary move on part of the workman

- action which will not constitute as voluntary retirement

-M/s J.K. Cotton Spinning and Weaving Mills Co. Ltd vs. State of UP and others [AIR 1990
SC 1808]
Retrenchment
-Baba Saheb Devgonda patil vs. Managing Director, Shri Panchgonda Sahkari
Sankhar Karkhana Ltd. [(1998) 2 LLJ 413 Bom]

(3)Retirement on reaching superannuation age [Sec.2(oo)(b)]

- 2 conditions

(4) Termination on non-renewal of service contract or on expiry of fixed terms

contract [(Sec.2(oo) (bb)]

-Rameshwar Lal Ghelot’s case [AIR 1996 SC 1001]

Retrenchment
(5) Continued ill Health [Sec.2 (oo)(c)]

-Burrakur Coal Company Ltd.vs . Azimuddin Ashray [(1960)2 LLJ 434 (Pat)]

-meaning of ‘for any reason whatsoever’ in the definition : Action taken by the
employer may be for any reason e.g. economy, rationalisation in the industry,
installation of new labour force, saving machinery etc. It doesn't matter why the
employer is discharging the surplus labour in a running or continuing business.

-Difference between lay-off and retrenchment

-Difference between closure and retrenchment

Retrenchment
-Procedure for retrenchment - Chapter V A

-Conditions Precedent to retrenchment of workmen :Section 25F

Definition of continuous service for retrenchment : Section 25 B

--Rajasthan State Ganganagar S Mills v. State of Rajasthan [(2004)8 SCC 161]

-Surendranagar District Panchayat v. Dahyabhai Amarsingh [2005 LIC 4308 SC]

-Pramod Jha v. State of Bihar [(2003) 3ACE 167]

Remedy against violation of Section 25 F: only exclusive remedy available -to get adjudication
under section 10.
Retrenchment

-Rule to be followed for retrenchment of Workmen (Sec. 25 G) -”First Come Last Go” or “Last
Come First Go”

-Conditions to be followed for the application of the rule.

-Departure from this rule possible only in 2 cases:

(1) By agreement to the contrary between the workman and the employer and
(2) For any other reasons to be recorded by the employer

The deviation of the rule must be justified by sound and valid reasons.
Retrenchment
-Re -employment of Retrenched Workman (Sec. 25-H)

-Penalty for retrenchment without previous permission (Sec. 25-Q)

-Retrenchment Compensation to Workmen in case of Transfer of Undertakings :Section 25

FF

-Workmen v. Dahingeapara Tea Estate [AIR 1958 SC 1026]

-When rights of Compensation on Transfer of Undertakings are not available: Proviso to

Section 25 FF

-South Arcot Electricity Distribution Co. Ltd. v. NKM Khan (1969) 2 SCR 902

-Workmen of Karnataka Agro Proteins Ltd. Vs Karnataka Agro Proteins Ltd (1992) 1 LLJ 712
(Karn)
Closure
-Definition of Closure (Section 2(cc))

- Procedure for Closure of an Undertaking under Chapter V-A :Section 25-FFA

-Penalty for closure without notice

-Compensation to workmen in case of closing down of undertakings: Section 25-

FFF

-Penalty for Illegal closure of undertaking (Section 25 R)