‘RETRENCHMENT

’
 DEFINTION
SECTION 2(OO)
[IR CODE 2020: SECTION 2(zh)]

RETRENCHMENT

NOT AS
TERMINATION OF PUNISHMENT BY
FOR ANY REASON WAY OF
SERVICE OF BY EMPLOYER EXCLUDES
WHATSOEVER DISCIPLINARY
WORKER
ACTION

RETIRED ON
VOLUNTARILY
REACHING AGE OF
RETIRED
SUPERANNUATION

DISCHARGED ON
NON-RENEWAL OF GROUND OF
CONTRACT CONTINUED ILL-
HEALTH
 ‘FOR ANY REASON WHATSOEVER’

State Bank of India v N. Sundara Money AIR 1976 SC 1111

Every termination spells retrenchment. A termination takes place where a term expires
either by the active step of the master or the running out of the stipulated term.
CONDITIONS PRECEDENT FOR RETRENCHMENT
SECTION 25F
[IR CODE 2020: SECTION 70]
The workman has been paid, at
The period of notice has the time of retrenchment,
Workman has been given one
expired, or the workman has compensation which shall be
month’s notice in writing
been paid in lieu of such notice, equivalent to fifteen days'
indicating the reasons for
wages for the period of the average pay for every
retrenchment
notice completed year of service in
excess of 6 months

Notice in the prescribed manner

is served on the appropriate
Government
 PROCEDURE FOR RETRENCHMENT
SECTION 25G
[IR CODE 2020: SECTIONS 71 AND 72]

■ The employer shall ordinarily retrench the workman who was the last person to be employed in
that category, unless for reasons to be recorded the employer retrenches any other workman.
■ Rule of ‘Last Come First Go’
Workmen of Sudder Workshop of Jorhaut Tea Co. Ltd. V Management (1980) Lab 742 SC
Rule of Last Come First Go is not an inflexible rule. Burden of proof is on the management to
substantiate the special ground for departure from the rule. There must be a valid reason for
deviation from rule.
■ Departure from rule – there should be reliable evidence preferably in recorded history of the
workman showing inefficiency, unreliability, or habitual irregularity.
 RE-EMPLOYMENT OF RETRENCHED WORKERS
SECTION 25H
[IR CODE 2020: SECTION 72]

■ Within one year of retrenchment, employer proposes to employ – give an opportunity to

retrenched workers to offer themselves for re-employment
■ Workman should offer himself for re-employment in response to the notice by the
management
■ Workman should be from same category in which the employment is proposed
■ Such workers shall have preference over other persons
 SPECIAL PROVISION
SECTION 25N
[IR CODE 2020: SECTION 79]
■ Industrial establishment (not being an establishment of a seasonal character or in which
work is performed only intermittently) in which not less than 100 [300 or such higher
number as notified by the appropriate government] workmen were employed on an
average per working day for the preceding twelve months.
■ Workman to be given 3 months’ notice in writing indicating the reasons for
retrenchment and the period of notice has expired, or the workman has been paid in lieu
of such notice, wages for the period of the notice
■ Prior permission of the appropriate government
■ Same procedure as for lay-off