1.

Introduction

All the companies are running on the competition on earning more profit,
Automation is not only the reason behind the mass layoff. in every 10 years technology
will change but which is least impact to the layoff. The reason is companies profit
motive. To increase the profit motive they are reducing the operational cost by layoff
many senior employees and junior employees too.

Corporations exist if they deliver on the objectives of the investors and

shareholders. One of the primary investment goal is profit and revenue. There may be
additional more altruistic goals such as improving society, making technology etc, but
investors will pull away in droves if they suspect that the corporation is not headed
towards returning profits. A company typically has a portfolio of service or product
offerings each of which are at different phases of their life-cycle - each of which play a
different role in their revenue and profit share. Some would be strategic and key for
future growth, others may deliver large margins today and others may deliver large
revenue share.

Each offering may require different skills and tools to produce. When there is a
technology disruption i.e. significantly new tools that dramatically lower the cost of
production as is occurring in the IT industry today, the corporation has to adjust its cost
to stay competitive in the marketplace. Offshoring IT work was another disruption - the
cost of IT Services was dramatically lower when delivered out of India - and foreign
corporations rushed to take advantage of the same, resulting in layoffs in their home
countries.

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 2. Meaning
“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
materialsor the accumulation of stocks or the breakdown of machinery [or natural
calamity or for any other connected reason] to give employment to a workman whose
name is borne on the musterrolls of his industrial establishment and who has not been
retrenched.

Definition of Retrenchment (Section 2(oo))-

“Retrenchment” means the termination by the employer of the service of a workman for
any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary
action, but doesn't include-

(a) Voluntary retirement of the workman; or

(b) Retirement of the workman on reaching the age of superannuation if the contract of
employment between the employer and the workman concerned contains a stipulation
in that behalf; or [(bb) termination of the service of the workman as a result of the on-
renewal of the contract of employment between the employer and the workman
concerned on its expiry or of such contract being terminated under a stipulation in that
behalf contained therein; or]

(c) Termination of the service of a workman on the ground of continued ill-health;]

Definition of Closure (Section 2(cc))-

Lay-off is a measure to cope with the temporary inability of an employer to offer

employment to a workman to keep the establishment as going concern. It results in
immediate unemployment though temporary in nature. It does not put an end to the
employer-employee relationship, nor does it involve any alteration in the conditions of
service. Further, lay-off occurs only in a continuing business. When the industrial

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establishment is closed permanently or it lock-out is declared by the employer, the
question of lay-off has no relevance. Lay-off is justified only when it is in conformity with
the definition given under Section 2 (kkk) of the Industrial Disputes Act.

Difference in Lay-off/laid off and retrenchment -:

 Layoff refers to the provisional termination of the employee, at the instance of the
employer. Retrenchment means involuntary separation of an employee due to
the replacement of labour by machines or the close of the department.
 The layoff is an action step, whereas retrenchment is a business strategy to
reduce company‟s expenses.
 The layoff is defined in section 2 (kkk) of the Industrial Disputes Act, 1947.
Conversely, Retrenchment is defined in section 2 (oo) of the Industrial Disputes
Act, 1947.
 The layoff is of a temporary nature, i.e. it is for a definite period, in which the
employees are recalled after the expiry of the term. As opposed to retrenchment,
is permanent in nature.
 After the declaration of layoff, the company‟s operations stops because of the
shortage of raw material, the breakdown of machinery, economic recession and
so on. On the other hand, the operations of the company continue even after
retrenchment is declared.
 As soon as the layoff period is over, the employees are re-appointed to their
previous posts. Unlike Retrenchment, in which the employees are not taken back
by the company, once they are terminated.

It is quite clear that layoff and retrenchment are two different ways of involuntarily
terminating employees. While in both the cases the employees are paid compensation
as per the method specified in the act.

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 3. Case Study:
[ Mohan Lal Vs. Bharat Electronics Ltd., AIR 1981 SC 1253 ] : In order to determine
whether a workman has put in continuous service or not will be decided in accordance
with the above provisions of Section 25-B of the Industrial Disputes Act. The supreme
court held that the appellant was on duty from December 8, 1973 to October 19, 1974.
When his service was terminated he had rendered service for a period of 240 days
within a period of 12 calendar months preceding the date of closure excluding the
period of illegal strike he will be deemed to be in continuous service within the meaning
of Section- 25(B)(2) immediately before the date of closure. Sundays and other holidays
for which the workmen are paid wages are to be included for calculating 240 days.

[Management of Kairbette Estate, Kotagiri Vs Rajamanickam, AIR 1960 SC 893 ] :

SC observed that lay-off may takes place for multiple reasons like shortages of coal,
power, machinery, raw materials or any other reason. The expression „any other reason‟
should be construed to mean reason similar to the preceding reasons specified in the
definition. The provisions have been made very clear by substituting the expression
„natural calamity or for any other connected reasons‟ in the definition in 1982.

[K.S.R.T.C. and another Vs. S.G. Kotturappa and another, (2005) II LLJ 161 (SC)]:
The respondents were appointed as badly conductors in substitute vacancy arising out
of suspension pending inquiry by the appellant corporation. Their services having been
found to be not satisfactory were terminated on November 11, 1983 and September 9,
1980. The industrial dispute, having been raised regarding their termination, was
reffered for adjudication by Labour Court, Bangalore. The termination orders were held
to be bad in law for non-compliance of natural justice and the workmen were directed to
be reinstated with full back-wages.

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 4. Rights of Workmen

According to Section 25 C of the Industrial Disputes Act, a workman who is laid-off is

entitled to compensation equivalent to 50 per cent of the total basic wages and
dearness allowance for the period of lay-off. This right of compensation is, however,
subject to the following conditions:

(i) He is not a badli or a casual workman.

(ii) His name should be borne on the muster rolls of the establishment.

(iii) He should have completed not less than one year of continuous service under the
employer.

Badli Workman :- A badli workman means a workman who is employed in place of

another workman whose name is borne on the muster rolls of the establishment.
However, such a workman ceases to be a badli workman on his completion of one year
of continuous service in the establishment.

A workman is entitled to lay-off compensation at the rate equal to fifty per cent of
the total of the basic wage and dearness allowance for the period of his lay off except
for weekly holidays which may intervene. Compensation can normally be claimed for
not more than forty-five days during any period of twelve months. Even if lay-off
exceeds forty five days during any period of twelve months no compensation is required
to be paid for the excess period if there is an agreement to that effect between the
workman and the employer.

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If the period of lay-off exceeds forty-five days, the employer has two alternatives before
him, namely:

(i) to go on paying lay-off compensation for such subsequent periods

(ii) to retrench the workman.

In case the employer adopts the second alternative, he is bound to comply with the
provisions of section 25F. In case of such retrenchment, the employer is enabled to
adjust the amount of lay-off compensation paid during the preceding 12 months against
retrenchment compensation payable under section 25-F.

The right of workmen to lay off compensation is designed to relieve the hardship caused
by unemployment due to no fault of the employee. The provision for payment of
compensation for lay-off does not mean that the employer can pay lay-off compensation
and declare lay-off. Payment of compensation is not a condition precedent to lay-off.
Where the lay-off is justified and it satisfies the requirements of the definition under
Section 2(kkk), the only relief to which workmen laid off are entitled is the statutory relief
prescribed by Section 25-C.

If the lay-off is malafide in the sense that it has been declared in order to victimise the
workmen, it would not be lay-off justified under Section 2(kkk), and the relief provided to
the laid-off workmen under section 25-C would not be the only relief to which they are
entitled.

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 5. Duties of the Employer

(a) The employer must maintain a muster roll of workmen and to provide for the making
of entries therein by workmen who may present themselves for work at the
establishment at the appointed time during normal working hours notwithstanding that
workman in any industrial establishment have been laid off.

(b) The lay-off must be for the reasons specified in Section 2(kkk).

(c) The period of detention of workmen if stoppage occurs during working hours should
not exceed two hours after the commencement of the stoppage.

(d) The compensation for lay-off must be at the rate and for the period specified in
Section 25-C of the Industrial Disputes Act.

[Cases in which a Workman is not Entitled to Lay-Off Compensation]:

The provisions of Section 25-E provide certain exceptions to the general rule for the
payment of lay-off compensation. In other words even if the workman is laid off, he will
be disentitled to claim compensation if his case falls within any of the three clauses of
this section. In the following cases, a worker who is laid-off will not be entitled to claim
compensation.

1. Refusal to Accept Alternative Employment:

If a laid off workman refuses to accept alternative employment provided that such
alternative employment is:

(a) In the same establishment from which he has been laid-off or

(b) In any other establishment belonging to the same employer situated in the town or
village within a radius of five miles from the establishment to which he belongs,

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(c) In the opinion of the employer the alternative employment does not call for any
special skill or previous experience and can be done by the workman.

2. Absence From the Establishment:

If the workman does not present himself at the appointed time during normal working
hours at least once a day.

3. Strike or Go Slow:

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.

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 6. Prohibition of Lay-Off:

There are certain prohibitions which are as follows:

 Section 25 M (Chapter V B added to the Industrial Disputes Act, 1947 by the

Industrial Disputes Amendment Act, 1976) places certain restrictions on the right
of the employer to lay-off workers.

However, for the application of this chapter, it is necessary that the industrial
establishment must not be of a seasonal character or in that establishment work must
not be performed intermittently and that the strength of workmen should not be less
than one hundred.

 Section 25 M lays down that no workman, other than a badli or a casual

workman, whose name is borne on the muster rolls of an industrial establishment
to which this chapter applies shall be laid off by his employer unless such lay-off
is due to shortage of power or natural calamity, and in the case of a mine such
lay-off is due also to fire, Hood, excess of inflammable gas or explosion.
 He can lay-off the workman only with the prior permission of the appropriate
government or such authority as may be specified by that government on an
application made in this behalf (as amended by the Industrial Disputes
Amendment Act, 1984).
 An application for permission shall be made by the employer in the prescribed
manner stating clearly the reasons for the intended lay-off. A copy of such
application shall also be served simultaneously on the workmen concerned.
 Where the workmen other than badli workmen or casual workmen of a mine have
been laid-off for reasons of fire, flood or excess of inflammable gas or explosion,
the employer, shall within a period of thirty days from the date of commencement
of such lay-off apply to the appropriate government or specified authority for
permission to continue the lay-off.

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 Where an application for permission has been made, the appropriate government
or the specified authority shall make necessary enquiry as it thinks fit. It shall give
a reasonable opportunity of being heard to the employer, the workmen
concerned, and the persons interested in such lay off.
 The appropriate government, having regard to the genuineness and adequacy of
the reasons for such lay-off, to the interest of the workmen, and all other relevant
factors by order and for reasons to be recorded in writing, grant or refuse to grant
such permission. A copy of the order of the appropriate government or
prescribed authority shall be communicated to the employer and the workmen.
 Where an application for permission has been made, and the appropriate
government or the specified authority does not communicate the order granting
or refusing to grant permission to the employer, within a period of sixty days from
the date on which such application is made, the permission applied for shall be
deemed to have been granted on the expiration of the said period of sixty days.
 An order of the appropriate government or the specified authority granting or
refusing to grant permission shall be final and binding on all the parties
concerned and shall remain in force for one year from the date of such order.
 The appropriate government or the specified authority may either on its own
motion or on the application made by the employer, or any workman, review its
order granting or refusing to grant permission or refer the matter to a tribunal for
adjudication. Where a reference has been made to a tribunal it shall pass an
award within a period of thirty days from the date of such reference.
 Where no application for permission has been made, or where the permission for
any lay off has been refused, such lay-off shall be deemed to be illegal from the
date on which the workmen had been laid off. The workmen shall be entitled to
all the benefits under any law for the time being in force as if they had not been
laid-off.

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  The appropriate government may, if it is satisfied that owing to exceptional
circumstances as in case of accident in the establishment or death of the
employer it is necessary so to do, by order direct that the provisions of sub-
section (1) and (3) shall not apply in relation to such establishment for such
period as may be specified.

A workman shall not be deemed to be laid-off under this section by an employer if such
an employer offers any alternative employment to the workmen. The alternative
employment in the opinion of the employer should not call for any special skill or
previous experience and can be done by the workmen.

The offer of alternative employment should be in the same establishment from which he
has been laid-off or in any other establishment belonging to the same employer situated
in the same town or village or situated within such distance from the establishment to
which he belongs that the transfer will not involve undue hardship to the worker.

Further the wages which would have been paid to the workmen are offered for the
alternative employment also.

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 7 . CONCLUSION

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 layoff is called redundancy. But in

view of the Industrial disputes act, 1947 , 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.

Lay-off in general sense is not under anyone‟s control and may happen in any

industry. It is unexpected and sometimes even necessary to keep the industry up and

running. The relevant act in this matter provides essential laws to safeguard rights of

workers and state duties of employers.

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 6. BIBLIOGRAPHY

1. Legal service India (as accessed on 12/04/2019)

2. LABOUR LAWS HANDBOOK (And Bare Act) {Edition: 2016}.

3. Your Article (Library), Laws and Provisions of Lay-off (as

accessed on 12/04/2019)

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