STRIKE AND

LOCKOUT

LABOUR LAW

SUBMITTED BY SUPERVISED
BY
Jash Dharod PROF. PRACHI

BA LLB
BATCH OF
2019- 24

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 INDEX

Sr. Title Page no.

1 Introduction 2

2 What is Lay Off and Retrenchment 3

3 Layoff 4

4 Landmark Judgement Regarding Lay-off 8

5 Retrenchment 9

6 Landmark Judgements regarding retrenchment 13

7 How are Lay-off and Retrenchment Different? 14

8 Conclusion 15

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INTRODUCTION –

⮚ Dispute resolution between employers and employees, especially in cases

where an employer has to end an employee’s service, is an essential part of

the Labour Laws in India.

⮚ Therefore, to govern the same, the Central Government introduced

the Industrial Dispute Act in 1947.

⮚ The Act was enacted to facilitate the investigation and settlement of

industrial disputes, prevent strikes and provide relief to the workmen at the
time of lay-off and retrenchment.

⮚ There are different employer compliance needs regarding lay-off and

retrenchment, which the employer must know to ensure that the lay-off and
retrenchment are carried on as per the Industrial Dispute Act, 1947.

⮚ This article discusses employer compliance regarding Lay-off and

Retrenchment under the Industrial Dispute Act, 1947, to help employers

avoid any risk of non-compliance regarding the same.

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What is Lay Off and Retrenchment?

⮚ Lay-off can be defined as the employer’s inability, refusal or failure to

employ the workman whose name is listed on the muster roll of his
industrial establishment.

⮚ Lay-off may happen due to the shortage of coal, raw materials, power, and

breakdown of machinery, accumulation of stocks, natural calamity, or any

other connected reason.

⮚ In simple terms, lay-off refers to a situation where the employer is

constrained to deny the work to the industry workers due to the temporary
inability to continue the business operations.

⮚ On the other hand, retrenchment is similar to downsizing. It is a way of

terminating a workman for any reason, such as reducing operational

expenses.

⮚ However, retrenchment should not be a punishment for disciplinary action

against the worker. However, this would not be applicable in the case of –

● Voluntary retirement by the workman.

● Retirement of the workman on account of reaching the age of

superannuation.

● Termination of the workman’s services due to the non-renewal or

expiry of the service contract.

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 ● Termination of the workman due to continued ill health.

Employer Compliance Regarding Lay-off

⮚ The compliance requirements that the employers must consider while laying

off their workmen include the following:

Providing Compensation to the Laid Off Workmen

⮚ The compliance related to compensation of laid-off workmen includes the

following:

1. The employer must provide compensation equal to half of the wages

and allowances during the lay-off of the workmen.
2. The workmen must ensure that the following conditions are fulfilled
before providing the compensation:

● The workmen must not be badli or casual workers.

● The must roll of the industrial establishment must mention the

workman’s name.
● The workmen must have rendered one year of continued services for the
employer.

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 3. The employer must be aware of the circumstances where the laid-off
workmen are not entitled to compensation for the lay-off period. The
circumstances are mentioned in Section 25E of the Industrial Dispute
Act 1947, which are as follows:
4. If the workmen are absent from the establishment during working
hours at least once a day
5. If the workmen are laid off due to the reason of slowing down the
efficiency of other workmen in another establishment
6. In case the workmen refuse to take the alternative employment
which is being offered to him, provided that:
7. The employment is being provided in the same establishment from
which he has been laid off.
8. The employment is provided in a different establishment; however,
the employer remains the same, and the premises are within a radius
of 5 miles from his prior establishment.
9. If the employer believes that the employment in the new
establishment doesn’t need any separate skill set or previous
experience compared to the work the workmen already do.

Maintaining the Muster Rolls

⮚ According to section 25D of the IDA 1947, the employer must maintain the

muster rolls and ensure that the workmen make entries in the muster roll
daily to avoid any confusion regarding the compensation of the workmen.

Following Prescribed Procedure for Lay-off

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⮚ Chapter V-B of the Industrial Disputes Act, 1947 defines the special

provisions regarding lay-off, and Section 25M deals with the prohibition of
lay-off by the employer.

⮚ An employer must mandatorily comply with the provisions of Section 25M.

It is to be noted that this applies to industrial establishments that are not

seasonal and consist of more than 100 workmen.

o The employer must take prior permission from the appropriate government
or any special authority before laying off any workman (other than badli or
casual workers) whose name is listed on the muster roll. However, this
requirement is not applicable when the lay-off is due to natural calamity or
shortage of power in the establishment or flood, fire, excess of combustible
gas or explosion.

o The employer must prepare an application as per the format, stating the
reason for the lay-off, and supply a copy to the workman.

o In case a workman working in a mine is laid off due to flood, fire, excess of
flammable gas or explosion, the employer must apply with the appropriate
government or the special authority concerning continuing the lay within 30
days from the date of commencement of that particular lay-off.

o The appropriate authority may either grant or refuse the application for lay-
off. However, such a decision is taken only after an enquiry to check the
accuracy and genuineness of lay-off, and other factors deemed fit by the
authority. The authority must also provide a reasonable opportunity to be

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 heard to the workmen, employer or any other person interested in the lay-
off and record the same in writing.

o A copy of the permission must be supplied to the employer and the

workmen by the Government/ Authority.

o In case the government/authority fails to communicate the status of the

application of permission i.e., granted or refused to the employer, within 60
days from the day of applying, the application for permission would be
deemed to be granted after the expiration of the said period of sixty days.
o The order of the Government / Authority for such permission is considered
final and binding on all the concerned parties. It remains in force for one
year from the date of the order.

o The appropriate authority can review the order either by its motion or
through an application by the employer. It can even refer the matter to the
tribunal for adjudication.

o The tribunal must pass the award within 30 days from the reference date.

o If the employer fails to apply for permission off lay off, or if the application is
refused by the authority/ government and the workmen are still laid off,
such lay-off will be considered illegal. The employer is obligated to provide
all the benefits to the workman in the same way as if the workmen had not
been laid off.

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o The compliance related to applying for permission of lay-off in case of
industrial establishment or mine can be waived off by the government
through an order under exceptional circumstances such as the death of the
employer or accident in the establishment, and such wavier would be valid
till the subsistence of the order.

o The employer must compensate the workmen during such lay-off as per
section 25C of the Act, except during certain specific cases.

Landmark Judgement Regarding Lay-off

❖ Papnasam Labour Union V. Madhura Coats Ltd 1995 AIR 2200, 1995 SCC

(1) 50
o This case provides a landmark judgement for lay-offs. The case was
regarding the constitutional validity of Section 25M of the Act, which talks
about the prohibition of lay-off by the employer.
o The constitutionality of this section was challenged on the ground that the
imposed unreasonable restriction as it mandated the employer to obtain
the prior permission of the government or special authority before lying off
the workmen, which was considered void and ultra vires.
o It was held by the apex court that the main objective of the introduction of
Section 25M is to prevent avoidable hardships to the employees as a result
of lay –off and maintain higher productivity and production through
preserving the peace and harmony of the industries, it was further

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 mentioned that the legislature had taken care by exempting the need of
prior permission for lay-off in case the lay-off is necessary due to natural
calamities or power failure as these situations are explicit, grave and
sudden.
o Therefore there is no need for any further scrutiny in these situations.
o The employer must take the prior permission of the government rather than
deciding as per his assessment.
o Hence, to maintain industrial peace and harmony and avoid unemployment
due to unjust cause, Section 25M cannot be considered arbitrary or
unreasonable, and the constitutional validity was upheld.

Employer Compliance Regarding Retrenchment

⮚ The employer needs to fulfil the following compliances with regard to the

retrenchment of workmen:

⮚ Notice to the Workmen before Retrenchment

● The employer must provide written notice of at least one month of the
retrenchment of the employee. The notice must include the reasons for such
retrenchment, and the employer must pay the wages entitled to the worker
during the notice period.
● The employer must pay the wages of Retrenchment equivalent to the
average pay of a period of 15 days for each year of continuous service
provided by the workmen.

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● The employer needs to serve the notice to the appropriate government as
well.

Compliance with Prescribed Procedure of Retrenchment

⮚ The employer is required to adhere to the prescribed procedure of

retrenchment, which is as follows:

● Suppose the employers decide to retrench the employer that belongs to a

certain class of workmen. Then, he must retrench the workmen who are the
last candidates to be employed for that work at the time of the
employment. The most common rule of retrenchment is that the
retrenchment procedure should start from the beginners, i.e. the person
who just joined the establishment, and then move to the senior workmen.

● However, the rule is not applicable if there is a contract specifying different

stipulations, and the same is consented to by the workman and employer.

● The employer can continue the employment of the workmen who, in his

opinion, possess the required skill set, which can be beneficial for the
establishment then, he can choose not to retrench that person irrespective
of the time of joining the establishment.

Conditions before Retrenchment of Workmen

⮚ There are numerous conditions to be fulfilled before the retrenchment of

workmen, which include the following. The employer must fulfil these

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 certain conditions before retrenching workmen who have been in
continuous service for one year under the employer.

● The employer must provide written notice of at least three months to the
workmen stating the reason for such retrenchment, or the employer must
pay prescribed wages to the workmen instead of the notice.
● The employer is required to obtain prior permission regarding such
retrenchment from the appropriate Government 0r the special authority
through drafting an application for the same.
● The rest of the procedure is the same as the procedure of layoff, and the
employer must follow that procedure to ensure the systematic
retrenchment of the workmen
● The management needs to prove that the copies of the application, as
required by section 25N r/w section 76A of the Industrial Disputes Rules,
1957, were served to the concerned workman.

Constitutional Validity of Section 25N

⮚ The following case laws discuss the constitutional validity of section 25N:

Workmen of Meenakshi Mills Ltd., etc. V. Meenakshi Mills Ltd. Anr

⮚ Here, the apex court upheld the constitutional validity of Section 25N,

stating that the restrictions imposed on the employer regarding the

retrenchment of the workmen were absolutely in the interest of the general
public. It in no way infringes Article 19(1)(g) and the duty of passing a

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 speaking order and allows the parties concerned with the judicial power
while functioning under Section 25N(2).

Uttaranchal Forest Development Corporation and Anr v. Jabar Singh and Ors

● In this case, the respondent was retrenched from his services by notices

under Section 6N of the U.P Industrial Disputes Act 1947, and the
retrenchment was held valid by the concerned labour court.

● The award of the labour court was challenged in the High Court of Uttar

Pradesh, and the court directed for the reinstatement with back wages for
the workmen.

● The major question was if the corporation falls in the ambit of industrial

establishment as per Section 25L of the Industrial Dispute Act 1947 and if
the retrenchment was invalid due to the non-compliance of section 25N of
the IDA 1947.

● The Apex Court held that the establishment could be considered as an

industrial establishment under section 25 L as the process of cutting trees by

axe and changing the shape by saw and conversion of trees into logs for
sale and disposal fell in the ambit of the manufacturing process under
Section 2-K of the Factories Act, 1948, and the provisions of section 25 N
applies on this establishment.

● Further, the court observed that the appellant didn’t comply with two

requirements of 25N of the Act, such as providing notice for at least three
months or wages in place of the same and taking the prior permission of the
appropriate authority.

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● Hence, the retrenchment was declared illegal, and the apex court held that

the workmen were entitled to reinstatement along with wages and

continuity of services.

● The judgements related to lay-off and retrenchment portray the vigilance of

the Indian judicial system towards the Lay-off and Retrenchment along with
its efforts to safeguard the interest of the workmen.

Landmark Judgements regarding retrenchment:

Byram Pestonji Gariwala v Union Bank of India and Others

● In this case, the Apex court restricted the definition of ‘retrenchment’ as

defined under Section 2(oo) (bb) of the Industrial Disputes Act, 1947. It held

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 that only when ‘discharge of excess of labour’ is done by the employer then
retrenchment is said to occur.

State Bank of India v N. Sundaramony

● In this case, the Supreme Court put an end to its earlier decision expressed

in Byram Pestonji Gariwala v Union Bank of India and Others by expanding

the definition of retrenchment as defined under Section 2(oo) of the
Industrial Disputes Act, 1947. It held that any retrenchment done as per
Section 2(oo) shall mean that the termination of a workman is done by the
employer for any reason whatsoever other than as a punishment in
furtherance of imposing disciplinary action and those explicitly excluded by
clauses (a), (b) and (c) of the said definition.

G. Jagadishwar Reddy v Railways, Guntakal Division

● In this case, it was held that retrenchment compensation can also be

claimed by casual workers under the provisions of Section 25F of the

Industrial Disputes Act, 1947 if such casual worker had rendered continuous
service for a period of one year.

Delhi Cloth and General Mills v Union of India

● In this case, it was held by the Supreme Court that if the name of any

workman is removed from the muster roll of an industrial establishment

then it would automatically be deemed as the retrenchment of such
workman.

How are Lay-off and Retrenchment Different?

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 ⮚ Lay-off and Retrenchment can be differentiated on the following basis –

Basis Layoff Retrenchment

Meaning A layoff can be defined as the Retrenchment can be defined

inability, refusal, or failure of the as the termination of the
employer to provide employment to services of the workman by
the workman whose name is borne the employer due to any
on the muster roll of his industrial reason other than a
establishment due to the shortage of punishment as a result of any
coal, raw materials, power, and disciplinary action against the
breakdown of machinery or worker
accumulation of stocks, natural
calamity or any other connected
reason and not retrenched.

Section Section 2(kkk) of the Industrial Section 2(oo) of the Industrial

Dispute Act 1947 Dispute Act 1947

Impact on The Industrial establishment ceases The operations of the

Operations of to operate. Industrial establishment
Industrial continue.
Establishment

Effect on the Here, the employer-employee The employee-employer

employer- relationship continues relationship ends
employee
relationship

Employment of The workmen are appointed back This results in the immediate

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Workmen after the end of the layoff period termination of the workmen

Motive Action Step Business Strategy

Conclusion

⮚ The Industrial Disputes Act 1947 lays down various employer compliance

requirements regarding layoff and retrenchment of workmen.

⮚ It is essential for the employer to be aware of such compliances to ensure

peace and harmony within the industrial establishment and to avoid any
adversities related to the non-compliance.

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