On 8 December 2022, during a Rajya Sabha session, the Labour and Employment Minister Bhupendra Yadav clarified that mass layoffs are illegal if the process of the terminations doesn’t fall under the provisions of the Industrial Disputes Act, and central and state-level governments can take action to protect the interest of the employees. The statement comes after the question was raised in Rajya Sabha about how the government is going to tackle the mass lay-offs in IT, ed-tech, social media, and other larger multi-national companies.
He also added that as per the Industrial Disputes Act, firms and companies which operate with 100 employees or more have to seek permission from the Government before implementing any kind of layoff or closure.
Industrial Dispute Act, 1947
This is an Act that came into force in the year 1947. The objective of the act was to promote industrial peace by facilitating the investigation and settlement of industrial disputes through negotiation. It is labor legislation to protect the workmen against victimization by employers and to ensure social justice for both employers and employees. The unique object of the Act is to promote collective bargaining and to maintain a peaceful atmosphere in industries by avoiding illegal strikes and lockouts.
Lay-Off, Retrenchment, and Closure are three case scenarios contemplated in the Industrial Disputes Act, of 1947, which essentially results in employees losing their jobs. These are rather scenarios where situations compel an employer to resort to denying employment to their employees. The Industrial Disputes Act has come up with formal definitions and has set out laws that govern these case scenarios.
The term ‘lay-off’ has been defined as the failure, refusal, or inability of an employer on account of the shortage of coal, power, or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other unconnected reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.
Essentially, a lay-off is a condition where employers are constrained to deny work to their workforce owing to conditions that bring forth a temporary inability to keep their business going. The said case scenario can happen only in a continuing establishment.
Essentials conditions that lead to layoffs are -
- There has to be a failure, refusal, or inability of an employer
- This failure, refusal, or inability should be an offshoot of the shortage of coal, power, or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity, or any other unconnected reason
- The names of the laid-off workers should necessarily feature on the muster rolls of the establishment
- The said workers should not have been retrenched
The employer cannot, without prior permission from the appropriate government, lay off an employee featuring on the muster rolls of the establishment A copy of the said application has to be given to the concerned workmen as well. If the lay-off happened where the workmen of an industrial establishment, being a mine, owing to reasons of fire, flood, or excess of inflammable gas or explosion, the employer, in relation to such establishment, shall, within a period of thirty days from the date of commencement of such lay-off, apply in the prescribed manner, to the appropriate Government or the specified authority for permission to continue the lay-off.
The said application will be considered and a reasonable opportunity to be heard shall be given to the employer as well as the workmen. After considering the same, the appropriate government may or may not grant the employer to close down. Even here, if the government does not respond within 60 days of application, the permission will be deemed to have been granted. There are provisions for review of the said decision by the authority suo-moto or in response to an application.
Compensation for Laid-Off period
A workman who is laid-off is entitled to compensation equivalent to 50% of the total basic wages and dearness allowance for the period of lay-off. The said compensation can be availed only if the employee has done continuous service for at least one year; this will be detailed in an upcoming section of this article. A temporary worker cannot avail of such compensation. Refusal to accept alternative employment, absence from the establishment, strike, or deliberate slowing down of production could be grounds that would entail disentitlement to such compensation.
If such Lay-off exceeds 45 days, the employer can either keep paying such lay-off compensation or retrench the workers. Nonetheless, retrenchment should necessarily be applied abiding by the procedure set out by the statute.
The Act defines “Retrenchment” as the termination by the employer of the services 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 on that behalf; or
Termination of the service of the workman as a result of the non-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
Here, the key ingredient is the termination of a workman from service, by the employer. This does not mean the employer can retrench a worker as a punishment by way of disciplinary action. Further, this scenario strictly does not include the above-mentioned conditions contemplated under the subsection.
The Act defines “Closure” as the permanent closing down of a place of employment or part thereof. Here, the employer is constrained to close the establishment permanently. Nonetheless, the due procedure has to be complied with when it comes to rolling out a plan of closure. However, the closure procedures do not apply to an undertaking set up for the construction of buildings, bridges, roads, canals, dams, or other construction work.
Although employers may be forced to deprive their employees, invoking the case scenarios as explained above, the Industrial Dispute Act has been successful in setting out standards of mutual respect and requirement for solid reasons as preconditions to bringing these into play. These provisions aim at protecting the worker’s rights while respecting the employer’s point of view as well.