LAYOFF AND

RETRENCHMENT
 President of India, promulgated Industrial Dispute Amendment Ordinance 1953
 Management right to layoff- Under the traditional law: management had a right to
layoff its workman and adjust labour force happened to be in breach of contract of
employment, aggrieved employee is entitled to compensation.
 Under standing orders- under standing orders, employers are allowed to lay off
their workmen in accordance with provisions of standing orders of establishment.
 Under ID
 Under IR
 Workemn of Dewan Tea estate v. The management (1964)1 llj 358
 If any case is not covered by the standing orders, it will necessarily be governed by provisions of the Act and
layoff would be permissible only where one or other factors mentioned by Section 2(kkk) is present and lay off
compensation is awarded.
 S 65
 CONTINUOUS SERVICE
 continuous service in relation to a worker, means the uninterrupted service of such worker, including his service
which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal
or a lock-out or a cessation of work which is not due to any fault on the part of the worker. Explanation 1.—For
the purposes of this section, where a worker is not in continuous service for a period of one year or six months, he
shall be deemed to be in continuous service under an employer— (a) for a period of one year, if the worker during
a period of twelve months preceding the date with reference to which calculation is to be made has actually
worked under the employer for not less than— (i) one hundred and ninety days in the case of a worker employed
below ground in a mine; and (ii) two hundred and forty days, in any other case; (b) for a period of six months, if
the worker during a period of six months preceding the date with reference to which calculation is to be made has
actually worked under the employer for not less than— (i) ninety-five days in the case of worker employed below
ground in a mine; and (ii) one hundred and twenty days, in any other case. Explanation 2.—For the purposes of
Explanation 1, the number of days on which a worker has actually worked under an employer shall include the
days on which— (i) he has been laid-off under an agreement or as permitted by or under this Code or any other
law applicable to the industrial establishment for the time being in force; or (ii) he has been on leave on full wages
earned in the previous years; or (iii) he has been absent due to temporary disablement caused by accident arising
out of and in the course of his employment; or (iv) in the case of a female, she has been on maternity leave, so
however, that the total period of such maternity leave does not exceed the period as specified in the Maternity
Benefit Act, 1961.
 Uninterrupted service
 Interrupted service – sickness, authorised leave, an accident, a strike which is not illegal, a lockout,
cessation of work that is not due to fault on the part of workman.
COMPENSATION FOR LAYING OFF
 S 67
 His name should be borne on muster rolls and he should not have been retrenched
 He should not be a badly workmen / casual workmen
 He should have completed atleast 1 year of continuous service
 69. No compensation shall be paid to a worker who has been laid-off— (i) if he
refuses to accept any alternative employment in the same establishment from
which he has been laid-off, or in any other establishment belonging to the same
employer situate in the same town or village or situate within a radius of eight
kilometres from the establishment to which he belongs, if, in the opinion of the
employer, such alternative employment does not call for any special skill or
previous experience and can be done by the worker, provided that the wages
which would normally have been paid to the worker are offered for the alternative
employment also; (ii) if he does not present himself for work at the establishment
at the appointed time during normal working hours at least once a day; (iii) if such
laying-off is due to a strike or slowing-down of production on the part of workers
in another part of the establishment.
Refusal to accept alternative employment

 Refusal to accept an alternative employment will disentitle him to claim lay off
compensation, if such alternative employment is
 In the same establishment from which he has been laid off
 In any other establishment belong to same employer situates in the same town or
village or situate within 8 km
 alternative employment calls for any special skill or previous exp and can be laid
off
 It carries same wages which could normally have been paid to the workman in his
original employment
In Layoff relationship of master- servant is temporarily suspended
 RETRENCHMENT
 Discharge of surplus labour or staff by employeron account of a long period of lay off or rationalisation or
production processes or improved machinery or automation of machines or similar other reasons. It is
adopted as a economy measure. The subsisting employer, workmen relationship is terminated in case of
retrenchment.

 (zh) "retrenchment" means the termination by the employer of the service of a worker for any reason
whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—
(i) voluntary retirement of the worker; or (ii) retirement of the worker on reaching the age of
superannuation; or (iii) termination of the service of the worker as a result of the non-renewal of the
contract of employment between the employer and the worker concerned on its expiry or of such contract
being terminated under a stipulation in that behalf contained therein; or (iv) termination of service of the
worker as a result of completion of tenure of fixed term employment; or (v) termination of the service of a
worker on the ground of continued ill-health;
 Pipraich Sugar Mills v. Pipraich Sugar Mills Mazdoor Union AIR 1957 SC 95
 Retrenchment means that business itself is being continued but that a portion of the staff or the labour
force is discharged as surplasage and the termination of services of all workmen as a result of closure of
the business cannot therefore be properly described as retrenchment
the Court also held that transfer of ownership of an undertaking to another employer did not constitute
retrenchment
Barsi Light Railway Company v. Joglekar 1957 SCR 121.
“ any reason whatsoever was interpreted: retrenchment has no wider meaning than it is ordinarily accepted.
It means discharge of surplus labour or staff by the employer for any reason whatsoever other wise than as a
punishment inflicted by way of disciplinary action and it has no application where the services of all
workmen have been terminated by the employer.
State Bank of India v. N Sundara Mani AIR 1976 SC 1111
K Iyer
Santosh Gupta v. State Bank of Patiala.
SBP terminated the service of one of its workmen who had put in more than 240 days of service on ground
of her failure to pass the prescribed test provided for confirmation in service. She was neither served the
notice nor paid retrenchment compensation.: if the words for any reason whatsoever are understood to mean
what they plainly say , it is difficult to escape the conclusion that retrenchment must include every
termination of service of a workmen by an act of the employer except those not included under 25 F. the court
held that discharge of worken on the ground that she did not pass the test that would have enabled her to be
confirmed was retrenchment.
 Issues of interpretation was far reaching : it means discharge would become superfluous.
 In L Robert D’Souza v Executive Engineer, Southern Railway AIR 1982 SC 854. The definition of
expression retrenchment is so clear and unambiguous that if termination of services of workmen is
brought about for any reason whatsoever, it would be retrenchment except if the case falls wthin
any of the excepted categories
 Termination as a result of closure is not retrenchment
 S70
 Procedure for retrenchment
 71. Re employment of retrenched worker
 72. Where any worker is retrenched and the employer proposes to take into his employment any person
within one year of such retrenchment, he shall, in such manner as may be prescribed, give an opportunity
to the retrenched workers who are citizens of India to offer themselves for re-employment and such
retrenched workers who offer themselves for re-employment shall have preference over other persons
 He must be workman
 He must be employed in an industry
 He must have put in one year of continuous service
 REQUIREMENTS
 One month’s notice in writing indicating reasons for retrenchment or wages in
lieu of notice
 Payment of compensation equivalent to 15 days average pay for every completed
year of continuous service or any part thereof in excess of 6 months
 Notice to appropriate government in prescribed manner
NOTICE OR WAGES IN LIEU OF
NOTICE
 Workman proposed to be retrenched should be given one month’s notice in
writing indicating the reasons for retrenchment and period of notice should expire
before retrenchment
 In Vinay Kumar Majoo v. State of Rajasthan (1968) 2 LLJ 398. it is open to
employer to not give notice but in that event, it will be incumbent on him to pay at
the time of retrenchment one month’s wages for the period of notice
 COMPENSATION; WHEN PAYABLE
 In Rajasthan SRTC V. IT (1985)LAB IC 480,
 In Gurnail Singh v. State of Punjab AIR 1993 SC 1388: maount of compensation due to various workmen
awarded through individual bank drafts by divisional or sub divisional offices of employer was sufficiently in
time and therefore, there was sufficient compliance of provisions of the section.
 Calcutta Telephones v. Rintu Bagchi (2001) 3 LLN 1006. Termination of a casual worker who worked for
more than 240 days without complying with S 25 F is invalid and without jurisdiction, he is entitled to
reinstatement
 Allahabad Jal Sanstan v. Daya shankar rai AIR 2005 SC 2371.
The number of days of work put in by the employees in broken period cannot be taken as continuous service
for the purpose of S 25 F, termination of service of workman is valid.
.
Rajasthan Lalit Kala Academy v. Radhe Shyam AIR 2009 SC (Supp) 919.
once the termination of the employee is held to be illegal, th relief of reinstatement is ordinarily available to
the employee. But the relief of reinstatement with full abck wages need not be granted automatically in
every case where Labour Court / IT records the finding that termination of services of a workman which was
in violation of provisions of the Act. For this purpose several factors like mode and method of slection,
nature of appointment, adhoc, daily wages, temporary or permanent period for which workman had worked
and delay in raising ID , are required to be taken into consideration
VIOLATION OF PROCEDURE

 Prior to 2005, SC observed that section has to be followed , it is manadatory and

non compliance renders the retrenchment of employees a nullity. If its invalid, it
cannot be said to have terminated the relationship of empoyers and employees
 In delhi Cloth and Genral Mills Co Ltd v. Shambhu Nath Mukherji ( 1978) 1 llj 1
SC pointed out that any order of retrenchment in violation of procedure is invalid. If
its in invalid, it is considered he is still service
In Harjinder Singh v. Punjab state warehousing corporation 2010 3 scc 192 granted
reinstatement to workers who had been retrenched without procedure adopted. It
needs no emphasis that if a man is deprived of his livelihood, he is deprived of all of
his fundamental and constitutional rights and for him goal of social justice and
economic justice, equality of status and of opportunity , the freedoms enshrined shall
remain illusory
 UP state Brassware Corporation Ltd v. Uday Narain Pandey 2006 1 scc 479.question arose
as to whether back wages are payable consequent upon declaration that a workman has
been retrenched in violation of procedure: Court held a person is not entitled to get
something only because it was lawful to do so. And payment of full back wages will not be
aconsequence.

Mahboob Deepak V, Nagar panchayat , gajraula (2008) 1 scc 575. sucha termination in
violationof procedure although can be set aside, it doesn’t mean an award of reinstatement can
be automatically passed.
The factors determining that are whether appointment was in compliance with statutory
provisions, the period he had worked, whether tehre is a vacancy, whther he had obtained
another employment on the date of termination
Reiterated in Jagbhir singh v. Haryana state agricultural board
TRANSFER

 There should be a transfer of ownership of management of the undertaking from

one employer to another by agreement or operation of law.
 The undertaking should be an industry
 The workman claiming compensation should be workman
 Workman should have put in minimum one year of continuous service within the
meaning of S 25 B immediately before transfer of ownership or management of
the undertaking
 Workmen of Mettur Beardshell v. Management AIR 2006 SC 2056
Company entered into partnership with 2 of its own divisions and employees working
on it. Later on company retired from partnership
This section would not apply if a transfer is made in regard to a branch of a business
run by an undertaking and the workmen would be entitled to countend that a partial
transfer is outside scope of this section. If one undertaking is running several
industries or business which are distinct or separate . In sucha case transfer con be
effected/.
 Anakpalia Cooperative Agricultural and Industrial Society Ltd v. Its workman
On payment of compensation and still claiming re employment: 5 judge bench held tht it is not possible to
grant both. The double benefit in the form of payment of compensation, and immediate re employment
cannot be said to be based on any consideration of fair play or justice.
Gurnail Singh v. S/ Punjab the employees of predecessor has no right to claim re employment by the
successor in business. It cant be claimd as a right, but rather it is one of discretion
CLOSURE

 74.
PROCEDURE

 75. (1) Where an establishment is closed down for any reason whatsoever, every
worker who has been in continuous service for not less than one year in that
undertaking immediately before such closure shall, subject to the provisions of
sub-section (2), be entitled to notice and compensation in accordance with the
provisions of section 70, as if the worker had been retrenched:
 Provided that where the undertaking is closed down on account of unavoidable
circumstances beyond the control of the employer, the compensation to be paid to
the worker under clause (b) of section 70, shall not exceed his average pay for
three months.
OBJECT

 To provide for involuntary employment in case of closure of an undertaking

 To create a sense of security in a worker to a reasonable extent that in case he
sticks to his work he will not be thrown out when his employment is terminated
either when the industry continues to run o when it is closed down for any reason
including one due to transfer of business to a new employer or due to its closure
on the ground of its expediency
 To raise the position and status of labour and to standardise its rights in relation to
industry
 Hathi Singh Mfg Co Ltd V. UOI (1960) 2 SCR 528.
 Constitutional validity of Section 25 FFF of ID Act
 Indian Hume Pipe Co Ltd v. Workmen (1969) 1 LLJ 242
The company closed its factory claiming the area surrounding it is uninhabitable. The tribunal took the
view that the decision to close down the factory was in retaliation of a strike notice given by the union
over the question of bonus. In appeal, The SC held that it was not open to the tribunal to go into the
question as to the motive of the company in closing down the factory and to inquire whether it was bona
fide or malafide. The court said it is not concerned to go into the question as to the motive which guided
him and to come to a conclusion that because of the previous history of the dispute between employer
and employees , the closure was not justified.
Reiterated in Kalinga Tubes v. Workman (1969) 1 LLJ 557.the essence of the mater therefore is the
factum of closure whatever reasons motivated
 Closure of portion of an undertaking
 Workmen of strawboard manufacturing co ltd v. management AIR 1947 SC 1132
 THE most important aspect in this particular case relating to closure in our opinion is
whether one unit has such componential relation that closing of one must lead to the
closing of the other. Functional irregularity will assume an added significance in case of
closure or branch or unit.
 Closure compensation:
 Maximum compensation payable to workman on account of avoidable circumstances
beyond the control of employer is limited to avg pay for 3 months
 The explanation provides that undertaking which is closed down by reason merely of
financial difficulties, accumulation of undisposed stock, expiry of period of lease or
license granted, exhaustion of minerals , shall not be deemed to be closed down on
account of unavoidable circumstances
 Unavoidable circumstances, vis amjor, enemy action, civil commotion, action of state etc
 Sri Rameshwar das v. S/ Haryana; if there is complete lawlessness prevailing in the
undertaking over the course of a year, it cunld be considered as unavaoidable
circumastances
SPECIAL PROVISIONS

 S77- S80
 .