LAYOFF AND RETRENCHMENT UNDER LABOUR LAW DISHA GUPTA BASICS OF LAW Sat, Oct 12, 2019, at ,11:41 AM LAYOFF The term ‘lay-off’ has been defined under section 2 (kkk) of the Industrial Disputes Act, 1947, and means 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. Layoffs are not caused by any fault of the employees but by reasons such as lack of work, cash, or material. The permanent layoff is called redundancy. But in view of the Industrial disputes act, 1947 (India), layoff means temporary removal of employees because of deficit and shortage of inputs which are related to productivity, breakdown of machinery or affect 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 affected productivity. ESSENTIALS OF LAYOFF The essentials of lay off are as follows- There must be failure, refusal or inability on the part of the employer to give employment to a workman. The failure, refusal or inability should be on account of a shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery, or natural calamity, or any other connected reason. The workman’s name should be on the muster rolls of the industrial establishment. The workman should not have been retrenched. COMPENSATION FOR LAYOFF According to Section 25 C of the Industrial Disputes Act, a workman who is laid-off is entitled to compensation equivalent to 50 percent 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. 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. (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. EFFECTS OF LAYOFF Effects of layoffs in the workplace: Layoffs have remained the greatest way for a company to cut costs. Although from the employer's perspective a layoff is beneficial for the business, layoff creates uncertainty in the workplace environment and lower other employees’ job security as well as create apprehension and fear of termination for the remaining employees, and subsequently lowers overall motivation in the workplace environment. Effects of layoffs to the employee: Employees (or former employees in this case) can be affected in a couple of different ways. When an employee is laid off, his or her general trust in long-term work may decrease, reducing expectations upon rehire. After an employee withstands a layoff, the effects can trickle into future employment and attitudes. RETRENCHMENT Retrenchment means termination of service of a workman by the employer by any reason but other than punishment or disciplinary action. In simple words, if an employer discharges or removes any workman or staff member on the ground of surplus labour or staff, but not as a disciplinary action it is called retrenchment. Retrenchment is one of the ways companies use to terminate employment when the company is forced to downsize its number of employees. Subsidiary companies of Multinational Corporations often resort to retrenchment to deal with their expenditure on human resources. However, companies often fail to consider the legal requirements to be carried out before retrenching their employees. ESSENTIALS OF RETRENCHMENT No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until- The workman has been given one month’s 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; The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months; and Notice in the prescribed manner is served on the appropriate Government for such authority as may be specified by the appropriate Government by notification in the Official Gazette. If there exists an agreement specifying a date of termination of service, no notice is necessary in such cases Compensation is equivalent to 15 days average pay for every completed year of service or any service or any part thereof in excess of six months; and Notice in the manner prescribed in Rule 76 of the Industrial Dispute Rules 1957 should be served by the appropriate government.