LAY OFF & COMPENSATION UNDER
INDUSTRIAL DISPUTES ACT,1947
INTRODUCTION-
Industrial Disputes Act came into force in the year
1947, the year in which India got independent. The Objective of
the Act was to promote industrial peace by facilitating the
investigation & settlement of Industrial disputes through
negotiation. It is labour legislation to protect the workmen
against victimization by employers & to ensure social justice to
both the Employers & employees. The unique object of the act
is to promote collective bargaining & to maintain a peaceful
atmosphere in industries by provisions for regulation of lay-off.
A layoff is temporary in nature as it indicates the incapability of
an Employer to continue the employment of the workers for a
short period. Layoff refers to the removal of employees by the
employer for reasons other than the employee`s fault. Through
this article, we will discuss the term ‘Layoff’ and its
Compensation in detail.
THE CONCEPT OF LAYOFF UNDER THE
INDUSTRIAL DISPUTES ACT, 1947-
Sec.2(kkk) of the Act
defines the term ‘layoff’ as, “the inability, failure or refusal of
the employer to provide employment to a workman whose
name is mentioned in the muster roll of his Industrial
establishment & who is not retrenched due to the lack of
power, coal, raw materials, accumulation of stocks, breakdown
of machinery or natural calamity for any other relevant
reason.”
CONDITIONS ESSENTIALS FOR LAYOFF –
Following conditions are required-
There must exist an inability, failure or refusal from the
employer`s side to provide employment to the workmen.
Such inability, failure or refusal must be due to lack of
power, coal, raw materials, accumulation of stocks,
breakdown of machinery or natural calamity for any other
relevant reason.
The name of the workman must be mentioned in the
muster roll of the employer`s industrial establishment.
The workman must not have been subjected to
retrenchment.
Some Important Facts-
A layoff is a measure that is used only in continuing
business. If the Employer decides to permanently shut
down his industrial establishment then layoff is of no
use. Layoff must adhere to the conditions provided in
sec.2(kkk) of the Industrial Disputes Act, 1947 or else it
will not be considered right as per the law.
Layoff means, there will be instant removal of the
employees, however, such unemployment is temporary
in nature, so it does not result in the termination of the
already existing employer-employee relation & leads to
no alteration of the terms of such employment.
A workman, whose name is name mentioned in the
muster roll of the employer`s industrial establishment &
who is present for work during the working hours of any
day is not employed within two hours of him being
present for work is said to be laid-off for that
particular day. Similarly, if the workman is asked to
work during the second half of the day, then he is
considered to be laid-off for the whole day.
If the workman is asked to work during the second half
of his shift & is employed then he is said to be laid-off
for half of the day.
Non-Applicability of compensation on Industries
(sec.25A)-
As per sec.25A, the Compensation accrued from the layoff
provisions mentioned in the said Act shall not apply to the
following kinds of Industrial establishments-
Such individual establishments where less than 50
workmen worked on an average during each working day
in the preceding calender month.
An Individual establishment that comes under the chapter
V-B as included by the Industrial disputes Amendment Act
of 1976.
Continuous Service(sec.25B)-
Workman is said to render continuous service if he has worked
for at least one year without any interruption.
He shall be eligible for Compensation if he has rendered a
minimum of one year of continuous service. The interruption of
such continuous service is not affected by reasons such as an
accident, authorized leave, sickness, legal strikes, a lock & the
termination of work that is not due to the fault of the workmen.
There are two exceptions where even if a workman is not in
continuous service, shall be deemed to be in continuous
service. They are-
1. If the workman was employed for the preceding 12
months from the date on which such calculation is being
made.
2. If the workman during these 12 months had rendered his
services for 190 days or more in the case of being
employed in a mine & 240 days in any other employment.
CONDITIONS PRECEDENT FOR PROVIDING
COMPENSAT
-ION TO A LAID OFF WORKMAN-
As per sec.25C of the said Act, the workman, who is laid off, is
entitled to compensation that is equivalent to half of the total
wages allowance given for the said period of layoff & dearness
allowance payable to him.
Workman has right to layoff compensation subject to the
following conditions, they are-
1. Workman name should be borne on the muster rolls of the
establishment & he/she is not a badli workman or a casual
workman,
2. The workman should have completed not less than one
year continuous service as defined under sec.25B,
3. The workman should have been laid off continuously or
intermittently,
4. Then the workman shall be entitled to layoff compensation
for all days during which he was so laid off,
5. However, the workman shall not be paid layoff
compensation for such weekly holidays as may intervene
the period of layoff.
The compensation can`t be paid for more than 45 days,
if the layoff period extends the prescribed period then,
the employer can continue paying the compensation or
can be retrenched.
The layoff compensation is provided to overcome
unemployment pains that are not under employer`s
control. A layoff can be declared only in unforeseeable
situation & not to victimize the worker.
Workman not entitled to Compensation in certain
cases(sec.25E)-
1. 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
situated in the same town or village or situate within a
radius of 5 miles from the establishment to which he
belongs, if, in the opinion of the employer, such
employment(alternative) does not call for any special skill
or previous experience & can be done by the workman,
provided that the wages which would normally have been
paid to the workman are offered for the alternative also,
2. If he does not present himself for work at the
establishment at the appointed time during normal
working hours at least once a day.
3. If such laying off is due to a strike or slowing down of
production on the part of workman in another part of the
establishment.
SPECIAL PROVISIONS RELATING TO LAYOFF-
Prohibition of Lay off(sec.25M)-
1. No workman(other than a badli workman) 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 except with
the prior permission of the appropriate gov. or such
authority as may be specified authority, obtained on
an application made in this behalf, unless such layoff
is due to shortage of power or to natural calamity, &
in the case of a mine, such layoff is due to fire, flood,
excess of inflammable gas or explosion.
2. An application for permission under (1) shall be made
by the employer in the prescribed manner stating
clearly the reasons for the intended layoff & a copy of
such application shall also be served simultaneously
on the workman concerned in the prescribed manner.
3. Where the workman(other than badli workman or
casual workman) of an industrial establishment,
being a mine, have been laid off under (1) for
reasons of fire, flood or excess of inflammable gas or
explosion, the employer, in relation to such
establishment, shall, within a period of 30 days from
the date of commencement of such layoff, apply in
the prescribed manner, to the appropriate gov. or the
specified authority for permission to continue the
layoff.
4. Where an application for permission under subsec.(1)
or (3) has been made, the appropriate gov. or the
specified authority, after giving a reasonable
opportunity of being heard to the employer, the
workman concerned & the persons interested in such
layoff, may, having regard to the genuineness &
adequacy of the reasons for such layoff, the interests
of the workman & all other relevant factors, by order
& for reasons to be recorded in writing, grant or
refuse to grant such permission & a copy of such
order shall be communicated to the employer & the
workman.
5. If the appropriate authority does not grant order or
refuse within 60 days, the permission shall be
deemed to be granted.
6. The appropriate government either by itself or on the
application made by the employer or any workman,
review its order or refer it to the Tribunal, where the
Tribunal will pass an reward within 30 days of such
reference.
According to (6), it will be binding upon the parties.
7. Where no permission is made under (1) or (3) within
prescribed period or permission for layoff has been
refused. Such layoff will be illegal & laid off workman
will be entitled to benefits under any law for the time
being in force as if they had not been laid off.
Reasonable Restrictions- In order to prevent hardship to
the employees & to maintain higher tempo of production &
productivity, sec.25M of the Act puts some restrictions on the
employer`s right to layoff, retrenchment & closure. Sec.25M
makes it clear that no workman whose name is borne on the
muster rolls of his employer shall be laid off without previous
permission of such authority as may be specified by the
appropriate gov. unless such layoff is due to shortage of power
or natural calamity & in case of a mine, it is due to fire, flood
etc.
Illegal layoff[sec.25(m)]-
Where no application is made, or where the permission for
any layoff has been refused, such layoff shall be deemed to be
illegal from the date on which the workman had been laid off.
The workman shall be entitled to all benefits under any law for
the time being in force as if they had been laid off.
Penalty for illegal layoff [sec.(25Q)-
According to this sec., an employer who contravenes the
provisions of sec.25M & declares or continuous layoff without
the permission of the appropriate government or specified
authority is punishable,
a. With imprisonment for a term which may extend to 1
month, or
b. With fine, or
c. With both, imprisonment as well as fine.
SOME CASE LAWS RELATED TO LAYOFF-
1. Central India spinning, weaving & manufacturing
co. ltd. Vs State industrial court (1959 Bombay H.C)-
The Bombay high court held that the key to the definition
is to be found in the world failure, refusal or inability of an
employer these words make its clear that employment has
to be on account of a cause which is independent of any
action or inaction on the part of the workmen themselves.
2. Industrial employees union, Kanpur Vs . J.K cotton
spinning & weaving mills co.-
It was held that offering unskilled work to a skilled worker
does not amount to compensation if & only if he/she has
been in continuous service. Continuous service is defined as
providing uninterrupted service (includes interrupted service
due to sickness or accidents) for at least a year.
3. State Bank of India Vs N Sundaramony & others
(1975)-
The Supreme court in this case held that employees who
have been laid off are entitled to compensation equivalent to
50% of their basic wages & dearness allowance. However, this
compensation is only payable for the first 45 days of layoff.
After that, the employee may be terminated or retrenched.
4. Papnasam labour union Vs Madhura coats ltd.
(1995)-
This case provides a landmark judgement for layoffs. The
case was regarding the constitutional validity of sec.25M of
the Act, which talks about the prohibition of layoffs by the
employer. 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
laying off the workmen, which was considered void & ultra
vires.
It was held by the Apex court that the main objective of the
introduction of sec.25M is to prevent avoidable hardships to
the employees as a result of layoff & maintain higher
productivity & production through preserving the peace &
harmony of the industries, it was further mentioned that the
legislature had taken care by exempting the need of prior
permission for layoff in case, the layoff is necessary due to
natural calamities or power failure as these situations are
explicit, grave & sudden. Therefore, there is no need for any
further scrutiny in these situations. The employer must take
the prior permission of the government rather than deciding
as per his assessment.
Hence, to maintain industrial peace & harmony & avoid
unemployed due to unjust causes, sec.25M cannot be
considered arbitrary or unreasonable, & the constitutional
validity was upheld.
CONCLUSION-
While setting up any industry in India, layoff provisions
acquire importance especially most labour law legislations
are proworkman. Laying off is a power in the hands of the
employer but it has to be exercised judicially in accordance
with the applicable legal regulations. The monetary penalty
for contravention of these provisions is not a lot but, it can
impact the establishment goodwill & reputation. Further,
improper laying off workman can lead to strikes & lock-outs,
which can result in significant loss for the establishment.
Therefore, there is reason enough for every establishment in
India to follow & adhere to labour legislations to ensure
harmony amongst its workmen & facilitate smooth running of
their business activites.
