Lay - Off and Retrenchment
Lay - Off and Retrenchment
CLASS- 3 RD YEAR
ENROLLMENT NO -18FLICDDN01020
SECTION: A
Originally the Industrial Dispute Act did not provide for lay-off and retrenchment .The
explosive situations due to enormous accumulation of stocks, particularly in the textile mills,
with the consequence of probable closure, large scale lay-off and retrenchment in many mills
provoked to introduce some effective measures to prevent large scale industrial unrest in the
country.
In order to overcome the situation the president of India promulgated the Industrial Dispute
Amendment Ordinance 1953 to take effect from 24 th October 1953. The ordinance made
provisions for payment of compensation for lay- off or retrenchment. The said ordinance was
repealed and replaced by the Industrial Dispute Amendment Act1953 on 23rd December ,1953.
The Supreme Court in Hari prasad Shiv Shankar Sukla V A.D. Divakar AIR 1957 SC 121
Held that retrenchment means the discharge of surplus labour or staff by the employer for any
and it has no application where the service of all workmen have been terminated by the
employer on a real and bona fide closer of business or where the service of all workmen have
been terminated by the employer on the business or undertaking being taken over any
employer.
The effect of the SC pronouncement was that the Act was again amended on 6 the june 1961
and two new sections 25 FF and 25 FFF were inserted . By this amendment provision was
Sections 25-C to 25-E inclusive shall not apply to industrial establishments to which Chapter V-
B applies, or
(a) to industrial establishments in which less than fifty workmen on an average per working day
(b) to industrial establishments which are of a seasonal character or in which work is performed
only intermittently.
work is performed therein only intermittently, the decision of the appropriate Government
Explanation.- In this section and in Sections 25-C, 25-D and 25-E, “industrial establishment”
means-
(i) a factory as defined in clause (m) of Section 2 of the Factories Act, 1948 or
(ii) a mine as defined in clause (f) of Section 2 of the Mines Act, 1952 or
(iii) a plantation as defined in clause (f) of Section 2 of the Plantations Labour Act, 1952
the period with reference to which the number of employees is to be determined is the calendar
month preceding the point of time when the statutory right under section 25 C arose. In this
case the court asserted that the two expressions seasonal character and intermittent are not
defined in the Act but they are not synonymous. Seasonal implies dependence on nature over
which neither the employer nor the employee in the establishment has any control. Intermittent
(1) a workman shall be said to be in continuous service for a period if he is, for that period, in
work which is not due to any fault on the part of the workman;
(2) where a workman is not in continuous service within the meaning of clause (1) 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 workman, during a period of twelve calendar months
preceding the date with reference to which calculation is to be made, has actually worked under
(i) one hundred and ninety days in the case of a workman employed below ground in a mine;
and
the date with reference to which calculation is to be made, has actually worked under the
(i) ninety-five days, in the case of a workman employed below ground in a mine; and
Explanation.- For the purpose of clause (2), the number of days on which a workman has
(i) he has been laid-off under an agreement or as permitted by standing orders made under the
Industrial Employment (Standing Orders) Act, 1946 or under this Act or under any other law
(ii) he has been on leave with full wages, earned in the previous year;
(iii) he has been absent due to temporary disablement caused by accident arising out of and in
(iv) in the case of a female, she has been on maternity leave; so, however, that the total period of
25C. Right of workmen laid off for compensation.- Whenever a workman (other than a badli
establishment and who has completed not less than one year of continuous service under an
employer is laid-off, whether continuously or intermittently, he shall be paid by the employer for
all days during which he is so laid- off, except for such weekly holidays as may intervene,
compensation which shall be equal to fifty per cent of the total of the basic wages and dearness
allowance that would have been payable to him had he not been so laid-off:
Provided that if during any period of twelve months, a workman is so laid-off for more than
forty-five days, no such compensation shall be payable in respect of any period of the lay-off
after the expiry of the first forty-five days, if there is an agreement to that effect between the
Provided further that it shall be lawful for the employer in any case falling within the foregoing
proviso to retrench the workman in accordance with the provisions contained in Section 25-F at
any time after the expiry of the first forty five days of the lay-off and when he does so, any
compensation paid to the workman for having been laid-off during the preceding twelve months
establishment in the place of another workman whose name is borne on the muster rolls of the
establishment, but shall cease to be regarded as such for the purposes of this section, if he has
Notwithstanding that workmen in any industrial establishment have been laid off, it shall be the
duty of every employer to maintain for the purposes of this Chapter a muster-roll, and to provide
for the making of entries therein by workmen who may present themselves for work at the
(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 five miles 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 workman provided that the wages
which would normally have been paid to the workman are offered for the alternative
employment also;
(ii) if he does not present himself for work at the establishment at the appointed time during
(iii) if such laying-off is due to a strike or slowing-down of production on the part of workmen
But the Act does not provides any test to determine what is one establishment .Where any
The question for determination arose whether the limestone quarry was part of a cement factory
run by the same employer . The following test were considered by the SC, namely,
different employer
v- functional integrity
National Iron and Steel Co. Ltd Vs State of West Bengal (1967) ILLJ SC
Four companies were situated in the same premises, they were engineering concerns engaged in
production of different types of iron and steel goods. They had a common office time, cash
office, works managers, labour officers etc. The SC in special appeal held that the things which
the four companies had in common were sufficient to show that they constituted one integrated
establishment.
No workman employed in any industry who has been in continuous service for not less than one
(a) 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
equivalent to fifteen days' average pay for every completed year of continuous service or any
(c) notice in the prescribed manner is served on the appropriate Government or such authority
by operation of law, from the employer in relation to that undertaking to a new employer, every
workman who has been in continuous service for not less than one year in that undertaking
immediately before such transfer shall be entitled to notice and compensation in accordance with
Provided that nothing in this section shall apply to a workman in any case where there has been a
(a) the service of the workman has not been interrupted by such transfer;
(b) the terms and conditions of service applicable to the workman after such transfer are not in
any way less favorable to the workman than those applicable to him immediately before the
transfer; and
(c) the new employer is, under the terms of such transfer or otherwise, legally liable to pay to
the workman, in the event of his retrenchment, compensation on the basis that his service has
(1) An employer who intends to close down an undertaking shall serve, at least sixty days before
the date on which the intended closure is to become effective, a notice, in the prescribed manner,
on the appropriate Government stating clearly the reasons for the intended closure of the
undertaking
(ii) less than fifty workmen were employed on an average per working day in the preceding
twelve months,
(b) an undertaking set up for the construction of buildings, bridges, roads, canals, dams or for
(2) Notwithstanding anything contained in sub-section (1), the appropriate Government may, if
death of the employer or the like it is necessary so to do, by order, direct that provisions of sub-
section (1) shall not apply in relation to such undertaking for such period as may be specified in
the order.
(1) Where an undertaking is closed down for any reason whatsoever, every workman 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 25-F, as if the workman 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 workman under clause
(b) of Section 25-F and it shall not exceed his average pay for three months.
(iii) the expiry of the period of the lease or licence granted to it; or
(iv) in a case where the undertaking is engaged in mining operations, exhaustion of the minerals
in the area in which such operations are carried on, shall not be deemed to be closed down on
account of unavoidable circumstances beyond the control of the employer within the meaning of
mining operations is closed down by reason merely of exhaustion of the minerals in the area in
which such operations are carried on, no workman referred to in that sub-section shall be entitled
to any notice or compensation in accordance with the provisions of Section 25-F, if-
(a) the employer provides the workman with alternative employment with effect from the date
of closure at the same remuneration as he was entitled to receive, and on the same terms and
(c) the employer is, under the terms of such alternative employment or otherwise, legally liable
to pay to the workman, in the event of his retrenchment, compensation on the basis that his
service has been continuous and has not been interrupted by such alternative employment.
(1-B) For the purposes of sub-sections (1) and (1-A), the expressions “minerals” and “mining
operations” shall have the meanings respectively assigned to them in clauses (a) and (d) of
Section 3 of the Mines and Minerals (Regulation and Development) Act, 1957 .
(2) Where any undertaking set-up for the construction of buildings, bridges, roads, canals, dams
or other construction work is closed down on account of the completion of the work within two
years from the date on which the undertaking had been set up, no workman employed therein
shall be entitled to any compensation under clause (b) of Section 25-F, but if the construction
work is not so completed within two years, he shall be entitled to notice and compensation under
that section for every completed year of continuous service or any part thereof in excess of six
months.