ICFAI UNIVERSITY

ICFAI LAW SCHOOL

DEHRADUN
LABOUR LAW ASSIGNMENT

NAME- ANAY KHANDELWAL

CLASS- 3 RD YEAR

PROGRAM- BBA LLB(HONS)

ENROLLMENT NO -18FLICDDN01020

SUBJECT- LABOUR LAW

SECTION: A

SUBMITTED TO – PROF. SHUSANTA SHADHANGI

 Lay-off and Retrenchment

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repealed and replaced by the Industrial Dispute Amendment Act1953 on 23rd December ,1953.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

reason whatsoever, otherwise than on a punishment inflicted by way of disciplinary action

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

made for compensation for retrenchment of workmen on transfer of a business or on closing

down of an industrial concern.

Section25 A - Application of Sections 25 C – 25 E

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

have been employed in the preceding calendar month; or

(b) to industrial establishments which are of a seasonal character or in which work is performed

only intermittently.

(2) If a question arises whether an industrial establishment is of a seasonal character or whether

work is performed therein only intermittently, the decision of the appropriate Government

thereon shall be final.

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

Kohinoor Saw Mills CO Vs State of Madras (1957) II LIJ 210 MAD

Where it is contested that less than 50 persons were employed in any industrial establishment,

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

means not continuous but falling after certain gaps or intervals.

25B. Definition of continuous service.- For the purposes of this Chapter,--

(1) a workman shall be said to be in continuous service for a period if he is, for that period, in

uninterrupted service, including 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 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

the employer for not less than

(i) one hundred and ninety days in the case of a workman 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 workman, during a period of six calendar 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 a workman employed below ground in a mine; and

(ii) one hundred and twenty days, in any other case

Explanation.- For the purpose of clause (2), the number of days on which a workman 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 standing orders made under the

Industrial Employment (Standing Orders) Act, 1946 or under this Act or under any other law

applicable to the industrial establishment;

(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

the course of his employment; and

(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 twelve weeks.

25C. Right of workmen laid off for compensation.- Whenever a workman (other than a badli

workman or a casual workman) whose name is borne on the muster-rolls of an industrial

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

workman and the employer:

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

may be set off against the compensation payable for retrenchment.

Explanation.-”Badli workman” means a workman who is employed in an industrial

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

completed one year of continuous service in the establishment.

25D. Duty of an employer to maintain muster rolls of workmen.-

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

establishment at the appointed time during normal working hours.

25E. Workmen not entitled to compensation in certain cases.-

No compensation shall be paid to a workman 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 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

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 workmen

in another part of the establishment.

But the Act does not provides any test to determine what is one establishment .Where any

industrial establishment consist of a number of branches , deportments or units situated in the

same or deferent places.

In Associated Cement Companies Ltd Jhinkapani Vs Their Workmen (1960)ILLJ I SC

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,

i- Geographical proximity of two parts of an establishment or location of the establishment

ii- Unity of ownership, whether both parts of an establishment are owned by the same or

different employer

iii- Management and control of the two parts

iv- Unity of employment and condition of services

v- functional integrity

vi- general unity of purpose

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.

25F. Conditions precedent to retrenchment of workmen

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-

(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

notice, wages for the period of the notice,

 (b) 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

(c) notice in the prescribed manner is served on the appropriate Government or such authority

as may be specified by the appropriate Government by notification in the Official Gazette.

25FF. Compensation to workmen in case of transfer of undertakings-

Where the ownership or management of an undertaking is transferred, whether by agreement or

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

the provisions of Section 25-F, as if the workman had been retrenched.

Provided that nothing in this section shall apply to a workman in any case where there has been a

change of employers by reason of the transfer, if-

(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

been continuous and has not been interrupted by the transfer.

25FFA. Sixty days' notice to be given of intention to close down any undertaking.-

(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

Provided that nothing in this section shall apply to-

(a) an undertaking in which –

(i) less than fifty workmen are employed, or

(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

other construction work or project.

(2) Notwithstanding anything contained in sub-section (1), the appropriate Government may, if

it is satisfied that owing to such exceptional circumstances as accident in the undertaking or

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.

25FFF. Compensation to workmen in case of closing down of undertaking.-

(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.

Explanation.-An undertaking which is closed down by reason merely of-

(i) financial difficulties (including financial losses); or

(ii) accumulation of un disposed of stocks; or

(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

the proviso to this sub- section.

(1-A) Notwithstanding anything contained in sub-section (1), where an undertaking engaged in

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

conditions of service as were applicable to him, immediately before the closure;

(b) the service of the workman has not been interrupted by such alternative employment; 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.