LABOUR LAWS AND INDUSTRIAL LAWS

A Project Report on

LAYOFF

SUBMITTED TO: SUBMITTED BY:

DR.VARINDER NEGI HARPREET KAUR BAWA

UILS,PU ROLL NO. : 44/16
CHANDIGARH CLASS : BALLB( HONS.)
SEMESTER: 9th
SECTION – A

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 ACKNOWLEDGEMENT

I would like to thank my professor Dr. Varinder Negi for endless guidance and
cooperation in making of this project and giving me the opportunity to work
and research on this project topic ‘’LAYOFF’’. I would like to acknowledge with
much appreciation crucial role of the staff of UILS ,who gave the permission to
use all necessary material.
Further , I would like to thank all those who helped me in preparing this
project.

With all due regards

HARPREET KAUR BAWA

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 TABLE OF CONTENTS

S.NO. PARTICULARS PAGE NO.

1. Introduction……………………………………………………..4
2. Meaning and definition of lay-off…………………….5
3. Essential features of lay-off……………………………….5
4. Deemed lay-off …………………………………………………6
5. Continous service ……………………………………………..6
6. Procedure for lay-off …………………………………………7
(a)lay-off under chapter V-A of act…………………….7-9
(b)lay –off under chapter V-B of act…………………..9-12
7. Conclusion ……………………………………………………….13
8. References ………………………………………………………14

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INTRODUCTION:

The industrial Dispute act, 1947 governs the various provisions pertaining to
lay-off of workmen. The scope of this act is to achieve harmony between
employers and workmen and promote economic and social justice ,thereby
classifying the act as a welfare legislation. The preamble of the act clearly
states that the objective of this act is ‘’ to make provision for the investigation
and settlement of industrial dispute’’.This shows the intention of the
legislature is to safeguard the right of the workmen and the industrial
establishement.1

‘’Industrial Dispute’’ is defined under section – 2 (k) of the act . it lays down
certain pre-requisites that must exist to constitute an industrial dispute.There
can be no lay-off if the dispute doesn’t fall within the ambit of section -2(k).

An employer may lay-off or retrench his workmen and may close down or
transfer his industrial establishement in accordance with the provisions of the
act. The act provides for the compensation to the workmen who is laid –off or
retrenched to overcome economic hardship . Similarly, a workmen is also
entitled to compensation when he is denied employment due to the transfer
or closure of the industrial establishement where he was employed .

The provisions regarding compensation and procedure for lay-off

,retrenchement ,transfer or closure have been laid down under chapter V-A
and chapter V-B of the act.

Chapter-V-B provides for the special provisions for lay-off ,retrenchment and
closure .Chapter-V-B applies to industrial establishements employing not less
than one hundred workmen and which are not seasonal in their character.

1
Lay-off under the industrial dispute act,1947 available at www.psalegal.com
(last accessed on 16th December ,2020 ).
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MEANING AND DEFINITION OF LAY-OFF:
Lay –off is a practice whereby the employer cannot give employment to
workmen for various reasons including shortage of raw material , coal, or
power, accumulation of stocks, break down of machinery etc. or for any other
connected reason.

It has been defined under section- 2 (kkk) of the act .

It defines lay –off as :

‘’Lay-off means the failure,refusal or inability of an employer on account of

shortage of coal, power or raw material or the accumulation of stocks or the
breakdown of machinery or natural calamity or for any other connected
reason to give employment to a workmen whose name is borne on the
muster rolls of his industrial establishment and who has not been
retrenched.’’2

ESSENTIAL FEATURES OF LAY –OFF ARE:

1. Failure,refusal or inability of an employer to give employment to his
workmen.
2. This failure,refusal or inability is on account of :
(a) Shortage of coal;
(b) Power;
(c) Raw material;
(d) Accumulation of stocks;
(e) Breakdown of machinery;
(f) Natural calamity

3.The name of the workmen is borne of the muster rolls of the industrial
establishment

4.The workmen has not been retrenched.

2
Section – 2 (kkk), industrial Dispute Act ,1947
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Deemed Layoff
Explanation to the definition of lay-off under section – 2(kkk) provides for the
‘’deemed lay-off’’.It says if a workman , whose name is on the muster rolls of
the industrial establishment presents himself for work and is not given
employment within two hours of presenting himself ,he shall be deemed to
have been laid off for that day.3

Continous service :
Defined under section -25B of the act , a workmen is said to be in continuous
service if he provides uninterrupted services, which includes interrupted
service due to sickness, accident, strikes which are not illegal, lockout or
cessation of work not due to the fault of the workmen .In other words, the
duration when the workman is out of the office on account of illness is not
excluded while computing continuous service.

The service is construed as continuous for period of 1 year if the workmen

works in the previous year for :

 190 days- below the ground in mine

 240 days- in any other job

The service is construed as continuous for a period of 6 months if the workman

works in the preceding 6 months for:

 95 days – below the ground in mine

 120 days- in any other job.4

In sur enamel and stamping works ltd. V their workmen5,the SC held that
before a workman can be considered to have completed ‘’one year of
continuous service’’ in an industry, it must be shown that he was employed for
a period of atleast 12 calender months and during those 12 calender months
he had worked atleast 240 days.

3
Explanation to the definition of lay –off under section -2 (kkk)
4
Dr.Meenu Paul,labour and industrial law 124 ( Allahabad law agency,
Faridabad, edition 2020)
5.(1963)2LLJ 367,379 SC.

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 PROCEDURE FOR LAY-OFF:

(A) LAY OFF UNDER CHPTER-V A OF THE ACT:

Industrial establishements to which the provisions of the lay-off under
chapterV-A are applicable are specified under section -25A of the act.

Section-25 A applies –

 To industrial establishements in which less than fifty workmen on

an average per working day have been employed in the preceding
calendar month; or
 To industrial establishement whichare of seasonal character in
which work is performed only intermittently.

If a question arises whether an industrial establishement is of a sesonal

character or whether work is performed therein only intermittently , the
decision of the appropriate government thereon is final6

The provisions relating to lay-off under chapter V-A do not apply to industrial
establishements to which chapter V-B applies.

COMPENSATION TO THE LAID –OFF WORKMEN UNDER CHAPTER V –A

( SECTION 25-C): According to section 25-C of chapter V-A, employer
must pay compensation to laid –off workmen:

(a) Who is not a badli workmen or a casual workmen ;

(b) Whose name is borne on the muster roll of the industrial
establishement;and
(c) Who has completed not less than one year of continuous service
under the employer.

Explanation to section -25C describes ‘’badli’’ workman as follows :

‘’Badli’’ workman for the purpose of section-25C means a workman who is

employed in an industrial establishement in the place of another workman

6
Section – 25 A(2) , industrial disputes act,1947
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whose name is borne on the muster rolls of the establishment. But a badli
workmen ceases to be regarded as such for the purpose of section 25-C, if he
has completed one year of continuous service in the establishement.

Amount of compensation: According to Section 25C of the industrial disputes

act , a workman who is laid –off is entitled to compensation equivalent to 50%
of total basic wages and dearness allowance for the period of lay-off.

If during the one year period of continuous service , the workmen is laid-off
more than 45 days, no further compensation will be paid if there is an
agreement in that respect between the workmen and the employer. Upon the
expiry of this period, the employer can retrench the workmen and the
compensation then would exclude the amount already paid during the 45 day
period of lay-off.

The Supreme Court in P.Virud Chalam v . Management of lotus Mills7 held as

follows;

‘’Section -25C clearly lays down that if there is an agreement for not paying any
more lay-off compensation beyond 45 days between the workmen and the
employer such an agreement has binding effect both on the employer and and
the workmen concerned.’’

Workman not entitled to compensation :

Section- 25E of the act highlights situations when a workman is not entitled to
compensation even after being laid-off . This Section – 25E works like an
exception to Section -25C . A Workman is not entitled to compensation if:

a) He refuses to accept any alternate employment offered by the employer

in the same establishement , or in any other establishement of the same
employer, provided such establishement is within a 5 miles radius from
the previous establishement. Further, such alternate employment

7
1998 Lab IC 834 SC
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 should not call for any special skill or experience and the employer must
pay atleast the same wages as were previously paid to the workman .

b) He does not present himself for work at the establishment at the

appointed time during normal working hours atleast once a day

c) Such lay –off is due to a strike or slowing down of production by

workman in another part of the establishement.

The burden of proof is on the employer to show that the workman is

disentitled to claim compensation because his case falls under the
purview of section- 25 E. 8

(B) LAY-OFF UNDER CHAPTER V-B OF THE ACT:

Special provisions relating to lay-off under the chapter V-B of the act
apply to industrial establishments specified under section- 25K of
the act..
According to section – 25 K of the act , chapter V-B of the act applies
to industrial establishements which are :

1) Not seasonal in their character or in which work is not performed

only intermittently ; and workmen
2) In which not less than one hundred were employed on an
average per working day for the preceding 12 months.

8
Dr menu paul, labour and industrial laws 130 ( Allahabad law agency ,
Faridabad , edition ,2020)
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Procedure for lay-off under chapter V-B ( Section- 25 M) :

I. Prior permission of the central government

II. Compensation to the laid – off workman

Prior permission of the central government :

Section – 25 M lays down that no workman, other than a badli or a casual

workman , whose name is borne on the muster rolls of an establishment to
which this chapter applies shall be laid off by his employer unless such lay –off
is due to shortage of power or natural calamity, and in the case of mine such
lay-off is due also to fire, flood , excess of inflammable gas or explosion..

He can lay –off the workman only with the prior permission of the appropriate
government or such authority as may be specified by that government on an
application made in this behalf ( as amended by the industrial dispute
amendment act, 1984.)

An application for the permission shall be made by the employer in the

prescribed manner stating clearly the reasons for the intended lay-off. A copy
of such application shall also be served simultaneously on the workmen
concerned.

Where the workmen other than badly workmen or casual workmen of a mine
have been laid –off for reasons of fire, flood, or excess of inflammable gas or
explosion , the employer shall,within a period of 30 days from the date of
commencement of such lay-off apply to the appropriate government or
specified authority for permission to continue the lay-off.

Where an application for permission has been made , the appropriate

government or the specified authority shall make necessary enquiry as it thinks
fit. It shall give a reasonable opportunity of being heard to the employer , the
workmen concerned, and the persons interested in such lay-off.9

The appropriate government ,having regard to the genuineness and adequacy

of the reasons for such lay-off ,to the interest of the workmen,and all other
relevant factors by order and reasons to be recorded in writing, grant or refuse
9
Ibid at 131
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to grant such permission. A copy of the order of the appropriate government
or prescribed authority shall be communicated to the employer and the
workmen.

Where an application for permission has been made , and the appropriate
government or the specified authority does not communicate the order
granting or refusing to grant permission to the employer, within a period of 60
days from the date on which such application is made , the permission applied
for shall be deemed to have been granted on the expiration of the said period
of 60 days .

An order of the appropriate government or the specified authority granting or

refusing to grant permission shall be final and binding on all the parties
concerned and shall remain in force for one year from the date of such order.

The appropriate government or the specified authority may either in its own
motion or on the application made by the employer, or any workmen, review
its order granting or refusing to grant permission or refer the matter to a
tribunal for adjudication

Compensation to the laid –off workmen ( section -25 M(10)) :

According to sub –section(10)of section-25M , a workmen laidoff under section

-25 M of chapter V-B of the act must be paid compensation according to the
provisions of section – 25C.

According to section-25C , a workmen who is laid off is entitled to

compensation equivalent to 50 percent of total basic wages and dearness
allowance for the period of lay-off.

This right of compensation is, however ,subject to the following conditions;

a) He is not a badli or casual workmen

b) His name should be borne on the muster rolls of the establishment
c) He should have completed not less than one year of continuous service
the employer10

10
ibid
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 A workmen Is not entitled to compensation for such weekly holidays as
may intervene during the period of laid-off.

Illegal lay-off ( Section – 25 M (8) ) :Where no application for permission

has been made , or where the permission for any lay-off has been
refused, such lay-off shall be deemed to be illegal from the date on
which the workmen had been laid off .the workmen shall be entitled to
all benefits under any law for the time being in force as if they had not
been laid-off.

Penalty for illegal lay-off ( section -25 Q ): according to this section , an

employer who contravenes the provisions of section – 25 M and
declares or continuous lay-off without the permission of the appropriate
government or specified authority is punishable;
a) With imprisonment for term which may extend to one month ; or
b) With fine ;or
c) With both, imprisonment as well as fine.

Circumstances in which workman is not deemed to be laid –off under

section- 25 M of chapter V-B; 11 A Workmen shall not be deemed to be laid –
off under this section by an employer if such an employer ;

a) Offers an alternative employment to the workmen;

b) The alternative employment in the opinion of the employer does not call
for any special skill or previous experience and can be done by the
workmen;and
c) The offer of the alternative employment should be in the same
establishement from which he has been laid-off;or
d) With such distance from the establishement to which he belongs that
the transfer will not involve any undue hardship to worker.
e) The wages which would have been paid to the workman are offered by
the alternative employment also.

11
Ibid at 133
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 CONCLUSION

While setting up any industrial establishment in India, lay-off provisions

acquire importance especially most labour law legislations are pro-
workman.Laying-off is a power in the hands of the employer but it has to be
exercised judiciously in accordance with the applicable legal regulations. The
monetary penalty for contravention of these provisions is not a lot but it can
impact the establishement’s goodwill and reputation. Further , improper laying
off workmen can lead to strikes and lock-outs ,which can result in significant
loss for the establishement. Therefore , there is reason enough for every
establishement in india to follow and adhere to labour legislations to ensure
harmony amongst its workmen and facilitate smooth running of their business
activities.

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 REFERENCES

BIBLIOGRAPHY:

 Dr. Meenu Paul , Labour and industrial laws ( Allahabad law agency ,
Faridabad , edition 2020 ).

WEBLIOGRAPHY:
 Lay-off under the industrial disputes act ,1947 available at
www.psalegal.com ( last accessed on 16th dec , 2020 ).
 http://www.legalservicesindia.com/article/2416/lay-off,retrenchment-
and-closure-under-industrial-disputes-act accessed on 17th
Dedember,2020.
 http://www.legalbites.in/lay-off-retrenchement-and-closure last
accessed on 17th December,2020.
 https://thefactfactor.com/facts/law/civil-law/labour-laws/industrial-
disputes-act/lay-off/411 last accessed on 18th December,2020.

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