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-
Ø 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.
Ø 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.
Ø 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.
Ø 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.