Albeit the fact that the term ‘lay-off’ is used widely across industries, it needs to be noted that the law has given it a very refined applicability. Unlike a general case of termination, lay-offs are decisions taken by corporates which are covered under the Industrial Disputes Act, 1947 on the basis of any failure, refusal or inability of such corporate to continue the employment of a workman. Further, workmen is a more refined class of employees and refers to only those individuals who are hired to do any manual unscaled scaled technical operational clerical of supervisory work for higher or reward.
Legal definition of the term, lay-off
In terms of Section 2 (kkk) of the Industrial Disputes Act, 1947, lay-off means the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the break-down of machinery or natural calamity or for any other connected reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.
What about entities that are not covered under the Industrial Disputes Act, 1947
As for entities which are not covered under the Industrial Disputes Act, 1947, the removal of a particular employee is done in terms of the employment contract executed with such employees and in conformity with the applicable shops and establishment law of the State where the establishment or the office is located.
Are companies in the IT/ITES sector covered under the Industrial Disputes Act, 1947?
On the much debated topic of whether the Industrial Disputes Act, 1947 is applicable to employees engaged in the IT/ITES sector or not, it needs to be first understood that the applicable law has specific requirements for coverage and it does not include persons employed in managerial or supervisory capacity nor does it include employees earning over INR 10,000/-, hence each such concern will need to be looked into on a case to case basis and then only it can be determined whether the employee is covered as a workman under the law or not. It needs to however be noted that unless there is exemption provided by a particular State on the applicability of the Industrial Disputes related laws to a particular sector such as IT/ITES, it cannot be mooted that the IT/ITES sector is not covered under the Industrial Disputes Act, 1947.
Essentials for Lay-off
For the purpose of Lay-off, the Industrial Disputes Act provides for the following essentials;
- There must be failure, refusal or inability on the part of the employer to give employment to a workman;
- The failure, refusal or inability should be on account of a shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery, or natural calamity, or any other connected reason;
- The workman’s name should be on the muster rolls of the industrial establishment; &
- The workman should not have been retrenched.
Conclusion: Compensation
It is pertinent to mention here that when a workman has completed a no less than one year of continuous service with the employer, then that workmen shall be entitled to compensation equivalent to 50 percent of the total basic wages and dearness allowance for the period of lay-off. During lay-off the workman continues to be in the employment of the employer but at a reduced pay. If the lay-off continues for a duration of 45 days or more the employer can proceed for retrenchment. The compensation paid for lay-off is adjustable with the compensation payable for retrenchment.
The processes for lay-off shall differ from one establishment to other depending on number of workmen employed and nature of activity undertaken.
For a non-workman category employees the conditions of lay-offs will need to be mutually agreed. Needless to mention, despite necessary steps being followed, there is still the probability of a workmen challenging the termination before a court of law.
Corrida Legal is consistently rated as the best HR & employment law firm in Gurgaon, Delhi and Mumbai. Reach out to us on LinkedIn or contact us at contact@corridalegal.com/+91-8826680614 in case you require any legal assistance.
