Lay off, Lockout, Retrenchment & Strike: Notes

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Lay off, Lockout, Retrenchment & Strike: Notes

Table of Contents

Section 2(kkk) – Lay off

Lay-off means failure, refusal, or inability of a employer to give employment to a workman whose name is on the muster rolls of his industrial establishment and who has not been retrenched, on the account of lack of coal, lack of power, lack of raw material, over stocking of output, failure of machinery, due to natural calamity, or due to any other connected reason.

Central India Spinning, Weaving, and Manufacturing Co. Ltd. Nagpur vs State Industrial Court 1959 – Held that the words, “failure, refusal, or inability” are key to the definition and means that the unemployment is due to a cause independent of any action or inaction of the workmen.

Temporary
Due to reasons beyond employer’s control
Due to economic reasons
non-intentional

Rights and Obligations Resulting from lay-off

Layoff is not a right conferred upon the employer but an obligation that the unemployment is temporary in nature and in a reasonable time the laid off worker will be restored his position. However, there is no indication regarding the time layoff will continue.

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 percent 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 25F 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.

25M. PROHIBITION OF LAY-OFF. –

(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 Government or such authority as may be specified by that Government by notification in the Official Gazette (hereinafter in this section referred to as the specified authority), obtained on an application made in this behalf unless such lay-off is due to shortage of power or to natural calamity, and in the case of a mine, such lay-off is due also to fire, flood, excess of inflammable gas or explosion.

(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended lay-off and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.

(3) Where the workmen (other than badli workmen or casual workmen) of an industrial establishment, being a mine, have been laid-off under sub-section (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 thirty days from the date of commencement of such lay-off, apply, in the prescribed manner, to the appropriate Government or the specified authority for permission to continue the lay-off.

(4) Where an application for permission under sub-section (1) or sub-section (3) has been made the appropriate Government or the specified authority, after making such inquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such lay-off, may, having regard to the genuineness and adequacy of the reasons for such lay-off, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.

(5) Where an application for permission under sub-section (1) or sub-section (3) 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 sixty 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 sixty days.

(6) An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (7), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.

(7) The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (4) or refer the matter, or, as the case may be, cause it to be referred, to a Tribunal for adjudication :

Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.

(8) Where no application for permission under sub-section (1) is made, or where no application for permission under sub-section (3) is made within the period specified therein, 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 and the workmen shall be entitled to all the benefits under any law for the time being in force as if they had not been laid-off.

(9) Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1), or, as the case may be, sub-section (3) shall not apply in relation to such establishment for such period as may be specified in the order.

(10) The provisions of section 25C (other than the second proviso thereto) shall apply to cases of lay-off referred to in this section.

Explanation : For the purposes of this section, a workman shall not be deemed to be laid-off by an employer if such employer offers any alternative employment (which in the opinion of the employer does not call for any special skill or previous experience and can be done by the workman) 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 such distance from the establishment to which he belongs that the transfer will not involve undue hardship to the workman having regard to the facts and circumstances of his case, provided that the wages which would normally have been paid to the workman are offered for the alternative appointment also.

Section 2(oo) – Retrenchment

Retrenchment means termination of service of an employee by an employer for any reason other than as a punishment due to disciplinary action. This does not include – voluntary retirement, superannuation, non-renewal of contract, termination on the ground of continued ill-health.

For any reason what so ever –  surplusage, redundancy due to advanced machinery, slowdown in business. Reason does not matter.

DC & G Mills vs Shambhu Nath 1978 –  Due to reorganization, a few workers were made redundant. Instead of retrenching them, they were absorbed in other places. One worker was given employment in another dept. with same pay. However, due to lack of performance, he was shifted to another dept. However, he refused to go to another dept. and asked for one more chance. He was then removed from the rolls. This was held retrenchment.

Morinda Coop Sugar Mills vs Ram Kishen and others 1996 – Workers were employed in the sugar mill only during the season and then they ceased to work. Held that it is not retrenchment because it is only seasonal work.

Santosh Gupta vs SBI 1980 – A worker was removed after he failed a test that he was required to pass for confirmation of service. SC held it to be retrenchment because termination for any reason is retrenchment except if it is because of the reasons mentioned in the act.

VRS
Panjab National Bank vs Virendra Kumar Goel 2004 – SC held that employees who opted for voluntary retirement and availed any part of retirement benefits were not eligible for retraction.

Ill-health
Lalit Mohan Puri vs Pure Drinks 1992 – A employee was asked to appear before ESI doctor to prove ill health. He failed to appear. He was then removed. SC held merely refusal to appear for medical examination should not be construed as ill health and held it to be retrenchment.

Contract of Employment (subclause bb)
In the case of Dilip Hanuman Shirke vs Zilla Parishad Yavatmal 1990 – Held that the sub clause bb that allows an employer to not renew the employment contract must be read restrictively. The duration of employment must be read as per the nature of work and not from just the employment letter otherwise it will be abused by the employers.

Section 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.

Section 25G. PROCEDURE FOR RETRENCHMENT
Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, in the absence of any agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. 

Section 25N. CONDITIONS PRECEDENT TO RETRENCHMENT OF WORKMEN

  1. No workman employed in any industrial establishment to which this Chapter applies, who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until –
    1. the workman has been given three months’ 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; and
    2. the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf. 
  2. An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
  3. Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such inquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
  4. Where an application for permission has been made under sub-section (1) 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 sixty 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 sixty days.
  5. An order of the appropriate Government or the specified authority granting or refusing to grant permission shall, subject to the provisions of sub-section (6), be final and binding on all the parties concerned and shall remain in force for one year from the date of such order.
  6. The appropriate Government or the specified authority may, either on its own motion or on the application made by the employer or any workman, review its order granting or refusing to grant permission under sub-section (3) or refer the matter or, as the case may be, cause it to be referred, to a Tribunal for adjudication :Provided that where a reference has been made to a Tribunal under this sub-section, it shall pass an award within a period of thirty days from the date of such reference.
  7. Where no application for permission under sub-section (1) is made, or where the permission for any retrenchment has been refused, such retrenchment shall be deemed to be illegal from the date on which the notice of retrenchment was given to the workman and the workman shall be entitled to all the benefits under any law for the time being in force as if no notice had been given to him.
  8. Notwithstanding anything contained in the foregoing provisions of this section, the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the establishment or death of the employer or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply in relation to such establishment for such period as may be specified in the order.
  9.  Where permission for retrenchment has been granted under sub-section (3) or where permission for retrenchment is deemed to be granted under sub-section (4), every workman who is employed in that establishment immediately before the date of application for permission under this section shall be entitled to receive, 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.

Section 25H. RE-EMPLOYMENT OF RETRENCHED WORKMEN
Where any workmen are retrenched, and the employer proposes to take into his employment any persons, he shall, in such manner as may be prescribed, give an opportunity to the retrenched workmen who are citizens of India to offer themselves for re-employment, and such retrenched workmen who offer themselves for re-employment shall have preference over other persons. 

Section 2(l) – Lock Out

Lockout means temporary closing of the place of employment or suspension of work or refusal by the employer to continue to employ any number of persons employed by him.

Used as a measure of coercion – Antithesis of strike.
due to a trade dispute.
intentional

4 ingradients of Lockout

  1. Temporary closure of a place of employment by employer or suspension or work by the employer, or refusal to employ any number of persons by the employer.
  2. motivate by coercion
  3. in an industry
  4. due to a dispute in such industry.

Workmen of Itakhoolie Tea Estate vs Management 1952 – In lock out workmen are asked by the employer to keep away from work and thus they are not under any obligation to present themselves for work.

Section 2(q) – Strike
Strike means a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment.

Indian Iron and Steel Co vs Its Workmen – Held that mere cessation of work is not strike unless it is shown that it is due to an industrial demand.
Ram Sarup vs Rex – Mere absence from work is not enough but there should be a concerted refusal to accept employment to call it a strike.
Patiala Cement Co. vs Certain Workers – Cessation of work for even half an hour can be a strike.

Types of Strike – General, Go Slow, Work to Rule, Tools down/Stay In, Sympathetic, Hunger.

Section 22. PROHIBITION OF STRIKES AND LOCK-OUTS

  1. No person employed in a public utility service shall go on strike in breach of contract –
    1. without giving to the employer notice of strike, as hereinafter provided, within six weeks before striking; or 
    2. within fourteen days of giving such notice; or 
    3. before the expiry of the date of strike specified in any such notice as aforesaid; or 
    4. during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings.
  2. No employer carrying on on any public utility service shall lock-out any of his workmen – 
    1. without giving them notice of lock-out as hereinafter provided, within six weeks before locking-out; or
    2. within fourteen days of giving such notice; or
    3. before the expiry of the date of lock-out specified in any such notice as aforesaid; or
    4. during the pendency of any conciliation proceedings before a conciliation officer and seven days after the conclusion of such proceedings. 
  3. The notice of lock-out or strike under this section shall not be necessary where there is already in existence a strike or, as the case may be, lock-out in the public utility service, but the employer shall send intimation of such lock-out or strike on the day on which it is declared, to such authority as may be specified by the appropriate Government either generally or for a particular area or for a particular class of public utility services.
  4. The notice of strike referred to in sub-section (1) shall be given by such number of persons to such person or persons and in such manner as may be prescribed.
  5. The notice of lock-out referred to in sub-section (2) shall be given in such manner as may be prescribed.
  6. If on any day an employer receives from any person employed by him any such notices as are referred to in sub-section (1) or gives to any person employed by him any such notices as are referred to in sub-section (2), he shall within five days thereof report to the appropriate Government or to such authority as that Government may prescribe, the number of such notices received or given on that day.

Section 25. PROHIBITION OF FINANCIAL AID TO ILLEGAL STRIKES AND LOCK-OUTS
No person shall knowingly expend or apply any money in direct furtherance or support of any illegal strike or lock-out.

Section 26. PENALTY FOR ILLEGAL STRIKES AND LOCK-OUTS
(1) Any workman who commences, continues or otherwise acts in furtherance of, a strike which is illegal under this Act, shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to fifty rupees, or with both.

(2) Any employer who commences, continues, or otherwise acts in furtherance of a lock-out which is illegal under this Act, shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to one thousand rupees, or with both.

Section 2(j) – Industry
Industry means any trade, business, undertaking, manufature, or calling of service of employers and includes any calling, service, employment, handicraft, industrial occupation, or avocation or workers.

State of Bombay vs Bombay Hospital Mazdoor Sabha  – Any activity systematically or habitually undertaken for the production or distribution of goods or for the rendering of material service to the community at large or a part of such community with the help of employees is an industry.

Bangalore Water Suppy vs A Rajappa – Practially reiterated the principles in Bombay Hospital Mazdoor Sabha case.
Triple Test –

  1. Systematic Activity
  2. organized by a cooperation of employer and employees
  3. for the production and or distribution of goods or services calculated to satisfy human wants and wishes.

The following points were also observed –

  1. Does not include spiritual or religious services e.g. making, on a large scale, prasad. It only includes material services and things.
  2. Absence of profit motive or gainful objective is irrelevant be the venture public, private, or joint.
  3. The true focus is on the function and the decisive test is the nature of the activity with special emphasis on employee-employer relationship.
  4. If an organization is a trade or business, it does not cease to be an industry merely because philanthropy is animating the undertaking.

Dominant Nature Test – If an undertaking includes several activities some of which are industry and some not, the predominate nature of the business and the integration of the departments is the true test.

Exceptions –  Certain gurukuls, or research labs, or clubs operating on a small scale are not industry.

In the Bangalore Water Suppy case, Bombay Hospital Mazdoor Sabha case was rehabilitated and Hospital is considered an industry.

DN Banerjee vs PN Mukherjee –  Municipal Corporation is an industry.

Brahmo Samaj Education Society vs WB College Employees Associaltion – Whether a University or Educational institution is an industry or not depends on the evidence in each case. If the evidence points that there is no much importance of individual teachers and the focus is mainly profit, it is an industry. In general Universities are industry even though its workers may not be Workers as per the the act.

Clubs such as Cricket Club of India, Lawyers Office, Indian Standards Institute are all Industry.

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