LAY-OFF

The Industrial Disputes Act, 1947 Industrial Relations Code, 2020

Section 2 (kkk), Section 2 (t)

CHAPTER V-A LAY-OFF AND
RETRENCHMENT (Sections 25 A to CHAPTER IX LAY-OFF,
25 J) RETRENCHMENT AND
CHAPTER V-B SPECIAL CLOSURE (Sections
PROVISIONS RELATING TO LAY- 65,66,67,68,69,76)
OFF, RETRENCHMENT AND
CLOSURE IN CERTAIN CHAPTER X SPECIAL
ESTABLISHMENTS PROVISIONS RELATING TO
(Sections 25 K to 25 S ) LAY-OFF, RETRENCHMENT
AND CLOSURE IN CERTAIN
Lay-Off- Section 25 A,25 B,25 C,25
D,25 E ESTABLISHMENTS (Sections
77,78)
25- K,25-L,25-M,25 -Q

2(t) "lay-off" (with its grammatical variations and cognate expressions) 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 worker whose name is borne on the muster
rolls of his industrial establishment and who has not been retrenched.

Explanation.—Every worker whose name is borne on the muster rolls of the industrial
establishment and who presents himself for work at the establishment at the time appointed
for the purpose during normal working hours on any day and is not given employment by the
employer within two hours of his so presenting himself shall be deemed to have been laid-off
for that day within the meaning of this clause:

Provided that if the worker, instead of being given employment at the commencement of any
shift for any day is asked to present himself for the purpose during the second half of the shift
for the day and is given employment then, he shall be deemed to have been laid-off only for
one-half of that day:

Provided further that if he is not given any such employment even after so presenting himself,
he shall not be deemed to have been laid-off for the second half of the shift for the day and
shall be entitled to full basic wages and dearness allowance for that part of the day;
 Layoff

Layoff which was earlier defined under S. 2(kkk) of Industrial Disputes Act,

1947, has now been defined in Industrial Relations Code under S. 2(t). It

essentially means the failure, refusal or inability of an employer to give

employment to a workman whose name appears on the muster rolls of his

industrial establishment. This inability to provide work can arise from any

number of reasons ranging from shortage of coal, power, raw materials,

breakdown of machinery and natural calamity; which are out of control of

the employer. A point to be noted from the definition is that it only applies

to a workman who has not been retrenched. As can be understood, it

occurs due to no fault of either workman or employer but factors which are

beyond their control.

 The relation between the employer and employed during lay-off is only
suspended and employees continue to be on the muster roll of the
employer and they have to be reinstated as soon as normal work is
resumed. It is neither temporary discharge nor suspension rather it is
temporary unemployment within the industry.

 “For any other reasons”.- The words ‘for any other reasons’ in Section
2(KKK) do not mean for any reason whatsoever, or for whatever be the
reason. They covey to mean for some reason analogues to the reasons
specified in the section, and not for any other reason of whatever
character.
 Any other reason to which the definition refers must be a reason which
is allied or analogous to the reasons already specified and if there is a
strike or slowing down of production in one part of the establishment
and if lay-off is the consequence, the reason for which lay-off has taken
place, would undoubtedly be similar to the reason specified in the
definition. (Karibetta Estate v Rajamanickam) 1960

The words “for any other reason in section 2(KKK)” must be considered
ejusdem generis with the words that precede them, and the
circumstances which would justify a lay-off must be integrally connected
with production. A lay-off merely on ground of financial depression of
the employer is not comprehended by the definition. A lay-off declared
mala fide by the employer or to victimize the workmen or for some other
ulterior purpose is not lay-off contemplated by Section 2(KKK) of the
Act. The device of lay-off cannot be invoked to victimize workers.
(Tatanagar Foundry v Workmen) 1962

 If the employer has deliberately and maliciously brought about a

situation culminating in the declaration of lay-off then it will not be
covered by the definition as it is mala fide lay-off. For the same reasons
a lay-off declared to victimise the workmen or for some other ulterior
purpose would not come within the definition.

 It will not be open for the Tribunal to inquire as to whether the employer
could have avoided the lay-off by being more diligent, more vigilant or
more farsighted.

LAY-OFF DIFFERS FROM LOCK-OUTS.-

 The Supreme Court in Kairbetta Estate v Rajamanickam (1960),discussed

the concept of lay-off and lock-out and observed that both are different.
The main points of difference between them are:-

i) That lay-off generally occurs in a continuing business whereas lock-out is

a closure of the business even though temporarily.
 ii) In case of lay-off the employer is unable to give employment due to the
reasons specified such as shortage of coal, power, raw materials, or
accumulation of stock or break down of machinery, etc. In lock-out the
employer deliberately closes the place of business and lock/-outs the
whole body of workmen for reasons which have no relevance to the causes
applicable to lay-off

iii) In the case of lay-off employer is liable to pay compensation whereas in

lock-out no such liability is imposed upon the employer if the lock-out is
justified and legal.

iv) Lock-out is resorted to by the employer as a weapon of collective

bargaining whereas lay-off is invariably caused by economic and trade
reasons.

v) The Act imposes certain prohibition and penalties against lock-out

whereas lay-off does not have such thing.

Application of Chapter VA.-

Section 25-A makes it clear that the provisions of Sections 25-C to 25-E
shall not apply to:
(i) Industrial establishments in which less than fifty workmen on an
average per working day have been employed in the preceding
calendar month; or
(ii) Industrial establishments which are of a seasonal character or in
which work is performed only intermittently.

 “Seasonal Character, intermittently”.-The above expressions are not to mean the same.
They are distinct to mean seasonal or otherwise intermittent. The term intermittent denotes no
continuity. Seasonal character are when there are breaks or when the work is not regular in
nature. “Seasonal” implies dependence on season or nature and hence neither the employer
nor the employee in the particular industrial establishment has any control.

 Government decides “Seasonal Character” intermittence- Section 65(2) empowers the

appropriate Government to decide the “Seasonal Character” or the “intermittent” nature of
work in the industrial establishment, it that becomes a point of dispute. The decision of the
Government on this will be final. Tribunal has no such jurisdiction.

 The power endowed with the appropriate Government is quasi-judicial in nature as there are
two contending parties and a point of dispute. Therefore, the Government is bound to give
 opportunity to both the contending parties to make their representation and further that all
relevant factors must be taken into consideration and that the decision should not be based on
irrelevant factors.(Associated Cement Co. v Workmen)1960.

 The source of Power to Lay-Off must be found out from the terms of contract of service or
the standing orders governing the establishment. Where there are no Standing Orders by
reason of non-application of the Act of 1946, nor was there any term of contract of service
conferring any right of lay-off, the workmen must be held to be laid off without any authority
of law or the power in the management under contract of service. Such a case goes out of the
law. Ordinarily and generally the workmen under such circumstances are entitled to their full
wages.(Workmen v Firestone Tyre & Rubber Co.) 1976

Who can claim compensation: (Section 25 C of ID Act and Section 67 of

Code 2020)

Under S.25C of Industrial Disputes Act, 1947 and under Section 67 of the

Industrial relations code, if a workman's name is on the industrial

establishment's muster roll (Section 25 D of ID Act and Section 68 of Code

2020)and he has completed one year of continued service (Section 25 B of

ID Act and Section 66 of Code 2020) and he is not a badli/casual worker,

then he is entitled to compensation on getting laid off. The explanation to

both the above-mentioned sections describe a badli worker as a worker

who is employed in the place of another workman whose names appear on

the muster rolls of the industrial establishment.

It must be highlighted here that if a workman has been working as

a badli worker for one year, then he shall not be regarded as a badli worker.

The conditions for lay-off compensation are the following:

i)The establishment must have employed fifty or more workmen in an

average during the calendar month preceding the lay-off;

ii) The industrial establishment in question must not be of a seasonal

character or in which work is performed intermittently;

iii) The claimant should come within the definition of workman;

iv) He should not be badli workman; or casual workman;

v) His name must be borne on the muster roll and he should not have been

retrenched;

vi) He must have completed not less than one year of continuous service;

vii) Each one year continuous service must be under the same employer;

viii) Lay-off compensation must be half of basic wages and dearness

allowance;

ix) Maximum period for entitlement of lay-off compensation is forty-five

days during any period of twelve months;

x) No right to lay off compensation for more than forty-five days during 12

months if there is an agreement to that effect;

xi) In the absence of a contrary agreement, lay-off compensation is payable

for subsequent periods beyond 45 days during the same 12 months; if such

subsequent period is/are not less than one week or more at a time;

xii) Beyond 45 days the employer can escape liability of resorting to

retrenchment after payment of retrenchment compensation;

xiii) Finally, the lay off in question should not be by way of mala fide or

victimization or with other ulterior motives.

Badli workmen.– ‘Badli workmen’ as stated in the explanation to Section

25C is a substituted workman. He is employed in the place of another

whose name is borne in the muster roll. The badli workman’s name should

not find a place in the muster roll. Such a workman ceases to be a badli

workman for the purpose of section 25-C on his completion of one year’s

continuous service in the establishment. Consequently, a badli workman

who has completed one-year continuous service is entitled to get work

from the employer. If the employer fails to give him work, the badli
workman would be entitled to get lay-off compensation, if he has

completed one year’s continuous service with that employer.

Continuous service- –(Section 25 B of ID Act and Section 66 of Code

2020)

A workman who has completed a minimum of one year’s continuous

service with the same employer alone is entitled to lay-off compensation

under Section 25C.

Continuous service means uninterrupted service. However, interruption on

account of any of the following reasons will still deem such service to be

uninterrupted. Such instances are:

a) Sickness;

b) Authorized leave;

c) Accident;

d) Strike which is not illegal;

e) Lock-out; and
 f) Cessation of work which is not due to any fault on the part of the

workman.

Continuous service of one year.-Under Section 25B(2)(a) of the Act a

person can be said to be in continuous service for a period of one year if

that worker:-

i) Has been in employment for twelve calendar months; and

ii) ii) He has actually worked for not less than:

a) 190 days in the case of employment below ground in a mine;

b) 240 days in any other case

Who is not entitled to compensation? –(Section 25 E of ID Act and Section

69 of Code 2020)

While both S. 25E of Industrial Disputes Act, 1947 and S. 69 of Industrial

Relations Code have laid down conditions in which a laid-off workman can

be denied compensation, there is a slight difference.

While S.25E of Industrial Disputes Act, 1947 says that if a workman who

has been laid off, refuses alternate employment provided or arranged by

the employer either in the same establishment from which he had been laid
off or another establishment belonging to the same employer within 5

miles from this previous establishment, he is not entitled to compensation,

S.69 of Industrial Relations Code, substitutes 5 miles with 8 kilometres.

So, on a re-reading, if a laid-off workman refuses alternate employment

either in the same establishment or an establishment owned by the same

employer within 8kms of this previous establishment and the work does

not even require any special skill or previous experience and is doable by

the workman, then the workman is not entitled to compensation.

Furthermore, if the workman does not come to work during normal working

hours at least once a day, OR the lay-off has happened because of strike or

slowdown of production due to workmen in another part of establishment,

then the workman is not entitled to compensation. This provision is also

provided in both the Act and the Code and remains unaltered.

ALTERNATIVE EMPLOYMENT : Meaning of.—The expression “any

alternative employment” in Section 25-E of the Act must mean any other
similar or like or equivalent employment to the original job. It does not

mean that a variety of jobs be offered; offer of one alternative job must be

considered enough but that job must be like or similar to the original job

from which the workmen concerned were laid off. The clause “can be done

by the workman” is, however, significant in conditions of Section 25-E and

means not only physical capability but also its acceptability on the part of

the workman. Offer of the job of coolie to a skilled workman cannot

amount to the offer of an alternative job. Industrial Employees' Union,

Kanpur v. J.K. Cotton Spinning and Weaving Mills Company, (1956) 1 LLJ

327.

Compensation rights: Under S. 25C of Industrial Disputes Act, 1947 and S.

67 of Industrial Relations Code, compensation has to be paid to laid off

workmen for all days during which a workman is laid off except for weekly

holidays. Compensation amount will be equivalent to fifty percent the total

of (basic wages + dearness allowance). It also has to be noted here that if

the workman has been offered alternate employment by the employer, he

should accept it. Although as one supreme court judgment puts it, offering

the job of a coolie to a skilled workman cannot amount to the offer of an

alternative job (Union Kanpur v. JK Cotton Spinning and weaving mills

company).

Lay-off compensation payable under Section 25C is not wages within the

meaning of the term ‘wages’ in the Payment of Wages Act, 1936. This is by

way of temporary relief to a workman who is forced to undergo involuntary

unemployment, of course for reasons stated in the definition clause of “lay-

off”. The employer, for reasons beyond his control, is unable to provide

work and hence as a social security measure and in the general social

interest a duty is imposed upon the employer to give compensation to the

workman who is deprived of his opportunity to work and hence forced to

lose wages.

Section 65. Application of sections 67 to 69

65. (1) Sections 67 to 69 (both inclusive) shall not apply to industrial establishments to which
Chapter X applies; or

(a) to industrial establishments in which less than fifty workers 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 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 67, 68 and 69, industrial establishment
shall mean a—

(i) factory as defined in clause (m) of section 2 of the Factories Act, 1948; or
(ii) mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act,
1952; or
(iii) plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951.

Section 66. Definition of continuous service

In this Chapter, continuous service in relation to a worker, means the uninterrupted service of
such worker, including his 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 worker.

Explanation 1.—For the purposes of this section, where a worker is not in continuous service
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 worker during a period of twelve 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 worker 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 worker during a period of six 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 worker employed below ground in a mine; and
(ii) one hundred and twenty days, in any other case.

Explanation 2.—For the purposes of Explanation 1, the number of days on which a worker
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 or under this Code or any other
law applicable to the industrial establishment for the time being in force; or
(ii) he has been on leave on full wages earned in the previous years; or
(iii) he has been absent due to temporary disablement caused by accident arising out of and in
the course of his employment; or
 (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 the period as specified in the Maternity Benefit Act,
1961.

 The employer must be one and the same. But, it is not necessary that the workman should
work in the same capacity during the required period in order to earn ‘continuous service’ as
defined in this section.

 Ramakrishna Ramnath v Labour Court (1970) These provisions of law do not show that a
workman after satisfying the test under Section 25B has further to show that he has worked
during all the period he has been in the service of the employer for 240 days in the year.

 Surendra Kumar Verma v CGIT-cum Labour Court (1981) Under Section 25B, it is not
necessary that a workman should have been in the service of the employer for one whole
year. Even if not so, he shall be deemed to have been in such ‘continuous service’ for a
period of one year if he has actually worked under the employer for 240 days in the preceding
period of twelve months.

 Workmen of American Express IBC v Management (1985) Supreme Court held that the
expression ‘actually worked under the employer’ cannot mean only those days when the
workmen works with hammer and sickle or pen, but must necessarily comprehend all those
days during which he was in the employment of the employer and for which he had been paid
wages either under express or implied contract of service or by compulsion of statute,
Standing Orders, etc. Accordingly the Court held that Sundays and other Holidays would be
comprehended in the words ‘actually worked’.

 Chairman ONGC Ltd. V SC Bhowmik (2006) Burden of proof is on claimant workman to

show that he had worked for 240 or 120 days, as the case may be, in a year. For this the
general principles of Evidence Act can apply.

Section 67. Right of workmen laid-off for compensation

Whenever a worker (other than a badli worker or a casual worker) 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 worker 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
worker and the employer:

Provided further that it shall be lawful for the employer in any case falling within the
foregoing proviso to retrench the worker in accordance with the provisions contained in
section 70 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 worker for having been laid-off during the preceding
twelve months may be set off against the compensation payable for retrenchment.

Explanation.— For the purposes of this section "badli worker" means a worker who is
employed in an industrial establishment in the place of another worker whose name is borne
on the muster rolls of the establishment, but shall cease to be regarded as such, if he has
completed one year of continuous service in the establishment.

 Even in case of an agreement between the workmen with regard to period of compensation
for the lay-off of workmen, it cannot override Section 25-C (previous law). But where a
workman is entitled to more favourable benefits under the Provisions of any other Act or
Rules, or Orders or Notifications issued thereunder or under any Standing Orders or under
any award, contract of service or otherwise than those to which he would be entitled under
this Act, the former will have the priority over the latter.

 Payment of compensation is not a condition precedent to lay-off - Payment of

compensation on should not precede the declaration of lay-off. On the contrary, declaration
of lay-off may be effected first and this will impose a liability on the employer to pay and a
right on the workmen to recover lay-off compensation. It has been held that compensation for
lay-off cannot be awarded in advance of actual lay-off and on grounds of social justice.

Section 69. Workmen not entitled to compensation in certain cases

No compensation shall be paid to a worker 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 eight kilometres 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 worker, provided that
the wages which would normally have been paid to the worker 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 workers
in another part of the establishment.

 In Associated Cement Co v Workmen, the Supreme Court had occasion to interpret the term
“part of the same establishment” used in Section 25(E)(ii). The companies owned cement
works and limestone quarry, both in Bihar. The cement works depend solely on the quarry for
its limestone. The quarry workers struck work. Therefore, some parts of the cement works
were closed down by the company. Subsequently, the strike in the quarry was withdrawn.
Therefore, the closed down parts of the cement works started functioning. However, the
workers in the closed down parts claimed lay-off compensation. On reference the tribunal
held that quarry is not part of the cement works. On appeal Supreme Court reversed it. The
court said that the Industrial Disputes Act is silent regarding the test to decide “what is one
establishment.” Geographical proximity, unity of ownership, functional integrity, general
unity of purpose, can be the tests. The real purpose of these tests is to find out the true
relation between the parts, branches of units. If in their true relations they constitute one
integrated whole then they can be said to be one establishment.

In the instant case the quarry and cement factory constituted one establishment within the
meaning of Section 25(E)(iii). The lay-off in the factory was due to non-supply of limestone
by reason of the strike in the limestone quarry and the strike was decided by the same union
which consisted of workmen of the cement factory and the quarry. Thus, section 25(E)(iii)
clearly applied and the workmen of the closed down cement factory are not entitled to claim
lay-off compensation.

Section 68 Duty of an employer to maintain muster rolls of workers. Notwithstanding

that workers 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 workers who may present themselves for work at the
establishment at the appointed time during normal working hours.

RETRENCHMENT

The Industrial Disputes Act, 1947 Industrial Relations Code, 2020

Definition -Section 2(oo) Definition -Section 2 (zh)

25 G,
25 F CHAPTER IX LAY-OFF,
Chapter V-B SPECIAL PROVISIONS RETRENCHMENT AND
RELATING TO LAY-OFF, CLOSURE
RETRENCHMENT AND CLOSURE
IN CERTAIN ESTABLISHMENTS Section 70,71,72
25 N,25 Q
CHAPTER X SPECIAL
The Industrial Disputes (Central) Rules, 1957 PROVISIONS RELATING TO
Rules – LAY-OFF, RETRENCHMENT
Rule No. 76(Notice of retrenchment- Form P),
Rule No. 77- Maintenance of seniority list of
AND CLOSURE IN CERTAIN
workmen ESTABLISHMENTS
Rule no. 78. Re-employment of retrenched
workmen Section 79,83

Rules 25 to 27,31,35 of Draft Rules

The Industrial Relation (Central)

Rules, 2020
(oo) “retrenchment” means the termination by the employer of the service of a
workman for any reason whatsoever, otherwise than as a punishment inflicted
by way of disciplinary action, but does not include—

(a) voluntary retirement of the workman; or

(b) retirement of the workman on reaching the age of superannuation if the

contract of employment between the employer and the workman concerned
contains a stipulation in that behalf; or

(bb) termination of the service of the workman as a result of the non-renewal of

the contract of employment between the employer and the workman concerned
on its expiry or of such contract being terminated under a stipulation in that
behalf contained therein; or

(c) termination of the service of a workman on the ground of continued ill-

health;]

Section (zh) "retrenchment" means the termination by the employer of the

service of a worker for any reason whatsoever, otherwise than as a punishment
inflicted by way of disciplinary action, but does not include—

(i) voluntary retirement of the worker; or

(ii) retirement of the worker on reaching the age of superannuation; or
(iii) termination of the service of the worker as a result of the non-renewal
of the contract of employment between the employer and the worker
concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein; or
(iv) termination of service of the worker as a result of completion of tenure
of fixed term employment; or
(v) termination of the service of a worker on the ground of continued ill-
health;

Section 25-F. 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.

The underlying object of Section 25-F is two fold.

Firstly, a retrenched employee must have one month's time available at his
disposal to search for alternate employment, and so, either he should be given
one month's notice of the proposed termination or he should be paid wages for
the notice period.
Secondly, the workman must be paid retrenchment compensation at the time of
retrenchment, or before, so that once having been retrenched there should be no
need for him to go to his employer demanding retrenchment compensation and
the compensation so paid is not only a reward earned for his previous services
rendered to the employer but is also a sustenance to the worker for the period
which may be spent in searching for another employment. Pramod Jha v. State
of Bihar, (2003) 4 SCC 619

Barsi Light Rly Co Ltd v KN Joglekar (1957) ‘Retrenchment’ means discharge of surplus
labour or staff by the employer, for any reason whatsoever……in no case is there any
retrenchment unless there is a discharge of surplus labour or staff in a continuing or running
industry.

Hariprasad Shivshankar Shukla v A.D. Divelkar (1957) Where the services of all
workmen have been terminated by the employer on a real and bona fide closure of business
or where the services of all workmen have been terminated by the employer on the business
or undertaking being taken over by another employer, it was held that it did not amount to
retrenchment.

Punjab LDRC v PO Labour Court (1990) Termination for any reason shall be treated as
retrenchment instead of the single ground i.e., discharge of surplus labour.

State of Haryana v Om Prakash (1998) ‘Retrenchment’ contemplates an act on the part of

the employer, which puts an end to the service, to fall within its ambit. If the workman ceased
to report for duty and, even after he ceases to report for his duty, it is not his case that at any
point of time, he reported for duty and was refused work, it could not be said it was a case in
which the employer had done anything to put an end to his employment. Hence such a case
would not fall within the meaning of Retrenchment.

NCL-II (2002) recommended that the term ‘retrenchment’ should be defined precisely, to
cover only a termination of employment arising out of a need for the reduction of surplus
workers in an establishment, such surplus having arisen out of one or more of several
reasons.

Casual Workers

S M Nilajkar v Telecom District Manager (2003) Termination of service of the casual

workmen employed in State projects cannot be treated as Retrenchment.

Seasonal Workers – Not Retrenchment

Exceptions
(i) voluntary retirement of the worker; or

Bengal Nagpur Cotton Mills v J Bastion (1960) Instead of voluntary

resignation, the concerned workman, in spite of his protest, was asked to
handover the charge which he did in protest. Court held that where resignation
is tendered on account of duress or coercion etc., it ceases to be voluntary act of
the employee expressing his desire to quit.

(ii) retirement of the worker on reaching the age of superannuation; or

(iii) termination of the service of the worker as a result of the non-renewal

of the contract of employment between the employer and the worker
concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein; or

Santosh Gupta v. State Bank of Patiala (1980) stirred up the maximum

controversy. Here the services of a workman (a woman who had put in more
than 240 days in a year) were terminated for her failure to pass the test which
would have enabled her to be confirmed in the service. The court held it to be a
case of retrenchment and observed : If the definition of 'retrenchment is looked
at unaided and unhampered by precedent, one is at once struck by the
remarkably wide language employed and particularly by the use of the words
"termination... for any reason whatsoever" ...[I]f the words "for any reason
whatsoever" are understood to mean what they plainly say, it is difficult to
escape the conclusion that the expression ' retrenchment ' must include every
termination of the service of a workman by an act of the employer . Explaining
the object and nature of retrenchment, the court observed: The manifest object
of these provisions is to so compensate the workman for loss of employment as
to provide him the where- withal to subsist until he finds fresh employment...
As the expression retrenchment compensation indicates, it is compensation paid
to a workman on his retrenchment and it is intended to give him some relief and
to soften the rigour of hardship which retrenchment inevitably causes. The
retrenched workman is suddenly and without his fault , thrown on the street and
has to face the grim problem of unemployment. At the commencement of his
employment a work- man certainly expects and looks forward to security of
service spread over a long period, but retrenchment destroys his hopes and
expectations.

Mohan Lal v. Management, Bharat Electronics Ltd (1981) where services of

Mohan Lal were terminated during the extended probation period because the
employer found the same to be unsatisfactory, court, while holding it out to be a
case of retrenchment, opined: Termination by the employer of the service of a
workman for reason whatsoever would constitute retrenchment except in cases
excepted in the section 2(oo).

CM Venugopal v LIC of India (1994) Where the terms of contract of service

provided for the necessity of some minimum business to be done by the
employee and in case of failure provided for the termination. Court held that the
case was covered by exception, and was not retrenchment.

LIC v Raghavendra s Kulkarni (1998) – The termination of services of a

probationer, in terms of appointment letter, does not amount to a retrenchment.

(iv) termination of service of the worker as a result of completion of tenure of

fixed term employment; or

State Bank of India v. Sundara Money , (1976) onwards the Supreme Court
took a swing and adopted a different line of reasoning. In this case the
employee's services were terminated after the expiry of the period stipulated in
the contract of employment. It was expressly stated in the order of appointment
itself that the services of the employee were not required by the employer
beyond the period specified therein. Holding it to be a case of retrenchment, the
court observed : A termination takes place where a term expires either by the
active step of the master or the running out of the stipulated term. To protect the
weak against the strong this policy of comprehensive definition has been
effectuated. Termination embraces not merely the act of termination by the
employer but the fact of termination however produced. A separate subsequent
determination is not the sole magnetic pull of the provision. A pre-emptive
provision to terminate is struck by the same vice as the post-appointment
termination. Supreme Court based its decision on the construction of the words
‘for any reason whatsoever’ as ‘very wide and almost admitting of no
exception’.

Haryana State FCCW Store Ltd v Ram Niwas (2002) Appointment being for
a specific purpose and for a particular period, there shall be no retrenchment in
termination of their services.

(v) termination of the service of a worker on the ground of continued ill-

health;

Anand Bihari v RSRTC (1991) Medical examination of Bus Drivers revealed

that they had developed a defective eye-sight and did not have the required
vision for heavy motor vehicles. Court held that defective eye-sight, disabling
the workmen from discharging their normal duty of bus driving, fell within the
meaning of the expression ‘continued ill-health’.

LAST COME, FIRST GO

Section 71. Procedure for retrenchment (Code 2020)

Where any worker in an industrial establishment who is a citizen of India, is to be

retrenched and he belongs to a particular category of workers in that establishment,
then, in the absence of any agreement between the employer and the worker in this
behalf, the employer shall ordinarily retrench the worker who was the last person to be
employed in that category, unless for reasons to be recorded the employer retrenches
any other worker.

(ID Act )Section 25-G. 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.

 Failure to comply with this rule, or in case of departure from this principle by the employer,
the reasons for such departure not being recorded, would make the retrenchment invalid.

 The class or category is a group in which posts of particular description are included and the
grade has reference exclusively to scales of pay.

 Where the employer and the workmen have agreed between themselves to abide by certain
procedure for retrenchment in their establishment, then that agreement will prevail and the
statutory procedure will not apply. The rule of ‘last come, first go’ can be altered, modified or
completely abrogated by an agreement between the employer and workmen by making a
provision in Contract of Service or in a Collective Bargaining Agreement or Standing Order.

 Rule 77 of the ID Rules 1957 requires preparation and publication of a list of all workmen in
the concerned category at least seven days in advance of the actual retrenchment. This rule
has been framed so that the object of Sec.25 G may be effectively achieved and with a view
to facilitate the retrenched workman to verify that he is not being discriminated against,
otherwise it may be impracticable for him to collect relevant information and enforce his
right.

 This rule has to be applied where other things are equal. Where the management retains staff
possessing special qualification in the interest of the business, that action cannot be discarded
merely because this rule has not been observed. For instance, a junior recruit who has special
qualifications needed by the employer may be retained even though another who is one up is
retrenched.

 Industrial Tribunal or any Court cannot assume the functions of the employer and decide for
him which workman to retain and which not to retain. The Tribunal merely has to determine
whether the management has in ordering the retrenchment acted fairly and properly and not
with any ulterior motive.

Indian Cable Limited v Workmen (1962) The doctrine of ‘last come, first go’ has to be
borne in mind only with respect to different categories of workmen working in an industrial
establishment and not to the whole of the industrial establishment.

Swadesimitran Ltd. v Workmen (1960) In a case where it is proved that the rule in question
has been departed from, the employer must satisfy the Industrial Tribunal that the departure
was justified, and in that sense the onus would undoubtedly be on the employer. In other
words, the employer should be able to justify the departure if an ID has been raised by the
workman regarding his retrenchment.

Departure from the ‘last come first go’ rule is permissible on valid and
justifiable grounds. Burden is on the management to prove existence of
such grounds. The provisions of Section 25-G are directory but a departure
from the principle of last come first go can be made only for sufficient
grounds. The principle of ‘last come first go’ is not applicable to
termination of the services of a temporary employee on the assessment of
his work and suitability in accordance with terms and conditions of his
service.

Section 25-H. Re-employment of retrenched workmen-Where any workmen

are retrenched and the employer proposes to take into his employ 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 72. Re-employment of retrenched worker (Code 2020)

Where any worker is retrenched and the employer proposes to take into his
employment any person within one year of such retrenchment, he shall, in such
manner as may be prescribed, give an opportunity to the retrenched workers
who are citizens of India to offer themselves for re-employment and such
retrenched workers who offer themselves for re-employment shall have
preference over other persons.

Rule 78 (The Industrial Disputes (Central) Rules, 1957 Rules)

Re-employment of retrenched workmen.

(1)At least ten days before the date on which vacancies are to be filled, the
employer shall arrange for the display on a notice board in a conspicuous
place in the premises of the industrial establishment details of those
vacancies and shall also give intimation of those vacancies by registered
post to every one of all the retrenched workmen eligible to be considered
therefor, to the address given by him at the time of retrenchment or at any
time thereafter:
Provided that where the number of such vacancies is less than the number of
retrenched workmen, it shall be sufficient if intimation is given by the
employer individually to the seniormost retrenched workmen in the list
 referred to in Rule 77 the number of such seniormost workmen being double
the number of such vacancies:
Provided further that where the vacancy is of a duration of less than one month
there shall be no obligation on the employer to send intimation of such
vacancy to individual retrenched workmen:
Provided also that if a retrenched workman, without sufficient cause being
shown in writing to the employer, does not offer himself for re-employment
on the date or dates specified in the intimation sent to him by the employer
under this sub-rule, the employer may not intimate to him the vacancies that
may be filled on any subsequent occasion.
(2) Immediately after complying with the provisions of sub-rule (1), the
employer shall also inform the trade unions connected with the industrial
establishment, of the number of vacancies to be filled and names of the
retrenched workmen to whom intimation has been sent under that sub-
rule: Provided that the provisions of this sub-rule need not be complied
with by the employer in any case where intimation is sent to every one of
the workmen mentioned in the list prepared under Rule 77.

Rule 26. Manner of giving an opportunity for re-employment to the

retrenched workers under Section 72.- (Draft Rules-The Industrial Relation
(Central) Rules, 2020

Where any vacancy occurs in an industrial establishment and there are workers
of such industrial establishment retrenched within one year prior to the proposal
for filling up such vacancy, then, the employer of such industrial establishment
shall offer an opportunity at least 10 days before by registered post or speed
post and through e-mail to such retrenched workers who are citizens of India. If
such workers give their willingness for employment then, the employer shall
give them preference over other persons in filling up of such vacancy.

Non-compliance with Section 25-F — Retrenchment—Termination of service

not covered within the excepted or excluded categories mentioned in Section
2(oo) amounts to retrenchment. Hence, non-compliance with Section 25-F
would vitiate such termination. Hari Mohan Rastogi v. Labour Court, 1984
Supp SCC 428 : 1985 SCC (L&S) 152.
Retrenchment without complying with Section 25-F would be void ab initio.
Such action would entitle the workman to a declaration for continuation in
service with full back wages.

Compliance with Section 25-F : Condition Precedent.—Retrenchment of

workman “in continuous service for not less than one year” under State or its
establishment/undertaking without complying with mandates of Section 25-F,
illegal which cannot be sought to be justified by employer before Labour
Court/Tribunal, at stage of grant of relief to workmen, on ground that his initial
appointment was in violation of Articles 14 and 16 of the Constitution, when
such ground was neither stated in retrenchment order, nor taken in reference
under Section 10. Although State or its establishment/undertaking can order
retrenchment of workman on such ground, but it cannot do so in contravention
of Section 25-F as that would render order illegal and may amount to unfair
labour practice by employer with object of depriving workman benefits of the
ID Act, Ajaypal Singh v. Haryana Warehousing Corpn., (2015) 6 SCC 321 :
(2015) 2 SCC (L&S) 279.