Lay off and Retrenchment - Industrial Disputes Act(1947), Industrial Laws | Industrial Laws - B Com PDF Download

Introduction

• Layoff refers to the removal of employees by the employer for reasons other than the employee’s fault. 
• A layoff is temporary in nature and usually happens when an employer is unable to continue employing workers for a short period. 
• Retrenchment refers to a situation where the employer removes his employees in order to increase profits and decrease losses. 
• Even in retrenchment, there is no fault of the employee that results in the termination of the employment.

Lay-off under the Industrial Disputes Act, 1947

The term 'layoff' is defined in Section 2 (kkk) of the Industrial Disputes Act, 1947 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 and 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 essential for a lay-off

• 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.

Retrenchment under the Industrial Disputes Act, 1947

Section 2(oo) of the Industrial Disputes Act, 1947 defines retrenchment as the termination of a workman for any reason other than a form of punishment in connection with disciplinary action. However, retrenchment does not include the voluntary retirement of a workman, the workman retiring upon reaching the age of superannuation as mentioned in the employment contract, the removal of a workman on the basis of continued ill-health, or the removal of the workman because the employment contract is terminated or is not renewed after its expiry.

Key Differences between layoff and retrenchment

Conclusion

The Industrial Disputes Act 1947 lays down various employer compliance requirements regarding layoff and retrenchment of workmen. It is essential for the employer to be aware of such compliances to ensure peace and harmony within the industrial establishment and to avoid any adversities related to the non-compliance.