TOPIC NAME :- DIFFERENCE BETWEEN RETRENCHMENT,

LAY OFF, DISMISSAL AND DISCHARGE

UNDER INDUSTRIAL DISPUTE ACT
1947

SUBJECT NAME :- LABOUR LAW

SEMESTER 3 YEAR (LL.B)

PROJECT SUBMITTED TO:- PROF. AVINASH B. PATIL

STUDENT NAME:- RAHUL GAJANAN TANDEL

ROLL NO :- 51

DATE :- 09-JUN-2021

SIGNATURE OF INTERNAL FACULTY:-

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SIGNATURE OF EXTERNAL FACULTY: -

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 ACKNOWLEDGMENT

This project would not have been possible without the fruitful guidance of
PROF. AVINASH B. PATIL, in charge of subject LABOUR LAW, her sincere
efforts in explaining the subject and related topic helped us to be familiar with the
subject.
I am thankful to madam to give clear guidance on the vast subject and important
pillar of the law and make ability to clear knowledge about it.

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 CONTENT

Sr No. Content Page No. Remark

1 Lay off 4
2 Dismissal And Discharge 5
3 Retrenchment 6
5 Conclusion 8
6 Reference 9

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LAY-OFF:
Section 2 (kkk) of Industrial Dispute Act, 1947
A lay-off cannot be avoided in certain situations. A lay-off is a temporary separation of an
employee from his/her employer at the instance of the latter, without any prejudice to the former.
Lay-off is initiated as the failure, refusal, or inability of an employer to continue employment of
a worker whose name is in the rolls but who has not been retrenched.

Lay-off may occur as a result of the occurrence of the following:

 Major breakdown of machinery

 Shortage of coal, power, or raw material
 Accumulation/accrual of stock, thus increasing the inventory of finished items

One of the major stress triggers for human resource professionals is bearing the bad news of
layoffs. In addition, losing a trusted colleague all of a sudden, is a major shock and one’s
reaction is quite similar to losing a loved one. Some companies arrange for re-engagement of
their laid-off employees through outplacement agencies.

Example (Lay-off)
IT and telecom companies that have announced job cuts (or are likely to) in 2017.
Cognizant
Cognizant appears set to layoff at least 6,000 jobs, which represents 2.3% of its total workforce,
as the IT MNC struggles with growth in an IT environment that is fast shifting towards new
digital services. The company is said to be looking to layoff roles which have become redundant
due to the impact of automation on lower-end IT jobs.

Infosys.
Indian IT giant Infosys is likely to announce job layoff in the coming days. According to sources,
nearly 1,000 employees in job level 6 and above (group project managers, project managers,
senior architects and higher levels) are expected to be asked to leave.

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DISMISSAL AND DISCHARGE:
Dismissal is the termination of the services of an employee as a punitive measure for some
misconduct. Discharge also means termination of the service of an employee, but not necessarily
as a punishment step. A discharge does not arise from a single irrational act. Dismissal or
discharge is a drastic step and should be taken after careful thought.
A dismissal needs to be supported by just and sufficient reasons. Before discharging or
dismissing the employee, advance notice of the impending danger must be given and the reasons
of discharge must be stated clearly. The employee must be given the opportunity to defend
himself.
If the grounds under which the employee has been discharged are not strong enough, there
should be a provision for reviewing the case. In any case, the punishment should not be out of
proportion to the offence. Such step should be taken as a last resort if all other measures fail in
salvaging the employee.

The following reasons may lead to the dismissal of an employee:

 Unauthorized absenteeism from duty for a long time.

 Willful violation of rules.
 False statement of qualification at the time of employment.
 Dishonesty
 Drunkenness
 Carelessness
 Insubordination
 Inefficiency
 Violent and aggressive acts
 Physical disability

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RETRENCHMENT:
Section 2 (oo) of Industrial Dispute Act, 1947
Retrenchment refers to an employer giving a termination to a workman for any reason
whatsoever, otherwise than a punishment inflicted by way of disciplinary action.

It is important to remember that it does not include the following:

 Voluntary retirement of the workman

 Retirement of the workman on reaching the age of superannuation
 Termination of the service of the workman as a result of non-renewal of the contract of
employment between the employer and the workman
 Termination of the service of a workman on the ground of continued ill-health.

Retrenchment is to reduce the amount of corporate expenses. When a company/firm implements

retrenchment, it cuts off or minimizes all the unnecessary expenditures, usually by cutting back
on the diversity of products or services it offers and often reducing the size of its company by
closing down some of its offices that don’t necessarily mean a reduction in a company’s
workforce.
It simply means termination of employee’s services, because of replacement of the worker by
machines or closure of the unit due to the lack of product’s demand, produced by the unit. In
retrenchment, the termination of services of several employees takes place where they are sent to
the home and their connection with the organization are completely and immediately severed.

Retrenchment also results in the separation of an employee from his/her employer. It differs from
lay-off and dismissal. In case of lay-off, the employee continues to be in the pay-role of the
organization and is assured of being called back after the expiry period of lay-off. However, in
case of retrenchment, an employee is sent for good, and his/her connections with the
organization completely end.
Retrenchment differs from dismissal, too. It means the discharge of surplus labor or staff in the
continuing industry, and the removal of dead weight of uneconomic surplus. An employee can be
retrenched even if a company operates at a level of profits. As per Industrial Disputes Act, 1947,

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employers must fulfill conditions precedent to retrenchment. Dismissal, on the other hand, refers
to separation on account of gross misconduct.

A retrenched employee can approach the court of law for justice. If an employee is retrenched
illegally and the employer cannot produce supporting documents to the court, the employee
becomes eligible for reinstatement with back wage.

CASE LAW(Retrenchment) :
The Supreme Court in Byram Pestonji Gariwala v. Union Bank of India and othershad restricted
the defintion of ‘Retrenchment’ under S.2(oo)(bb) to occur only when there is a ‘discharge of
excess labor’ by the employer. Later the Supreme Court in State Bank of India v. N. Sundara
Money, Punjab Land Development and Reclamation Corporation Ltd., Chandigarh v. Presiding
Officer, Labour Court, Chandigarh and subsequent decisions rejected the narrow interpretation
adopted by the Court in the earlier decision and held that any retrenchment, as defined in Section
2(oo), means 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 and those
expressly excluded by Clauses (a), (b) and (c) of the definition. In view of these decisions, it
cannot be said that retrenchment means termination by the employer of the service of a workman
as surplus labor.

The Supreme Court excluded closure from the scope of retrenchment in Hariprasad Shivshankar
Shukla vs. A.D. Divelkar. Further, in the State Bank of India vs. Sundara Money, the Supreme
Court adopted the literal meaning of retrenchment, which is exhaustive and comprehensive and
held that the expression "for any reason whatsoever" was very wide and admitted almost no
exceptions. So, retrenchment means termination of a worker's services for any reason
whatsoever, other than those specified in Section 2(oo).

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CONCLUSION
Therefore, with the above discussion, it is quite clear that layoff and retrenchment are two
different ways of involuntarily terminating employees and dismissal is the termination of the
services of an employee as a punitive measure for some misconduct. While in both the cases the
employees are paid compensation as per the method specified in the act. However, gratuity is
paid only in retrenchment but not in layoff.

BASIS FOR LAYOFF RETRENCHMENT DISMISSAL OR

COMPARISON DISCHARGE

Meaning Lay-off refers to Retrenchment means Dismissal is the

the provisional involuntary separation of termination of the
termination of an employee due to the services of an
the employee, replacement of labor by employee as a
at the instance machines or the close of punitive measure for
of the the department. some misconduct.
employer. Discharge also
means termination of
the service of an
employee

What is it? Action step Business strategy Action step

Defined in Section 2 (kkk) Section 2 (oo) of --

of Industrial Industrial Dispute Act,
Dispute Act, 1947
1947

Nature Temporary Permanent

Operation of Stops after the Continues even after the Continues even after
company declaration. declaration. the declaration.

Permanent Re- As soon as the Employee's connection Employee's

appointment lay-off period with the organization are connection with the
ends. severed immediately. organization are
severed immediately.

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REFERENCES
https://www.advocatekhoj.com/
https://indiankanoon.org/
https://www.lexology.com/

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