DR.

RAM MANOHAR LOHIYA NATIONAL LAW

UNIVERSITY, LUCKNOW

PROJECT – LABOUR LAW

TOPIC – CONCEPT OF LAY-OFFS AND RETRENCHMENT IN LIGHT OF THE

COVID 19 PANDEMIC

SUBMITTED BY SUBMITTED TO –

Harshil Dey Dr. Prasenjit Kundu

210101180 Assistant Professor (Law)

TABLE OF CONTENTS

Poor-Rich Divided Into Multiple Segments During Lockdown- ............................................... 3

Provisions Relating To Lay-Offs Under Industrial Disputes Act, 1947 .................................... 5
Lay-off ................................................................................................................................... 6
Retrenchment ......................................................................................................................... 8
Constitutional Aspect Of Labour Strategy With Alternate State Rules- ................................. 10
Conclusion ............................................................................................................................... 14
POOR-RICH DIVIDED INTO MULTIPLE SEGMENTS DURING LOCKDOWN-

Crisis doubles up with a single-handed operation of an economy where once the economy is
exploited and it booms for the rest of the time in an elastic manner, and same happens with
the labour scenario in India. The battle to get adequate laws for labourers came into the good
picture, but the regulations and enforcement seem a bit suppressed. India is one of the
developing states where the ratio of poor is too rich is like 4:1, and majorly the poor are
dependent on a harsh livelihood via manual labour work, which is the rough-most patch in
life. Seeing the history of labour services in India, it began with forced or bonded labour with
no recognition of fundamental rights and continued till a new height of labour laws in the
country along with constitutional rights being provided to them. Availability of so many
labour legislation for both organised and unorganised labour structures in India couldn’t fetch
a proper solution for the justice of labours and hence it seems India is yet downtrodden in
the regime of labour law. But, the concern lies from the onset of Covid-19, where the labour
law started facing actual hardships in respect to health and livelihood with the dark
celebration of International Labour Day on May 2. Migrant workers seemed to travel a lot
with the least concern on safety aspects being taken into concern by the Centre and the
States, which hasnot only led to the violation of fundamental human rights but also the
increase in the flow of Covid-19 cases with the easy transmission. Almost more than half of
the unorganised sector of workers fell jobless and the basic necessities became dormant for
every household.

The social breakdown has led to dreadful implications in the pandemic where labour
displacement has been running across the states and the countries. The economy is on
standstill since the outbreak of the virus with a special feature of a different kind of ideology
to the virus, which is very novel in the market. Pros of organised sector employees are more
than the unorganised sector where at least the system of affordable work from home is yet
functional and it resolves the salary issues got to the employees, which isn't the case in the
unorganised sector. Businesses have manipulated policy in their favour before 1991, by
resorting to pal capitalist economy and since then by tilting policy in their favour, curtailment
of workers rights and pressuring the government. to weaken support to the marginalised
sections on the plea that the markets ought to be allowed to perform. Currently, victimisation
COVID-19 as a defend, workers rights area unit being more curtailed. No wonder, the
country collects solely of value as direct taxes in spite of the large disparities. The burden of
taxation falls on the indirect taxes that area unit paid by everybody, as well as the
marginalised. It is clear that firms posing for the lifting of imprisonment at intervals in the
name of sustenance are not involved regarding what share poor can die but, as usual,
regarding their profits. They did not worry regarding individuals, staff and farmers earlier
and not even currently, otherwise they might have asked for a way higher enforced
imprisonment and survival package that could have protected the lives of the marginalised
sections. The lesson that required to area unit to learn is that the Republic of India was unable
to have an effect on the pandemic due to the adverse living conditions of the bulk of our
individuals.And now, labour laws area unit being diluted which can guarantee a worsening
of living conditions. this would possibly make sure that once a later pandemic comes in due
course thecountry can flounder. The tragedy is that the Republic of India is nowadays headed
towards asocial breakdown for temporary term gains of some. But, a basic rethink of any
current rulingideology is usually at a vital price.

Policies are at par with political warfare amongst the various parties in India and one of such
recent development has been seen with the speech of the Indian PM, which denoted
“Atmanirbhar Bharat”. The long term goal and objective is refined to true spirits in Covid-
19, where people get boosted up with proper analysis, but as soon as the reality comes,
scenarios choke. Migrant workers are losing jobs from the factories, contract labour tasks,
and even if the normal vegetable vendors were slashed hard amid the Covid-19 instead of a
proper “Health Policy” which can ‘insure’ the lives of all the citizens of India. Our economic
growthis all in favour of the rich people and sorry to address that India neither have a proper
health insurance scheme nor a population control mechanism. Both ways, the only worst hit
are the labour class, where life always stays at risk with no array of hope and altruism in the
darkest corner of their house. The constitution talks about the Right to Health as a
fundamental right under Article 21, DPSP of the State under Article 39 for the health and
strength of the workers, Article 42 for the humane working conditions as well as Article 43
for maintaining a proper wage system for the workers. But, unfortunately, the country is run-
in behind the actual implementation of these articles and yet to be bound with the duties to
the State. Even the workers are mistreated on the payment basis indicating the violation of
Right to Equality under Article 14 and the Covid-19 has put an experiment to check the
veracity of theconstitutional provisions and the surveillance has got bad results.
PROVISIONS RELATING TO LAY-OFFS UNDER INDUSTRIAL DISPUTES ACT, 1947

The Industrial Dispute Act came into force in 1947 with the goal to encourage industrial peace
by making it easier to investigate and negotiate a resolution to problems in the workplace. The
purpose of labour legislation is to safeguard employees against victimisation by employers and
to uphold social justice for both parties. The Act’s special goal is to support collective
bargaining and keep workplaces calm by preventing unauthorised strikes and lockouts.
Additionally, it contains guidelines for regulating layoffs and retrenchments.

Further, in the case of the Workmen of Dimakuchi Tea Estate v/s Management of Dimakuchi
Tea Estate1 , the Hon’ble Supreme Court laid down the object of the Industrial Dispute Act
1947 in the following five ways:

1. The Promotion of measures for securing amity and good relations between the
employer and workmen;

2. An investigation and settlement of industrial disputes between employers and

employers, employers and workmen or workmen and workmen with a right of
representation by a registered Trade Union or Federation of Trade Unions or
Association of employers or a federation of association of employers

3. The prevention of illegal strikes and lock-outs;

4. Relief to workmen in the matter of lay-off, retrenchment, and closure of an

undertaking;

5. Collective bargaining.”

Thus, it can be stated that the principle of industrial democracy is the bedrock of the Act and it
should be one of the foremost measures while dealing with any industrial dispute between an
employer and the workman

1
Workmen of Dimakuchi Tea Estate v Management of Dimakuchi Tea Estate AIR 1958 SC 353 (India)
Lay-off

Section 2 (kkk) of the act defines lay-off. The essential conditions for lay-off are as follows:

1. failure, inability and refusal by employer due to following reasons:

a. Shortage of raw material

b. Accumulation of stock

c. Machinery not working

2. The establishment’s muster rolls must always include the names of the laid-off
employees.

3. The aforementioned employees shouldn’t have been retrenched.

Compensation for laid-off period

According to section 25C which states that the worker who has been laid off has the right to
compensation for laid-off period. This compensation will be equivalent to half of the total of
basic and dearness allowance.

However, such compensation is conditional compensation and following conditions must be

fulfilled:

a. The workman should not be a badli worker.

b. The worker’s name must be there on the muster roll of the establishment.

c. The worker must have worked at least 1 year of continuous service.

Continuous service (Section 25B): Accidents, authorised leaves of absence, illnesses, lawful
strikes, locks, and terminations of employment that are not the workers’ fault do not impair the
continuity of such service.

There are two exceptions where a worker will still be considered to be in continuous service
even though they are not:
 a. if the worker has been employed for the past 12 months as of the date the calculation is
being performed.

b. if the worker had worked for 190 or more days in the case of a mine employment and
240 days in any other employment during such a 12-month period.

Conditions for non-applicability of compensation on workmen

A worker is not eligible to layoff pay, according to Section 25E, is when:

a. if the employee misses at least one day each week of the mandatory working hours at
the company.

b. if the worker is fired because their actions are causing other employees to work less
efficiently or because of a strike.

c. if the employee indicates a desire to decline the alternative employment offered to him,
it must be in the same organisation where he was previously employed.

d. within a 5-mile radius of the establishment where he belonged, such work is provided
in any other establishment run by the same employer. when compared to the work that
the employee can do, the employer claims that such employment does not require any
prior experience or particular talents.

e. the worker receives the same pay from this job as from his prior one.

In Vierya v Fernandez, the Bombay High Court, the Petitioner Company laid off some
employees owing to difficulties which it thought might result in a stoppage of work. This lay-
off continued for a full year. The services of a few of those laid off were terminated, after the
Company (because certain disputes were already pending) received permission from the
Labour Appellate Tribunal. The Company paid compensation for lay-off according to the
provisions of the Act, as it then stood, and also retrenchment compensation. The petitioner and
other workmen contended that they were entitled to full wages for one year. The Payment of
Wages Authority rejected this contention. The workmen moved the High Court by writ petition
contending that the employer had no right to layoff workmen under the Industrial Disputes Act,
because that Act did not more than to prvide comensatiin for workers laid off under some other
authority. Excerpts from the judgment of Chagla c.J., follow:] The Expression used by Mr.
Buch (for the workmen) on which he has based the whole of his argument that the employer
[because of lack of any contract therefor, or any standing orders, or any express statutory
authorization] does not possess the right to layoff an employee under the provisions of the
Industrial Disputes Act is not a very appropriate expression.

Layoffs occur for many reasons beyond an employer’s control however, employers are required
to adhere to specific conditions such as notifying the relevant government authorities with
proper reasoning and ensuring compliance with the provisions stipulated under the ID Act. In
order to avoid legal complications, employers must carefully comply with the provisions of the
Industrial Dispute Act that aim to protect the interests of workmen and ensure job security.

The ID Act provides remedies for workmen who have been laid off, retrenched, or wrongfully
terminated without following proper procedures which may include compensation or
reinstatement.

Layoffs become illegal in cases where employers fail to adhere to the prescribed procedures or
fail to provide proper and timely notice to the workmen. Such non-compliance with the
provisions can result in legal action including penalties and fines.

Retrenchment

According to Section 3(1) of the Industrial Disputes Act of 1947, businesses in India with more
than 100 employees are required to seek government approval before implementing
redundancies or retrenchments, and they are required to give their staff three months’ notice
before doing so. The technique protects workers who might be let go by companies without
cause or justification and also acts as a cost-cutting measure for employers. The goal of passing
such legislation is to safeguard employees’ rights and advance the welfare of the workforce,
however this objective has the unintended effect of making the Indian economy less flexible.

Retrenchment is defined under Section 2(oo) of the Industrial Disputes Act, 1947. It is the
termination of a portion of staff or labour force due to surplusage. Retrenchment could be for
any reason.

Retrenchment does not include the following:

a. Voluntary retirement.
b. Retirement due to age factors and terms of the contract.
c. Termination due to continued sickness of the workman.

Section 25F lays about essential conditions to be fulfilled prior to retrenchment. These are:
a. The workmen have to be given one month’s written notice stating reasons for
retrenchment and wages for the notice period.
b. At the time of retrenchment, the worker has to be paid with compensation of fifteen
days’ wages.
c. The notice should also be served on the appropriate government Compliance

Requirements as Per Retrenchment Compensation

The employer is expected to compulsorily adhere to the following regulations in the case of a
retrenchment compensation process:

1. The employee should be given about the retrenchment decision with the help of a notice.

2. The notice should be issued one month prior and brought into action. The notice should
strictly mention the grounds behind the failure of compliance.

3. The employee should be compensated well at the time of the reduction process and not
beyond the passage of time.

Requisites For a Valid Reduction Process Are:

1. Within 30 days, the manager should provide a written notification that should contain
the reduction process’s basis; the retrenchment should only be put into force when the
employee has been given the notice.
 2. If the manager cannot send a note to the workmen within the specified period, they are
eligible to pay an amount in compensation for such an act.

3. The employee must be reimbursed with a sum of money equal to their wages of 15 days
for one full year of continuous service in the company or any portion of their service
exceeding 6 months or half-year.

A notice is delivered to the appropriate government agency following a certain format that is
specified in the allowed device. Rule 76, which governs the warnings of the retrenchment
process, must be followed by the regulations stated in the notification. The requirements for
compensating an employee are a necessary prerequisite before an employee can be laid off. As
a result, failure to comply with the provisions will render the retrenchment procedure
illegitimate. For instance, if the retrenchment process is found to be unlawful or is rejected by
government officials, the employee has the right to return to work and receive his back pay for
the time he was laid off.

Procedure of retrenchment

1. The person seeking protection must qualify the definition of a worker as defined in
Section 2(S) of the Act.

2. The workman should be a citizen of India

3. The employee should have been employed in the establishment, which, according to
Section 2 (J) of the Act, is classified as an industry.

4. The employee must belong to a specific category of a workforce in the industry

5. There should not be any kind of agreement between the employer and the employee
regarding the principle of last come first go

CONSTITUTIONAL ASPECT OF LABOUR STRATEGY WITH ALTERNATE STATE RULES-

Many rising and developing economies were seeing a lot more vulnerable development
before the beginning of the pandemic. Joined with the basic idea of the slowdown, this would
compound the drawn-out impacts of profound recessions related to the pandemic. The Indian
economy was additionally going through a profound slowdown, even before the pandemic
struck the nation. The genuine gross domestic product (GDP) development had fallen more
than nine consecutive quarters.

In the organised manufacturing sector, the examination of Annual Survey of Industries (ASI)
information had uncovered that work efficiency had fallen fundamentally in the course of
the most recent eight years. Work profitability was additionally altogether lower than that of
neighbouring China. In any case, quite a bit of this decay was accused of India's
unpredictable labour laws. So as to profit by the interruptions in worldwide gracefully tie
because of disruption global supply chain, to welcome unfamiliar speculations for global
firms trying to move creation out of China, and assist organisations with recouping from the
stun of the pandemic, a few state governments, for example, Maharashtra, Madhya Pradesh,
Haryana, Uttarakhand, Himachal Pradesh, Uttar Pradesh and Gujarat, as of late, pronounced
a slew of labour law suspensions. These arrangement changes have prompted subverting
labourer rights and destruction of decades-old protective estimates that were surrounded to
stand by ILO conventions and sacred commitments.

The Preamble to the Constitution of India lays down the goals of politico-socioeconomic
democracy for the citizens of India. The framers of the Constitution were conscious of the
fact that in a poor country such as India, political democracy would be useless without
economic democracy. Therefore, borrowing the idea from the Irish Constitution, ‘Directive
Principles of State Policy’ were introduced into the Indian Constitution with a view to
achieving the amelioration of the socio-economic condition of the masses. The Directive
Principles contained under Articles 36 to 51 lay down certain socio-economic goals which
the State Governments have to strive to achieve; the underlying idea being to usher in social
and economic democracy in the country. Articles 42 and 43 are labour welfare-oriented.
Article 42 requires the State to make provision for securing just and humane conditions of
work and, for maternity relief. Whereas, Article 43 provides that the “State shall endeavour
tosecure, by suitable legislation or economic organisation or in any other way, to all workers,
agricultural, industrial or otherwise, work, a living wage, conditions of work ensuring a
decent standard of life and full enjoyment of leisure and social and cultural opportunities
and,in particular, the State shall endeavour to promote cottage industries on an individual or
cooperative basis in rural areas.”
The Uttar Pradesh State Legislature has authorized7 for exclusion of all industries from
practically all labour legislation for a period of three years. Subject to conditions point of
reference to be satisfied by the establishment to avail such exemptions. Managers must pay
minimum wages as compensation to their labourers and ought to cling to the course of events
inside which such payment should be provided as endorsed under ‘Payment of Wages Act,
1936’. The Provisions identifying with health and security given under ‘Building and Other
Construction Workers Act, 1996’ and ‘Factories Act, 1948’ will keep on agreeing. Wages
will be paid to labourers according to the ‘Employees Compensation Act, 1923’ and in
caseof a mishap prompting demise or incapacity of any worker. Laws identifying with the
employment of women and children will keep on staying in power. There would be no
typeof fortified work or obligation subjugation rehearsed by any establishment.

On 6th May 2020, the State Government of Madhya Pradesh passed an Ordinance which
amends two-state labour legislations: ‘the Madhya Pradesh Industrial Employment (Standing
Orders) Act, 1961’, and ‘the Madhya Pradesh Shram Kalyan Nidhi Adhiniyam, 1982’. The
1961 Act directs the states of work of labourers and is applied to all establishments with at
least 50 workers. The Ordinance builds this edge to at least 100 workers. In this way, the Act
will no longer apply to establishments with somewhere in the range of 50 and 100 workers
that were recently controlled. The 1982 Act accommodates the arrangement of a Fund
that will back exercises identified with government assistance of labour. The Ordinance
changes the Act to permit the government to exclude any establishments or classes of
establishments from the arrangements of the Act through a notification. These enactments
incorporateinstalment of commitments into the Fund by businesses at the pace of three rupees
at regular intervals. Further, the state government has excluded every new manufacturing
plant from specific sections of the ‘Industrial Disputes Act, 1947’. Provisions identified with
lay-off and retrenchment of labourers, and closure of establishments will keep on exercising.
Provided that ‘the Industrial Disputes Act, 1947’ allows the government to exclude certain
factories from the provisions of the Act till the extend it is fulfilled that a component is set
up for the resolution and examination of industrial disputes.

Succeeding the strides of the Uttar Pradesh government, the State Legislature of Gujarat has
issued a marginally extraordinary prototype of Labor legislation exception in the state for an
inside and out 3 years time frame under all categories. The State Government has adopted an
unequivocal strategy towards opening new industries units in the state by excluding the
current system of Labor Legislations for a time of three years for new organizations just as
organizations established over the most recent one year. Be that as it may, essential
government assistance enactments, for example, ‘Minimum Wages Act, 1948’, ‘Industrial
Safety Rules and Employee Compensation Act,1923’ need assent. The State Government
has likewise clung to a techno-accommodating methodology of the online approval process
for building up new ventures within a 15 days time span. The establishments administered
under ‘the Factories Act, 1948’ have been given sure relaxation. Such production lines will
be excluded from different provisions identifying with week by week hours, everyday hours,
spans for rest, and so forth of grown-up labourers under provisions of Factories Act
separately subjected to hardly any conditions from 20th April to 9th July 2020. No labourer
will work for over six hours without taking a break for at least thirty minutes and no female
worker should be employed to work between 7 pm to 6 am in any establishment. Labourers
are entitled to compensation in relation to the current wages.

The Government of Rajasthan has additionally given an umbrella exception in various labour
enactments. The state government has exculpated the arrangements of working long periods
for grown-up labourers under the Factories Act for a quarter of a year. Working hours have
been expanded from 8 hours to 12 hours. 4 hours of additional time will be permitted and
wages for extra time will be made according to rules. Labourers will work for a limit of six
days per week and the constraint of additional time will be 24 hours out of every week.

The Himachal Pradesh state government has confined its guidelines to comparable
enactments like that of the government of Gujarat. The establishments will be absolved under
various provisions of the Factories Act subject to conditions. Notwithstanding, the labourers
would be qualified for additional time compensation. Labourers ought to get compensation
in relation to the current minimum wages predetermined by the State Government of
Himachal Pradesh under ‘Minimum Wages Act, 1948. No labourer will work for over six
hours without taking a break for at least thirty minutes and no female worker should be
employed to work between 7 pm to 6 am in any industrial facility.
CONCLUSION

The current situation surrounding labour laws and their implementation in India presents a
complex scenario with significant implications for the rights and welfare of workers, especially
in light of the COVID-19 pandemic. The essay highlights various challenges faced by the
labour force, including issues related to lay-offs, retrenchment, and the broader economic and
social impact of the pandemic on vulnerable communities.

Several states have recently made changes to labour laws, aiming to attract investment and
stimulate economic growth. However, these changes have raised concerns about the erosion of
worker rights and protection. While the government emphasizes economic revival, there is a
need for a balanced approach that prioritizes both economic growth and the well-being of
workers.

The Constitution of India provides a framework for ensuring social and economic justice,
including provisions related to labour welfare. However, the implementation of these
provisions remains a challenge, as evidenced by the gaps between constitutional ideals and
ground realities.

The COVID-19 pandemic has exacerbated existing inequalities and vulnerabilities within the
labour force, leading to widespread job losses and economic hardship, particularly for migrant
workers and those employed in the informal sector. It has also underscored the importance of
comprehensive health and social protection policies to safeguard the rights and well-being of
workers.

In conclusion, addressing the complex issues surrounding labour laws in India requires a multi-
faceted approach that balances economic imperatives with social justice concerns. It
necessitates robust enforcement mechanisms, stakeholder engagement, and policy
interventions aimed at promoting inclusive and sustainable development while protecting the
rights and dignity of all workers.