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Vaibhav Bhardwaj

Partner, Induslaw

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Protecting Employee Rights During Mass Lay-offs: The Importance Of Seeking Representation

Seeking representation through a trade union or attorney can significantly mitigate the risks of undue exploitation of laid-off workmen, and protect their rights during the period of lay-off writes Vaibhav Bhardwaj, Partner, INDUSLAW.

In India, lay-offs are governed by the provisions of the Industrial Disputes Act, 1947 (“ID Act”).¹  The ID Act defines a “lay-off” as the failure, refusal, or inability of an employer to provide employment to a workman, on account of certain specified grounds such as shortage of raw materials, breakdown of machinery, natural calamities, etc. Hence, the meaning of “lay-off” under the ID Act varies substantially from the meaning of the term as used in common parlance. As per the ID Act, lay-off does not refer to a termination of employment – instead, it refers to a temporary suspension of a workman’s employment due to certain specified supervening circumstances.² 

Workmen category employees enjoy certain protections under the ID Act from being laid-off. The ID Act also casts certain obligations on the employers to carry out  a legally valid lay-off. We have, in this article, elaborated upon the protection of employee rights during lay-offs as well the importance of seeking representation in this regard.  

LAW GOVERNING LAY-OFFS IN INDIA

For a valid lay-off to be effectuated, every employer should consider the following:   

  1. As per the ID Act, a lay-off can only be for the following reasons: i) shortage of coal, power, or raw materials; ii) accumulation of stocks or the breakdown of machinery; iii) natural calamity; or iv) for any other connected reason. It is a settled principle of law propounded by the Supreme Court of India that the phrase “for any other connected reason” cannot be considered as referring to any and all kinds of difficulty that an employer may face in providing employment to a workman.³ For instance, financial difficulties faced by an employer is not a valid ground for laying-off workmen.⁴ Hence, the term “any other connected reason” must be sui generis to the preceding grounds, as mentioned under serial numbers i), ii), and iii) above. 

  1. In case a workman (whose name is borne on the employer’s muster rolls) presents herself/himself for work at the employer’s establishment at the commencement of normal working hours on any day, and is not given employment within 2 hours of presenting herself/himself, such workman will be deemed to have been laid-off for that particular day, within the meaning of the ID Act. This is, however, subject to certain conditions and exceptions. 

Special Provisions for Industrial Establishments Having 50 or more Workmen

 For industrial establishments (not being of a seasonal character) employing 50 or more workmen on an average working day in a calendar month, the following shall apply in addition to the criteria specified above:  

  1. In case a workman (whose name is borne on the employer’s muster rolls) has completed not less than 1 year of continuous service under an employer (within the meaning of the ID Act), such workman cannot be laid off unless compensation equal to 50% of the total of basic wages and dearness allowance payable to the workman, is paid to such workman.  

  1. However, in case in a period of 12 months, the workman has been laid off for more than 45 days, the employer will not be required to pay lay-off compensation for any period exceeding 45 days, if there is an agreement to that effect between the workman and the employer. 

  1. In cases where the workman has been laid-off for more than 45 days in a period of 12 months, it is also lawful for the employer to retrench such workman in accordance with the provisions of the ID Act. In such eventuality, any lay-off compensation paid to the workman can be set off against the compensation payable to the workman for retrenchment.  

Special provisions for Factories, Mines and Plantations employing 100 or more Workmen:

For factories, mines, and plantations (not being of a seasonal character) employing 100 or more workmen, an employer cannot lay-off any workman (whose name is on the employer’s muster rolls), without prior permission of the appropriate government/authority in accordance with the ID Act.   

PROTECING RIGHTS OF WORKMEN DURING A LAY-OFF

As is evident from Part 2, the ID Act provides for several protections aimed at alleviating the hardships of laid-off workmen, while also being accommodative of certain business exigencies that an employer may face. However, despite the same, there may be several situations wherein an employer takes undue advantage of the provisions governing lay-offs. For instance, an employer can deliberately cause the onset of a false shortage of raw materials in order to lay-off workmen. This would jeopardise the interests of workmen since, the employer would only be required to pay half wages to the workmen during the period of lay-off. The situation could be aggravated in case the workmen’s employment contracts allow the employer to stop making payments after the expiry of 45 days of lay-off.  

In order to ensure that the provisions on lay-offs are not unduly exploited by employers, workmen can adopt the following checks and legal routes:  

a. Workmen must ensure that a lay-off has not been declared with a mala fide intent and the grounds for declaring the lay-off are genuine. The veracity of these grounds can be duly investigated by the workmen, by demanding substantive proof from the employer to demonstrate that legitimate grounds for declaring lay-offs indeed exist. In case the grounds for declaring lay-offs are found to be illegitimate, an industrial dispute can be raised before the appropriate authorities. 

b. Even if an employer has declared a lay-off on genuine grounds, the employer may unduly continue the lay-off even after the supervening circumstances no longer exist. This may result in workmen being rendered in a state of suspended animation, where they are not paid adequate wages (or no wages at all) for a prolonged period of time while being unable to seek new employment. Remedying this issue will require continued vigilance, in order to persistently monitor if the circumstances which triggered the declaration of lay-offs continue to exist. In case such circumstances are found to have subsided, an industrial dispute can be raised before the appropriate authorities. 

c. In case an employer is unduly continuing the lay-off even after the supervening circumstances have subsided, workmen can claim retrenchment in accordance with the provisions of the ID Act as a matter of right.⁵ In order to validly claim retrenchment, a period of 45 days of lay-off must have been completed. In case the employer refuses to retrench the workmen (by providing the stipulated notice, retrenchment compensation, etc.) or to duly reinstate the workmen, an industrial dispute can be raised before the appropriate authorities.  

d. Workmen must take care to ensure that the terms of their employment do not allow the employer to stop paying lay-off compensation after the expiry of 45 days. This can be duly negotiated with the employer. 

e. In case any laid-off workman has been unduly discharged or dismissed by way of victimisation, in bad faith, etc., a claim of unfair labour practices can be raised against the employer. Similarly, in case the employer shows favouritism to one set of workmen without any merit (for instance, retrenching one set of laid-off workmen while reinstating another set of laid-off workmen, without any plausible justification), a claim of unfair labour practices can also be raised against the employer.  

In light of the aforesaid checks and legal options available to workmen, it is imperative for workmen to rightfully defend themselves in order to safeguard their interest. This would ensure that the workmen are not unduly exploited. Hence, where the workmen are represented through the trade unions, being an effective collective bargaining agent, such trade unions can: a) demand information from an employer to verify if the grounds for declaring lay-offs are legitimate and/or if the continuance of such lay-off is legitimate; b) negotiate with the employer to ensure that workmen do not agree to unfavourable terms of employment which could jeopardise their interest; and c) raise industrial disputes to address the grievances of the laid-off workmen. Alternatively, workmen also have the right to seek legal representation through attorneys before employers as well as the appropriate authorities. With the objective of ensuring free and accessible legal aid, the Government of India has also put in place several initiatives for workmen who cannot afford legal representation for themselves. Thus, this also casts an obligation on the employers to ensure that the workmen are aware of their rights and entitlements under law. Hence, seeking representation through a trade union or attorney can significantly mitigate the risks of undue exploitation of laid-off workmen, and protect their rights during the period of lay-off.  





References

[1] Please note that the ID Act is only applicable to “workman” category employees. In this regard, a workman has been defined as “any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied.”

[2] Veiyra M.A. vs. Fernandez C.P. and Ors., MANU/MH/0054/1955.

[3] Management Of Kairbetta Estate vs Rajamanickam And Others, AIR 1960 SC 893

[4] Workmen Of Dewan Tea Estate And Ors vs The Management, AIR 1964 SC 1458.

[5]  Veiyra M.A. vs. Fernandez C.P. and Ors., MANU/MH/0054/1955.


Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house


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