What is Retrenchment?
The term “Retrenchment” has been given a very wide meaning under Section 2(oo) of the ID Act to include termination by the employer for any reason whatsoever, other than a punishment given in disciplinary proceeding.

The provision further states that Retrenchment does not include:

1.Voluntary retirement;

2.Retirement on reaching age of superannuation;

3.Termination of service of workman as a result of non-renewal of contract of employment;

4.Termination of workman due to continuous ill-health

Conditions have to be fulfilled for retrenchmet

Section 25F of the ID Act is a very essential provision for law relating to retrenchment.

If the conditions or requirements given in this provision are not followed by the employer, then the retrenchment of employee will be illegal and invalid.

According to this provision, a workman employed in any industry who has been in continuous service for not less than one year under an employer cannot be retrenched unless-

1. 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;

2. The workman has been paid compensation at the time of retrenchment;

3. Notice in the prescribed manner is served on the appropriate Government

If aforesaid conditions have not fulfilled by the employee before retrenching employee, then the employee can challenge the same

Section 25FF of the ID Act provides for Compensation to workmen in case of transfer of undertakings.

According to this provision where the ownership of management of an undertaking is transferred from the old employer to a new employer, a workman is entitled to notice and compensation.

However, the workman shall have been in continuous service for minimum one year in that undertaking immediately before such transfer.

AMOUNT OF RETRENCHMENT COMPENSATION

while effecting retrenchment of the workmen, it is obligatory on the part of employer to pay retrenchment compensation at the rate of 15 days wages for every completed year of service to be calculated at the last drawn salary of an employee.

Retrenchment of White Collar Employees:

The term white collar employees have nowhere been expressly defined under the Indian Law. However, white collar employees are those who work in the managerial capacity.

Thus, the employees who don’t fall under the definition of “workman” under Section 2(s) of ID Act are white collar employees. The definition of workman 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, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute.

The definition of “workman” specifically excludes those persons who are employed in managerial or administrative capacity. so, white collar employees are not governed by the ID Act and retrenchment or termination on account of redundancy is also not governed by the provisions of the ID Act. In private sector organizations, the employment and termination of white-collar employees or employees who do not fall under the definition of “workman” under Section 2(s) of the Industrial Dispute act, 1947, will majorly be governed by the terms of the employment or the employment contract. If there is any breach of the terms of employment contract, then the employee can claim damages from the employer.

Meaning of Lay-Off:

The term ‘lay-off’ has been defined under Section 2 (kkk) of the Industrial Disputes Act, 1947, thus lay-off means the failure, refusal or inability of an employer on account of the shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other unconnected reason to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched.

Following are the essentials of lay-off:

 (i) There must be failure, refusal or inability on the part of the employer to give employment to a workman.

 (ii) The failure, refusal or inability should be on account of shortage of coal, power or raw materials or accumulation of stocks or breakdown of machinery, or natural calamity, or any other connected reason.

 (iii) The workman’s name should be on the muster rolls of the industrial establishment.

 (iv) The workman should not have been retrenched.

Lay-off is a measure to cope with the temporary inability of an employer to offer employment to a workman to keep the establishment as going concern. It results in immediate unemployment though temporary in nature. It does not put an end to the employer-employee relationship, nor does it involve any alteration in the conditions of service. Lay-off occurs only in a continuing business. When the industrial establishment is closed permanently or it lock-out is declared by the employer, the question of lay-off has no relevance. Lay-off is justified only when it is in conformity with the definition given under Section 2 (kkk) of the Industrial Disputes Act.

If a worker whose name is borne on the muster roll of’ the industrial establishment and who presents himself for work during normal hours on any day, and he is not given employment within two hours of his so presenting himself, he is said to be laid-off for the day.

If he is asked to present himself during the second half of the shift and is given employment, he is deemed to be laid-off for half the day.

However, if the workman is not given employment even after presenting himself at the commencement of the second half of the shift, he is deemed to have been laid-off for the full day.

Further, Section 25 A of the Act provides clearly that the provisions of the Industrial Disputes Act, 1947 relating to lay- off and retrenchment compensation do not apply to the following three types of industrial establishments:

 (a) An industrial establishment in which less than fifty workmen on an average per working day have been employed in the preceding calendar month  

 (b) Industrial establishments which are of a seasonal character or in which work is performed only intermittently 

 (c) Industrial establishments to which chapter V-B applies as inserted by the Industrial Disputes Amendment Act, 1976.

The right to compensation under the Act accrues to a workman only if he has put in at least ‘one year of continuous service.’ Section 25 B defines what amounts to continuous service. A workman is said to be in continuous service if he is for that period in uninterrupted service.

Interruption on account of sickness, authorised leave, an accident, a strike which is not illegal, a lock and a cessation of work which is not due to the fault of the workman should not be taken into consideration for calculating the period of continuous service.

Compensation for Lay-Off (Rights of Workmen):

According to Section 25 C of the Industrial Disputes Act, a workman who is laid-off is entitled to compensation equivalent to 50 per cent of the total basic wages and dearness allowance for the period of lay-off.

This right of compensation is, subject to the following conditions:

 (i) He is not a badli or a casual workman.

 (ii) His name should be borne on the muster rolls of the establishment.

 (iii) He should have completed not less than one year of continuous service under the employer.

 A workman is entitled to lay-off compensation at the rate equal to fifty per cent of the total of the basic wage and dearness allowance for the period of his lay off except for weekly holidays which may intervene.

Compensation can normally be claimed for not more than forty-five days during any period of twelve months.

Even if lay-off exceeds forty-five days during any period of twelve months no compensation is required to be paid for the excess period if there is an agreement to that effect between the workman and the employer.