Lay Off Reasons - Industrial Establishment - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Loginmiraclelogistics
Asso.prof.(commerce & Management) Pg
Stephen_7
Senior Officer - Hr
Eswararao Ivaturi
Ex-manager (pers&adma)
+1 Other

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Dear Seniors,

Our management was planning to do layoff workers in one of the factory in tamilnadu which was 25 years old. But it was making huge loses from past 5 years due to Raw material price is tripled, power, competitors, etc..! Right now it is in the position of almost nil income from past 6 months, where production happens of 5 to 10% maximum of that plant's capacity. Some of the ground details of the factory:

1. Permanent workers are 20 and they have labour union.

2. Management spoke to them to downsize the workers to half, but they wanted life time settlement and everyone wanted to leave at single shot, as it will cause internal fight inside their union.

3. Average salary for the workers is Rs. 10,000/- Basic average is Rs. 5000/-

4. Most of all 20 workers are working for 13 to 20 years service.

Management wants to know, what are the basic things is required to start the lay off process. To whom should we inform about this plan? to Inspector of factories or Labor commissioner? On what grounds it will be succeeded.

Please explain.

Thanks.

Dear Stephan,
Hope that your Management intends to keep some workmen off work temporarily due to their inability to provide work to all the workmen for the reasons stated. Given the reasons cited are genuine and the particulars given are correct, you can straight away lay the required no of workmen off according to the order of their juniority simultaneously informing the Area Conciliation Officer and the Commissioner of Labour( Form Q1 ). Remember that you will have to pay 50% of the last-drawn wages for the days of lay-off. Ask your Management to make a critical analysis of the present situation and if the chances of revival or improvement is very remote or impossible, better devise a voluntary separation scheme in consultation with the workmen and try to implement it forthwith. Otherwise, sooner or later, your establishment will become a white elephant.

Dear Stephen,
Mr.Umakanthan's suggestion is the need of the hour. Incidentally, you mentioned that your factory (manufacturing or fabrication industry ? ) is running into loss for the lost 5 yrs. If so I presume by now your Net worth should have eroded beyond restructuring in which case it now attained the status of a "SICK" co. if so, it should get registered with the BIFR under the SICA (if applicable to you) and apply for closure. This is a binding provision under the Companies Act as well. However you should consult your Auditors for a proper guidance before taking any decision. On the other hand, to smoothen the process it's necessary that all employees should be settled after reaching to a mutually agreed solution. Laying off or lockout only add to your burden especially you may not have a revival plan on hand for a foreseeable near future viewing from the hopeless power situation and bleak monsoon in TN.

Dear Umakanthan sir,
Thanks for your valuable suggestion. We are planning for lay off as of now. We have the below queries. Please help us by clarifying the below doubts.
1. Last drawn wages means, do we need to pay 50% of their basic wages? or 50% of their gross salary?
2. Are they supposed to come 2 weeks (15 days) per month whenever there is work in the factory? if so, how many days before we should inform them to come to work?
3. If they don't turn up to the work at critical times on lay off period, what can company do?
Management doesn't want to lock out now. As they are expecting that the situation will improve in next few months.

Dear Stephan,
1) Lay-Off compensation = 50% of Basic+D.A only. No compensation payable for intervening weekly holidays during Lay-Off period.
2) During the entire period of Lay-Off, the laid-off workmen should present themselves for work at the establishment at the appointed time during normal working hours at least once a day.
3) Failure to do so will result in deprivation of compensation.

Before giving layoff, it is necessary to buildup the correspondence intimating the workers and the union through
circulars with a copy to Asstt. Labour Commissioner or
Labour Commissioner about the gravity of the situation of the factory. Also separate letters should be addressed
to the Union concerned marking s copy to ACL/DCL indicating the inability to
run the factory/establishment. Better to hold talks with the Union to make them understand the need to declare layoff. Lay off wages are required to be paid for 45 days and thereafter \"No work no pay\" will apply. There is a clause in the Industrial disputes act for the layoff on account of shortage of Raw material or power. Alternatively, taking into confidence of the Union, on rotation 50% of the
workwes can be engaged on full working and remaining on lay off. However everything depends on how the HR rep. convince the Union and the legal authorities.
Eswararao Ivaturi.

Dear friends I doubt whether provisions of lay off in Industrial Disputes Act applies to a Factory having less than 50 workmen.See section 25 A(a) of ID Act. Varghese Mathew
Yes, Mr.varghese, you are absolutely correct. As per Sec.25A (1)(a), every industrial establishment employing less than 50 workmen on an average per working day in the preceding calendar month is exempted from the provisions of Ss 25C to 25E. But we should admit the fact that the employer has no inherent right to lay-off his workmen unless it has been specifically provided for in the contract of employment or governed by the provisions of any Law applicable.The resultant effect of lay-off is temporary unemployment and loss of earnings to the workmen if it is genuine and malafide. So, there is scope for an argument that such establishments employing less than 50 workmen have no right to lay-off their workmen by virtue of the exemption granted u/s 25A from Sections 25C to 25E. Even, High Courts have a divided opinion on this issue. While the Kerala High Court held in South India Corporation v. All Kerala Cashewnut Factory Workers' Federation [ 1960 (II) LLJ 103 ] that the bar of S.25A is absolute, the Punjab High Court held in Kundan Iron and Steel Iindustries [1961 II LLJ. 599 ] that the award granting compensation was justified because the lay-off virtually amounted to malafide termination of the services of the workmen. So, my suggestion was not based on legal principle but as a matter of expediency of crisis management.
Friends,
There were some discussions in citehr. earlier which probably not giving a definitive answer to the query, read from these links:
https://www.citehr.com/16363-legal-p...s-act-pg2.html
https://www.citehr.com/260390-layoff...ia-id-act.html
https://www.citehr.com/141472-lay-of...-disputes.html
https://www.citehr.com/145359-regard...ctory-act.html
Friends can find some references reg.Lay off in an estt. where the employees are < 50 (ID Act applies only to estts. where 50 or more employees on roll) read from the following link.
http://www.psalegal.com/pdf/LABOUR%2...SSUE%20III.pdf
Still, I feel, we have to find conclusive legal provisions which applies to lay off in estt. where employees are less than 50. Till such time it's "time out time" , a strategic break.

In the SC decision in Workmen v. Firestone Tyre & Rubber Co (1976 1 LLJ 493) it was held that where the number of workmen are 30, chapter V-A is not applicable and workmen are entitled for full wages for lay off.
Varghese Mathew


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