Labour Law & Hr Consultant
Senior Officer - Hr
Loginmiraclelogistics & Management) Pg
Eswararao Ivaturi
Ex-manager (pers&adma)
+1 Other

Thread Started by #stephen_7

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.

30th June 2014 From India, Chennai
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.
1st July 2014 From India, Salem
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.
2nd July 2014 From India, Bangalore
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.
2nd July 2014 From India, Chennai
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.
2nd July 2014 From India, Salem
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.

3rd July 2014 From United States, Cupertino
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
4th July 2014 From India, Thiruvananthapuram
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.
4th July 2014 From India, Salem
There were some discussions in citehr. earlier which probably not giving a definitive answer to the query, read from these links:
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.
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.
4th July 2014 From India, Bangalore
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
5th July 2014 From India, Thiruvananthapuram
Thank you, Mr.Varghese! This is the judgment I searched for but in vain. Generally, we find the numerical strength of the employees as one of the criteria fixed for the purpose of applicability of Labour legistions either in totality or in respect of particular chapters relating to certain conditions of employment and other aspects of managerial decisions affecting employment in larger scale.. The various conditions of employment, per se, are not just creatures of Law but originate from customs and practices followed ever since human labour started to be barted for reward from times immemorial and later came to be codified with the metamorphosis of the relationship of hirer and the hired from that of master and servant to employer and employee with its ever-icreasing complexities.The logic behind such a move is equity and social justice. That's why leizzez faire has universally given way to State intervention in matters of trade, commerce and indusrial employment.For examlpe payment of bonus.Though, the term " bonus" escapes a precise legal definition, literally it means "anything pleasant that is extra and more or better than expected ". When the agreed due compensation part of the terms of employment is fulfilled by the employer then and there, what is the necessity of paying bonus to the employed at the end of the year? Is it not an additional and unagreed liability imposed on him? In every economic society grant of festival inam to servants is a custom in vouge. In every agrarian community, festival is associated with harvest. When the harvest is objectively fair, the farmer comes forward to apportion a part of his harvest to all the people associated with it directly or indirectly. It is a compassionate gesture in recognition of their services.It arises spontaneously out of the employment relationship of the partners of production.But,in the context of industrial employment as it has been obtaining ever since Industrial Revolution, the relatioship has become highly impersonal and the owner or the master of the business need not be the employer.So, legal compulsion becomes inevitable particularly in the absence of fair or living wages after making provision for equitable dividends to the share holders, depreciation of plant and machinery and future development of the enterprise. The complex nature of financial calculations in this regard makes it imperative for exempting the small enterprise and where the number of employees criteria comes into play.It is not the intent of the Law that a small employer need not pay bonus or his employees have no right to claim bonus.But it is an implied and positive expectation of Law that they would work it out amicably. Similarly, when Chapter V-A of the Industrial Disputes Act is neither applicable nor the strength of workmen is 50 or above, the underlying legislative intention is that the employer and the employees would come to an amicable decision of lay-off as per their subsisting contract of employment or otherwise befitting their mutual interests. Hope, Mr.Kumar agrees with me now.
6th July 2014 From India, Salem
Dear Sirs,
Thanks for the valuable information with practical ideas. I have one query here. At the period of layoff, Can employer appoint casual labours for full month and pay wages to them for dispatching the available stock to customers and do some emergency services (Electrical work) in factory. Unionized workmen anyway will not support it due to some workmen will get full wages and others will not. It will cause internal fight between them.
In this case, Can employer appoint maximum 6 (2 workmen x 3 shifts) contract labours at layoff period?
8th August 2014 From India, Chennai
Dear stephen Greetings!!!
As our friend Umakant rightly said, in an unionised organisa-
tion, we have to deal and take
decisions on practically within
the framework of the rules.
Here, interpretation of rules
based on the problems we are
facing in day to day organisation is also more
important. Regarding engagement of casual labour
during the period of lay off.
no union leader or worker generally agree. To come out
from such problem first of all option should be given to the existing employees whether they would like to work till the available stock is dispatched. If they agree
the required no. of workers can be engaged on routine basis without giving any chance for dispute. This I am
mentioning on practical basis. Hope this may be helpful.
Eswararao Ivaturi.

9th August 2014 From United States, Cupertino
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