Outsourcing Led to Surplus Staff: Is Their Petition for Reinstatement Justified?

Hi, in our company, the operation has been outsourced to an organization on a contract basis. Consequently, some employees, including casual, trainees, regular, and contractual staff, have become surplus. One day, management issued a notice stating that their services are no longer required and instructed them to settle their accounts. Subsequently, almost all employees settled their final accounts and obtained a no-dues certificate. Following this, all employees went to the labor office and submitted a petition for reinstatement. The labor office has now requested our presence at a meeting.

My question is, since they have cleared their settlements, is their petition justified? Kindly advise. - Mantu71

Dear,

Going to the Lab Commissioner is their right. You will have to explain before the authority and satisfy that the retrenchment is valid and proper as per the provisions of the ID Act. Get prepared for that. Hire a local specialist/consultant if you feel the need.

With Regards
V. Sounder Rajan
E-mail: rajanassociates@eth.net

As Rajanassociates stated, going to the Labour Office or Labour Court is their right. The employees may even defend that they were forced to sign some papers but were totally ignorant of the consequences. The Labour Dept., which is supposed to be inclined towards the labor side, may even ask the employer for reinstatement of the workers retrenched.

However, the employer has every right to retrench the workers who are found surplus but after following the relevant provisions of the Industrial Disputes Act. If your company has an employment strength of 100 or more, you should have applied to the government for permission to retrench the workers. Similarly, you should have given notice to the workers three months before such retrenchment. Retrenchment of employees by an employer who employs 100 or more workers (or where Chapter VB of the ID Act applies) without approval of the government will be treated as invalid.

In case you employ less than 100 but not less than 50 employees, you need to give at least one month's notice and intimate the government of your intention to retrench the listed employees. Notice can be waived if you compensate by way of salary for the month(s).

The above being the grounds, your act of retrenchment shall not be justified just by asking the employees to sign an agreement for mass retrenchment or settlement. In labor issues, mass retrenchment will always be viewed very seriously. Therefore, while attending the hearing, you have to show how the workers became surplus, why shouldn't the workers be given alternative employment in your other companies within a radius of 5 sq. km, and why the notice in form P-A seeking permission from the government was not issued?

Even in the case of concerns employing less than 50 employees, although prior intimation to the government is not required, you should have informed the employees of the retrenchment by way of notice in form P. Please study the matter properly before attending the hearing. I hope some other members may also have inputs to share with you. Let's take that also before we come to a conclusion.

Regards,
Madhu.T.K