Understanding Retrenchment: Which Establishments Fall Under VA & VB in the ID Act?

Dear seniors, I am confused about which establishment comes under V A & V B in the ID Act for retrenchment benefits and procedure. Please clarify the same.

Regards,
Jaspal

CH-VA

In this section and in sections 25-C, 25-D, and 25-E, 'industrial establishment' means:

(i) A factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948); or

(ii) A mine as defined in clause (j) of section 2 of the Mines Act, 1952 (35 of 1952); or

(iii) A plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (63 of 1951).

Sections 25C to 25E inclusive shall not apply to Industrial Establishments to which Chapter VB applies, or:

(a) To industrial establishments in which less than fifty workmen on average per working day have been employed in the preceding calendar month; or

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

Ch VB

Application of Chapter V-B

(1) The provisions of this Chapter shall apply to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than one hundred workmen were employed on average per working day for the preceding twelve months.

25-L Definitions

For the purposes of this Chapter:

(a) "Industrial establishment" means:

(i) A factory as defined in clause (m) of section 2 of the Factories Act, 1948 (63 of 1948)

(ii) A mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952 (35 of 1952); or

(iii) A plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951 (69 of 1951);

(b) Notwithstanding anything contained in sub-clause (ii) of clause (a) of section 2,

(i) In relation to any company in which not less than fifty-one percent of the paid-up share capital is held by the Central Government, or

(ii) In relation to any corporation not being a corporation referred to in sub-clause (i) of clause (a) section 2 established by or under any law made by Parliament,

the Central Government shall be the appropriate Government.

Our construction establishment employs 700 workmen through 10 subcontractors, for which we have obtained the labor license in our establishment's name. Could you please clarify whether we will fall under category VA or VB? I am eagerly awaiting your valuable feedback.

Thank you,

Jaspal

All establishments must follow the retrenchment procedures as per the ID Act. However, for managerial staff, the company will adhere to the retrenchment procedure stated in their Offer Letter or Appointment Letter.

Regards,

I presume you are covered under the Shops & Commercial Act for your area. You have informed that you employ around 700 employees. A breakdown of this figure into those who would conform to the definition of a "workman" under the Industrial Disputes Act and those who do not is also necessary.

While the relevant provisions of the Industrial Disputes Act apply primarily to "factories" under the Factories Act, the notice period requirement and the compensation and other related provisions will continue to apply even if you are a Shops & Commercial Act-covered establishment.

Now to the Crux of the Matter:

1) Chapter V-A applies to factories under the Factories Act and other establishments having employed less than 50 employees on any day during the preceding twelve months.

2) Chapter V-B applies to factories under the Factories Act and other establishments having employed more than 100 employees on any day during the preceding twelve months.

While Chapter V-A allows you to downsize (retrench, lay off, or even close down the place of manufacture) without obtaining prior permission from the Appropriate government, Chapter V-B mandates that unless you have obtained PRIOR permission from the Appropriate government, you are prohibited from retrenching, laying off, or closing down the manufacturing establishment.

Procedures are identical for all types of establishments, but permission is a necessity only for factories employing more than 100 employees.

This response is nothing more than an introduction. If you need specific advice or guidance, you will need to ask a more focused question and provide relevant information, please!

Prima facie, your issue revolves around the number of workmen you are employing and whether, therefore, you need to obtain prior permission from the Appropriate government!

Hope this helps!

Regards,
Samvedan

The question is whether this will apply since construction activity is not an industrial establishment. Construction is not production, I think.

In my considered opinion, the requirement of "permission" will not apply as it is concerned only with Industrial Establishments as defined under the Act. The compensation part, the Notice to Employees or wage in lieu of Notice part, Information to the Government in stipulated form, and the condition precedent part in appropriate cases will apply to any establishment as much as the Industrial Dispute Act applies to establishments covered by the Shops & Comm... Act anyway!

Regards,
Samvedan
August 22, 2012

Applicability of Chapter V-A and V-B for Layoffs

For the purpose of layoffs, Chapter V-A is not applicable to shops and commercial establishments. However, the provisions of retrenchment and closure will apply to them if they have 50 to 99 workmen. If they have 100 or more workmen, both V-A and V-B will not apply.

Regards,
Varghese Mathew
BIL, PGDPM
Labour Law/HR Advisor
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