Retirement Age for Workers Without Contracts in Small Factories: What Does the Law Say?

A SSI factory in Maharashtra with fewer than 50 workers employs a worker without an appointment letter, and the factory does not have standing orders or a union. At what age can such a worker be retired, or must they be employed until they are physically and mentally fit? Please advise on applicable laws and court cases for similar situations.

Retirement Age and Legal Implications

In the absence of any retirement age fixed either in the appointment order or standing order, an employee can work until he is fit to work. In such a case, if the employer wants an employee to retire at a certain age, it shall attract the provisions of Section 25F of the Industrial Disputes Act, which deals with retrenchment and the compensation to be paid for retrenchment.

Regards,
Madhu.T.K

What Mr. Madhu said is correct. He has to be continued until he is physically and mentally fit or chooses to resign by submitting a resignation.

Regards,
B. Saikumar
Mumbai

As seen from your query, it is very strange that the SSI factory you described does not want to follow any law or rule while recruiting a person or thereafter during the service but wants to follow the provisions of labor laws and court judgments while terminating one's services.

Retirement Age and Conditions

As a general rule, you may retire a person on reaching 58 years of age. In case you intend to retire a person on the grounds of physical and mental fitness, you have to prove the same by asking him to present himself before a Medical Board of a recognized hospital, which can be questioned by a court of law if disputed. As suggested by Sh. B. Saikumar, it is better to obtain a resignation from such a person to avoid legal complications later on.

Reservations on Legal Suggestions

I am sorry; I have certain reservations about agreeing with the suggestion given by my colleague Madhu.T.K. In my opinion, the provisions of Section 25F of the Industrial Disputes Act have wide implications and cannot be applied to an individual case. There is a set procedure for resorting to retrenchment, for which the employer should have cogent reasons or grounds.

Regards,
BS Kals
Member since Aug 2011

Dear fellows, where there is no mention of retirement age in the appointment letter, nor does any standing order exist, the model standing order of the state prevails. There is no need to apply any provision of any other act to retire the employee.

Regards.

If an employee is not fit for the work for which they are employed for a continuous period of 2 years, the employee can be terminated for continued ill health. This ill health can be physical, mental, or any other. The important thing is that the employee is unable to perform the work for which they are employed. In such cases, there is no question of age and retirement.

Otherwise, although there are no Model Standing Orders applicable, it does not mean there can be no rules. The employer can adopt the Model Standing Orders. Even when nothing is done, it is reasonable that the employee is superannuated at the age of 60.

Regards, Vibhakar Ramtirthkar.

Absolutely no problem if you want to continue him in the absence of any SOPolicy. But you may face some manageable issues after the normal superannuation age of 55 or 58 or 60 (only Judges retire at 65). This is regarding PF, ESI, Gratuity, and most importantly, what repercussions you may face from his colleagues who would be affected in terms of blocked promotion, importance, portfolio, etc., and he might deny an opportunity for a youngster who would have got a livelihood in his place.

Regards,
Kumar S.

As is well known, the provision for retirement is mentioned in the applicable Standard Operating Procedure (SO). Neither the unit has its own SO, nor is the Maharashtra Model SO applicable since it applies to industries employing 50 or more workers. Since there is no such provision mentioned anywhere in the unit's rule book, as opined by Shri Madhu, an employee has a right to continue in service until he is physically and mentally fit. Retiring him at 55/58/60 or at any later date could be termed as 'Retrenchment' with all the consequences flowing from it. Thus, it would be better for the Small Scale Industry (SSI) unit to have its rules and regulations clearly fixed, indicating the retirement age.

I agree with you that model standing orders will apply in the absence of certified standing orders. However, in this case, the factory employs less than 50 workers, and hence the Industrial Employment (Standing Orders) Act is not applicable.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

An establishment employing fewer than 50 employees and having no standing rules regarding conditions of service is the main focus of this discussion. In such an establishment that operates solely based on the proprietor's decisions, I don't think there will be any repercussions from fellow employees who are also engaged without any service conditions. When there are no conditions of service, why should they worry about promotions and opportunities for younger employees?

Understanding the Model Standing Order

The Model Standing Order is only a model that can be adapted for a period of six months from the date on which the establishment falls under the purview of the Industrial Establishment (Standing Orders) Act. Therefore, it does not mean that an establishment can follow the model standing order without proceeding to obtain certified standing orders.

Clarification on Section 25F

BS Kals, a member since 2011, has misinterpreted section 25F, as I understand it. Section 25F applies to individual cases, and even a casual employee has the right to receive protection under section 25F if their service is terminated without following the provisions of section 25F or 25N (in cases of companies employing 100 or more workers falling under chapter VB). Therefore, if an employee's service is terminated due to reaching a specific age, such as 58 or 60, on the grounds of superannuation without any conditions of service either in the appointment order or certified standing orders of the company, the termination will be deemed as retrenchment as defined in section 2(oo) of the Industrial Disputes Act. It will be an illegal termination if the termination is made without following section 25F/25N of the Act.

Regards,
Madhu.T.K

As is well known, the provision for retirement is mentioned in the applicable Standing Orders (SO). Neither the unit has its own SO, nor is the Maharashtra Model SO applicable since it applies to industries employing 50 or more workers. Since there is no such provision mentioned anywhere in the Unit's Rule book, as opined by Shri Madhu, an employee has a right to continue in service until they are physically and mentally fit. Retiring them at 55/58/60 or at any later date could be termed as 'Retrenchment' and with all the consequences flowing from it. Thus, it would be better for the SSI unit to have its rules and regulations clearly fixed, indicating the retirement age.

Probably, they might as well officially retire them at some age and reengage them as a Consultant or some such designation suitable on a fixed-term contract. This way, they might even qualify for Employee Provident Fund (EPF) and gratuity, which, if invested in a good portfolio, would be additional income for them. Of course, this might deny the Provident Fund (PF) Employer's contribution if eligible.

Regards, Kumar.s.

In my organization, I am also facing the same problem. As an HR professional, I have tried my best to bring about change, but the management didn't support my efforts. Would it be a problem if a labor officer ever visited here?

Regards,
Tupai

I believe that the employees of the said organization are covered under the Payment of Gratuity Act. Please check the deed your organization has signed with the insurance company, as the age of retirement is the most important clause of the deed without which a deed cannot be signed. If the age of retirement is mentioned in the deed, then that document will have the final say on the matter.

Regards,
Kamal

Retirement and Reengagement as a Consultant

Probably, they might as well officially retire him at some age and reengage him as a Consultant or some such designation suitable on a fixed-term contract. This way, he might even qualify for EP and gratuity, which, if invested in a good portfolio, would be additional income for him. Of course, this might deny the PF Employer's contribution if eligible.

Conditions for Retirement

An employer cannot retire an employee at a certain age unless it is stipulated in an agreement, standing orders, or service rules. Therefore, unless an employee agrees to resign on his own, he needs to be continued subject to his being medically fit. However, an employee may agree to resign if the employer can approach the employee with an offer to engage him as a consultant. Otherwise, any unilateral decision to retire an employee will be squarely covered by retrenchment, as Madhu said.

Regards,
B. Saikumar
Mumbai

Your clue to retiring an employee is interesting. However, the age of retirement is a condition of service and thus will be the subject matter of a contract between the employer and employee and cannot be a subject matter of an agreement between the employer and third parties. It also implies that if the employer and the employees cannot agree upon any service condition, the employer can indirectly control and regulate the service conditions of the employees by entering agreements with third parties, which is unknown to service law and industrial law. Nevertheless, I appreciate the effort on your part to look for helpful solutions.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

I too agree with Madhu ji. Still, I wish to draw your kind attention to one very old case in which the Supreme Court in GM Talang and others Vs. Shaw Wallace relied upon the report of the Norms Committee. According to the Norms Committee, the age for retirement for workmen in all industries should be fixed at 60.

Importance of Appointment Orders in Small Organizations

In many small organizations, appointment orders are not given. They may not be covered under standard operating procedures (SOP) or model SOP. In such organizations, retirements will result in retrenchment. It is important for such organizations to have appointment orders or contracts of appointment with the employees. These documents should contain all terms and conditions, specifically outlining the age of retirement.

Regards,
Varghese Mathew
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