Understanding Layoff Regulations and Part-time Work under the Industrial Disputes Act

We have a factory wherein fewer than 50 workmen are working. During the current fiscal year, we don't have any orders; as a result, we are unable to meet our fixed costs on a month-to-month basis. Therefore, we wish to declare a layoff. Since our workforce is fewer than 50, we do not need to seek permission from the government for the layoff.

Question on Layoff and Part-Time Work

My question is whether the workers would remain without work during the layoff, or if we can give them part-time work, such as for 3 or 4 hours a day. Since we may not have enough work for them for the entire day, could we assign maintenance work during the layoff period?

Understanding State Rules for Layoffs

You need to check the rules in your state and the procedures specified in the state rules. You are allowed total or partial layoff. However, either a person is on layoff or he is working; it can't be halfway. So, some of the persons can be working, and some can be laid off. But you can't give them half days of work and lay off for a half day.

One way is to give layoff on a rolling basis so the payment for work gets distributed equitably. I hope seniors can confirm that for me.

We have a factory where more than 300 workmen are working. The company has been facing financial crises for the last 6 months, and some of the units are not operational. Consequently, the workers have no work. Can we declare a lay-off in such a case?

Is a Lay-off Allowed During Financial Crises?

Is a lay-off allowed during financial crises or not?

Layoff Provisions for Small Establishments

A company wherein fewer than 50 workers are employed is not covered by the layoff provisions of the Industrial Disputes Act. Therefore, if you do not have any work, you can declare a layoff without informing the Labour department, but you should pay full wages during the layoff period. This means Section 25C of the ID Act, which outlines the payment of layoff compensation at the rate of 50% of wages, is not applicable to establishments employing fewer than 50 workers.

However, this does not mean that such small establishments can declare a layoff without paying the layoff compensation of 50% wages. It should be understood that such organizations shall pay full wages in case they declare a layoff, as was decided in Workmen Vs Firestone Tyre & Rubber Co (1976(1)LLJ 493SC).

Therefore, it is advisable to engage them in part-time work for at least 3 or 4 hours a day.

Regards,
Madhu.T.K

I would give a point-wise reply as follows:

1. You need not declare a layoff since your factory employs fewer than 50 workers. Section 25A (1)(a) of the ID Act, 1947, prescribes that the provisions of layoff are not applicable to a factory employing less than 50 workers.

2. If your factory wants to give work for half a day, you can do that by having a written understanding with the workers if they are employed directly by you, or with the contractor through whom you are employing the workers.

3. If you stop the work and want to carry out the maintenance of machines, you can do that. The only thing to be taken care of is that your contract letters given to workers or the understanding made with them should be clearly written and accepted by the contractor/workers so that workers may not raise any issue at any subsequent stage.

I would like to draw Mr. Srivastava's attention to the case cited by me in my reply and would like to reiterate that the non-applicability of Section 25A (1)(a) to establishments employing fewer than 50 workers should be read as follows:

Legal Interpretation of Section 25C

Section 25C does not recognize a common law right to lay off workmen. Therefore, the reason for a layoff must be one contemplated by Section 2(kkk) [Workmen of Dewan Tea Estate Vs. Management (AIR 1964 SC 1458)]. Financial difficulties are not a reason for layoff as per Section 2(kkk).

If the number of workers is below fifty, Section 25C will not apply. In the absence of service conditions and standing orders, the employer has no right to lay off their workmen, and in such cases, the workmen would be entitled to their full wages for the period of layoff [Workmen Vs. Firestone Tyre & Rubber Co (1976 (1) LLJ 493 SC)].

Regards,
Madhu.T.K

You are contradicting yourself. If you are able to provide work for less than half a day, then you can pay 60% of wages as minimum wages. You can't have a lay-off and simultaneously offer part-time work for part of the day.

I am unable to find any contradiction in Madhu's statements as suggested by Shrikanth. If we closely analyze the purpose, scheme, and provisions of the Industrial Disputes Act, 1947, we will come to the irrefutable conclusion that it is a piece of crisis-management industrial relations law imposing reasonable restrictions on the rights and responsibilities of both the employer and the employees to keep the wheels of employment moving even in harder times.

The statutory restrictions on hiring and firing, both temporary or otherwise, are appropriate modifications of the existing contractual rights between the employer and the employees. In fact, such restrictions are only reasonable concessions granted to establishments of larger employment strength to tide over the difficulties arising due to specific contingencies. From that point of view, establishments normally employing fewer workmen have no right, both statutorily and morally, to do away with the smooth flow of employment in violation of the contract of employment.