Facing Layoffs at a Small Plant: What Steps Should We Take to Ensure a Smooth Process?

Layoff Procedure for a Plant with 65-70 Workers

It's about the layoff of a plant with 65-70 workers. The plant has not been in progress mode for the last 10-12 months and has been incurring losses continuously even after due care and efforts. Every month, we have been investing Rs.10+ lakhs towards wages, and management wants to reduce this expenditure by laying off employees immediately.

Understanding the Layoff Process

My understanding of the layoff process is as follows:
- Provide a 30-day notice to workers.
- Government approval is not necessary in this case as the number of workers is below 100.

I would appreciate your insights on any additional formalities and precautions to consider in this situation.

Thanks,

Raghavendra

It is true that you do not need to get any permission from the government for declaring a layoff in your company, as the number of workers is less than 100. Therefore, Chapter VB of the Industrial Disputes Act is not applicable. However, since the number of employees is more than 50, you must inform the government of your decision to lay off, stating the reasons for the layoff.

Reasons for Layoff

The reasons for a layoff should be those provided in Section 2(kkk) of the Act, which defines a layoff as the failure to provide employment due to a shortage of raw materials, coal, power, breakdown of machinery due to natural calamity, or any connected reasons or accumulation of stock. It does not include financial loss of the company. In the case of Workmen of Dewan Tea Estate Vs Management (1964 AIR 1458), it was decided that financial loss could not be considered a reason for laying off employees. In this case, reference was also made to the Certified Standing Orders of the Tea Estate, which stated that "any reason beyond the control of the management shall be taken as a reason for layoff." The court ruled out the significance of the Standing Order as well.

Therefore, before proceeding further, please conduct homework to determine whether the reasons for the layoff are genuine or not.

Regards,
Madhu.T.K

I think you are talking about retrenchment, but you mentioned layoff.

Meaning:

Layoff refers to the inability or failure on the part of the employer to provide employment to the employees whose names are on the muster roll due to a lack of power, raw material, accumulation of stock, etc.

Retrenchment means the termination of employment for reasons other than the following:

1. Retirement
2. Voluntary Retirement
3. Termination due to disciplinary action
4. Due to disablement
5. Non-renewal of a contract

As you mentioned, a 30-day notice period will come under retrenchment and not layoff.

Retrenchment Procedure:

If your organization employs more than 50 workers but fewer than 100 workers, then the following procedure will apply:

1. You have to give a 30-day notice period to workers who have completed continuous service of 240 days.
2. If you want to retrench workers sooner, then pay one month's salary in lieu of the 30-day notice period.
3. Then compensation for retrenched employees is 15 days' salary for each completed year of service.
4. Next, you have to inform the Assistant Labour Commissioner or Commissioner about the number of workers retrenched by your organization.
5. Settle the Full & Final settlement for retrenched workers.

Regards,
Mr. Thumbs Up

Yes, you can go for retrenchment. But while doing so, you cannot pick and choose the employees; it should be the last one employed in a particular division or category who should be retrenched first. For retrenchment, obviously, one month notice and retrenchment compensation at the rate of 15 days' pay for every year of service should be paid to each employee who has completed at least one year of service with the company. Similarly, intimation to the Labor Officer should also be served.

Madhu.T.K