Lay-Off Procedures for Companies with 50-100 Workers: What Steps Should Be Taken?

Dear members,

In the ID Act, Section 25A of Chapter VA addresses the applicability of Sections 25C to 25E, which discusses lay-offs and specifies that Section 25A applies to industrial establishments employing less than 50 workmen. In essence, Section 25A outlines the procedure for lay-offs to be followed by an industrial establishment with fewer than 50 workmen.

Chapter VB applies to industrial establishments where more than 100 workmen are employed. Now, my question is, what procedure should be followed during lay-offs by an industrial establishment employing more than 50 but less than 100 workmen? Please clarify.

Thanks.

Understanding Section 25A of the Industrial Disputes Act, 1947

I think that you have to re-read Section 25A. You'll find that Section 25A of the Industrial Disputes Act, 1947, in its Chapter V-A, clearly speaks about the non-applicability of certain other sections to specific industrial establishments. These are: (1) industrial establishments to which Chapter V-B applies, (2) those employing less than 50 workmen, and (3) seasonal establishments. Thus, the non-applicable sections are:

25C, dealing with the right of workmen laid off for compensation,
25D, prescribing the duty of an employer to maintain a muster roll of workmen, and
25E, stating the circumstances under which the laid-off workmen are not entitled to compensation.

The effect of the non-applicability of the above sections to establishments employing less than 50 workmen, by virtue of the operation of Section 25A, is that there is no inherent power in the employer of such establishments to lay off their workmen. If they do so, they must pay them full wages for the entire period. That's the ratio decidendi of the judgment in Workmen of M/S Firestone Tyre & Rubber Co. v M/S Firestone Tyre & Rubber Co., [AIR 1976 SC 1775 - 1976 (1) LLJ 493].

Lay-off in Establishments Employing More Than 50 but Less Than 100 Workmen

Now, coming to your question of lay-off in an establishment employing more than 50 workmen but less than 100. By virtue of the total number of workmen in such establishments being less than 100, Chapter V-B does not apply. Therefore, the issue of obtaining permission for lay-off does not arise.

Again, with the number of workmen being above 50, the exclusion of the applicability of Sections 25C to 25E is not available to such establishments. In other words, the employer of an industrial establishment having more than 50 but less than 100 workmen on his roll can lay them off by paying lay-off compensation.

Dear Umakanthan sir,

I'm a bit confused about the applicability of the ID Act 2017. Will this act be applicable only to industrial establishments or to every establishment? If so, could you please interpret the definition of an industrial establishment?

Thanks In Advance,
Akhil

Dear Akhil, your confusion is quite natural because of the recurrence of the term "Industrial Establishment" in various chapters of the Industrial Disputes Act, 1947, with different meanings. However, you can certainly dispel this confusion with a little more effort by re-reading with reference to the context wherever it is used.

In common parlance, every establishment carrying on any activity pertaining to an industry is an industrial establishment. Such activities may include manufacturing, mining, exploration of oil and allied products, business/trading including buying and selling of goods and commodities, and rendering services like transportation of people and goods, telecommunications, hospitality, education, healthcare, entertainment, etc. Commercial activities like banking, non-banking financial activities, insurance, and so on are also included.

The complex nature of social life is such that every activity, irrespective of its nature and purpose, requires hiring the services of human beings for some reward, which can be either material or otherwise. Take, for example, the running of a temple or a church. It is essentially a religious activity aiming at spiritual benefits for its followers. However, such a religious institution/undertaking may engage in other activities too, like running lodging houses, transportation, renting out buildings, and selling religious artifacts and prasads on a large scale, which are analogous to trade or business. These can be separable from the main spiritual activity of the temple or church. Therefore, that particular separable activity is an industrial establishment. Similarly, if the predominant activity of the undertaking is analogous to industry and the other non-industrial activities of the undertaking are not separable, then the entire undertaking is an industrial establishment for the purpose of the ID Act, 1947. That is the exact purpose and meaning of the term "industrial establishment" as defined under section 2(ka) of the ID Act in Chapter I.

Chapter V-A of the Act deals with lay-off and retrenchment of certain workmen and closure of the establishment generally and specifically with reference to industrial establishments employing less than 100 workmen on average in a period of 12 months prior to lay-off/retrenchment/closure, as the case may be.

Here, the Act has to differentiate the establishments in terms of the application of this chapter as well as the prefixed number of workmen. Therefore, there is another definition of the term "industrial establishment" with an explanation of clarifying nature under section 25-A for the specific purposes of this chapter only. They are (1) those establishments to which Chapter V-B does not apply or such of the factory or mine or plantation where less than 50 workmen are/were employed or a seasonal establishment. For these establishments, no necessity for obtaining permission for lay-off or retrenchment or closure is necessary. Regarding compensation for lay-off in these establishments, I've already placed my view on record based on a case law supra. Insofar as compensation for retrenchment and closure, sections 25F and 25FFF have to be strictly followed.

Coming to all other industrial establishments employing 01 to 99 workmen, no permission is required for lay-off/retrenchment/closure. However, it is mandatory to pay compensations under sections 25-C, 25-F, and 25-FFF respectively. Besides, only in the case of closure, those establishments having 50 and above but below 100 workmen on their rolls must send a 60-day prior notice to the Government under section 25-FFA.

Here, by all other establishments, I mean every establishment employing less than 100 workmen other than those industrial establishments mentioned in section 25-A of Chapter V-A and even those establishments employing 100 and more workmen as well, other than those mentioned and defined in sections 25-K and 25-L respectively in Chapter V-B of the ID Act, 1947.

Regarding Chapter V-B, I need not explain in detail about the aspects of lay-off, retrenchment, and closure, for the concerned provisions are very clear and self-explanatory. However, you should remember that section 25-S of Chapter V-B mandates the application of the general provisions of sections 25B, 25D, 25FF, 25G, 25H, and 25J of Chapter V-A.