Facing a Raw Material Shortage: What Are the Legal Liabilities for Laying Off 50% of Employees?

Firm running a manufacturing activity with more than 1000 permanent employees, but due to a shortage of raw materials, the firm is unable to provide work to its employees. The firm has already informed its employees that the raw material shortage will worsen day by day, leading to a 50% reduction in the organization's workforce. What legal liabilities does the firm bear?

As per the Industrial Disputes Act, for a shortage of raw material, the employer can lay off employees. Such employees should be paid half of basic pay + DA as per Section 25C of the said act.

Dear Friend,

Please study Chapter V B of the ID Act. This chapter starts with Section 25K, and the provisions are very easy and clear to understand.

As per Chapter VB of the Act, you can neither terminate/retrench nor lay off except by following due process of law as enshrined in the provisions of this chapter. You will have to obtain permission from the appropriate Government.

Warm Regards,
Bharat Gera
HR Consultant