Navigating Termination: Do We Follow the Industrial Disputes Act for Contract Labour?

Dear Sir, do we need to follow The Industrial Disputes Act of 1947 when we terminate a workman's employment who is working under the Contract Labour (Regulation and Abolition) Act of 1970 and the Contract Labour (Regulation & Abolition) Central Rules of 1971 for any reason (i.e., completion of contract work, lay-off, termination, retrenchment, etc.)?

Conditions Precedent to Retrenchment

The Industrial Disputes Act of 1947 specifies conditions precedent to the retrenchment of workmen. No workman employed in any industry, who has been in continuous service for not less than one year under an employer, shall be retrenched by that employer until:

(a) The workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice.

(b) The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof more than six months.

(c) Notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate Government by notification in the Official Gazette.

Rights of Laid-Off Workmen

The Industrial Disputes Act of 1947 also addresses the right of workmen laid off for compensation. Whenever a workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is laid off, except for such weekly holidays as may intervene. The compensation shall be equal to fifty percent of the total of the basic wages and dearness allowance that would have been payable to him had he not been laid off.

Explanation of Badli Workman

Explanation: "Badli workman" means a workman who is employed in an industrial establishment in the place of another workman whose name is borne on the muster rolls of the establishment. However, he shall cease to be regarded as such for the purposes of this section if he has completed one year of continuous service in the establishment.

Thank you.

Applicability of the ID Act

Is this information for dealing with active units or for academic knowledge? First and foremost, one should be sure whether or not the ID Act is applicable to the establishment and the employee concerned.

1) The grounds under which the retrenchment is being considered.
2) Conditions prevailing warranting the retrenchment, such as the closure of the unit, etc.
3) Compliance with procedures applicable before the retrenchment.
4) Approval of the competent authorities.
5) Ascertainment and disbursement of compensation to the concerned, etc.

If you provide full details of the unit and other circumstances, we may be able to offer our suggestions. The matter has been discussed many times in this forum. Please search for the links on the subject, which you may find to your right on the screen, for further information.

Dear Thirumurugan,

At times, everyone requires re-reading certain terms used in any law, as well as some provisions provided therein under special circumstances, to understand their import. The term "retrenchment" is one such term, as well as a provision to reduce the surplusage of regular workmen in an industrial establishment.

The term "retrenchment," as defined under Section 2(oo) of the ID Act, 1947, encompasses all types of termination of the services of a workman by the employer, other than those explicitly excluded therein. The conditions precedent to retrenchment as set down under Section 25-F and the procedures therein under Sections 25-G and 25-N certainly presuppose a contract of service between the employees proposed to be retrenched and their employer, as well as the regularity of their employment.

Exactly similar is the situation of lay-off.

As such, can you please confirm if there exists a contract of service between the Principal Employer and the contract labor engaged by him through a contractor?