Can Employers Use Sabbaticals Instead of Layoffs During Financial Crises? Seeking Advice

Hi Seniors/Experts,

Request your help to know to what extent an employer can use sabbaticals as a tool instead of layoffs. To announce leave without pay for a long time for all employees in this financial crisis time.

Understanding Sabbaticals

A sabbatical is not just a long leave but also a study leave. When an employee wishes to pursue higher studies, companies allow such employees to take a long leave while keeping their employment intact. Generally, a sabbatical is paid, but it can be unpaid too. Availment of a sabbatical is based on trust. Companies have complete trust in the employee, believing that when an employee returns with enhanced knowledge, it would be beneficial to the company. Therefore, it is a win-win situation. However, the allotment of sabbaticals is few and far between and cannot be on a mass scale.

Legal Implications of Using Sabbaticals as Layoffs

However, in your case, what you prefer doing is camouflaging a layoff with a sabbatical. Will it escape legal scrutiny? That remains to be seen. Rather than adopting a method that misrepresents a situation, is it not worthwhile to approach the labor office and obtain permission that is legally valid? COVID-19 is an unprecedented situation, and I don't think that the labor officers will avoid giving permission.

Future Financial Prospects

Lastly, how come your company is so sure that its financial situation will not improve for a long time? Once the situation becomes normal, who knows, India may start getting export orders in a big way, which, in turn, could boost economic activity at the national level.

Thanks,

Dinesh Divekar

Sabbatical is employee-initiated leave for reasons explained above. No pay, no benefits, no service continuity could be the conditions applied as defined in company policy.

Furlough leave could be an option that the organization can initiate in such situations. Part pay or no pay could be discretionary, but medical insurance benefits, term life benefits, and service accrual for gratuity, etc., would be applicable during furlough. Can someone validate the furlough leave point?

Thanks

Dear Thirumeni Selvam,

Is it an alternative proposal gaining the active consideration of your management, or just a curious question to find out an alternative for mass layoff in a situation like a nationwide lockdown due to COVID-19?

Our learned friend, Mr. Dinesh, has given an elaborate answer distinguishing sabbatical leave and layoff and the legal approach to layoff, and I do hope that your "thank you note" indicates your satisfactory acceptance of the answers given so far.

Just for the sake of academic as well as practical knowledge of the concept of "layoff" as defined under Section 2(kkk) of the Industrial Disputes Act, 1947, I request you to kindly go through sections 25-C of Chapter V-A and 25-M of Chapter V-B of the same. Since the outbreak of COVID-19 is recognized as a national disaster under the provisions of the Disaster Management Act, 2005, any industrial establishment falling under Chapter V-B need not seek prior permission from the appropriate Government as per the exception clause of Section 25-M(1) but can straight away resort to layoff subject to the payment of compensation as provided for under Section 25-C.