Project Closure Layoffs: What Compensation Should Employees Expect When Let Go?

Hi, I have a question. If a project is getting closed, and the employee is applying for other projects but is not being selected due to lack of capability, the company is now asking the employee to leave. What compensation is the employee entitled to?

Retrenchment of Employees: Workman and Non-Workman

In my opinion, you are looking for a way of retrenchment of employees. As termination has to be backed by misconduct, there are two categories of employees here:

1. Workman under IDA 1947
2. Non-Workman (Managerial) Cadre

Retrenchment of a Workman

For retrenchment of a workman, the compensation and procedure according to IDA 1947 Sec 25 have to be followed if your company is an Industrial Establishment. Generally, he will be entitled to gratuity (if applicable), leave with wages, leave balance, unpaid salary for the period, notice pay (if applicable), etc., and compensation of 15 days average pay for every year he has worked in your company.

Retrenchment of a Non-Workman

For non-workman: he may be dismissed by the company by giving due notice. He will be entitled to gratuity (if applicable), leave balance, unpaid salary for the period, notice pay (if applicable), etc., and any other form of pay/allowances that your company provides but has not paid.

Important Considerations During Lockdown

Important: Please note not to terminate/dismiss an employee during the current lockdown period, as it will open up the company for litigation under the Disaster Management Act 2005 and IDA 1947. You will have to continue the employee with his full salary payment during this period.

Regards,

Sir,

The establishment is an IT firm. I am going to lay off the employee as they have not been able to find any jobs within the company that were provided by the organization. Hence, we have to lay off the employee since they did not secure a job even after being given the opportunity.

Sir, to add on under the Disaster Management Act, I did not see any provisions that a company cannot lay off. Can you please share the document if you may have.

Employee Retrenchment in IT Outsourcing

Considering the case here that the company is an IT company, I presume that the employee is currently on your payroll and was deputed to another organization/company for some job work - IT outsourcing.

Considering that the employee has not found any job within the company provided by the organization, he may be retrenched.

If the employee (although in an IT company) is not working at any supervisory or managerial level but still fits the definition of a "workman" doing skilled/technical work, the provisions of the ID Act must be followed, or the company may open itself to litigations.

Provisions Under the Disaster Management Act

Secondly, regarding your query that the provisions of layoff do not appear in the Disaster Management Act...

The government, through its notification, has clearly directed employers not to terminate the employment of employees, specifically workmen, or deduct any part of their salary. These directives have been issued under the Disaster Management Act, which empowers the government to give necessary orders/directions for disease containment and related measures for its curtailment.

Hence, considering that in the retrenchment/layoff there will be termination of employment and reduction in the employee's salary, the employer cannot take either of these actions during the lockdown situation.

Even though such a provision is not directly stated under the DM Act, the orders of the government are mandatory for compliance.

The company may make a decision after the lockdown period is over.

Hope this answers your query.

Regards,

Fantastic, sir. This gives a full picture.

If it's under normal circumstances and the IT company lays off a worker due to non-availability of a project, currently, we are only giving 2 weeks of pay. Can you please let me know what the law says? What is the amount of money I need to pay as notice pay for employees whom we are laying off under normal circumstances?

I have been working with a reputed travel agency in Mumbai for the past 3.5 years on a contract/third-party basis. On 17th March, our management decided to lay off a few employees due to no business as a result of Covid-19. They shortlisted around 10-12 employees, including myself, and verbally asked us to resign by the 20th of March. We requested that they email us the reason for our resignation.

Instead of emailing us, they pressured us verbally through calls, stating that if we did not resign, they would terminate our employment. Due to the lockdown that was subsequently imposed, there was no action taken on the resignation matter. Suddenly, yesterday, I received a contract closure letter from my actual employer/staffing company, stating that my employment/contract would end on 15th May 2020 due to business exigency. I am also unsure if I will receive my full and final settlement.

Please advise me on this critical situation as I need to take care of my family. 