Facing Hospital Closure: What Steps Should HR Take to Support Staff and Ensure Compliance?

Dear Seniors, my name is Aathira, and I work as an HR in a reputed hospital in Kerala. Our management is planning to close this organization. The staff strength is nearly 200. As an HR, what do I need to do before closing this organization, both from a legal perspective and in other aspects? Please assist me.

Thank you.

Please clarify these points:

1. What are the reasons for the intended closure?

2. Is it a company, partnership, or proprietorship?

3. Are all 200 employees permanent, or are some on the permanent roll while others are temporary/contract labor?

4. Are there any recognized/registered unions in operation there? Are they aware of your intentions?

5. How many years has this hospital been in operation?

6. Is the hospital earning a profit or facing losses, and are operations continuing as usual?

7. What registration does your hospital have?

Closure Procedure Under the Industrial Disputes Act

For closure, you will have to follow the procedure laid down in the Industrial Disputes Act of 1947. It will also have to be ascertained whether your hospital is covered within the term "industrial establishment" or not. You will appreciate that due to closure, services of the employees are terminated; hence, there will be labor unrest. Therefore, before initiating any action in furtherance of closure, you must consult a Labor Lawyer.

Thank you for your reply.

Partnership in a New Hospital

1) Our owner is planning to be a part of a new hospital in partnership.

Current Company Structure

2) It's a single-owned company working in a leased building.

Staff Composition

3) Nearly 20% of the staff are on a temporary basis.

Union and Staff Awareness

4) No active unions. All staff know about this closure.

Company History

5) Nearly 15 years.

Current Operational Status

6) The company is operating in normal mode, neither making a profit nor a loss.

Registration Details

7) Paramedical Institution registration.

Handling the Closure of a Hospital Under the ID Act

These are my suggestions:

1. Try to introduce a VRS, under which whoever is willing can avail themselves of the benefits under this scheme and will be treated as voluntarily retired. In respect of contract labor, you have to issue adequate notice to the contractor regarding the proposed closure.

2. The rest will have to be issued advance notice of termination with the required compensation as per the ID Act. Consult the Labor Department for taking adequate steps.

3. File an application with the state government (Labor, Director of Industries, Health Dept.) for approval for the termination and closure of the hospital.

4. Once the formal approval is received, the rest of the compliance can take place.

5. You may engage an able advocate for compliance with all these procedures.

Some of the relevant provisions and procedures under the ID Act are discussed in the attachment.

Overview: The awaited introduction of Labour Codes contains certain provisions relating to closure and other relevant subjects. My hunch is that even if you apply now, your application may be delayed, resulting in consideration under the new regime of Labour Codes instead of the extant provisions. By December 2020, you are likely to have a clear picture on this. You may also consider this aspect.

How to Close HR Service Pvt Ltd

How can I close HR Service Pvt Ltd?

Potential Problems if the Company is Not Closed

What problems will arise if the company is not closed?

Thank you.

Dear Aathira, your hospital, even though having a workforce of 200 employees in total as of now, is not an "industrial establishment" as defined under Section 2-L of the IDA, 1947. Therefore, the restrictions imposed under Chapter V B of the Act on closure are not applicable to it.

Similarly, the restrictions under Chapter V A are also not applicable, except for Section 25-F, which mandates notice and payment of compensation for retrenchment.

For the settlement of legal dues to employees such as retrenchment compensation and gratuity (for employees, including non-workman cadre), it is advisable to engage the services of a labor law consultant like Mr. Varghese Mathew or another consultant of your choice.

Regarding the surrender of license/registration under the MCI norms, you should contact the Regional Joint Director of State Medical Services.

Please let me know if you need any further assistance.

Thank you.

Hospital Industry under the ID Act

In my opinion, a hospital is an industry under the ID Act. 99% of the hospitals are commercial.

As per Section 2(ka) of the Act, an industrial establishment or undertaking means an establishment or undertaking in which any industry is carried on.

Definitions in Chapters V-A and V-B

For Chapters V-A and V-B, an establishment means a factory, plantation, and mine. For Chapter V-B, this meaning applies to lay off, retrenchment, closure, transfers, etc. But in V-A, this meaning is limited to lay off only, i.e., for Sections 25A to 25E only. The word used in Chapter V-A for retrenchment, closure, transfers, etc., is an undertaking.

Applicability of Chapter V-B

So Chapter V-B applies only to factories, plantations, and mines employing 100 or more workmen. For an undertaking which is an industry other than a factory, plantation, and mine employing 100 or more workmen, Chapter V-A will be applicable for the purpose of retrenchment, closure, and transfer of undertakings.

Therefore, I believe that for the closure of a hospital, one should follow the provisions of Section 25FFA and Section 25FFF, wherein the word used is an undertaking, not an industrial establishment.