Sir, my company closed one of its plants two years ago, and 600 employees were relocated to our plant. Now, after two years, the company is stating that we do not have production, so they will seek approval from the government for an extended shutdown period without pay. The company is also considering employee retrenchment. What are the legal rules governing this situation, and what actions can we take?
From India, Pune
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From India, Pune
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Sir, my company closed one of its plants 2 years ago, and 600 employees were relocated to our plant. Now, after 2 years, the company is stating that we don't have production, so they will seek government assistance for an extended shutdown period, and they have not paid for this. The company is also considering employee retrenchment. What are the legal rules, and what actions can we take?
From India, Pune
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From India, Pune
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Dear Prins,
"Shut Down," "Suspension of Operations," and many more terms like these, according to possible fanciful phraseology, are modern terms coined and used by some employers to circumvent the provisions relating to "Closure" of industrial establishments under the Industrial Disputes Act, 1947.
As per your post, the plant was closed two years ago, and now only the affected 600 employees have been "shifted" to another plant of the same company. The company now refuses to pay wages for the entire two-year period of non-employment based on the principle of "No work-No wages." Am I right?
It is a clear case of a violation of the provisions of sec. 25-O of the ID Act, 1947 by the company, and the closure itself is illegal. Therefore, the affected 600 workmen are entitled to full wages with continuity of service for the entire period of their non-employment. The proposed move of the management to approach the appropriate government for ratification of the illegal closure now, to escape the statutory liability of payment of wages to the workmen for the period of such illegal closure, will not be fruitful.
Due to the application of Chapter V-B of the ID Act, 1947, the company can only go for retrenchment after obtaining prior permission from the government. The previous two-year period of non-employment of the 600 workmen due to the closure in violation of the relevant provisions would certainly make it impossible.
If the reasons for the alleged illegal closure and the proposed retrenchment are genuine and actually beyond the capacity of the company, my suggestion would be that both the employer and the workmen/trade unions can hold direct negotiations to sort out the issues of back wages for the closure period and right-sizing the number of employees by means of any voluntary separation scheme so that unnecessary and protracted litigation can be avoided in the interest of both the employer and the workmen.
From India, Salem
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6108"Shut Down," "Suspension of Operations," and many more terms like these, according to possible fanciful phraseology, are modern terms coined and used by some employers to circumvent the provisions relating to "Closure" of industrial establishments under the Industrial Disputes Act, 1947.
As per your post, the plant was closed two years ago, and now only the affected 600 employees have been "shifted" to another plant of the same company. The company now refuses to pay wages for the entire two-year period of non-employment based on the principle of "No work-No wages." Am I right?
It is a clear case of a violation of the provisions of sec. 25-O of the ID Act, 1947 by the company, and the closure itself is illegal. Therefore, the affected 600 workmen are entitled to full wages with continuity of service for the entire period of their non-employment. The proposed move of the management to approach the appropriate government for ratification of the illegal closure now, to escape the statutory liability of payment of wages to the workmen for the period of such illegal closure, will not be fruitful.
Due to the application of Chapter V-B of the ID Act, 1947, the company can only go for retrenchment after obtaining prior permission from the government. The previous two-year period of non-employment of the 600 workmen due to the closure in violation of the relevant provisions would certainly make it impossible.
If the reasons for the alleged illegal closure and the proposed retrenchment are genuine and actually beyond the capacity of the company, my suggestion would be that both the employer and the workmen/trade unions can hold direct negotiations to sort out the issues of back wages for the closure period and right-sizing the number of employees by means of any voluntary separation scheme so that unnecessary and protracted litigation can be avoided in the interest of both the employer and the workmen.
From India, Salem
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Sir,
I think I had not been explained clearly. Let me try again -
As I mentioned before, 600 employees were transferred from another plant to ours 2 years ago. This is the current situation in my company. Our plant is also facing challenges because we now have 1100 employees, including the 600 transferred from the other plant, resulting in an increase in permanent staff.
My concerns are as follows:
1) The company plans to increase production significantly next year and is considering seeking government permission to reduce employee payments.
2) The company is also contemplating seeking approval for a "no work, no payment" policy, which would mean that if implemented, we would have less than 8 months of production next year.
3) Additionally, the company is considering retrenchment.
I would like to understand if the company can proceed with these actions. If so, what are our legal rights and how can we protect ourselves? I believe that if the 600 transferred employees were not part of our workforce, we would have sufficient production for the 1100 employees. It seems that these situations have been created by the company.
Thank you.
From India, Pune
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I think I had not been explained clearly. Let me try again -
As I mentioned before, 600 employees were transferred from another plant to ours 2 years ago. This is the current situation in my company. Our plant is also facing challenges because we now have 1100 employees, including the 600 transferred from the other plant, resulting in an increase in permanent staff.
My concerns are as follows:
1) The company plans to increase production significantly next year and is considering seeking government permission to reduce employee payments.
2) The company is also contemplating seeking approval for a "no work, no payment" policy, which would mean that if implemented, we would have less than 8 months of production next year.
3) Additionally, the company is considering retrenchment.
I would like to understand if the company can proceed with these actions. If so, what are our legal rights and how can we protect ourselves? I believe that if the 600 transferred employees were not part of our workforce, we would have sufficient production for the 1100 employees. It seems that these situations have been created by the company.
Thank you.
From India, Pune
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Last come first go.
Procedure for calculation of retrenchment compensation
While effecting retrenchment of the workmen, it is obligatory on the part of the employer to pay retrenchment compensation at the rate of 15 days wages (for every completed year) to be calculated at the last drawn salary of an employee. The calculation of compensation is to be based from the date of appointment and in case an employee has completed 240 days, he will be entitled to 15 days retrenchment compensation besides one month’s notice or salary in lieu thereof as if he has worked for one year. 240 days includes Sundays or off days as well as festival or national holidays.
In case an employee has worked for more than one year, the procedure is that in case the subsequent period of one year is less than six months then it will be counted as one year for calculation of compensation. While making calculations the period of notice is also to be taken into consideration.
Provisions related to retrenchment
Now that the law is settled on what retrenchment is, let us proceed to the provisions contained in the Industrial Disputes Act, 1947, regarding the procedure to be followed in cases of retrenchment.
Condition precedent to retrenchment
Section 25F provides the conditions precedent to retrenchment. According to this section the employer must satisfy the following conditions before retrenching an employee employed for a period of continuous period of not less than one year -
(a) the workman has been given one months 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 in excess of six months;and
(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].
Calculation of average pay is done by dividing the last drawn monthly salary by 25 and then multiplying the dividend by 15 for every completed year of continuous work.
Section 25N also lays down the conditions precedent to retrenchment -
1) No workman employed in any industrial establishment to which this Chapter applies, 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 three months 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; and
(b) the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf.
(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
(3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such inquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made under sub-section (1) and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
Procedure of retrenchment
Section 25G lays down the procedure of retrenchment. Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, in the absence of any agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. The employer is also required to maintain a seniority list of the workmen. The system of last in first out is to be followed in retrenching workmen.
Regards,
Anil Kumar KT
From India, Bangalore
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Procedure for calculation of retrenchment compensation
While effecting retrenchment of the workmen, it is obligatory on the part of the employer to pay retrenchment compensation at the rate of 15 days wages (for every completed year) to be calculated at the last drawn salary of an employee. The calculation of compensation is to be based from the date of appointment and in case an employee has completed 240 days, he will be entitled to 15 days retrenchment compensation besides one month’s notice or salary in lieu thereof as if he has worked for one year. 240 days includes Sundays or off days as well as festival or national holidays.
In case an employee has worked for more than one year, the procedure is that in case the subsequent period of one year is less than six months then it will be counted as one year for calculation of compensation. While making calculations the period of notice is also to be taken into consideration.
Provisions related to retrenchment
Now that the law is settled on what retrenchment is, let us proceed to the provisions contained in the Industrial Disputes Act, 1947, regarding the procedure to be followed in cases of retrenchment.
Condition precedent to retrenchment
Section 25F provides the conditions precedent to retrenchment. According to this section the employer must satisfy the following conditions before retrenching an employee employed for a period of continuous period of not less than one year -
(a) the workman has been given one months 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 in excess of six months;and
(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].
Calculation of average pay is done by dividing the last drawn monthly salary by 25 and then multiplying the dividend by 15 for every completed year of continuous work.
Section 25N also lays down the conditions precedent to retrenchment -
1) No workman employed in any industrial establishment to which this Chapter applies, 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 three months 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; and
(b) the prior permission of the appropriate Government or such authority as may be specified by that Government by notification in the Official Gazette (hereafter in this section referred to as the specified authority) has been obtained on an application made in this behalf.
(2) An application for permission under sub-section (1) shall be made by the employer in the prescribed manner stating clearly the reasons for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
(3) Where an application for permission under sub-section (1) has been made, the appropriate Government or the specified authority, after making such inquiry as it thinks fit and after giving a reasonable opportunity of being heard to the employer, the workmen concerned and the persons interested in such retrenchment, may, having regard to the genuineness and adequacy of the reasons stated by the employer, the interests of the workmen and all other relevant factors, by order and for reasons to be recorded in writing, grant or refuse to grant such permission and a copy of such order shall be communicated to the employer and the workmen.
(4) Where an application for permission has been made under sub-section (1) and the appropriate Government or the specified authority does not communicate the order granting or refusing to grant permission to the employer within a period of sixty days from the date on which such application is made, the permission applied for shall be deemed to have been granted on the expiration of the said period of sixty days.
Procedure of retrenchment
Section 25G lays down the procedure of retrenchment. Where any workman in an industrial establishment, who is a citizen of India, is to be retrenched and he belongs to a particular category of workmen in that establishment, in the absence of any agreement between the employer and the workman in this behalf, the employer shall ordinarily retrench the workman who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other workman. The employer is also required to maintain a seniority list of the workmen. The system of last in first out is to be followed in retrenching workmen.
Regards,
Anil Kumar KT
From India, Bangalore
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