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Lay-off & Retrenchment

Lay – 0ff Definition

Section 2 (kkk) : Lay-offs means the failure,
refusal or inability of an employer on
account of shortage of coal, power, or raw
materials or the accumulation of stock or
the break down of machinery (or natural
calamity or for any other connected
reason) to give employment to a workman
whose name is borne on the muster rolls
of his industrial establishment and who
has not been retrenched.
Essentials of lay-off
• There must be the (i) failure, (ii) refusal or
(iii) inability of the employer to give
employment to a workman.
• The names of the workman laid off must
be in the muster rolls on the date they
have been laid off.
• Te
• He failure, refusal or inability must be on
account of one or more of the following:
Lay-off (contd.)
• Shortage of coal
• Shortage of power
• Shortage of raw materials
• Accumulation of stocks
• Breakdown of machinery
• Natural calamity or for any connected reason
The workman in question must not have been
Classification of lay-off
On the basis of duration
(i) Lay-off for a day occurring when work is
denied within two hours of his presenting
himself for work.
(ii) Lay-off for one half of day occurring when
work is denied in the first half of the shift but
the workman is called in the second half of the
shift for doing work
(iii) Lay-off for more than a day but not amounting
to retrenchment
Rights of workman laid-off
• Whenever a workman (other than badli
workman) whose name is borne on the muster
rolls and who has completed not less than one
year of continuous service is laid off, he shall be
paid by the employer for all days during which
he is so laid off, except for such weekly holidays
as may intervene.
• First 45 days
• Retrenchment after 45 days.
Section 2 (oo): Retrenchment means the
termination by the employer of the service
of a workman for any reason whatsoever,
otherwise than as a punishment inflicted
by way of disciplinary action, but does not
include -
• (a) voluntary retirement of workman

• Retirement of the workman on reaching

the age of superannuation if the contract
of employment between the employer and
the workman concerned contains a
stipulation in that behalf; or
• Termination of the service of the workman
as the result of the non-renewal of the
contract of employment; beween the
employer and the workman concerned on
its expiry or of such contract being
terminated under a stipulation in that
behalf contained therein; or
• Termination on the ground of continued ill-
Essentials of retrenchment
• Termination of service
• On the ground of surplus labour
• The terminated service must have been capable of
being continued
• For any reason but should not be actuated by any
motive of victimisation or unfair labour practice
• Termination must be of surplus labour in a
continuing industry; thus closure is not
Essentials (contd)
• The termination must be for proper reason
such as economy, rationalisation,
installation of labour saving machinery, or
any other industrial or trade reasons
• Termination should not fall within the
exclusion clause of the definition.
Conditions precedent to
• One month’s notice in writing giving reason or
paid in lieu of such notice
• The workman has been paid, compensation
equivalent to 15 day’s average pay for every
completed year of continuous service or any
part thereof in excess of six months
• Notice in the prescribed manner on the
appropriate government by notification in the
Official Gazette
• Compensation to workmen in case of
transfer of undertakings (Section 25-FF)