" lay- off"

Section 2(kkk)

" lay- off"

Lay-off means failure, refusal, or inability of a

employer to give employment to a workman

whose name is on the muster rolls of his
industrial establishment and who has not
been retrenched, on the account of lack of
coal, lack of power, lack of raw material, over
stocking of output, failure of machinery, due
to natural calamity, or due to any other
connected reason.

" lay- off"

Employment suspension by the employer

without fault of the employee

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 thedate they have been
laid off.

REASONS FOR "

lay- off"
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

retrenched.

" lay- off"

Temporary

Due to reasons beyond employer's control

non-intentional

Classification of layoff
On the basis of duration(i)Lay-offfor aday occurring

when work is denied within two hours of his

presenting himself for work.
(ii)Lay-off forone half of dayoccurringwhen 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-offformore than adaybutnotamounting to
retrenchment

lay off and lock out

Lay-off occurs while the establishment is

continuing operation.
In lay-off, the employer is unable to provide

employment to one or more workmen due to

several reasons generally genuine and owe to
economic factors
Compensation shall be paid to the workers

laid-off.

Lay-off

: Retrenchment

Lay-off is purely temporary

Retrenchment is permanent
While the process of retrenchment is going on,

the industry does not stop its function.

The retrenched employees are paid

retrenchment compensation

" lay- off"

"failure, refusal, or inability" are key to the definition

and means that the unemployment is due to a cause

independent of any action or inaction of the workmen
AIR 1959 Bom 225

Central India Spinning, Weaving, and

Manufacturing Co. Ltd. Nagpur vs State Industrial

Court

" lay- off"

25C. RIGHT OF WORKMEN LAID OFF FOR

COMPENSATION

25M. PROHIBITION OF LAY-OFF

Central India Spinning, Weaving, and Manufacturing

Co. Ltd. Nagpur vs State Industrial Court

The petitioner is known as the Empress Mills

Nagpur. These mills are five in number and

are known and styled as Empress Mills No. 1,
Empress Mills No. 2 Empress Mills No. 3,
Empress Mills No. 4 and Empress Mills No. 5

Retrenchment
Sec . 2 (oo)
Sec . 25 (f)

Retrenchment
Retrenchmentmeans the termination by the

employer of the service of a workman

Retrenchment
Exclusion from the definition of retrenchment
disciplinary action

voluntary retirement of the workman

retirement of the workman on reaching the age of

superannuation
termination of the service of a workman on the ground of

continued ill-health

Essentials
Termination of service
On the ground of surplus labour
The terminated service must have been capable

ofbeing continued
For any reason but should not be actuated by any
motive of victimisation or unfair labour practice
Termination must be of surplus labour ina
continuing industry; thus closure is not
retrenchment

Essentials
The termination must be for proper reason

such as
Joblessness due to advanced machinery,
slowdown in business.
installation of labour saving machinery, orany
other industrial or trade reasons

Morinda Coop Sugar Mills vs

Ram Kishen and others 1996

Workers were employed in the sugar mill only during the season

and they were asked to leave the industry when the season
ended.
WORKERS CLAIMED COMPENSATION

ACCORDING TO 25 F

Morinda Coop Sugar Mills vs Ram Kishen and others 1996

1996 AIR 332

Morinda Coop Sugar Mills vs

Ram Kishen

Held that it is not retrenchment because it is

only seasonal work

1996 AIR 332

State Bank of India v Sundarmany

the bank, employed respondent as a

temporary employee because the

permanent cashier was away. When
the permanent cashier joined duty,
Sundarmanys services were
dispensed with. The High Court held
this was nothing but discharge of
Sundarmany as surplus employee.

State Bank Of India vs Shri N.

Sundara Money
The appellant employer, has appealed

against the ad verse judgments, on the

only ground that there was no
retrenchment of the respondent-employee
and, consequently the latter was ineligible
to-the statutory compensation .
State Bank of India v Sundarmany AIR 1976 SC III

State Bank Of India vs Shri N.

Sundara Money
In the present case the employment ceased,

concluded, ended on the expiration of days

automatically

State Bank Of India vs Shri N.

Sundara Money

Termination embraces not merely

the act of termination by the

employer, but the fact of termination
howsoever produced.

State Bank Of India vs Shri N.

Sundara Money
Moreover, an employer terminates employment not

merely by passing an order as the service runs. He

can do so by writing a composite order, one giving
employment and the other ending or limiting it. A
separate, subsequent determination is not the sole
magnetic pull of the provision.
the appeal is dismissed

The Judgment of the Court was delivered by KRISHNA 1 YEAR, J

In Hindustan Steel case

the workmen were timekeepers for a number

of years on the fixed term. Their services

have been extended from time to time. Later,
consistent with the economic policy, the
employer chose not to renew the contract

Hindustan Steel Ltd v. State of Orissa

1970 Lab IC 345 Orissa

Hindustan Steel case

The Court discussed the impact of a

composite order which implied the single

order covering an appointment and
termination of services. In cases of composite
order the absence of an independent order
terminating the services will not affect the
coverage of retrenchment.

Santosh Gupta vs State Bank Of

Patiala
The appellant was employed in the State Bank of Patiala, Patiala from July

13, 1973 till August 21, 1974, when her services were terminated. Despite
some breaks in service for a few days, the appellant had admittedly worked
for 240 days in the year preceding August 21, 1974. According to the
workman, the termination of her service was "retrenchment
Since there was "retrenchment", it was bad for non-compliance with the

provisions of section 25 F of the Industrial Disputes Act.

1980 AIR 1219

Santosh Gupta vs State Bank Of

Patiala
On the other hand, the contention of the

management was that the termination of

services was not due to discharge of surplus
labour. It was due to the failure of the
workman to pass the test which would have
enabled him to be confirmed in the service.
Therefore, it was not retrenchment

Santosh Gupta vs State Bank Of

Patiala
HELD: (i) The discharge of the workman on

the ground that she did not pass the test

which would have enabled him to be
confirmed was "retrenchment" within the
meaning of section 2(OO) and, therefore, the
requirements of section 25F had to be
complied with.

Santosh Gupta vs State Bank Of

Patiala
2(OO) is so comprehensive to cover

termination for any reason whatsoever except

those not expressly included in section 25-F.
The object of the above provisions is to
compensate
the workman for loss of employment, until he
finds alternate employment

Delhi Cloth & General Mills v Sambu

Nath
striking off the name of a workman from the

rolls

AIR 1978 SC 8

Impact of 1984
amendment
the insertion of section 2(OO) (bb) in 1984
Hence, when the employment was for a

stipulated time period under a contract then

the non-renewal of the contract of
employment on the expiry of the stipulated
period would not amount to retrenchment

Probationer entitled to
benefitKarnataka S.R.T Corpn. V. Sheikh Abdul

Khaddar
AIR 1983 SC 1320
discharge from employment or termination of

service of a probationer also amount to

retrenchment

Termination of casual workers

service
-Termination of casual worker engaged for particular

urgent work on completion of such work will not amount

to retrenchment. Where the workman was engaged on
casual basis without a written service contract or letter of
appointment, for doing a particular urgent work, his
service automatically came to an end when the work was
over and there was no retrenchment.
Therefore, the question of complying with the procedure
for retrenchment does not arise in such case. Further, in
such a case merely because the workman was required
repeatedly for doing the urgent work and thus had to work
for considerable time, the termination of service would not
amount to retrenchment

Termination of casual workers

service
Marinda Cooperative Sugar Mills v Ramkishen

AIR 1996 SC 33

Condition for valid

retrenchment
i) He is given one months notice of it with reasons, or

one month wages in lieu of such notice. Provided no

such notice is necessary if it is under an agreement
specifying the date of termination of service
ii) He is paid compensation equivalent to 15 days

average pay for every completed year of companys

service or any part of it exceeding six months; and
iii) Notice is served on the appropriate government or
on such notified authority. Sec. 25 f

Retrenchment can be only in a live

industry
Since the termination of the services of a

workman who is employed in an industry

constitutes retrenchment, it clearly indicates,
that there must be an industry which must
be running or in existence. It required an
industry which is alive and not closed. As in
the case of strike, lock-out or lay-off there
cannot be a retrenchment in a closed or dead
industry
Union of India v Pitu Kishu (1977) I Lab IC

1236 (Cal)

Termination not as
punishment
Termination of the services of a workman as

punishment inflicted by way of disciplinary

action will not be a retrenchment.

Imperial Tobacco Co. v Ethiraj (1954) II LLJ 637

(Lat)

Last come first

go
The principle of last come first go is

statutorily incorporated in Section 25-G. If a

case for retrenchment is made out, it would
normally be for the employer to decide which
of the employees should be retrenched.
However, this rule is not intended to deny the
freedom of the employer to depart from it for
sufficient and valid reasons.

Departure from the rule

last
come first go
The rule is that the employers shall retrench the

workman who came last, first, popularly as last come

first go. It is not inflexible rule and extraordinary
situations may justify variations. For instance, a junior
recruit who has a special qualification needed by the
employer may be retained even though another who
is one up is retrenched. But there must be valid
reason for this deviation. The burden is on the
management to substantiate the special ground for
departure from the rule.
Om Oil & Oil Seeds Exchange Ltd v Workmen (1966) I
LLJ 324 SC

lay-off
In lay-off the relationship of employment is

not terminated while in retrenchment it is

terminated.
In lay-off the relationship of employment is
only suspended while in retrenchment it is
terminated.

Closure differs from

Retrenchment
In the case of closure the undertaking is

closed or permanently discontinued, whereas

in retrenchment the business continues its
operation even though the services of some of
the workers are terminated due to surplusage
or due to any other reason.

Closure
The last come first go rule under section 25-

G and the duty to give preference to the

retrenched workman in case of reemployment under section 25-H which are
strictly applicable in case of closure. Section
25-H is never attracted to cases of transfer of
business or of closure of an industry.

Retrenchment
While following the process of retrenchment

the workmen must be provided with other

employment opportunities in other industries
and compensated for the period of
unemployment.

Retrenchment
Rate of compensation Sec. 25 F(b )

Re-employment of retrenched workman-

Section 25-H-