Layoff & Retrenchment

1).Synopsis
2).Meaning and Definition of Layoff [Sec-2(kkk)]
3).Essentials of Lay-off [Sec-2(kkk)]
4).Prohibition/Procedure of lay-off [Sec-25M]
5).Penalty for lay-off without previous permission:
6).Rights of laid-Off employee:
7).Alternate actions instead of lay-off:
8).Side effects of lay-off to the employee
9).Meaning, Definition of retrenchment
10).Principles of Retrenchment: [25(G) and 25(H)]
11).Compensation of Retrenchment:
12).Provisions in Chapter VA and VB for lay-off and Retrenchment
13).Conditions precedent to retrenchment of workmen: (25F, 25N)
14).Comparison Chart of Layoff Vs Retrenchment
15).Conclusion
16).References

Details:
Synopsis:
Layoff refers to the provisional termination of the employee, at the instance of the employer.
Retrenchment means involuntary separation of an employee due to the replacement of labour
by machines or the close of the department.
The layoff is defined in section 2 (kkk) of the Industrial Disputes Act, 1947. Conversely,
Retrenchment is defined in section 2 (oo) of the Industrial Disputes Act, 1947
1).Meaning of Layoff
#).Lay-off means
~Temprory Suspension or
~Permanant termination
~of employment (with or without notice) by the employer or management.
#).In Lay-off the employer and employee relationship does not come to an end but it is merely suspended during the
period of emergency.
#).Layoffs are not caused by any fault of the employees
#).Lay-off is for trade reasons beyond the control of the employer, i.e, it is not an intentional act.
#).Lay-off is occasioned by the employer's failure or inability of an employer on account of
~shortage of coal, power or raw materials or
~the accumulation of stocks or
~the break-down of machinery or
~natural calamity or
~for any other connected reason
#).Permanent layoff is called redundancy in UK.
#.These are not technically classified as firings
2).Definition of Layoff [Sec-2(kkk)]
As per sec-2(kkk),
#).Lay-off means the failure, refusal or inability of an employer on account of
~shortage of coal, power or raw materials or
~the accumulation of stocks 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.
Case law:
<Anusuyabai v. Mehta 1959 (2). LLJ 742>
It is clear that the layoff does not terminate or bring to an end to the contract of employment. The employees
continue to be on the master roll of the employer and they have to be reinstated as soon as normal working is
resumed
<Hope Textiles Ltd v. State of M.P., 1992 (65) FLR 770 (M.P)>
Employer should give reasons before laying off the workmen –
Disconnection of power-supply and financial crisis due to non-receipt of sanction to develop land from Government
–
As reasons for laying off worker not relevant and proper.
Lay off by its very nature is for a short duration and cannot be for years Case Laws – Lay off Section 2 (kkk)
3).Essentials of Lay-off [Sec-2(kkk)]
#).There must be failure or refusal or inability of an employer to give the employment to the worker
#).The failure, refusal or inability should be on account of one or more of the following reasons
~shortage of coal, power or raw materials
~accumulation of stocks
~breakdown of machinery
~natural calamity
~lack of Funds
~lack Of Work:
~organizational change
~economical issues
~any other connected reason
#).The name of workman must appear on the muster rolls of the establishment
#).The workman should not have been retrenched.
5).Prohibition/Procedure of lay-off [Sec-25M]
5.1).Planned Lay-off
As per Sec-25M(1),
Any workman can be laid-off by his employer
#).If a workman should not be a badli or casual worker and
#).his name should be in muster roll and
#).the below procedures are followed...
5.2).Emergency Lay-off
As per Sec-25M(3),
Any workman can be laid-off by his employer
#).Due to Shortage of power
#).Due to Natural clamity
#).Due to fire, floot, excess inflamatory gas or explosion in case of mine.
5.3).Permission for Planned Lay-off:
As per Sec-25M(2),
#).Prior permission is required from specified authority to implement the lay-off
#).Specified authority means appropriate Government or such authority as specified in Official Gazette
#).For that, an application should be prepared in the prescribed manner
#).This application should contain the reasons for intended lay-off
#).A copy of such application should be given to the workman simultaneously
5.4).Permission for Emergency Lay-off:
As per Sec-25M(3),
#).The permission is required from specified authority to continue the lay-off
#).For that, an application should be prepared in the prescribed manner
#).This application should be sent to specified authority within 30 days from the date of commencement of such lay-
off.
5.5).Enquiry on application by authority (for both lay-off)
As per Sec-25M(4),
#).On receipt of the application for sec-25M(1) and Sec-25M(3), the authority makes an enquiry in this behalf.
#).This enquiry must include
~All Concerns of employer
~All Concerns of workman
#).The complete details of the inquiry will be recorded in writing with evidences.
#).The copy of the written details will be send to both employer and employee for their refernces.
5.6).Order issued by authority
As per Sec-25M(5),
#).After conducting enquiry and after considering all factors in this respect the authority issues its order,either
granting or refusing the application.
#).The authority should communicate its refusal within 60 days from the receipt of the application to concern parties
otherwise it is deemed to be granted.
5.7).Implementing the issued order
As per Sec-25M(6),
An order of grading or refusing by the appropriate Government or the specified authority shall,
~subject to the provisions of sub-section (7). (This section talk about review and reference of specified
authority/employer/emplyee)
~be final and binding on all the parties concerned.
~shall remain in force for one year from the date of such order.
5.8).Issued order for Adjudication
As per Sec-25M(7),
#).The issed order (either granding or refusing) can be reviewed by the concen parties.
#).Here parties are appropriate goventment,specified authority,employer and workman
#).Then it may be refered to Tribunal for adjudication
#).The Tribunal shall pass an award within a period of thirty days from the date of such reference.
5.9).Illegal Lay-off
As per Sec-25M(8),
#).The Lay-off deemed to be illegal when,
~No application made for permission as per sec-25M(1) and Sec-25M(3)
~The permission for any Lay-off has been refused
#).The workman shall be entitled to all the benefits effected from the date on which the notice of Lay-off was given
to the workman
5.10).Exception situation
As per Sec-25M(9),
#).The section 25M(1) and 25M(3) is not applicable for the below exceptional circumstances
~accident in the establishment
~death of the employer
~any necessary by order or direct
5.11).Workmen Entitled to Lay-Off Compensation (Rights of Workmen)
As per Section 25C,
#).A workman who is laid-off is entitled to compensation equivalent to 50 per cent of the total basic wages and
dearness allowance for the period of lay-off.
#).This right of compensation is, however, subject to the following conditions:
~He is not a badli (a person who is employed as a casual workman who is working in place of another), or a casual
workman.
~His name should be borne on the muster rolls of the establishment.
~He should have completed not less than one year of continuous service under the employer.
#).A workman is entitled to lay-off compensation at the rate equal to fifty per cent of the total of the basic wage and
dearness allowance for the period of his lay off except for weekly holidays which may intervene.
#).Compensation can normally be claimed for not more than forty-five days during any period of twelve months.
#).Even if lay-off exceeds forty five days during any period of twelve months no compensation is required to be paid
for the excess period if there is an agreement to that effect between the workman and the employer.
5.12).Workmen Not Entitled to Lay-Off Compensation
As per Section 25E,
The below Cases in which a Workman is not Entitled to Lay-Off Compensation:
#).Refusal to Accept Alternative Employment:
If a laid off workman refuses to accept alternative employment provided that such alternative employment is:
(a).In the same establishment from which he has been laid-off or
(b).In any other establishment belonging to the same employer situated in the town or village within a radius of five
miles from the establishment to which he belongs,
(c).In the opinion of the employer the alternative employment does not call for any special skill or previous
experience and can be done by the workman and
(d).It carries the same wages which would normally have been paid to the workman in his original employment.
#).Absence From the Establishment:
If the workman does not present himself at the appointed time during normal working hours at least once a day.
#).Strike or Go Slow:
If such laying-off is due to a strike or slowing down of production on the part of workmen in another part of the
establishment.
6).Penalty for lay-off without previous permission:
As per Sec-25Q,
Any employer who contravenes the provisions of section 25M shall be penalised as follows:
(1).imprisonment up to one month or
(2).fine up to Rs. 1000 .
(3)with both.
9).Rights of laid-Off employee:
#).Severance
#).Recall
#).Preferential Rehire
#).Outplacement Transition Services
10).Alternate actions instead of lay-off:
#).Transfer or reassignment to open vacant positions
#).Pay cuts (FEDEX)
#).Shut down retirement funds( G.M)
#).Cut back on costs:
~Energy saving
~Training cost
~Free lunches
~Office supplies (sprint)
#).Restructuring the business
#).Closing of obsolete plants or branches
#).Administrative overhauls(revision)
#).Selling of non-core operations
#).Improving internal processes
#).Examples
~Company
Ernst & Young
Luxury Retreats
Best Buy
Twisted Limb Paperworks
Nokia
~Alternative
Leave Without Pay
Employee Shuffling
Enhanced Severance
Four-Day Workweek
Mass voluntary resignations
11).Side effects of lay-off to the employee
#).Loss of wages and benefits
#).Loss of role as worker and provider.
#).Loss of dignity and self esteem
#).Loss of trust
#).Loss of control over your life
#).Loss of the pattern of daily life
#).Loss of the work family
#).Loss of collective strength.
1).Meaning, Definition and Explanation of retrenchment
1.1).Meaning of retrenchment
#).The discharge of surplus labour or staff by the employer for any reason whatsoever except 2 action
#).The words ‘for any reason whatsoever’ indicates any reason such as,
~economy
~rationalization in industry
~labour saving machineries
#).Retrenchment is a form of dismissal due to no fault of the employee,
#).it is a process whereby the employer reviews its business needs in order to increase profits or limit losses, which
leads to reducing its employees.
#).The employer must give fair reasons for making the decision to retrench and follow a fair procedure when making
such a decision or the retrenchment may be considered unfair.
1.2).Definition of Retrenchment [Sec-2(oo)]
As per sec-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 the workman; or
(b).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
(bb).Termination of the service of the workman as a result of the non-renewal of the contract of employment
between the employer and the workman concerned on its expiry or of such contract being terminated under a
stipulation in that behalf contained therein; or
(c).Termination of the service of a workman on the ground of continued ill-health;
1.3).Retrenchment does include:[from sec-2(oo)]
#).The termination by the employer of the service of a workman ;
#).The termination may be for any reason whatsoever;
#).But the termination should not be as a measure of punishment by way of disciplinary action.
1.4).Retrenchment does not include:[from sec-2(oo)]
#).voluntary retirement of a workman, or
#).superannuation retirement of a workman (There is a stipulation between employer and workman in this regard);
or
#).The termination of the service of a workman because of non renewal of an employment.(Contract may not end if
renewal happened)
#).The termination of the service of a workman because of expiration of employment duration mentioned in
agreement (Contract end)
#).The termination of the service of a workman on the ground of continued ill- health.
#).The termination should be as a measure of punishment by way of disciplinary action.
#).Superannuation v/s. Retirement
~Superannuation refers to retirement you take after you have reached a predetermined age.
~By contrast, retirement refers to cessation of work that occurs at ANY age.
~Thus, superannuation always constitutes a type of retirement,
~but not all retirement constitutes superannuation.
1.5).Case laws
<Barsi Light Railway Co. Ltd. Vrs. K.N. Jogelekar, AIR 1957 SC 121>
The expression “termination………… of the service of a workman for any reason whatsoever” was interpreted by
the Supreme Court to mean that “retrenchment as defined in Sec. 2(oo) and as used Sec. 25-F, has, no wider
meaning than the ordinary accepted for any reasons whatsoever, otherwise than as punishment inflicted by way of
disciplinary action and for any of the reasons falling under sub-clauses (a), (b), (c) of the definition. It would thus
appear that “retrenchment” means the discharge of surplus labour or staff by the employer for any reasons
whatsoever except in the four class of cases mentioned above. <Santosh Gupta Vrs. State Bank of Patiala, AIR 1980
SC 1219>
termination of service of a probationary workman not considered for confirmation has been held to be a case of
retrenchment.
<Punjab Land Development V. The Presiding Officer Labour Court, Chandigarh, 1990 (61) FLR 73(SC) >
Striking off name of the workman from the rolls by management in termination of service. Such termination of
service is retrenchment within the meaning of Sec. 2(oo) of the Act
2).Principles of Retrenchment: [25(G) and 25(H)]
There are two principle of Retrenchment as,
~First come last go and Last come first go
~Re-Employement
2.1).Principle of First come last go and Last come first go: [25(G)]
#).Workman can claim protection under this principle if
~he must be a workman
~the establishment he works in is an industry within the meaning of this Act
~he must belong to a particular category of workman
2.2).Principle of Re-Employment: [25(H)]
#).It is based on the known principle that when a workman has been retrenched by the employer on the ground of
surplus staff.
#).such workman should first be given an opportunity to join service whenever an occasion to employ another hand
arises.
#).This section imposes a statutory obligation on the employer to give opportunity to the retrenched employees to
offer themselves for reemployment.
#).However in order to claim preference in employment a workman must satisfy the following conditions:
(1).he should have been retrenched prior to reemployment;
(2).he should be a citizen of India;
(3).he should offer himself for re-employment in response to the notice by the employer
(4).he should have been retrenched from the same category of service in the industrial establishment in which the re-
employment is proposed.
3).Compensation of Retrenchment:
3.1).Meaning of Compensation of Retrenchment
#).Retrenchment is the termination of an employee by an employer for reasons other than a punishment meted out
by disciplinary action.
#).Employees terminated in such a manner is financially compensated by the employer.
#).This kind of compensation is known as retrenchment compensation.
3.2).Issue in Compensation of Retrenchment in original act
#).Generally employer has discretionary power to retrench the employees.
#).Thus it is clear that the workmen without any fault are deprived of their right to work.
#).But are they compensated for this? No as per originally enacted Industrial Dispute Act,1947
#).Most surprisingly the original enactment of 1947 contained no provision for retrenchment compensation.
#).As a result amendment became necessary and in this respect the 3 amendments respectively of 1953,1964 and
1976 are mention worthy.
3.3).Retrenchment provisions in Amendment act, 1953 (Inserted Sec- 25A to 25J where 25F to 25H deals with
retrenchment)
#).IN 1953 a huge stock had accumulated in textile industries.
#).Textile mills were in a mood to close one or more shifts.
#).The closure must have resulted in retrenchment or laying-off a large number of textile employees
#).This issue causing great unrest in the whole of the textile industry.
#).In order to overcome the situation the president of India promulgated The industrial Disputes (Amendment )
Ordinance, 1953 to take effect from 24th October, 1953.
#).The Ordinance made provision for payment of compensation for lay-off and retrenchment.
#).The said Ordinance was repealed and replaced by The Industrial Disputes ( Amendment ) Act, 1953 on 23rd
December,1953.
#).By this amendment Ss. 25-A to 25-J under Chapter V- A was introduced to the Act.
#).Among these sections Ss. 25- F, 25-G and 25-H deals with retrenchment provisions
3.4).Retrenchment provisions in Amendment act, 1976 (Inserted chapter V-B)
#).The 1976 amendment inserted another chapter called Chapter V- B
#).Chapter V-B contains the special provisions relating to lay- off and retrenchment.
#).This Chapter is applicable to the following industries :
~Not a seasonal industry (i.e. Regular industry)
~But work is not performed continuousely
~Average worker employed per day is not less than 100 for past 12 months
#).The industries not covered in this chapter V-B are covered by the provisions of Chapter V-A.

3.5).Provisions in Chapter VA and VB for lay-off and Retrenchment

Chapter-5A
3.5.1).For Retrenchment:
25A= Application of sections 25C to 25E.
25B= Definition of continuous service. [Applied for VB too as per u/s-25S]
25F= Conditions precedent to retrenchment of workmen.
25G= Procedure for retrenchment. [Applied for VB too as per u/s-25S]
25H= Re-employment of retrenched workmen [Applied for VB too as per u/s-25S]
3.5.2).For Lay-off
25C=Right of workmen laid-off for compensation.
25D=Duty of an employer to maintain muster rolls of workmen. [Applied for VB too as per u/s-25S]
25E=Workmen not entitled to compensation in certain cases.
Chapter-5B
3.6.1). For Retrenchment:
25K=Application of Chapter VB.
25L=Definitions.
25N=Conditions precedent to retrenchment of workmen.
25Q=Penalty for lay-off and retrenchment without previous permission.
25S=Certain provisions of Chapter VA to apply to an industrial establishment to which this Chapter applies.
[25B, 25D, 25FF, 25G, 25H, and 25J in Chapter VA applied to VB also]
3.6.2). For Lay-off
25M=Prohibition of lay-off.

4).Conditions precedent to retrenchment of workmen:

  Sec-25F
The workman As per Sec-25A(1),
should be #).The workman should be employed in
employed in a industrial establishment explained in Sec-
specific 25A(2).
industry #).In which less than 50 employees have
been engaged on an average per working
day in the preceding calendar months
#).Such industries which are of seasonal
nature
#).Such industries in which work is
performed only intermittently.
As per Sec-25A(2),
#.If any confusion to conclude the nature
of industry then the decision of the
appropriate Government is final
Sec-25N
As per Sec-25K(1),
#).The workman should be employed in industrial
establishment explained in Sec-25L.
#).In which not less than 100 employees have been
engaged on an average per working day in the
preceding twelve months
#).Such industries which are not of seasonal nature
(Regular work)
#).Such industries in which work is performed not
only intermittently. (Continuous work)
As per Sec-25K(2),
#.If any confusion to conclude the nature of industry
then the decision of the appropriate Government is
final
That specific As per Sec-25A(2), As per Sec-25L,
industry #).A factory as defined in clause (m) of #).A factory as defined in clause (m) of section 2 of
should be an section 2 of the Factories Act 1948 (63 of the Factories Act 1948 (63 of 1948); or
Industrial 1948); or #).A mine as defined in clause (i) of section 2 of the
Establishment #).A mine as defined in clause (i) of section Mines Act, 1952 (35 of 1952); or
2 of the Mines Act, 1952 (35 of 1952); or #).A plantation as defined in clause (f) of section 2 of
#).A plantation as defined in clause (f) of the Plantations Labour Act, 1951 (69 of 1951).
section 2 of the Plantations Labour Act, #).Any corporation established by or under any law
1951 (69 of 1951). made by Parliament, the Central Government shall be
the appropriate Government.
#).Any company in which not less than fifty-one per
cent. of the paid-up share capital is held by the Central
Government
The workman As per Sec-25F, <Refer [25N(1)> As per Sec-25N(1),
should be an #).The compensation of retrenchment #).The compensation of retrenchment applicable only
eligible applicable only for eligible emplyee for eligible emplyee
person for #).Eligible emplyee is a workman #).Eligible emplyee is a workman employed in any
that industry employed in any industrial establishment as industrial establishment as explained in 25L
explained in 25A #).Such workman, who has been in continuous service
#).Such workman, who has been in for not less than one year
continuous service for not less than one
year
The workman As per Sec-25B(1), As per Sec-25B(1), [25B is in CH-VA, also applied for
should #).A workman shall be said to be in CH-VB as per u/s-25S]
perform continuous service for a period if he is, for #).A workman shall be said to be in continuous service
continuous that period, in uninterrupted service. for a period if he is, for that period, in uninterrupted
service for #).The uninterrupted service includes service.
that industry ~sickness leave #).The uninterrupted service includes
~authorised leave ~sickness leave
~an accident ~authorised leave
~a strike which is not illegal,or ~an accident
~a lock-out or a cessation of work which is ~a strike which is not illegal,or
not due to any fault on the part of the ~a lock-out or a cessation of work which is not due to
workman any fault on the part of the workman
As per Sec-25B(2), As per Sec-25B(2),
The employer As per Sec-25F(a), <Refer:[25N(1)(a)> As per Sec-25N(1)(a),
should send #).one months prior notice must be given to #).one months prior notice must be given to the
the the employee by the employer employee by the employer
Retrenchment #).This notice must contains #).This notice must contains
Notice to ~the reasons for retrenchment ~the reasons for retrenchment
employee: ~the period of notice has expired ~the period of notice has expired
#).in absence of such a notice wages for th #).in absence of such a notice wages for th period of
period of notice should be paid to the notice should be paid to the employee.
employee
The employer As per Sec-25F(c), <Refer:[25N(1)(b)> As per Sec-25N(1)(b),
should get #).For any retrenchment, Prior permission #).For any retrenchment, Prior permission is required
Permission is required from specified authority from specified authority
from #).Specified authority means appropriate #).Specified authority means appropriate Government
specified Government or such authority as specified or such authority as specified in Official Gazette
authority in Official Gazette
The employer   As per Sec-25N(2),
should send #).For that, an application should be prepared in the
the prescribed manner
application to #).This application should contain the below details
get ~the reasons for retrenchment
Permission ~the period of notice has expired
from #).A copy of such application should be given to the
specified workman.
authority
Enquiry on   As per Sec-25N(3),
application by #).On receipt of the application the authority makes an
authority enquiry in this behalf.
#).This enquiry must include
~All Concerns of employer
~All Concerns of workman
#).The complete details of the inquiry will be recorded
in writing with evidences.
#).The copy of the written details will be send to both
employer and employee for their references.

Order issued   As per Sec-25N(4),

by authority #).After conducting enquiry and after considering all
(action of on factors in this respect the authority issues its order,
enquiry either granting or refusing the application.
application) #).The authority should communicate its refusal within
60 days from the receipt of the application to concern
parties otherwise it is deemed to be granted.

Implementing   As per Sec-25N(5),

the issued #).An order of granting or refusing by the appropriate
order Government or the specified authority shall,
~subject to the provisions of sub-section (6). (This
section talk about review and reference of specified
authority/employer/employee)
~be final and binding on all the parties concerned.
~shall remain in force for one year from the date of
such order.
Issued order   As per Sec-25N(6),
for #).The issued order (either granting or refusing) can be
Adjudication reviewed by the concern parties.
#).Here parties mean appropriate government,
specified authority, employer and workman
#).Then it may be referred to Tribunal for adjudication
#).The Tribunal shall pass an award within a period of
thirty days from the date of such reference.

Meaning of   As per Sec-2(b),

an award “award” means an interim or a final determination of
any industrial dispute or of any question relating
thereto by any Labour Court, Industrial Tribunal or
National Industrial Tribunal and includes an
arbitration award made under section 10A
Compensatio As per Sec-25F(b), <Refer:[25N(9)>
n for ~The workman should have been paid at
Retrenchment the time of retrenchment.
~This pay is a compensation equivalent to
15 days average pay for every completed
year of service
~If employee works six or more month also
calculated for compensation accordingly
Meaning of As per Sec-2(aaa),
average pay “average pay” means the average of the
wages payable to a workman
2).He must be compensated in the manner
as described below:
#).If the workman is being paid on a
monthly basis – on the basis of three
calendar months.
#).If the workman is being paid on a
weekly basis – on the basis of four
completed weeks.
#).If the workman is being paid on a daily
basis – On the basis of the last 12 working
days.
#).If such calculation can not made, the
average pay shall be calculated as the
average of the wages payable to a workman
during the period he actually worked
Retrenchment ~If the above steps are not complied then
will be void the retrenchment will be void ab-initio
ab-initio ~the employee would be entitled to all
consequential benefits as if there had been
no retrenchment
Illegal  
Retrenchment
Legal  
Retrenchment
As per Sec-25N(9),
~The workman should have been paid at the time of
retrenchment.
~This pay is a compensation equivalent to 15 days
average pay for every completed year of service
~If employee works six or more month also calculated
for compensation accordingly
As per Sec-2(aaa),
“average pay” means the average of the wages payable
to a workman
2).He must be compensated in the manner as described
below:
#).If the workman is being paid on a monthly basis –
on the basis of three calendar months.
#).If the workman is being paid on a weekly basis – on
the basis of four completed weeks.
#).If the workman is being paid on a daily basis – On
the basis of the last 12 working days.
#).If such calculation can not made, the average pay
shall be calculated as the average of the wages payable
to a workman during the period he actually worked
~If the above steps are not complied then the
retrenchment will be void ab-initio
~the employee would be entitled to all consequential
benefits as if there had been no retrenchment
As per Sec-25N(7),
#).The retrenchment deemed to be illegal when,
~No application made for permission as per sec-25(1)
~The permission for any retrenchment has been
refused
#).The workman shall be entitled to all the benefits
effected from the date on which the notice of
retrenchment was given to the workman
As per Sec-25N(9),
#).The retrenchment deemed to be Legal when,
~retrenchment has been granted under Sec-25(3) or
~retrenchment has been granted under Sec-25(4)

Penalty for   As per Sec 25Q,

retrenchment An employer who contravenes the provisions of s.
without 25N(2) shall be penalized as follows:
previous (1).imprisonment up to one month or
permission (2).fine up to Rs. 1000 .
(3)with both.
 Exception   As per Sec-25(8),
#).The section 25(1) is not applicable for the below
exceptional circumstances
~accident in the establishment
~death of the employer
~any necessary by order or direct

Comparison Chart

BASIS FOR
LAYOFF RETRENCHMENT
COMPARISON

Meaning Lay-off refers to the Retrenchment means involuntary

provisional separation of an employee due to
termination of the the replacement of labor by
employee, at the machines or the close of the
instance of the department.
employer.

What is it? Action step Business strategy

Defined in Section 2 (kkk) of Section 2 (oo) of Industrial

Industrial Dispute Dispute Act, 1947
Act, 1947

Nature Temporary Permanent

Operation of Stops after the Continues even after the

company declaration. declaration.

Re-appointment As soon as the lay- Employee's connection with the

off period ends. organization are severed
immediately.

Conclusion

Therefore, with the above discussion, it is quite clear that layoff and retrenchment are two
different ways of involuntarily terminating employees. While in both the cases the employees
are paid compensation as per the method specified in the act. However, gratuity is paid only in
retrenchment but not in layoff.