Lay-off is a well-known name in respect of industrial dispute also known as returning without work or keeping without work. Lay-off means putting aside the workman temporarily. The employer-employees relationship does not come to an end but it merely suspended during the period of emergency.

Meaning of lay-off

Lay-off means temporarily keeping a workman without or away from work. The question of keeping without work arises when employers are unable to provide employment to the workman for the reason beyond his control such reason or situations may be:

• Shortage of raw materials
• Economic recession
• Breakdown of machinery
• Accumulation of stocks
• Layoff

Definition:
"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.

Above definition shows the essential elements of lay-off:

1. Such workman is laid off whose name is borne on the muster roll and he has not been retrenched
2. Employee is willing to employ but unable to provide employment due to some reason beyond his control.
3. Such situation hall be an emergency and is of temporary nature and
4. Lay-off does not cease the relationship between employer-employees rather are suspended for the emergency period.

Case law: Central India spinning, weaving and manufacturing co.ltd Nagpur v/s state industrial court 1959 Bombay HC
The Bombay high court held that the key to the definition is to be found in the world failure, refusal or inability of an employer these world make it clear that employment has to be on account of a cause which is independent of any action or inaction on the part of the workmen themselves.

Case law: M.A Veigra v/s C.P. Fernandes 1957 Bombay
The Bombay high court held that it is not a privileged right of employers rather it is an imposed right for the benefit of workman

Right of Compensation by workmen laid-off

Right of workmen laid-off for compensation] Industrial Disputes Act, 1947 Section 25-C.
Workman has right to lay-off compensation subject to the following conditions, they are:

1. Workman name should be borne on muster rolls of the establishment and he/she is not a badli workman or a casual workman; and
2. The workman should have completed not less than one year continuous service as defined under Section 25-B; and
3. The workman should have laid-off, continuously or intermittently;
4. Then the workman shall be entitled to lay-off compensation for all days during which he was so laid-off;
5. However, the workman shall not be paid lay-off compensation for such weekly holidays as may intervene the period of lay-off.

The lay-off compensation is equal to 50% of the total of the basic wages and dearness allowance that would have been payable to him, if he had not been so laid off. Explanation:
"Badli workman" means a workman who is employed in an industrial establishment in the place of another workman whose name is borne on the muster rolls of the establishment, but shall cease to be regarded as such for the purposes of this Section, if he has completed one year of continuous service in the establishment.
In Vijay Kumar Mills v. Labour Court, the Madras High Court held that the badli workman is one whose name is not borne on muster rolls of the establishment. If his name is found on the muster roll, even if he is a badli workman, he is entitled to lay-off compensation.

Maximum days allowed to Layoff of employee by employer
According to section 25C of Industry and dispute Act 1947, maximum days allowed to Layoff of employee by employer is 45 days, for those days, employee who is laid-off is entitled for compensation equal to 50% of the total of the basic wages and dearness allowance that would have been payable to him, had he not been so laid off.

Workmen not entitled to compensation in certain cases Section 25E of Industrial Dispute act 1947

1. If he refuses to accept any alternative employment in the same establishment from which he has been laid off, or in any other establishment belonging to the same employer situated in the same town or village or situate within a radius of five miles from the establishment to which he belongs, if, in the opinion of the employer, such alternative employment does not call for any special skill or previous experience and can be done by the workman, provided that the wages which would normally have been paid to the workman are offered for the alternative employment also;
2. If he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day;
3. 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.

Compulsory permission from competent authority by employer to lay off of workmen. Section 25M of Industrial Dispute act 1947

For Industrial establishments in which not less than 100 workmen are employed, on an average per working day and are of not being seasonal character and in which work is performed only intermittently, have to seek prior permission from competent authority by the employer to layoff workman. if the employer does not apply to seek prior permission or where such permission is refused by the competent authority specified above, to effect lay-off, such lay-off shall be considered as illegal and the workmen laid-off shall be entitled to all benefits as if they have not been laid-off.

Retrenchment
It also has an important place in industrial disputes act 1947. Retrenchment means the discharge of surplus labour by the employer for any reason whatsoever otherwise then as a punishment inflicted by way of disciplinary action. It has no application where the service of all workmen have been terminated by the employer on a real and bona fide closure of business or on the undertaking on taking being an another employee.

Definition of retrenchment of employee [Section 2(oo)]

"Retrenchments" 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:

1. Voluntary retirement of the workman; or
2. 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 on that behalf contained therein; or]
    
3. termination of the service of a workman on the ground of continued ill-health;]

In Duryodhan Naik v. Union of lndia, the Court held that the discharge of surplus labour by the employer� for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action is called retrenchment, but where the services of all workmen have been terminated by the employer on a real and bona fide closure of business or the undertaking is taken over by another employer, it has no application of retrenchment.

In Santosh Gupta v. State Bank of India, a female employee was discharged on the grounds that she failed to qualify herself in the prescribed test for confirmation of services. The Tribunal held that the termination does not amount to retrenchment. But the Supreme Court reversed the decision of the Tribunal and ordered reinstatement of the employee with full back wages.

The Supreme Court further held that the expression "termination of service for any reason whatsoever" is wide enough to include every kind of termination of service except those which are expressly excluded by the proviso to the definition of retrenchment as given in Section 2(oo)|.

In Tatanagar Foundry Co. v. Their Workmen, it was held that employer cannot lay-off the workmen with mala fide intention or by way of victimization

Reason for retrenchment
There shall be some reasons for the retrenchment. The service of any employee cannot be terminated without any reason by the way of retrenchment. Generally the reason could be following-

1. More than required labour or employee are employed
2. The closure of any part or department of the industry
3. Lack of raw material
4. Deficit in machinery
5. Natural calamity
6. Establishment of self-working machine
7. Economic crises

Case law: Banaras Ice Factory ltd. v/s workman 1957 SC
It was held that reforms in industry renovation or establishment of machine were the reasons for retrenchment.

Procedure for retrenchment [Section 25G]

The principle of 'last come; First go:
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.

Re-employment of retrenched workmen [Section 25H]
Where any workmen are retrenched, and the employer proposes to take into his employ any persons, he shall, in such manner as may be prescribed, give an opportunity [to the retrenched workmen who are citizens of India to offer themselves for re-employment, and such retrenched workmen] who offer themselves for re-employment shall have preference over other persons.

Retrenchment conditions
To an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than [50 but not more than 100] workmen were employed on an, average per working day for the preceding twelve months.[Section 25A]

According to the Section 25F [Conditions precedent to retrenchment of workmen]

• Employee should have continuous service for not less than one year under an employer
• One month's notice in writing indicating the reasons for retrenchment or payment for the period of the notice
• 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.
• Notice in the prescribed manner is served on the appropriate government

To an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than [one hundred] workmen were employed on an, average per working day for the preceding twelve months.[Section 25K]

According to the Section 25N [Conditions precedent to retrenchment of workmen]

1. Employee should have continuous service for not less than one year under an employer
2. Three months notice in writing indicating the reasons for retrenchment or payment for the period of the notice
3. 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.
4. An application for permission to specified authority for the intended retrenchment and a copy of such application shall also be served simultaneously on the workmen concerned in the prescribed manner.
5. Compulsory permission from competent authority by employer retrenchment of workmen For Industrial establishments in which not less than 100 workmen are employed, on an average per working day and are of not being seasonal character and in which work is performed only intermittently, have to seek prior permission from competent authority by the employer to layoff workman.

If no application seeking permission to retrench workmen is made by the employer or where such permission is refused, such retrenchment shall be
deemed to be illegal and the workmen shall be entitled to all benefits as if they have not been given any notice. (sub-Section 7).

Penalty for lay-off and retrenchment without previous permission

This section applies to an industrial establishment (not being an establishment of a seasonal character or in which work is performed only intermittently) in which not less than [one hundred] workmen were employed on an, average per working day for the preceding twelve months. [Section 25K]

Compulsory permission from competent authority by employer to lay off of Workmen [Section 25M] of Industrial Dispute act 1947

Section 25N [Conditions precedent to retrenchment of workmen]

Any employer who contravenes the provisions of section 25M or section 25N shall be punishable with imprisonment for a term which may extend to one month, or with fine which may extend to one thousand rupees, or with both.