Retrenchment
is a sensitive issue and is regulated by the Indian Labour Code to ensure that
the rights of workers are protected and that the process of retrenchment is
carried out in a fair and transparent manner. Retrenchment in the Indian Labour
Code has grabbed its value under the industrial relations code 2020 [ under
chapter IX, X ], Industrial Disputes act, 1947.
The term Retrenchment in the Indian Labour Code refers to the termination of employment of a worker due to redundancy or as a result of the closure of a workplace. Retrenchment is a form of termination of employment that is carried out by an employer due to economic reasons, such as downsizing or restructuring.
According to Section 2(oo) of the Industrial Disputes Act, 1947 (IDA), retrenchment is the termination of service of a worker "for any reason whatsoever", but excludes termination by way of punishment inflicted pursuant to disciplinary action, voluntary retirement, retirement on reaching the age of superannuation if the contract of employment contained such stipulation, non-renewal of the contract of employment, and continued ill health.
Retrenchment under the Industrial Disputes Act, 1947
The modification to the Industrial Disputes Act of 1947 included Section 2(oo). The provision was added to the Industrial Disputes Act, 1976 by the way of an amendment. The Act was amended because the 1947 Act lacked measures that would give employees protection and immunity if they were faced with any type of involuntary unemployment. Therefore, Section 2(oo) was introduced as a statutory provision to promote the welfare of the laborers and provide them with adequate financial realities in the Industrial Disputes Act,1976.
The code lays down specific procedures that must be followed by an employer before retrenching workers. These include giving the workers at least 60 days' notice, and paying them compensation equivalent to 15 days' average pay for every completed year of continuous service.
The Industrial Relations Code, 2020 lays down the procedure for retrenchment of workers and the rights and obligations of both the employer and the workers. The following are some of the key provisions related to retrenchment in the Indian Labour Code:
Notice Period: The employer is required to give at least 60 days' notice to the workers before retrenchment. The notice period can be waived by mutual agreement between the employer and the workers.
Compensation: The employer is required to pay compensation to the retrenched workers equivalent to 15 days' average pay for every completed year of continuous service.
Procedure for retrenchment: The code lays down a procedure for retrenchment, which includes obtaining prior approval from the government in certain cases, giving notice to the workers and the concerned authorities, and paying compensation to the retrenched workers.
Right to be heard: The workers have the right to be heard and make representations before the retrenchment process is carried out.
Prohibition on retrenchment: Retrenchment is prohibited in certain circumstances, such as during the pendency of proceedings before a labour court, tribunal or national commission, and during the settlement of a dispute through conciliation.
In addition to these provisions, the code also requires the employer to provide information to the government regarding the number of workers employed, the reasons for retrenchment and the compensation paid to the retrenched workers.
The Industrial Relations Code, 2020 lays down the procedure for retrenchment of workers and the rights and obligations of both the employer and the workers. The following are some of the key provisions related to retrenchment in the Indian Labour Code:
Notice Period: The employer is required to give at least 60 days' notice to the workers before retrenchment. The notice period can be waived by mutual agreement between the employer and the workers.
Compensation: The employer is required to pay compensation to the retrenched workers equivalent to 15 days' average pay for every completed year of continuous service.
Procedure for retrenchment: The code lays down a procedure for retrenchment, which includes obtaining prior approval from the government in certain cases, giving notice to the workers and the concerned authorities, and paying compensation to the retrenched workers.
Right to be heard: The workers have the right to be heard and make representations before the retrenchment process is carried out.
Prohibition on retrenchment: Retrenchment is prohibited in certain circumstances, such as during the pendency of proceedings before a labour court, tribunal or national commission, and during the settlement of a dispute through conciliation.
In addition to these provisions, the code also requires the employer to provide information to the government regarding the number of workers employed, the reasons for retrenchment and the compensation paid to the retrenched workers.
Procedure of retrenchment
The retrenchment principle of ‘first come, last go’ and ‘last come, first go’ are well-known in industrial law. The concept has been codified in Section 25G. A worker can seek the procedural protections afforded by this provision.
Section 25G of Industrial Disputes Act 1947 : "Procedure for retrenchment"
25G.
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 protection can only be availed if the following requirements are fulfilled:
The person seeking protection must qualify the definition of a worker as defined in Section 2(s) of the Act.
The
workman should be a citizen of India
The
employee should have been employed in the establishment, which, according to
Section 2(j) of the Act, is classified as an industry.
The
employee must belong to a specific category of a workforce in the industry
There
should not be any kind of agreement between the employer and the employee
regarding the principle of ‘last come first go’.
The
procedure of retrenchment can only be valid under Section 25G if all the five
conditions have been simultaneously complied with.
Principle of ‘first come, last go’ and ‘last come, first go’
The
principle of ‘first come, last go’ and ‘last come, first go’ can only be
applied if the worker has been classified under different categories of the
workmen employed in any industry or establishment. The principle of ‘last come,
first go’ states that in the case of retrenchment, the employer has the power
to decide which of the employees are to be retrenched. The rule acts as a
healthy safeguard if there is any kind of discrimination against the worker in
case of retrenchment. The principle will not be applicable if :
If there is any type of agreement between the employer and the employee.
For
any other reason, the employer considers necessary.
The
principle of retrenchment is that management should start with the latest
recruit and progressively retrench employees higher up in the list of
seniority. The management in matters of retrenchment should act fairly and must
comply with the principles of equality, equity, justice, and fairness.
Re-employment of retrenched workmen
The
Act’s Section 25H is based on the well-known concept that when an employer
retrenches a worker due to labour allow shortage, the worker should be given
the first chance to return to work whenever the need for another hand arises.
Section 25H imposes a statutory obligation on the employer to give an
opportunity to the retrenched employees to apply for re-employment. The workmen
must satisfy the following conditions:
When the company retrenches, the workers should be allowed to re-enter employment.
The
worker must be a citizen of India.
The
notice should be given to the workmen for any kind of re-employment.
The
workers should be granted reemployment in the same industry where he was
employed before being laid off.
The
retrenched workers shall be preferred by the employer for re-employment over
other persons.
Only
a ‘retrenched’ workman has been given the right to claim benefit under Section
25H. A dismissed, discharged or superannuated worker has no claim for preferential
re-employment. If the worker is given a notice by the employer for
re-employment and he consequently fails to offer himself for re-employment,
then he will be disentitled from claiming the benefit under Section 25H. When
an employer has to employ more workers, the retrenched worker must be allowed
to re-enter the workforce. The principle of equality is not only incorporated
in this specific Section 25H, but it is the general application in industrial
adjudication that everybody must be equally treated and must comply with the
provisions of natural justice, equality, fairness, justice, and equity.
Conclusion
Retrenchment is the termination of the employment of workmen by the employer for any reason other than those specified as misconduct. In India, the retrenchment of workers is governed by the Industrial Disputes Act, 1947. The act provides for certain protections to workers against arbitrary termination of their employment and lays down procedures that must be followed before retrenchment can take place. In conclusion, retrenchment is regulated by Indian labor laws to prevent its arbitrary use and to ensure fair treatment of workers.
References
Labour and Industrial Laws by S.N.Mishra, 29th edition.
https://www.researchgate.net/publication/335060965_SEMINAR_ON_LABOUR_LAW_RETRENCHMENT_SARALA_JUWEL_ANTAO
Written By:
B. Lohith [2nd Year, BA.LLB(Hons.)] under the guidance of Dr. Nagalatha Bathina, Associate Professor, Vignan Institute of Law.
Editorial Director:
Dr. Nagalatha Bathina, Associate Professor, Vignan Institute of Law.
Editors:
Dr. Praveen Kumar, Director, Vignan Institute of Law
Mr. L. Ashish Kumar, Assistant Professor, Vignan Institute of Law
Blog Managed By:
Taj Mahamood Baig [2nd Year, BA.LLB(Hons.)]
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