Comparative Study of Lay-Off, Retrenchment, and Closure

Indian Legal System > Civil Laws > Industrial Disputes Act, 1947 > Comparative Study of Lay-Off, Retrenchment, and Closure

In this article, we shall do Comparative Study of Lay-Off, Retrenchment, and Closure and its effect on employment.

 Definition of Lay-Off:

• “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 breakdown 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.

Definition of Retrenchment:

• “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 on-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;]

Definition of Closure:

• The Industrial Disputes Act, 1947, originally does not contain the provisions relating to the closure of an industry. The provisions relating to the law of closure were inserted in the year 1957 in view of the Supreme Court judgment in case Hariprasad Shivshankar Shukla v/s. A.D. Diwelkar, AIR 1957 S.C 121
• Subsequently, over a period of years the law relating to closure has undergone a series of amendments from time to time and thus was consolidated to the present position in the year 1982.
• According to Section 2(cc) of the Industrial Disputes Act, Closure of an industry means the permanent closing down of a place of employment or part thereof.
• Section 2(cc) of the Industrial Disputes Act was inserted by Industrial Disputes (Amendment) Act of 1982, (w.e.f. 21-8-1984)

Distinguish Between Lay-Off and Retrenchment

Lay-Off	Retrenchment
Lay-off is defined in Section 2 (kkk) of the Industrial Disputes Act, 1947	Retrenchment is defined in Section 2 (oo) of the Industrial Disputes Act, 1947
It is temporary	Retrenchment is permanent. They may again be appointed in appropriate cases.
In lay-off, the employer is compelled to refuse employment under certain circumstances, viz. shortage of raw materials, power, finance, etc., which arise temporarily in the industry.	In retrenchment, the employer lessens over-burdened employees under circumstances, viz. Government policies, loss in some departments, etc.
When the employer declares lay-off, the industry stops its function.	While the process of retrenchment is going on, the industry does not stop its function. It continues to function.
In lay-off, all the employees or a group of employees are refused to employment.	In retrenchment, the last come first goes. i.e. last employed person is retrenched first.
The Conditions Precedent is not necessary in case of lay-off.	The Conditions Precedent are to be followed in case of retrenchment, viz. notice to the concerned employee, notice to Government in the prescribed manner, etc. (Sec. 25-F).
The laid-off employees are paid laid-off compensation. The payment of gratuity does not arise in a lay-off.	The retrenched employees are paid retrenchment compensation + payment of gratuity
All of the laid-off employees should be taken back in their usual posts, as soon as the lay-off lifted out.	Re-employment of retrenched workmen also takes place in certain circumstances. But it is, not mandatory that all the retrenched workers should be re-employed. (Sec. 25-H)

 

Distinguish Between Lay-Off and Lockout

Lay-Off	Lockouts
Lay-off is defined in Section 2 (kkk) of Industrial Disputes Act, 1947	Section 2(i) defines “Lock-out” of Industrial Disputes Act, 1947
Lay-off means the failure, refusal or inability of an employer on account of shortage of raw materials, shortage of power, no market demand for finished products etc.	Lock-out means the temporary closing of a place of employment.
Lay-off occurs while the establishment is continuing operation.	In Lock-out, the establishment is completely closed.
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.	Generally, the causes of lock-out lie political, disturbances with trade union leaders, rigid policies of management, etc., besides economic problems.
Compensation shall be paid to the workers laid-off.	Payment of compensation to workers depends upon various factors viz. legal or illegal lock-outs, justified or unjustified.
Generally, the employer declares lay-off under certain genuine circumstances.	Generally, the lock-out is declared by the employer in answer to strike.
Lay-off may be applicable to a group of workers or to entire workers.	Lock-out is applicable to the entire industry

 

Distinguish Between Closure and Lockout

Closure­­	Lockouts
Section 2 (cc) defines ‘Closure’.	Section 2(i) defines “Lock-out” of Industrial Disputes Act, 1947
Closure means the permanent closing down of a place of employment or part thereof	Lock-out means the temporary closing of a place of employment.
A closure is not a weapon in the hands of the employer. It equally effects on both the employer and employees	It is a weapon in the hands of the employer against his employees. He uses it as a threat.
A bona fide closure can never be illegal.	A bona fide lock-out can be illegal if it is violated the provisions of Sec. 24.
Closure signifies the final and irrevocable termination of the business itself.	Lock-out signifies the closure of the place of business and not the closure of the business.
In the Closure, the relationship between them comes to an end.	In the lock-out, the relationship between employer and employees does not come to an end.
The causes for the Closure of industry are permanent or lasting and cannot be cured.	The causes for the lockout in an industry are temporary and can be cured.
. Generally, the cause of closure is economical, poor quality of maintenance, poor management, non­availability of raw material, Government policies, etc.	Generally, the causes of lock-out arise from political, disturbances with trade union leaders, rigid policies of the State, and particularly the economic factors too, etc.
Closure cannot be turned into a lock­out.	A lock-out may turn into the closure of an industry.
Closure of an industry is the last resort. It may be due to economic reasons	Generally, the lock-out is declared as an answer to a Strike.

Indian Legal System > Civil Laws > Industrial Disputes Act, 1947 > Comparative Study of Lay-Off, Retrenchment, and Closure