Lay-off Compensation

Indian Legal System > Civil Laws > Industrial Disputes Act, 1947 > Lay-off Compensation

Before understanding lay-off compensation, we have to understand the term continuous service.

Continuous Service:

• The term “Continuous service” is defined in S. 25B. The section defines “continuous service” as

1. a workman shall be said to be in continuous service for a period if he is, for that period, in uninterrupted service, including service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal, or a lock- out or a cessation of work which is not due to any fault on the part of the workman.
2. where a workman is not in continuous service within the meaning of clause (1) for a period of one year or six months, he shall be deemed to be in continuous service under an employer (a) for a period of one year, if the workman, during a period of twelve calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than — (i)one hundred and ninety days in the case of a workman employed below ground in a mine; and (ii)two hundred and forty days, in any other case; (b)for a period of six months, if the workman, during a period of six calendar months preceding the date with reference to which calculation is to be made, has actually worked under the employer for not less than—(i)ninety- five days, in the case of a workman employed below ground in a mine; and (ii) one hundred and twenty days, in any other case. Explanation.– For the purposes of clause (2), the number of days on which a workman has actually worked under an employer shall include the days on which—(i) he has been laid- off under an agreement or as permitted by standing orders made under the Industrial Employment (Standing Orders) Act, 1946 (20 of 1946 ), or under this Act or under any other law applicable to the industrial establishment; (ii) he has been on leave with full wages, earned in the previous years; (iii) he has been absent due to temporary disablement caused by accident arising out of and in the course of his employment; and (iv) in the case of a female, she has been on maternity leave; so, however, that the total period of such maternity leave does not exceed twelve weeks.]

Explanation:

• A workman is said to be in continuous service if he is for that period in uninterrupted service. Interruption on account of sickness, authorised leave, an accident, a strike which is not illegal, a lock and a cessation of work which is not due to the fault of the workman should not be taken into consideration for calculating the period of continuous service.
• Even if a workman has not been in continuous service for a period of one year, he shall be deemed to be in continuous service for the period of one year if he satisfies the following two conditions:

1. He was in employment for twelve calendar months preceding the date with reference to which calculation is to be made, and
2. During such twelve months, he actually worked for not less than (a) one hundred and ninety days in the case of employment in a mine, and (b) two hundred and forty days in any other case.

• According to the explanation of this section, for the purpose of calculating the number of days on which a workman has actually worked under an employer, the following days shall be included:

1. The days on which he has been laid-off under an agreement or standing orders or under this Act or under any other law applicable to the industrial establishment
2. The days on which he has been on earned leave
3. The days on which he has been absent due to temporary disablement due to an accident arising out of and in the course of his employment
4. In the case of a female worker, the days on which she has been on maternity leave, not exceeding twelve weeks.

Importance of Continuous Service:

• Compensations for lay-off, retrenchment, leave, and gratuity are available to a workman, only he has put in continuous service. If the employee fails to satisfy the condition of continuous service, the employer can avoid liability to pay the compensations and other benefits.
• Case Law: Surendra Kumar Varma v. The Central Government Industrial Tribunal-cum-Labour Court & ar., (AIR 1981 SC 422)

Lay-off Compensation:

• The lay-off compensation is discussed in S.25 of the Industrial Disputes Act, 1947. It states that
• Whenever a workman (other than a badli workman or a casual workman) whose name is borne on the muster rolls of an industrial establishment and who has completed not less than one year of continuous service under an employer is laid- off, whether continuously or intermittently, he shall be paid by the employer for all days during which he is so laid- off, except for such weekly holidays as may intervene, compensation which shall be equal to fifty per cent. of the total of the basic wages and dearness allowance that would have been payable to him had he not been so laid- off: Provided that if during any period of twelve months, a workman is so laid- off for more than forty- five days, no such compensation shall be payable in respect of any period of the lay- off after the expiry of the first forty- five days, if there is an agreement to that effect between the workman and the employer: Provided further that it shall be lawful for the employer in any case falling within the foregoing proviso to retrench the workman in accordance with the provisions contained in section 25F at any time after the expiry of the first forty- five days of the lay- off and when he does so, any compensation paid to the workman for having been laid- off during the preceding twelve months may be set off against the compensation payable for retrenchment.

Conditions to be Satisfied For Lay-Off Compensation:

• The workman is one other than a badli or casual workman.
• The name of the workman is borne on the muster rolls of an industrial establishment.
• He has completed not less than one year of continuous service under the employer.
• It is immaterial that he is laid- off, whether continuously or intermittently under the employer.
• Note: A badli workman means a workman who is employed in place of another workman whose name is borne on the muster rolls of the establishment. However, such a workman ceases to be a badli workman on his completion of one year of continuous service in the establishment.

Extent of Compensation:

• The right of workmen to lay off compensation is designed to relieve the hardship caused by unemployment due to no fault of the employee. The provision for payment of compensation for lay-off does not mean that the employer can pay lay-off compensation and declare lay-off. Payment of compensation is not a condition precedent to lay-off.
• A workman is entitled to lay-off compensation at the rate equal to fifty percent 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.

Cases in which a Workman is not Entitled to Lay-Off Compensation:

• In the following cases, a worker who is laid-off will not be entitled to claim compensation.

Refusal to Accept Alternative Employment:

• If a laid-off workman refuses to accept alternative employment provided that such alternative employment is:
• In the same establishment from which he has been laid-off or
• 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,
• 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
• 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.

Indian Legal System > Civil Laws > Industrial Disputes Act, 1947 > Lay-off Compensation