Page 190 - DMGT306_MERCANTILE_LAWS_II

Unit 10: Industrial Disputes Act, 1947

calamity, or (v) for any other connected reason. Financial stringency cannot constitute a ground Notes
for lay-off (Hope Textiles Ltd. v. State of MP, 1993 I LLJ 603).
Lastly, the right to lay-off cannot be claimed as an inherent right of the employer. This right
must be specifically provided for either by the contract of employment or by the statute (Workmen
of Dewan Tea Estate v. Their Management). In fact, lay-off is an obligation on the part of the
employer, i.e., in case of temporary stoppage of work, not to discharge the workmen but to
lay-off the workmen till the situation improves. Power to lay-off must be found out from the
terms of contract of service or the standing orders governing the establishment (Workmen v.
Firestone Tyre and Rubber Co., 1976 3 SCC 819).

There cannot be lay-off in an industrial undertaking which has been closed down. Lay-off and
closure cannot stand together.

Difference between Lay-off and Lock-out

(1) In lay-off, the employer refuses to give employment due to certain specified reasons, but in
lock-out, there is deliberate closure of the business and employer locks out the workers not due
to any such reasons.
(2) In lay-off, the business continues, but in lock-out, the place of business is closed down for the
time being.
(3) In a lock-out, there is no question of any wages or compensation being paid unless the lock-
out is held to be unjustified.
(4) Lay-off is the result of trade reasons but lock-out is a weapon of collective bargaining.
(5) Lock-out is subject to certain restrictions and penalties but it is not so in case of lay-off.
However, both are of temporary nature and in both cases the contract of employment is not
terminated but remains in suspended animation.

(viii) 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 or 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.
(c) termination of the service of workman on the ground of continued ill-health.

Thus, the definition contemplates following requirements for retrenchment:
(i) There should be termination of the service of the workman.

(ii) The termination should be by the employer.
(iii) The termination is not the result of punishment inflicted by way of disciplinary action.

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