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Retrenchment and Laying Off Employees During Pandemic


As the lockdown appeared inevitable, the effect on businesses and organizations could not be forgotten. Top analysts and financial firms deem this situation worse than the 2008 economic crisis, which would leave corporations in tatter. To resolve this crisis, companies are taking extraordinary steps, such as the firing of workers or the contraction of their area of service, pay cuts, etc. Many small companies or start-ups have been shut down as a result of the pandemic because they were unable to survive the damages suffered.

Big companies such as Ola, Zomato, Uber, We Operate, etc., have now laid off a vast number of workers to keep the company from falling through more losses. This left the workers in a state of total shock, when they become unemployed in a state of pandemic, which in fact, produces a situation in which they cannot even look after their own well-being.


Retrenchment, as specified in Section 2 of the Industrial Disputes Act, provides that the contractor terminates the workman’s service for some cause whatsoever, other than the penalty levied as a result of disciplinary action. This therefore does not require termination as a consequence of an over-annuation of the deal or termination as a result of ill health. Simply put, it is the division of the relationship between the employer and the employee, except in the circumstances described above. Section 25F of the Act sets out some requirements before the removal can take place. The conditions for retraction include a notice to the worker 30 days in advance specifying the reasons for retraction, an appropriate payout to the employee for a period of 15 days, and government officials should also be aware of the same.

Compensation is a requirement for the retraction of workers and if compensation is not paid, the process cannot be held to be legitimate in compliance with Section 25F. The third provision that allows for the intimation of the government authority cannot be treated as a precondition for retraction, because the object of that particular clause is merely to notify the government authorities so that the government can act. It may also be mentioned that the two necessary conditions for retirement are to serve a notice and to pay the workers who have been retrained. However, the courts have specifically established that while 25F(c) is not a precedent, it is mandatory for a note to be submitted to the government by the employee. The court also has the right to keep a retrenchment order unconstitutional if the decision has not been communicated to the government authorities.

In order for any employee to benefit from the benefits given by Section 25F, it is important for him or her to prove that he or she has been in continuous service for more than a year immediately before the withdrawal. Only once this has been formed the company would be obligated to give a warning and to pay the employee. On simultaneous reading of Sections 25F and 25B, a year is equal to 240 days of service in a year but before coming at any conclusion, it must be tested whether or not the employee has served 240 days. Retrenchment of an employee shall not be found accountable if the person is not awarded retrenchment and one month’s compensation at the time of retrenchment and the person will be returned to the company with 50% of the income that was owed to him.

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Furthermore, if the workers were dismissed without compliance with the rules of Section 25F of the Act, the workers will have the right to be recalled, although it does not mean that they have the right to demand back pay on the simple fact that they have been reinstated by the courts. The employee would have to show to the court that, although in disservice to the company, he did not have any other jobs and salary of any kind. Once this is proven before the court of trial, the blame transfers to the employer. The employer will want to show otherwise that the employee was hired by another person during the time of which he was retired, but the original responsibility lies on the employee.

Factors that decide the amount of back-paid to be received by the employee are non-gainful jobs of the worker, time lost in arbitration, last-draw wages, payment of managerial capacity at the time financial situation of the worker, quality of job, etc. Furthermore, it is also specified under section 25G that the last person to join the firm should usually be retrained first. The law lays out the last come first go’ argument, but the rule is not rigid and can vary based on the facts and circumstances. This provision provides for the contractor to eliminate the economic weight that the employee bears if the employee fails to fulfil those requirements. The section suggests that the right to withdrawal is implicit in the right of management of the employer’s company providing that the condition accompanying the withdrawal is met.


Lay-off as described in Section 2 of the Industrial Disputes Act, 1947 means the reluctance, reluctance or unwillingness of an employer, on account of a lack of coal, power or raw materials, or an accumulation of stocks or a breakdown of machinery, to provide employment to a worker whose name is on the shoulder rolls of his industrial establishment and who has not been cut back.

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There are 4 basic conditions to be followed before any employee is laid off. In the first place, workers must not be able to continue the services of workers. In the second condition, workers must be reported at the meeting spot on the day of lay-off. Thirdly, the cause for lack of jobs must be the lack of coal, electricity or raw materials, or the accumulation of supplies or the deterioration of equipment in order to provide employment to a worker. Fourthly, there should be no reduction in the elimination of workers.

While workers are laid off, it still happens at the whim of the judge. There are also situations where the employers follow unfaithful practices and lay-off even though there is no need for them. The court determined that it was beyond its control to assess whether the employer had a chance to prevent a lay-off and whether it should have been more vigilant and cautious in its service. Unless the ill-advised motive is asserted or shown the court will have exercised its authority in determining if the lay-off was just or not.

Section 25C of the Act provides for benefits to be paid to the worker if the worker has been laid off by the corporation or organization. It accounts for 50% of the gross monthly salaries and allowances to be paid as compensation to the worker for the days on which the worker is laid off. There are three preconditions before a worker is entitled for benefits. First of all, the worker can be a bad or casual worker. Second, his name must be on the registry of manufacturing establishments. Third, it should have completed one year of continuous service at the establishment, either regularly or intermittently. The lay-off payment to be paid to the worker shall be paid on all days of lay-off beyond the first 45 days, whether or not the time is ongoing, unless there is some agreement to the contrary. In the absence of any other arrangement, the company cannot waive its duty to pay wages to the employee for a period of 45 days.


The COVID-19 age has left our country’s workers feel precarious about their work status, as they worry that they could be laid off or cut off at some point in time. The businesses have done their hardest not to remove any workers until it is absolutely necessary. The government has also been aggressively working to protect the needs of workers, but the matter remains out of control. Employers and associations are required to comply with the general laws in force concerning removal and firing without any particular limitations but are cautioned not to take any stringent steps unless they are inevitable.

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The Government released an order on 29 March 2020 specifying that according to Article 10(2) of the Disaster Management Act, State governments shall take the required measures to ensure that workers earn their salaries without any salary cuts. The Chief Labor Commissioner also released notices after contacting the Home Ministry to prohibit the dismissal of any employee, as seen in the case of Spice Jet CMD. Both the Central and the State Government issued numerous guidelines and notices encouraging/requiring employers not to dismiss their workers and pay maximum salaries to them, but the Government did not issue them.


The letter of 20 March 2020 urged employers not to take any action that would leave workers redundant during the pandemic until it became absolutely necessary. The strategy adopted by the Indian Government is commendable and will be effective in securing employees’ jobs but could have detrimental consequences in the long run. The Government’s inability to take account of the condition of workers and the directives and alerts given would complicate the cost-cutting steps taken by businesses to deal with the pandemic. It will drain the funds of the companies and will result in dramatic action being taken by the organization, such as the liquidation or substantial reform of the organization. This also appears to be harmful to the economy.

Cite this article (The Bluebook 20th ed.)-

Kosha Doshi, Retrenchment and Laying Off Employees During Pandemic, Ex Gratia Law Journal, (December 6, 2020),

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Kosha Doshi
Student - Symbiosis Law School, Pune