Lay-Off and Job Security Under Industrial Relations Code 2020: Compensation, Rights & G.E. Power Case

Abstract

Layoff is an important issue in industrial relations because it affects workers’ income, employment, and job security. A lay-off is generally temporary and does not mean permanent termination. The employment relationship usually continues even though the employer is temporarily unable to provide work.

Table of Contents

Because the employment relationship continues, important questions arise about:

Payment of wages or layoff.
Compensation
Continuity of services
Provident fund (PF)
Gratuity
Medical or ESI benefits
Another employment
Returning to the job after the lay-off ends.

This article studies the law of layoff and job security under the Industrial Dispute Act, 1947, and chapters XI and X of the Industrial Relations Code, 2020.

The industrial relation code came into force on 21 November 2025. Therefore, in the case G.E. Power System India Pvt. Ltd. (presently known as a Powerstatic Solutions India Pvt. Ltd.) v. Sanad Power Kamdar Union, it was dealt with under the earlier Industrial Disputes Act because the Gujarat High Court proceedings took place before the code came into force. [1][7]

The Gujarat High Court gave its order in its matter on 6 May 2024.

Fact of the Case

The company proposed to lay-off 43 workers for 14 days, from 6 May 2024 to 19 May 2024. [3]

The workers’ union opposed the proposed lay-off. It argued that the company was required to obtain prior permission under section 25M of the Industrial Dispute Act, 1947. [2]

The Gujarat High Court did not finally decide whether the layoff itself was legal or illegal. Instead, it stayed the interim order passed by the Industrial Tribunal and directed the tribunal to decide the union’s application within two weeks. [3]

Salary and Other Benefits

They are employment-related benefits that may also raise important issues, including:

PF (provident fund), retirement-related benefits.
Medical / ESI benefits—medical and social security protection, subject to the applicable law and eligibility.
Gratuity—continuity of service can be important for calculating gratuity.
Continuity of service during a temporary layoff should be distinguished from permanent termination of employment.

Role of the ILO International Labour Organisation

The article also considers the standards and principles of the International Labour Organization (ILO) relating to employment security and protection of workers.

ILO standards help explain the importance of protecting workers against unfair loss of employment while also recognizing legitimate requirements of employers.

Keywords

layoff job, security, Industrial Relations Code 2020, Industrial Disputes Act 1947, G.E. Power System India, Sanand Power Kamdar Union, ILO, layoff, compensation, alternative employment, social security.

1. Introduction: Lay-Off and the Concept of Job Security

Meaning of Layoff

A layoff happens when an employer is temporarily unable to provide work to employees because of certain reasons recognized by law. The worker generally remains employed during this period.

Therefore:

Lay-off = Temporary inability to provide work.

It does not automatically mean that the worker’s employment has permanently ended.

Lay-Off and Retrenchment

Lay-off retrenchment is different. In a lay-off, the employment relationship generally continues, but work is temporarily unavailable. In retrenchment, the worker’s employment is terminated by the employer, subject to the legal definitions and exceptions.

This research mainly focuses on LAY-OFF, not RETRENCHMENT.

Industrial Relation Code, 2020

Earlier, lay-off was mainly governed by the Industrial Dispute Act, 1947. The Industrial Relations Code 2020 came into force on 21 November 2025. [1][7]

Therefore, two legal periods are important for this research.

Reasons for Layoff

Layoff may occur because of a legal recognized reason, such as:

Shortage of coal, power, or raw materials.
Accumulation of stock.
Breakdown of machinery.
Natural climate.
Other reasons recognized under law.

Several questions can arise:

Will the worker get the original job back after the lay-off?
Can the employer provide another suitable job?
Will the workers receive the same wages as an alternative job?
What happened to PF, medical benefits, and gratuity?
How much lay-off compensation will the workers receive?
Can an employer repeatedly lay-off workers instead of providing regular employment?

These questions are important because workers need protection even when the interruption of work is temporary.

Objective of the Study

This study mainly aims to understand:

The legal protection available to workers during lay-off.
The proceedings in the GE power system case.
The balance between the employer’s business needs and workers’ job security.
Workers’ right to lay-off compensation.
Possibility of alternative employment.
Continuity of employment/service after layoff.
Protection of PF, medical, and other social security benefits.

Literature Review

Many laws, court cases, and research articles discuss lay-off and job security in India. Earlier, layoff was governed mainly by the Industrial Disputes Act, 1947. The Industrial Relations Code, 2020, reorganizes these rules. Lay-off law tries to balance business needs with workers’ income and job security.

Research Article 1: Roy and Dubey

Gopal Raj Roy and Amit Dubey, in “A Note on Industrial Relation Code, 2020 (2022),” compared the Industrial Relation Code, 2020, with the Industrial Dispute Act, 1947. Their study discusses employment protection relating to lay-off retrenchment and closure. It also studies the change in the special protection threshold from 100 workers under the earlier Central framework to 300 workers under the Industrial Relation Code. The study is useful because it explains why it remains important. [9]

Research Article 2: Singh and Sharma

Ratan Singh and Ravi Sharma, in “The Industrial Relation Code, 2020: An Analysis,” examine the main provisions and impact of the new code. Their article discusses industrial disputes, layoff retrenchment, strikes, and trade unions. It explains that labor-law reform has to support employment and business needs while also protecting workers’ rights. This article is useful for understanding the wider legal background of layoffs and job security under the Industrial Relations Code. [10]

Main Case: G.E. Power System India Pvt. Ltd. v. Sanand Power Kamdar Union

The main case is the research concerns a proposed 14-day layoff of 43 workers from 6 May to 19 May 2024. The company stated that there were not enough work orders. While the union argued that prior permission under section 25M of the Industrial Dispute Act, 1947 was required. The Gujarat High Court dealt with the interim procedural situation and directed the Industrial Tribunal to decide the matter quickly. It did not finally decide whether the proposed lay-off itself was legal or illegal for workers’ job security. [3].

In this case, workers were laid off for 45 days. The Supreme Court explained that an employer does not have an unlimited right to lay-off workers whenever it wants. A layoff must satisfy the legal meaning and applicable conditions. This case is important because it shows that financial or business difficulty alone does not automatically make every lay-off lawful. [4]

This case dealt with prior permissions for layoff under section 25M of the Industrial Dispute Act. The Madhya Pradesh High Court explained that establishments covered by Chapter V-B generally had to obtain prior permission before lay-off, subject to the statutory exceptions. The case is relevant to the present study because the G.E. Power Union also raised the question of prior permission under Section 25M. [8]

Research Gap

Previous studies explain the laws on lay-off, compensation, permission, and worker protection. However, there is limited research on the recent G.E. Power Systems case and its effect on job security.

Therefore, this study focuses on lay-off compensation, continuity of employment, return to work, and suitable alternative employment.

2. Legal Framework: ID Act Chapters V-A/V-B and IR Code Chapters IX/X

2.1 Position Under the Industrial Disputes Act 1947

Before the Industrial Relations Code, 2020, came into force, layoff matters were mainly governed by the Industrial Disputes Act 1947.

Two important chapters of the Act were Chapter V-A and Chapter V-B.

Provision	Subject
Section 25C	Eligible workers could get layoff compensation.
Section 25M	Certain companies needed government permission before laying off workers.

Section 25C dealt with lay-off compensation. Eligible workers who were laid off could receive compensation according to the conditions provided under the Act. (Industrial Disputes Act, 1947, s. 25C)

Section 25M, which was part of Chapter V-B, dealt with prior permission for lay-off establishments covered by this chapter generally had to obtain permission from the appropriate government before laying off workers, subject to the provision and exceptions under the Act. [2]

This issue became very important in the G.E. Power System case; the company relied on the provision relating to layoff compensation. However, the workers’ union argued that prior permission under section 25M was required and that the company had not obtained such permissions. (The Industrial Disputes Act, 1947, s.25M; G.E. Power System, 2024)

2.2 Chapter IX and X of the Industrial Relation Code 2020

The Industrial Relations Code, 2020, reorganized the law relating to lay-off.

Chapter IX generally deals with layoff, retrenchment, and related matters.

Chapter X provides additional rules for certain larger industrial establishments.

Sections 65 to 69 are particularly important for understanding layoff.

Section 67: Lay-Off Compensation

It explains when eligible workers can receive compensation during lay-off.

Section 68: Employer Must Keep a Muster Roll

The employer is required to maintain a mustard roll, which is an official record of workers.

Section 69: When Compensation Is Not Payable

It explains situations where a worker may not receive lay-off compensation. For example, compensation may not be payable when a worker refuses suitable alternative employment that meets the legal requirements.

Chapter X and the 300-Worker Threshold

Chapter X contains special requirements for certain Industrial establishments.

Under the central Industrial Relations Code framework, the important threshold is generally 300 workers, subject to exact statutory conditions. (Industrial Relation Code,2020, ChapterX)

Under the earlier centre framework of chapter V-B of the Industrial Dispute Act, the threshold was generally 100 workmen; although state amendments could create different rules.

2.3 Lay-Off Compensation

Section 67 of the Industrial Relations Code deals with compensation for eligible laid off workers.

Generally, an eligible workers must:

Have their name on the muster roll,
Have completed at least 1 year of continuous services,
satisfy the other conditions provided under the code.

Specified badli and casual workers are excluded from this entitlement.

For qualifying layoff days and eligible work is journal entitled to compensation equal to 50% of basic wages plus (DA) that would otherwise have been payable.(Industrial Relation Code,2020,s.67)

Intervening weekly holidays are excluded according to the provisions.

The code also contains rules for situations where lay-off continues for more than 45 days within a period of 12 months.

Easy Example

Suppose a qualifying worker’s:

Particular	Amount
Basic wages + DA equals	₹1,000 per day
50% of ₹1,000	₹500 per qualifying lay-off day

The normal lay-off compensation would be:

50% of ₹1,000 = ₹500 per qualifying lay-off day.

Therefore, lay-off compensation gives workers some financial support when work is temporary unavailable.

However, an important point is:

Lay-off compensation is not the same as full salary.

The workers generally receives 50%, of basic wages+DA, Subject to the conditions of the law, rather than the full normal wages.

Old Law and New Current Framework

Legal Framework	Relevant Chapters	Important Provisions
Old law: Industrial Disputes Act,1947	Chapter V-A and V-B	Section 25C and 25M were important.
New (Current) framework: Industrial Relation Code 2020	Chapter IX and X	Section 67, 68 and 69 are important for lay-off.

The main purpose of these provisions is to give workers compensation and legal protection during temporary lay-off, while also allowing employers to deal with genuine business or operational difficulties.

ILO Standard and the International Approach to Employment Security

The International Labour Organisation (ILO) provides International standards for protection of workers and their employment security. Its main idea is to maintain a balance between the needs of employers and the job security of workers.

Two Important ILO standards related to this topic are:

ILO convention No.158 Termination of employment convention, 1982.[5]
ILO convention No.166 Termination of employment recommendation, 1982.[6]

These ILO standards mainly deal with termination of employment, not directly with the Indian legal concept of temporary Lay-off. Therefore, they should not be treated as Indian lay-off laws. However, their principles are useful for understanding job security and protection against unnecessary loss of employment.

ILO Convention Number 158

According to ILO convention No.158, termination of a worker should have a valid reason.[5]

Reasons for Termination

The reason may be related to:

The worker ‘s ability to perform the job;
The worker’s conduct Or behaviour or,
The operational requirement of the company.

The basic idea is that workers should have a protection against employment being ended without a proper reason.

ILO Recommendation No. 166

ILO recommendation No.16 different ways employers can try to reduce or avoid loss of employment when a company faces economic, technological, structural or similar problems.

Some Possible Measures

Some possible measures are:

Reducing or stopping New hiring;
Reducing the workforce gradually instead of suddenly;
Transferring workers to another department or job:
providing training and retraining;
Reducing over time and
temporarily reducing normal working hours.(ILO recommendation No.166, 1982, paras 21-22)

For example, if a company is facing temporary financial or business problem, it may consider reducing working hours instead of immediately ending workers’ employment.

The recommendation also suggests considering partial compensation when workers lose some wages because their working hours have temporarily been reduces.

Importance for Lay-off and Job Security

These ideas are useful for understanding the purpose of layoff and job security.

If the employer’s problem is temporary, permanent loss of employment does not always have to be the first option.

Depending on the situation and the applicable law, an employer may consider:

Temporary reduction of work, transferred to another department, training or other suitable alternative that may help workers continue their employment.

ILO recommendation No.166 also the idea of considering suitable alternative employment and providing assistance to affected workers.(ILO recommendation No.166, 1982, para 25)

However, these ILO recommendations should not automatically be treated as a legal rights available to workers under Indian lay-off law. they provide International guidance and standards that can be used to understand how workers’ job security may be protected.

Main Ideas of the ILO Approach

For this research, the ILO approach gives three important ideas:

First, loss of employment should be avoided or reduced whenever it is practically possible.
Second, employers and worker representatives should communicate with each other when major changes may affect workers’ employment.
Third, alternatives such as an internal transfer, training, reduced working hours and other suitable work arrangements should be considered where appropriate before taking more serious steps affecting employment.

In simple words, the ILO approach says that employers need flexibility to manage business difficulties, but at the same time, workers should receive reasonable protection and efforts should be made to protect their employment whenever possible.

Facts of the Story: G.E. Power System India Pvt Ltd v. Sanand Power Kamdar Union

The main case studied in this research is Ge Power System India Private Limited (presently known as a Powerstatic solution India Pvt. Ltd.) V. Sanand Power Kamdar Union, R/Special Civil Application No. 7965 of 2024.

The case was decided by the Gujarat High Court at Ahmedabad. The order was passed by Justice Mauna M. Bhatt on 6 May 2024.[3]

4.1 Background of the Case

The dispute arose at the company’s Sanand manufacturing plant.

According to the company, the plant did not have sufficient work orders. Because of this, the company proposed to lay-off 43 workers for 14 days, from 6 May 2024. To 19 May 2024.[3]

There were 46 concerned workers in total. Three workers were not included in the proposed Lay-off, so 43 workers were affected.

The proposed lay-off was temporary and was not presented as permanent termination of employment.

4.2 Notice Given by the Company

The company stated that on 30 April 2024 it gave notice Form XXIII-Ai 8 to the Labour Department under Rule 79A of the Industrial Disputes (Gujarat)t rules, 1966.

The notice was displayed on the company’s notice board on 2 May 2024 to Inform the workers about the proposed lay-off.[3]

There is a small date problem in the reported High Court order. Some later parts mention the notice date as 30 May 2024, but this happiest to be a typing or recording error because the High Court itself passed its order on 6 May 2024, The earlier part of the order mentions 30 April 2024 which fits the sequence of events.

4.3 Industrial Tribunal Proceedings

The affected workers, through the Sanand Power Kamdar Union, approached the Industrial Tribunal Ahmedabad.

The union filed an application below Exhibit 12 (Exh.12) in Reference (I.T.) No.12 of 2024.

On 3 May 2024 the Industrial Tribunal passed an interim order directing the parties to maintain status quo until 9 May 2024.

The Tribunal also prevented the company from stopping the concerned workers from performing their duties from 6 May 2024

The employer then challenged this interim order before the Gujarat High Court.

4.4 Employer’s Arguments

The company argued that it had followed the required procedure by giving notice to the Labour Department and displaying the notice for the workers.

The employer also argued that the union’s Exh.12 application was not connected with the dispute already pending before the Industrial Tribunal. Therefore, according to the company, the Tribunal should not have passed the interim order.

The company also relied on the Section 25C lay-off compensation arrangement. It argued that if the workers ultimately succeeded, the remaining amount of wages could be paid later. Therefore, according to the company, there was no need for an immediate order preventing the proposed lay-off.[3]

4.5 Union’s Argument

The union mainly relied on Section 25M of the Industrial Dispute Act1947.

According to the union, the company was required to obtain express prior permission before laying off the workers.

The union argued that the company had not obtained this requirement permission.

Main Legal Disagreement

Position	Argument
Company’s position	the required notice had been given and the lay-off compensation provision could protect the workers financially.
Union’s position	notice alone was not enough because prior permission under section 25 M was required.[2][3]

4.6 Gujarat High Court’s Decision

The Gujarat High Court did not finally decide whether the proposed lay-off was legal or illegal.

The court stayed the implementation of the Industrial Tribunal interim order until the Tribunal decided the union’s Exh.12 application.

The High Court directed the Industrial Tribunal to decide the application as quickly as possible and within 2 weeks.

The high court then disposed of the Special Civil Application.

Most importantly, the High Court clearly stated that it had not gone into the merits of the dispute. The Industrial Tribunal was free to decide the matter according to law.

Therefore, the High Court order cannot be treated as a final decision that the company’s proposed lay-off was either lawful or unlawful.[3]

4.7 Importance of the Case

This case is useful for understanding the legal issues connected with a temporary lay-off.

It raises important questions about prior permission, lay-off compensation, employer’s operational difficulties and workers’ job security.

The case is particularly relevant because the employer proposed only a temporary 14-day lay-off, rather than permanent termination of the workers’ employment.

Dates, Hearing and Judicial Procedure

It is important to understand the dates and Court procedure in this case. The Gujarat High Court did not give a Final Decision that the lay-off was legal or illegal, It mainly dealt with the temporary order passed by the Industrial Tribunal.

5.1 Important Dates

Date	What Happened
30 April 2024	According to the company, notice was given to the Labour Department.
2 May 2024	The notice about the proposed lay-off displayed for the affected.
3 May 2024	The Industrial Tribunal, Ahmedabad passed an interim order under Exh.12 in Reference (I.T.) No. 12 of 2024.
6 May 2024	The proposed lay-off was supposed to begin.
6 May 2024	On the same day, the Gujarat High Court heard the company’s special civil Application..

5.2 Hearing Before the Gujarat High Court

The company was represented by Senior Advocate by K.M. Patel, assisted by Varun K.Patel.

The Sanand Power Kamdar Union was represented by P.C.Chaudhari.

The High Court did not finally examine whether the company’s reason for lack of sufficient work orders legal justified the lay-off.

Instead, the Court mainly considered the interim or temporary situation created by the Industrial Tribunal’s orders.

5.3 What Did the High Court Order?

The Gujarat High Court stayed the Industrial Tribunal’s interim order until the Tribunal decided the union’s Exh 12 application.(G.E. Power System, 2024, para 5-7)

The High Court also directed the Industrial Tribunal to decide the application as quickly as possible and within two weeks from the high Court’s order.

After giving these directions, the High Court disposed of the Special Civil Application.

5.4 Most Important Point

Paragraph 7 of the High Court order clearly stated that the court had not gone into the merits of the case.(G.E. Power System, 2024, para 7)[3]

In simple words, this means the High Court did not decide the main question of whether the proposed lay-off was legally right or wrong.

The Industrial Tribunal was free to examine the issue and decide it according to law.

Statements That Would Be Incorrect

Therefore, it would be incorrect to write:

“The Gujarat High Court declared the G.E.Power System lay-off legal.”

It would also be incorrect to write:

“The Gujarat High Court declared the lay-off illegal.”

The Correct Understanding

The correct understanding is:

The Gujarat High Court dealt only with the interim core procedure and left the main legal issue for the Industrial Tribunal to decide.

Arguments of the Employer and the Union

6.1 Employer’s Arguments

The employer give these main arguments:

The Sanand factory did not have enough work orders.
Therefore, the company planned to lay-off workers for only 14 days. It was temporary, not permanent.
The company said it had already informed the Labour Department and displayed the notice for workers.
The employer argued that the Industrial Tribunal should not have stopped the layoff, because the Exh. 12 application was not properly connected with the dispute already pending before the Tribunal.
The company also said that if the union later won the case, workers could be paid the remaining 50% wages.
Therefore, according to the employer, there was no need to stop the lay-off immediately.

6.2 Union’s Arguments

The Union mainly argue that:

Under section 25M of the Industrial Disputes Act, the employer was required to obtain prior permission before laying off the workers.(Industrial Dispute Act, 1947, S, 25M G.E. power system, 2024, para 4)
according to the union, the company had not obtained the required permission.
Therefore, the main issue was not only about 50% layoff compensation, but also whether the lay-off itself was legally allowed.
paying compensation does not automatically make a legal if the employer was first required to obtain permission.

Reasons, Duration and Conditions of Layoff

An employer cannot layoff workers without a proper and legal reason.

In Workmen of Dewan Tea Estate V. Management, the Supreme Court explained that Section 25C does not give employers an unlimited right to lay-off workers whenever they want. A lay-off must satisfy the legal definition and required conditions. (Workmen of Dewan Tea Estate V. Management, AIR 1964 SC 1458)[4]

This is important for job security. Simply paying workers 50% compensation does not automatically make every lay-off legal. Employers must also follow the required legal procedure.

Reason in the G.E. Case

In the G.E. Power System case, the company stated that there were not enough work orders at the Sanand plant. Therefore, it proposed a temporary lay-off.

The High Court did not finally decide whether this reason fulfilled all the legal requirements. The main issue was left for the Industrial Tribunal to consider.

Duration

The proposed lay-off was for 14 days, from 6 May to 19 May 2024.

This short and fixed period showed that the lay-off was intended to be temporary. However, a short duration alone does not make a lay-off legal.

Under Section 67 of the Industrial Relation Code, 2020, a lay-off may also continue for more than 45 days in a 12 month period, subject to the applicable conditions. Therefore, 45 days is mainly important for deciding lay-off compensation; it is not a universal maximum duration for everyday lay-off.

Important Legal and Job-Security Points During Lay-Off

For a fair and properly lay-off, workers should clearly know:

The genuine reason for the lay-off;
Which workers are affected;
The starting date and expected duration;
The compensation they will receive;
Any required attendance or muster-roll procedure;
Whether alternative employment is available where legally relevant; and
When and how they can return to normal work.

Workers should clearly know that the lay-off is temporary. An uncertain or very long lay-off can create serious job insecurity, even when the worker has not officially been terminated.

Salary/Wages, Lay-Off Compensation, PF, Medical and Gratuity Benefit

Salary and other employment benefits are important parts of job security during a lay-off.

8.1 Salary and Lay-Off Compensation

Under Section 67 of the Industrial Relation Code 2020, and eligible worker who has completed at least one year of continuous service and whose name is on the muster roll is generally entitled to 50% of basic wages plus dearness allowance (DA) for eligible lay-off days, excluding weekly holidays. (Industrial Relations Code, 2020, s, 67)[1]

This means that during a lay-off, a worker does not normally receive full salary. Instead, the worker receives lay-off compensation according to the law.

In the G.E. case the employer referred to Section 25C and argued that if the union later succeeded, the worker could receive the remaining wages. However, the High Court did not finally decide the exact amount payable to each worker.

8.2 Provident Fund (PF)

A temporary lay-off does not automatically cancel a worker’s PF account or existing PF balance.

However, the amount of PF contribution during the lay-off may depend on the wages received and the applicable social-security rules. Therefore, PF contribution during a lay-off may not always be the same as during normal employment.

The G.E. High Court order did not clearly state what happened to the PF contribution of the affected workers. Therefore, we cannot say that G.E. continued, reduced or stopped particular PF contributions during the lay-off.

8.3 Medical and ESI Benefits

Medical benefits may come from ESI, company medical schemes, insurance policies or employment agreements.

A temporary lay-off does not automatically mean that all medical benefits will stop. Whether the benefits continue depends on the applicable scheme and its rule.

The G.E. case did not clearly state whether the workers’ medical benefits continued or stopped during the proposed 14 days layoff.

For better job security, temporary lay-off should, as far as applicable rules allow, avoid unnecessarily affecting workers’ essential medical protection.

8.4 Gratuity and Continuity of Services

Gratuity is generally connected with a worker’s length and continuity of services.

A temporary lay-off should not automatically be treated as a resignation or completely new employment. If the employment relationship continues, the worker’s previous service should not simply disappear.

This is important because continuity of service can affect gratuity, seniority and other long-term benefits.

However, the G.E. High Court order did not state that the gratuity or qualifying service of the affected workers was cancelled or interrupted.

Therefore, PF, medical benefits, gratuity and continuity of services are important parts of job security. But the G.E. judgement does not provide specific findings about how every benefit was treated during the proposed lay-off.

9. Job Security: Return to Original Post and Alternative Employment

Job security is one of the most important issues during and after a lay-off.

9.1 Should the Workers Return After the Lay-Off?

A lay-off is temporary. It does not normally mean that the worker’s employment has permanently ended.

Therefore, when the reasons for the lay-off ends and work becomes available again, the worker should normally be able to return to work.

The worker should not automatically be treated as a new employee after the lay-off because this could affect seniority and other employment benefits.

However, the law does not necessarily guarantee that every worker will return to the exact same machine, shift, department or workplace in every situation. This depends on employment rules, contracts, settlements, standing orders and Labour Law.

For better job security, the workers should ideally return to the original or a substantially similar job.

In the G.E. case, the High Court order did not state that all 43 workers were guaranteed their exact original post after the proposed lay-off. It also did not state that their original post had been removed.

Therefore, the case mainly dealt with the legality and procedure of the lay-off rather than what would happen to each worker after it ended.

9.2 Alternative Employment

The Industrial Relation Code also recognises alternative employment.

Under Section 69, a worker may lose the right to lay-off compensation if the worker refuses suitable alternative employment offered by the employer when the legal conditions are satisfied. (Industrial Relations Code, 2020, s, 69)[1]

Alternative work may be offered in the same establishment or another establishment of the same employer subject to legal requirements regarding location (geographical limit specified by the provision), suitability and wages.

For example, if there is no work in Department A, but suitable work is available in Department B, the employer may offer that work.

However, an employer cannot simply force a worker to accept any job, at any place or at any wage.

9.3 Alternative Employment in the G.E. Case

The Gujarat High Court order does not state that G.E. offered the 43 affected workers jobs in another department, plant or company.

It also does not state that the workers refused any alternative employment.

Therefore, alternative employment is legally important, but there is no clear evidence in the reported High Court order that it was offered in this case.[3]

9.4 ILO Approach

ILO Recommendation No.166, suggests ways to reduce employment loss, such as:

Transferring workers internally;
Providing training or retraining;
Reducing overtime;
Temporarily reducing working hours; and
Considering suitable alternative employment.

These ILO recommendations do not guarantee every Indian worker a transfer after lay-off. However, they encourage employers to consider other possible solutions before workers lose employment.

Prior Permissions

One important change under the Industrial Relation Code, 2020 is the limit for getting prior government permission before lay-off.

Under Chapter X of the Industrial Relation Code, the special rules generally apply to certain Industrial establishment having 300 or more workers, according to the conditions given in the Code. (Industrial Relation Code, 2020, Chapter X)

For establishments covered by Chapter X, the employer may be required to take prior permission from the government before lay-off workers.

This permission requirement is important because it gives an outside authority a chance to check the situation before the lay-off takes place.

For workers, this can provide extra protection against an unfair or unnecessary lay-off.

For employers, it can mean more legal procedures and paperwork. It may also make it more difficult to take quick action when there is a sudden fall in demand or a temporary production problem.

Therefore, the 300-worker limit is important. Establishments below this limit may still have to follow other applicable labour law rules, but they are not automatically covered by the same Chapter X prior permission requirement only because they lay off workers.

10.2 Workmen of Dewan Tea Estate v. Management [4]

The Supreme Court case Workmen of Dewan Tea Estate v. Management helps us understand the limits of an employer’s power to lay-off workers. (Workman of Dewan Tea Estate V. Management, AIR 1964 SC 1458)

In this case, the employer tried to justify the lay-off partly because the company was facing financial difficulties.

The Supreme Court explained that an employer does not have an unlimited right to lay-off workers whenever it wants.

A lay-off must have a proper legal reason and must follow the conditions recognised under the law and the applicable standing orders.

This case shows that the reasons for the lay-off is very important.

Simply paying lay-off compensation does not automatically make every lay-off lawful. The employer must also have a legally acceptable reason for the lay-off.

10.3 Relationship with the G.E. Case

In the G.E. Power System India case, the company stated that it did not have enough work orders and this was the reason given for the proposed lay-off.

The important legal question is whether this shortage of work orders is a valid reason for lay-off under the law, applicable standing orders and permission requirements.

However, the Gujarat High Court’s order dated 6 May 2020 did not finally decide this question.

The High Court left this issue for the Industrial Tribunal to decide.

Therefore, we cannot say that the Dewan Tea Estate case automatically decides the G.E. Power System dispute.

Instead, the Dewan Tea Estate case gives us one important general principle:

An employer cannot lay-off workers simply because it wants a lay-off, must have proper legal reasons and must follow the required legal procedure.

Critical Analysis: Flexibility Versus Job Security

Lay-off law tries to create a balance between the needs of employers and the job security of workers.

Employer Flexibility and Business Problems

Employers need flexibility because businesses may face temporary problems such as fewer work orders, shortage of raw materials, electricity problems, machinery breakdown or low market demand.

During such a situation, it may be difficult for foreign employers to provide regular work to every employee. If the employer is forced to continue full employment during a serious business problem, it may increase cost and in some cases, may even lead to closure or permanent job losses.

Worker Protection During Lay-Off

At the same time, workers also need protection. Workers usually have no control over the company’s order, production plans or market conditions. However, when they are laid off, their income is directly affected.

A worker may be ready and willing to work but still receive less income because the employer cannot provide work.

Therefore, lay-off compensation tries to share the financial burden between the employer and the worker.

However, compensation alone cannot provide complete job security.

Key Elements of Job Security During Temporary Lay-Off

True job security during a temporary lay-off includes several important points.

1. Genuine Legal Reason for the Lay-Off

First, there must be a genuine legal reason for the lay-off. An employer should not use lay-off simply to remove workers for unfair, discriminatory or disciplinary reasons.

2. Proper Legal Procedure

Second, proper legal procedure must be followed. If notice or prior permission is required by law, the employer must follow these requirements. This helps maintain fairness and transparency.

3. Income Protection and Lay-Off Compensation

Third, workers need income protection. Section 67 provides lay-off compensation based on 50% of basic wages plus dearness allowance (DA) subject to the condition of the law. However, this state means that workers may receive much less than their normal earnings. (Industrial Relation Code, 2020, s. 67) [1]

4. Continuity of Employment

Fourth, continuity of employment is important. A temporary lay-off should not automatically remove the worker’s previous service or seniority. When work starts again, the worker should not automatically be treated as a completely new employee.

Fifth, Social-Security benefits are important. Benefits such as PF, gratuity and medical/ESI benefits should be considered separately according to the applicable law. A temporary lack of work should not automatically erase the worker’s previous employment benefits.

6. Alternative Employment

Sixth, alternative employment can be considered. Section 69 shows that suitable alternative work offered by the same employer may be relevant. If suitable work is available, it can help both sides.

The employer can retain trained workers, while workers can continue earning income. [1]

7. Returning to Employment

Seventh, returning to employment is important. Since a lay-off is temporary, workers should have a realistic opportunity to return to employment when the temporary problem ends.

The G.E. Case as an Example

The G.E. Power System India Case clearly shows the conflict between business flexibility and workers’ job security.

According to the company’s position, there were insufficient work orders. The company therefore proposed a 14 day temporary lay-off.

However, the union was concerned about the legal protection of workers. It argued that prior permission under Section 25M was required. (Industrial Dispute Act, 1947, s. 25M G.E. Power System, 2024)

The Industrial Tribunal initially gave temporary protection to the workers through a status-quo order.

The employer challenged this order before the Gujarat High Court.

The High Court stayed the Tribunal’s interim direction, but it did not finally declare that the lay-off was lawful. Instead, it directed the Tribunal to decide the matter quickly. [3]

Therefore, the case shows how Industrial courts and tribunals can help balance management decisions and workers’ employment protection.

Effects of the Higher Threshold

Under the Industrial Relation Code, the 300 worker threshold under Chapter X can be understood from both the employer’s and worker’s perspectives.

From the Employer’s Perspective

From the employer’s side, the higher threshold can provide new flexibility to smaller and medium-sized establishments because fewer establishments come under the special prior permission requirement.

From the Worker’s Perspective

From the workers’ side, there is a concern that word in establishments below this threshold may not receive the additional protection of prior government permission, even though a lay-off can seriously affect their income and job security.

Therefore, the higher threshold may make legal compliance easier for some employers, but it may also change the level of procedural protection available to some workers.

In simple words, the main issue is not only “employer versus employee.” A good labour law system should allow employers to deal with genuine temporary business problems while also protecting workers from unfair or unnecessary jobs in security.

Positive and Negative Aspects of Lay-Off

Positive Aspect

Lay-off helps employers manage temporary business problems.
Eligible workers can get 50% of basic wages + DA as a compensation.
Workers may be offered suitable alternative employment.
Prior government permission provides extra protection in applicable establishments.

Negative Aspect

Workers receive less than their normal income during lay-off.
The 300 worker threshold may reduce prior permissions protection for some workers.
Layoff can create job and financial insecurity.
Returning to the exact same post is not always guaranteed.

Conclusion

Lay-off is different from retrenchment or termination. In a lay-off, work is temporary unavailable, but the employment relationship generally continues.

The Industrial Relations Code, 2020 provides rules for lay-off under Chapter IX and X. Eligible workers generally receive 50% of basic wages plus DA as lay-off compensation. The law also deals with muster rolls and suitable alternative employment.

In G.E. Power System India Pvt. Ltd. V. Sanand Power Kamdar Union, the company proposed a 14 day lay-off of 43 workers from 6 May 19 May 2024. The union argued that prior permission under Section 25M of the Industrial Dispute Act, 1947 was required.

Importantly, the Gujarat High Court did not finally decide whether the lay-off was lawful. It stayed the interim order and directed the Tribunal to decide the matter within two weeks.

The case shows that job security is not only about compensation. Workers also need protection of continuity of employment, previous service, PF, gratuity, medical, ESI benefits and suitable alternative employment where applicable.

However, the court order did not confirm these benefits or guarantee that workers would return to exactly the same post.

ILO Recommendation No. 166 supports measures to reduce employment loss, including internal transfers, training and retraining, limiting overtime, temporary reduction of working hours and suitable alternative employment. (ILO Recommendation No. 166, 1982 paras, 21-25)

The 300-worker threshold may provide greater flexibility to smaller and medium-sized establishments, but workers below this threshold may not receive the additional safeguard of the special Chapter X prior-permission system.

In conclusion, lay-off should remain a temporary solution to temporary business problems. It should not be used as an indirect way to permanently remove workers without the legal safeguards required for termination.

Reference & Citation Key

The following primary legal and international sources support the statutory, case-law and ILO statements sighted in this article:

The Industrial Relation Code, 2020, Act No. 35 of 2020, specially ss 2(t) 65-69 and Chapter XI-X, Government of India, India Code: India Code :: Home
The Industrial Dispute Act, 1947, especially Chapter V-A/V-B, section 25C and 25M, Government Of India / India Code Industrial Disputes Act 1947 – Ministry of Labour & Employment
G.E. Power System India Pvt. Ltd. (presently known as a Powerstatic Solution India Pvt. Ltd.) V. Sanand Power Kamdar Union, R/Special Civil Application No. 7965 of 2024, Gujarat High Court order dated 6 May 2024 (Mauna M. Bhatti J.)
Workmen of Dewan Tea Estate and Ors V. The Management, AIR 1964 SC 1458, (1964) 5 SCR 548, Supreme Court of India, Judgement Dated 25 November 1963 Indian Kanoon | IALS Digital resources
ILO Termination of Employment Convention, 1982 (No.158).
ILO Termination of Employment Convention, 1982 (No.166).
Ministry of Labour & Employment, Government of India, Notification S.O. 5320(E), 21 November 2025, (Commencement of the Industrial Relation Code, 2020).
Nimar Textiles Ltd. v. L.K. Pandey, Dy. Labour Commissioner & Anr., Madhya Pradesh High Court, 31 August 1995. Indian Kanoon.
Roy, Gopal Krishna & Amaresh Dubey (2022), “A Note on Industrial Relations Code, 2020,” The Indian Journal of Labour Economics, 65(2), 533-543. DOI: 10.1007/s41027-022-00368-8.
Singh, Rattan & Sandli Brice, “The Industrial Relations Code, 2020: An Analysis,” Journal of University Institute of Legal Studies, Panjab University.

Disclaimer

This research article is prepared only for academic and educational purposes. The discussion of G.E. Power Systems India Pvt. Ltd. and Sanand Power Kamdar Union is based on publicly available court decisions, laws and the sources cited in this article.

The company name and the names of the parties are used only to explain and analyse the legal issues involved in the case. Statements relating to the company, the union or the court proceedings should be understood in the context of the cited sources and the positions of the parties.

The Gujarat High Court order dated 6 May 2024 did not finally decide whether the proposed lay-off was legal or illegal.

Nothing in this article is intended to make an independent allegation against, defame, or harm the reputation of the company, the union or any other person.

The views and analysis expressed in this article are for academic study and are based on the legal materials cited in the article.

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