The Industrial Relations Code,2020 is one among four Labour Codes which has been
passed by the Central Government on recommendations of Second National
Commission On Labour, The Ministry of Labour And Employment rationalized the 44
prevailing labour laws into Four major labour laws Codes i.e. a.) The Code on
Wages, 2019, b.) The Occupational Safety, Health and Working Conditions Code,
2020, c.) The Code on Social Security, 2020 and d.) The Industrial Relations
Labor Law falls under the ambit of the Concurrent List of the Constitution. So,
The Parliament and the state legislation can make laws regarding the same.
Earlier, The Industrial Disputes Act, 1947 is the basis which deals with the
disputes aroused between the employer and the workmen and to protect the workmen
from any sort of exploitation. Then this act has gone for various amendments
over the years majorly in the year 1956, 1976 and 2010.
The Industrial Relations Code, 2020 encompass three major Central Laws which are
related to the industrial dispute settlement and collective bargaining, namely:
- The Industrial Disputes Act,1947
- The Trade Unions Act,1926
- Industrial Employment (Standing Orders) Act, 1946.
SO, in this blog, we are going to discuss the lay off and retrenchment along
with their provisions in the Industrial Relation Code, 2020.
Layoff is defined under Section 2(t) of the Industrial Relation Code, 2020 which
was earlier defined under Section 2(kkk) of Industrial disputes Act, 1947.
"(t) "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
break-down of machinery or natural calamity or for any other connected reason,
to give employment to a worker whose name is borne on the muster rolls of his
industrial establishment and who has not been retrenched.
Every worker whose name is borne on the muster rolls of the
industrial establishment and who presents himself for work at the establishment
at the time appointed for the purpose during normal working hours on any day and
is not given employment by the employer within two hours of his so presenting
himself shall be deemed to have been laid-off for that day within the meaning of
Provided that if the worker, instead of being given employment at the
commencement of any shift for any day is asked to present himself for the
purpose during the second half of the shift for the day and is given employment
then, he shall be deemed to have been laid-off only for one-half of that day:
Provided further that if he is not given any such employment even after so
presenting himself, he shall not be deemed to have been laid-off for the second
half of the shift for the day and shall be entitled to full basic wages and
dearness allowance for that part of the day;"
It clear from the definition that Layoff is the inability of an employer to hire
a worker due to a variety of factors such as a lack of coal, power, or machinery
Non-seasonal industrial establishments (such as mines, factories, and
plantations) employing 50 to 300 people must:
- Pay 50% of basic wages and dearness allowance to a laid-off worker give
one month's notice or wages for the notice period to a retrenched worker.
- Non-seasonal industrial establishments with at least 300 employees must
obtain prior approval from the federal or state government before laying
off, retrenchment, or closing.
- Non-seasonal Industrial Establishments with at least 300 employees must
obtain prior approval from the central or state government before laying
off, retrenchment, or closing.
The applicability of Lay-off is defined under Section 65 of Chapter IX under The
Industrial Relations Code, 2020 which states as: The requirements of that
chapter relating to layoffs, retrenchments, and closures do not apply to an
industrial establishment with less than fifty employees or one that is seasonal
To put it another way, if an establishment employs less than 50 people or is
seasonal or intermittent in nature, none of the rules for layoffs, retrenchment,
or closure under the Industrial Disputes Act of 1947 or the Industrial Relations
Code apply to it. According to S. 25A(2) of the Industrial Disputes Act, Act,
1947 and S.65(2) of the Industrial Relations Code, 2020, the decision of the
appropriate authorities to decide whether an enterprise is of seasonal character
Furthermore, if an establishment employs 50 to 300 people, no clearance from the
competent authorities is required because Chapter VA of the Industrial Disputes
Act of 1947 and Chapter IX of the Industrial Relations Code include no criteria
previous to worker layoffs.
However, prior approval from the proper government was required before laying
off workers under Chapter VB of the Industrial Disputes Act of 1947, which was
only applicable to companies with more than 100 workers. However, the necessity
to acquire prior approval from the competent authorities is only applicable to
companies with 300 or more workers under the new code's Chapter X.
There are special provisions which are related to Lay-off under Section 77 and
78 Chapter X of the Industrial Relations Code, 2020. Chapter X is applicable
only when there is a prior approval of the government before the laying off any
worker. Specifically talking about section 77 which applies to the Industrial
establishment in which not less than three hundred workers, or such higher
number of workers as may be notified by the appropriate Government, were
employed on an average per working day in the preceding twelve months and
Section 78 talks about when there is no application for permission is made or
where the permission for any lay-off has been refused, such lay-off shall be
deemed to be illegal from the date on which the workers had been laid-off and
the workers shall be entitled to all the benefits under any law for the time
being in force as if they had not been laid-off.
Who Is Entitled For Compensation?
If a workman's name is on the industrial establishment's muster roll and he has
completed one year of continuous service and is not a badli/casual worker, he is
entitled to compensation if he is laid off under Section 25C of the Industrial
Disputes Act, 1947, and Section 67 of the Industrial Relations Code. A badli
worker is defined in both the above-mentioned sections as a worker who takes the
place of another worker whose name appears on the industrial establishment's
Provided that if during any period of twelve months, a worker 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 worker and the employer
Provided also that, in any case falling within the foregoing proviso, the
employer may retrench the worker in accordance with the provisions of section 70
at any time after the expiration of the first forty-five days of the lay-off,
and any compensation paid to the worker for being laid-off during the preceding
twelve months may be set off against the compensation payable for retrenchment.
Compensation must be provided to laid-off workers for all days during which they
are laid off, save for weekly holidays, according to Section 67 of the
Industrial Relations Code. The amount of compensation will be equal to half of
the total (basic salary + dearness allowance). It's also worth noting that if
the company offers alternative job to the worker, he should take it. Although,
as one Supreme Court decision puts it, offering a coolie job to a qualified
worker is not the same as offering an alternative career.
It is important to note that if a worker has worked as a badli worker for one
year, he is no longer considered a badli worker.
Who Is Not Entitled For Compensation?
The grounds under which a laid-off worker might be denied compensation are set
out in sections 25E of the Industrial Disputes Act, 1947, and S. 69 of the
Industrial Relations Code, however there is a little discrepancy between these
If a laid-off worker refuses alternate employment provided or arranged by the
employer, either in the same establishment from which he was laid off or another
establishment belonging to the same employer within 5 miles of this previous
establishment, he is not entitled to compensation, according to Section.25E of
the Industrial Disputes Act, 1947. S.69 of the Industrial Relations Code
replaces 5 miles with 8 kilometers.
So, if a laid-off worker refuses alternate employment in the same establishment
or one owned by the same employer within 8 kilometers of the previous
establishment, and the work does not even require any special skill or previous
experience and is doable by the worker, the worker is not entitled to
Furthermore, if the worker does not come to work at least once a day during
normal working hours, OR if the layoff occurred as a result of a strike or a
slowdown in production caused by workers in another part of the establishment,
the worker is not entitled to compensation. This provision is included in both
the Act and the Code and has not been changed.
IRC 20 defines lay-off as the inability of an employer, due to shortage of coal,
or power, material or breakdown of machinery, accumulation of material or
natural calamity from giving employment to a worker whose name is on the muster
roll and has not been retrenched. The provisions on lay-off and retrenchment
under IRC 20 do not apply to industrial establishments with less than 50 workers
on an average per working day or to seasonal industrial establishments. Further,
factories, mines and plantation, which have three hundred or more workers must
take prior permission of the appropriate Government before lay-off, retrenchment
- The Industrial Relations Code, 2020
- Monika Taparia, The Industrial Relations Code, 2020, Apr 12, 2022.
- Rashmi Bagri, A Look At Layoff And Retrenchment Procedures In Light Of
New Industrial Relations Code, 8 Jan 2022 11:34 AM
- Union Kanpur v. JK Cotton Spinning and weaving mills company
- Lakshmikumaran & Sridharan, Industrial Relations Code, 2020 - An
overview, October 2 2020