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Employers can layoff, retrench workers during natural calamity

As per the provisions of the Industrial Disputes Act, 1947, it will be lawful for the employer to retrench workers or employees at any time after the expiry of the first 45 days of the lay-off.

Employers can layoff, retrench workers during natural calamity
Representative image(Reuters)

New Delhi

Given the ongoing lockdown, it is being perceived that business activity may not start for a few months and some companies or establishments may not be able to sustain the workforce and finally, the business may not continue.

Anupam Malik of Centrum Strategic Consulting, Gurugram said that it is estimated that there would be no business for the next five to six months after which the trickling business would be insufficient to sustain profitability.

The legal position and various options are given under the Industrial Disputes Act. The inability of an employer to provide work to an employee in such a situation of a natural calamity is deemed to be a lay-off as per the definition of "lay-off" under Section 2 (kkk) of the act.

Malik said that whereas the situation is the present case is that neither the workers can report for duty nor their safety can be assured; and the employer obviously is in a worst situation being responsible for health and safety of the workers and also the customers. Therefore, in the ongoing lock down and curfew, the workers are deemed to have been laid-off, he added.

There are exhaustive provisions for the rights and responsibilities of the employer and the workers under the act to handle such situations arising out of natural calamities.

The provisions of clarify that if during any period of twelve months, a workman is so laid-off for more than 45 days, no such compensation shall be payable in respect of any period of the lay-off after the expiry of the first 45 days, if there is an agreement to that effect between the workman and the employer.

"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 25-F at any time after the expiry of the first 45 days of the lay-off, " Malik pointed out.

The entitlement of compensation for a worker during the period of a lay-off is provided in Section 25 C of the act in reference and is at the rate of half the wages for days of work (excluding weekly off).

However, on humanitarian grounds and in the interest of relations with the workers and obviously to abide by the advisory of the government to ensure that the workers do not lose wages at least till March 31, Malik said: "Therefore, it would be appropriate to pay the full wages to the workers for the month of March 2020 in the form of compensation and mitigation of forthcoming consequences. A notice to this effect is required to be put up in the establishment and/or served upon the workers which will also explain the further status due to shutting up of operation in the coming month."

It must be understood that there is no "order" or "ordinance" "directing" the payment of wages for the lockdown period. It is only an advice that must be followed in social and national interest till the resources permit.

Malik further clarified that the advisory does not create any permanent liability or property right when the payment of full wages is made to the worker on humanitarian grounds as it would be contrary to the duties and responsibilities of the government reposed under the Disaster Management Act, 2005 and contradictory rights of the employer under the Constitution. The ultimate law that governs such matters is the Industrial Disputes Act.

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