Labour Codes: #21 Layoff – Old vs New: A Comparison of the Old and New Provisions
Introduction: –
Chapter V-A and Chapter V-B of the Industrial Disputes Act, 1947 (“ID Act“) provide a legal framework for layoffs, retrenchment, and closure of establishments, with specific provisions governing the process of layoffs. The Industrial Relations Code, 2020 (“IR Code“) represents a significant transformation in India’s labor law framework, consolidating three major labor legislations including the ID Act. Chapter X of the IR Code deals with the provisions related to Layoffs, Retrenchment, and Closure.
Comparative Analysis of Key Provisions of the ID Act and IR Code:
| Criteria | ID Act | IR Code |
| Definition of Layoff | Failure, refusal, or inability of an employer to provide work to a regularly employed worker due to shortage in coal, raw material, too much stocks, breakdown of machines or natural disasters. | Same definition maintained under section 2(t) of the IR Code. |
| Determination of Layoff Status | An employee whose name is on the muster rolls and who presents for work but is not given employment within 2 hours is considered laid-off for that day. | Same provision maintained. |
| Half-day Layoff Provision | If employer directs worker to come in second half, the employee is considered laid off for half a day only. | Same provision maintained. |
| Compensation for Second Half Non-employment | If employee comes in second half as directed but is still not given work, entitled to full basic allowance and dearness wages. | Same provision maintained. |
| Scope of Application | Layoff provisions do not apply to establishments with less than 50 workers on any day preceding the calendar month. | Maintains the same threshold of 50 workers. |
| Exemptions | Provisions do not apply to seasonal or intermittent work. | Continues to exempt seasonal or intermittent work. |
| Chapter Reference | Falls under Part V-B of the Act. | Consolidated under Chapter X of the Code. |
| Permission Requirement for Layoff | Establishments with more than 100 workmen need prior permission from appropriate government (Section 25M). | Threshold raised to establishments with more than 300 workmen (Section 78). |
| Penalties for Non-compliance | Imprisonment up to one month or fine up to Rs. 1,000. | Significantly increased to compensation up to Rs. 2 lakhs for first conviction and Rs. 5 lakhs for second conviction. |
Key Impact on Employer:
- Increased Threshold for Permission: The threshold requiring prior government permission for layoffs has been raised from 100 to 300 workmen, providing employers with greater flexibility in workforce management for mid-sized establishments while reducing regulatory compliance requirements.
- Significant Higher Penalties: Non-compliance now attracts substantially higher financial penalties (up to Rs. 5 lakhs for repeat offenses compared to Rs. 1,000 previously), creating stronger deterrents and increasing potential financial liability for employers. Employers must strengthen compliance systems and legal oversight.
- Consolidation of Provisions: All layoff-related provisions now fall under Chapter X of the IR Code, providing a more streamlined and integrated regulatory framework, potentially simplifying compliance but requiring employers to familiarize themselves with the new structure.