Strikes, Lockouts, Lay-offs, and Retrenchment notes — Unit 3

A strike is the ultimate weapon in the hands of workmen to force collective bargaining. However, it is not an absolute right; it is highly regulated.

⇒Definition

'Strike' means a cessation of work by a body of persons employed in any industry acting in combination, or a concerted refusal, or a refusal under a common understanding, of any number of persons who are or have been so employed to continue to work or to accept employment.

⇒Essential Ingredients:

• 1. Plurality of workmen: A single worker stopping work is not a strike.
• 2. Cessation of work: Work must actually stop.
• 3. Concerted action: It must be planned and agreed upon by the workers together.
• 4. Industry: It must happen within an 'industry'.

Not all forms of protest fall legally under the definition of a 'strike'. Some are recognized, others are treated as mere indiscipline.

• Primary Strike: The normal strike against the employer for economic demands.
• Sympathetic Strike: Workers of Factory A strike in support of the workers of Factory B. (Usually held to be unjustifiable as Factory A's employer has no power to solve Factory B's dispute).
• Go-Slow (Slow Down): Workers don't stop work, but deliberately work at a very slow pace to reduce production. Supreme Court has held this is NOT a strike, but constitutes gross misconduct, as workers are pretending to work while taking full wages.
• Gherao: Encircling the management and physically confining them until demands are met. This is NOT a legal strike; it is a criminal offence (wrongful confinement under IPC).
• Pen-down/Tool-down Strike: Workers show up to the factory, mark attendance, but refuse to touch their tools or pens. This IS considered a strike.

A lockout is the employer's equivalent weapon against the workers.

⇒Definition

'Lock-out' means the temporary closing of a place of employment, or the suspension of work, or the refusal by an employer to continue to employ any number of persons employed by him.

⇒Lockout vs. Closure

A lockout is a weapon of coercion. The employer intends to reopen the factory once the workers agree to his terms. Closure is the permanent shutting down of the business with no intention of reopening.

⇒Lockout vs. Lay-off

A lockout is an intentional act of aggression by the employer during a dispute. A Lay-off is an inability to give work due to external economic reasons (shortage of raw materials, power failure) with no dispute involved.

The IDA attempts to prevent strikes and lockouts by imposing strict procedural conditions. A strike/lockout is illegal if it violates Section 22 or Section 23.

⇒Section 22: Public Utility Services (PUS)

Industries essential to public life (water, power, railways). Strikes here are heavily restricted. Workers cannot strike:

• 1. Without giving a Notice of Strike to the employer at least 14 days before striking.
• 2. Within 6 weeks of giving such notice.
• 3. Before the expiry of the date of strike specified in the notice.
• 4. During the pendency of any conciliation proceedings before a Conciliation Officer, and 7 days after the conclusion of such proceedings.

(The moment a notice is given in a PUS, conciliation starts automatically, essentially freezing the right to strike until conciliation fails).

Section 23 applies to ALL industrial establishments (not just Public Utility Services). It prevents strikes/lockouts while matters are sub-judice (pending in court).

No workman shall go on strike, and no employer shall declare a lock-out:

• 1. During the pendency of conciliation proceedings before a Board, and 7 days after.
• 2. During the pendency of proceedings before a Labour Court, Tribunal or National Tribunal, and 2 months after.
• 3. During the pendency of arbitration proceedings.
• 4. During any period in which a settlement or award is in operation, in respect of any of the matters covered by the settlement or award.

⇒Consequences of Illegal Strike (Section 24)

If a strike violates Sec 22 or 23, it is illegal. Workers lose wages for the strike period and may face disciplinary action. Instigators can face imprisonment and fines.

Do workers get paid for the days they were on strike? The Supreme Court has laid down clear principles:

⇒The 'Legal and Justified' Test

• Illegal Strike: If the strike violates Sec 22 or 23, it is illegal. Workers are entitled to NO wages for the strike period. ('No work, no pay').
• Legal but Unjustified: The strike followed procedure, but the demands were frivolous or the workers resorted to violence. No wages.
• Legal AND Justified: The strike followed all legal procedures, the demands were genuine economic grievances, and the employer was being unreasonable. Workers are entitled to full wages for the strike period.

⇒Wages during Lockout

If an employer declares an illegal lockout, they must pay full wages to the workers for the lockout period, as the workers were willing to work but were unlawfully prevented.

Economic realities sometimes force an employer to temporarily halt work. The law provides a cushion for workers during this time.

⇒Definition

'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 breakdown of machinery or natural calamity, to give employment to a workman whose name is on the muster rolls and who has not been retrenched.

• Key Elements: It is temporary. The employment relationship is NOT broken. It is caused by reasons beyond the employer's control.

⇒Right to Compensation (Section 25C)

If a worker (who has completed 1 year of continuous service) is laid off, they are entitled to 50% of their Basic Wage + Dearness Allowance for the days they are laid off.

A laid-off worker will NOT receive the 50% compensation in the following scenarios:

• 1. If they refuse to accept alternative employment provided by the employer (in the same establishment or another one within 5 miles), provided it doesn't require special skill.
• 2. If they do not present themselves for work at the establishment at the appointed time at least once a day.
• 3. If the laying-off is due to a strike or slowing-down of production on the part of workmen in another part of the establishment.

Retrenchment is the permanent termination of surplus labour for economic reasons (downsizing).

⇒Definition

Termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action.

⇒Exceptions (What is NOT Retrenchment)

• 1. Voluntary retirement of the workman.
• 2. Retirement on reaching the age of superannuation.
• 3. Termination due to continued ill-health.
• 4. Non-renewal of contract (Sec 2(oo)(bb)): If a worker is hired on a fixed-term contract (e.g., 6 months), and the contract simply expires, it is not retrenchment.

Before an employer can legally retrench a worker (who has completed 1 year of continuous service), three strict conditions must be met:

• 1. Notice: The worker must be given one month's notice in writing indicating the reasons for retrenchment, OR paid wages in lieu of such notice.
• 2. Compensation: The worker must be paid retrenchment compensation equal to 15 days' average pay for every completed year of continuous service (or any part in excess of 6 months).
• 3. Notice to Government: Notice must be served on the appropriate Government in the prescribed manner.

(Note: If Chapter VB applies - >100 workers - the notice period is 3 months, and prior permission of the Government is mandatory).

How does the employer decide WHICH worker to retrench? The law prevents favoritism and victimization.

⇒Section 25G: Procedure for Retrenchment

The employer must follow the rule of 'Last come, first go' (LIFO). The employer must retrench the workman who was the last person to be employed in that particular category.

• Exception: The employer can deviate from this rule for reasons to be recorded in writing (e.g., the junior-most employee has a highly specialized skill vital to the company, or the senior-most employee has a terrible performance record).

⇒Section 25H: Re-employment

If the employer's financial situation improves and they decide to hire people again, they must give preference to the retrenched workmen over new applicants.

⇒Transfer of Undertaking (Section 25FF)

If a company is sold to a new owner, the workers' employment is technically terminated by the old owner. Every worker is entitled to notice and retrenchment compensation from the old owner, UNLESS the new owner agrees to absorb them with continuous service and no less favorable terms.

⇒Closure (Section 25FFF)

Closure means the permanent closing down of a place of employment.

Even if a business goes bankrupt and closes, the workers don't walk away empty-handed. They are entitled to notice and compensation exactly as if they were retrenched.

• Exception: If the closure is due to unavoidable circumstances beyond the control of the employer (like an earthquake destroying the factory), the maximum compensation is capped at 3 months' average pay.

For large industrial establishments (factories, mines, plantations employing 100 or more workmen), the rules are aggressively pro-labour.

Under Chapter VB, an employer CANNOT lay-off, retrench, or close down the establishment without applying for and obtaining the Prior Permission of the Appropriate Government.

• The government will conduct a hearing, listen to the union, and decide if the economic reasons are genuine.
• If the government refuses permission (which it often does to save jobs), the employer is legally forced to keep the factory running and keep paying wages, even if they are making massive losses.

(This chapter has been heavily criticized by economists for creating 'exit barriers' that discourage foreign investment in India's manufacturing sector).

⇒Summary of Master Concepts

• Strike vs Lockout: Worker's weapon vs Employer's weapon. Regulated by Sec 22 (PUS) and Sec 23 (General).
• Wages during Strike: Only if the strike is BOTH Legal and Justified.
• Lay-off: Temporary inability to give work. Compensation = 50% wages.
• Retrenchment: Permanent surplus termination. Compensation = 15 days/year. Follows LIFO (Last In First Out).
• Chapter VB: >100 workers requires prior Govt permission for lay-off, retrenchment, and closure.

⇒University Exam Tips for this Unit (Premium Advice)

• Gherao and Go-Slow: Be crystal clear that neither of these is a legal strike. Go-slow is misconduct, Gherao is a crime.
• Section 25F (Retrenchment): Memorize the 3 conditions (Notice, 15-day Compensation, Govt intimation). Failure to comply with even one condition makes the retrenchment ab initio void (worker gets reinstated with back wages).
• Distinguish between Lay-off, Retrenchment, and Closure: A classic 10-mark comparison question. Lay-off = Temporary/No fault. Retrenchment = Permanent/Surplus labour. Closure = Permanent death of the business.