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The Industrial Disputes Act, 1947 (the Act) governs the various provisions pertaining to lay-off of
workmen. The scope of this Act is to achieve harmony between employers and workmen and promote
economic and social justice, thereby, classifying the Act as a welfare legislation. The preamble of the Act
clearly states that the objective of the Act is to make provision for the investigation and settlement of
industrial dispute. This shows that the intention of the legislature is to safeguard the right of workmen
and the industrial establishment1.
Industrial Dispute is defined under Section 2(k) of the Act. It lays down certain pre-requisites that
must exist to constitute an industrial dispute. There can be no lay-off if the dispute does not fall within
the ambit of Section 2(k).
Further, the application of the Act is limited to industries as defined under Section 2(j). However,
in cases where it is difficult to distinguish between an industrial and a non-industrial activity, the
dominant nature of the activity helps in determining the true scope of industry.
The present bulletin touches upon the meaning of lay-off as per the Act and deals with the issue of
compensation resulting from such lay-off. Since most establishments are interested in knowing the
monetary impact of laying-off workmen while reducing headcount, this bulletin provides an insight on
that process.
layoff a temporary interruption of the employment relationship at the direction of the employer
because of lack of work.
If the lay-off could be held to be in accordance with the terms of the contract
of service, no compensation at all could be allowed under section 33C(2) of the
Act. But if company had no power to lay-off any workmen, there is no escape
from the position that the entire sum payable to the laid-off workmen, except the
workmen who have settled or compromised, has got to be computed and
quantified under section 33C(2) of the Act of the period of lay-off; Workmen of
Fire-stone Tyre & Rubber Co. v. Firestone Tyre ft Rubber Co., AIR1976 SC
1775.
Temporary layoff
Requirement of notice, content of notice and employers responsibility
Under the Code, an employer who wishes to maintain the employment relationship may temporarily lay
off an employee. However, the Alberta Court of Appeal has determined that a valid notice of temporary
layoff must:
be in writing,
state that it is a temporary layoff notice and its effective date, and
include sections 62, 63 and 64 of the Code.
If these conditions are not met, the employee may have been unjustly or constructively dismissed. Some
courts have also held that while the Code permits an employer to temporarily lay off an employee in the
absence of a collective agreement or contract allowing layoff, the employee maintains the right to sue for
constructive or wrongful dismissal if laid off in those circumstances.
A temporary layoff cannot be more than 59 days in duration. On the 60th consecutive day of temporary
layoff, the employees employment terminates and the employer must pay the employee termination pay
on that day, unless:
wages or benefits continue to be paid on behalf of the employee; or
there is a collective agreement that provides other recall rights that are longer than the 59 days.
During the 59-day period, an employer may recall the employee with one week written notice. Should the
layoff extend past the 59 days, the employment terminates and termination pay appropriate to the length
of service of the employee is required.
The employment of an employee may be terminated while on temporary layoff, however the employee is
entitled to termination pay.
If an employer recalls an employee on a temporary layoff and requests the employee return to work and
the employee fails to return within the time specified in the notice by the employer, the employee would
not be entitled to any termination notice or termination pay, provided that the temporary layoff notice is
valid. It is in the employers best interest to retain a copy of the written request/notice.
Special layoff rules for school employees and school bus drivers
Because of the recognition that the summer break in the school year may exceed 59 days, section 63(1) of
the Code which provides for the payment of termination pay on the 60th consecutive day of a temporary
layoff does not apply to school employees, including school bus drivers. Section 5.1 of the Employment
Standards Regulation permits a temporary layoff to exceed 59 days during the time between the end of a
school year and the beginning of the next school year, if certain conditions are met.
If the lay-off could be held to be in accordance with the terms of the contract
of service, no compensation at all could be allowed under section 33C(2) of the
Act. But if company had no power to lay-off any workmen, there is no escape
from the position that the entire sum payable to the laid-off workmen, except the
1 Ins. by Act 36 of 1964, Section 18 (w.e.f. 19.12.1964).
2 Subs. by Act 46 of 1982, Section 17, for certain words (w.e.f. 21.8.1984).
3 Ins. by Act 46 of 1982, Section 17 {w.e.f. 21.8.1984).
The Industrial Disputes Act, 1947
workmen who have settled or compromised, has got to be computed and
quantified under section 33C(2) of the Act of the period of lay-off; Workmen of
Fire-stone Tyre & Rubber Co. v. Firestone Tyre ft Rubber Co., AIR 1976 SC
1775.
What are the requirements should an employer choose to terminate or layoff an employee?
Where an employee has been employed with an employer for less than six months, the employer is not
required to give the employee advance notice of the termination or layoff.
Where an employee has been employed with an employer for a period of at least six months but less than
five years, the employer must give the employee at least two weeks written notice of the termination or
layoff.
Where an employee has been employed with an employer for a period of five years or more, the employer
must give the employee at least four weeks written notice of the termination or layoff.
The employer may choose to pay the employee the wages the employee would have earned during the
applicable two or four week notice period instead of providing a written notice.
Period of employment Layoff or termination
Less than 6 months No notice required
More than 6 months, 2 weeks notice in
less than five years writing, or 2 weeks pay
5 years or more 4 weeks notice in
writing, or 4 weeks pay