As per employment law in India, an employer has the right to layoff, this right is subject to certain regulation by the law. Chapter V-B of the Industrial Disputes Act prohibits lay off in case of industrial establishments employing 100 or more workers without prior permission of the appropriate government or authority constituted by the appropriate government for such permission, thus no worker in such an establishment may be laid off without the prior permission of the government.
In case an industrial establishment employs less than 100 workers and the Industrial Establishments Standing Orders are applicable to the establishment. The employer is requested to pay 50% of the total of basic and Dearness Allowance during the period of lay off. No special permission is required if number of employees are more than 50 and less than 100.
If the industrial establishment is employing less than 50 workers, , the provisions relating to lay off provided in Chapter V-A are not applicable, thus the employer may lay off without prior permission. . Therefore in the absence of service conditions, instead providing for 50% of total of basic wage and allowances as a lay off compensation, such an employer may lay off the workers but is required to pay 100% wages.
In a case the Hon’ble Supreme Court in the matter of The Workmen of Firestone Tyre & Rubber Co. of India (P) Ltd. V/s The Firestone Tyre & Rubber Co. it was held that –
“Mere refusal or inability to give employment to the workman when he reports for duty on one or more grounds mentioned in Clause (kkk) of Section 2 is not a temporary discharge of the workman. Such a power, therefore, must be found out from the terms of agreement of service or the Standing Orders governing the establishment. In the instant case the number of workmen being only 30, there were no Standing Orders certified under the Industrial Employment (Standing Orders) Act, 1946. Nor was there any term of agreement of service conferring any such right of lay-off. In such a situation the conclusion seems to be inescapable that the workmen were laid-off without any authority of law or the power in the management under the agreement of service. “