Lay-off, Retrenchment & Closure

Lay-off, retrenchment and closure all end (or interrupt) employment — but they differ in cause, permanence and compensation, and confusing them is the classic exam trap.

The Three Compared

flowchart TD
    T["Termination / interruption of employment"]:::root
    T --> LO["Lay-off — S.2(v)"]:::type
    T --> RE["Retrenchment — S.2(zm)"]:::type
    T --> CL["Closure — S.2(e)"]:::type
    LO --> L1["Temporary inability to give work<br/>(shortage of coal, power, raw material)"]:::detail
    LO --> L2["Compensation = 50% of wages — S.77"]:::detail
    RE --> R1["Permanent termination for economic reasons<br/>(not disciplinary)"]:::detail
    RE --> R2["LIFO — Last In First Out — S.70(b)"]:::detail
    RE --> R3["1 month notice or pay + 15 days' wages<br/>per year of service — S.70"]:::detail
    CL --> C1["Permanent closing of the whole establishment"]:::detail
    CL --> C2["60 days' notice to govt if 100+ workers — S.74"]:::detail

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Feature	Lay-off	Retrenchment	Closure
Nature	Temporary	Permanent (individual)	Permanent (whole establishment)
Cause	Operational inability	Economic / surplus workforce	Business decision
Compensation	50% wages for lay-off period	15 days’ wages / year of service	15 days’ wages / year
LIFO rule	No	Yes — S.70(b)	No
Prior govt permission	No (unless 100+ workers)	No (unless 100+ workers)	Yes — S.74 if 100+ workers

Retrenchment essentials (S.70): (a) one month’s notice or pay in lieu, (b) retrenchment compensation of 15 days’ wages per completed year, and (c) LIFO — the last person employed in a category is the first to go, absent good reason.

Unfair Labour Practices — Fifth Schedule (S.2(zo))

The Code forbids unfair labour practices by both sides:

By employers: interfering with union formation, victimising a worker for union activity, discriminating between union and non-union workers, or refusing to bargain in good faith.
By workers/unions: coercing workers to join a particular union, staging go-slow / work-to-rule as a pressure tactic, or refusing to implement a settlement or award.

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