This question is usually asked after a layoff announcement, and the answer disappoints both sides. Employees expect that a large employer must ask permission. Employers sometimes assume the threshold change from one hundred to three hundred did more for them than it did. The provision that decides it is the application clause, and it has two conditions, not one.
The two conditions
Both conditions have to be met. The headcount threshold moved from one hundred to three hundred, which is the change everybody discusses, but the type of establishment limit did not move at all. A software company with five thousand employees in Bengaluru is not a factory, a mine or a plantation, so no permission is required from it. Our note on whether you count as a worker under the Industrial Relations Code and our answer on what an industrial establishment is deal with the definitional layer in more detail.
What the chapter requires where it does apply
- Lay-off. No worker whose name is on the muster rolls, other than a badli or casual worker, may be laid off except with the prior permission of the appropriate Government, unless the lay-off is due to shortage of power or a natural calamity, or in a mine to fire, flood, excess of inflammable gas or explosion. The application must state the reasons and a copy must be served on the workers.
- Retrenchment. Three months' notice in writing indicating the reasons, or wages in lieu, and prior permission. Where permission is granted or deemed granted, compensation of fifteen days' average pay for every completed year of continuous service and any part over six months is payable at the time of retrenchment.
- Closure. An application for prior permission at least ninety days before the intended closure, with a copy served on the workers' representatives.
- Deemed permission. If the Government does not communicate its order within sixty days of the application, permission is deemed granted. An order granting or refusing permission is final and binding for one year, subject to review by the Government or a reference to a Tribunal.
- The consequence of not applying. Where no application is made, or permission is refused, the retrenchment is deemed illegal from the date the notice of retrenchment was given, and the worker is entitled to all benefits under any law in force as if no notice had been given.
The right to be paid fifty per cent of basic wages and dearness allowance for days of lay-off sits in the general chapter, but that chapter expressly says the lay-off compensation sections do not apply to establishments covered by the special chapter, nor to establishments employing fewer than fifty workers on average per working day in the preceding calendar month, nor to seasonal or intermittent establishments. It then defines industrial establishment, for those sections, as a factory, mine or plantation. So there is no statutory lay-off compensation for an office. If an office employer sends people home on reduced pay, the claim is contractual, not statutory.
What is available to an office employee instead
- The general retrenchment provisions. One month's notice in writing with the reasons or wages in lieu, fifteen days' average pay per completed year and any part over six months, and notice to the appropriate Government. These are not limited to factories.
- The order of retrenchment. Within a category, the last person employed goes first unless the employer records reasons. Ask for the seniority list for your category.
- Preference in re-employment if the employer hires into the same category within a year.
- The re-skilling fund credit of fifteen days' wages last drawn, credited within forty-five days of retrenchment.
- Unfair labour practices. The Code prohibits any employer from committing an unfair labour practice specified in its Second Schedule, which is the route where the selection was really about union activity or victimisation.
- The Karnataka Shops and Commercial Establishments Act, 1961, which survives the codes and gives an appeal against removal without reasonable cause to an employee with six months of continuous service.
Note also what the chapter does not remove. Even where the special chapter applies, the provisions on continuous service, the order of retrenchment, re-employment preference, compensation on transfer of an establishment and the preservation of more favourable benefits continue to apply to those establishments as well.
The practical takeaway is to stop looking for a permission requirement that does not exist for your employer, and to test the exit against the obligations that do apply. Our guide on wrongful termination and employee rights in India sets out that sequence, and our overview of what the four labour codes changed for employees explains what the threshold change did and did not achieve.