Strikes, Lock-outs, Lay-off and Retrenchment under the IR Code

Understand Strikes, Lock-outs, Lay-off and Retrenchment

Key rules to remember

Strike notice and timing (s. 62(1))

Notice within 60 days before striking; no strike within 14 days of notice; no strike before the date stated in the notice

Applies to a person employed in an industrial establishment going on strike in breach of contract.

Lock-out notice and timing (s. 62(2))

Same as strike: notice within 60 days before; not within 14 days of notice; not before the date in the notice

Employer's side of the same rule.

Periods when strike or lock-out is prohibited

Conciliation: pendency + 7 days | Tribunal/NIT: pendency + 60 days | Arbitration (s. 42(5) notification): pendency + 60 days | Settlement or award in operation: on covered matters

Remember 7 days for conciliation and 60 days for the other two.

No notice where already on (s. 62(3))

Notice not needed if a strike or lock-out already exists; employer must intimate the specified authority on the day it is declared

Employer must also report notices received or given to the appropriate Government and conciliation officer within five days (s. 62(6)).

Illegal strike or lock-out (s. 63)

Illegal if in breach of s. 62 or continued against a s. 42(7) order

Continuance is not illegal if it was lawful at the start and was on when the dispute reached the Tribunal or arbitrator, and no s. 42(7) prohibition applies. A response lock-out or strike is not illegal.

Lay-off compensation (s. 67)

Compensation = 50% × (basic wages + dearness allowance) for each day of lay-off, excluding weekly holidays

For a worker on the muster rolls with at least 1 year of continuous service. Badli and casual workers are excluded.

45-day proviso on lay-off

If laid off for more than 45 days in any 12 months, no compensation after the first 45 days, if the worker and employer have agreed so

The employer may then retrench after 45 days, and lay-off compensation paid in the preceding 12 months can be set off against retrenchment compensation.

Retrenchment conditions (s. 70)

(a) 1 month's written notice with reasons, or wages in lieu; (b) compensation of 15 days' average pay for every completed year of service or part over 6 months; (c) notice to the appropriate Government or specified authority

Applies to a worker with at least 1 year of continuous service. Appropriate Government may notify a different number of days.

Closure compensation (s. 75)

Closure = treated as retrenchment under s. 70. If closed due to unavoidable circumstances beyond employer's control, compensation under s. 70(b) is capped at average pay for 3 months

Financial difficulties, unsold stocks, expiry of lease or licence, and mineral exhaustion alone are not unavoidable circumstances.

Construction undertaking (s. 75(4))

Closed on completion within 2 years of set-up: no s. 70(b) compensation. Not completed within 2 years: notice and compensation for each completed year or part over 6 months

Applies to buildings, bridges, roads, canals, dams and other construction work.

How to solve Strikes, Lock-outs, Lay-off and Retrenchment questions

1. 1Identify the act: strike, lock-out, lay-off, retrenchment or closure. Name the section that governs it.
2. 2For a strike or lock-out, list the dates: when notice was given, when the action began, and whether any conciliation, Tribunal, arbitration, settlement or award was on.
3. 3Test each limb of section 62: notice within 60 days, 14 days gap, date in the notice, and the bar periods. One breach makes it illegal under section 63(1).
4. 4Check the exceptions in section 63(2) and (3): action already on when the dispute was referred, or a response to an illegal act by the other side.
5. 5For lay-off, retrenchment or closure, check eligibility first: one year of continuous service, and for lay-off, name on the muster rolls and not a badli or casual worker.
6. 6Apply the money rule: 50% of basic plus DA for lay-off; 15 days' average pay per year for retrenchment; the three-month cap for closure by unavoidable circumstances.
7. 7Check procedure: written notice with reasons or pay in lieu, and notice to the appropriate Government.
8. 8Write the conclusion in one line, citing the section.

Quickest way: Timeline and eligibility check

Common mistakes in Strikes, Lock-outs, Lay-off and Retrenchment

• Saying notice of strike must be given 14 days before and stopping there.

  The 14-day figure is the one students remember from searching.

  Fix: State all three limbs: notice within 60 days before striking, not within 14 days of notice, and not before the date specified in the notice.

• Treating the post-proceeding bar as 60 days for conciliation.

  The 60-day figure appears in the Tribunal and arbitration limbs and gets applied everywhere.

  Fix: Conciliation: pendency plus 7 days. Tribunal or National Industrial Tribunal and arbitration: pendency plus 60 days.

• Calling every strike during a dispute illegal.

  Students overlook section 63(2) and (3).

  Fix: A lawful strike already on when the dispute is referred can continue, unless barred by a section 42(7) order. A strike in response to an illegal lock-out is not illegal.

• Paying lay-off compensation on total wages or including weekly holidays.

  Section 67 wording is read loosely.

  Fix: Use 50% of basic wages plus dearness allowance only, and exclude weekly holidays that fall in the lay-off period.

• Ignoring the 'part in excess of six months' rule in retrenchment.

  Students count only completed years.

  Fix: Count completed years, and add one more year if the remaining part exceeds six months. Six months exactly does not count.

• Capping closure compensation at three months for any closure.

  The proviso is remembered without its condition.

  Fix: The cap applies only when closure is due to unavoidable circumstances beyond the employer's control. Financial losses, unsold stock or lease expiry alone do not qualify.

Worked examples