Non disciplinary separations are a fact of corporate life. For the employer reduce sales of profits nay required layoffs or downsizing. Layoff generally refers to having selected employees take time off, with the expectation that they will come back to work. Downsizing refers to permanently dismissing a relatively large proportion of employees in an attempt to improve productivity and competitiveness. Similarly employees may resign to retire or to look for better jobs.
Lockouts, layoffs, retrenchments, and closures of firms in India are regulated by the law. The existing laws protect the interests and rights of employees of the firm.
Industrial Disputes Act of 1947
This act specifies conditions for lock outs, layoffs retrenchment and closures of enterprise. A lockout is the closing of a place of employment or suspension of work, or refusal by an employer to give work. (Section 2(I)): The act also specifies conditions under which a lockout can be prohibited or deemed illegal.
Layoffs as defined in the act, are the failure refusal, or inability of an employer to give employment to those whose name appear on the employment roll of the establishment. Laid off employees (who fulfill certain conditions) are entitled to lay off compensation at the rate of 50% of their basic and dearness allowance. A layoff is a temporary situation and once the situation improves laid off employees have to be taken back.
According to the act, establishments are allowed to retrench (separate) employees by giving on month’s notice and by paying compensation at the rate of 15 days’ for each completed year of service . The last to be employed will be retrenched first and if the employer decides to recruit at a later stage, the retrenched employees have to be given preference. Prior concurrence of the appropriate government has to be obtained for retrenchment
Closure of establishments employing more than 100 workmen can be done only after obtaining prior permission of the government. (Section 25 FFA) Workers with service not less than one year affected by closure are eligible to receive retrenchment compensation.
Since the definition of layoffs retrenchments and closure in the ID Act of 1947, managers or executives of firms are not beneficiaries of any compensation under the act. However, if the contract of employment specifies any severance payment, it should be paid.
The plant closing law in the United States:
Until 1989, there were no federal laws requiring notification of employees when an employer decided to close a facility. However, in that year the Worker Adjustment and Retraining Notification Act (popularly known as the plant closing law) became law. It requires employers of 100 or more employees to give 60 days notice before closing a facility or starting a layoff of 50 people or more. The law does not prevent the employer from closing down, nor does it require saving jobs. It simply gives employees time to seek other work or retraining by giving them advance notice of the shutdown.
The law says employers must give advance notice to employees who will (or who might reasonably be expected to) experience a covered employment loss. Covered employment losses include terminations (other than discharges for cause; voluntary departures retirement) ; layoffs exceeding six months and reductions of more than 50% in employer’s work hours during each month of any six month period. Generally the firm need not notify workers it reassigns or transfers to another company location within a reasonable commuting distance. While there are exceptions the penalty or failing to give notice is one day’s pay and benefits to each employee for each day’s notice that should have given up to 60 days. The law is not entirely clear about how to notify employees. However, a paragraph that might suit the purpose would be as follows:
Please consider this letter to be your official as required by the federal plant closing law that your current position with the company will end 60 days form toady because of a [layoff or closing] that is now projected to tale place on [date]. After that day your employment with the company will be terminated and you will no longer be carried on our payroll records or be covered by any company benefit programs. Any questions concerning the plant closing law or tis notice will be answered in the HR office.