Layoff Legal Rules – How IT companies ignore Land of Law with their corporate power?

This entry is part 7 of 10 in the series I, IT employee named Shyam Sundar

As I mentioned in last part, Indian law is master document and it consider all different aspect of problem involving employee and employer. It is quite common for any industry to face various issues like non availability of raw materials, pandemic situation, war, company running on loss and not in position to pay salary, lockout etc. Industrial dispute act (IDA) provides solution for all these problems. IDA has various sections to address the concerns of both employer and employee.

IDA allows employers to layoff employees temporarily or retrench permanently following certain rules balancing between employee and employer side. Employers can very well layoff or retrench employees by following law of land.

Section 25C of IDA talks about the various rules employers needs to follow during layoffs. To make readers clear, layoff, furloughs, asking employee to go on leave, yearend holiday shutdowns are temporary measures. As part of these measures, company is asking employees to apply either leave for specific period or if employee does not have sufficient leave balance, employer force employee to go on loss of pay. Employees affected as part of these activities are still with the payrolls of employer.

The various rules formulated by Section 25C as part of IDA is as follows:

  • If a company is employed with more than 100 employees, company need to obtain permission from labour department to perform layoff
  • Layoff can be carried out for maximum period of 45 days. Company must pay 50% of the basic and dearness allowance of the employee salary to employees who are laid off
  • If companies want to extend the period of 45 days, it should be in agreement with employee and employer. No compensation is required by the employer to pay for period beyond 45 days
  • If employee is not agreeing for extension of layoff period for more than 45 days or employer is not in position to pay employee anymore due to company financial conditions, employer has the right to retrench employees following rules and regulation governed by section 25F, 25G and 25H of IDA

As I mentioned, readers can google themselves for section 25C of IDA. The master copy of IDA is available in the government official website of labour . Readers can download IDA and can verify all queries on their legal issues by going through the document

If you see example of Tata Technologies, company asking employees to go on leave is communicated internally. The company sent mail to targeted employees to go on furloughs.

In case of Wipro Technologies, President and chief human resource organization officer of Wipro Mr. Saurabh Govil while announcing the company fourth quarter result gives the hint of company furlough plans while addressing media.  He quoted “Company could look various options to cut down the costs. We will look at if people can go on furloughs and leaves”

Both Wipro and Tata Technologies have more than 100 employees working in their company. As a part of Section 25C of IDA, company must obtain permission from labour officer in respective places where their office is located to perform layoffs. The company can exercise the option only after labour officer gives the permission.

Our prime minister Mr Narendra Modi has appealed all private and public limited companies of not cutting the salaries of their employees during this pandemic time. Both Wipro and Tata Technologies are not reporting losses during this pandemic time. So practically it will be difficult for these companies to seek permission from labour office for performing layoffs

If permission cannot be sought from labour office, why Mr Govil is publicly announcing the company is looking for options of furlough? This is the indirect message by Wipro management given to the employees of Wipro. As the statement came openly in media, employees of Wipro will believe company reserved the right to do layoffs and the decision of layoff is legally correct.

The problem here is labour department will not take any actions against the companies unless affected employees come forward and complaint about their issue. If you take Tata Technologies as an example, after our fellow IT union NITES took up the issue in labour department of Pune, only then it becomes an issue. Unless affected employees not seeking legal justice, it is impossible to take any action against the employer. That’s the reason all employers including Wipro, CTS, Tech Mahindra are announcing news about retrenchments, layoffs in media rather than seeking permission from labour office

People supporting companies still may see that law system is old and IT is new industry and many laws are not applicable to IT industry. Legal system of India provides solution for this also and that is the best part of our law.

Standing orders are the common rules applicable to all employers. If any industry or employer feel that certain rules as part of common framework is not applicable to their industry or company, they can very well consult with labour ministry and request to modify the standing orders specific to companies or industries. If labour ministry approves it, companies can follow rules specified on standing orders specific to that company. This process is called obtaining certified standing order specific to the company.

We will have a closer look on if any of the IT companies obtained certified standing order. As a part of NDLF, we have conducted RTI campaign during the year 2017 and asked various queries to the labour department about this. Readers can view the response obtained on this RTI campaign from labour department. They can cross verify my previous article on certified standing order for more details

None of the IT companies obtained certified standing order. If any of the IT companies obtained certified standing order in the last 3 years after our RTI campaign, they can very well send details to our NDLF email id and we will publish for the readers

If you see how furloughs are happening in IT companies, readers can understand what IT companies are doing. HR officer call individual employees and gives only 2 options – Accepting leave without pay or Employer will terminate. In this case, employee has no other option other than to choose option of going in loss of pay

If employee chooses loss of pay options, what it means to employer:

  • Employee applied leave on his own consent like for his/her personal marriage, personal issues, medical reason. As employee applied leave, salary is not paid to the employee
  • Employee don’t have the right to complaint in labour office as employee themselves are taking such leaves
  • Employers get rid of all legal complications as part of this process
  • Employers impose layoff exercise without obtaining permission from labour office. In fact, employer will not accept that any layoff is happening as they termed layoff with another fancy name called Furlough which is new word which Industrial dispute act does not understand
  • Employers save cost at the same time keeping up the promise to the Government of India on not terminating any employees during the pandemic time

The main reason here is companies ignore law of land completely while formulating their own policies. They use the loopholes exists in the legal system. They very well know employees will not take any fight against companies such decision. If we take the case of Wipro, based on TOI assumption of 12000 employees getting impacted, it has a total savings of 12000* 70000 (which is the average salary consider for each employee) = 84 crores every month. If these 12000 employees go on furlough as per TOI assumption, company will save 252 crores for period of 3 months

Employees should understand law first and many employees come forward in rejecting to such policies of company only will be the solution to fix this. If only few employees like me is rejecting the offers, employer may terminate only those people as they feel they are the troublemaker for the company.

I hope the understanding of Section 25C will help readers to understand legal aspect of layoffs or furloughs. But during this pandemic time, many retrenchments or terminations are happening in various companies. We have seen various news on Cognizant retrenching employees during pandemic time. Before we go into detail on sections relevant to retrenchment, we will try to answer the most common query of every IT employee on how to face HR calls related to retrenchment.  I got several 100 calls from different employees when their HR officer initiate discussion. Their main problem is they are not clear on what decision to take during this discussion. They have high mental trauma, tensed and clueless on what decision to be taken during HR calls.

I have a simple solution to help for their problems. We will see about simple quiz in next part which helps you to come to a final decision on what we must do as part of HR call. This quiz is simple quiz but has amazing result. I request readers to follow next part for taking this quiz which helps to face HR discussions.

  • Shyam Sundar
Series Navigation<< Forced leave without pay – What is in it for IT Employees?Got HR call? – Take this quiz and prepare yourself for the interview >>

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