Chapter 9: The Industrial Relations Code, 2020

CHAPTER IX: LAY-OFF, RETRENCHMENT AND CLOSURE

Section 65: Application of sections 67 to 69

This section defines which businesses are exempted from the general rules regarding compensation for lay-off (Sections 67, 68, and 69).

Sub-Section (1): Exemptions

The rules in Sections 67 (Lay-off Compensation), 68 (Muster Rolls), and 69 (No Compensation Cases) do not apply to the following:

• Exclusion 1: “to industrial establishments to which Chapter X applies;”
  • Simple English: If a business is large enough to be covered by the Special Provisions in Chapter X (which has stricter rules), it is not covered by the general rules in Chapter IX.
  • Example: A factory with 400 workers is covered by Chapter X, so it follows the prior permission rules of Chapter X, not the basic rules of Chapter IX.
• Exclusion 2 (Small Establishments): “to industrial establishments in which less than fifty workers on an average per working day have been employed in the preceding calendar month; or”
  • Simple English: Very small businesses (those with less than 50 workers) are exempt from these lay-off rules.
  • Example: A small printing press employs 45 workers. If they face a power shortage and must lay off workers, they do not have to pay the compensation required by Section 67.
• Exclusion 3 (Seasonal/Intermittent Work): “to industrial establishments which are of a seasonal character or in which work is performed intermittently.”
  • Simple English: Businesses that only operate during a specific part of the year (like a sugar mill operating only during harvest) or those whose work is not continuous (like a construction project that starts and stops) are exempt.
  • Example: A business that processes mangoes is highly seasonal. During the off-season, when there is no work, it does not have to pay lay-off compensation to its workers.

Sub-Section (2): Dispute Resolution for Exemption

• Legal Text: “If a question arises whether an industrial establishment is of a seasonal character or whether work is performed therein only intermittently, the decision of the appropriate Government thereon shall be final.”
• Simple English: If there is a disagreement over whether a business is truly seasonal or intermittent (and therefore exempt), the final decision is made by the relevant government (Central or State).
• Example: A company claims it is intermittent because it relies on sporadic government contracts. If the union disagrees, the dispute is sent to the State Government, whose judgment on the nature of the company’s work is final.

Explanation (Definition of “Industrial Establishment” for Chapter IX)

This clarifies what the term “industrial establishment” means specifically for the purpose of the lay-off, retrenchment, and closure rules in this chapter:

• Clause (i): “a factory as defined in clause (m) of section 2 of the Factories Act, 1948; or”
• Clause (ii): “a mine as defined in clause (j) of sub-section (1) of section 2 of the Mines Act, 1952; or”
• Clause (iii): “a plantation as defined in clause (f) of section 2 of the Plantations Labour Act, 1951.”
• Simple English: For Chapter IX, the rules apply only to businesses that are legally categorized as a Factory, a Mine, or a Plantation.
• Example: The general lay-off rules (Sections 67-69) apply to a tea estate (a plantation) and a textile manufacturing unit (a factory), but not necessarily to a software development office that is not categorized as a factory.

Section 66: Definition of continuous service

This section precisely defines what uninterrupted service is and, more importantly, how to calculate if a worker has reached the one-year or six-month minimum service thresholds, even if their work was interrupted.

• Legal Text (Core Definition): “In this Chapter, continuous service in relation to a worker, means the uninterrupted service of such worker, including his service which may be interrupted on account of sickness or authorised leave or an accident or a strike which is not illegal or a lock-out or a cessation of work which is not due to any fault on the part of the worker.”
• Simple English: Continuous service is generally uninterrupted work. However, legally acceptable breaks—like being sick, taking approved vacation, getting injured in an accident, participating in a legal strike, or being part of a lock-out—do not count as breaks in service.
• Example: Ms. Priya worked for 14 months, but took two months of paid sick leave and participated in a two-week legal strike. Her service is still considered continuous for the purpose of receiving her rights and benefits.

Explanation 1: The ‘Deemed’ Service Rule

This provides the exact number of days a worker must have physically worked to be considered in continuous service for one year or six months.

• Clause (a) (One Year of Continuous Service): A worker is deemed to have completed one year if they worked under the employer for not less than:
  • (i) 190 days in the case of a worker employed below ground in a mine; and
    • Example: A miner worked 195 days in the last 12 months. Even if his contract shows interruptions, he is legally considered to have completed one year of continuous service.
  • (ii) 240 days, in any other case.
    • Simple English: For most factory, plantation, or industrial workers, the threshold for completing one year of continuous service is 240 actual working days in the preceding 12 months.
    • Example: Mr. Rohan worked 238 days. He is not eligible for rights requiring one year of continuous service. Ms. Geeta worked 241 days, so she is eligible.
• Clause (b) (Six Months of Continuous Service): A worker is deemed to have completed six months if they worked under the employer for not less than:
  • (i) 95 days in the case of a worker employed below ground in a mine; and
    • Example: A miner worked 100 days in the preceding six months. She is legally considered to have completed six months of continuous service.
  • (ii) 120 days, in any other case.
    • Simple English: For most workers, the threshold for completing six months of continuous service is 120 actual working days in the preceding six months.

Explanation 2: Days That Count as Working Days

The law clarifies that when calculating the 190, 240, 95, or 120-day thresholds, several non-working days must be included in the total count of days worked.

The days a worker has actually worked includes the days they were:

• (i) Laid-off: Under an agreement or permitted by law.
  • Example: A factory worker was laid off for 30 days due to machinery repair. Those 30 laid-off days are included when calculating his 240-day total.
• (ii) On Leave with Full Wages: This refers to fully paid vacation or earned leave.
  • Example: A worker takes 15 days of paid annual leave. These 15 days are counted as days worked.
• (iii) Temporarily Disabled: Absent due to a temporary injury caused by a workplace accident.
  • Example: A construction worker breaks his leg on the job and is out for 45 days. Those 45 days are counted toward the 240-day requirement.
• (iv) On Maternity Leave: Up to the maximum period allowed by the Maternity Benefit Act, 1961.
  • Example: A female employee takes the statutory six months of maternity leave. Those six months (or relevant working days therein) are fully counted toward her continuous service calculation.

Section 67: Rights of workers laid-off for compensation, etc.

This section defines the amount of compensation a worker is entitled to receive during a lay-off, provided they are not a temporary worker and meet the service requirement.

• Legal Text (Eligibility): Applies to a worker (other than a badli worker or a casual worker) whose name is on the muster rolls and who has completed not less than one year of continuous service.
• Legal Text (Compensation Rate): The worker shall be paid compensation which shall be equal to fifty per cent. of the total of the basic wages and dearness allowance that would have been payable to him, had he not been so laid-off:
• Simple English: If an established worker (not temporary or a substitute) who has worked continuously for at least one year is laid off, the employer must pay them half of their normal salary (basic pay plus Dearness Allowance) for every day they are laid off.
• Example: A permanent factory worker whose daily basic pay plus DA is Rs. 1,000 is laid off for 10 days due to a power outage. The employer must pay him a lay-off compensation of Rs. 500 per day, totaling Rs. 5,000.
• First Proviso (45-Day Limit): “…if during any period of twelve months, a worker is so laid-off for more than forty-five days, no such compensation shall be payable in respect of any period of the lay-off after the expiry of the first forty-five days, if there is an agreement to that effect between the worker and the employer:”
  • Simple English: The employer’s liability to pay 50% compensation is generally capped at 45 days in any 12-month period. If a lay-off goes beyond 45 days, the employer does not have to pay compensation for the extra days, provided there is a signed agreement with the worker stating this limit.
  • Example: Due to continuous raw material shortages, a company lays off workers for 60 days. The employer must pay 50% wages for the first 45 days. The remaining 15 days are unpaid if an agreement exists.
• Second Proviso (Converting Lay-off to Retrenchment): “…it shall be lawful for the employer in any case falling within the foregoing proviso to retrench the worker in accordance with the provisions contained in section 70 at any time after the expiry of the first forty-five days of the lay-off and when he does so, any compensation paid to the worker for having been laid-off during the preceding twelve months may be set off against the compensation payable for retrenchment.”
  • Simple English: Once the lay-off exceeds 45 days, the employer has the right to permanently fire (retrench) the worker. If they do, any lay-off compensation already paid to the worker in the last year can be deducted from the mandatory retrenchment compensation they owe under Section 70.
  • Example: After 50 days of lay-off, the employer decides to retrench the worker. The employer owes Rs. 1,00,000 in retrenchment compensation. Since the employer already paid Rs. 20,000 in lay-off wages, they only have to pay the worker the remaining Rs. 80,000.
• Explanation (“Badli Worker” Definition): “For the purposes of this section ‘badli worker’ means a worker who is employed in an industrial establishment in the place of another worker whose name is borne on the muster rolls… but shall cease to be regarded as such, if he has completed one year of continuous service in the establishment.”
  • Simple English: A badli worker is a temporary substitute for a permanent, absent worker. This worker is not entitled to lay-off compensation. However, if that substitute worker completes one year of continuous service, they are no longer legally considered a ‘badli’ and become eligible for compensation.
  • Example: Ms. Neha is hired as a badli worker to cover a permanent worker on long leave. If Ms. Neha is laid off in her third month, she gets no compensation. If she stays on the payroll for over one year, she is eligible for compensation for future lay-offs.

Section 68: Duty of an employer to maintain muster rolls of workers

This section imposes a mandatory record-keeping duty on the employer during a lay-off.

• Legal Text: “Notwithstanding that workers in any industrial establishment have been laid-off, it shall be the duty of every employer to maintain for the purposes of this Chapter a muster roll, and to provide for the making of entries therein by workers who may present themselves for work at the establishment at the appointed time during normal working hours.”
• Simple English: Even when a lay-off is happening, the employer must keep an official attendance register (muster roll) and allow workers who show up for work to sign in. This document is proof that the workers presented themselves for work and are therefore eligible for lay-off compensation under Section 67.
• Example: The factory is laid off due to fire damage. The employer must still set up a table near the gate every morning so that any worker who presents themselves can sign the muster roll to prove their eligibility for the 50% lay-off pay.

Section 69: Workers not entitled for compensation in certain cases

This section lists the specific circumstances where an eligible worker who has been laid off can be legitimately denied the 50% compensation.

Lay-off compensation is not paid to a worker if:

• (i) Refusal of Alternative Employment: “if he refuses to accept any alternative employment in the same establishment from which he has been laid-off, or in any other establishment belonging to the same employer situate in the same town or village or situate within a radius of eight kilometres from the establishment to which he belongs, if, in the opinion of the employer, such alternative employment does not call for any special skill or previous experience and can be done by the worker, provided that the wages which would normally have been paid to the worker are offered for the alternative employment also;”
  • Simple English: If the employer offers the laid-off worker another job that is similar in nature, requires no special new skills, is within 8 kilometres of their original workplace, and pays the same wages, the worker cannot refuse it and still claim lay-off compensation.
  • Example: A skilled lathe operator is laid off. The company offers him a temporary job cleaning the warehouse (unskilled) at his same lathe operator salary, 5 km away. If the operator refuses, he loses his right to lay-off compensation.
• (ii) Failure to Present for Work: “if he does not present himself for work at the establishment at the appointed time during normal working hours at least once a day;”
  • Simple English: If a worker does not show up daily to sign the muster roll (Section 68), they cannot claim compensation for those days.
  • Example: A laid-off worker sleeps in for three days straight and doesn’t show up at the gate to sign the register. The employer can legally refuse to pay him lay-off compensation for those three days.
• (iii) Internal Strike or Slowdown: “if such laying-off is due to a strike or slowing-down of production on the part of workers in another part of the establishment.”
  • Simple English: If the reason the worker is laid off is because other workers in a different section of the same factory are striking or intentionally working slowly (slowing down production), the employer does not have to pay the laid-off worker compensation.
  • Example: The Raw Materials Department goes on an illegal strike, causing a shortage of components. The Assembly Line workers must be laid off as a result. The Assembly Line workers are not entitled to lay-off compensation because the lay-off was caused by the strike in the other department.

Section 70: Conditions precedent to retrenchment of workers

This section details the mandatory steps an employer must take before permanently terminating (retrenching) a worker who has completed at least one year of continuous service.

• Legal Text (Service Requirement): “No worker employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until—”
• Simple English: This entire section only applies to established workers who have worked for the company for at least 240 days in the last year (or 190 days for underground miners).
• Clause (a) (Notice or Pay in Lieu): “the worker has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the worker has been paid in lieu of such notice, wages for the period of the notice;”
  • Simple English: The employer must either give the worker one full month of warning along with the reason for the firing, or immediately fire the worker and pay them one month’s salary instead of waiting out the notice period.
  • Example: A company decides to retrench 10 workers. It can either give them a formal letter on March 1st saying their last day is April 1st, OR it can fire them on March 1st but include one month’s salary as part of their final compensation package.
• Clause (b) (Retrenchment Compensation): “the worker has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay, or average pay of such days as may be notified by the appropriate Government, for every completed year of continuous service or any part thereof in excess of six months;”
  • Simple English: The worker must be paid a severance package (retrenchment compensation) calculated as 15 days’ salary for every full year they worked, plus 15 days’ salary for any final partial year that was more than six months long.
  • Example: Mr. Kumar worked for 4 years and 7 months. Since 7 months is “in excess of six months,” the calculation is for 5 years. If his average pay is Rs. 1,000/day, his compensation is $5 \times 15 \times 1,000 = \text{Rs. } 75,000$.
• Clause (c) (Government Notice): “notice in such manner as may be prescribed is served on the appropriate Government or such authority as may be specified by the appropriate Government by notification.”
  • Simple English: The employer must formally notify the relevant government authority (State or Central, depending on the establishment) that they are carrying out a retrenchment.
  • Example: A factory is retrenching 10 workers. The manager must send a formal, written notice to the State Labour Commissioner as mandated by the government rules.

Section 71: Procedure for retrenchment

This section establishes the mandatory rule for deciding which worker must be retrenched (fired) when multiple workers are in the same job category.

• Legal Text: “Where any worker in an industrial establishment who is a citizen of India, is to be retrenched and he belongs to a particular category of workers in that establishment, then, in the absence of any agreement between the employer and the worker in this behalf, the employer shall ordinarily retrench the worker who was the last person to be employed in that category (LIFO), unless for reasons to be recorded the employer retrenches any other worker.”
• Simple English: When an employer decides to fire staff in a certain job group (like data analysts) and the workers are Indian citizens, the default rule is “Last In, First Out” (LIFO). The newest person hired in that job category must be the first person fired. The employer can only skip this rule if they formally write down the specific, valid reasons for keeping the newer worker and firing an older one.
• Example: A factory must eliminate two senior machine operator jobs. Mr. Anil was hired in 2018, and Ms. Bindiya was hired in 2020. The employer must retrench Ms. Bindiya first. If the employer decides to retrench Mr. Anil instead (because Ms. Bindiya is certified to handle specialized new machinery), they must document this reason.

Section 72: Re-employment of retrenched worker

This section protects the rights of retrenched workers, giving them priority if the employer decides to hire new staff later.

• Legal Text: “Where any worker is retrenched and the employer proposes to take into his employment any person within one year of such retrenchment, he shall, in such manner as may be prescribed, give an opportunity to the retrenched workers who are citizens of India to offer themselves for re-employment and such retrenched workers who offer themselves for re-employment shall have preference over other persons.”
• Simple English: If an employer fires workers and then decides to hire people for the same job within the next year, they must first contact their previously retrenched Indian citizens and give them a chance to apply. These former workers must be hired before the company hires any entirely new applicants.
• Example: A construction company retrenches 50 laborers in November. In April of the following year, they win a new contract and need 30 laborers. The company must first offer those 30 jobs to the 50 workers retrenched in November.

Section 73: Compensation to workers in case of transfer of establishment

This section governs the rights and compensation of workers when the ownership or management of a business is legally transferred to a new employer.

• Legal Text (Worker Right): “Where the ownership or management of an establishment is transferred… from the employer in relation to that establishment to a new employer, every worker who has been in continuous service for not less than one year in that establishment immediately before such transfer shall be entitled to notice and compensation in accordance with the provisions of section 70 as if the worker had been retrenched:”
• Simple English: If a business is sold, all established workers (with over one year of continuous service) are treated as if they were retrenched (fired) by the old employer. This means the old employer must pay them full retrenchment compensation and a month’s notice pay (per Section 70).
• Example: Company A sells its factory to Company B. All workers with over one year of service are due their full severance package (15 days’ pay per year of service) from Company A, the seller.

Proviso (No Compensation Exception):

The employer does not have to pay retrenchment compensation (per the main rule above) if the transfer meets all three conditions below:

• Clause (a) (Service Continuity): “the service of the worker has not been interrupted by such transfer;”
  • Simple English: The workers’ employment record (seniority and length of service) is officially maintained without any break under the new ownership.
  • Example: On paper, the workers move from the old company to the new company without losing a single day of service credit.
• Clause (b) (Terms and Conditions): “the terms and conditions of service applicable to the worker after such transfer are not in any way less favourable to the worker than those applicable to them immediately before the transfer;”
  • Simple English: The workers’ salary, allowances, pension benefits, and working hours cannot be worse under the new owner than they were before the sale.
  • Example: Before the transfer, a worker had 30 days of paid leave. The new employer cannot reduce this benefit to 20 days.
• Clause (c) (Compensation Liability): “the new employer is… legally liable to pay to the worker, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by the transfer.”
  • Simple English: The new owner must formally accept the legal responsibility to pay retrenchment compensation later on, calculated from the worker’s original hire date with the old company.
  • Example: A worker was hired by Company A in 2015. Company B buys the business in 2025. Company B must agree that if it fires the worker in 2030, it will pay retrenchment compensation calculated based on 15 years of service (2015 to 2030).

Section 74: Sixty days’ notice to be given of intention to close down any undertaking

This section mandates a warning period before an employer can permanently close down a business.

Sub-Section (1): Notice Requirement

• Legal Text: “An employer who intends to close down an undertaking shall serve, at least sixty days before the date on which the intended closure is to become effective, a notice… on the appropriate Government stating clearly the reasons for the intended closure of the undertaking:”
• Simple English: An employer must give the relevant government a mandatory 60-day written warning (notice) before shutting down the business. The notice must clearly explain why the closure is necessary.
• Example: A factory owner decides to shut down the plant due to financial losses on December 31st. They must submit a formal notice explaining the financial reasons to the State Government by November 1st at the latest.

Proviso (Exemptions to 60-Day Notice):

The 60-day notice rule does not apply to the following types of establishments:

• Clause (i) (Small Establishments): “an industrial establishment in which less than fifty workers are employed or were employed on any day in the preceding twelve months;”
  • Simple English: Small businesses (less than 50 workers) are exempt from this mandatory 60-day warning to the government.
  • Example: A repair shop with 45 employees can shut down without giving the government 60 days’ notice.
• Clause (ii) (Construction): “an industrial establishment set up for the construction of buildings, bridges, roads, canals, dams or for other construction work or project.”
  • Simple English: Temporary construction projects are exempt from this 60-day notice rule, as their closure is expected upon the project’s completion.
  • Example: A company finishing a four-year bridge project can close the site without submitting a 60-day notice to the government.

Sub-Section (2): Exemption in Exceptional Circumstances

• Legal Text: “Notwithstanding anything contained in sub-section (1), the appropriate Government may, if it is satisfied that owing to such exceptional circumstances as accident in the undertaking or death of the employer or an extraordinary situation such as natural calamities or the like, it is necessary so to do, by order, direct that the provisions of sub-section (1) shall not apply…”
• Simple English: The government can waive the 60-day notice requirement entirely if the closure is caused by sudden, unforeseen, and extraordinary events like a natural disaster, a fatal accident at the site, or the death of the owner.
• Example: A large factory is completely destroyed by a massive flood (natural calamity). The employer can immediately close the undertaking without having to wait 60 days, provided the government issues an order approving this exemption.

Section 75: Compensation to workers in case of closing down of undertakings

This section establishes the worker’s right to compensation when an entire business closes permanently.

Sub-Section (1): Closure Compensation as Retrenchment

• Legal Text (Worker Right): “Where an establishment is closed down for any reason whatsoever, every worker who has been in continuous service for not less than one year… shall… be entitled to notice and compensation in accordance with the provisions of section 70, as if the worker had been retrenched:”
• Simple English: When a business closes, all established workers (over one year of service) are entitled to the same notice pay and retrenchment compensation that they would receive if they were individually fired (as per Section 70).
• Example: A profitable factory is closed down because the owner wants to sell the land. Every worker is entitled to one month’s notice pay or wages in lieu, plus 15 days’ salary for every year of service.
• Proviso (Unavoidable Circumstances Cap): “…where the undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the worker under clause (b) of section 70, shall not exceed his average pay for three months.”
  • Simple English: If the business closes due to circumstances that the employer truly could not prevent (i.e., not a business decision), the mandatory severance compensation is capped at a maximum of three months’ average pay, regardless of the worker’s length of service.
  • Example: A business is forced to close because the government permanently cancels its operating license due to a zone change. This is deemed unavoidable. A worker with 10 years of service would receive only three months’ average pay, even though the standard calculation would normally give them 5 months’ pay ($10 \text{ years} \times 15 \text{ days} = 150 \text{ days of pay}$).
• Explanation (What is NOT Unavoidable): A closure is not considered “unavoidable circumstances beyond the control of the employer” if it is merely due to:
  • (i) Financial Difficulties: Financial losses or lack of funds.
  • (ii) Stock Accumulation: Too much unsold inventory.
  • (iii) Lease/License Expiry: The lease or operating license running out.
  • (iv) Mineral Exhaustion (Mining): Running out of minerals in a mine.
  • Simple English: These factors are considered risks of doing business. If the company closes for any of these reasons, the compensation is not capped at three months; the full Section 70 calculation applies.
  • Example: A textile mill closes due to huge financial losses (i). Compensation is not capped, and the full Section 70 amount must be paid.

Sub-Section (2): Mining Closure Exception (Alternative Employment)

This provides a specific exception for mining operations that close due to mineral exhaustion. If the employer meets certain conditions, they don’t have to pay notice or compensation.

No worker is entitled to notice or compensation if the mining operation closes due to running out of minerals, provided that the employer:

• Clause (a) (Alternative Job Offer): “provides the worker, at the place located within a radius of twenty kilometres from such undertaking… with alternative employment at the same remuneration as he was entitled to receive, and on the same terms and conditions of service…;”
  • Simple English: The employer offers the worker another job within 20 km of the closed mine, and the pay and benefits are exactly the same as before.
  • Example: Mine Alpha runs out of coal. The company offers all 100 workers a transfer to Mine Beta, located 15 km away, with their same salary and seniority status.
• Clause (b) (Service Continuity): “the service of the worker has not been interrupted by such alternative employment; and”
  • Simple English: The worker’s length of service remains unbroken during the transfer.
• Clause (c) (New Employer’s Liability): “the employer is… legally liable to pay to the worker, in the event of his retrenchment, compensation on the basis that his service has been continuous and has not been interrupted by such alternative employment.”
  • Simple English: The employer must commit to calculating any future retrenchment compensation based on the worker’s total uninterrupted service since the original hire date.
  • Example: A worker is transferred to the new mine. The employer agrees that if they fire him 5 years later, the compensation calculation will include his time at both the old and new mines.

Sub-Section (4): Construction Project Closure

This provides a specific compensation rule for temporary construction projects.

• Legal Text: “Where any undertaking set up for the construction of buildings, bridges, roads… is closed down on account of the completion of the work within two years from the date on which the undertaking had been set up, no worker employed therein shall be entitled to any compensation under clause (b) of section 70, but if the construction work is not so completed within two years, he shall be entitled to notice and compensation under that section for every completed year of continuous service or any part thereof in excess of six months.”
• Simple English: Workers on a construction project that finishes and closes down within two years of starting are not entitled to retrenchment compensation (the 15-day severance package). However, if the project drags on and the closure happens after two years, the workers are entitled to the full retrenchment compensation.
• Example: A road project is finished and closed after 18 months. Workers get no severance pay. If a new bridge project takes 30 months (2.5 years) and then closes, all workers with over one year of service are eligible for full Section 70 compensation.

Section 76: Effect of laws inconsistent with this Chapter

This section determines whether the rules in Chapter IX override or are overridden by other laws, agreements, or standing orders.

Sub-Section (1): Supremacy of Chapter IX (with Favourable Exception)

• Legal Text: “The provisions of this Chapter shall have effect notwithstanding anything inconsistent therewith contained in any other law including standing orders made under Chapter IV:”
  • Simple English: The lay-off, retrenchment, and closure rules in this Chapter override any conflicting rule found in a company’s standing orders or any other similar law.
  • Example: A factory’s old Standing Order says retrenchment compensation is 10 days’ pay per year. This Code mandates 15 days’ pay per year (Section 70). The company must follow the Code’s 15-day rule.
• Proviso (More Favorable Benefits): “Provided that where under the provisions of any other Act or rules… a worker is entitled to benefits in respect of any matter which are more favourable to him than those to which he would be entitled under this Code, the worker shall continue to be entitled to the more favourable benefits in respect of that matter…”
  • Simple English: If a worker’s existing employment contract, standing orders, or a State law gives them a better benefit than this Code does for the same matter, the worker keeps the better benefit.
  • Example: A State law mandates 20 days’ pay per year for retrenchment compensation, while this Code mandates 15 days’ pay per year. The worker gets the more favourable 20 days’ pay.

Sub-Section (2): Relation to State Dispute Laws

• Legal Text: “…nothing contained in this Chapter shall be deemed to affect the provisions of any other law for the time being in force in any State in so far as that law provides for the settlement of industrial disputes, but the rights and liabilities of employers and workers in so far as they relate to lay-off and retrenchment shall be determined in accordance with the provisions of this Chapter.”
• Simple English: This Code’s rules do not interfere with how State laws handle general dispute resolution (like State-specific Labor Courts). However, when it comes specifically to defining the rights and duties regarding lay-off and retrenchment compensation, the rules in Chapter IX of this Code are final.
• Example: A State law has a special process for resolving disputes over compensation. That process is still valid. However, the final amount of compensation paid during a lay-off must still comply with the minimum percentages and durations set in this Code.