Lay-off :
“Lay-off” (with its grammatical variations and cognate expressions) means the failure, refusal or inability of an employer to give employment due to following reasons, to a workman whose name appears on the muster-rolls of his industrial establishment and who has not been retrenched:
(a) shortage of coal, power or raw materials, or
(b) accumulation of stocks, or
(c) break-down of machinery, or
(d) natural calamity, or
(e) for any other connected reason. [Section 2(kkk)]
Explanation: Every workman whose name is borne on the muster rolls of the industrial establishment and who presents himself for work at the establishment at the time appointed for the purpose during normal working hours on any day and is not given employment by the employer within two hours of his so presenting himself shall be deemed to have been laid-off for that day within the meaning of this clause.
Provided that if the workman, instead of being given employment at the commencement of any shift for any day is asked to present himself for the purpose during this second half of the shift for the day and is given employment, then, he shall be deemed to have been laid-off only for one-half of that day.
Provided further that if he is not given any such employment even after so presenting himself, he shall not be deemed to have been laid-off for the second half of the shift for the day and shall be entitled to full basic wages and dearness allowance for that part of the day.
From the above provisions, it is clear that lay-off is a temporary stoppage and within a reasonable period of time, the employer expects that his business would continue and his employees who have been laid-off, the contract of employment is not broken but is suspended for the time being. But in the case of M.A. Veirya v. C.P. Fernandez, 1956-I, L.L.J. 547 Bomb., it was observed that it is not open to the employer, under the cloak of “lay-off”, to keep his employees in a state of suspended animation and not to make up his mind whether the industry or business would ultimately continue or there would be a permanent stoppage and thereby deprive his employees of full wages. In other words, the lay-off should not be mala fide in which case it will not be lay-off. Tribunal can adjudicate upon it and find out whether the employer has deliberately and maliciously brought about a situation where lay-off becomes necessary. But, apart from the question of mala fide, the Tribunal cannot sit in judgement over the acts of management and investigate whether a more prudent management could have avoided the situation which led to lay-off (Tatanagar Foundry v. Their Workmen, A.I.R. 1962 S.C. 1533).
Further, refusal or inability to give employment must be due to (i) shortage of coal, power or raw materials, or (ii) accumulation of stock, or (iii) break-down of machinery, (iv) natural calamity, or (v) for any other connected reason. Financial stringency cannot constitute a ground for lay-off (Hope Textiles Ltd. v. State of MP, 1993 I LLJ 603).
Lastly, the right to lay-off cannot be claimed as an inherent right of the employer. This right must be specifically provided for either by the contract of employment or by the statute (Workmen of Dewan Tea Estate v. Their Management). In fact ‘lay-off’ is an obligation on the part of the employer, i.e., in case of temporary stoppage of work, not to discharge the workmen but to lay-off the workmen till the situation improves. Power to lay-off must be found out from the terms of contract of service or the standing orders governing the establishment (Workmen v. Firestone Tyre and Rubber Co., 1976 3 SCC 819).
There cannot be lay-off in an industrial undertaking which has been closed down. Lay-off and closure cannot stand together.
Difference between lay-off and lock-out
(1) In lay-off, the employer refuses to give employment due to certain specified reasons, but in lock-out, there is deliberate closure of the business and employer locks out the workers not due to any such reasons.
(2) In lay-off, the business continues, but in lock-out, the place of business is closed down for the time being.
(3) In a lock-out, there is no question of any wages or compensation being paid unless the lock-out is held to be unjustified.
(4) Lay-off is the result of trade reasons but lock-out is a weapon of collective bargaining.
(5) Lock-out is subject to certain restrictions and penalties but it is not so in case of lay-off.
However, both are of temporary nature and in both cases the contract of employment is not terminated but remains in suspended animation.