This Article is written by Sharmishtha Trivedi, a student at Christ Academy Institute of Law
A company even tough being an artificial in nature, but acts as a natural person in terms of legality. To provide social justice to workers of any company, is the primary motive for all and it should be followed by each and every company, irrespective of anything. Industrial Dispute Act is one of the legislations which is known for its welfare provisions. It is a legislation which is beneficial is nature for the company as well as for the workers.
The process of downsizing is known as “Retrenchment”.
This Article deals with the process and basic understanding of Retrenchment and the principle of “Last Come, First Go”, under it.
MEANING OF RETRENCHMENT
Retrenchment as defined under Section 2(oo) in which surplus staff is removed. “Retrenchment means the termination by an employer of the services of a workmen for reason,
- Retirement of workmen on reaching the age of superannuation of the contract.
- Continued Ill Health.
- Unable to renew the contract.
ESSENTIALS OF RETRENCHMENT
In one of the famous case of Banaras Ice Factory, it was observed by the court that Termination of service of all workmen, of all industries which is not making profit will amount to retrenchment. It was held by the Hon’ble Court that the Closure of the business was made because the business was not running properly and was not able to make any profit. The court also made a clear distinction between the two terms.
In another case of State Bank of India v. Sundara Money, that Sundara Money’s discharge from his duty is a process of retrenchment and along with that the court gave another wide meaning for the term Retrenchment. Krishna Iyer J. was of the view that every termination should be said retrenchment so that the weak can be protected against the strong.
LAST COME, FIRST GO
The principle of Last Come, First Go is also known as Last In, first Out (LIFO). This principle means that a company or an organization should retrench employees in an ascending order. The principle of Last come, first Go is a way of carrying out the retrenchment exercise when there is a need to discharge some staff or employees from their duties whose service are no longer required by the company.
Section 25(g) of the Industrial Disputes Act talk about the procedure of retrenchment. The section becomes applicable only if all the conditions laid down are fulfilled or satisfied:-
- The person claiming protection should be a workman as defined in section 2(s);
- He should be a citizen of India;
- The “industrial establishment” employing such workman must be an “Industry” under sec 2(j)
- He should belong to a particular category of workmen in that establishment; and
- There should not be an agreement between the employer and the workman contrary to the procedure of “last come first go.”
In the case of Swadeshi Mitram, the issue which was put forward in front of the court was whether section 25(g) takes into consideration the reasons recorded and whether the reasons have to be satisfactory?
The court held that “ Yes, the reason has to be satisfactory else the retrenchment which took place will be considered as mala fide in nature or an unfair labour practice.
UNDERSTANDING THE LIFO PRINCIPLE
The principle of Last Come, First Go is statutorily incorporated in Section 25-G of the Industrial Disputes Act, 1947. If a case of retrenchment is made out, the employer has the power to decide which employee should be retrenched. The rule of “Last Come, First Go”, comes with an intention to provide a healthy safeguard to the workers if any discrimination happens in the workplace with regard to retrenchment.. The rule of “Last Come, First Go”, has to always be complied with for the validity of the retrenchment and compensation.
PURPOSE OF USING THIS PRINCIPLE
The main purpose of using this principle as a measure is to provide with healthy safeguard to the workmen and help them from not becoming the victims in their own work company. sometimes, a company finds themselves in a position where they have no other option than to downsize their company workmen. To remove or reduce the number of employees who are not needed for the company at that time, the company can use the measure of retrenchment but this measure cannot be used vaguely without any proper justification or reason. One of the procedures through which the process of retrenchment can be done is through the principle of LIFO that is, ‘Last In, First Out’.
Section 25-G of the Industrial Disputes Act insists on the rule of ‘Last Come, first go’ and discusses on being applied category wise. Therefore, this is to say that those who fall in the same category shall suffer retrenchment only in accordance with the principle of ‘ Last Come, First Go.’ Where the seniority list of particular workmen is the same, there is a telling circumstance to show that they fall in the same category.
In the year 1980, Supreme Court in the Case of Jorehaut Tea Co., out of 23 workmen 16 were retrenched in accordance with section 25-G of the Industrial Disputes Act, 1947 but the remaining of 7 workmen were retrenched not in accordance with the section 25-G.
EFFECT OF DEPARTURE FROM LIFO METHOD
If any retrenchment has happened who has violated the principle of “Last Come, first Go”, it will be declared as invalid unless such deviation is supported by a valid and justifiable reason. If any workmen is retrenched illegally or without any justifiable reason then he/she is entitled either for reinstatement of for compensation of wrongful retrenchment.
BURDEN OF PROOF
In the case of “Last Come, First Go” the burden of proof is always upon the employer.
In the case of M.S. Om Mills &Oil Seed Exchange, the Supreme Court observed that the principal of “Last Come, first go” is not a universal principal and can be departed. Management is given discretion on deportation , the only requirement is that there has to be a reason and the reason of retrenchment should be in good faith. If the retrenchment happens only to infringe the rights of the workers then it will bring labour unrest and will be termed as mala fide in nature.
The intention of this principle of “Last Come, first Go”, is to bring equality among the workers working in an industry and that there is no partiality happening between them. If they are deviating from this rule then they have to provide with a specific reason , else the retrenchment will be considered as mala fide.
HARJINDER SINGH’S CASE
In the Harjinder Singh’s Case the question of employer retrenching the workmen against the rule of “Last Come, First Go” came up for consideration. The employer as discussed above, is expected to adhere with this principle of the Act. Violation of social justice occurs at two stages-
- Firstly- Not sticking to the principle of ‘last come, first go’ i.e. the junior most person in the cadre shall face retrenched and the rule of seniority to be followed, which would be applicable even to daily wage workers.
- Secondly, not providing opportunity for re-employment of such retrenched workman, who has a preferential right of reemployment.
The court gave a long judgement in this case and stated the importance of the Principle, “Last come, first go”. This decision is viewed as a substantial contribution to the topic of social justice.
ADVANTAGES OF LIFO PRINCIPLE
- It helps the employer in carrying out the retrenchment procedure.
- It avoids partiality with regard to workers.
- It gives a privilege to the most senior worker of the company.
DISAVDANTAGES OF LIFO PRINCIPLES
- It is a principles which work against the young workers.
- It denies the opportunity of younger people to learn and come forward in the company.
- Negatively impacts the new minds to come forward.
From the above discussion, it is made clear the importance of “Last Come, First Go” principle and why it should be followed as a beneficial piece of principle for social welfare. To avoid any sort of biasness this principle was incorporated and shall be used by the employer of an industry.