This article is in relation to the Special Leave Petition (SLP) filed before the Supreme Court bench of Justice M.M. Sundresh and Justice Arvind Kumar. This was an employment dispute where Mr. Mukeshkumar, the workman was retrenched but the compensation and back wages were not paid. The Labour Court, though granted the request for reinstatement and compensation, the request for back wages was denied by both the Labour Court and High Court to the workman. The Supreme Court allowed the appeal and asked the District Rural Development Agency/ Appellant to pay Mr Mukeshkumar/ Respondent his compensation.
The order also talks about the process of retrenchment and the protection ensured to the workmen in the form of compensation and rights. The Supreme Court stressed upon the payment of back wages to the workmen.
What is retrenchment?
Retrenchment is the act of permanently dismissing or terminating a workman from employment on account of reasons pertaining to voluntary retirement, surplus staff, ill health of the workman, etc.
What are the essential conditions for retrenchment?
The essential conditions that must be fulfilled before the employer retrenches a workman are: –
- Workman must have worked for at least one year in the same industry.
- Employer must issue a one-month prior notice in advance to the workman, stating reasons for retrenchment.
- In the event, that the notice is not given, compensation must be paid in lieu of the notice period.
- "Last come, first go" rule to be followed while retrenching workmen i.e., the workman who joined the industry most recently, must be dismissed at first, unless, there are other reasons to retrench any other employee.
- Compensation to the workman must be paid for every fifteen days of every year that he has worked in the industry.
What is a workman's right to get compensation if it is shown that the retrenchment is illegal?
Yes, a workman is legally entitled to compensation after he proves to the Court that he had been illegally retrenched.
In this case, the workman Mukeshkumar was retrenched by the District Rural Development Agency in 2007. He alleged that the retrenchment was illegal and wrongful and was also able to successfully prove it to the Labour Court. Accordingly, he was reinstated by the Labour Court, however, the back wages were not granted based on the reasoning that the workman could not have stayed unemployed for such a considerable period of time. As a result, the District Rural Development Agency challenged the decision of the Labour Court before the Gujarat High Court. As it so transpired, the Gujarat High Court dismissed the said appeal and being aggrieved by the decision of the High Court, the Appellant approached the Supreme Court.
The Supreme Court observed, "The only issue is concerning non-compliance of Section 25F of the Industrial Disputes Act, 1947 (For short, 'the Act'). The law has been quite settled by this time by various judgments of this Court. It has been held that even assuming that there is apparent non-compliance of Section 25F of the Act, mere want of notice by itself will not enure to the benefit of the workman to seek reinstatement with back-wages".
Accordingly, the Supreme Court basis the aforementioned observation, allowed the appeal, however, ordered the Appellant to pay five lakh rupees in addition to one lakh rupees that had already been paid to the workman in the form of compensation towards the wrongful retrenchment.
The Supreme Court also mentioned that violation of section 25F of the Industrial Dispute Act and absence of notice cannot only be grounds for reinstatement of the workman along with the back wages. There will have to be other conditions involved for the workman to get compensation. Only illegal retrenchment of workmen cannot be the grounds for payment of back wages.
Why are workmen paid after the process of retrenchment is completed?
According to the Labour laws of India, there are two situations where a workman can be paid compensation from the employer. In the first case, a workman has rights in the statute for compensation if the retrenchment is illegal. It is because a workman who has been retrenched without notice or a valid reason has a family to support.
The second reason is when the employer retrenches the worker without a month's notice. The sudden and illegal retrenchment impacts the financial and social life of the workman and his family. Hence, to ensure the rights of workmen are protected and they are not illegally dismissed or retrenched from the industry, the provision of compensation has been introduced in the law. It is also a way to restore the position of the workmen as it was prior to their retrenchment and a way to deter such activities, which are illegal and contrary to the principles of natural justice.
What are the rights of a retrenched workman for re-employment in the same industry?
According to 25H of the Industrial Dispute Act,1947 state the conditions for re-employment of the retrenched workers:
- For re-employment, the workman must be an Indian citizen.
- The workmen must have worked in the industry or been retrenched from the same industry.
- The workman should present himself for re-employment.
- The workman will be given preference over others.
- The workman will be employed in the same industry where he was retrenched.
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