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Retrenchment in labour law is provided under Industrial Disputes Act, 1947. Retrenchment meaning can be derived as ‘termination of the employee by the employer.’ The relationship between employer and employee is based on the contract. Therefore, retrenchment means termination of service of a worker for any reason, other than those specified in Section 2(oo) of the Industrial Disputes Act, 1947.

Retrenchment Meaning

Retrenchment meaning as provided under section 2 (oo)(bb) of the Industrial Disputes Act, 1947. According to this section, Retrenchment means, “Termination of the service of the employee/workman by the employer by any other reason than punishment or any disciplinary action.”

Therefore, retrenchment of an employee does not mean voluntarily retirement of an employee, health issues to the employee, termination of contract or the contract is not renewed. These are other things.

In other words, the meaning of retrenchment can be stated as “when the employer removes any employee, workman or any staff member on the ground surplus labour or staff, but not as a punishment or disciplinary action then it is called as retrenchment in labour law.

What is a Retrenchment in Labour Law?

What is a retrenchment in labour law? The definition of retrenchment is not given in the original act of the Industrial Disputes Act, 1947. Later, Define retrenchment is provided in this Act through the amendment to the Act in the year 1953.

Retrenchment is defined under section 2 (oo)(bb) of the Industrial Disputes Act, 1947 as “Termination of the service of the employee/workman by the employer by any other reason than punishment or any disciplinary action.”

Conditions for Valid Retrenchment

Conditions for valid retrenchment has been provided under section 25(F) and 25(G) of the Industrial Disputes Act, 1947. These are;

  1. The employer should give one month’s notice of retrenchment in writing mentioning the reasons and grounds for the retrenchment, and 
  2. When the workman has been received the payment, at the time of process retrenchment, then the compensation that shall be left fifteen days’ average on each completed year of continuous service or any half thence in more than six months, and
  3. Notice within the prescribed manner is served on the acceptable Government for such authority as is also nominal by the acceptable Government by notification within the Official Gazette, and
  4. If there exists an associate agreement specifying a date of termination of service, no notice is important in such cases, and
  5. Compensation is love fifteen days average get each completed year of service or any service or any half thence in more than six months, and
  6. Notice within the manner prescribed in Rule seventy-six of the economic Dispute Rules 1957 ought to be served by the acceptable government.

Landmark Judgments

Byram Pestonji Gariwala v/s Union Bank of India and Others

In this case, the Supreme Court of India restricted the definition of retrenchment which is provided under section 2(oo)(bb) of the Industrial Disputes Act, 1947. Further, the court held that the retrenchment is said to be done by the employer only when there is the discharge of excess labour.

State Bank of India v/s Sundaramony

In this case, the Apex Court reversed the judgment delivered in the case of Byram Pestonji Gariwala v/s Union Bank of India and Others. And in this case, the Supreme Court expanded the definition of retrenchment under section 2(oo)(bb) of the Industrial Disputes Act, 1947.

The definition of retrenchment given by the Supreme Court is “Termination of the service of the employee/workman by the employer by any other reason than punishment or any disciplinary action.”

Compensation for Retrenchment

Compensation for retrenchment of the employee or any staff. It is the obligation of the employer to pay the retrenchment compensation at the rate of 15 days wager for every work completed year it should be calculated as per the last payment of salary/wages made in favour of the employee. 

Conclusion

Retrenchment in labour law and retrenchment meaning is the termination of the workman from the service by the employer. It is the obligation of the employer to look after its employees well enough and due to this, the employees use their best work in the development of the company or industry.

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