The Larger Establishments: Chapter X and the Three Hundred Threshold

In one line

In a large establishment the employer may not lay off, retrench or close without the Government's prior permission, and the periods of notice are longer; but if the Government does not answer within sixty days, permission is treated as given.

In exam wording: section 77 of the Industrial Relations Code 2020 applies Chapter X to an industrial establishment, not being of a seasonal character or one in which work is performed only intermittently, in which not less than three hundred workers, or such higher number as the appropriate Government may notify, were employed on an average per working day in the preceding twelve months; section 78 prohibits lay-off except with the prior permission of the appropriate Government, save where the lay-off is due to shortage of power or natural calamity, or in a mine to fire, flood, excess of inflammable gas or explosion; section 79 requires three months' notice in writing indicating the reasons and the prior permission of the appropriate Government before retrenchment; section 80 requires an application for prior permission at least ninety days before an intended closure; and sections 78(5) and 79(4) provide that where the Government does not communicate its order within sixty days, permission shall be deemed to have been granted.

Why the law has this at all

Chapter IX priced the ending of jobs. Chapter X does something different in kind: in the largest establishments it makes the ending of jobs conditional on somebody else's consent.

The reason is scale. When a plant of forty workers closes, forty families are affected. When a plant of three thousand closes, a town is affected: the ancillary units that supplied it, the shops that served it, the local revenue. The decision has consequences well beyond the parties to the contracts of employment, and the law therefore inserts the public authority into it.

That is why section 80(2) is drafted as it is. In deciding whether to permit a closure the appropriate Government must have regard not only to the genuineness and adequacy of the employer's reasons and the interests of the workers, but to the interests of the general public. The public interest is what justifies the intrusion.

And the price of that protection is admitted rather than hidden. An employer who cannot close without permission may be slower to open in the first place, and that is the argument on the other side. The Code's answer is the threshold: the requirement bites only at three hundred workers, and only in factories, mines and plantations.

Some words this chapter uses

Prior permission means the Government's consent obtained before the act. Contrast Chapter IX, where the employer gives notice of what he is doing.