'Lay-off' and the Right to Compensation

In one line

A lay-off is when an employer cannot give a worker work, for a reason like a shortage of material or a breakdown, but keeps him on the books; and a qualifying worker is paid half his basic wages and dearness allowance for every day he is kept idle.

In exam wording: section 2(t) of the Industrial Relations Code 2020 defines lay-off as the failure, refusal or inability of an employer, on account of a shortage of coal, power or raw materials, or the accumulation of stocks, or the break-down of machinery, or a natural calamity, or for any other connected reason, to give employment to a worker whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched; and section 67 provides that whenever a worker, other than a badli or casual worker, whose name is borne on the muster rolls and who has completed not less than one year of continuous service, is laid off, whether continuously or intermittently, he shall be paid for all days during which he is so laid off, except intervening weekly holidays, compensation equal to fifty per cent. of the total of the basic wages and dearness allowance that would have been payable had he not been laid off.

Why the law has this at all

Industry does not run smoothly. The power fails, the raw material does not arrive, a machine breaks, a flood closes the road. The employer has no work to give, and giving none costs him money already.

The question is who bears the loss of an idle day. There are only three possible answers and the law has to pick one.

The worker bears it. That is the position at common law: no work, no wages. It is also ruinous, because the worker has no reserves and no control over any of the causes.

The employer bears it entirely. That is also unreasonable: he did not break the machine either, and paying full wages for output he cannot sell would push a marginal unit into closing altogether, which costs the workers their jobs rather than a few days' pay.

They share it. That is what section 67 does. The worker gets fifty per cent. of basic wages and dearness allowance; the employer pays half of a wage bill for no production. Neither is made whole and neither is ruined.

And the relationship is preserved, which is the other half of the point. A laid-off worker is still employed. His name stays on the muster rolls, his continuous service goes on running under section 66, and when the material arrives he goes back to the same job. That is what separates a lay-off from a retrenchment, where the employment ends.