Section 67: Rights of workers laid-off for compensation

The Industrial Relations Code, 2020 (Act No. 35 of 2020) • Official Statutory Text & Plain English Practice Guide

Statutory Mandate
Chapter IX: Lay-off, Retrenchment and Closure
Competent Labour Forum
Act No. 35 of 2020

Legal Commentary & Landmark Judgments: Section 67

Section 67 of the Industrial Relations Code, 2020 grants non-casual, non-badli workers with at least one year of continuous service an enforceable statutory right to lay-off compensation equal to 50% of basic wages and dearness allowance for all lay-off days, subject to a 45-day cap by agreement.

  • Eligibility Criteria for Lay-Off Compensation: Worker must not be a badli or casual worker, must have their name borne on the muster rolls, and must have completed not less than one year of continuous service under the employer.
  • Mandatory 50% Compensation Formula: Employer must pay compensation equal to fifty percent of the total of basic wages and dearness allowance that would have been payable had the worker not been laid off, for all days of lay-off.
  • 45-Day Cap & Retrenchment Transition: If lay-off exceeds forty-five days in any 12-month period, compensation may be discontinued for subsequent days if a written agreement exists; employer may alternatively retrench the worker, setting off lay-off compensation against retrenchment dues.
Key Landmark Precedents:
  • Workmen of Firestone Tyre & Rubber Co. v. Firestone Tyre & Rubber Co. (1976) 3 SCC 819: Supreme Court held that the right to lay-off compensation is a mandatory statutory liability arising from employment status, enforceable irrespective of employer financial difficulties or lack of raw materials.
  • Central India Spinning, Weaving and Manufacturing Co. Ltd. v. State Industrial Court AIR 1959 Bom 225: Affirmed that statutory lay-off compensation cannot be contracted away or reduced below the fifty percent wage benchmark through individual waivers.
Courtroom Practice & Strategic Litigation Guidance:

When laying off workers due to coal shortages, power cuts, or breakdown of machinery, issue a formal lay-off notice specifying the statutory reason. Disburse the 50% compensation on normal monthly wage dates. If the stoppage extends beyond 45 days, execute a bipartite agreement with the negotiating union before suspending compensation.