Home  /  Industrial Relations Code, 2020  /  Section 77

Section 77: Special provisions relating to lay-off, retrenchment and closure in certain establishments

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

Statutory Mandate
Chapter X: Special Provisions (300+ Workers)
Competent Labour Forum
Act No. 35 of 2020
Section 76 All 104 Sections of Industrial Relations Code, 2020 Section 78

Legal Commentary & Landmark Judgments: Section 77

Section 77 of the Industrial Relations Code, 2020 demarcates the statutory applicability threshold for Chapter X, establishing that its stringent prior-permission regime for lay-off, retrenchment, and closure applies strictly to non-seasonal industrial establishments (factories, mines, and plantations) employing not less than 300 workers on average in the preceding twelve months.

  • The 300-Worker Applicability Threshold: Chapter X applies to an industrial establishment (factory, mine, or plantation) in which not less than 300 workers (or such higher number of workers as may be notified by the appropriate Government) were employed on an average per working day for the preceding twelve months, fundamentally easing the regulatory threshold from the erstwhile 100-worker norm.
  • Exclusion of Seasonal and Intermittent Establishments: Expressly excludes establishments of a seasonal character or in which work is performed only intermittently. If any question arises as to whether an establishment is seasonal or intermittent, the decision of the appropriate Government thereon shall be final.
  • State Government Notification Powers: Empowers the appropriate Government to notify higher employee thresholds (e.g., 400 or 500 workers) via official gazette, enabling state-level labor reforms to stimulate manufacturing investments while retaining supervisory control over mass employment shutdowns.
Key Landmark Precedents:
  • Workmen of Meenakshi Mills Ltd. v. Meenakshi Mills Ltd. (1992) 3 SCC 336: The 5-Judge Constitution Bench analyzed the special regulatory regime governing large industrial establishments, upholding statutory restrictions on lay-off and retrenchment in view of their profound socio-economic impact on mass employment and community stability.
  • Excel Wear v. Union of India (1978) 4 SCC 224: The Constitution Bench held that while the state has legitimate interests in regulating large industrial undertakings, excessive, unguided, and arbitrary executive restrictions on closure infringe the fundamental right under Article 19(1)(g), necessitating careful statutory calibration.
  • S.G. Chemicals and Dyes Employees Union v. Management (1986) 2 SCC 624: The Supreme Court held that in determining the headcount threshold for special industrial provisions, workers employed across functionally integrated units, registered offices, and factories of the same establishment must be aggregated.
Courtroom Practice & Strategic Litigation Guidance:

In calculating the 300-worker threshold, count all individuals who fall within the definition of 'worker' under Section 2(zr), including fixed-term employees and contract workers directly supervised in core operations. Maintain daily muster roll averages for the trailing 365 days. If the trailing average is 299 or fewer, the establishment is governed by Chapter IX (notice only); if 300 or more, Chapter X applies, mandating prior government applications for lay-off, retrenchment, or closure.

Section 76 All 104 Sections of Industrial Relations Code, 2020 Section 78