Difference Between Layoff And Lockout

Introduction

Whenever workers want their employer to heed their requisitions or to spurn working under the conditions of employers, they use strike as a weapon to force the management to accept their demand. As a counter, the management uses lockout to coerce the employees indulging in the strike to come down their demands, pursuant to the conditions of the employment. On the other hand, layoff takes place as a concomitant of the employer’s inefficiency to give employment.

Section 2 (kkk) of the Industrial Dispute Act, 1947 defines ‘Layoff’ as the inability, failure, or refusal of the employer to provide employment to the workmen, whose name is borne on the muster rolls of the industrial establishment and who has not been retrenched rather because of lack of resources, shortage of raw materials, accumulation of stocks or breakdown of machinery or natural calamities of any other relevant reasons. Whereas, Section 2(1) of the Industrial Dispute Act, 1947 defines ‘Lock out’ as a temporary closing or suspension of work or place of work, or refusal of an employer to provide/continue the employment of employees. To differentiate the concepts of layoff and lockout, it is a prerequisite to comprehending the meaning, components, condition essentials, and precedents of subjects in detail.

Layoff

Section 2(kkk) of the Act defines the term ‘Layoff” as the inability, failure, or refusal of the employer to provide employment to a workman who has not been retrenched and whose name is borne in the muster roll of his industrial establishment due to the lack of power, coal, raw materials, accumulation of stocks, breakdown of machinery or natural calamity for any other relevant and unconnected reasons. The layoff is justifiable only if it is in compliance with the definition given under the aforementioned provision. It is apparent from the definition that layoff occurs due to no fault of workman and employer as well but by the factor, which is beyond their control.

Like how lockout and closure have been demarcated with the usage of the word ‘Temporary’, the concept of layoff in labour law is differentiable from retrenchment by the mean that the former is where the incapability of the employer to provide employment culminate in temporary non employment of the worker, whereas, in latter, the employer removes a handful of employees to increase his profit and decrease his loss.

On layoff, there would be temporary unemployment yet immediate. The abrupt end of the employer-employee relationship and Alteration in conditions of service is not a concomitant to layoff. It is noteworthy that layoff takes place only in an ongoing business i.e. if an ongoing business is at closure or lockout has been declared by the employer; the question of a layoff would be irrelevant.

According to Section 25A, the compensation provision provided under this Act does not apply to the following industries,

• Industries, where less than 50 employees have been working
• An industrial establishment where work is done occasionally
• An industrial establishment that comes under the aegis of chapter V-B as included by the Industrial Disputes Amendment Act of 1976 [6]

As per Section 25C of the Act, if the industrial establishment’s muster roll has the name of the workman mentioned and he has completed one year of continued service[7] not as a casual worker, he can claim the compensation for being laid off. It is to be noted that, if a workman has been working as a badli/casual worker for one or more years, he cannot be regarded as a badli worker.

Essentials of Layoff

An act of the employer would be perceived as layoff if the following essentials are there,

1. The employer’s name must be present in the muster roll of the industry.
2. There must be a failure, refusal, or inability on the employer’s part to give employment to the employees.
3. Such failure must be related to the shortage of coal, power, or raw materials or breakdown of machinery or accumulation of stocks or natural calamities, or any other associated reasons.
4. The employer should not have been retrenched.

Lockout

The lockout is the refusal of the employer to offer employment with having no intention to close the employment unit. Lockout is the literal opposite of strike. Chapter V of the Industrial Dispute Act dealt with the provisions pertaining to lockout especially illegal lockout and its prohibition in industries, factories, companies and etc. The former chapter VI lays down penalties for carrying out illegal strikes and lockouts. Reiteratively, through the lockout, management forces the employees or negotiates the terms and conditions of the workmen’s employment. The definition given by the Industrial Dispute Act, 1947 has three components, viz.

1. Temporary closing of the employment place.
2. Suspension of work.
3. Employer’s refusal to continue offering the employment.

The lockout prompts in stoppage of work so as to prevent employees from working. If employees refuse to work, it is a strike, whereas, in the lockout, employers refuse to give employment to put pressure on their workers to keep them in line with employment conditions. However, from the opening of the section, it is pertinent to note that the lockout is differentiated from closure by only mean of mentioning the word ‘temporary’. In case of closure, the employer does not merely close the place of employment but the business itself. In the case of Management of Express Newspaper Ltd v. its workmen[1], the court attempted to differentiate lockout from closure as follows,

• In pursuance of section 2(I), a lockout is the temporary closure of the employment unit, whereas, closure is the permanent, final, and irrevocable termination of the employment unit, which is incurable as per Section 2(cc) of the Act.
• In closure, both the place of working and the business would be closed, if the place of business is closed but not the business then it could be perceived as a lockout.
• Lockout is the weapon in the hands of the employer, but closure can never be considered as a weapon in the hands of the employer as closure affects both employer and the employee.
• In closure, the relationship between the employer and the employee comes to an end. Whereas, it is not the case in a lockout.
• A lockout can be an illegal act if it violates section 24 of the Act, but closure can never be illegal.
• Lockout is the outcome of an industrial dispute, whereas closure is the consequence of economic detriment or unrecoverable loss.

The latter half of the definition talks about the employer’s refusal to give employment to any number of people; this implies that the employer can offer employment to other workers excluding a certain number of employees. Though both lockout and layoff are temporary in nature and some employees might not get employment it does not connote that there is no difference between the concepts. In the case of Kairbetta Estate v. Rajamanicham,[2] Apex court clarifies that when there is no requirement to resort lockout, the employees can make use of layoff only in cases mentioned under Section 2(kkk) of the Act. The court went on to explain that the employer is liable to pay compensation whereas in lockout there is no such liability attached. Per contra, in the case of Indian Marine Service Pvt. v. Their workers,[3] the court held that the workers are entitled to full wages for the entire period of the lockout if the lockout is unjustifiable. However, it was also stated that if a lockout has been declared after an illegal strike, the employers are entitled to only half of their salary during the lockout as both parties were at fault.

Essentials of Lockout

The essential ingredients of lockout are as follows,

1. Whenever the employer declares lockout it falls under the ambit of Section 2(j) and shall come within the meaning of Section 2(I) of the Act and would be in line with the aforementioned components.
2. Coercion would be the motivating factor.
3. Lockout shall be made in the course of an industrial dispute.

In the case of Ramachandra Spinning Mills v. the State of Madras,[4] the court elucidated what amounts to lockout and which actions put forth by the employer constitute lockout. Such actions are as follows,

• If the employer shut down the industry as a courter of the strike has been initiated in his industry that will amount to a lockout.
• If an employer has been put in a place by his employees, where he has no other option but to temporarily shut down his employment unit that will amount to lockout.
• Whenever the employer has to act (belligerent), will amount to lockout.[5]But, if the temporary closure of the place of business is due to his inability to sell the goods or due to a shortage in availability of raw materials or any other cause of economic shortcomings will not amount to lockout.

Difference Between Layoff And Lockout

Layoff	Lockout
Layoff implies the separation of employees from the employment unit by the employer on his inability to provide employment because of external or internal disruption.	Lockout connotes the refusal from the side of an employer to employ the workers by a provisional shutdown of the enterprise despite having any intention to close the business.
It is because of trade reasons, which are beyond the control of the employer rather than of any industrial dispute.	It is a process by which the employer pressurizes or coerces employees to accept his demands.
A layoff is not concerned with the industrial dispute. The employer declares layoff on a specific circumstance.	Lockout is one of the ramifications of industrial disputes.
As far as the applicability is concerned, a layoff is applicable to a group of workers and can be on a shift, department, or unit basis.	Lockout applies to the whole establishment or industry.
The business continues to be operating.	The business will be temporarily closed for a specific period.
In general, Compensation is paid to laid-off workers.	Compensation is paid based on the type of lockout being declared.

Conclusion

At the outset, this piece of writing tries to elucidate that lockout can occur as a counteraction brought by the management to curb the strike conducted by the employees due to reasons like inadequate wages, political interference, and unfair labour practice, so on. On the other hand, lay-offs can occur due to trade reasons like machinery breakdown, lack of resources, or any other trade reasons. Though there is a considerable difference between layoff and lockout, there are similarities as both are temporary in nature, and the contract of employment is not terminated but remains as a temporary suspension. However, both are adverse to an enterprise as it causes damage to the company’s goodwill and reputation.

References:

• https://blog.ipleaders.in/how-strikes-and-lockouts-considered-as-weapons-of-collective-bargaining-limitations-on-managerial-prerogatives/
• https://blog.ipleaders.in/comparative-analysis-lay-off-retrenchment/#:~:text=A%20layoff%20is%20temporary%20in,increase%20profits%20and%20decrease%20losses.
• https://www.ijlmh.com/paper/wages-during-strikes-lock-outs/
• https://www.livelaw.in/know-the-law/lay-off-retrenchment-industrial-relations-code-labour-rights-189044

[1] AIR 1963 SC 569,

[2] AIR 1960 SC 893.

[3] 1963 AIR SC 528.

[4] AIR 1956 Mad 241.

[5] https://www.legalbutton.com/2020/11/what-are-lockout-closure-and-lay-off.html.

[6] https://www.yourarticlelibrary.com/industries/lay-off-of-workman-in-industries-meaning-duties-and-provisions/75372#:~:text=The%20term%20’lay%2Doff’,calamity%20or%20for%20any%20other.

[7] Section 25B of Industrial Dispute Act, 1947.