“If
you’re on this call, you are part of the unlucky group that is being laid off,” said the CEO of Better.com (an Online mortgage lender Company)
that recently fired over 900 of its employees over a Zoom call.
The services of about 9% of the establishment’s workforce in the
US and in India were terminated effective immediately over a zoom call. The
affected employees in the US were paid severance pay of four weeks and a
month’s full benefits. The video of the Zoom call received many reactions, with
people slamming the employer for its actions.
“I’m curious
whether you think a CEO can survive after a blunder like this? Is it fair, or
not, to allow a second chance…?”
tweeted Anand Mahindra, Chairman of Mahindra Group.
An employee commits to give his best performance to the
establishment while an employer, in lieu, is the provider of the livelihood to
the employee. This employer-employee relation is essential for an establishment
to function as a going concern.
Retrenchment as defined in Section 2(oo) of the Industrial Disputes Act, 1947, means termination by the employer of the services of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action and does not include: -
· Voluntary retirement of the workman; or
· Retirement of the workman on reaching the age of superannuation; or
· Termination of the service of the workman on account of expiry of contract; or
· Termination of the services on the ground of continued ill-health.
It may be noted that
retrenchment can be for any reason whatsoever,
and the things that may not be categorized as retrenchment are exhaustively
listed. So, a company is well within its right to retrench its employees.
Procedure of
Retrenchment
The Industrial
Disputes Act, 1947 which is the governing legislation of retrenchment in India does
not apply to industrial establishments in which less than 50 workmen on an
average per working day have been employed in the preceding calendar month. It provides
a division of applicable laws on the following basis:
a) Industrial establishments employing more than 50 workmen but less than
100 workmen on an average per working day in the preceding calendar month; and
b)
Industrial establishments employing more than 100 workmen on an average
per working day in the preceding calendar month.
Establishments employing workmen between 50 to 100
workers
As per Section 25F of
the Act, a workman continuously in service for at least a year shall be given:
1. One month’s notice in writing indicating the reasons for retrenchment
and the period of notice shall expire; or in lieu of such notice, wages for one
month may be paid;
2.
Retrenchment compensation equivalent to 15 days of average pay for every completed year of service or any part thereof
in excess of six months; and
3.
Notice in the prescribed manner shall be served on the appropriate
government.
It is to be noted
that all three conditions are a requirement under this categorization.
Establishments employing more than 100 workmen
As per Section 25N of
the Act, a workman continuously in service for at least a year shall be given:
1. Three months’ notice in writing indicating the reason for retrenchment;
or in lieu of such notice, wages for the period of the notice;
2.
Prior permission of the appropriate Government shall be obtained; and
3.
Where permission for retrenchment is granted, retrenchment compensation
equivalent to 15 days of average pay
for every completed year of service or any part thereof in excess of six months
shall be paid.
Following are further clarifications on the above conditions:
- Average pay is the average of three complete calendar months. For the purpose of calculation of retrenchment compensation, 15 days of the average of wages paid in the last three complete calendar months shall be computed for every year. Further, while calculating the service period for the purpose of retrenchment compensation, if the period of service includes a period in excess of six months then such period shall be deemed to be one complete year. Therefore, where a workman is retrenched after 8 years and 7 months of service then for the purpose of retrenchment compensation, his service period shall be deemed to be 9 years.
Notice of retrenchment shall be as per Form P prescribed in Rule 76 of the Industrial Disputes (Central) Rules, 1957
- Application for permission for retrenchment shall be made as per Form PA provided under Rule 76A of the Industrial Disputes (Central) Rules, 1957.
- An application for permission of retrenchment to the appropriate government (for establishments employing more than 100 workers) shall include the reasons for intended retrenchment and a copy of such application shall be served simultaneously on the concerned workmen.
Therefore, assuming
any such action as done by Better.com (on whom laws of US applies) is performed
by an Indian entity, their action might not be legally incorrect if the
workforce is less than 100 workmen (assuming such employees to be workmen),
however, the manner in which the speech delivery was made could have been cautiously
and strategically made on such a sensitive issue.
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