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Difference between Lay-off and Lock-out

The Supreme Court in Kairbetta Estate v Rajamanickam discussed the concept of the difference between lay-off and lock-out and observed that both are different. The main points of difference between them are:-


i) That lay-off generally occurs in a continuing business whereas lock-out is a closure of the business even though temporarily.


ii) In case of lay-off the employer is unable to give employment due to the reasons specified such as shortage of coal, power, raw materials, or accumulation of stock or break down of machinery, etc. In lockout the employer deliberately closes the place of business and lock/- outs the whole body of workmen for reasons which have no relevance to the causes applicable to lay-off.


iii) In the case of lay-off employer is liable to pay compensation whereas in lock-out no such liability is imposed upon the employer if the lock-out is justified and legal.


iv) Lock-out is resorted to by the employer as a weapon of collective bargaining whereas lay-off is invariably caused by economic and trade reasons.


v) The Act imposes certain prohibition and penalties against lock-out whereas layoff does not have such thing.

Difference Between Lay-off and Retrenchment.

Term lay-off has been defined in Section 2(kkk) and the term retrenchment’ in Section(oo). In case of lay off there is failure, refusal or inability of the employer to give employment to a workmen for a temporary period while in retrenchment the workman is deprived of his employment permanently. Lay-off is on account of one or more reasons mentioned in Section2(kkk) while in retrenchment the termination is on
the ground of service of labour.

The reasons for lay-off are entirely different as compared to reasons for retrenchment. In lay-off, the labour force is not surplus but in retrenchment, it is surplus that has to be retrenched. In lay-off, the relationship of employment is not terminated while in retrenchment it is terminated. In lay-off relationship of employment is only suspended while in retrenchment it is terminated. The consequences of both are different to each other and are governed by different norms. Lay-off is for trade reasons beyond the control of the employer i.e it is not an intentional act while retrenchment is permanent with the intention to dispense with surplus labor. In a layoff, there is no severance of the relationship of employer and employee while in retrenchment, the relationship of employer and employee is severed at the instance of the employer. The right to receive lay-off compensation is subject to certain more stringent restrictions while the right to receive compensation is absolute in retrenchment. The right to receive lay-off compensation is subject to certain more stringent restrictions while the right to receive retrenchment compensation is subject to less stringent restrictions.

Also Read: Difference between agreement and contract

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