What happens when industries get shut down during COVID-19 lockdown? What is the law on closure of industries?
Closure means the permanent closing down of a place of employment or a part of it1. Because of the Covid-19 outbreak, there may be a situation where an industry, whether manufacturing essential or non-essential goods, may shut down.
Notice for Closure
In the event of such an intended closure, the employer is bound to give 60 days’ notice 2to the State Government along with the reasons for the closure of any undertaking or industry where:
- More than fifty workmen are employed, or
- More than fifty workmen were employed on an average per working day in the preceding twelve months
However, this does not apply to an undertaking set up for construction work, like construction of buildings, bridges, roads, canals, dams, etc.
The Government can do away with the requirement of a 60 day notice for intended closure on grounds of “exceptional circumstances”, such as3:
- An accident in the undertaking or
- The death of the employer or the like it is necessary so to do
- Undertaking closed down for any reason: Where an undertaking is closed down for any reason whatsoever, every workman who has worked there for at least 1 year will be entitled to notice and compensation
- Undertaking closed down due to unavoidable circumstances: Where an undertaking is closed down on account of unavoidable circumstances beyond the control of the employer, the compensation to be paid to the workman shall not be more than his average pay for three months.
Please note that if an undertaking is closed down due to the following reasons, it is not considered to be closed down on account of unavoidable circumstances beyond the control of the employer:
(i) Financial difficulties (including financial losses)
(ii) Accumulation of undisposed of stocks
(iii) The expiry of the period of the lease or licence granted to it
(iv) Exhaustion of the minerals (in a case where the undertaking is engaged in mining operations)
It remains to be seen whether the consequences of the COVID-19 lockdown would constitute “exceptional circumstances” or “unavoidable circumstances” under the law. There is also lack of clarity on whom you can approach if you have been aggrieved due to a closure during the lockdown period. You can try and contact the labour commissioner of your district to see what steps you can take.
- Section 2(cc), Industrial Disputes Act, 1947.
- Section 25FFA(1), Industrial Disputes Act, 1947.
- Section 25FFA(2), Industrial Disputes Act, 1947.
- Section 25FFF, Industrial Disputes Act, 1947.
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