15 Dec, 2022 12:29 AM

Labour Min Layoffs in companies over 100 require government approval.

Labour Min Layoffs in companies over 100 require government approval.

The Industrial Disputes Act makes retrenchment and layoffs illegal, according to India's Labour and Employment Minister Bhupender Yadav. Importantly, the Act requires companies with more than 100 employees to get government approval before laying off workers. Byju's, Unacademy, Vedantu, Ola, and Oyo Rooms have over 100 employees.

In the Rajya Sabha, the minister was asked if the government had considered the enormous layoffs in IT, social media, Edu Tech, and associated enterprises. The Industrial Disputes Act, 1947 (ID Act) governs lay-off and retrenchment in industrial facilities. The minister stated that the ID Act requires establishments with 100 or more employees to obtain government approval before closing, retrenching, or laying off.

Any retrenchment or layoff that violates the ID Act is criminal. He added, "ID Act also provides for compensation and re-employment of retrenched workers."

The minister noted that state governments have control over multi-national and Indian IT, social media, ed-tech, and related industries, and no central data is kept on layoffs and retrenchments in these areas.

He stated Central and State Governments address workmen's difficulties and protect their interests according to the ID Act's jurisdictions. The minister said the Central Industrial Relations Machinery (CIRM) maintains good industrial relations and protects workers' interests in Central Government establishments, including layoff and retrenchment prevention.

It's unclear how the Act defines a layoff—it may require a certain number of people to be fired before it takes effect—but it doesn't appear to be actively implemented. Startups that fail to attract further funding or discover product-market fit routinely terminate substantial numbers of staff. Flipkart, Paytm, and Zomato have all laid off employees.

Businesses prosper when they can easily scale up and down. If firing people is difficult, organisations may hesitate to hire workers for risky initiatives. Startups generally have unproven business ideas, and dealing with government authorities if the company fails will add a degree of complication that early-stage startups cannot afford. The Kerala government "persuaded" Byju's to not lay off 100 employees when they protested to the state's labour minister. In response to a question about ed-tech layoffs, India's Labour Minister invoked the Industrial Disputes Act in Parliament, making it much harder for startups to navigate the fundraising cold.

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