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Posted at: Aug 2, 2017, 12:34 AM; last updated: Aug 2, 2017, 12:34 AM (IST)

Ethical or otherwise?

The recent spate of layoffs in the IT sector have lead to a debate over the fairness of these decisions. Are IT companies justified in dumping employees almost unceremoniously?

Geetu Vaid

Layoffs by IT companies, big as well as small, over the past few months has assumed alarming proportions now. Though initially disregarded even by NAASCOM as a routine exercise by the IT companies, something which was not supposed to have an effect on the hiring as well as job scenario in the IT sector, the lay off trickle has transformed into a heavy downpour which is difficult to be swept under the carpet any longer. 

Recent data figures show significant reduction in the workforce in the major IT companies in the quarter ending in June, 2017. The country’s largest job creator and $154 billion sector is suddenly an uncertain ground for its workforce. Besides stringent visa norms for US and Brexit, the key factor behind layoffs is rapid automation and failure to keep up with the changing technology by the work force. Several traditional job roles have suddenly become redundant and companies are looking for people with niche skills rather than a broad-based portfolio. In such a scenario many of the mid-level executives have been handed over the pink slips with “low performance” being the reason given for discontinuing their services, while the hiring of freshers has also been curtailed heavily. 

With india’s Silicon Valley, Bengaluru, suddenly becoming the hub of protests by those affected by the retrenchment move, the debate over the ethical and legal aspects of these layoffs is raging. “There has always been a churn in every IT Company, on a year-on-year basis,  either at the annual Performance Appraisal cycles or when projects are not very good and employees, too, had a limited view of loyalty for such employment. The deficit between hires Vs exits was a common phenomenon and is now being highlighted only when the industry is experiencing difficulties”, says Subramanyam, CEO of Ascent HR. He, however, maintains that whole blame should not be transferred to the employer as the IT employees have been changing jobs for better prospects till now. 

According to Subramanya Sirish Tamvada, Dean, IFIM Law College, “As long as the companies follow the law, retrenchment is not illegal however, it may be unethical. There are people who are dependent on these jobs, they have financial commitments such as repayment of loans; health care expenses of old parents or daughter or sister marriage at home”. 

“ The case of RIF or reduction in force as the industry refers to it can not be termed legal given the framework in India today. But this is an industry that thrives on opportunity than structured planning and hence using the word unreasonable for this act of the industry appears harsh”, maintains Subramanyam. 

Can the employees take legal recourse to come out of this situation? 

Any employee qualifying as workmen can raise an industrial dispute and contest the action of the employer in asking someone to go or essentially retrench. According to Tamvada the employees can take legal recourse in case there is non-compliance on the part of the employers. “If the company has not followed the due process of law, then that company will be held liable and strict action should be taken against them”, he says.  

“The labour laws in India are quite stringent and well structured to handle any act of oppression of workmen. The question comes only when an person is a senior employee designated possibly as Director or Vice President is asked to go and whether the person can invoke the right of a workman under the law? The answer would be largely No, and he may need to seek recourse within the terms of the Contract of employment or Service”, explains Subramanyam.

“Laying off hundreds and thousands of people in one go is shocking and definitely unethical and it does not build confidence in our system and particularly in the IT sector”, adds Tamvada.  

Point of Law

The law relating to retrenchment is provided under Section 2 (oo) of the Industrial Disputes Act, 1947 (ID Act). Retrenchment means termination of service of an employee by an employer for any reason other than as a punishment due to disciplinary action. This does not include — voluntary retirement, superannuation, non-renewal of contract, termination on the ground of continued ill health. There are certain conditions to be met before retrenchment of workforce. Section 25F of the ID Act provides that:

Any workman employed in any industry who has been in continuous service of not less than one year under an employer shall b retrenched by that employer until: 

  • The workman has been given one month’s notice in writing indicating the reasons for retrenchment and the period of notice has expired or the workman has been paid lieu of such notice, wages for such period of the notice 
  • The workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days’ average pay for every completed year of continuous service or any part thereof in excess of six months; and 
  • Notice in the prescribed manner is served on the appropriate government or such authority as may be specified by the appropriate Government by notification in the official gazette. 
  • Popular misconception is that industrial laws in the country do not apply to IT and ITES companies. In HR Adyanthaya v. Sandoz (India) Ltd., the Supreme Court in 1994 decided that the definition of workman includes ‘a person to be workman under the industrial disputes act must be employed to do the work of any of the categories viz, manual, skilled, technical, operational, clerical or supervisory. However, people in managerial positions are exempted. 


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