Information Technology and Information Technology Enabled Services industry of India (“IT/ITESindustry”) has been a significant contributor to the Indian economy, not only in terms of the revenue it generates but also on account of the employment opportunities (direct and indirect) it creates. Placing reliance on some of the available data in public domain, IT/ITESindustry employs approximately 10 (Ten) million people in India. It is estimated that the IT industry will get bigger, but at the same time there is a possibility of significant amount of job displacements as well, which is attributable to many reasons including but not limited to automation, technology advancements, robotics, cost effectiveness, and performance issues (failure to up-skill), etc.

Unlike some of the sectors like manufacturing, the IT/ITESindustry in India is nascent and therefore, hasn’t yet matured in terms of collectivization and unionism. If we further analyze the applicable laws for IT/ITES sector, we can conclude that various states of India, in order to achieve ease of doing business for the IT/ITESindustry, have either allowed exemptions or relaxed some of the provisions of applicable laws like Industrial Employment (Standing Orders) Act, 1946 and Shops and Establishment laws. It implies that governments and its instrumentalities definitely contemplate that the IT/ITES industry promises a good work environment and fair conditions for its people and substantial growth for the society at large. Indeed, the last few years have been great for the IT/ITESindustry in India, however, very recently news of job displacements and lay-offs has become prevalent and therefore, it is important to understand the legal issues involved in lay-offs, retrenchment, and job displacements in the industry.

From a legal perspective, employees of the IT/ITESindustry can be divided into two categories (1) workman (2) managerial/supervisory staff. As far as workmen are concerned, retrenchment shall be governed by the Industrial Disputes Act, 1947(“ID Act”), which requires employers to ensure that the conditions stipulated by ID Act are met before a workman is retrenched. The ID Act defines “retrenchment” as the termination by the employer of the service of a workman for any reason whatsoever, other than as a punishment inflicted by way of disciplinary action but does not include: voluntary retirement of the workman; or retirement of the workman on reaching the age of superannuation if the contract of employment between the employer and the workman concerned contains a stipulation in that behalf; or termination of the service of the workman as a result of the non-renewal of the contract of employment between the employer and the workman concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or termination of the service of a workman on the ground of continued illhealth.

We must understand that before retrenching workmen who have been in continuous service for at least one year, the following conditions have to be met:

At least one week prior to retrenchment, a seniority list of workmen arranged category-wise of all categories from which retrenchment is proposed, has to be put up on the notice board of the establishment, and retrenchment should normally be effected of the junior most persons from each category (last in, first out), unless there are compelling reasons to retain a junior while retrenching a senior. Reasons for departure from the order of seniority must be recorded. This rule is only applicable to workmen who are citizens of India.

One month’s notice in writing is to be given to the workman indicating the reasons for retrenchment or wages in lieu of the same. Payment of compensation has to be made. The amount of compensation payable to the workman is 15 days average pay for every completed year of continuous service or any part thereof in excess of 6 months.

Notice of retrenchment has to be given to the appropriate authority. This notice generally requires the reasons for the termination to be given.

ID Act also requires that if any workmen are retrenched, and the employer further comes up with vacancy, it shall, give an opportunity to such retrenched workmen to place their application for the job and employer shall give them preference, unless the vacancies are for the roles and qualifications substantially different of the retrenched workmen.

As far as managerial and supervisory resources of the IT/ITESindustry are concerned, the termination of their employment can be made in accordance to the Shops and Establishment Act of a particular state and the employment contract which has been entered into by and between an employer and employee.

To conclude, it is appropriate to mention that job displacements in the IT/ITESindustry are regulated by applicable laws in India and employment contracts in place. In addition to the aforesaid, India has a robust judicial and adjudication mechanism in place to ensure that justice is done in the event of the illegal termination of the employees and laws are equally forceful when it comes to the offences and breaches committed by employees.