Tech Workers, ‘Mass Layoffs’ are Mostly Illegal
Here’s what you need to know if your company is downsizing
A major tech giant in the IT industry, Oracle has started downsizing its staff in the US and other countries including India, and there are reports that thousands of employees will be laid off. Both tech companies and startups in India have seen mass layoffs in 2022. The reasons cited in media reports say that in a sluggish economy, they are expecting businesses to be hit, and thus the response is cutting down on their expenses through firings.
Firstly, let us examine why downsizing happens
The reason for downsizing (irrespective of what companies claim) is simple — to increase their profit margins, corporations would always look to cut down on their biggest expenditure i.e. the cost of workers to the company.
Furthermore, with the development of automation, we find companies constantly ‘downsizing’ their workforce, alongside overworking the people whom they deem to be the best of their workers. This ultimately increases unemployment and reduces the bargaining power of the employees, because of a looming surplus force of unemployed workers.
Whenever there is a global economic slowdown, like the one brought about by the Covid-19 pandemic, the companies, in many cases, leverage the crisis as an excuse to rapidly increase the process of cutting down their workforce, while still making profits and retaining enormous accumulated profits.
Alongside this, as a feature of the trailing market cycle, there is also a sudden increase in investments and thus hiring to capitalise on the slowdown as long as it lasts. Thus, during the onset of the Covid-19 pandemic, we also saw investment and hirings in the tech sector with employees getting good salaries. In less than a year or so, a number of IT sector startups and large profitable companies alike, have started massively cutting down on their workforce. So, the sector just saw a temporary spike in investments between two global economic crises, a phenomenon which has occurred since the beginning of the free market, thereby exposing its diabolical nature, and especially of the capitalists who profit from it.
Now, we come to the legal rights of employees, that can help them fight ‘downsizing’ malpractices
Workers are protected by labour laws, which have been won by the struggle of workers and are still being fought for today by workers’ unions in all industries.
The term which is oft used for the illegal practice of downsizing is a ‘layoff’, yet legally, the term layoff is very different from the act of terminating a large number of employees suddenly.
As per the Industrial Disputes Act of 1947, the term ‘lay-off’ has been defined as “the failure, refusal or inability of an employer on account of the shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other unconnected reason, to give employment to a workman whose name is borne on the muster rolls of his industrial establishment and who has not been retrenched”.
The term lay-off, as per Indian labour laws, is defined only for specific business scenarios where the company can no longer find or create work for certain employees or even a single employee. It is also called ‘benching’ the employees.
What is the legal procedure for a Layoff?
To legally layoff or bench employees, a company needs to seek permission from the Labour Commissioner. A 30-day prior notice has to be given to the employees before the layoff phase starts.
After a minimum of 45 days of layoff, the company can decide to terminate the employee. The employee gets 50% of base pay plus dearness allowance in the layoff phase. The laid off employee has the legal right to ask for a copy of the permission sought from the Labour Department. The only condition is that the employee must have served 1 year in the organisation.
From these provisions, we can see that the companies can’t just say that there is an economic slowdown and randomly terminate large groups of employees in the name of cost cutting. If there is an actual hit to the business (which is not the case, atleast in the case of the large tech corporations), then those can become conditions for layoff following all the above-mentioned procedures for the same.
What is the legal procedure for a Termination?
Similar to layoff, termination, or retrenchment of an employee who has served more than 1 year is also a legal procedure, for which the companies need to seek permission from the Labour Department.
There can be an enquiry as requested as per the Industrial Disputes Act wherein both sides i.e. the employees and employee, will be heard on the performance issue. If there’s no reply from the appropriate government for a period of sixty days from the date of application, the permission shall be deemed to have been granted.
Further, it is to be noted that the said decision could be reviewed by the said appropriate government suo-moto or on application from any of the sides. The retrenchment or termination also requires a 1 month’s notice or compensation in lieu of the notice period, plus a retrenchment compensation of 15 days multiplied by the number of years of employment. So, for an employee with 5 years of service, the retrenchment compensation will be 15*5 = 75 days.
As part of the retrenchment process, companies are expected to follow a ‘last come, first go’ principle i.e. terminate most recently hired employees. If they don’t wish to do so, the employer has to record ‘reasons in writing’ with the appropriate government. Moreover, employees who are retrenched are also supposed to get first preference when the company is re-hiring. This acts as a healthy safeguard against any kind of discrimination against the workers. However in reality, these processes are flouted by companies almost all the time.
Forced ‘Voluntary’ Resignations — A loophole used by companies to circumvent legal procedures while downsizing
Both layoffs and retrenchments are legal procedures which require permission from the Labour Department — this is applicable to all companies with more than 100 employees and for all the employees who have at least served 1 year. They also levy a cost to the company in terms of compensation which needs to be paid to the employees undergoing these processes.
Now, we know the legal hustle of following due processes for the companies, and therefore, most cases of mass layoffs in the name of the business being hit (a condition for layoff) are completely illegal. In order to work around these laws, the company use a legal loophole with a convincing argument.
The companies force the employees to resign ‘voluntarily’. They would say that ‘if you resign, it will not be a blot on your record and we can have an easy separation’. This is once again illegal as the companies also threaten their employees that they would be terminated if they don’t resign themselves. If an employee does end up resigning under pressure, it would be very difficult to legally challenge that it was forced.
The best response the employees can have in these situations is a simple refusal
Especially in mass downsizing cases, such as that in Oracle — if the employees refuse to resign, the company will be left with no option but to continue with them on board because there is no legal procedure for mass terminations!
For individual terminations too, an employee can simply refuse and the company would thus have to follow the official procedure of PIP (Performance Improvement Plan) failing which the employee can be terminated with all the legal procedures followed. The official PIP report becomes the ground for a below-par performance report in case of disputes.
In the case of ‘voluntary forced resignations’, employees should stand their ground and either ask for a formal written request or audio record the conversation.
We urge employees of tech companies facing downsizing malpractices, to refuse to resign under duress, as it is illegal as per the laws of India. The only way tech workers can fight this oppressive misrule of large corporations is firstly by becoming aware of their own legal rights, and secondly, by unionising and fighting together.
If you as a tech worker are facing these issues within your company, in any region in India, you are not alone. The All India IT & ITeS Employees’ Union is here to support and fight with you. To get in touch with the union please call us on +91 7003106941 or email us at aiiteu.gs@gmail.com
