• Closure of factory and labour liability

The owner, my brother in law, has a weaving factory 100 km from near Mumbai in MIDC area, land for which was allotted in 1990.
30% of the turnover of the pvt company is from manufacturing and the rest is from outsourced job work. 
The owner wants to close down the factory as manufacturing is not economically viable. He wants to sell the machines and use the factory premises as a godown for storing yarn etc. He may also resume production later with new machines if market conditions improve
The factory employs 21 workers and four supervisors who will have to be retrenched permanently.   
However, the additional staff relating to outsourced production, accounts and watchman will be retained as the company will continue to be in business by outsourcing 100% production.
What is the procedure for closure and the liability to be paid to the labour and the supervisor.
Asked 2 years ago in Labour from Bangalore, Maharashtra
1) The term "closure" is defined under Section 2(cc) of the I.D.Act. It means the permanent closing down of a place of employment or part thereof. 

 2) Section 25FFF of the Industrial Disputes Act, 1947deals with compensation to workmen in case of closing down of undertakings. The relevant part of sub-section (1) of Section 25-FFF (omitting the proviso) reads as under:

25-FFF. Compensation to workmen in case of closing down of undertakings.(1) Where an undertaking is closed down for any reason whatsoever, every workman who has been in continuous service for not less than one year in that undertaking immediately before such closure shall, subject to the provisions of sub-section (2), be entitled to notice and compensation in accordance with the provisions of Section 25-F, as if the workman had been retrenched:

3) you  have to give notice to labour office regarding the closing of your establishment. Then same as communicated to your all employees(Individually)

4) you have to pay notice pay and retrenchment compensation of 15 days salary for every completed year of service 

5) you also have to pay gratuity to employees who have completed 5 years of service 

6) payment of gratuity act is applicable  to workers employed in every factory, shop & establishments or educational institution employing 10 or more persons on any day of the proceeding 12 months.

7) The amount of gratuity payable shall be at the rate of 15 days wages based on the rate of wages last drawn, for every completed year of service. The maximum amount of gratuity payable is RUPEES TEN LAKHS.
Ajay Sethi
Advocate, Mumbai
46877 Answers
2772 Consultations

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Send an intimation to the factory inspector of the area where the factory is located of the intended date, reason of closure, number or workmen employed, muster roll, period of closure, type of closure and fill all the relevant forms as are required before ninety days of intended closure. If you need to adjust the employees, you need to transfer them to your other unit without affecting their position and scale of payment and inform the same through letter to the factory inspector as well as to the commissioner of labour or GLO of your area. Further, if there is permanent closure you need to pay to all the empoloyees who are continuining compensation at the rate of fifteen days pay completed years of service.
Ashish Davessar
Advocate, Jaipur
23176 Answers
641 Consultations

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