Question

Termination of a worker from service due to economic losses is called:

• A. Lock out
• B. Lay off
• C. Removal due to closure of company
• D. Retrenchment

Hint:

Lay-off = Temporary unemployment. Lock-out = Employer temporarily closes workplace. Retrenchment = Permanent removal of surplus employees. Closure = Entire business shuts down permanently.

Answer 1

The Correct Option is D

Concept: Labour laws distinguish between temporary interruptions of employment and permanent termination of employment. Different legal consequences follow depending on the nature of the employer's action.

Step 1: Understand the meaning of retrenchment. Under Section 2(oo) of the Industrial Disputes Act, 1947, retrenchment generally refers to the termination of the service of a workman by the employer for reasons other than disciplinary punishment.

Step 2: Examine the economic rationale. Employers often reduce workforce strength because of:

• Financial losses.

• Decline in production.

• Technological changes.

• Business restructuring.

• Surplus labour.
Permanent removal of employees under such circumstances constitutes retrenchment.

Step 3: Distinguish related concepts.

• Lay-off: Temporary inability to provide work.

• Lock-out: Temporary closure by employer during an industrial dispute.

• Closure: Permanent shutting down of the entire establishment.
Since the question refers to termination because of economic losses while the enterprise continues operating, the correct term is retrenchment. Therefore, Option (D) is correct.