What are my rights if my company shuts down permanently?

Question

My employer has announced permanent closure of the unit. I want to know what compensation and notice workers are entitled to. I would rather settle this without going to court if the law allows it, but I need to know my rights before I sign anything. Please tell me what to do first and what document to keep.

MyVakeel Legal Desk · Accepted Answer

Under Indian law, Industrial Disputes Act 1947, Section 25FFA is the starting point for this labour law question. What follows is the position in substance, together with the steps that usually make the difference in practice.

Section 25FFA requires an employer to give 60 days' notice to the appropriate government of intention to close down an undertaking, except in specific exempted cases.

Establishments employing 100 or more workmen must obtain prior permission under Section 25O, and closure without permission is illegal, entitling workmen to full wages as if not closed.

On closure, workmen are entitled under Section 25FFF to compensation as if retrenched under Section 25F, calculated at 15 days' average pay per completed year of service, subject to certain caps for unavoidable circumstances.

Gratuity dues under the Payment of Gratuity Act 1972 and provident fund dues under the EPF Act remain payable in full irrespective of the reason for closure and cannot be reduced.

Workmen can challenge an illegal closure or inadequate compensation by raising an industrial dispute before the Labour Commissioner for conciliation and subsequent adjudication.

What to do next: 1) Obtain the closure notice and check whether government permission was sought where mandatory; 2) Calculate your dues: closure compensation, gratuity, PF, and unpaid wages; 3) File a claim with the labour department if dues are unpaid or closure is procedurally defective; 4) Engage a labour advocate to pursue adjudication before the Industrial Tribunal if needed.

If you are unsure whether your facts fall inside Industrial Disputes Act 1947, Section 25FFA, that is worth checking with an advocate before you commit to a route, because switching later costs time. You can post the details on the MyVakeel forum for a practising advocate to review, or book a paid consultation with a Bar Council verified lawyer in labour law.