Labour Law

Workmen of Firestone Tyre & Rubber Co. of India Ltd. v. Firestone Tyre & Rubber Co. of India Ltd.

(1976) 1 LLJ 493 (SC); (1976) 3 SCC 819

Facts

Firestone manufactured tyres at its Bombay factory.
General strikes occurred at the Bombay factory:
between 3 March and 16 May 1967; and
again from 4 October 1967.
Because of the strikes, the company received a substantially reduced supply of tyres for distribution.
Firestone employed only about:
thirty workers at its Delhi distribution office; and
thirty-three workers at its Madras distribution office.
The company laid off:
seventeen Delhi employees; and
several Madras employees.
The workers were not paid wages or compensation for the lay-off period.
The Delhi Administration referred the dispute to an Industrial Tribunal.
Madras employees separately filed applications under Section 33-C(2) for computation of their wages.
The adjudicating authorities considered the lay-off justified and refused full payment.
Chapter V-A did not apply to these offices because they employed fewer than the statutory number of workers.
There were also:
no certified Standing Orders; and
no contractual term expressly giving the company a power to lay off employees.
The workers appealed to the Supreme Court.

Whether Section 2(kkk) or Chapter V-A itself gives management a right to lay off workers.
Whether an employer can lawfully lay off workers without authority in the contract or Standing Orders.
Whether workers in establishments excluded from Chapter V-A can claim wages or compensation.
What relief was appropriate where the reason for temporary non-employment was genuine but the power was absent.

Section 2(kkk) defines the circumstances constituting lay-off; it does not confer a substantive managerial power.
The authority to lay off workers must arise from:
the contract of service;
certified Standing Orders;
statutory rules; or
another applicable legal provision.
Chapter V-A governs compensation where:
the establishment falls within it; and
the employer otherwise possesses a valid power of lay-off.
Chapter V-A is not a complete code for establishments excluded by Section 25-A.
Where no legal power exists, the employer’s refusal to provide work ordinarily leaves the wage obligation intact.
In an industrial reference, however, the Tribunal may award less than full wages where the temporary stoppage was genuinely justified.

The reduction in tyre supply was directly caused by the Bombay factory strikes.
Therefore, the reason for the temporary stoppage was genuine and connected with business operations.
However, genuine necessity did not answer the separate legal question of power.
The Delhi and Madras offices were too small for Chapter V-A to apply.
They also had no certified Standing Orders authorising lay-off.
Firestone did not identify any contractual term permitting it to suspend employment and wages temporarily.
The Court rejected the view that an employer possesses a general common-law power to lay off workers.
The definition in Section 2(kkk) merely explains when an existing failure or refusal to provide work may be described as lay-off.
It cannot itself be used as the source of authority.
The Court compared lay-off with suspension.
An employer may direct a worker not to work, but without legal authority the employer normally remains responsible for wages.
For the Delhi workers, an industrial reference was already before the Tribunal.
Because the commercial reason was genuine, the Supreme Court considered it fair to award 75% of basic wages and dearness allowance instead of full wages.
The Madras workers had proceeded under Section 33-C(2).
Since the employer had no lay-off power, their full wage claims had to be computed, subject to any individual settlement or compromise.

The Supreme Court held that Firestone had no legal power to lay off the Delhi and Madras workers.
Section 2(kkk) and Chapter V-A did not independently create such a right.
Delhi workers were awarded 75% of basic wages and dearness allowance because the lay-off was factually justified.
Madras workers were entitled to computation of the full amount payable, except where claims had been settled.
Use this case for: the existence of a genuine lay-off reason does not replace the need for contractual, statutory or Standing Order authority.