Are you a techie who has been laid off? Here are some legal remedies

With many tech companies announcing layoffs in 2023, employees are often unaware of what legal recourses they can take if they feel they are wrongfully laid off. Here’s what you can do if you feel that the employer’s decision was unfair.

While layoff has been defined by the Industrial Disputes Act, 1947, it exempts employees who are at managerial or supervisory levels. The Act also specifies that an employee needs to be a ‘workman’ to avail any legal recourse that it provides. While the term ‘workman’ itself is broadly defined, it does not, in most cases, apply to tech employees.

What law governs you when you are laid off?

Sameer Jain, managing partner at PSL Advocates and Solicitors, notes that Industrial Disputes Act, 1947 is principally enacted for blue-collar workers. Employment in white-collar jobs is regulated by employment contracts in India. There is no law which regulates the termination procedure of tech employees.

An employment contract is an exhaustive document that an employee is required to sign before she can start working in an organisation. It is a document which says what an employee’s rights are and what the company expects of them at work. In addition to this, the contract will also spell out the benefits such as payouts, notice period, insurance, etc that you are entitled to when you are laid off.

According to Jain, before joining any employment, the employee should know that the terms of the contract are not set in stone, and the employee can ask for a revision of terms as per their requirements.

Jain clarifies that “the broad definition of workman could be covered for tech workers. Developers and coders can be covered under the Act but managers or supervisors are not.”

When an employee is laid off, the first document they should see is the employment contract. Mumbai-based arbitration expert Sumit Rai said, “Employees must have a close look at the terms to see if all commitments have been complied with, including notice period, severance pay, etc.”

What can you do if you are laid off?

Even though you might not be covered by the ID Act, you can still fall back upon some legal options, if you are laid off. For that, you must see your contract and find out if the reason for your termination is covered in the contract.

Arbitration

Employment contracts usually have an arbitration clause, which says the employer and you agree upon settling the dispute by going to an arbitrator, Rai notes. Arbitration is a mechanism, where a neutral person called an arbitrator is appointed as the judge to decide the dispute between the company and you, without going to court. The decision of an arbitrator, which is called an arbitral award, is legally enforceable. Arbitration can conclude faster than court proceedings and can also be cheaper.

The Arbitration Act 1996 governs the procedure for arbitration in India.
Rai said, “Employees are often dissuaded to invoke arbitration when they see that such clauses give the right of appointment of arbitrator solely to the company.” He clarified that this unilateral appointment of arbitrator is not legal and employees can ask for the arbitrator to be changed if they feel that the arbitrator is biased towards the company.

Thus, employees can invoke arbitration and insist on the appointment of a neutral arbitrator of mutual choice or approach courts if companies don't cooperate, opines Rai. Arbitrations are affordable and employees should not write off their rights fearing costs, he says.

Breach of contract

If the employment contract does not have an arbitration clause, you can approach civil courts as well. This can be done if you find out that the employer has not followed the procedure mentioned in the contract to terminate your services. For instance, if your contract specifies that you are entitled to 3 months’ salary if you are laid off and the company does not pay it, it can be sued for breach of contract. A civil suit, however, is time-consuming and may turn out to be expensive.

“if the employee finds out that he has been terminated for a reason that does not feature in it, they can approach the civil court for ‘breach of contract’ under the Indian Contract Act, 1860,” said Siddharth Mody, senior partner, Desai & Diwanji.

How can you find out if you are a workman?

If you are a workman, you can approach the labour courts. The ID Act says a person who is employed in any industry and doing any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward is a workman. A manager or a supervisor is not a workman.

In addition to this, you can claim the benefit of the law only if you have worked for 240 days in the company in a year. If you fall into this category, the company cannot terminate you without complying with the provisions relating to layoffs under the ID act.

However, Suyash Srivastava, partner, DSK Legal said, “The organisation terminating a ‘workman’ has to comply with provisions of ID Act, and obtain relevant permissions from the government for layoffs; these conditions may apply only to notified industrial establishments such as factory and mines among others.”

State benefits for laid-off employees in the US

The situation in the United States is almost the same as in India with most of the tech employment being governed by employment contracts. Some employees could be covered by the Workers Adjustment and Retraining Notification (WARN) Act, 1988, which protects some employees by mandating companies to give laid-off employees advance notice to give them time to look for another job.

However, the US created an unemployment insurance program in 1935, a scheme that offers support to people who have lost their jobs. A laid-off employee can seek the benefit of this scheme as soon as they lose their jobs. While this is a Federal scheme, the quantum of benefits, contribution towards the insurance and other factors vary from state to state.

According to the Centre on Budget and Policy Priorities, the scheme is a form of social insurance wherein taxes collected from employers are paid into the system on behalf of working people to provide them with income support if they are rendered unemployed.

A basic unemployment insurance program in most states provides up to 26 weeks of benefits to unemployed workers, replacing about half of their previous wages, on average. However, this may vary from state to state.