Difference Between Layoff and Lockout
Difference Between Layoff and Lockout
Both layoff and lockout are terms related to industrial disputes and the stoppage of work, but they differ mainly in who initiates the stoppage and the circumstances around it.
1. Layoff
Definition:
Layoff occurs when the employer temporarily suspends or terminates the services of employees due to lack of work, shortage of raw materials, financial difficulties, or other economic reasons not related to the employee’s fault or misconduct.
Who Initiates?
Employer initiates layoff by sending employees home temporarily.
Purpose:
It is usually a non-disciplinary action. The employer may recall employees once conditions improve.
Effect on Employment:
Layoff implies temporary suspension of employment, but the employee’s contract is not terminated permanently.
Payment:
Typically, during layoff, the employer may be required to pay layoff compensation or allowance to employees (depending on union agreements or practice), though this varies.
Reason:
Business reasons beyond control — e.g., machinery breakdown, shortage of raw materials, or economic downturn.
2. Lockout
Definition:
Lockout is an act of the employer preventing employees from entering the workplace, usually as a response to a trade dispute or industrial unrest, to pressurize workers to accept certain terms or conditions.
Who Initiates?
Employer deliberately closes the workplace or denies employees access.
Purpose:
It is used as a weapon in industrial disputes to compel employees to accept employer’s terms.
Effect on Employment:
Lockout amounts to temporary closure of the establishment or part of it, and employees cannot work.
Payment:
Employers may refuse wages during the lockout period, though this can be contentious.
Reason:
Industrial dispute, strike threats, collective bargaining deadlocks.
Key Differences
| Aspect | Layoff | Lockout |
|---|---|---|
| Initiated by | Employer due to shortage of work or resources | Employer as a measure during industrial dispute |
| Purpose | Temporary suspension due to lack of work | To force employees in a trade dispute |
| Employees’ access | Not allowed to work because of no work | Denied entry to premises deliberately |
| Employment contract | Temporarily suspended | Temporarily suspended due to employer action |
| Payment during period | Usually compensation paid | Usually no wages paid during lockout |
| Nature | Non-disciplinary, economic reason | Disciplinary or tactical during dispute |
Illustrative Case Laws
Case 1: Workmen of Madras Electric Tramways Co. Ltd. v. Madras Electric Tramways Co. Ltd.
Summary:
In this case, the company laid off employees due to mechanical breakdown and shortage of materials. The court held this as a layoff since the stoppage was due to lack of work and not a dispute with employees.
Key point: Layoff arises due to lack of work, not due to conflict.
Case 2: Bharat Engineering Works v. Union of India
Summary:
The employer closed down the factory to resist workers' demand for higher wages. The court held this to be a lockout since it was a deliberate employer action to pressurize the workers in a dispute.
Key point: Lockout is employer-initiated closure during industrial disputes.
Summary
| Feature | Layoff | Lockout |
|---|---|---|
| Who initiates? | Employer due to economic reasons | Employer due to industrial dispute |
| Nature | Suspension due to no work | Suspension due to dispute |
| Employer's motive | No work available | To pressurize employees |
| Effect on work | Temporary suspension | Denial of access to workplace |
| Payment | Layoff compensation may be paid | Usually no payment during lockout |
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