Downsizing in the Companies: An Economic Conundrum for Indian Companies During the COVID-19 Crisis

Must Read

India’s International ‘Retrospective Taxation’ Regime Vis-a-Vis PCA Rulings in Vodafone and Cairn in 2020

The imposition of retrospective taxation of foreign companies doing business in India has been at the helm of controversy...

What is the Real Estate (Regulation and Development) Act, 2016?

The Real Estate (Regulation and Development) Act, 2016 (“RERA”) is an Act of the Parliament. It seeks to protect...

Should the Exorbitant Amounts Charged for RT-PCR Tests be Refunded?

Introduction A plea has been filed in the Honourable Supreme Court of India seeking a refund of exorbitant amounts charged...

Should CCTV’s be Installed in the Police Station?

Introduction In a recent judgment, the bench led by Justice Nariman issued directions to both the state and Union Territory...

A Legal Analysis of the West Bengal Political Crisis on IPS Deputation

The Ministry of Home Affairs (MHA) has recently summoned three IPS officers of West Bengal (WB). The decision was...

Explained: Postal Ballot for NRIs

At the end of November 2020, Election Commission sent a proposal to the law ministry to amend the Representation...

Follow us

The wrongful dismissal of the employee means the termination of an employee of a company without any sufficient cause or without severance pay. Indian law provides for remedies to such a situation. But, in certain conditions, it is difficult to ascertain wrongfulness. When a company is facing severe financial problems, and it lays off some of its employees to keep itself afloat, a wrongful dismissal suit might not be the best option.  With the country facing a pandemic and a possible economic slowdown, this has become very relevant.

Wrongful Dismissal under Indian Law

Fair-grounds of dismissal include misconduct, discharge, or retrenchment. For clarity purposes, retrenchment means cutting down costs during economic difficulty. This mostly excludes downsizing from the area of wrongful dismissal. But the ultimate judgment relies on the bench deciding the matter. When an employee is dismissed for motherhood reasons, breach of employment contract, prejudice, or personal bias, it can be classified as unfair or wrongful. If an employee is wrongfully dismissed from their position, they can file a suit in a Labor Court for the restoration of their position.

If their unfair dismissal has to do with procedural errors while dismissal, they can file a suit for a breach of their employment contract from their employer’s end. Courts sometimes order employees to pay fines or pay compensation to the disgruntled former employee instead or in addition to the restoration of designation. In reality, it becomes very difficult to prove wrongful dismissal as several employers are able to prove that the dismissal was on fair-grounds.

Financial Impact of COVID-19 on Companies

Due to the spread of the COVID-19 global pandemic, the Central Government of India itself gave orders to their employees to work from home. The nation-wide lockdown from mid-March reinforced it. It was extended until May 31. But the lockdown continued in containment zones under July 1. This was termed as the beginning of Unlock 2. As per the speculations, it will stretch up to 31 July. It is pertinent to note that the lockdown has led to an abrupt halt of the tourism, hospitality, retail, film, sports, and personal service industries. It also affected the industries which rely heavily on human resources. Moreover, in early March, the United Nations Conference on Trade and Development (UNCTD) predicted India’s likely loss in trade impact due to COVID-19 to be about 348 million USD.

Dismissal of Employees During the Lockdown

Due to the lockdown, the industries have stopped functioning and have no means of revenue. As a result, they are resorting to downsizing their taskforce at a high rate. Big companies have also followed this step. They have suffered financial losses due to functioning being limited to online and from home means. To name a few, OLA and UBER, the taxi aggregator services, and Swiggy and Zomato, the food delivery services, announced lay-offs for the employees and pay cuts for the ones that remain. News organizations Times of India, The Quint, and News Nation Network laid off a lot of their employees. Chairman and MD of Raymond Group talked in a video to the company employees about ‘tough decisions’ that the executives might have to take and making of ‘personal sacrifices’, implying job cuts or pay cuts.

All of these dismissals and pay cuts have been announced publicly. This makes one wonder how many such layoffs and worse have occurred in the informal job sector where employees are not even aware of any rights that they might have.

Government Advisory Prohibiting Dismissals During the Lockdown

The Secretary of the Labour Ministry, Heeralal Samariya, sent out an advisory on 23 March. It urged private and public companies not to terminate the services of any of their employees or cut their pay. This, the advisory stated, would help avoid deepening the crisis.

Plea in SC against unfair dismissal and pay cuts in media houses

The National Alliance of Journalists, the Delhi Union of Journalists, and the Brihanmumbai Union of Journalists filed a petition in the Supreme Court in April. It accused the media houses of arbitrarily laying off their workers after the Centre’s advisory. The bench, headed by Justice NV Ramana, heard the plea. They asked the Centre to urgently respond to the matter.

Pune Labour Commissioner Office Issues Notice to Hexaware Technologies

National Information Technology Employees Senate (NITES) filed a complaint against Pune-based IT firm. It accused Hexaware of alleged ‘non-payment of employee salaries for 3 months’ and dismissing employees to ‘maintain profitability’. It apparently received complaints from their employees about the same. The Labour Commissioner office at Pune sent Hexaware a notice on 15 May warning them with legal actions, if they terminate any employments or cut the pay of any employee.

Possible Solutions: the Middle Ground

The increase in unemployment during COVID-19 made India’s unemployment go up to 27.4%.  27 million people between the ages of 20 and 30 years lost their jobs in April itself. No doubt many of these happened due to downsizing. India has a problem that it needs to acknowledge and attempt to solve immediately.

There are many ways companies can avoid ridding people of their means of livelihood while facing an economic crisis. They can stop hiring new employees. Reducing a workweek can reduce short-term payroll costs. Employees can also be offered voluntary sabbatical leaves with reduced pay or no pay for the time being. The lending of employees to another company is also a practice common in firms when they are experiencing financial troubles. Early retirement is also a way of taking the sting out of laying people off. Lowered additional benefits can further help people stay on with companies.


The author submits that even after all these measures, some companies might have to resort to dismissing some employees. It is very important to treat these employees in a humane manner. Giving them letters of recommendation, resources, and support might help make their lives and the process easier. Employers may also open up their networks for these people so that they get employed again is more accessible to them. It is important not to cut off contact with these former employees. Such a step will not alienate them.

In the end, we need to remember that the entire world is going through the same crisis, and helping each other out is how we will survive this. is now on Telegram. Follow us for regular legal updates and judgments from the court. Follow us on Google News, InstagramLinkedInFacebook & Twitter. You can also subscribe to our Weekly Email Updates. You can also contribute stories like this and help us spread awareness for a better society. Submit Your Post Now.


Please enter your comment!
Please enter your name here

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Latest News

SC: Under-21 Convicts Can Be Given Less Than Minimum Sentence, Resorts To Probation of Offenders Act

The Supreme Court resorted to the Probation of Offenders Act to sidestep the mandate under Section 397 of the Indian Penal Code that mentions a sentence of not less than 7 years to those convicted of armed robbery, to give a chance to two young convicts to reform their lives.

Environment Protection Act Passed at the Instance of Foreign Powers: NHAI in Karnataka HC

The National Highways Authority of India (NHAI) claimed in a submission that the Environment Protection Act 1986 was passed not only for the protection of the environment by the parliament but also at the instance of foreign powers. This statement was made while referring to a UN conference and got the NHAI into great trouble in the Karnataka High Court.

Delhi High Court To Implement a Hybrid System Through Virtual and Physical Hearing

On Friday the Delhi High Court said that they have initiated steps to implement a mode wherein hearing can be done by virtual as well as physical mode. The Delhi High Court is aiming to implement the Hybrid mode. It stated that when the particular bench is conducting a virtual hearing the lawyer may opt for this mode after giving prior intimation about the same.

Mercy Plea of Rajiv Gandhi Assassination Case To Be Decided in Four Weeks, TN Governor To Supreme Court

Tamil Nadu Governor Banwarilal Purohit on Thursday told the Supreme Court that a decision on the mercy petition of one of the convicts serving a life sentence for the assassination of former Prime Minister Rajiv Gandhi, AG Perarivalan will be taken within four weeks. The petition has been pending with the Governor since December 30, 2015.

Bombay High Court Questions FIR Over Journalist Alleged of Communist Comment on WhatsApp

An FIR lodged against the editor of Marathi newspaper, Rajkumar Chhajed has been questioned by the Bombay High Court. The Maharashtra Police has accused Chhajed of creating a rift between the two communities based on a WhatsApp message.

Allahabad High Court Expresses Dissatisfaction on Counsels Seeking Unnecessary Adjournments

The petition had been filed by Smt. Radha prayed to issue directions to Judicial Magistrate-I in Faizabad. The petition sought a speedy decision in...

[Delhi Riots] When the IT Ministry Calls Us, We Will Go Says Harish Salve To Delhi High Court

The Vice President and Managing Director of Facebook, Ajit Mohan told the Supreme Court that when the representatives of the company are called by the Information Technology Ministry they will come and record their statements.

Allahabad High Court Seeks Response on Compensation of Cutting Trees From National Highways Authority of India (Nhai) 

The Order had come in the form of a Public Interest Litigation (PIL) filed by a bunch of law students in Uttar Pradesh. The...

Doctrine of Proportionality Must Adhere to Reasonableness Principal Test: Madras High Court

Young Men's Christian Association built a commercial complex and leased it without having due permission. The District Collector & Tahsildar issued a show-cause notice...

Delhi High Court Refuses To Stay Release of ‘The White Tiger’ on the OTT Platform Netflix

A plea requesting a stay on the release of the film ‘The White Tiger’ by the American producer, John Hart Jr. alleging copyright violation was rejected by the Delhi High Court on Thursday.

More Articles Like This

- Advertisement -