Navigating Layoffs, Restructuring, and Workforce Transitions the Right Way

An organization looking to close one of its lines of production thinks that the difficult bit lies in the business aspect of the decision. The organization then finds out that the difficult bit is all that follows, in calculating retrenchment compensation, adhering to the full and final settlement deadlines which are no longer the same after the labour codes currently applicable and ensuring that the provident fund and gratuity dues are cleared before any grievances related to those dues can be raised. A public sector firm considering whether to implement a voluntary retirement scheme is looking to find out whether the incentives system which it wants to implement will stand the test of law or will create yet another compliance issue for the firm. An automobile manufacturer reaching the hundred employee mark realizes, usually only after someone tells them, that the Industrial Relations Code makes it mandatory for them to institute a works committee. A firm taking on another business realizes that merging the two workforces creates many more issues than merging the two sets of books, whose pay system prevails, whose HR policy reigns, and what happens to workers whose job description has ceased to exist in the combined business. And a firm looking to shed jobs is wondering if there is a way for it to do that without irreparably hurting its image as a good place to work, not just from a legal standpoint but from the standpoint of those employees who have remained at the business.

Each of  these situations pertain to some phase of the same basic issue, which is how to reduce, restructure, or transition a workforce without the process itself becoming a source of damage in terms of legal and reputational ramifications. The common denominator between the two is the fact that a downsizing process almost never fails due to downsizing; it fails due to the fact that the process surrounding downsizing was not properly constructed. Retrenchment done without compliance with the proper notice periods and compensation formulae is open to challenge irrespective of the underlying soundness of the decision-making process. A seemingly generous VRS package may end up being a source of litigation for an organization as a result of inconsistency in eligibility criteria for employees. Mergers that lack a planned integration of labourforce end up with having two distinct groups of employees receiving different pay packages for the same job position, creating yet another potential dispute.

At Corrida Legal, our role is ensuring that the processes are set up right even before they become the cause of any disputes. As such, we draft retrenchment policies, notices of layoff, and agreements related to severance pay that comply with statutory requirements in respect of notice periods, compensation, and full & final settlement within a prescribed period of time. We have recently done so for a manufacturing firm that was shutting down only one production unit, while the other units remained in operation. In case where the company opts to pursue a voluntary retirement approach, the scheme’s qualification requirements and financial inducements will be carefully formulated so as to withstand analysis under the labourlaws and tax laws, and in our recent experience we successfully facilitated an optimization process of this sort for one of our public sector clients. In cases where a company passes a certain threshold level, which would make it necessary to establish a works committee as per the provisions of the Industrial Relations Code, we will assist in establishing the committee and will provide advice on collective bargaining and union negotiations.

Mergers and acquisitions carry their own restructuring considerations, too, and we examine how an acquisition will impact the combined employee group, provide guidance on transferring and redeploying employees, and create the harmonized salary and HR policies necessary for merging two separate employee groups into one cohesive whole, as was the case with the integration of a technology firm’s newly-acquired staff without resorting to running two separate HR operations in parallel. In instances where layoffs become inevitable, we help devise outplacement programs, severance planning coupled with career transition counselling  and reemployment assistance services so that an organization can downsize while avoiding the reputation of being the organization that downsizes poorly, an issue as important to the executives of a retail chain as the expense of the severance package itself. Finally, in cases where restructuring does lead to conflict in the form of a strike, lockout, or even a hearing before a tribunal, we represent organizations through the process and make sure that the mandatory notice periods mandated by the new code are complied with, even though this sits at the edge of our work rather than its centre, since a well-structured restructuring process rarely requires this kind of defence in the first place.