Section 25FF of Industrial Disputes Act 1947 - Compensation to Workmen on Transfer of Undertakings

Section 25FF of the Industrial Disputes Act, 1947 dealt with the rights of an eligible workman when the ownership or management of an undertaking was transferred from one employer to another. The provision linked the workman's entitlement to the notice and compensation prescribed by Section 25F, subject to a statutory exception where continuity and service protections were preserved.

Historical legal scope: This article explains Section 25FF under the legal position applicable before the Bharatiya Sakshya Adhiniyam, 2023 came into force on 1 July 2024. The Bharatiya Sakshya Adhiniyam concerns the law of evidence and did not itself amend Section 25FF. For present labour-law matters, the subsequent Industrial Relations Code, 2020 and applicable commencement, repeal, savings and transitional provisions should also be checked.

What was Section 25FF?

Section 25FF was titled "Compensation to workmen in case of transfer of undertakings." It applied where the ownership or management of an undertaking was transferred, whether by agreement or by operation of law, from the existing employer to a new employer.

A workman who had been in continuous service for not less than one year in the undertaking immediately before the transfer was ordinarily entitled to notice and compensation in accordance with Section 25F, as if the workman had been retrenched.

Text and effect of Section 25FF

Where the ownership or management of an undertaking was transferred, whether by agreement or by operation of law, from the employer in relation to that undertaking to a new employer, every workman who had been in continuous service for not less than one year immediately before the transfer was entitled to notice and compensation in accordance with Section 25F, as if the workman had been retrenched.

The proviso excluded that entitlement where the change of employer resulting from the transfer satisfied all three statutory safeguards described below.

When was compensation not payable under Section 25FF?

The proviso to Section 25FF applied only where the required safeguards were satisfied. In substance:

No interruption of service: the workman's service was not interrupted by the transfer.
No less favourable service conditions: the terms and conditions applicable after the transfer were not in any way less favourable than those applicable immediately before the transfer.
Continuity for future retrenchment compensation: the new employer was legally liable, under the transfer or otherwise, to pay future retrenchment compensation on the basis that the workman's service remained continuous and was not interrupted by the transfer.

These requirements were cumulative. The statutory exception depended on preservation of continuity of employment, service conditions and the employee's accrued service for future retrenchment compensation.

Meaning of continuous service

For Chapter V-A, Section 25B defined "continuous service" and laid down the statutory rules for determining continuity, including specified deemed-continuity requirements. Section 25FF required continuous service for not less than one year immediately before the transfer.

Connection between Sections 25F and 25FF

Section 25F prescribed conditions precedent to retrenchment of a workman who had completed the qualifying continuous service. Under the central provision, these included one month's written notice stating the reasons for retrenchment or wages in lieu of notice, retrenchment compensation calculated at fifteen days' average pay for every completed year of continuous service or a part exceeding six months, and prescribed notice to the appropriate Government or specified authority.

Section 25FF used Section 25F as the measure of notice and compensation when a qualifying transfer occurred, unless the conditions in the proviso to Section 25FF were fulfilled.

Transfer by agreement or operation of law

The provision expressly covered a transfer of ownership or management either by agreement or by operation of law. Therefore, the statutory inquiry was not confined to a private sale agreement. What mattered was whether ownership or management of the undertaking had passed from the employer to a new employer and whether the other requirements of Section 25FF were met.

Important points for applying Section 25FF

Identify whether there was a transfer of ownership or management of the undertaking.
Determine whether the employee was a "workman" for purposes of the Industrial Disputes Act as applicable to the relevant period.
Verify at least one year of continuous service immediately before the transfer under the applicable statutory rules.
Examine whether service continued without interruption.
Compare pre-transfer and post-transfer terms and conditions of service.
Confirm whether the new employer assumed legal liability to recognize past continuous service for future retrenchment compensation.
If the proviso did not apply, calculate notice and compensation by reference to Section 25F and any applicable State amendment.

Current-law caution

The Industrial Disputes Act, 1947 was later brought within the repeal and savings framework of the Industrial Relations Code, 2020. Accordingly, Section 25FF remains important for historical causes of action, saved proceedings and interpretation of rights arising during the period when the Industrial Disputes Act applied, but a present-day dispute should be examined under the law and transitional provisions applicable to its dates and facts.

Official legal resources

For authoritative statutory material, see the India Code portal and the Ministry of Labour and Employment. For a dispute involving a particular State, applicable State amendments, rules and notifications should also be verified.