Authors: Shubhranshu & Vashmath Potluri are 4th-year law students at NALSAR University of Law, Hyderabad.

Since substantial reforms in the domestic labour regime are still delayed in India, it is important to scrutinize the re-employment rights provided under Section 25H of the Industrial Disputes Act, 1947. It works as a safeguard mechanism for workmen who have been retrenched by making sure that if the employer later hires for the same type/category of work, those previously retrenched receive the first opportunity to return. Basically, they deserve to be considered before any new applicants. This provision reflects the idea that if any workman has already contributed to the organization but has lost the job due to reasons like operational or business changes, they shouldn’t be overlooked when that role becomes available again. This principle is based on the considerations of fair play and justice.

Section 25H’s fundamental goal is to ease the impact of retrenchment by providing a route back to employment. Retrenchment is a legitimate practice, but it undoubtedly puts those affected in economic distress and socially vulnerable positions. To tackle this, the provision gives retrenched workers a statutory right of preference when positions become available again. The broad definition of “retrenchment” in the act reinforces the legislature’s intent of protecting as many affected workers as possible. Courts have also supported this view, noting that Section 25H is written in broad terms and applies to all retrenched workers, not just those who satisfy the narrower conditions under Section 25F. The Supreme Court has further emphasized that this right to re-employment aligns with the constitutional principles of equality, noting that Section 25H “is in conformity with Articles 14 and 16” of the Constitution.

Section 25H is different from other provisions of the Industrial Disputes Act, 1947 as it lacks any explicit time limit. Unlike Sections 25N and 25O, which have timelines and procedures for obtaining prior permission for retrenchments and closure. Section 25H simply states that retrenched workmen must be given preference “when the employer proposes to employ any persons.” It doesn’t clarify how long this preferential right lasts or specify any time frame within which the employer must act. This legislative silence carries important consequences, shaping both the scope of workers’ reemployment rights and employers’ obligations.

JUDICIAL INTERPRETATION OF SECTION 25H’S TEMPORAL SILENCE

Judicial scrutiny of Section 25H’s silence on any time limit has been sparse but consistent: courts apply the statute as written and refuse to graft on un-statutory restrictions. This approach reflects a strict textualism, particularly appropriate for remedial labour provisions meant to benefit workmen.

First, in Peirce Leslie India Ltd. v Secretary, CITU the Kerala High Court confronted Rule 78(3) of the Kerala Industrial Disputes Rules, 1957, which had capped an employer’s re-employment obligation at one year after retrenchment. Observing that Section 25H itself contains no temporal restriction, the Court declared the rule ultra vires, holding that a delegated regulation cannot curtail a substantive right that Parliament deliberately left open. Consequently, the duty to notify retrenched workmen endures as long as the employer continues to hire for the same category of work. In another case involving allegations of ultra vires rule-making power, the Supreme Court affirmed that provisions affecting substantive rights should be dealt with by the legislature itself and are not to be inferred from the rule making power conferred unless that is specifically provided for.  At the apex level, the Supreme Court has repeatedly interpreted Section 25H without introducing any time-bar. In Ajaypal Singh v Haryana Warehousing Corp., the Court reaffirmed that retrenched employees “shall have preference over other persons” when vacancies arise, emphasizing the section’s broad sweep and consistency with Articles 14 and 16, but it attached no deadline to that right. Later, in Management of Barara Coop. Soc. v Pratap Singh, the Court focused solely on procedural compliance, whether proper notice was given and whether the workman had waived his claim by accepting compensation, again without suggesting that an employer’s obligation could expire after a certain period.

Together, these decisions establish clear principles. First, Section 25H’s preferential right persists indefinitely until a vacancy is filled. Second, courts will enforce only the procedural safeguards spelt out in the Act and its rules, like notice and application windows requirements, but will not infer any additional temporal conditions. Overall, judicial debate has favoured strict textualism: courts will not read in a “reasonable” or “implied” deadline, leaving any decision to impose a time limit firmly with the legislature.

REAL-WORLD IMPLICATIONS AND PRACTICAL CHALLENGES

The absence of a fixed timeline under Section 25H creates considerable uncertainty for both employers and retrenched workmen. For employers, the open-ended obligation to offer re-employment can be difficult to manage. Years after retrenchment, they may struggle to locate former employees, maintain contact information, and demonstrate that reasonable efforts were made to notify them about fresh vacancies. Without statutory guidance on what amounts to adequate notice or outreach, disputes often turn on conflicting claims about whether the employer acted in good faith and took all reasonable steps to comply. From the workman’s perspective, the lack of clarity can lead to false expectations. A retrenched worker who has since changed occupations or relocated may still technically hold a preferential right to re-employment, but if vacancies are filled without notifying him, he may struggle to prove that this right was denied. This right is challenging to enforce effectively unless the workman closely observes the employer’s hiring practices and promptly exercises the right, which limits its real-life application. He must not only establish that no notice was issued but also ensure that his claim is timely, typically within a reasonable period, despite Section 25H’s silence on any limitation period. But without clear statutory benchmarks, such decisions are left to judicial discretion, which may result in unpredictable outcomes for both employers and workmen.

COMPARATIVE PRACTICE: RE-EMPLOYMENT RIGHTS IN FOREIGN JURISDICTIONS

While India’s Section 25H grants retrenched workers an open-ended re-employment preference, several Western jurisdictions, particularly within the EU, have opted for more structured and time-bound models.

At the broader EU level, the Collective Redundancies Directive (98/59/EC) governs mass layoffs but does not explicitly mandate a statutory right to re-employment. Instead, Article 2(2) of the Directive requires employers to consult workers’ representatives and to discuss the mitigating the consequences of redundancy i.e., mass layoffs, such as facilitating redeployment or retraining. This leaves individual member states to frame more specific rules around re-employment preference.

Finland has a structured re-employment framework. Under Chapter 6, Section 6 of its Employment Contracts Act, employees dismissed for financial or production-related reasons who register as a jobseeker must be offered re-employment by the employer if a similar position becomes available within four months. This period extends to six months for those with at least 12 years of service. France adopts a comparable model. Its Labour Code grants workers dismissed on economic grounds a one-year priority right to be considered for suitable vacancies within the same company. However, to activate this right, the former employee must formally request to be notified of such openings. Norway adopts a similar model in its Working Environment Act. If a worker is dismissed after having been employed for at least 12 months in the previous two years, they have a one-year preferential right of re-employment, provided they are qualified for the position (and it arises) in the same company or undertaking.

Other EU countries, including Germany and Sweden, also have re-employment rights into their broader labour law frameworks. While specific conditions such as eligibility criteria, duration of the preferential period and procedural requirements vary across jurisdictions, these do share a core principle of balancing protection for displaced workers with employers’ operational autonomy. These more structured, time-constrained approaches contrast sharply with the open-ended obligations that the Indian law places on employers.

WAY FORWARD

One of the core challenges with section 25H is the absence of any clear time limit within which this right can be exercised. This lack of a statutory deadline creates practical difficulties for both employers and retrenched workmen. Fortunately, this gap will soon be bridged by the enactment of the Industrial Relations Code, 2020. Section 72 of the Code brings a one-year window during which retrenched workers may claim preference for re-employment. However, because the Code is yet to be notified, the previous provisions of Industrial Disputes Act, 1947 remain in place, and the present problem remains unresolved.

Another major flaw requiring urgent attention is the broad interpretation of “retrenchment” under Indian law. While the Act does not specifically include termination due to unsatisfactory performance, the Supreme Court has held that the phrase “for any reason whatsoever” extends to all terminations except those specifically excluded, such as dismissals for misconduct or voluntary retirements. Consequently, even termination for non-performance, if not linked to misconduct, is treated as retrenchment. Many cases have supported this position, treating termination due to poor performance as retrenchment. This creates a problematic scenario. Even when an employer follows a standard Performance Improvement Plan (PIP), a widely accepted HR practice, though not codified, they may still face a legal obligation to rehire an employee deemed unsuitable. The situation is complicated further by the absence of a time cap in the existing law, which potentially imposes an indefinite re-employment burden on the employers regardless of the reasons for the termination in the first place.

Critics may argue that a blanket exclusion for performance-based terminations in the Indian context would be easy to abuse and hard to police. Many employers, especially in smaller firms or the informal sector, lack robust, documented performance-management systems, allowing exclusions based on “performance” would therefore invite sham explanations for economically driven layoffs. To prevent such misuse while preserving worker protection, the law should adopt a rebuttable presumption: retrenchment would apply by default, but an employer could rebut it by proving, on the balance of probabilities, (1) a transparent, pre-existing performance policy, (2) written warnings, and (3) a documented opportunity to improve performance (for example, a PIP). This balances the protective intent of Section 25H with the employer’s legitimate need to maintain workplace standards.

Incorporating such safeguards would bring India’s framework closer to several European regimes that take a more balanced approach. In France, Finland, and Norway for example, re-employment rights are extended only where the dismissal is for economic or business related reasons (like redundancy or restructuring). Terminations for personal reasons like poor performance are explicitly excluded from such provisions. This clear distinction ensures that employers are not compelled to rehire individuals they had already found unsuitable for the role.  

As India considers labour law reforms, the Industrial Relations Code will offer a timely opportunity to refine the re-employment framework. The one-year limitation under Section 72 needs to be enforced. But more importantly, the lawmakers should use this opportunity to refine the definition of ‘retrenchment’ where performance-based terminations should be excluded from any re-employment obligations. Taking a cue from EU jurisdictions, a statutory carve-out would help strike a fair balance, keeping the rights of workers genuinely retrenched without eroding the employer’s right to maintain workplace standards and be efficient at work.