Calcutta High Court Clarifies That Operational Non-Availability Of Work Amounts To Layoff, Not Suspension

The Calcutta High Court in Eastern Chemofarb Pvt. Ltd. v. Eastern Chemofarb Pvt. Ltd. Permanent Worker’s Union & Anr., 2025 LLR 1107, decided in early 05 December 2025, examined a dispute arising from the employer’s decision to place workers under “suspension” during a period of operational difficulty. The case involved a situation where production had slowed significantly due to shortage of materials and internal technical issues, leaving the employer unable to provide continuous work. Instead of declaring a layoff, the company issued suspension orders, leading the workers’ union to challenge the move as an attempt to avoid statutory layoff obligations.

The Court held that when an employer is unable to offer work for reasons such as lack of raw materials, machinery breakdown, or operational slowdown, the correct legal classification of the situation is layoff, not suspension. Suspension, the Court explained, is a disciplinary measure connected to alleged misconduct and cannot be used for business-related interruptions. The Court reiterated that substance prevails over terminology if the factual circumstances resemble a layoff; the employer must follow the layoff provisions under the Industrial Disputes Act, including payment of statutory compensation.

On the issue of employer discretion, the Court emphasized that labour law does not permit employers to re-label an operational stoppage as “suspension” merely to avoid financial liabilities. Suspension presupposes a pending enquiry or disciplinary investigation; without such context, the action becomes legally indefensible. The Court noted that allowing employers to mask layoffs as suspensions would open the door to misuse and undermine the entire statutory framework designed to protect workers during economic downturns.

For employers, the ruling highlights the critical need to correctly identify the nature of workforce disruptions and document them accurately. Using suspension orders during periods of operational difficulty can invite serious legal risk, including back-wage claims, invalidation of the action, and potential industrial unrest. HR and legal teams should ensure that all decisions, whether layoff, temporary closure, or disciplinary suspension are properly classified, justified with records, and compliant with statutory procedures.

The decision reinforces that accurate legal characterization is essential in workforce management. Employers must distinguish clearly between disciplinary tools and operational challenges, adopting the correct statutory route in each situation. Ultimately, the ruling highlights that transparency and procedural compliance remain the safest approach for managing periods of business strain.