cry, fear, horror

LAYOFFS IN INDIA AND LEGAL PREROGATIVES

ABSTRACT
Global economic activity has increased dramatically, and India is now on par with its global peers. There has been a spurt in new businesses and startups, particularly since the pandemic. Tech startups have flourished like anything else, with new startups emerging and popping up. This surge is a boost for the Indian economy and will help to achieve its goal of becoming a world economic power. However, such growth on weak fundamentals cannot sustain for long without strict legislation and active enforcement. As a result, there has been a full-fledged layoff spree across all sectors, with new startups leading the charge as they tumble due to the headwinds of global challenges and fear of recession.


KEYWORDS
Layoffs, Startups, Economy, Labour Laws, Employment


INTRODUCTION
The new trend of layoffs has become the new normal across the world, along with India. Most big corporations have fired large numbers of employees, and this trend appears to be continuing, whether it is Microsoft, Meta, Twitter, Google, & Bluestacks, Unacademy, Wipro, and many others in the case of India. Employees took a sigh of relief as the year 2022 began with a halt in the layoff culture. However, the global oil crisis, the Russia-Ukraine war, low demand, and recession fear have thrown the world into a vicious cycle of layoffs for varied reasons, the majority of which is to manage expenditure costs and company restructuring. Even now, there is no solution in sight, as Twitter is on a firing spree following Elon Musk’s takeover of the company.
This research paper delves deeply into the relatively new culture of layoffs to determine the cause and, if any, legal redressal. Aspects of both the company and the employee have been listed and reviewed in this chapter.


RESEARCH METHODOLOGY
This paper aims to present the shortcomings of large corporations and early-stage startups. My research is descriptive in nature and based on secondary sources such as news articles, blogs, and reports.


REVIEW OF LITERATURE


WHAT IS A LAYOFF?
A layoff is simply the termination of a company’s employee. It happens for business reasons, not solely because of the employee’s fault. Companies are firing employees for many reasons, including economic conditions, pandemics, and it’s restructuring.
When a company wants to fire employees who do not perform well or meet the company’s standards, the human resources department usually considers directly initiating the labor contract’s termination provisions. Foreign companies frequently operate in India in this manner, but this overlooks an important point: India’s labor law is more effective than contract clauses of individuality between the parties. The general perception is that hiring and firing are simple processes. The law contains some mandatory provisions that govern the dismissal of workers.


INSIGHTS
Layoffs are primarily the result of the global recession, which has reduced consumer demand for its services and applications. And the situation has been aggravated by the conflict between Ukraine and Russia. Another reason will be the growth of technology firms in the second half of the year. Companies have failed to live up to expectations, as evidenced by Amazon, whose shares fell more than 50% year on year in November .
As a result of closely scrutinizing both the top and bottom lines in light of the possibility of a downturn, tech companies have cut expenses, resulting in widespread layoffs. Consider the recent firing of a key employee by one of India’s leading tech firms. Employees claimed that the company used unethical tactics to force them to sign a pre-written resignation letter.
The report states that 44 companies, including unicorns, laid off 15,216 workers due to this year’s fundraising freeze. In 2022, the ed-tech sector had already laid off the most workers, followed by consumer services and e-commerce, with fourteen education technology businesses laying off 6,898 workers .
As economic experts suggest an inescapable recession, employment woes are only growing – those who lost their jobs are struggling to find new ones. Those who were able to keep their jobs are frequently forced to overwork for inadequate pay, citing a lack of workforce and profit in the organization. Below is a list of top Indian and international companies that have laid off employees in 2022 .
• Lido Learning – 200 employees
• Microsoft – 1800 employees
• Netflix – 450 employees
• Twitter – Laid Off – 100 employees
• BlueStacks – 60+ employees
• Unacademy – 600 employees
• Vedantu – 624 employees
• Cars24 – 600 employees
• Meesho – 150 employees
• Blinkit – 5% of the workforce
The year was quite difficult for the tech industry, with as many as 11,833 startup employees in India losing their jobs in 2022. However, the first quarter was bleak, with 1,010 layoffs recorded. The most terminations were reported in the second quarter, between April and June, at 5,520, with the highest executed in May. In that quarter, as many as 22 companies laid off workers. The majority of layoffs this year have been reported in tech companies such as Byju’s, Unacademy, Vedantu, WhiteHat Jr, and others. In April this year, Unacademy laid off 17% of its employees, and 2,210 people lost their jobs between July and September.
The last few months have been challenging for Indian workers in private companies, particularly in the software industry. Edtech firms Byju’s and Unacademy have laid off hundreds of employees; social media giant Twitter has laid off more than half of its employees in India, and Indians are among those affected after Meta, Facebook’s parent company, slashed about 13% of its 87,000-strong workforce . The wave of layoffs has stirred controversy on social media, and those affected are using the internet to express their displeasure and form support structures. Meta, meanwhile, has said that,
“In the United States, fired employees will receive 16 weeks of pay plus two weeks for each year of service, with no time limit. Mark Zuckerberg stated that Meta will pay all PTO and that everyone in the restricted stock unit (RSU) program will receive their vesting on November 15. Meta will also provide six months of health insurance coverage for employees and their dependents and three months of career support, including early access to unpublished job leads.”


LEGAL ASPECTS
The term “layoffs” generally means the termination of some employees or redundant employees who do not satisfy the company’s quality standards because of financial reasons. The “Labour and Management Dispute Act of 1947” governs “layoffs” in India (ID Act) .

Section 2 states that :
The following categories are not affected by layoffs:
a. Employees retire
b. Retire because the employee has reached the retirement age specified in the labor contract.
c. Terminated because the employee’s labor contract expired and was not renewed
d. As a result of the worker’s ongoing physical illness
Aside from comprehending the definition of layoffs, employers must also comply with the provisions of Section 25F of the Labour Dispute Law, which states that employers must meet the requirements before laying off employees.
The Industrial Disputes Act, of 1947 was amended under Article 32 of the Constitution to include Chapter V-B. This chapter covers the special provisions for lay-off. Sections 25-K to 25-S of the Industrial Disputes Act of 1947 are included in Chapter V-B.
The clause states that workers who have been continuously employed in any industry for at least one year may not be laid off, except in the following circumstances:
a. A written notice explaining the reason for the layoffs was given one month in advance, and the notice period has expired, or the employee has been paid in advance to replace the notice.
b. Each year (or part thereof) is equal to 15 days’ salary paid to the employee;
c. The “Labour Dispute Act” requires employers to provide three months’ notice or pay compensation to employees in certain “industrial organizations (such as factories, mines, or farms with more than 100 workers).
Employers need to send notices to specific government departments under Clause 25F(c) , clearly stating the reason for the layoffs. Furthermore, Section 25N requires units employing more than 100 workers on an average day in the previous 12 months to obtain prior approval from the state government for layoffs in writing, including the reasons for the termination.
Following the completion of the relevant inquiry procedures, the state government has the authority to approve or suspend its layoff application. As a result, if the layoff application is challenged and rejected by the host state’s government, dismissal based on a simple labor contract will result in severe consequences.


CASE
Delhi Cloth and General Mills Co. Ltd. v. Sambu Nath Mukerji : – According to the Supreme Court of India, “layoffs” include even removing employees absent from work because they did not take leave. As a result, the reason for termination does not limit to any specific reason, and they are not limited to economic reasons, such as staff downsizing.


OTHER LEGAL REDRESSAL
The question then becomes, which tribunals or courts have the authority to hear employee-related complaints? The ID Act provides that complaints filed before Conciliation Officers, Boards of Conciliation, Courts of Inquiry, Labour Courts, Industrial Tribunals, and National Tribunals.
They may also file a grievance with a civil court or the appropriate authority prescribed by state-specific S&E acts.


FACTS AND FINDINGS
The massive demographic profit and potential consumer market in India have attracted several foreign companies to invest in India. Investment in factory localization will inevitably necessitate the employment of local workers. India’s labor and employment legislation is complicated and divided into categories. At the central and state levels, there are labor and employment laws.


STATISTICAL DATA
Provided data is on layoffs that occurred in recent months, particularly in 2022. It includes major global corporations as well as top Indian businesses that are on a firing spree this season.


META
Meta, the parent company of Facebook, Instagram, and WhatsApp, announced on November 9, 2022, that it is laying off over 11,000 employees, accounting for nearly 13% of its workforce. It is one of the most significant tech layoffs of 2022. According to Mark Zuckerberg, mass layoffs is due to the macroeconomic downturn, increased competition, and declining ad revenues, which have affected the company’s profits.


TWITTER
Twitter is an American social media platform founded in 2006 by Jack Dorsey. Its current HQ is in San Francisco, California, United States. It is one of the most popular social media platforms and made headlines due to one of the most massive acquisitions in modern history ($44 billion) by billionaire Elon Musk (TESLA owner). In July 2022, Twitter laid off 30% of its recruiting team (nearly 100 employees). On November 4, 2022, Twitter laid off approximately 3,700 employees, accounting for 50% of its global workforce, including 90% of employees in India, as a cost-cutting measure.


UNACADEMY
Unacademy, a SoftBank-backed ed-tech start-up, also caught everyone’s attention in April 2022 when it laid off around 600 employees. This figure represents 10% of its workforce. It was to cut costs ahead of a potential funding slowdown in the country.
CARS24
The market of used automobiles got boosted over recent years, wherein Cars24 is one of the most sought participants. According to the ET report, Cars24 has fired over 600 employees. Terminations were across various departments and roles. This figure of more than 600 employees represents more than 6% of the company’s total headcount of approximately 9,000 people.


VEDANTU
Vedantu is another tech platform that has laid off employees. According to an ET report, the unicorn recently fired 424 full-time and contractual employees, or about 7% of its workforce, as the company seeks to increase its capital runway. It reported earlier this month that the company had already laid off 200 contractual and full-time employees due to fluctuating demand for online education as schools and institutes reopened.


MEESHO
After raising nearly $900 million in funding and achieving unicorn status last year, e-commerce startup Meesho laid off 150 workers from its grocery business in April 2022. A Meesho spokesperson confirmed the layoffs to ET, saying, “Approximately 150 full-time employees impacted by Meesho Superstore’s restructuring, which aimed at bringing inefficiencies.” The company offered severance packages and outplacement assistance to those affected to help them find new jobs outside the company.” According to sources close to the situation, the company’s downsizing will affect approximately 400 employees.


UDAAN
Udaan, an Indian Unicorn and B2B e-Commerce business, has joined the list of top companies laying off employees. To achieve profitability and efficiency, the firm laid off approximately 350 full-time employees in November 2022. However, this is not the first time the company has laid off workers. It laid off 180 employees earlier in June 2022 as part of its cost-cutting initiatives. The start-up’s second round of layoffs this year comes just a week after raising $120 million in convertible notes and debt.


CLEARTAX
Clear (formerly ClearTax), India’s leading Fintech SaaS startup, has joined the list of companies laying off employees in 2022. On September 15, 2022, the Bengaluru-based startup laid off 190 to 200 employees across various departments. It represents nearly 20% of the company’s workforce. The layoffs are said to be part of the company’s restructuring.


BLUESTACKS
BlueStacks, headquartered in Campbell, California, is the world’s second-largest PC gaming platform, aiming to bring together PC gamers and the Android gaming library. The surge in demand for Android smartphones has aided the company’s tremendous growth this year. According to reports dated July 20, 2022, this popular platform has laid off 60 Indian employees. On July 18, 2022, BlueStacks reportedly informed many of its employees via video calls that their services would no longer be in need.
Along with India, the company has reduced its workforce in several other countries, including London, Tokyo, Seoul, and Beijing. According to the reports, the total number of layoffs could be as high as 150 employees, ranging between 120 and 150. Internal restructuring is the reason for the termination. According to sources, BlueStacks has offered laid-off employees a month’s salary as severance pay and medical benefits.


BYJU’S
India’s largest Edtech company announced in October 2022 to fire 2,500 employees or 5% of its workforce. Even after reaching a valuation of around $22 billion, the unicorn decided to fire its employees. The co-founder and CEO blamed mass layoffs on macroeconomic conditions and their plans to achieve profitability by the end of the current fiscal year.


OVERVIEW
Considering the statistical data provided by various sources, it is evident that these layoffs are primarily caused by a drop in profit margins and a reduction in demand in the respective sectors, leading employees to suffer. Furthermore, a thorough examination of the figures represented by the companies reveals that the situation is critical not only in India but globally, and the law relating to layoffs is ineffective because it offers flexibility to the employer in case of firing.


SUGGESTION
According to an ET report, even after market volatility and the ongoing Ukraine-Russia war, companies in India’s startup ecosystem raised massive amounts (more than 10 billion dollars) from the stock market in the first three months of 2022. But, amid this funding and IPO after IPO, there may be some stipulations over these filings happening in markets .
It is a growing concern, as are instances of layoffs. Many companies have laid off employees for various reasons, including cost-cutting, ‘performance-linked layoffs,’ restructuring, or something entirely different. There have been numerous layoffs in the corporate sector this year. The global economic situation is also a factor in these layoffs. According to reports, over 8000 people got terminated by their companies in just the first half of 2022 .
With the assistance of the government of India, various funding houses, and, of course, the stock market, raising markets in India has become extremely simple. Because of digital access to the large population of society, many new investors have entered the stock market, increasing liquidity. It facilitates easy fundraising for businesses of all sizes. That is what has happened in the last two years, with a flurry of IPOs and people pouring money into various startups, only to see them fail. As the startups received funding, they expanded their branches and hired employees. However, because these companies couldn’t meet future financial demands, they began to fail. When we examine the percentage of the number, we can see that large corporations have fewer layoffs than startups with low-profit margins.
As a result, for the economy to function properly, employees’ health must be taken care of, as they are assets in any economy. In this regard, it is time to enact strict legislation to address the issue of layoffs in India, and a close eye must be on this expanding sector.
Corporate behemoths like Twitter are supposed to be models of work culture and professionalism for other businesses, but if such an act continues, it will exacerbate the current recession. This trend of layoffs and firing employees will eventually become part of the workplace culture, affecting many people’s lives.
In the case of India, various acts are active, including the Industrial Disputes Act of 1947 , the Factories Act of 1948 , and the Shops and Establishment Acts of states. Some flaws are there that these business houses manipulate. As a result, these laws must be re-evaluated, with changes in response to recent issues.


CONCLUSION
As previously stated, companies are firing employees for varied reasons, including economic conditions, pandemics, company restructuring, and even employee inefficiency. Aside from that, there appears to be a slowdown in funding and investor pressure to increase profitability. With the current global economic situation, the worst is yet to come, and a massive economic downturn is probable if this trend continues. However, with the active participation of the government of India, business houses, experts, Ministry Bureaucrats, and trade unions, a better solution to the problem can be found that benefits both the nation and the employees.
India is a developing country, projected to expand rapidly in the coming decades. This expansion will be all-encompassing. The fundamental requirement for such a development is stalwart and intellectual employees. Before moving forward in any industry, stipulate the rights and responsibilities of employees and employers. Because if this structure fails, the ambition to become an economic power could dash.

AUTHOR:
AJAY SINGH RATHORE
2ND Year law student pursuing B.A.LL.B (H) at Shri Ramswaroop University, Lucknow