Sections 71 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Section 71 sets the order of retrenchment: the last person employed in the worker's category goes first, unless the employer records reasons. Section 72 gives retrenched workers who are citizens of India preference if the employer proposes to re-employ within one year. Rule 28 of the Central Rules, 2026 supplies the seniority list and vacancy-notice steps.
Where a worker who is a citizen of India is to be retrenched from a particular category, and there is no agreement, the employer shall ordinarily retrench the last person employed in that category, unless for reasons to be recorded he retrenches another (s.71). If the employer proposes to employ anyone within one year of retrenchment, he must, in the prescribed manner, give retrenched citizens of India an opportunity to offer themselves, and those who do have preference (s.72). Rule 28 requires a seniority list seven days before retrenchment and vacancy notice fifteen days before filling.
Section 71: who is retrenched first
Section 71 applies "where any worker in an industrial establishment who is a citizen of India, is to be retrenched and he belongs to a particular category of workers in that establishment". Then, "in the absence of any agreement between the employer and the worker in this behalf, the employer shall ordinarily retrench the worker who was the last person to be employed in that category, unless for reasons to be recorded the employer retrenches any other worker."
| Element | Text |
|---|---|
| Who is protected | A worker who is a citizen of India in an industrial establishment |
| Grouping | The category of workers to which he belongs |
| Default rule | Retrench the last person employed in that category (last in, first out) |
| Departures | By agreement between employer and worker, or by recorded reasons |
Points to read carefully
- The rule is "ordinarily". It is a default, not an absolute bar; the employer can depart from it if reasons are recorded. The reasons need to be in writing and specific to the case.
- It works within a category, and the Code does not define the term here. Employers should define categories consistently, for example by the skill or job classification in the establishment's own records.
- Citizenship appears in the text: the section speaks of a worker "who is a citizen of India". Section 71 does not say what happens for other workers; we do not read in a rule the text does not contain.
- The order of retrenchment sits alongside the conditions of s.70 (notice, compensation, Government notice); see sections 68 to 70. For the old-law comparison see Last In First Out (LIFO) principle in retrenchment.
Example (invented). A plant has a category of "machine operators" with four workers who joined in 2015, 2018, 2021 and 2024. The employer must retrench one operator. Ordinarily the operator who joined in 2024 goes. If the employer instead retrenches the 2018 operator because, say, the 2024 operator alone holds a certificate the plant needs, it must record that reason.
Section 72: re-employment preference
Section 72 provides: "Where any worker is retrenched and the employer proposes to take into his employment any person within one year of such retrenchment, he shall, in such manner as may be prescribed, give an opportunity to the retrenched workers who are citizens of India to offer themselves for re-employment and such retrenched workers who offer themselves for re-employment shall have preference over other persons."
- Trigger: the employer proposes to take anyone into employment within one year of the retrenchment.
- Duty: give retrenched workers who are citizens of India an opportunity to offer themselves, in the prescribed manner.
- Result: those who do offer themselves have preference over other persons.
The text gives preference but does not say retrenched workers must be offered re-employment at the same post or pay.
Rule 28 of the Central Rules, 2026
The Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026) prescribe the procedure for Central-sphere establishments; where the State Government is the appropriate Government, the State's own rules apply.
| Rule | What the employer does |
|---|---|
| 28(1) | Prepare a list of all workers in the category from which retrenchment is contemplated, arranged by seniority in that category, and paste a copy on a notice board in a conspicuous place at least seven days before the actual date of retrenchment |
| 28(2) | When a vacancy occurs and workers were retrenched within one year before the proposal to fill it, give preference on seniority to those who are citizens of India and have given their willingness |
| 28(3) | Display the details of vacancies on the notice board at least fifteen days before they are to be filled, and inform all eligible retrenched workers by speed post or e-mail, at the latest address given at retrenchment or afterwards |
| 28(4) | Inform the negotiating union, or the constituents of the negotiating council, or the Trade Unions connected with the establishment, of the number of vacancies and the names of the retrenched workers informed |
Three provisos to sub-rule (3):
- If vacancies are fewer than the retrenched workers, it is enough to inform individually the senior-most retrenched workers, twice the number of vacancies.
- Where a vacancy lasts less than one month, there is no obligation to inform.
- If a retrenched worker, without sufficient cause shown in writing, does not offer himself on the date(s) specified in the information, the employer need not inform that worker of later vacancies.
The proviso to sub-rule (4) says it need not be complied with where information has been sent to every worker on the sub-rule (1) list.
Practical checklist for employers
| Stage | Action | Source |
|---|---|---|
| Before retrenchment | Seniority list on notice board, seven days before | Rule 28(1) |
| At retrenchment | Note the worker's current address or e-mail for later vacancy notices | Rule 28(3) |
| Within one year | Before hiring, display vacancy details fifteen days ahead and write to eligible workers | Section 72; rule 28(3) |
| After informing | Tell the union or council | Rule 28(4) |
Our labour law compliance team can help you maintain the seniority list, the address record and the vacancy notices, so that a later hiring decision can be shown to comply with s.72.
Need help with retrenchment procedure?
Order of retrenchment and the one-year preference are where retrenchments are most often challenged. Our labour law compliance team can help you document categories, recorded reasons and re-employment notices.
Key takeaways
- The last person employed in a category is ordinarily retrenched first, unless there is an agreement or recorded reasons (s.71).
- Section 71 speaks of a worker who is a citizen of India.
- Within one year, retrenched citizens of India must be given an opportunity to offer themselves for re-employment, with preference (s.72).
- Central Rules: seniority list seven days before retrenchment, vacancy notice fifteen days before filling (rule 28).
- Keep the retrenched worker's latest address or e-mail.
Read next
- Section 68-69-70: laid-off workers and conditions precedent to retrenchment
- Section 73: compensation on transfer of ownership or management
- Last In First Out (LIFO) principle in retrenchment
- Deemed retrenchment: non-renewal of contract
Disclaimer: Based on the Industrial Relations Code, 2020 (as enacted) and, where noted, the Industrial Relations (Central) Rules, 2026 (G.S.R. 342(E), 8 May 2026), as on 30 September 2026. The Code is in force from 21 November 2025; some provisions may be notified later, and State Governments make their own rules for establishments where the State is the appropriate Government. Verify the current position before acting.