Section 78 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 78 bars an employer in a Chapter X establishment from laying off a muster-roll worker without the prior permission of the appropriate Government. The application is electronic, a copy goes to the workers, and silence for sixty days means deemed permission. A lay-off without permission is illegal and the workers keep all their benefits.
In an industrial establishment to which Chapter X applies, no worker on the muster rolls (other than a badli or casual worker) may be laid off except with the prior permission of the appropriate Government, unless the lay-off is due to shortage of power or natural calamity or, in a mine, fire, flood, excess of inflammable gas or explosion. If the Government does not decide within sixty days, permission is deemed granted. An order lasts one year. A lay-off made without permission, or after refusal, is illegal from the date of lay-off. The fine for contravention is one lakh to ten lakh rupees (s.86(1)).
Who and what section 78 covers
Section 78 applies only to establishments within section 77: a factory, mine or plantation with an average of 300 or more workers per working day in the preceding twelve months (or a higher notified number), other than seasonal or intermittent ones. If you run such a unit, our labour law compliance team can help you build the permission file before a lay-off is announced.
"Lay-off" is defined in s.2; see lay-off, closure, retrenchment. The protected workers are those whose names are on the muster rolls. Badli workers and casual workers are excluded.
Sub-section by sub-section
| Sub-section | Rule |
|---|---|
| 78(1) | No muster-roll worker (other than badli or casual) may be laid off without prior permission on an application, unless the lay-off is due to shortage of power, natural calamity, or, in a mine, fire, flood, excess of inflammable gas or explosion. |
| 78(2) | The application is made electronically or otherwise in the prescribed manner, stating clearly the reasons; a copy is served simultaneously on the workers concerned in the prescribed manner. |
| 78(3) | Mine workers laid off for fire, flood, excess of inflammable gas or explosion: the employer must, within thirty days of the start of the lay-off, apply for permission to continue the lay-off. |
| 78(4) | The Government makes such enquiry as it thinks fit, gives a reasonable opportunity of being heard to the employer, the workers and persons interested, and may grant or refuse by an order with written reasons, having regard to the genuineness and adequacy of the reasons, the interests of the workers and all other relevant factors. The order is communicated to the employer and the workers. |
| 78(5) | No communication of an order within sixty days of the application: permission is deemed granted as applied for on the expiry of sixty days. |
| 78(6) | The order is final and binding, subject to sub-section (7), and stays in force for one year from its date. |
| 78(7) | The Government may review its order on its own motion or on application by the employer or any worker, within the prescribed time, or refer the matter to a Tribunal, which must pass an award within thirty days of the reference. |
| 78(8) | If no application is made under (1), or none is made within the thirty days in (3), or permission is refused, the lay-off is deemed illegal from the date the workers were laid off, and the workers are entitled to all benefits under any law as if not laid off. |
| 78(9) | The Government may, for exceptional circumstances such as an accident in the establishment or the employer's death, direct that (1) or (3) shall not apply for a stated period. |
| 78(10) | Section 67 (other than its second proviso) applies to lay-offs under this section. |
Sixty days is a real deadline for the Government
The deemed-grant rule in s.78(5) works in the employer's favour. The permission is treated as granted "as applied for", and the application as disposed of. The employer should still keep proof of the date of application, because the sixty days run "from the date on which such application is made".
The Explanation: alternative employment
A worker is not deemed laid off if the employer offers alternative employment that, in the employer's opinion, needs no special skill or previous experience and can be done by the worker. It may be in the same establishment or in another establishment of the same employer in the same town or village, or within a distance that does not involve undue hardship, provided the wages that would normally have been paid are offered for the alternative appointment as well.
Compensation still runs
Section 78(10) brings in section 67 (fifty per cent of basic wages and dearness allowance for each day laid off, for a worker with a year of continuous service), other than the second proviso. Permission to lay off therefore legalises the lay-off but does not remove the compensation. The rules on who gets no compensation are in section 69.
Central Rules, 2026: rules 30 to 32
These rules apply to Central-sphere establishments. Where the State Government is the appropriate Government, the State's own rules apply.
| Rule | Requirement (G.S.R. 342(E), 8 May 2026) |
|---|---|
| 30(1) | Application in Form XIV to the Central Government stating the reasons; a copy is served simultaneously on the worker concerned electronically, in person or by speed post. |
| 30(2) | The application is also displayed conspicuously on the notice board or electronic board at the main entrance. |
| 31 | For a mine, application in Form XIV within thirty days to continue the lay-off, electronically and by speed post with a copy to the Deputy Chief Labour Commissioner (Central), specifying days, number of workers laid off, total workers employed, date of lay-off and reasons. |
| 32(2) | An employer or worker may apply for review within thirty days of the order; the Government disposes of it within two months after hearing the parties. |
| 32(3) | On a review on its own motion, it takes steps within one month of the order and disposes of it within two months of deciding to review. |
See rules 30 to 32 for the full text and Form XIV for the form.
Penalty
Section 86(1) punishes an employer who contravenes section 78, 79 or 80 with a fine of one lakh to ten lakh rupees. On a second or subsequent offence after conviction, s.86(2) provides a fine of five lakh to twenty lakh rupees, or imprisonment up to six months, or both. See section 86(1) to (6).
Example. A plantation with 340 workers on average loses its processing line for three weeks because of a machinery breakdown. A breakdown is not shortage of power or natural calamity, so s.78(1) requires prior permission. The employer files Form XIV, serves the workers, and displays it at the gate. If no order comes within sixty days, permission is deemed granted; if it is refused, the lay-off is illegal and the workers are paid as if never laid off.
The old Act's lay-off compensation is covered in our post on lay-off under the Industrial Disputes Act.
Need help with a lay-off application?
A lay-off in a Chapter X unit needs the reasons, the worker list and the service proof in one file, filed before the lay-off begins. Our labour law compliance team can check whether s.78 applies, prepare the application and keep the timeline. Bring the muster roll and the average headcount for the last twelve months.
Key takeaways
- Prior permission is needed to lay off muster-roll workers in a Chapter X establishment; badli and casual workers are excluded.
- Shortage of power and natural calamity (and fire, flood, gas or explosion in mines) are the exceptions.
- No order in sixty days means deemed permission; an order lasts one year and can be reviewed or referred to a Tribunal.
- A lay-off without permission or after refusal is illegal and workers keep all benefits.
- Central-sphere employers use Form XIV and display the application at the entrance.
Read next
- Section 79: prior permission for retrenchment
- Section 67: rights of laid-off workers to compensation
- Sections 81 and 82: muster rolls and provisions applicable to Chapter X
- Layoff under the old Act: Section 25C compensation
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.