Are Retrenchments in IT Sector Legal?

In the context of a note by the Tamil Nadu state labour and employment department that the information technology (IT) industry is not exempt from the provisions of the Industrial Disputes Act, 1947 (ID Act), there were a spate of reports/articles on job security of IT employees. With the increasing use of artificial intelligence, especially in software testing, which has the potential to displace jobs, speculations were rife on the negative impact of the note on IT companies.

However the captains of the industry were unperturbed. The president of the National Association of Software and Services Companies (NASSCOM), R Chandrasekhar was quoted as saying, “The Tamil Nadu government has simply clarified the law and its applicability to IT companies and its employees. There is no new provision, because there was no exception to begin with.” In fact, what is relevant and more important is what was left unsaid by the note and Chandrasekhar. Certain provisions of the ID Act pertaining to lay off, retrenchment and closure of establishments are not applicable to some industries, including IT industries. This was not because these industries were exempt, but were not made applicable ab initio (from the beginning).