Full Bench Formula in Labour Law
Full Bench Formula in Labour Law
What is the Full Bench Formula?
The Full Bench Formula is a judicial principle developed by the Indian judiciary concerning retrenchment compensation, particularly in cases where there is break in continuous service or previous service with another employer.
It primarily deals with how to calculate the period of continuous service for the purpose of retrenchment compensation, especially when an employee’s service is interrupted by layoff, suspension, or transfer between companies.
Why is the Full Bench Formula Important?
Section 25F of the Industrial Disputes Act, 1947 provides compensation to a workman on retrenchment.
The amount of compensation depends on the length of continuous service.
But what if the workman’s service was broken by layoffs, or he worked for a related company previously?
The Full Bench Formula provides a solution for calculating service continuity and thus compensation fairly.
The Origin: The Full Bench of the Supreme Court in Workmen of Tata Iron and Steel Company Ltd. vs. Tata Iron and Steel Company Ltd. (1964 AIR 400)
The Case: Workmen of Tata Iron and Steel Co. Ltd. vs. Tata Iron and Steel Co. Ltd.
Facts: The workmen had interrupted service due to layoffs but were later reinstated and retrenched.
Issue: Whether the layoffs should break continuity of service for calculating retrenchment compensation.
The Full Bench Formula Explained:
The Full Bench ruled that:
“The period of continuous service for the purpose of retrenchment compensation should be calculated by excluding the periods of layoff or suspension where the employee was not in actual service, but without breaking continuity, provided the layoff was for a reasonable cause and the employee was not employed elsewhere during that time.”
Key Points of the Full Bench Formula:
Continuity is not broken by temporary layoffs or suspensions if caused by genuine business reasons.
Periods of layoff/suspension are excluded from the total length of service.
The employee is entitled to retrenchment compensation based on the effective working days.
If the employee was employed elsewhere during the layoff, continuity may be broken.
It ensures a fair balance between employer’s operational needs and employee’s rights.
Application of the Formula:
If an employee worked for 5 years, was laid off for 1 year, then reinstated for 2 years, the continuous service for compensation would be calculated as 7 years (excluding the 1-year layoff).
This formula protects workers from losing retrenchment benefits just because of temporary layoffs.
Supporting Case Laws:
1. Steel Authority of India Ltd. vs National Union Water Front Workers (1989 AIR 1229)
The Supreme Court reaffirmed that layoffs or suspensions caused by management do not break continuity of service.
Emphasized the Full Bench Formula’s principle that such periods should be excluded but continuity preserved.
2. Punjab National Bank vs. Employees Union (1990 AIR 1549)
Court held that employees are entitled to retrenchment benefits for continuous service excluding layoffs.
Reinforced the principle that service should not be broken unnecessarily.
3. Union of India vs. H.C. Goel (1971 AIR 1125)
This case reinforced that technical interruptions like layoffs do not affect continuous service.
The court rejected the argument that mere non-work breaks the continuity.
Summary Table of the Full Bench Formula
| Aspect | Explanation |
|---|---|
| Continuity of Service | Not broken by genuine layoff or suspension |
| Period to Exclude | Duration of layoffs/suspensions |
| Period to Include | Actual days worked |
| Effect on Compensation | Compensation calculated on effective continuous service |
| Condition | Layoff/suspension caused by employer; employee not working elsewhere |
Why the Full Bench Formula Matters?
Protects workmen’s rights to fair retrenchment compensation.
Provides clarity in cases of interrupted service.
Prevents employers from exploiting technical breaks to reduce liability.
Balances employer’s operational flexibility with worker protection.
Conclusion:
The Full Bench Formula is a judicially crafted principle to fairly calculate continuous service for retrenchment compensation, by excluding layoff periods but maintaining overall continuity. It helps uphold worker protections in Indian Labour Law while recognizing industrial realities.
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