Labour law execution and retrenchment in commercial banks has become a serious challenge to labour unions, employers and governments as result of non-compliance to standard operating procedure at workplace. It is even more frequent in private organization especially in banking sector. This paper examines the labour laws, banks and labour relationship and reveals that Nigerian Labor and Employment Laws are based on the statutes such as the Labour Act of 2004, Trade Union Amended Act, 2005, Employees’ Compensation Act, 2010, and Factories Act, 2004. Others are Pensions Act, 2004; and Trade Disputes Act, 2004. The paper identifies basic causes and challenges of staff retrenchment, which includes poor management practice, fraudulent activities, staff under performance and economic recession. Some of the challenges are distortions of human resource processes, social; physical and psychological effects of retrenchment; and difficulties in working with affected employees respectively. The paper concludes that there is interrelationship among labour union, employees and employers in commercial banks in Nigeria and retrenchment has a detrimental effect on the workforce, their families and the society at large.