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FAQs

FAQ's

A curated and categorised database of common questions regarding the law.




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1 What constitutes sufficient cause for dismissal?

In general, what conduct amounts to sufficient cause for discipline is a matter for the employer in the light of work rules and disciplinary procedure the employer has established. However, if the employer acts unreasonably, this could lead to the employee having claims against the employer and in case of a workman, the decision could be set aside in court leading to the employee being reinstated with full back wages and seniority. In case of a manager, civil courts cannot reduce or mitigate the quantum of punishment thus awarded but can award suitable compensation thereof.

For a dismissal to be justified, the dismissal must be for a potentially fair reason. These include
a) Capability
b) Conduct
c) Integrity issues or fraud as can be proved beyond doubt in a court of law
d) Any other substantial reason as could justify dismissal
It is also essential that the employer follows with diligence the due procedure as established by work rules and common law taking into account the principles of natural justice to avoid the dismissal order being set aside on technical grounds
2 Can an employee be dismissed for disciplinary reasons? What indemnities or severance pay is he/she entitled to?

. An employee may be dismissed for disciplinary reasons relating to conduct or performance. In case of non-workmen staff, the employer is free to award any punishment for disciplinary infringements and any indemnity or severance pay will be only as per contract of employment. In case of workmen and borderline cases where employees could be held to be workmen, it is essential that the employer follows with diligence the due procedure as established by standing orders and common law taking into account the principles of natural justice to avoid the dismissal order being set aside or the quantum of punishment being reduced on technical grounds in case the employee takes recourse to legal action. If an employee is dismissed without notice, then he/she is not entitled to any pay or severance compensation. In case of dismissal with notice, then the contractual rights for the period of notice upto the date of dismissal will apply. The employee is also entitled to his bonus under the Payment of Bonus Act unless his dismissal is due to fraud, riotous or violent behavior, or theft, misappropriation or sabotage of any property of the establishment. In case of gratuity payable to an employee under The Payment of Gratuity Act, the gratuity of an employee who has been dismissed for willful omission or negligence causing damage or loss to the employer’s property can be reduced to the extent of such damage or loss. The gratuity may be wholly or partly forfeited if the termination of services is due to an employee’s riotous or disorderly conduct or any other act of violence or an offense involving an act of moral turpitude committed in the course of employment. In the case of an employees provident fund, the amount to the credit of an employee including the employer's contribution cannot be attached, assigned or charged under any circumstances including dismissal.
3 Can an employee be fired for drug and alcohol problems?

A dismissal for a drug or alcohol problem will be reasonable and fair if it manifests itself in a gross misconduct or a performance problem at work, where normal disciplinary rules and procedure will be followed. Conduct outside work following such problems may provide a fair reason for dismissal if this affects the employee’s position at work in some way. If such a problem manifests itself in an absenteeism or a poor performance record, the employer would have to give the employee a suitable opportunity to improve and maintain a suitable record of such opportunities in order to conduct disciplinary action leading to dismissal. It is recommended that a clear policy relating to drug and alcohol misuse is published and established as part of code or conduct or work rules to enable an employer to take suitable action in such cases.
4 What indemnities or severance pay should be given to a high level executive?

There are no principles or statutes in law regarding severance pay to a high level executive. Such packages are usually governed by the contract of employment and/or negotiations with the individual so concerned.
5 What process should be followed in terminating an employee?

Though no disciplinary procedure is laid down in statutory law, the company should follow a disciplinary procedure which ensures fairness to the employee and follows the principles of natural justice before terminating his/her services. The essential elements of a disciplinary process are as follows:

a) Preliminary enquiry or investigation - this step is not essential but is ideal to determine on a prima-facie basis whether grounds for carrying out the disciplinary process exist. This step can be eliminated in case of gross misconducts

b) Issuance of a Charge Sheet - A critical step in the process, the objective being to provide the employee an opportunity to understand the nature of his offense and give him an opportunity to explain his conduct and prepare his defense

c) Domestic Enquiry - A proceeding enabling both sides to present their case. The company should for this proceeding, remind the employee of his rights under the procedure e.g. the right for representation. The enquiry should be conducted by someone other than those involved in the investigation or in the incident. The principles of natural justice should also be followed in the enquiry. These include the following:
I. The employee should know what is alleged against him
II. The employee should have reasonable time and opportunity to defend himself
III. All documents and evidence should be recorded in the employees presence and no material should be relied upon against the employee without giving him/her an opportunity to defend him/herself.
IV. The employee should have an opportunity to cross examine witnesses brought against him/her.
V. The employee should have an opportunity to bring in evidence of his/her choice to defend him/herself.
The enquiry officer has to submit his report, a copy of which must be forwarded to the employee.

d) Decision - If the employer considers the case is made out on consideration of the balance of probabilities involved, he must decide the appropriateness of the penalty by reference to the disciplinary procedure, past practice, the individual factors of the case and principles of common law in such matters. The decision should then be served on the employee in writing.
If the decision is to dismiss, it is advised that the employer take appropriate legal opinions in the matter before serving the decision. It is also recommended that the decision be reviewed by management at a level at least one level higher than the dismissed employee or the employees conducting the disciplinary procedure.

e) Appeal: An employee should be given the right to appeal the decision and the management should appoint a high-level appellate authority, not involved in the disciplinary process for this purpose. Dismissal need not be delayed until after the appeal, although it must remain possible to reinstate the employee after the appeal is successful.

6 What form of notice of termination must be given?

Unless the offense is a gross misconduct where dismissal without notice is possible, notice under the contract of employment must be given in writing.
7 What reviews are required before an employee is terminated (relations, management, legal, etc.)

It is advisable to set up a clear management structure, by reference to the disciplinary procedure, to govern what decisions may be made by what level of management. With large organizations, it may be advisable for a central personnel function to be involved in the decision to dismiss or to be a source of information as to past practice to ensure consistency of treatment in the organization. It is also recommended that the decision be reviewed by management at a level at least one level higher than the dismissed employee or the employees conducting the disciplinary procedure.
8 Is it possible to reach a termination agreement that can preclude court litigation? If so, what are the legal requirements for an effective release of employment claims?

A binding agreement minimising the possible success of a claim for breach of contract can be reached by a contract between the employer and employee. This need not be in any particular form, needing simply to meet the normal contractual requirements of Indian law of there being an offer and acceptance of such in writing. An effective method of precluding any claims by the employee is as part of the agreement to prevail upon the employee to treat this agreement as a voluntary cessation of employment on terms and conditions agreed in the contract and obtain this in writing from the employee. However, no contract can preclude the employee from going to court as on a worst case basis, the employee can go to court claiming the contract was signed under duress. Thus, it is only possible to minimise the chances of an employees success in such a case with a watertight agreement.
9 What are the legal consequences if a termination is not handled properly? What are the potential penalties for a wrongful termination?

A union may legally challenge a termination by raising an industrial dispute in the appropriate forum. Individual employees may also approach a labor court to challenge a termination order.
The potential penalties for a wrongful termination in a labor court are
i) reinstatement of the wronged employee with full seniority and benefits
ii) full back wages for the period he was wrongfully terminated.
In case of a civil court, the employer is liable to pay compensation for damages suffered by the employee due to wrongful termination. There are no guidelines for such awards which are left to the discretion of the judge.
10 What circumstances will justify group layoff? Can there be a collective layoff due to business restructuring even though a negative economic situation cannot be demonstrated?

, there are also provisions in the law dealing with group retrenchments in case of transfer of an undertaking or in case of closure of part or the whole of an undertaking. It is to be noted that under the Industrial Disputes Act, the term ‘lay off’ refers to a temporary laying off of one or more workmen and the term as applicable under this context is ‘retrenchment’. While retrenchment is possible under law, in practice Indian Employers or Multinational Companies operating in India have found it extremely difficult to put this law into practice due to two reasons: a) Industrial unrest and unions obtaining injunctions from courts leading to lengthy litigation with no certainty of success at the end and b) Requirement of permission from the government which, in keeping with the ‘idealistic socialism’ framework of the constitution takes a lenient view of the employee’s perspective and results in the lack of a suitable exit policy. Thus, although a negative economic situation need not be demonstrated, industries find it difficult to retrench groups of employees even in case of negative economic situations.
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