This article is written by Ankeeta, pursuing Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho. The article has been edited by Prashant Baviskar (Associate, LawSikho) and Smriti Katiyar (Associate, LawSikho).
Introduction
Labor law is a concurrent topic under India’s Constitution, which means that the country’s labour and employment laws are controlled at both the federal and state levels. The Industrial Job (Standing Orders) Act (IESA), 1946, and the Industrial Disputes Act (IDA), 1947, as modified, are the two primary federal legislation that governs employment termination.
The Shops and Establishments Act, which has been passed in most states with slight variances in implementation procedures, also regulates the Indian labour market. The Shops and Establishments Act governs labour and employment in any location where a trade, business, or profession is conducted. Furthermore, the application of state laws varies depending on the employer’s business activities, as described in the laws and supporting guidelines.
There is no uniform procedure for terminating an employee in India due to the nature of Indian labour regulations. An employee’s employment may be terminated in accordance with the conditions of the particular labour contract between the employee and the employer. Similarly, the terms may be governed by labour regulations in the nation. Employers should be aware that the requirements of labour contracts are superseded by Indian labour laws, thus any termination policy or clause mentioned in a contract should be reviewed against the law by a specialist.
If there is no labour contract or if the labour contract does not specify how the employee will be terminated, the employer must abide by state law. In this case, an employer must fire the employee in accordance with India’s unique, state-specific labour laws.
When there is no labour contract or when the labour contract does not specify a manner of termination, the situation falls within the authority of the state’s labour laws. This is due to the fact that employment contracts in India are not required to be in writing by law.
In India there are many types of employees and employers
In India, there are primarily two categories of employers and two types of employees recognised by the law.
Employers come in a variety of shapes and sizes, including:
- Establishments– This phrase encompasses a wide range of employers.
- Factories– This phrase refers to employers who work in the manufacturing industry.
Employees come in a variety of shapes and sizes.
- Employees– A phrase that encompasses all employees in whatever capacity.
- The term “workmen” was coined in 1947. Workmen are employees who are not in administrative, supervisory, or management positions.
Types of employment termination
Termination on one’s own accord
An employee who voluntarily leaves his or her job with a corporation is referred to as a voluntary termination. This might include personal motivations for an employee, such as obtaining a new and better job, retiring from a profession, or launching their own business. This might also be attributed to a constructive dismissal for professional grounds. When an employee is unsatisfied with his or her workplace, it is referred to as constructive dismissal. They may be subjected to harassment, low pay, lengthy work hours, and a long commute, among other things.
Termination without warning
When an employee is forced to quit a company against their choice, this is known as involuntary termination. During layoffs, terminating employees, downsizing, and other situations, a firm may choose involuntary termination.
Downsizing and layoffs
Layoffs and downsizing are terms used to describe a company’s decision to reduce its staff. Employees that are downsized are frequently fired without cause. Companies reduce and rearrange their personnel to save money. When a firm goes bankrupt or merges, downsizing is frequent. Layoffs can also occur when an employee’s skill set is no longer relevant to the company’s current needs.
Losing your job
Employees may be dismissed as a result of poor work performance or because their actions and attitudes cause problems in the workplace. A 30-day notice is not required in many countries, including India, when an employee is fired for misbehaviour. Before being dismissed, employees who have been fired for breaking business policies must be given the opportunity to defend themselves.
Unlawful dismissals
An employer has total control over anyone he or she hires and fires in his or her company. However, an employer, on the other hand, cannot terminate an employee without good reason. In many countries, firing an employee based on caste, race, colour, gender, or other factors is unlawful. An employee who has taken maternity leave or a leave of absence, or who has revealed organisational wrongdoings, cannot be dismissed for these reasons.
If your organisation is found guilty of unfairly firing employees, you must pay them and either restore or give equivalent job opportunities. If companies are found guilty of wrongful termination, they may face financial penalties.
Contractual termination
The method for ending employment is usually extremely explicit in most employment contracts. This is most common when the termination is mutually agreed upon, and in particular when contractual employment is for a specified amount of time. Consultants with international organisations, for example, or interns at private companies, for example, frequently have set job terms.
Unless a new contract is provided or the terms of the existing contract are changed, an employee is regarded as dismissed at the end of such a contract. Employees who are fired by their employers are frequently given one month’s notice or paid one month’s salary in lieu of notice, as is the case in most countries.
Termination under the law
As previously stated, any termination must adhere to federal and state laws, which take precedence over contract provisions. When there is no specified method for termination, however, state law becomes extremely relevant. In such cases, state law becomes the standard for dismissing an employee. State legislation varies depending on the employer’s business practises.
In Indian states there are laws that control the dismissal of employees
We’ll look at state regulations regarding termination in a few of India’s most popular investment destinations in the next section.
Delhi Union Territory’s state labour legislation
According to the Delhi Shops and Establishments Act of 1954, an employer cannot fire an employee who has worked for the company for more than three months without providing at least 30 days’ notice or a severance pay. If misbehaviour is the reason for termination, the employer is not required to give notice. In such cases, however, the employee should be given a reasonable opportunity to clarify the accusation before being fired.
Maharashtra has a state labour legislation
According to the Maharashtra Shops and Establishments Act, an employer cannot fire an employee who has worked for the firm for more than a year without providing at least 30 days’ written notice. If an employee has worked for more than three months but less than a year, the employer must provide at least 14 days’ notice. If the employee is being fired for misbehaviour, the notice is not required.
Karnataka and Tamil Nadu have state labour laws
An employer cannot fire an employee who has worked for the company for more than six months unless there is a “good cause,” according to the Karnataka Shops and Establishments Act of 1961 and the Tamil Nadu Shops and Establishments Act of 1947. A month’s notice is also required from an employer. There is no need for notice or a payout if the reason for termination is misbehaviour.
Andhra Pradesh’s State Labor Law
According to the Andhra Pradesh Shops and Establishments Act, 1988, an employee who has worked for at least 6 months would not be entitled to a notice period. In the notice of resignation letter, the employee has the right to state and explain the Separation.
West Bengal has a state labour law
According to the legislation, the employer must provide a 30-day notice period to the employee. The Act nevertheless applies to the institution even if there are no employees entitled for gratuity payments. This might happen within 30 days after the termination date.
Rajasthan’s State Labor Law
According to the Rajasthan Shops & Commercial Establishments Act, 1958, no employee who has been in continuous work for less than six months can be fired without receiving a month’s notice.
In India there are rules controlling the dismissal of employees
The decision to fire an employee is most likely based on one of the reasons listed above. Whatever the reason for terminating employees, every company must adhere to specific federal and state regulations. Here are the six most crucial guidelines to follow before firing your staff.
When it comes to dismissing employees, a 30-to-90-day notice period is common. The Industrial Disputes Act of 1947 stipulates that when more than 100 employees in a manufacturing facility, mining, or plantation unit are laid off, government clearance is necessary. Terminating employees in other industries just need a government notice.
An employee can be legitimately discharged from an organisation for one of the following reasons under Indian labour laws:
- Disobedience or full insubordination.
- Theft, dishonesty, or fraud.
- Wilful loss or damage to the employer’s possessions.
- Accepting bribes or receiving unlawful gratifications.
- Absence of more than ten days without seeking leave.
- Attendance was a little late.
- Disruptive conduct in work.
- Workplace negligence.
When companies lay off employees for a variety of reasons, the policy stipulates that the last person to join the company must also be the first to go. When the company rehires for the same or similar job responsibilities, the dismissed employees should be given first priority.
When a company terminates a pregnant or maternity leave-seeking employee for the sake of convenience, they risk violating the Indian constitution’s Maternity Benefit Act of 2017.
Non-solicitation provisions are restricted in scope, whereas non-compete agreements are not enforceable under Indian law.
In India, most states have legislation allowing for up to 10-15 days of paid vacation each year. Employees can also take up to ten days of sick leave and additional ten days of unpaid leave. Employees who request leave under these circumstances are not deemed dismissed.
Employee termination HR checklist
Here’s a brief guide to some of the steps that must be followed when dismissing staff.
Examine the company’s human resources policy
Before giving a termination notice to any employee, it is necessary to review your company’s HR guidelines and policies. Every business has its own set of protocols for dealing with various circumstances.
Consult the employee contract
The employment agreement will detail the notice time, severance pay, and other benefits that must be provided to the employee in the event of termination. This agreement is frequently signed at the start and acts as a valuable reference that may be used in a court of law.
Publish a notice
Serving a notice is an important aspect of terminating an employment. 30 to 90 days before termination, a severance notice must be delivered. This notification must be in writing and provide a detailed explanation of why the employee is being fired.
Agree on a severance package
Employees who retire, get laid off, or reach the end of their contractual obligations are eligible for severance pay. Employees who have worked for a year or longer shall be paid one month’s wages. Employees must be granted three months’ pay if they are being laid off in a protected industry. Employees are entitled to gratuity payments after five years of continuous employment under the Payment of Gratuity Act.
Employee protection and access to the courts in the event of a conflict
A fired employee has the legal right to appeal to his or her jurisdictional authority. For one of the following reasons, the employee might file a lawsuit in court:
- An employee was fired by his or her company for no apparent cause.
- The employee has not been found guilty of any wrongdoing and maintains his innocence.
- The employee believes their dismissal was made on unjustified grounds.
An employee must first construct a case and obtain clearance from their local labour authority before seeking remedy of any of the following concerns. The matter may be handled by jurisdictional conciliation officers, industrial tribunals, or labour courts if consent is given. The Indian Industrial Act of 1947 was enacted to address the problems of workers in the manufacturing industry.
Conclusion
Wrongful termination, or not following due process as defined by the respective state laws, will result in legal punitive consequences for the employer. In addition, the courts may order the employer to pay fines and award additional compensation to an employee that was terminated.
Employers that review labor laws and, explicitly, state procedures for terminating employees in their contracts, significantly reduce the potential for labor disputes related to the termination of an employee.
Beyond this, however, employers must ensure that management teams and HR professionals are fully briefed on termination procedures. Contracts can protect employers; yet, management teams and HR professionals must ensure labor law compliance to protect them from any adverse litigation.
There are many laws in every sector ( public sector, private sector) for the protection and welfare of different kinds of workers, (permanent, contractual, part time) but very few people know the proper use of it to avoid exploitation by the employer. Many workers enter the contract agreement/bond without reading and without knowing the legal prospect and conditions of the contract. To avoid the misuse of laws workers enter into trade unions which give them a sense of security. But there is a need to make workers aware of their rights and laws, which would affect them
References
- https://labour.gov.in/constitutional-provision#:~:text=Under%20the%20Constitution%20of%20India,being%20reserved%20for%20the%20Centre.&text=Trade%20Unions%3B%20 industrial%20and%20labour%20disputes.&text=Social%20Security%20and%20 insurance%2C%20employment%20and%20unemployment.
- https://clc.gov.in/clc/sites/default/files/Industrial%20Employment%20%28Standing%20Orders%29%20Act%2C%201946_1.pdf
- https://labour.gov.in/sites/default/files/THEINDUSTRIALDISPUTES_ACT1947_0.pdf
- https://www.indiafilings.com/learn/shop-and-establishment-act-india/
- https://www.latestlaws.com/articles/all-about-industrial-disputes-act-1947-by-megha-ahuja
- https://labour.delhi.gov.in/content/delhi-shops-act-1954
- https://mahakamgar.maharashtra.gov.in/lc-the-maharashtra-shops-establishment.htm
- https://www.indiacode.nic.in/bitstream/123456789/7609/1/8_of_1962_%28e%29.pdf
- https://www.indiacode.nic.in/bitstream/123456789/13171/1/tn-shops-and-establishments-act_1947.pdf
- https://www.indiacode.nic.in/bitstream/123456789/16396/1/act_no_20_of_1988.pdf
- https://labour.gov.in/sites/default/files/Maternity%20Benefit%20Amendment%20Act%2C2017%20.pdf
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