This article has been written by Kalpesh Amrute, pursuing the Diploma in Labour, Employment and Industrial Laws (including POSH) for HR Managers from LawSikho.
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Serving a “notice period” is like a honeymoon period, isn’t it??? Well, some employees may feel like it, but as an HR professional, it is an alarming time. A tricky period, time to pull up your socks. Should we focus on convincing the resigned employee to stay or start a new talent search while working on the realignment of work responsibilities? But hey, we can do any of it only when the outgoing person is serving a notice period. But what if they refused to serve it? Stumped??? How to deal with it?
Let’s understand it better with a scenario. Mr. X working with ABC ltd. and has been a decent performer for over a period of time but, one day he suddenly resigns from his job and refused to serve the necessary notice period arguing no law mandates him to do so, hence organization can’t force him to continue even for a certain time and asks for immediate relieving. As HR, we sometimes come across such scenarios in our day-to-day work. So, then how to deal with it? Let’s find out.
In this article, we’ll try to figure out
- Understanding the meaning of a notice period
- Legal perspective in this
- Some key legal battles related to this
- The possible impact of this on organization
- Remedies to prevent such scenarios
What do you mean by a notice period?
In simple words, it is the time between the date of resignation and the last working day of an employee. A number of days an employee is mandated to serve notice before leaving the organization depends on the terms & conditions of the contractual agreement between the employee and the employer. Normally in India, the notice period varies from fifteen days to up to three months depending on the type of employment (probationary or permanent) or the level of seniority. In general, the higher the level of seniority, the greater is the notice period.
Employers have certain limitations before forcing an employee to serve a notice period post-resignation unless there is a written employment contract between them and a special clause related to separation. While the majority of the labor laws related to working conditions talk about the compensation & notice period required to be given “by the employer” before terminating the services of its employees, they still lack procedural clarity “by the employee” in case they want to resign and leave their job. Therefore, it becomes imperative to look at certain statutes and some fundamental rights provided by the Constitution of India to its citizens for a better understanding of the topic.
- The Specific Relief Act, 1963, Section 14 limits the enforceability of any contract related to personal service in the court of law, which means the employer has to be restricted to the extent that he can claim recovery “in lieu” of the notice period. It is up to an employee to honor the notice period to be able to collect his/her full payment along with a relieving letter. Also, to seek any relief as per Section 41 of the same act, substantial proofs against the opposite party are necessary for any prevention.
- The Indian Contract Act, Section 27 Every agreement by which anyone is restrained from exercising a lawful profession, trade, or business of any kind, is to that extent void. It means, “the employment letter “or “work contract” is a legally valid document and the terms are binding on the employee who signs it. However, if the separation clause mentions the words “in lieu of ” related to payment against notice period, in such cases the employer can not force an employee to complete the notice period if he/she is ready to sacrifice their salary against such notice period. In such cases, the employer is bound to issue a “relieving letter” to the employee, provided they do proper clearance as per the company’s rules & regulations.
- Industrial Employment (Standing Orders) Act, 1946 provides an opportunity for employers to clearly define, with certainty, conditions of service in their establishments in writing and get it certified with the appropriate authorities to avoid any “industrial dispute”.
- The Constitution of India provides certain fundamental rights to the citizens of India including Article 19 which protects their right to practice any profession or to carry on any occupation, trade, or business. Also, Article 13 states that any laws which are derogatory or inconsistent with the fundamental rights of its citizens shall be termed as void. Therefore, an employee can approach either The High Courts (Article 226) or The Supreme Court of India (Article 32) in case they feel they are deprived of any fundamental right and these courts can invalidate such unconstitutional & contravening laws.
Now that we understand that there is no specific provision in any statutes to force an employee to serve a notice period, let’s see how various courts in India have dealt with such cases.
In this case, the appellant was working with Air India Limited as Assistant Aircraft Engineer. He joined service on September 1st, 1992, and as per the terms & conditions of his Appointment letter he was supposed to serve the company for a minimum period of five years, which he did before tendering his resignation. The respondent (Air India Limited) claims that as per certified standing orders of the company framed under The Industrial Employment (Standing Orders) Act, 1946 an employee has to serve a minimum of 30 days’ notice and an acceptance of resignation is necessary.
The court was of the opinion that in this case as per the provisions of standing orders it is clear that an acceptance of resignation is required only if there is a spot resignation or at any time before the expiry of the notice period. Acceptance of resignation is not required if 30 days’ notice has been served. Mr. Jain has a right to resign and more so, the employment contract was for five years which was admittedly over at the time of his resignation plus no disciplinary inquiry pending against him. The Supreme Court of India amplified in its verdict that “To resign is a right of an employee and he or she cannot be forced to serve notice unless it is stipulated in terms & conditions of the organization or any disciplinary inquiry is pending and employee seeking to duck it deliberately by tendering his/her resignation.”
The case was all about the employee not serving the notice period and sought to depart from the organization by simply putting in his resignation and seeking to join another organization. Since the person was handling a critical job, it requires for an organization, minimum of 30 days to find a suitable replacement as well as proper handover from the outgoing person. Hence the organization rejected the resignation and filed a case against the defendant to refrain him from joining any other organization as well as divulging any critical data with them before he completes a proper handover of his duties and assets possessed by him and ends his employment legally and as per the policy of the company.
The Delhi High Court observed that the company failed to produce any documentary evidence about the substantial loss it incurred because of his resignation, at the same time took 10 days to respond to the employee about rejecting his resignation. It also failed to produce any substantial evidence that the employee has joined any other organization and was sharing any critical data with them that could incur any substantial loss to the plaintiff. since the employee has already resigned from the company and does not wish to rejoin it again, he can’t be forced to do so based on Section 27 of the Contract Act as well as Section 14 of The Specific Relief Act and in the absence of any prima facie case to go for a trial for recovery of any damage or loss, the case was dismissed.
In this case, as per the service rules employee was mandated to submit a notice period of three months once resigned at the same time the bank may terminate the service of an employee by either giving a notice of three months or pay in lieu of it. Here the employee sent a letter to the bank in the month of January, that he would be leaving by the end of June, way in advance than the mandatory three months. However, in February the bank sent a letter to the employee informing him that they are relieving him with immediate effect and there is no need for him to serve the notice further. Bank’s argument, in this case, is that the provision of the notice period is to protect the interest of the employer and to make necessary arrangements in case it decides to accept the resignation. Therefore, it is not incumbent for a bank to wait till June to relieve him from his duties. During the hearing, The High Court stated that it is a voluntary act on the part of an employee to resign from his duties and choose the resignation date that would be effective from and give notice to the employer.
As per the company rules of Bharat Earth Movers, a permanent employee may resign from his job by giving a one-month’s notice in writing or by paying one month’s basic salary in lieu of the notice period to the company. In this case, even though the employee resigned from his job, he did not pay any money to the company against his notice period. In other words, his letter of resignation would become effective after one month as per service rules. Further, in the case, even the company accepted his resignation and allowed him to relieve from his services on 4th January 1993, on the same day company granted a brief period of casual leave to him and informed him that he would finally be relieved after the closing hours on 15th January 1993 and accordingly issue him the relieving letter and due payment, the day on which the employee was present on the job. In between the employee on 8th January 1993, the employee withdrew his resignation.
Even though the case went on to decide whether the employee was legitimate on his part to withdraw his resignation in between to claim subsequent benefits from the company, which eventually he did get from The Supreme Court of India, including the back wages, we understand that the base of the argument was the service rules. Since the employee did not pay any amount in lieu of his notice period to the company while tendering his resignation, it was safe to assume that he was willing to serve his notice period and continue to work till the end of such period.
The possible impact of spot resignations and the remedies available to the organization
When an employee puts in their resignation paper and seeks an early exit without serving any or part of their notice period, it not just disturbs the workflow of the organization and demands HR to find a suitable replacement but there is more than that. Tremors could be much more if the outgoing person is a key member of the organization and handling any sensitive portfolio. As HR, we are not just supposed to focus on the disciplinary side of the issue but also need to protect the interest of the organization in terms of preventing a possible leak of sensitive information and recovery of the company’s assets from the outgoing employee.
In order to ensure that the separation happens, honoring the terms & conditions of the employment contract and as per service rules & keeping fundamental rights of an employee and certain statutory provisions in mind, organizations, in order to prevent such incidents, may take certain steps as below.
- Clearly defining Employment contract & service rules – Since the rules & regulations, as well as terms & conditions of an employment contract, are key factors to avoid any legal dispute, make sure you draft them clearly and precisely. Get is reviewed from time to time with the help of experts. If the clause for termination involves the term “payment in lieu of notice” then it applies to both parties. Employees may choose to compensate the organization against their notice period. So, choose your words wisely while drafting and understand its possible repercussions beforehand, if any.
- Be fair and flexible with the duration of the notice period – As a recruiter, if you expect a particular level of professional to join your organization within a month’s time, then be ready to relieve people in your organizations working at a similar level within the same period as well. You can not expect the best of both worlds. If possible, have a “buyout clause” attached with the notice period, leaving some room for negotiations.
- Give fair treatment and timely F & F settlement – Employees will come and leave, you can’t retain everyone in a practical scenario. So, when someone puts in their resignation papers, there is no need to rush for a handover if you expect them to work till the end of their notice period. No need to treat them differently. Any isolation or unfair treatment will have a negative impact on others who might give it a second thought before serving their notice period post-resignation. Do not hold their F & F settlement unless there are any glitches.
- Be precise in communication – During the exit interview process, when an employee enquires about their relieving letter, be precise in communicating to them the conditions of receiving it from you and the possible consequences of not having a relieving letter. In case if the person does not return the company’s assets or serves a proper notice period as per the employment contract, then mention the same in the letter, if you are issuing any. Also, make them aware that if you receive any Background verification communication from their possible next employer, you will give them “the right feedback”. Contact their present employer, if the situation demands.
- Use tools like “exit memo” – Just like an employment contract, a written exit memo will not just make the outgoing employee aware of possible consequences of any violation but also help the organization against recovery of any damage or loss in case of any litigation.
With considering the legal angle, HR should focus on making the internal system robust as well as building a conducive environment to ensure fair treatment even for a resigned employee. Make the field open for both parties to have a fair play. After all we are dealing with human beings.
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