INDIA Law and Practice Contributed by: Anshul Prakash, Kruthi N Murthy and Deeksha Malik, Khaitan & Co
Termination Without Cause Employment can be terminated at the employer’s dis - cretion for any reason other than proven misconduct by simply invoking the notice period provisions in the employment agreement/applicable law/policies. Such termination could be on account of: • an employee’s unsatisfactory performance; • redundancy of the role/downsizing/closure of the establishment; • frequent absence from work due to continued ill health, etc. Termination without cause (or termination simpliciter) includes scenarios wherein there may be underlying reasons for the separation but the employer, as per its assessment of such reasons or cause, does not intend to or does not deem it appropriate to: • mention or assign such reasons for the separation in the exit documentation; and/or • deprive the employee of any contractual or statu - tory benefit pursuant to their exit. The employee will be entitled to all service benefits (statutory as well as contractual) that have been earned up to the date of the cessation of employ - ment. Non-managerial employees who have rendered at least 240 days of service will be entitled to notice of at least one month (or salary in lieu thereof) and statutory severance compensation (computed at 15 days’ wages for every year of completed service or part thereof in excess of six months) (“Retrenchment Compensation”). In cases of collective redundancies involving non-managerial employees, as per the ID Act, employers will also have to comply with the “last in, first out” principle. Termination With Cause This includes the termination of employment for breaches of the terms and conditions of employment, misconduct, etc. Termination on account of miscon - duct should be preceded by a domestic inquiry con - ducted in accordance with the principles of natural justice (ie, the employee should be given a fair oppor - tunity to present their case and defend themselves against the charges levelled). In cases of termination on the grounds of misconduct, the employee would
not be entitled to receive notice pay or any other stat - utory and contractual payments, except gratuity (with necessary adjustments for losses due to misconduct, if any) and leave encashment. 7.2 Notice Periods The concept of “at will” employment (or hire and fire policy) is not recognised in India. Employers are required to comply with notice period requirements (or pay salary in lieu of notice) as per applicable laws/ employment agreements and policies (whichever is higher) in case of termination of an employee’s ser - vices for any reason other than proven misconduct. The ID Act and state-specific S&E Acts prescribe a minimum notice period of one month in the event of termination simpliciter. While the ID Act and most S&E Acts only apply to non-managerial employees, cer - tain S&E Acts (such as those of Haryana and Delhi) also apply to managerial employees. Notice period requirements in respect of managerial employees will be governed by the terms of their employment agree - ment/employer’s policy in this regard. In case of termination simpliciter (which includes ter - mination of employment on account of redundancy or unsatisfactory performance), non-managerial employ - ees who have rendered at least 240 days of service will be entitled to Retrenchment Compensation. Employ - ers are also required to notify the jurisdiction’s labour commissioner regarding such termination (please note that this is not an approval requirement). Additional Requirements for Factories, Mines and Plantations In the termination of services of non-managerial employees (who have rendered at least 240 days of service) engaged in factories, mines or planta - tions employing at least 100 or 300 non-managerial employees (the threshold varies from state to state), an employer is required to: • obtain prior permission from the appropriate gov - ernment; • give the non-managerial employees concerned three months’ notice or salary in lieu thereof; and • pay Retrenchment Compensation.
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