As the pandemic worsened and the economy slowed, a large number of employees were dismissed in various sectors. Such termination entails a risk for the employer in the market, in terms of reputation.
Unfair dismissal, or a wrongful termination of an employee, is an act where an employer terminates/dismisses/removes an employee without providing any valid grounds of removal. It is imperative that the employer furnish strong and valid reasons for termination, and in case it is not provided, it’s a wrongful termination. Wrongful, also because the employee is not provided an opportunity to be heard. With this, even the fundamental legal principle which says, “Listen to the other side,” stands violated.
As the pandemic worsened and the economy slowed, a large number of employees were dismissed in various sectors. Such termination entails a risk for the employer in the market, in terms of reputation. These matters are generally dealt under labour and industrial laws, which were enacted to deal with various labour issues, ranging from protection of rights of workmen to regulating instances such as closure, retrenchment, lay off, etc. in the establishment. Before getting into that, let us briefly touch upon the relevant regulation under the labour laws.
Labour Law is a concurrent subject, which implies that both Central and State governments can regulate it. Undoubtedly, this has worked preferably in granting protection to employees, but it has made compliance difficult for businesses. Subsuming 29 central laws and state laws, the Indian government came up with four major Labour Codes. This was indeed a welcome move to simplify the complex procedures associated with labour issues.
Code of Wages, 2019 covers aspects relating to the payment of wages, bonuses, remuneration to employees. It subsumes four labour laws. Industrial Relations Code,2020 subsumes three labour laws namely, The Industrial Disputes Act, 1947, The Trade Unions Act, 1926, The Industrial Employment (Standing Orders) Act, 1946. It deals with employment conditions, industrial disputes, working conditions of employees, making it one of the most hotly debated codes. The Occupational Safety, Health, and Working Conditions Code, 2020 subsumes 13 central labour laws dealing with contract labor, factories, establishments, etc. The Code on Social Security, 2020 subsumes nine laws meant for social security for workmen pertaining to various retirement, maternity, and other health and social benefits. With the incoming of the above-mentioned codes, it is preferably assumed that labor issues will be streamlined in a much more convenient manner. Nevertheless, there are no such ‘substantial’ changes in the law itself, making more of a unification of existing laws. The government has not notified the dates from which the codes will be effective.
Understanding nuances of Wrongful Termination
No standard procedure is followed for the termination of employees in India, even though the law tries to resolve multiple issues. Protecting the interests of employees must be prioritised over other aspects; nevertheless, this is an absolute grey area. Most of the employees have a lenient approach towards employers, making them more vulnerable to any unfair dismissal. Also, there cannot be any specific reasons for dismissal, which largely varies from place to place and organization to organization, making an inexhaustible list of grounds. But it is to be noted that there has to be uniformity in the grounds of dismissal for all employees.
The main law which handles such termination is the Industrial Disputes Act, 1947 (ID), which will be under the Industrial Relations Code, 2020 (IRC), once effective. Under the IRC, termination for any reason other than disciplinary action will be treated as Retrenchment, which requires a months’ written notice period. This notice period must stipulate the reason for retrenchment. With the retrenchment being done, compensation must be equal to 15 days of average pay for every completed year of continuous service. Therefore, it must be noted that the employee has the right to certain payments, as per the IRC, or the employment contracts, as the case may be.
In the case of those establishments where not less than 300 workers have been in continuous service for one year, prior permission of the appropriate government is required for termination. Also, the employer is required to provide a three-month notice period to employees. In case the termination is done on grounds of misconduct, the employer needs not to provide any prior written notice. But the inquiry must have been done in accordance with the principle of natural justice, as mentioned, giving due opportunity to employees to present their contentions.
An important point that might fall against the rights of workers is the concept of fixed term employment, which is kept outside the purview of Retrenchment under the IRC. In this case, any workers who are under fixed term employment can be dismissed and terminated on completion of the time period, without giving any reasons. This can substantiate the unfair dismissal/wrongful termination, without providing any strong rights to employees.
The IRC bars the jurisdiction of the Civil Court in any matter to which any provision of the Code applies. It also abolishes the Labour Court. Instead, it provides for the establishment of the Industrial Tribunal and National Industrial Tribunal as per Section 44 and Section 46 of IRC.
Issues related to the discharge and dismissal of workers, or the grant of relief, will be under the jurisdiction of the Industrial Tribunal as per Section 44(7) of IRC. The abolishment might curtail the rights of the workers in terms of denying access to justice. Across most legislations, the notice period is usually one month for termination of employment. Such notice entitlement is under the ID act and is also present in different State Shop and Establishment Acts. For example, in Delhi State Shop and Establishments Act, 1954 a notice period of thirty days needs to be given to the employee. But in the Maharashtra State Shop and Establishment (Regulation of Employment and Conditions of Service) Act 2017, no formal statutory notice period has been specified. On the other hand, if an employer wants to change any condition of service applicable to any worker, it needs to provide a Notice of Change, at least 21days before the change.
Having no standard procedure, the main document is the Employment Contract between the employee and the employer wherein the terms and conditions are enshrined. In case the contract is arbitrary, it is to be noted that the labor law will supersede the employment contracts. Therefore, while terminating an employee, the employer needs to comply with the central and the state law, or the Codes, once effective. As mentioned, the employer must provide a reasonable reason for the dismissal. If the reasons are not provided, it is the prerogative of the employee to seek them. In case the reasons are unjust, the employee has the right to conduct an inquiry against the unjust treatment. The employee can send a legal notice to the employer in case of such unjust termination. The employee can finally move the Labor Court, in case no relief is provided from the employer. Once the Codes are effective, it will be the Industrial Tribunal, rather than Labour Courts.
The Maternity Benefit Act, 1961, which will be subsumed in the Code of Social Security, 2020, prohibits any sort of termination of woman employees on the reason of pregnancy. The Code does not change any such maternity benefits, allowing a paid maternity leave for 26 weeks for the first two births and 12 weeks for subsequent births.
The employer can cite any reason for making an unfair dismissal seem a fair one, which is very common. Any small charges, such as non-performance or unsatisfactory work can be cited by the employer as a reason for dismissal. In such cases, the employee needs to be cautious of the reasons. It is also highly advised that the employee must keep all the documentation and credible evidence at hand, for dealing with any false allegation. Any mishandling by the employer must be noted, in case any allegations are put against the employee. An important point to be noted is that if a Tribunal or a National Industrial Tribunal awards any such reinstatement of any worker, and the employer appealed such decision in the High Court or the Supreme Court, the IRC makes it clear that the employer shall be liable to pay the worker the last drawn full wages if the worker has not been employed during the period of pendency of such proceedings in the High Court or the Supreme Court.
If the employer is found liable for any wrongful dismissal, the Tribunal or the higher adjudicating body can direct the employer to compensate the employee and restore the service, as the case may be. The employer can also be penalised. Finally, it is also advisable to consult a lawyer in such cases, as a lawyer will be in a better position to understand the situation and advise the next step.
(The writer is an Associate with Khurana & Khurana Advocates and IP Attorneys, a leading IP and Commercial law firm in India with presence internationally across countries.)