Indian Labor Laws – Part 2 – Dismissal of Employee for Misconduct
This is my second article in the series on employment and layoffs of employees by Indian corporations. My previous article dealt with the question of whether a software and information technology development company qualifies as an ‘industrial establishment’ within the meaning of the Industrial Disputes Act of 1957 (“IDA”) and whether that company may follow the “hiring and fire policy for termination of services needed for reasons other than employee misconduct without compliance with the IDA. This article deals with a situation where termination of services is necessary due to employee misconduct and procedural compliance required by Indian labor laws.
For the sake of clarity, let’s consider a hypothetical situation where an employee services say that Mr. Shyam Nagpal has been terminated by an IT company effective immediately for misconduct and the Company now wants to understand the legal consequences of such rescission.
Mr. Nagpal was engaged in software development and acted as “Group Leader”. As group leader, Mr. Nagpal was responsible for monitoring and regulating the work of two or three associates on his team, as well as providing software development services. Mr. Nagpal’s performance during the first year of service was above average, but his performance deteriorated thereafter and he was often late for work. Taking into account the mediocre performance of Mr. Nagpal and due to the company’s decision to reduce its workforce, Mr. Nagpal’s services were terminated with immediate effect with one month’s salary instead. The Company soon realized that it had not taken adequate measures for the provision of Mr. Nagpal’s services and is evaluating his involvement and exposure under the law.
Evaluation
The validity of Mr. Nagpal’s termination and the consequences thereof under Indian law would largely depend on the crucial question of whether Mr. Nagpal was a “worker” within the definition of IDA.
An employee is called a worker if he or she is hired to perform any manual, unskilled, skilled, technical, operational, administrative, or supervisory work for pay or compensation. Excluded from the definition of worker is a person who is employed primarily in a managerial or administrative capacity, or who is employed in a supervisory capacity, earns salaries in excess of Rs 1,600 per month, or functions primarily of an administrative nature. Supervisor means a person who has the authority, in the interest of the employer, to hire, transfer, suspend, fire, retire, promote, fire, assign, reward or discipline other employees or the responsibility to direct them or adjust their complaints or to effectively recommend such action and in the exercise of such authority uses its independent judgment. Simply put, a supervisor is someone who has authority over others, to supervise and direct.
The Indian Civil and Labor Courts have considered the actual and prevailing duties performed by an employee and the remuneration received by that employee as the basis for determining classification into the category of “worker” or “non-worker” and held that the designations merely Managerial or administrative are inconclusive of the status of any employee as “non-worker”.
The Supreme Court of India has repeatedly held that it is the main functions performed by an employee that should be considered for the purpose of determining the actual status of the employee, namely whether the employee has been performing administrative, managerial or administrative duties. supervision. . Sometimes an employee may be required to perform managerial, supervisory, or administrative work, but such occasional performance alone does not determine the actual status of the employee and it is the primary or primary duty performed by the employee that determines the status. actual employee and whether or not the employee in question is a worker under the IDA.
Consequently, whether Mr. Nagpal, who was presumably not in a managerial or administrative role, was employed in a supervisory capacity as a Group Leader or for technical / software development work, it will depend on whether the main and main functions made by him were:
(a) those of a supervisory nature, that is, he had powers to give instructions to others on the actual way in which they should perform and carry out their functions and to examine the work carried out by others in order to ensure that it was being done correctly , or
(b) of a nature made by a software developer.
If Mr. Nagpal was primarily doing supervisory work, but incidentally or for a fraction of the time, he also did some software development work, then he was employed in a supervisory capacity and would not be a worker under the IDA. On the contrary, if the main work performed was software development, the mere fact that some supervisory tasks were also carried out incidentally or as a small fraction of the work performed by Mr. Nagpal will not convert your employment. as a skilled worker in one of supervision. capacity.
Considering that the nature of the work performed by Mr. Nagpal was primarily software development and not supervisory, Mr. Nagpal would be classified as “worker” in IDA terms.
In IDA terms, an employee in the category of worker who has been in continuous service for at least one year cannot be terminated at the will of the employer unless the employee is terminated through disciplinary action or as a result of failure to do so. renewal of the employment contract, or fired due to ongoing health problems, etc. Termination for any other reason, including termination of service due to reduction in turnover, amounts to a reduction in personnel and the IDA prescribes a detailed procedure for the reduction of personnel of a worker, including compliance with the rule of last in arrive, first out, notice, payment of prescribed compensation, i.e. 15-day average payment for each full year of continuous service, pre-government filings / approvals, if required, etc.
For termination of services for disciplinary reasons, the procedure for terminating an employee (who is classified as “worker” under the IDA) for misconduct and / or indiscipline (which should normally be incorporated into a company’s Employee Handbook) would need To be in terms of general principles of natural justice, the IDA and the guidelines evolved from various court decisions as follows:
(i) issue a charge sheet;
(ii) conduct an internal investigation;
(iii) examine the report of the investigating officer;
(iv) issue a demonstration of cause notice to the employee; and
(v) issue order of punishment.
In view of the above, the termination of Mr. Nagpal’s services for misconduct without following the principles of natural justice viz. The sending of notifications, inquiries and defense opportunities to the employee may be open to challenge. The violation of the provisions of the IDA makes the directors, manager, secretary, agent or other official of the company responsible for the administration responsible for the prosecution and sanctions if it is shown that the infraction was committed with knowledge or consent and would give the right upon termination. employee to file a dispute with the labor court and seek reinstatement of services with back wages.
Remedies
To minimize exposure arising from the termination of Mr. Nagpal’s services for misconduct without following the procedure prescribed by IDA, it is advisable for the company to do the following:
(i) The Company must immediately liquidate and pay all outstanding amounts owed by Mr. Nagpal, including the gratuity under the Bonus Payment Act, 1972, if applicable, at the earliest.
(ii) The Company must maintain adequate supporting evidence demonstrating Mr. Nagpal’s poor performance on the job. Company notices / reminders to Mr. Nagpal to improve his work and productivity should also be part of this paperwork.
To minimize employee-related disputes and complaints, it is advisable to follow the rules and guidelines set forth in the Employee Handbook and exercise due caution and adherence to the procedure related to termination before terminating employees for misconduct.