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8
Due Process in Terminating
an Employee in India
By Dezan Shira & Associates
Editor: Siddhartha Thyagarajan
Employers are exposed to a number of legal
and reputational risks resulting from wrongful
termination, or not following due process.
Employers should, therefore, plan to construct
contracts and human resource (HR) materials to
ensure that senior management, HR personnel
and employees are fully apprised of their rights
and responsibilities.
There is no standard process to terminate an
employee in India. An employeemay be terminated
according to the individual labor contract signed
between the employee and the employer, if
the contract defines a process for termination.
Employers should be aware, however, that labor
laws supersede the provisions of labor contracts
– any termination policy or clause outlined within
a contract should be checked against the law by
a professional.
In the case that there is no labor contract, or
the labor contract does not define a method of
termination, then the employer has to follow
the state law. In this scenario, an employer needs
to abide by India’s distinct, state-specific labor
legislations in order to terminate the employee.
Pre-defined Termination
In most cases, employment contracts are very
specific about the process for terminating
employment. This is mostly the case when
termination is by mutual agreement, and in
particular in caseswhere contractual employment is
set for a fixed period. For instance, consultants with
international organizations, or interns at private
organizations, often have defined employment
periods.
An employee is considered terminated at the
conclusion of such a contract, unless a newcontract
is offered or the clauses in the initial contract are
amended. As in most countries, employees that
are terminated by employers are often given one
month notice or payment of one month of wages
in lieu thereof.
Termination by Law
As previouslymentioned, any termination needs to
comply with federal and state law because these
laws supersede contract provisions. However,
state law becomes particularly important when
no defined procedure for termination exists. In
such scenarios, state law becomes the rule of
thumb for terminating an employee. State law
itself is dependent on the area of operations of
the employer.
In the below section, we examine state laws for
termination in several prominent investment
destinations, including the Delhi Union Territory,
Maharashtra, Karnataka and Tamil Nadu.
The Delhi Shops & Establishments Act, 1954
An employer cannot terminate an employee who
has been with the corporation for more than three
months without giving the employee at least 30
days of notice or a salary in lieu of such notice. An
employer need not give notice if misconduct is