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9
Issue 30
·
February 2016
·
I
ndia
B
riefing
the cause for termination. However, an employee
should have an opportunity to reasonably explain
the charge against them prior to termination.
The Maharashtra Shops and
Establishments Act, 1948
An employer cannot terminate an employee who
has been with the company for more than a year
without giving the employee at least 30 days of
notice in writing. If an employee has been with the
company for more than threemonths but less than
a year, the employer needs to give at least 14 days
of notice. The notice is not necessary if an employee
is being terminated for misconduct.
The Karnataka Shops and Establishments
Act, 1961; the Tamil Nadu Shops
and Establishments Act, 1947
An employer cannot terminate an employee that
has been with the enterprise for more than six
months, except for a‘reasonable cause’. In addition,
an employer must provide a one month notice. If
misconduct is the cause for termination, no notice
or associated payoff is required.
The Industrial Disputes Act, 1947
This Act applies to workers who are not working
in a managerial or administrative capacity. The
Act states that any such employee who has been
employed for greater than a year can only be
terminated after permission is granted by a suitable
government office. Additionally, an employer
must provide valid reason for termination and pay
a severance amount, which is equivalent to 15
days’ average salary for each year of uninterrupted
employment.
Protections for Employees
Laws in India offer employees a great degree
of protection, and both the judiciary and the
government tend to have a pro-worker stance in
employment-termination disputes. It is therefore
not unusual for employees who have been
dismissed from employment to exercise their
right of appeal. In these cases, employees often
challenge their dismissal on the ground that there
was no reasonable cause for dismissal or that they
had not been guilty of misconduct as held by the
employer.
Impact on Employers
Wrongful termination, or not following due process
as defined by the various state laws, could result in
legal consequences for the employer. In addition,
courts may order the employer to pay fines and
award additional compensation to an employee
that was terminated.
Employers that review labor laws and explicitly state
procedures for terminating employees in the
contracts significantly reduce the potential for labor
disputes related to the termination of an employee.
Beyond this, however, employers must ensure that
management teams and HR professionals are fully
briefed on termination procedures. Contracts can
protect employers; however, management teams
and HR professionals must comply with these
procedures to ensure their effectiveness.
Termination for Cause
Severance Payment Due
• Willful insubordination or disobedience
• Theft, fraud or dishonesty
• Willful damage toor loss of employer’s goods
• Taking or giving bribes or any illegal
gratification
• Absencewithout leave formore than 10 days
• Habitual late attendance
• Disorderly behavior during working hours
• Habitual negligence of work
• No legislated reasons. However, the
employer will have to notify the relevant
government authority of a termination
event, and courts may demand a fair
hearing for the employee. As a result,
these types of terminations can be very
protracted
• Owed in ordinary terminations. Only
owed in terminations upon expiry if the
employee has been with the company
for at least 2 years and the reason for
termination is redundancy
• Calculated on a case-by-case basis on
duration of employment, performance
and salary
Termination Procedures in India
Ordinary Termination
(30 Days’ Notice)