Article (August-2021)


Termination through mere notice is illegal

H.L. Kumar

Designation : -   Advocate, Supreme Court

Organization : -  New Delhi


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Let me start this article with a personal note. While practicing in labour laws for companies, I frequently come across in some cases where the service of a workman is terminated by issuing of a notice or salary in lieu of notice since every appointment letter as issued to an employee contains a clause that the employer can terminate his/her services by one month's notice. When told that such termination will not be legally valid since the Indian labour laws particularly the provisions of Industrial Disputes Act, 1947 provides maximum job security against illegal termination of an employee who happens to be a 'workman' by notice as stipulated in the appointment letter. It becomes difficult to convince the clients that it is merely a decorative clause that provides a pleasant satisfaction to an employer that he could dispense with the service of an employee by issuing a notice.

It is further argued that if such a clause of termination by notice is incorporated in the appointment letter which had been issued to the employee and received by him without any protest, reservation and objection. With this impression the employers are still terminating the services of the workman by issuing notices one month or three months as stipulated in the appointment letters.

Hardly there is any appointment letter issued by the employers to the employees which does not contain such a clause. Such terminations when challenged by the workmen before the labour authorities result into disastrous consequences causing the humiliation of the employer when the termination is set aside by the Labour Court or Industrial Tribunal and workmen are awarded to be reinstated with full or partial back wages.

It is really amazing that most of the employers not excluding HR Executives are still ignorant the protection of labour laws for the workmen against their termination simpliciter. Needless to reiterate, that those days are gone when an employer could terminate the services of an employee at his/her sweet will. Howsoever, undisciplined, inefficient, habitual absentee an employee may be the employer has to initiate disciplinary action by holding of enquiry to avoid humiliation; the financial burden of back wages and accommodating a reinstated employee in the establishment may be a factory, school, hospital or a hotel etc. Such a situation is avoidable provided the employers and HR Executives are conversant with the labour laws. Unfortunately neither the Law Colleges nor even B-Schools teach the practical aspects and implications of labour laws. Needless to reiterate that the students of HR are taught and trained with literature and the material having relevancy with the advanced countries where the working environments are in contrast with that as prevailing in India. The study material as available for HR Executive is mainly based on the working condition in the advanced countries where the problem of discipline and initiating of disciplinary action is not there since the employees don't have job security and the employer can dispense with any employee who is not found up to expectation or that he acts in an undisciplined manner. But in India, in the absence of 'hire and fire' policy, industrial relations continue to be the major problem and the HR Executives have to be conversant with such a scenario lest it may lead to disastrous consequences.

In context with above, one such case by Calcutta High Court needs to be read, re-read and retained for future decisions since it should be treated as a wake-up call and every line of the judgment is an eye-opener.

The Calcutta High Court in the 'Webfil Limited versus Workman' has said that such a clause of termination in the appointment letter by giving one month's salary is not acceptable as the employer-employee relationship has entirely changed in the last seventy years. The Court even imposed Rs. 20,000 on the employer who terminated the services of the employee without holding any enquiry and giving any cogent reasons.

The court said that the employer must conclusively prove by evidence that the employee was not working in the supervisory capacity, in the absence of which, the question of whether an employee is a workman within the meaning of section 2(s) of the Industrial Disputes Act is not required to be considered, which provides that even if it is not given in the appointment letter there are certain conditions precedent for dispensing with the services of the workman.

Section 25F of Industrial Disputes Act 1947 says that 'No workman employed in any industry who has been in continuous service for not less than one year under an employer shall be retrenched by that employer until-(a) the workman has been given one month's notice in writing indicating the reasons for retrenchment and the period of notice has expired, or the workman has been paid in lieu of such notice, wages for the period of the notice (b) the workman has been paid, at the time of retrenchment, compensation which shall be equivalent to fifteen days' average pay for every completed year of continuous service or any part thereof in excess of six months and (c) notice in the prescribed manner is served on the appropriate Government or such authority as may be specified by the appropriate Government by notification in the Official Gazette.’

Issue of Jurisdiction

On the issue of jurisdiction, the court ruled that 'the principle is that when a case had been tried by the court on the merits and judgment rendered, it should not be liable to be reversed purely on technical grounds unless it had resulted in failure of justice, and the policy of the legislature has been to treat objection to the jurisdiction both territorial and pecuniary and not open to consideration by an appellate court unless there has been prejudice on the merits.’

It is relevant to mention here that being the custodian and the possessor of documentary evidence, the company failed to produce any piece of the document showing that the workman either used to sanction leave, gate pass and overtime or assess the performance of any worker of the company or take any independent decision which was binding upon the company. Even no workman came forward to give evidence orally that he was under the control and supervision of the respondent workman. In fact, 'supervisory work and duties in supervisory capacity are a completely different concept. Supervision of the machine is not but supervision of men certainly is the duty of supervisory capacity, which is wanting.'

About the back wages, the court said that the employer has not taken the plea that after his termination the workman was not re-employed. It should have been conclusively proved by the employer that the employee was gainfully employed. The High Court made a scathing remark by saying that the high-handed action of termination which fits in a feudal minded society for termination of service of a person by merely giving notice without holding him guilty of any offence is wholly unfit in the atmosphere of a democratic country like ours where the dynamics of law is towards fairness in all actions.

Therefore, the laws of domestic enquiry must be strictly followed by the employers even if it is not specially mentioned in the terms and conditions of the employment. The Court has come down heavily on the employer, who dispensed with the services of an employee without holding any enquiry. The Court said that the constitution exists for the common man, for the poor and the humble, for those who have businesses at stake, for the butcher, the baker and candlestick maker. The 'rule of law' guarantees rights and freedom to the individual, side by side, and consistent with the overriding power of the State to act for the common good of all.

Lump-sum compensation would be justified

Let me conclude the article by two important factors. One is that the provision for one month or three months is not unnecessary. It is quite relevant for the probationers and beginners, but it should not be made a thumb rule while dispensing with the services of regular employees. And the second point that constitutional courts will do well to adopt the practical and holistic view of justice while deciding the employer-employee disputes. It would be far preferable if a lump sum amount of money is awarded to the workman, when the termination is found to be illegal, by way of compensation instead of 'reinstatement with back wages'. For instance, in the instant case, the employee concerned was out of the employment of the employer for 11 long years. It may take many more years if the litigating parties remain adamant to further contest the case.

During the long alienation of the employee-employer relationship, the atmosphere of the workplace, and the attitude of the employee as well get immensely changed. The employee would find it difficult to adjust himself in the milieu of the workplace and the employer would hardly have any confidence left in the employee. Thus, it would neither be beneficial for the employee nor employer to follow the outcome of justice.

The experts of employment law have also been of the view that the compensation would go a long way in dispensing the mutually acceptable justice for both employees and employers.

H.L. Kumar - Advocate, Supreme Court of India, New Delhi