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Employment Termination Without Reason, Cause or Pay

It has become really common nowadays to see employees getting fired without a warning or reason, if you're an employer or even an employee, here's what you should know.

Employment Termination Without Reason, Cause or Pay

Wednesday April 05, 2017,

5 min Read


It had been a year and a half since Rohit landed his first job. No later did he receive a termination letter by his boss who instructed him to leave his job the very next day. The letter read misconduct as the cause for termination.

In such a case, does Rohit enjoy the protection of the law? What are the rights employees are subjected to under the constitution?

The Industrial Dispute Act of 1947 defines industrial dispute as any dispute or difference between employers or employer and workman or between workmen related to the terms of employment or conditions of labour.

Industrial Dispute Act defines workmen as people employed in the industry engaged in manual, unskilled, skilled, technical, operational or clerical jobs but not holding managerial, administrative or supervisory roles. A workman is governed by the Industrial Disputes Act; his hiring, duties and termination of services have to be in accordance with this act.

The termination of an employee’s services can take place in two ways, both underlined in the Act:

1. Termination with cause

2. Termination without cause

In the former, the employee can be terminated, say for example for breach of company policy. In this case, the employee will not receive a notice of dismissal or severance pay. However, in the latter form of termination, the employee will receive a notice of dismissal 30-90 days prior to termination of service or severance pay. This article will discuss termination without cause and pay.

Termination without cause

An employer has the right to end an employment relationship without a good reason and therefore is not required to justify the dismissal of services. However, he or she is obliged to send a notice of termination, 30-90 days prior to cessation of services and clear all dues, making the following payments:

1. Salary in lieu of notice when the notice has not been given

2. Salary for the days worked which remain unpaid

3. Encashment of unused paid leaves

4. Payment of gratuity to the employee who served for five years or more, as given in the Payment of Gratuity Act 1972

5. Payment of bonus for those employees who worked for at least 30 days in a financial year and earn up to Rs.10,000; as per the Payment of Bonus Act 1965

6. Any other dues contractually agreed under the company policy

The payment of aforementioned dues comes under the title of Severance Pay. The practice of offering severance pay less than what a workman is entitled to is not uncommon. If the employee feels that the package offered is unjust, he or she can approach the labour court regarding the same. It is advisable to hire a corporate lawyer to review the severance package before consenting to it.

In a A.N. Nakul v/s Phillips India and Others case, the services of the plaintiff were terminated due to change in business plans. The employee was ousted as reconstruction and reorganisation of the company rendered his services nil. A separate clause under the appointment letter said “the age of superannuation from the company’s service is normally 60 years however, the company shall have absolute discretion to retire you at any time without assigning any reason after you attain the age of 58 years and for the purpose of determining this, the age recorded with the company at the time of appointment shall be considered as final and conclusive. Additionally, – your services may be terminated by either party giving the other three months written notice or salary in lieu.” The plaintiff asserted this unawareness of this clause as it was never made public. The Court denied the contentions of the plaintiff and held that in terms of the appointment letter, defendant had the right to terminate the employment of the plaintiff.

Termination under misconduct

An employee whose services have been dismissed due to misconduct has the right to call for an enquiry. Audi alteram partem i.e. let the other side be heard as well is a fundamental right which the citizens are entitled to. In industries it plays out as a right of the employee to check the falsity of the employer’s contention.

The Industrial Employment Act of 1946 lays down the procedure to conduct the enquiry.

An example of grave misconduct can be defiance of the company’s code of conduct or policy. Before termination of services, the company is required to give warnings regarding the employee’s behaviour and conduct an internal inquiry. If the reasons are not in accordance with company’s policies then the employee can be terminated.

The employer, however, has the right to terminate services without conducting internal inquiries. But this seldom happens as (s)he then has to justify before the court the reasons for not doing so. The employee can plead unjust domestic inquiry by providing substantial evidence for the same. However, such claims have to be made at the earliest in the form of written statements submitted to the court.

Illegal termination

An employee can plead illegal or wrongful termination in the following cases:

1. Violation of the state’s anti-discriminatory laws

2. Violation of the employment or labour laws of India

3. If termination is viewed as a form of sexual harassment

4. If termination is understood as retaliation to an earlier act by the employee say for example filing a   complaint against the employer

Coming back to Rohit’s case, dismissal of his services is illegal since he did not receive a notice 30-90 days prior to termination. He also has the right to challenge the cause for his termination in the court.

It is very important for employees to be aware of their legal rights and duties in the workplace. If one is confronted with a similar situation then the first and the foremost step is to consult and hire a lawyer. A lawyer can not only provide legal protection but also help one take informed decisions.