Kool's Commentary : Sep 15 PR - Page 10

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The main statutes which regulate termination of employment (in India) are the Industrial Employment (Standing Orders) Act (IESA), 1946, and the Industrial Disputes Act (IDA), 1947, as amended. Some States have also passed legislation dealing with dismissal.

Dismissal

The law relating to termination of employment in India distinguishes broadly between three different situations: dismissal for misconduct, discharge and retrenchment. Indian law starts from the common law premise that an employer has a right to terminate the services of an employee without giving a reason. However, this position has been affected by legislative intervention and by the development by the courts of natural justice requirements.

As regards termination of employment for disciplinary reasons, some instances of misconduct which may justify dismissal without notice and any compensation in lieu of notice include:

• wilful insubordination or disobedience;
• theft, fraud or dishonesty;
• wilful damage or loss of employer's property;
• bribery;
• habitual lateness or absence; and
• striking unlawfully

Termination of employment is unlawful if it is for reasons related to trade union membership or activity; filing complaints concerning the employer; race, colour, sex, marital status, pregnancy, religion, political opinion or social origin. In addition, termination of employment in violation of fair labour practices as defined by legislation or case law will not be valid. Some "Unfair Labour Practices" include dismissal on account of trade union activity or membership; dismissal by way of victimization; dismissal not in good faith but in "the colourable exercise of the employer's rights" … dismissal without due regard to natural justice or for minor misconduct leading to disproportionate punishment.

Furthermore, despite the fact that an employer is entitled to dismiss an employee for serious misconduct or inadequate performance of work, the rules of natural justice have now influenced labour law jurisprudence in India to the extent that the employer will be required to give the employee a "hearing" to answer the charges before the dismissal is effected. This may take the form of a written complaint to initiate departmental proceedings with a view to disciplinary proceedings, and the hearing may be a mere explanation from the employee or may be a full departmental inquiry into the matter with the necessary documentary evidence. Questions into the legality of dismissal due to misconduct often hinge on the nature of this internal inquiry and the Indian courts, in the interest of good industrial relations, have consistently affirmed the need for the rules of natural justice to apply. Central to these rules are the requirements that the employee has a fair hearing, including the right to adduce evidence on his or her behalf and to cross-examine witnesses, and that the hearing be free from bias. An employee who faces a charge of misconduct may also generally expect only a warning if it is a first offence or is not habitual conduct.

Retrenchment

Under sec. 25F of the IDA, an employer proposing to retrench workers, who have been continuously employed for more than one year, must give one month's notice or pay in lieu of such notice to the worker, and must also notify the relevant governmental authority, giving the reasons for the proposed retrenchment.

Special provisions under the IDA are applicable in relation to industrial establishments employing 100 workers or more. In this case, workers may not be retrenched unless three months' written notice, stating reasons for the retrenchment, or pay in lieu of notice, is given to the worker. In addition, the employer must seek prior authorization from the relevant governmental authority before the retrenchment can be carried out.

The concept of "prior authorization" in this context perhaps needs some elaboration here. The Supreme Court of India has recognized the right of management to run its own business as it pleases without any interference by the courts. The decision to retrench is thus left solely up to the discretion of management. The court will inquire only into the closure to verify that it is bona fide and for economic reasons and will not question the motive behind it. The concept of a bona fide redundancy does not, for example, include a situation where retrenchment is carried out in accordance with unfair labour practices or to victimize workers. Consequently, the proper governmental authority is required to examine the reasons given in the notice for the proposed retrenchment to ascertain whether they are in accordance with good labour practice and are for bona fide reasons of redundancy. If this is not found to be so, the governmental authority may refuse permission for the retrenchment, giving its reasons in writing

Avenues for redress

Since the 1965 amendments to the IDA (sec. 2A), the dismissal or retrenchment of an individual is deemed to be an industrial dispute, hence the ability of a worker to take his or her claim to the Labour Courts. Under sec. 2(a) of the IESA, a worker dissatisfied with his or her termination of employment is entitled, in the first instance, to raise the matter as a labour dispute with an officer from the conciliation department of the Ministry of Labour. The officer will attempt to conciliate the matter and must submit a report to the Government if conciliation fails, pending a decision from the governmental authority on whether the matter merits adjudication before the Labour Court or Tribunal.

Challenges to dismissal can be made to the Labour Court under sec. 11A of the Industrial Relations (Amendment) Disputes Act, 1971. The Labour Court may review a termination of employment and set aside a dismissal if it decides that the dismissal was not justified