Guidance on termination of employees.
Legal reference:
a) Industrial Dispute Act, 1947 (IDA)
b) Industrial Relations Code, 2020 (IRC)
I. INDUSTRIAL DISPUTE ACT, 1947
Pursuant to relevant provision of the IDA, where any employer discharges, dismisses, retrenches, or otherwise terminates the services of an individual workman, any dispute or difference between that workman and his employer connected with, or arising out of, such discharge, dismissal, retrenchment, or termination shall be deemed to be an industrial dispute.
> Explanation 1: As a result, we understand, that if any individual workman or worker raises a dispute over the termination, it may fall under the umbrella of an industrial dispute.
Further, as per IDA, retrenchment and workman is defined as follows.
“Termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action but does not include –
a) Voluntary retirement of the workman; or
b) Retirement on reaching the age of superannuation; or
c) Termination of services because of the non-renewal of the contract
d) Termination on the ground of continued ill-health.”
“Workman” means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge or retrenchment has led to that dispute, but does not include any such person;
who, being employed in a supervisory capacity, draws wages exceeding ten thousand rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.
> Explanation 2: Therefore, as per references give above, retrenchment is the termination of service of a worker “for any reason whatsoever” but excludes termination by way of punishment inflicted pursuant to disciplinary action, voluntary retirement, retirement on reaching the age of superannuation if the contract of employment contained such stipulation, non-renewal of the contract of employment, and continued ill-health. Because the IDA does not define disciplinary grounds or misconducts, therefore, whatever an establishment wishes to include in its grounds of misconduct based on their organizational policies will be referred for disciplinary action.
As a result, we conclude that to categorize any dispute or differences as industrial dispute, there must be two aspects to it, first, there must be a termination (other than exclusions) of the services and secondly, the one whose services have been terminated should be a workman.
Conditions precedent to termination under IDA:
No workman employed in any industry who has been in continuous service for not less than one year under an employer
1) shall be retrenched by that employer until the workman has been given one month’s notice in writing indicating the reason for retrenchment or the workman has been paid in lieu of such notice, wages for the period of the notice, and
2) 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
II. THE INDUSTRIAL RELATIONS CODE, 2020
Pursuant to relevant provision of the IRC “retrenchment” means the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include—
(i) voluntary retirement of the worker; or
(ii) retirement of the worker on reaching the age of superannuation; or
(iii) termination of the service of the worker as a result of the non-renewal of the contract of employment between the employer and the worker concerned on its expiry or of such contract being terminated under a stipulation in that behalf contained therein; or
(iv) termination of service of the worker as a result of completion of tenure of fixed term employment; or
(v) termination of the service of a worker on the ground of continued ill-health.
Further, “industrial dispute” means any dispute or difference between employers and employers or between employers and workers or between workers and workers which is connected with the employment or non-employment or the terms of employment or with the conditions of labour, of any person and includes any dispute or difference between an individual worker and an employer connected with, or arising out of discharge, dismissal, retrenchment or termination of such worker
> Explanation 1: Therefore, as per references give above, any dispute arising out of termination of the employee may lead to industrial dispute but excluding terminations by way of punishment inflicted pursuant to disciplinary action. Therefore, in order to avoid any possible conflict, as far as practically possible, grounds of misconduct which may lead to employee’s termination must be defined in writing.
Conditions precedent to retrenchment as per IRC:
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 the workman has been given one month’s notice in writing indicating the reason for retrenchment or the workman has been paid in lieu of such notice, wages for the period of the notice.
Additional financial exposure w.r.t retrenchment:
- As per Sec 70 (b) of IR Code, retrenchment compensation equivalent to 15 days of average pay (shall be paid to the retrenched worker by the employer (average pay of such days as may be notified by the appropriate Government).
- As per Sec 72, where any worker is retrenched and employer proposes to take into his employment any person within 1 year of such retrenchment, opportunity and preference would be given to the retrenched person, provided he is a citizen of India.
- As per Sec 83 of IR Code, contribution by employer will be done with respect to a worker re-skilling fund, equivalent to fifteen days wages last drawn by the worker(s) within 10 days of such retrenchment.
Conclusion:
According to the above-mentioned texts, the advice on retrenchment is more or less the same, with the exception of the worker reskilling fund provided under the IRC.
Further, as we all know, there are two types of employment: workers and non-workers. For non-workers, any period of notice can be agreed upon between the employer and the employee, although in the event of egregious or gross misconduct, even a non-worker is subject to prompt termination. However, as a conservative approach, even a non-worker should, in theory, be given at least one month’s notice (in general cases like poor performance, redundancy etc.) for the termination.
Disclaimer: The preceding information is offered solely for educational purposes and should not be considered as legal advice; as a result, we will not be held liable, either directly or indirectly.
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