Termination without following Natural Justice Principles: Turning A Blind-Eye Towards the Rights of Contractual Employees
Introduction
A contractual employee is defined under Section 2(b) of The Contract Labor (Regulation and Abolition) Act, 1970 which states that a contractual employee is employed by a principal employer in connection with the work of an establishment through a contractor. Earlier, a contractual employee could be terminated merely in accordance to the terms set out in the employment contract. However, over the decade, there has been a notable shift in the legal position of the employee and their relationship with the employer.
Owing to the notable shift, in January 2023, the Kerala High Court (‘HC’) in Tintu K. & Anr. v. Union of India & Ors. held that a contractual employee cannot be terminated merely on the ground of ‘unsatisfactory performance’ without being given a proper notice of such termination. Furthermore, in February 2023, the Orrisa HC in Bichitrananda Barik v. State of Odisha & Ors. held that it is mandatory to follow the rules of natural justice before terminating a contractual employee.
The blog aims to highlight the plight of contractual employees by providing instances where there has existed a constant tussle between the employer and the employee, the blog also highlights the impact of such constant tussle. The blog, in the next section, puts weight on the decisions of the judiciary by reiterating the necessity of providing an adequate notice-period and following natural justice principles while terminating a contractual employee.
Tussle With The Employer: Plight Of The Contractual Employee
It has been observed that contractual employees avail limited rights from their employers since they are primarily employed on the basis of the contract drafted by the employer. Consequently, they are often subjected to unfair treatment within the organization by receiving lesser payment for their work. In September 2022, Odisha saw a massive protest organized by contractual workers. The main theme for the protest was the underpayment of contractual employees in comparison to normal employees . The protesters vocalized the lack of benefits received by contractual employees and demanded that there must exist equal pay for equal work.
Recently, the contractual employees of Visvesvaraya Iron and Steel Plant (‘VISP’), a subsidiary of Steel Authority of India Limited (‘SAIL’), staged a protest opposing the decision of closing the plant by SAIL without making an attempt to bring new investment that would make the production better. The shut down of the plant is threatening the job of over 1300 contractual employees with no other opportunity available to them in any alternative industry.
The author believes that a contractual employee is left with two mechanisms to cope with such working conditions: (a) a contractual employee may quit working with their current employer and hope to find another job or (b) a contractual employee may play a role in protests and become a part of a trade union to present a united front for their concerns. However, due to lack of employment opportunities and considering the demise in working condition after Covid-19, the contractual employee is left with a third option, that is to suffer at the hands of their employer in silence.
The Judicial Stance on Termination of Contractual Employee
In order to better the conditions of such contractual employees, in December 2011, the Hon’ble SC in GRID-CO Limited & Anr v. Sri Sadananda Doloi & Ors. held that a court exercising writ jurisdiction has the power to examine the validity of termination of a contractual employee. In cases where the court has reasons to believe that the termination is unfair, unreasonable, perverse, arbitrary or illegal, then the court has the power to interfere in the matter notwithstanding the contractual nature of the matter. Moreover, a contractual employee can now claim protection against an untimely or arbitrary termination even if the employer is the State. Therefore, the Hon’ble SC acts as a safeguard for the contractual employees in cases where the employee has been removed from service on the grounds mentioned above.
(a) Termination of a contractual employee without giving an opportunity to be heard.
Consequently, the judiciary has, time and again, reiterated that the employer while terminating the contractual employee must follow the principles of natural justice. The Orrisa HC in the case of Bichitrananda Barik v. State of Odisha & Ors. has put an emphasis on adherence of the principles of fairness while terminating a contractual employee. In the above-mentioned case, a show-cause notice was issued to a contractual junior teacher for the termination of contract by the District Education Officer. The points of contention in the case are as follows:
(a) the CEO, Zilla Parisad-cum-collector is the appointing authority as well as the disciplinary authority, and any action thereof is supposed to be initiated by the CEO and not the District Education Officer for any misconduct during the employment; and
(b) when an enquiry was conducted, the petitioner had no knowledge regarding the enquiry and therefore lost the opportunity to defend himself against the allegations.
The Orrisa HC in reply to the contentions held that the District Education Officer lacked authority to issue a show-cause notice to the petitioner. The HC further observed that conducting an enquiry in such a manner was untenable in the eyes of law and it was contrary to the principles of natural justice. It is pertinent to note that the Court in the above case did not prohibit action being taken against the petitioner but merely ascertained that the disciplinary action must be done in accordance to law.
(b) Terminating a contractual employee merely on the ground of ‘unsatisfactory performance’ without supplementing a proper notice.
Building on the importance of following natural justice principles while terminating a contractual employee, the Kerala HC in Tintu K. & Anr. v. Union of India & Ors. held that before terminating contractual employees, it is mandatory to provide a notice with regards to the unsatisfactory nature of their service, and the employee can only be terminated after due enquiry if a finding is rendered in support of such performance. The court in the above-mentioned case observed that the petitioners were in service on a contractual basis from 2010 to 2016 and the contention raised to send them out of service merely on the ground of unsatisfactory performance without proper notice was pervasive in nature.
Analysing the stance taken by various courts, the author suggests the incorporation of three essential guidelines for the employer to follow for promoting discussion and open communication with the contractual employee:
first, only a competent officer with the requisite authority shall issue a notice for terminating a contractual employee;
second, during the enquiry, the employer shall adopt a receptive and open vantage point ensuring that the termination is not arbitrary or pervasive; and
third, the employer shall provide full consideration to the views of the contractual employee and shall ensure adherence to the principles of natural justice.
Conclusion
Over the decade, there has been a notable shift in the legal position of the employee and their relationship with the employer, however, there exists a need for a generous system of protection for contractual employees. By ensuring that principles of natural justice are followed while terminating contractual employees, the judiciary is attempting to bridge the gap that exists between contractual law and the interests of the contractual employee.
The blog reiterates few of the numerous instances where there has existed a tussle between the employer and the contractual employee. The common vantage point in all of these instances is that the contractual employee suffers at the hand of the employer since the employer has a leverage buried in the fine prints of the contract. Ultimately, the blog puts forward the position that an employer can definitely terminate his contractual relation with the employee for reasons that exist in law; however, it is important for the employer to first, provide a proper notice of such termination and second, to follow the principles of natural justice by allowing the contractual employee to defend himself in case of an enquiry.
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