Wrongful termination of employment – Rights and remedies

Admin

1 year ago

The pandemic has significantly impacted India’s economic landscape, leading to numerous wrongful terminations that have left many employees facing mental distress and financial instability. Each year, countless individuals experience wrongful termination, often finding themselves without any financial safety net. Being wrongfully terminated can be an incredibly upsetting experience, whether it results from discrimination, retaliation, or contract violations. In these situations, it’s crucial to understand the laws governing wrongful termination and our rights and remedies to seek justice.

Wrongful Termination

Wrongful termination occurs when an employer dismisses an employee for illegal reasons, breaches employment contracts, or fails to provide valid grounds for dismissal. Common causes include discrimination based on race, gender, age, religion, or disability, retaliation for whistleblowing, or violation of company policies. Employers must provide legitimate reasons for termination; if they fail to do so, it constitutes wrongful termination, also referred to as wrongful dismissal or wrongful discharge.

Laws Governing Wrongful Termination in India

Labor law is a concurrent subject under the Indian Constitution, meaning that labor and employment regulations are managed at both federal and state levels. Important federal statutes that cover employment termination include: The Industrial Employment (Standing Orders) Act (IESA), 1946 and The Industrial Disputes Act (IDA), 1947, as amended.

Key Labor Codes

Code of Wages, 2019: This code consolidates four labor laws and addresses wage payments, bonuses, and employee remuneration.
Industrial Relations Code, 2020: This code merges three laws—The Industrial Disputes Act, 1947; The Trade Unions Act, 1926; and The Industrial Employment (Standing Orders) Act, 1946. It focuses on employment conditions, industrial disputes, and employee working conditions, making it a subject of significant debate.
Occupational Safety, Health, and Working Conditions Code, 2020: This code combines 13 central labor laws related to contract labor, factories, and other establishments.
Code on Social Security, 2020: This code subsumes nine laws aimed at providing social security benefits to workers, covering retirement, maternity, and various health-related benefits.

Shops and Establishments Act: In addition to these codes, labor in India is also regulated by the Shops and Establishments Act, which varies slightly from state to state. This Act governs employment conditions in all commercial premises where trade, business, or profession is conducted, with implementation differing based on the employer’s area of operations.
Absence of a standard termination process: According to Indian labor laws, there is no standardized process for terminating an employee. The following points summarize how termination can occur:

Termination may be carried out according to the specific terms outlined in the individual labor contract between the employee and employer. Similarly, the terms may be governed by the country’s labor laws.
Employers must ensure that any termination policy or clause in the contract complies with existing labor laws, which take precedence over the contract terms. Professional legal advice is recommended for this purpose.
If there is no written labor contract or if the contract lacks termination procedures, the issue falls under the jurisdiction of the respective state’s labor legislation. Indian federal law does not mandate written employment contracts.
Indian labor laws offer substantial protections for workers. Courts, along with state and federal labor departments, typically adopt a pro-worker stance in disputes related to employment termination, reinforcing the rights of employees in these matters.

Grounds For Wrongful Termination

Employees can be terminated for either valid or invalid reasons. Terminations based on valid grounds, such as misconduct, poor performance, dishonesty regarding qualifications, theft of information, sexual harassment, willful disobedience, or damage to the employer’s property, are not considered illegal. These valid grounds are typically outlined in the employment contract. If a dismissal aligns with these agreed-upon criteria, it is deemed fair.

However, many cases involve terminations based on arbitrary or vague reasons, which can lead to illegal dismissals. Such wrongful terminations generally fall into several broad categories:

Discrimination: Termination based on race, age, gender, nationality, or health status (such as being HIV positive) is considered wrongful termination. Such actions violate an employee’s fundamental rights as protected by the Constitution of India.
Violation of Agreement/Contract: Both employers and employees must adhere to the terms of their employment contracts. If an employer breaches these terms to terminate an employee, it constitutes illegal termination. This includes situations where an employer creates conditions that force the employee to resign, known as constructive dismissal.
Constructive Dismissal: This occurs when an employee feels pressured to leave their job due to an unapproachable work environment or changes to their job terms initiated by the employer.
Retaliation: Employees discharged for reporting illegal or discriminatory behavior, or for participating in investigations, face wrongful termination. For example, if an employee reports discrimination and is subsequently dismissed, this is considered illegal.
Coercion to Commit Illegal Activities: Termination following an employee being asked to engage in illegal acts—such as spreading rumors or altering sensitive information—constitutes wrongful dismissal.
Personal Bias: If an employee is fired due to personal grudges, disputes, or refusal to follow illegitimate orders from the employer, this is deemed illegal termination. An employer cannot dismiss an employee based on personal animosity.

Rights Against Illegal or Wrongful Termination

Right to be given a written notice of termination: The most important of termination rights is the right to be given a written notice of termination. This notice must state the reasons for dismissal and be truthful. If the employee contests the reasons for their dismissal, they have the right to have the notice evaluated by an employment tribunal. Additionally, the notice period must be a minimum of seven days unless there is an emergency. Lastly, when an employer decides to terminate an employee, the organization is required to provide the worker with a written notice of termination.
Right to Appeal: The employee has the right to appeal the decision, with the grounds for appeal varying depending on the circumstances, often relating to discrimination. If an employee is dismissed without a clear reason or feels the dismissal was unfair, they can appeal to the court. Employees have a legal right to appeal to their relevant authority for the following reasons:

The employer terminated the employee without providing a specific reason.
The employee has not been found guilty of misconduct and asserts their innocence.
The employee believes their dismissal was based on unfair grounds.
Before seeking redress for these grievances, employees must establish a case and obtain approval from their local labor authorities. Once approved, the case may be handled by conciliation officers, industrial tribunals, or labor courts. In India, most workforce disputes take between six months to two years to resolve.

Right to a hearing on the matter: Even if there are valid reasons for a dismissal, the employee has the right to a hearing regarding the issue. This includes an examination of their work performance and behavior. If the employee disputes their dismissal, they can request a review by an employment tribunal.
Right to be informed of the reason for dismissal: When an employee is terminated, it’s important for them to understand their rights and take appropriate action. Here are four key points to keep in mind regarding termination:

An employee who feels their rights were violated during the termination process has the right to file a grievance.
If an employee does not receive a notice of dismissal, they can request one from their employer.
Employers are required to investigate all claims of wrongful termination and take necessary corrective measures.
Employees are entitled to receive written notice of their dismissal, which must include the reasons for the termination.

Right to Court: when an employee is terminated unlawfully, that dismissal is subject to penalties. Even if employer engage in any illegal actions related to your termination, the employee has the right to sue for damages.
Right to Severance Pay: Employers must clearly communicate the reasons for an employee’s dismissal. It is required to provide a written explanation of the grounds for termination and an estimate of severance pay entitlements. The termination notice should also outline the process and timeline for appealing the dismissal. According to the Payment of Gratuity Act, 1972, employees are entitled to gratuity payment after five years of continuous service.
Right Against Discrimination: India has several labor laws that protect against wrongful termination. If a dismissal is based on discrimination, it violates an individual’s fundamental rights as outlined in the Indian Constitution. Employees can seek legal recourse for such violations.

Remedies Available to Employees

There are many remedies available against wrongful termination of employment and the factors Indian courts consider when awarding such remedies to workers and employees.

Legal Notice: The legal notice is the initial step in pursuing legal recourse. It should provide a detailed account of the situation and be signed by a lawyer. Through this notice, the employee must seek full compensation, including back pay, lost benefits, injunctive relief, front pay punitive damages, health insurance, provident fund, and lost salary. A specific timeframe for the employer to respond and compensate the employee for their job loss and salary (including interest for delays) should be included. The notice should also indicate that the employee will file a case in court if the employer does not comply within the specified timeframe.
Suit: If there is no response or if the response from the employer is unsatisfactory, or if the employee’s rightful demands are not met within the timeframe, they can file a suit in court with the assistance of a lawyer. The employee may also approach the Labour Commissioner in their region to present their case, where the employer will be called to respond. If the dispute remains unresolved after 45 days, the employee can escalate the matter to the Industrial Court in their region. Many employers prefer out-of-court settlements, such as mediation, as they are quicker and help maintain the company’s reputation.
Jurisdiction: The appropriate jurisdiction for seeking remedies against wrongful termination depends on the right being enforced and the type of relief requested. If the right is defined by specific regulations, the designated forum will usually have jurisdiction, depending on the nature of the relief sought. When determining jurisdiction for employment disputes, the Supreme Court has stated:

Civil courts have jurisdiction if the dispute is not classified as an “industrial dispute” or does not relate to rights granted under industrial laws.
Civil courts have jurisdiction if the dispute is an “industrial dispute” and the right being enforced is under common law rather than industrial law.
Civil courts do not have jurisdiction if the dispute is an “industrial dispute” and the right being enforced is under industrial law.
The term “industrial dispute” encompasses issues arising from the discharge, dismissal, or retrenchment of workers.

Reinstatement or Specific Performance: Reinstatement is a common remedy where the employee is returned to their position. Indian law regarding specific performance of employment contracts is well-established. According to the Specific Relief Act, 1963, in the context of private employment, even if termination is deemed wrongful, the former employee may only claim damages, as employment contracts are generally seen as personal service contracts that can be terminated with appropriate notice.nFor workers, the situation is more complex. Industrial law allows industrial tribunals to award reinstatement and compensation. If a worker is terminated for cause, courts may set aside the termination order only if it is deemed disproportionately severe or if the inquiry conducted by the employer was unfair.
Damages: Indian courts apply the principle of mitigation of damages outlined in Section 73 of the Indian Contract Act, 1872, which means that damages awarded must be reasonable in relation to the employment agreement. The Supreme Court has indicated that if the employment contract allows for termination with one month’s notice, damages for wrongful termination will typically equate to one month’s salary, reflecting the period the employee could seek alternative employment. Courts usually grant damages limited to the salary for the notice period and do not award damages for unemployment beyond that period.

Relevant Case Laws

Smt. Saroj Agarwal vs Union of India and Others: In this case, the court determined that reinstatement, along with continuity of service and back wages, is the standard remedy for wrongful termination.
Ram Manohar Lohia Joint Hospital and Others vs Munna Prasad Saini and Another: This case focused on whether the first respondent was employed by Bombay Intelligence Security (I) Ltd. or by the appellant hospital.
S.S. Shetty v Bharat Nidhi Ltd: The Supreme Court ruled that if employment terms specify termination with one month’s notice, damages awarded should typically amount to one month’s salary.
Vikas Kumar v. South Delhi Municipal Corporation: The High Court determined that compensation is an appropriate remedy when reinstatement is not feasible.
Ram Ashrey Singh and Others vs. Ram Bux Singh: The Supreme Court stated that back wages are not automatically granted; instead, their entitlement is discretionary and depends on the specific circumstances of each case.
State of Uttarakhand v. Raj Kumar: The Supreme Court held that when illegal termination is established, reinstatement with full back wages is generally granted, though this is contingent upon the details of the case.

Conclusion

Wrongful termination can significantly impact both an employee’s career and personal life. However, knowing your rights, the relevant laws, and the remedies available can provide some relief and it is crucial for employees who find themselves in such distressing situations, whether due to discrimination, retaliation, or contract violations. The laws governing wrongful termination in India provide significant protections for employees, ensuring that dismissals are based on legitimate grounds and that employees are afforded their rights during the termination process. From the right to receive written notice and the ability to appeal a dismissal to the right to seek legal recourse, employees are empowered to challenge unjust terminations.

Moreover, various remedies are available, including the possibility of reinstatement, compensation for lost wages, and other damages. The legal landscape, reinforced by key labor codes and case law, underscores the importance of following proper procedures in termination cases. As employees navigate these challenges, awareness of their rights and the avenues available for redress can help them seek justice and recover from the impacts of wrongful termination. Ultimately, the fight against wrongful dismissals is not just a legal battle but a critical component of ensuring fair treatment and dignity in the workplace.

FAQ

Can Termination Be Challenged in Court?

Whether termination has occurred is inferred from the circumstances. If there is a repudiation of the contract between the parties, it constitutes wrongful termination, and the affected individual is entitled to damages.

Can We Terminate an Employee Without Notice?

In India, the general rule is that employers must provide notice before terminating an employee. However, certain situations—such as gross misconduct, breach of contract, redundancy, or during probation—may justify immediate termination without notice.

Can I Sue for Wrongful Termination in India?

Courts have frequently deemed such questionable actions invalid and have granted relief to employees through reinstatement and payment of back wages. Workers can approach labor courts for claims of wrongful termination under the Industrial Disputes Act.

When Can an Employee File for Wrongful Termination?

Wrongful termination occurs when an employer violates an employment contract or law while dismissing an employee. Such terminations may result from harassment, discrimination, or retaliation, among other factors.

What is the Compensation for Wrongful Termination in India?

Mitigation of Damages under Contract Law: According to Section 73 of the Indian Contract Act, 1872, an employee is entitled to compensation for wrongful termination but is expected to mitigate their damages.