Termination of employment contracts in India

In India, employees are broadly categorized as workmen and non-workmen. Persons employed in a managerial or administrative or supervisory capacity and earning salary in excess of INR 10,000 (~USD 120) are considered as non-workmen. The employment of such employees (non-workmen) may be terminated at will so long as it is in accordance with the terms of their employment contract.

A person qualifying as a ‘workman’ can be dismissed/retrenched only with sufficient cause and in accordance with the procedure provided under law (such as notice, payment of retrenchment compensation, etc.).

There is no general concept of ‘dismissal protection’ in India. However, women employees on maternity leave cannot be dismissed during their maternity leave. Also, workmen cannot be dismissed during the adjudication of an industrial dispute.

If it is found that the employment of a workman was wrongfully terminated, the workman will be entitled to reinstatement of employment plus damages/compensation. Workmen can approach the labour department and the industrial tribunal in this regard. However, in the case of non-workmen (employees), their only remedy is to claim damages if their employment is terminated in breach of the employment contract.

If it is found that the employment of a workman was wrongfully terminated, the quantum of damages is usually based on whether the damages are paid in lieu of reinstatement or in addition to the reinstatement of employment. As regards employees (where their employment is terminated in breach of their employment contract), damages are usually awarded only for direct loss or damage caused from such termination. Remote or indirect loss or damages are typically not entertained.

No, the right to terminate does not forfeit. However, where termination is for misconduct, action must be taken within a reasonable time from the date of misconduct/date on which the employer became aware of the misconduct.

While the law does not mandate the submission of a written notice of termination, as a matter of practice, termination letters are always issued in writing mentioning details of the notice period/payment in lieu of notice, etc.

Notice of termination cannot be rejected as such, and internal authorisation is generally sufficient.

In case of non-workmen, there is no specific procedure to be followed and termination of employment would be as per the terms of their employment contract. In the case of workmen, (who have been in continuous service for at least a year, i.e., 240 days), the employer is required to notify the labour authorities as a pre-condition to the retrenchment of workmen. However, certain industrial establishments in which more than 100 workmen are employed, prior approval of the labour authorities must be sought prior to the retrenchment of any workman.

Further, in case of retrenchment, every worker who has been in continuous service for at least one year (i.e., 240 days) is entitled, among other things, to retrenchment compensation at the rate of 15 days average pay for every completed year of continuous service or any part in excess of six months. For non-workers, severance payments are set out in the agreements executed between the employers and employees.

No statutory authority needs to be notified upon termination of employment of non-workmen. In the case of retrenchment of workmen, depending on the number of workmen engaged, employers are required to either notify or seek prior approval of the concerned labour department. The timeline and format for such notices varies from state to state.

No, there is no such employee representative body that needs to be dealt with before a valid termination letter is issued to an employee or a workman. Having said that, in the case of a workman, it must be examined if any agreed obligations are owed to the workmen’s union (where the workman is a part of any such union).