On June 25th, the 3rd Additional Labour Court, Bengaluru directed WIPRO to reinstate a senior employee, who had apparently been forced to resign. Though the said judgment has not attained finality, it is a wake up call to Information Technology (IT) and Information Technology Enabled Services (ITES) establishments who “ask” employees to resign. Over the years, this practice has become prevalent as companies and employees alike believe that a termination would impact the future prospects of the employee in question. As a result of this belief, a common human resource (HR) practice has begun in the IT/ITES sector where an employee earmarked for separation due to performance issues or redundancy is asked to resign instead of the company terminating his services.
Separation & Termination – What does the law say?
An employee whose role has been rendered redundant or whose performance does not meet the expected standard, is asked to tender his resignation and move out. Many a time, the line managers or Human Resource Business Partners (HRBPs) are required to communicate the same to the employee and the same is done either by email or face to face. This is obviously not a comfortable conversation and many a time leaves the employee devastated.
This practice is not just against the tenets of labour laws, it is also an unhealthy practice that leaves the door open for employees to initiate future action. Every company must ensure it has watertight processes in place for separation. Voluntary separation and involuntary separation must be dealt with as two distinct buckets and each category must follow a strict process with no scope for deviations. A termination is the right approach for any involuntary separation and the company may have options to change it in the future, if so requested by the employee. Otherwise, all involuntary separation should rightly be categorized as terminations/retrenchment and the legal procedure laid down under Chapter V or VA of the Industrial Disputes Act, 1947 must be followed.
Additionally, a reasonable distinction may be drawn between workmen and non-workmen. While those falling within the category of workmen can approach the labour courts and industrial tribunals as set out in Section 7 and 7A of the Industrial Disputes Act, 1947, the same is not the case for non-workmen. Further, Section 3 of Karnataka Shops and Establishment Act, 1961 excludes managerial employees from the applicability of provisions of the said Act. This means, non-workmen have limited or no rights under any specific law and have taken shelter under the general law i.e., Contract Act, 1872 (‘Contract Act’). The rights of a non-workman are derived from the provisions of the Contract Act and employment agreement/ letter of appointment.
In order to enforce their rights, a non-workman has to approach a civil court by way of filing a civil suit. In the event the employment agreement provides for any alternative dispute resolution, under which circumstance such an approach may be adopted.
