Termination by Cause: Mitigating Risks and Ensuring Compliance.

Terminating an employee for a cause—due to poor performance, misconduct, or violation of company policies—can be a complex and sensitive process for employers. While termination by cause is often necessary to maintain a productive and compliant workplace, it also carries inherent risks of legal challenges and litigation if not handled properly. In this article, we explore key considerations for employers when terminating employees for cause and strategies to mitigate risks effectively.

Understanding Termination by Cause

Termination by cause refers to the dismissal of an employee due to specific reasons, such as:

Poor Performance: Persistent failure to meet job expectations, achieve targets, or perform duties adequately despite warnings or performance improvement plans.

Misconduct: Violation of company policies, code of conduct, or ethical standards, including dishonesty, harassment, discrimination, theft, or insubordination.

Breach of Contract: Non-compliance with employment agreements, terms of employment, or contractual obligations, such as confidentiality agreements or non-compete clauses.

Key Considerations for Employers

When terminating employees for cause, employers must prioritize compliance with applicable labor laws, fairness, and due process. Here are essential considerations to mitigate risks and ensure legal compliance:

Documentation: Maintain thorough documentation of the employee's performance or misconduct issues, including performance evaluations, warning notices, disciplinary actions, and any relevant correspondence. Clear and detailed documentation serves as evidence to support the termination decision and defend against potential legal challenges.

Consistent Enforcement: Apply disciplinary policies and procedures consistently and fairly across all employees. Ensure termination decisions are based on objective criteria and not influenced by personal biases, favoritism, or discriminatory practices.

Due Process: Provide employees with notice of performance or conduct deficiencies, opportunities for improvement, and a reasonable chance to address concerns through performance improvement plans or corrective actions. Employees should be allowed to respond to allegations or provide their side of the story before making any termination decision.

Legal Review: Seek legal guidance or consult employment law experts to review termination decisions, assess compliance with labor laws, and evaluate potential legal risks. Legal counsel can provide valuable insights into the legal implications of termination by cause and help mitigate risks of litigation.

Conclusion

Termination by cause is a critical aspect of managing a workforce effectively, but it requires careful planning, documentation, and adherence to legal requirements to minimize risks and ensure compliance. By maintaining clear documentation, applying consistent enforcement of policies, providing due process to employees, seeking legal guidance, and offering fair severance packages when appropriate, employers can mitigate the risk of litigation and maintain positive employee relations even in challenging termination situations. Ultimately, prioritizing fairness, transparency, and compliance with labor laws is essential for successful termination by cause management.

Understand domestic enquiry due process in India to reduce litigation risks and fair.

A company investigation to identify facts and data about a situation in which an employer has accused an employee of misconduct. Typically, a domestic investigation follows a 'show cause' letter, which is sent to the worker asking for an explanation for the alleged misconduct. The employer will move to a more formal domestic inquiry if the reply is not satisfactory.

We understand that the term domestic inquiry is mainly used to refer to an inquiry into an employee’s charges of indiscipline and misconduct, based on the above description of domestic inquiry. Domestic inquiry means departmental inquiry or domestic tribunal in common parlance. The matter is decided by administrative officers in such investigations and not by the courts of law. It is common for disciplinary authorities in a department or in an industry to appoint an officer or officers in cases of alleged indiscipline to investigate the allegations against an employee. These inquiries are generally referred to as 'Domestic Enquiries'. At times it is in the best interest to engage an outside firm to ensure no bias and adoption of the full procedure.

Notice that the domestic inquiry is simply an exercise in obtaining facts, i.e., the jury charged with collecting the evidence does not make conclusions about guilt or punishment. The final report is sent to the parties involved, most senior officials, who then decide on the required course of action.

PRINCIPLES OF DOMESTIC ENQUIRY

1. The rule of Natural Justice must be observed.

2. The delinquent is entitled to a just hearing.

3. He can call for his own evidence.

4. Cross-examine any witness called by the prosecution.

A disciplinary hearing held by an employer to decide if an employee is guilty of wrongdoing is a domestic investigation. A domestic inquiry is meant to uncover the facts of the accusations made against the worker.

The Industrial Court, in the course of adjudicating whether a dismissal is without just cause or excuse within the context of Section 20 of the Industrial Relations Act 1967, does not merely examine whether there were proper grounds for the employer to terminate the services of the employee but also examines whether the process by which the employee was terminated was fair or unfair.

(a) That there were fair reasons for the firing of the worker;

(b) That the process used to fire the employee was fair.

Labor laws in India with Penal clauses i.e. Imprisonment

Labor laws in India are designed to regulate employment relationships, protect workers' rights, and ensure fair and equitable treatment of employees. Many labor laws in India have provisions for penal clauses, which outline penalties and consequences for employers who violate these laws. Here are some key labor laws in India with penal clauses:

Industrial Disputes Act, 1947:

This law governs the resolution of industrial disputes and layoffs. It includes provisions for penalties in case of illegal strikes, lockouts, or unfair labor practices.

Penalties can include fines or imprisonment for both employers and employees involved in illegal strikes and lockouts.

Employees' Provident Funds and Miscellaneous Provisions Act, 1952:

This act regulates the establishment and management of the Employees' Provident Fund (EPF) scheme. It ensures that employers contribute to the EPF for their employees.

Penalties for non-compliance include fines and imprisonment for employers who fail to deposit contributions or submit required documentation.

Employees' State Insurance Act, 1948:

The ESIC Act provides for the establishment of the Employees' State Insurance Corporation, which provides medical and cash benefits to employees and their families.

Penalties include fines for employers who do not register with ESIC or fail to contribute their share to the fund.

Minimum Wages Act, 1948:

This act sets the minimum wage rates that employers must pay to workers in certain scheduled employments. Non-compliance can lead to penalties.

Penalties can include fines and imprisonment for employers who pay less than the prescribed minimum wages.

Payment of Gratuity Act, 1972:

This law mandates the payment of gratuity to employees who have completed at least five years of continuous service with an employer.

Penalties include fines and imprisonment for employers who fail to pay gratuity as required.

Factories Act, 1948:

The Factories Act regulates the conditions of work in factories. Violations of safety, health, and welfare provisions can lead to penalties.

Penalties may include fines and, in some cases, imprisonment for employers who do not comply with safety regulations.

Child and Adolescent Labor (Prohibition and Regulation) Act, 1986:

This act prohibits the employment of children in certain hazardous occupations and regulates the working conditions for adolescents.

Penalties include fines and imprisonment for employers who employ children or violate the regulations.

Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 (PoSH Act):

This act aims to prevent and address sexual harassment in the workplace. Employers are required to comply with its provisions and create a safe environment.

Penalties for non-compliance can include fines and legal action against employers.

It's important to note that the specific penalties and consequences under these labor laws can vary depending on the severity of the violation and the specific provisions of each law. Employers are encouraged to comply with all labor laws to avoid legal consequences and ensure fair treatment of their employees. Employees who believe their rights have been violated can file complaints with the appropriate labor authorities.

Employment Law - Discrimination Related to Indian Laws

Discrimination in remuneration, whether during recruitment or employment, is prohibited under several Indian laws that aim to ensure equality and protect the rights of different groups. Here's an elaboration on each of the mentioned acts:

Equal Remuneration Act, 1976:

The Equal Remuneration Act of 1976 ensures that men and women receive equal pay for equal work. It prohibits discrimination in remuneration on the grounds of gender. This means that employers are required to provide the same remuneration to both male and female employees if they perform the same or similar work.

Rights of Persons with Disabilities Act, 2016 (Disabilities Act):

The Disabilities Act aims to protect the rights of persons with disabilities. It prohibits discrimination on the grounds of disability in various aspects, including employment. Employers cannot discriminate against individuals with disabilities in terms of remuneration or any other employment-related benefits.

Maternity Benefit Act:

The Maternity Benefit Act prohibits discrimination against women on the basis of maternity status. This act ensures that women employees are not denied employment opportunities or remuneration benefits due to pregnancy or maternity leave. Employers are required to provide maternity benefits to eligible female employees.

Human Immunodeficiency Virus and Acquired Immune Deficiency Syndrome (HIV/AIDS) Act, 2017:

This act prohibits discrimination against individuals with HIV and/or AIDS. Employers cannot discriminate in terms of remuneration or employment opportunities based on an individual's HIV status. Furthermore, it forbids the requirement for HIV testing as a precondition for employment.

Transgender Persons (Protection of Rights) Act, 2019:

This act seeks to protect the rights of transgender persons. It prohibits discrimination in employment that results in unfair treatment, denial of employment, or termination solely on the basis of an individual being transgender. Employers are required to provide equal employment opportunities to transgender individuals, including fair remuneration.

Sexual Harassment of Women at Workplace (Prevention, Prohibition, and Redressal) Act, 2013 (PoSH Act):

While this act primarily addresses sexual harassment against women in the workplace, it also indirectly impacts remuneration. Discrimination in remuneration on the grounds of gender can be considered a form of harassment. The PoSH Act emphasizes the creation of a safe and non-discriminatory work environment for women.

It is essential for employers to comply with these acts to ensure that they do not engage in discriminatory practices related to remuneration. Violations of these acts can lead to legal consequences, including fines and penalties. Employees who believe they have been subjected to discrimination can file complaints with the appropriate authorities and seek redressal under the relevant legislation.

In summary, these Indian laws collectively work to prohibit discrimination in remuneration on various grounds, including gender, disability, maternity status, HIV/AIDS status, and transgender identity, thereby promoting equality and fairness in the workplace

Employment Law - Steps for if your employer is not providing you with a relieving letter

If your employer is not providing you with a relieving letter, it can be concerning, as this document is often necessary for various purposes, including future job applications. Here are steps you can take to address the situation:

1. Communicate Clearly: Initiate communication with your former employer in a polite and professional manner. Send an email or letter explaining your request for a relieving letter and the importance of having it for your future endeavors.

2. Follow Company Procedures: Review your employment contract or company policies to see if there are any specific procedures or timelines for obtaining a relieving letter. Ensure that you have complied with these requirements.

3. Contact HR: Reach out to your company's HR department or the relevant HR personnel responsible for handling employee records and documentation. Request their assistance in obtaining the relieving letter.

4. Provide Notice: If your company has any outstanding issues with you, such as notice period completion, dues, or return of company property, address these issues promptly. Clearing any outstanding matters may facilitate the issuance of the relieving letter.

5. Mention Legal Rights: Politely remind your employer that, in many jurisdictions, employees have the legal right to receive certain documents upon termination, including relieving letters. Refer to any applicable labor laws or regulations that support your request.

6. Escalate Gradually: If your initial attempts to obtain the relieving letter do not yield results, consider escalating the matter within the organization. Speak to higher-level managers or supervisors who may have the authority to issue the letter.

7. Consult Legal Advice: If your employer continues to withhold the relieving letter without valid reasons, consider seeking legal advice. A labor attorney can help you understand your rights and may be able to send a legal notice to your former employer requesting the letter's issuance.

8. Documentation: Keep records of all your communications and interactions related to the request for the relieving letter. This includes emails, letters, and notes from any conversations. This documentation can be valuable if you need to pursue legal action.

9. Alternative References: In the absence of a relieving letter, you can use alternative references, such as colleagues, supervisors, or other documents (like appointment letters or payslips), to demonstrate your work experience and employment history to potential future employers.

10. Seek External Mediation: Depending on your jurisdiction, you may have access to labor boards or government agencies that can mediate disputes between employees and employers. Explore this option if necessary.

Remember that the specific steps you take may vary depending on your location and the circumstances of your employment. It's crucial to remain professional and patient throughout the process while advocating for your rights. Consulting with a legal expert is advisable if the situation remains unresolved or becomes contentious.

Important Legal Aspects for Employee and Employer under the payment of gratuity act India

The Provision of Gratuity Act is a contractual reward given to workers who have worked for at least five years on an ongoing basis. Based on the length of his complete employment, which is a lump sum charged to an employee. The gratuity payment is payable to an employee following cessation of employment (either by dismissal, death, retirement, or termination, etc.) on the basis of the calculation of the last drawn salary. It is applicable where ten or more persons are employed or were employed, on any day of the preceding twelve-month

An employee who has worked for no less than five years shall be entitled to gratuity for his retirement or retirement or resignation, or for his death or injury. Where the cessation of the employment of any person is due to death or injury, a pre-requisite of completion of continuous service of five years shall not be required. In the event of an employee's death, the gratuity owed to him shall be paid to his nominee or, in the absence of that appointment, to his heirs.

The gratuity shall be due on termination of employment to an employee after undertaking continuous service for no less than five years. A person shall be said to be in continuous employment for a span of time whether he has been in continuous employment for that period which requires activities that may be disrupted due to sickness, injury, leave, a departure from duty without leave, lay-off, strike or lock-out or termination of employment not due to the negligence of the employee, whether such continuous or interrupted service has been done or not.

Gratuity is calculated at 15 days' wages last drawn by the employee for each completed year of service. The monthly Basic Salary is divided by 26 and multiplied by 15. In computing a completed year of service the period in excess of six months shall be taken as a full year. 

Gratuity = Monthly salary / 26 x 15 days x No. of years of service. 

The maximum amount of gratuity payable under the Act is Rs.20 Lacs.

The Payment of Gratuity (Amendment) Act, 1987 has prescribed provisions for compulsory insurance for the employer’s liability for payment towards the gratuity under the Act from LIC under the LIC Act,1956, or any other prescribed Insurer.

Each employee who has completed one year of service is required to make a nomination for the purposes of gratuity in case of his death. There can be more than one nominee. (Form F). Nominees may be changed at any time by the employee, by giving written notice to the employer. (Form H). If no nomination has been made, it shall be paid to the legal heirs of the deceased employee.

In the execution of any decree or order of any civil, income, or criminal case, no gratuity due under the Act shall be liable for attachment. However, if the employee has agreed to a deduction as a gratuity from the balance owed, the amount would be restored.

Employment (HR) Policies/Practices and Compliance Audit

Employment (HR) Policies/Practices and Compliance Audit 

KEY OUTCOMES

• HR-related decisions were taken through a decision-making matrix and thus consistently applied across the business, saving management time and reducing ambiguity when communicating with the rest of the team.

• The HR Audit document became the list of projects and initiatives that were scheduled to be completed in order of importance to the business to ensure legal and best practice compliance.

• HR system was sourced, handbooks and policies were introduced, employment contracts were updated and rolled out, governance system was developed, and all I relations issues were resolved.

• We identified a potential Claim that could be raised from the PF department amounting to 25 crores (approx.) and a risk mitigation and remediation

plan was implemented

The Company

Medium-sized IT /Software service provider.

The Problem

The business had recently experienced growth, which necessitated the hiring of a large number of additional staff members quickly. The company's current

Procedures could not support the growth, which led to many HR Area-related problems/ challenges.

The business lacked the in-house expertise necessary to recognize /identify and implement

the improvements that were needed for the HR practices and procedures.

Our Approach

To better understand the business's goals in the short, medium, and long terms as well as the existing HR processes, we spoke with

the senior management team.

We looked at the problems they had with HR practices & policies due to which leadership was required to spend a huge amount of time handling/managing People and process issues.

Actions

• We identified the essential processes and policies that were required as a minimum and put these processes in place immediately to ensure smooth functioning &legal compliance and resolve the current issues

• Developed a detailed report highlighting the good areas and the areas of concern, including longer-term considerations to ensure that the business achieved its goals.

 The report used a traffic light system:

1. Green to identify areas that were fit for the purpose

2. Amber indicated areas that would benefit the business if these actions took place

3. Red highlighted areas that required immediate attention.

Posh Act Support - Kanchan Khatana and Associates

 

Posh Lawyer in India 

The Sexual Harassment of Women at Workplace (Prevention, Prohibition and Redressal) Act, 2013 is a legislative act in India that seeks to protect women from sexual harassment at their place of work. It was passed by the Lok Sabha (the lower house of the Indian Parliament) on 3 September 2012. It was passed by the Rajya Sabha (the upper house of the Indian Parliament) on 26 February 2013. The Bill got the assent of the President on 23 April 2013. The Act came into force on 9 December 2013.  Kanchan Khatana & Associates has a dedicated sub-vertical POSH ADVO   that helps you become compliant with the various mandates under the prevailing law, whereby we provide policy, training and inquiry support in case of a sexual harassment complaint.

This includes :

Acting as External Member on the Internal Committee (IC) and support in driving investigation and documentation of cases

Consultation and Advisory

Organize Mandatory Training 

File Annual Returns for the Company