Steps that Companies must ensure before

terminating an employee

5 Votes

HIRE AND FIRE AT WILL IN CONTEXT TO INDIA

THE EMPLOYER EMPLOYEE RELATIONSHIP AN EVOLUTION
Times have changed in every respect and this change is more discernible in the economic and
industrial fields. The concept of traditional animosity between the two classes of employers
and employees has also undergone change beyond recognition. Animosity has given way to
co-operation and hatred to loyalty. It is incentive that works better than disciplining. Trust
not mistrust has injected a sense of responsibility among employees. The change is certainly
a welcome sign for establishing a cordial and congenial atmosphere between the employers
and employees.
For determination of the concept of employment, the essential ingredients are:

Employer

one

Employee

who
one

employs
who

i.e.

engages

works

the

for

services
other

of

others;

for

hire;

Contract of Employment the contract of service between the employer and employee
where under the employee agrees to serve the employer subject to his control and
supervision.
In determining whether one acting for another is a servant or an independent contractor, the
following

matters

of

facts,

among

others

are

considered:

(a) The extent and control which, by the agreement the master may exercise over the details
of the work;
(b) Whether or not the one employee is engaged in a distinct occupation or business;
(c) The kind of occupation with reference to whether, in the locality, the work is usually done
under the direction of the employer or by specialist without supervision;
(d) The skill required in the particular occupation;

(e) Whether the employer or the workmen supplies the instrumentalities, tools and the place
of work for the person doing the work;
(f) The length of time for which the person is employed;
(g) The method of payment, whether by the time or by the job;
(h) Whether or not the work performed is a part of the regular business of the employer; and
(i) Whether or not the parties believe that they are creating the relationship of master and
servant;
GOOD

EMPLOYEE

IS

AN

ASSET

Few years ago if you would have asked the senior executives what their companys most
valuable assets were, chances are they would have talked about the brand, goodwill, plant
and machinery and so on. But ask them this question today, and people will most likely
figure in the list. As organisation is made up of competencies which we can loosely call
capital. Its components are customer capital, structural capital and human capital.
Globalisation has certainly thrown new challenges before HR persons as they have to prepare
employees to meet the challenges of knowledge based economy and to respond to the
dynamics of work environment with technological skill and a high level of thinking. Just as it
is vital for every establishment to attract the right talent, it is equally important for them to
retain that talent. Todays situation is such that companies are constantly vying with each
other to offer better perks to their employees. While the nature of these perks may differ
across levels, companies are offering incentives something beyond just pay packages. It is a
fact that no employer will dismiss or terminate or retrench an employee unless he is
compelled to do so. An employer is always interested in production, rendering of services and
performance of duties as assigned to an employee. An employee is also bound to maintain
discipline

and

perform

duties

diligently

and

efficiently.

If, however, any employee becomes incorrigible, the law provides ways and means to an
employer to dismiss, discharge or retrench him/her. However while doing so employer will
have to observe certain procedure and his action should never smack of mala fide intention,
otherwise that will not stand the scrutiny of the court. It must be noted that labour laws in
India are codified and they have been further expanded by judicial interpretation and
verdicts.
The traditional right of an employer to hire and fire his workmen at his will has been
subjected to may restraints. Industrial tribunals can by their award make a contract which is
binding on both the parties creating a new right and imposing new obligations arising out of
award. There is no question of the employer agreeing to the new contract; it is binding even
though it is unacceptable to him. The creation of new obligations is not by the parties
themselves. Either or both of them may be opposed to it, nevertheless it binds them. An
employer has the freedom to select anybody according to his requirements but he does not

have the liberty to fire the workman / employee as per his will. Legislations like Industrial
Disputes Act (in case of workman) and Shops and Commercial Establishments Act (in case of
an employee) has made it difficult for an employer to dismiss / discharge / retrench an
employee

by

employer

Dismissal

at

his

Discharge

free

will.

of

Employee

DISMISSAL
Dismissal of an employee is the biggest punishment which an employer can give to an
employee. It is the termination of services by way of punishment for some misconduct or for
unauthorised and prolonged absence from duty. There is a vital difference between dismissal
and discharge. Discharge is a termination of a contract by notice or payment of wages /
salary in lieu of notice, whereas dismissal implies not merely termination without notice or
payment, but essentially indicates a measure of punishment. The dismissal of an employee is
easier said than done. The employer is bound to give an opportunity to explain the conduct
and show cause why he should not be dismissed. The general rule is that in this process,
there should be no violation of what is known as the principles of natural justice, which
ensures that punishment is not out of all proportions to the offence, misconduct or negligence
alleged. In fact, there is no provision for summary dismissal. Before dismissal the employee
may be placed under suspension and a proper inquiry is conducted to enquire about the
misconduct of the employee. During the suspension the employee receives a subsistence
allowance. The managements action must not suffer from vindictiveness and capricious
attitude. In case of dismissal for misconduct the tribunal / court do not, however, act as a
court of appeal and substitute its own judgement for that of the management, it will
interferea)

When

b)

there

When

there

is

is

want

victimisation

of

or

good

unfair

faith;

labour

practices;

c) When the management has been guilty of a basic error or violation of the principles of
natural
d)

justice;

When

on

the

material

the

finding

is

baseless

or

perverse.

These are basic four exceptions which confer jurisdiction on industrial tribunals to interfere
with the managerial discretion and apply with equal force to the determination of the
question

of

the

quantum

of

the

punishment.

DISCHARGE
Discharge is a permanent separation of an employee from the pay-roll for violation of
company

rules

or

for

inadequate

performance.

discharge

becomes

necessary:

i) When the volume of business does not justify the continuing employment of the person(s)
involved;
ii) When a person fails to work according to the requirements of the job either because of
incapacity or because he has deliberately slowed down work, or because there is no suitable
place

where

he

can

be

transferred;

iii) When he forfeits his right to a job because of his violation of a basic policy often involving
the

safety

of

others,

the

morale

and

discipline

of

group.

Causes

of

Discharge

A discharge seldom arises suddenly or from a single impulsive act. Many causes account for
it.

Some

of

these

are:

a) Frequent causes: Inefficiency, dishonesty, drunkenness, carelessness or indifference,

violation

of

rules;

b) Infrequent causes: Accidents, insubordination, personal conduct, uncleanliness, infraction

of

rules,

destructive

negligence,

wastefulness

and

physical

unfitness.

c) Other causes: Carelessness, lack of co-operation, laziness, tardiness in starting work,

frequent absence without leave, dishonesty, lack of specific skill, preventing promotion,
adverse

attitude

towards

Discharge

organisation.
Procedure

To avoid unnecessary grievances arising from discharges, proper rules should be framed to
govern them. To demonstrate that a discharge is justified and does not arise out of unfair
discrimination or personal prejudice of the supervisor, following evidence needs to be
produced:
(1) Permanent records of all merit ratings made by supervisors;
(2) Permanent records of ratings of the employees traits;
(3) A memorandum bearing an efforts made by the management to help the employee to
overcome his weakness;
(4) A copy of any warning that has been sent to him;
(5) The letter of discharge, especially, if the letter states the cause of discharge;
(6) Discharge should always be made in accordance with the procedure stated or specified in
the code of conduct / service rules. If there are no service rules / code of conduct, then the
management needs to reflect that their conduct is not arbitrary and against the principles of
natural justice. Further such service rules / code of conduct and amendments thereto should
have been communicated to employee at appropriate time;
(7) The action of discharge should be bona fide and should neither be a punitive measure nor
a case of victimisation;
(8) The reasons of discharge should be clearly communicated;
(9) The individual concerned should be adequately informed about the reasons for his
discharge;
(10) The supervisor, in charge for initiating the action should be fully conversant with rules
and regulations of the organisation;

(11) The facts regarding the violation of rules and regulations should be carefully analysed;
(12) Adequate provisions should exist for review of the discharged employees case;
(13) A discharged employee needs a reasonable notice or an equivalent pay in lieu of notice.
It carries with it certain penalties, such as difficulty of re-employment, loss of benefits and, in
certain cases, loss of a part of provident fund.
CONCLUSION
Although good management generally does not opt for adopting deterrent methods to curb
and control indiscipline and misconduct of employees, yet many a times it becomes
necessary to take recourse to harsh methods. Modern management believes more in
motivation, co-operation and incentives than rigours of discipline, confrontation and
distraction. However, it is absolutely necessary for a personnel manager or person in charge
of employee issues to know the basics of labour laws to deal with contingencies.
CONTACT INFORMATION
LOKESH
advocate_lokesh@yahoo.co.in
+919036033535

RAJPAL