Query
Hi, Iam from a large proprietorship company in Delhi.

Recently some employees are hired in our company across various functions.

As per co policy, offer letter is given only after joining. The offer letter carries standard terms of termination for all levels/function. It says, co. can terminate any employee any time without assigning any reason with one months salary/notice whereas if the employee wants to leave he/she will have to pay last 5 months salary.

We want to terminate contract of couple of employees (middle-senior management) as they are not able to perform as well as not able to adjust culturally. These employees are nearly 3 months old and despite some reminders, they are not able to show improvement.

We want to terminate the contract without paying one month notice salary as we have given them verbal indirect indication on few occasion.

If we terminate contract of these employees without notice, can they go to labor court and challenge termination? what consequence we will have to face as an company?

Please advise as how should we handle the situation. we have to act fast so I will really appreciate your quick response.

Thanks Chetan
Anonymous

24th January 2014 From India, Delhi

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Dear Chetan,
Appended are the suggestion/reply on your query : -
Whatever agreement Company has signed with employees & employees has agreed on the terms framed by the Company, will be valid in between both the parties (Empoyee & Employer).
As per the Agreement, Company can terminate the employees by giving them letter in writting in advance (Appropriate notice should be give or notic pay). You have a very valid reason to terminate them on the ground of performance.
Instead of teminate, ask them to resign & settle their dues.
If you will terminate contract of these employees without notice or notice pay, they can sue the company in labor/ civil court and challenge termination. In that case either company have to re-employe them or have to pay the compensation decided by the court.
24th January 2014 From India, New Delhi
Since the employees seem to be in the middle and senior managerial cadre, they do not fall within the purview of the industrial Disputes Act and thus they cannot raise any dispute in labour forums.The other option left to them is civil court which I am afraid, they may not pursue as the litigation consumes lot of time.It is also not desirable from the management point of view since they need to defend their case too by engaging a lawyer which also costs them. It is advisable to try for a win-win situation by persuading them to resign with one month notice.This way, they too do not carry any stigma and they will have sufficient time to find out an alternate employment.

However, if the management wants to terminate their employment on grounds of non-performance, it is better to examine certain issues before taking a call on it, namely;

1) whether the employees in question have been provided feed back about the areas in which they are weak;

2) Whether the management has ascertained the reasons for their non-performance such as bad and uncooperative boss or lack of training or guidance or coaching etc;

3) if so whether the management has offered to provide such support. You have stated that you have merely given them reminders to improve.;

4) Were the employees given enough time to improve:

While ti is true that no employer is expected to retain an inefficient employee and pay for his inefficiency, a prudent management and HR shall address these issues before taking a call on termination since it also involves livelihood of the employee. If it decides to take a final call of terminating their services, then it is desirable to try for a win-win situation a sit does not hurt any of the parties.

B.saikumar

HR & Labour law Advisor


24th January 2014 From India, Mumbai
Sir, thanks a lot for the clarity. Actually employees are neither given any warning in writing nor any chance to improve. Its been just 2.5 months.
Actually it is a case of wrong hiring, these were new positions in the co. & in hurry management made mistake in hiring people as well as explaining their expectation to the employees clearly. That's why both parties are dissatisfied (but management thinks more than the wrong fitment it is an issue of capability). To be fair with employees within 2 months fulfilling expectations is not justified knowing that they come from different background.
Now I have been given this task and we have to get the position vacated asap as co. can not continue to pay salaries.
You mentioned this can be challenged only in civil court, if you could give me an idea as how much time/money (average) it takes to challenge.
It will help me resolve peacefully the matter between employees & the mgt.
Thanks again for your great help.
24th January 2014 From India, Delhi
If management or HR hired misfits, then it is the management or HR that has to blame itself and shall not penalize the employees for their doing. It will be also difficult to retain a misfit.at the same time This situation all the more demands a win-win solution.You can explore the possibilities of locating them on the jobs where they can fit in after discussing with them or seek their resignations by convincing them that is the only way that ensures fairness to both.
B.Saikumar

24th January 2014 From India, Mumbai
I second Saikumar. It is always good if a proper evaluation is taken before you take a final call to terminate the services. When you admits that it is a case of wrong recruitment and wrong induction, you can always compromise to find an alternative position for the employee. Moreover, it is only 3 months since he joined and 3 months time is very less for an employee to show his performance and I feel if you clearly describe his duties and tell him what is expected from the him, you will get resource.

Now coming to the termination clauses, I have an opinion that your contract is one sided and a one sided contract may not hold good. Say, for example, there is a provision that the employer can terminate an employee without any reason and by giving the employee one month notice whereas the employee who has been working FOR the employer should pay five months' salary. It is clear that those who leave will be leaving for some better opportunities and career prospects and who will get it, only good performers will be able to get a chance to move. That means only performing employees move out. Had him be a bad performer you should have sent him out much earlier by paying one month salary/ notice. This good performer would have contributed a good amount towards the revenue of the company. In this scenario is it right to ask him to pay five months salary if he wants to go? No, I believe so.

Being an employee in managerial capacity, he may not be able to fight against the order of the employer in the Labour Court or other dispute redressal machinery but there is some thing more than this when you think about termination and that is professional ethics. When you find that he is a misfit and is an error in recruitment, the employee can also say that it is an error in his decision taking and he has taken a wrong decision by leaving the previous organisation and joining you accepting the promises and offers given by you. Certainly, no decision is free from RISK.

One more thing to add is that the designation and grade of employee as Manager/ Middle Management Cadre only cannot decide whether this person is a worker or not. If he was not given any functional responsibilities and authorities of a manager he will also land up in the same definition of workman.

Regards,

Madhu.T.K
25th January 2014 From India, Kannur
Dear ,
1. How you can assess a person with in 03 month. Did you mentioned this clause in appointment letter that "your performance will be assess in every 03 months and on that performance assessment company will have right to terminate your service.
2. Warning to improvement the performance in writing is necessary to make a point for termination the services.
3. Have you set the Goal (KRA & KPA)for the employees and informed them in writing.
4. Do you have the acceptance copy of appointment letter of employees.
5. Their Performance Assessment sheets should be available.
6. I think Notice period to be paid to the employees and only this will be the right step.
Brij N Sharma
HR
26th January 2014 From India, Bangalore
Dear Mr. Sharma, thanks for your comments. we don't have all such things in writing like KRA/KPA/Assessment etc.
assessment is done purely on the basis of business generated, we believe that the end of the day one must earn his/her salary by getting business or meeting management expectations.
We mention in our offer letter that in case of termination no reason shall be assigned and we have copy of acceptance.
So I think we can safely terminate without notice (as verbal warnings are already issued) and employees would be smart enough the gauge the danger.
Since its a case of middle-senior mgt so labor court option is also not available to the employees. So they will have to accept what management decides.
Please share if you have alternate views on various options available to employees in this case.
27th January 2014 From India, Delhi
Dear classiccopperian,

Your query is from legal point of view and you have got very good replies by experts in this field. However, I would like you to think from the organisation's culture point of view. My points are as below:

a) This is a case of poor recruitment. Termination or resignation after 3 months, what would be the cost of poor recruitment? On what parameters would you like to measure? Who has been made accountable for this loss?

b) Terminations of this kind, will they create fear among other employees? Will it not degrade the morale of existing employees? Have you calculated the cost of low morale and if yes, then on what parameters? Who is accountable for this cost?

c) Because of their termination, will the positive message or negative message be sent in the job market? Will you be able to attract right talent because of the whims and fancies of the management? Will existing employee refer their friends or ex-colleagues to join your companies? If no, then what is the cost of lost opportunities? Who is accountable for this loss?

Termination of employees may give solace to you or your management but it is nothing but hiding someone's inefficiency. From your last post, I find that you are deriving your strength from the tardy litigation process and not from implementation of principles of management. How long will this continue? Sentence in the first paragraph of your last post says "we don't have all such things in writing like KRA/KPA/Assessment etc." This sentence speaks volumes. Why the recruitment was not based on the KRAs? Whose failure is this and what is the punishment given to this person?

While selecting job candidates, we always place premium on selecting the "experienced" candidates. By selecting the wrong candidates, where was your or your management's experience? Leadership does not just lie in placing the blame at someone's doorstep but by doing introspection on why this case happened at all.

I have put forth my comments to bring to light the other side as well. Nothing personal as such against you.

Thanks,

Dinesh V Divekar
27th January 2014 From India, Bangalore
Dear Member

I hope you have already got the reply that you wanted from Legal standpoint. I would like you to introspect and find answers to the following questions. :-

1. When the matter of mishiring is well within the knowledge of the management, why is it not shouldering the responsibility and abiding by the rules and regulations framed by themselves. Secondly what is the action management proposes against the person / s who were responsible for the mishiring.

2. Does the management want to pass a message in the organisation that even if it management mistake the employees are the ones who is going to bear the responsibility and the burnt.

3. What if a group of Performers decide to leave the organisation without any notice after they know that the contract between the management and employee has no value for the management itself.

As a professional it is important that such aspects are put forth to the management as any haste in such matter damage the image of the organisation in a long run and your mishiring may result in misfiring too.

Regards

Preetam Deshpande
27th January 2014 From India, Mumbai

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