Sir, We are an NBFC with branches across multiple states. Recently, we discovered that the Area Manager (AM) and Branch Manager (BM) of a particular branch have jointly opened a private limited company with themselves as directors in February 2021. The company's nature of activity is mentioned as social service.
One of our employment agreements states: "The Employee shall devote his/her entire working time, energy, and attention exclusively to his duties in connection with our company and its business, and shall not take up employment or engagement, either full-time and/or part-time, neither directly nor indirectly, with any other person while in employment with our company, nor shall the Employee accept compensation in any form from any outside party for any actions performed on behalf of our company without the express written permission of our company."
Based on this, we have issued a show cause notice to the BM seeking an explanation. In reply, he mentioned that: 1) it is an NGO and was part of his personal movement, 2) he is not physically connected to the company, 3) out of good faith, he provided documents for registration purposes, 4) he has since resigned from that company, and 5) the company is not active as of date.
We have yet to issue a notice to the AM. He has already resigned and left the organization, but his F&F is yet to be settled. The BM has given his resignation after replying to our show cause notice and is currently on the notice period.
On the ROC site, the company is shown as active, and the resignation of the BM from the NGO company is not registered in ROC.
We want to write back to him stating that he is guilty of double employment, even though the company may be an NGO, non-functional, or he is not earning any income from it, etc., and we want to terminate the BM.
1) Can someone please provide me with a suitable draft reply for the same?
2) Is one show cause notice enough to terminate a person, or are there any further formalities?
3) Can we withhold the F&F?
4) Are they still eligible for Gratuity? (both have served our organization for more than 5 years)
From India, Mumbai
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One of our employment agreements states: "The Employee shall devote his/her entire working time, energy, and attention exclusively to his duties in connection with our company and its business, and shall not take up employment or engagement, either full-time and/or part-time, neither directly nor indirectly, with any other person while in employment with our company, nor shall the Employee accept compensation in any form from any outside party for any actions performed on behalf of our company without the express written permission of our company."
Based on this, we have issued a show cause notice to the BM seeking an explanation. In reply, he mentioned that: 1) it is an NGO and was part of his personal movement, 2) he is not physically connected to the company, 3) out of good faith, he provided documents for registration purposes, 4) he has since resigned from that company, and 5) the company is not active as of date.
We have yet to issue a notice to the AM. He has already resigned and left the organization, but his F&F is yet to be settled. The BM has given his resignation after replying to our show cause notice and is currently on the notice period.
On the ROC site, the company is shown as active, and the resignation of the BM from the NGO company is not registered in ROC.
We want to write back to him stating that he is guilty of double employment, even though the company may be an NGO, non-functional, or he is not earning any income from it, etc., and we want to terminate the BM.
1) Can someone please provide me with a suitable draft reply for the same?
2) Is one show cause notice enough to terminate a person, or are there any further formalities?
3) Can we withhold the F&F?
4) Are they still eligible for Gratuity? (both have served our organization for more than 5 years)
From India, Mumbai
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Dear member,
You have discovered dual employment by two employees of your organization. One of them is the Area Manager (AM), and the other is the Branch Manager. While the former has left the organization, the latter is about to leave.
Yes, taking up a second employment could be misconduct. However, with their resignations at hand, I do not think there is a need to pursue this case. Even if you issue a show-cause notice, what will you achieve? The issuance of the show-cause and receiving their replies will be an infructuous exercise.
Regarding the payment of gratuity, both employees are perfectly eligible to receive gratuity. Even if you had awarded them punishment for the misconduct, they still would have become eligible to receive the gratuity. The provisions of the Payment of Gratuity Act, 1972, are independent of the normal misconduct of the employees. You can withhold gratuity only in cases of actions of moral turpitude like arson, destruction of the property of the employer, etc.
Thanks,
Dinesh Divekar
From India, Bangalore
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8072You have discovered dual employment by two employees of your organization. One of them is the Area Manager (AM), and the other is the Branch Manager. While the former has left the organization, the latter is about to leave.
Yes, taking up a second employment could be misconduct. However, with their resignations at hand, I do not think there is a need to pursue this case. Even if you issue a show-cause notice, what will you achieve? The issuance of the show-cause and receiving their replies will be an infructuous exercise.
Regarding the payment of gratuity, both employees are perfectly eligible to receive gratuity. Even if you had awarded them punishment for the misconduct, they still would have become eligible to receive the gratuity. The provisions of the Payment of Gratuity Act, 1972, are independent of the normal misconduct of the employees. You can withhold gratuity only in cases of actions of moral turpitude like arson, destruction of the property of the employer, etc.
Thanks,
Dinesh Divekar
From India, Bangalore
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Thank you for your response, Mr. Divekar. Our Audit & Risk team has conducted an investigation and found the following:
1) Both employees are promoting recruitment for this new venture they have started. The AM who has exited has begun recruiting our existing employees from the branches he was handling in our organization.
2) Not only that, but he has also challenged our company, stating that he will slowly take all the employees out of these branches to his company.
3) The WhatsApp chat of the BM, who is serving the notice period, shows various messages between this AM, another BM, and field-level employees who have been actively involved in the formation of this new venture since the beginning.
4) The AM concerned has threatened the present AM with dire consequences if we conduct further inquiry.
5) The portfolio of the region during the tenure of this exited AM is now in NPA.
6) Field-level inquiries with customers have revealed that the visit of the employee for the collection of EMI was irregular, whereas the AM used to report that EMI was not coming due to the lack of economic activity and earnings due to Corona.
Under the above circumstances, do we still have to let go of the employee as suggested by you, sir?
From India, Mumbai
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1) Both employees are promoting recruitment for this new venture they have started. The AM who has exited has begun recruiting our existing employees from the branches he was handling in our organization.
2) Not only that, but he has also challenged our company, stating that he will slowly take all the employees out of these branches to his company.
3) The WhatsApp chat of the BM, who is serving the notice period, shows various messages between this AM, another BM, and field-level employees who have been actively involved in the formation of this new venture since the beginning.
4) The AM concerned has threatened the present AM with dire consequences if we conduct further inquiry.
5) The portfolio of the region during the tenure of this exited AM is now in NPA.
6) Field-level inquiries with customers have revealed that the visit of the employee for the collection of EMI was irregular, whereas the AM used to report that EMI was not coming due to the lack of economic activity and earnings due to Corona.
Under the above circumstances, do we still have to let go of the employee as suggested by you, sir?
From India, Mumbai
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Dear member,
You have provided elaboration through six points. Let me comment on each:
Point No. 1: It is not misconduct as such.
Point No. 2: Let him challenge. He can snatch your employees but not necessarily your customers. Customers always remain loyal to the company and not to the individual. At the same time, make efforts to retain the existing employees.
Point No. 3: Here lies a catch. If he was promoting a personal business insidiously, how was it discovered? Secondly, do you have standing orders? If yes, have you listed "diverting business to the rival company" as misconduct? If yes, then you can take action against the employee.
Point No. 4: Let the management give moral support to the current AM. No need to bother about such sterile threats.
Point No. 5: Making the portfolio NPA cannot be misconduct.
Point No. 6: If the AM was providing false information, it is called a misrepresentation of facts. Action can be taken against him.
Based on the inquiry by the "Audit & Risk Team," I recommend you to order the domestic inquiry. Direct both employees to depose before the inquiry. Clearly state to them that unless the inquiry is completed, their FnF will be held in abeyance. If the misconduct is proven in the inquiry, then you are free to take action, which will be the recovery of the losses caused to the company. If they fail to depose before the inquiry, and if you have incontrovertible proof of their misconduct, then your company may proceed to file a police complaint. Possibly, a police complaint could help in calming the situation down.
Thanks,
Dinesh Divekar
From India, Bangalore
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You have provided elaboration through six points. Let me comment on each:
Point No. 1: It is not misconduct as such.
Point No. 2: Let him challenge. He can snatch your employees but not necessarily your customers. Customers always remain loyal to the company and not to the individual. At the same time, make efforts to retain the existing employees.
Point No. 3: Here lies a catch. If he was promoting a personal business insidiously, how was it discovered? Secondly, do you have standing orders? If yes, have you listed "diverting business to the rival company" as misconduct? If yes, then you can take action against the employee.
Point No. 4: Let the management give moral support to the current AM. No need to bother about such sterile threats.
Point No. 5: Making the portfolio NPA cannot be misconduct.
Point No. 6: If the AM was providing false information, it is called a misrepresentation of facts. Action can be taken against him.
Based on the inquiry by the "Audit & Risk Team," I recommend you to order the domestic inquiry. Direct both employees to depose before the inquiry. Clearly state to them that unless the inquiry is completed, their FnF will be held in abeyance. If the misconduct is proven in the inquiry, then you are free to take action, which will be the recovery of the losses caused to the company. If they fail to depose before the inquiry, and if you have incontrovertible proof of their misconduct, then your company may proceed to file a police complaint. Possibly, a police complaint could help in calming the situation down.
Thanks,
Dinesh Divekar
From India, Bangalore
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Legal Actions Against Accused Employees
Two persons are involved in the above-cited case who are charged with infringement of laws/rules or accused persons: the Area Manager (AM) and Branch Manager (BM). The AM has already made his final exit from your company, and the BM is on the way to his final exit.
In such a scenario, it is felt that there is no significance in conducting a domestic enquiry and initiating disciplinary proceedings against the accused persons. If their deeds and acts have damaged you financially, then you can proceed against them legally in the Court of Law.
Similarly, it is observed that one of the accused has threatened your company employee with dire consequences. This act of the accused person cannot be agreed to, and his actions shall fall under IPC section. Your company should file a police case against the accused person.
From India, Aizawl
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Two persons are involved in the above-cited case who are charged with infringement of laws/rules or accused persons: the Area Manager (AM) and Branch Manager (BM). The AM has already made his final exit from your company, and the BM is on the way to his final exit.
In such a scenario, it is felt that there is no significance in conducting a domestic enquiry and initiating disciplinary proceedings against the accused persons. If their deeds and acts have damaged you financially, then you can proceed against them legally in the Court of Law.
Similarly, it is observed that one of the accused has threatened your company employee with dire consequences. This act of the accused person cannot be agreed to, and his actions shall fall under IPC section. Your company should file a police case against the accused person.
From India, Aizawl
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Notice of Employee Change.doc