What Can Employers Do Legally if an Employee Won't Repay Their Settlement?

Hello Everyone, I am seeking information about the potential legal actions an employer can take if an employee refuses to repay their full and final settlement amount. Could you please provide a detailed explanation? Thank you.

Dear, Why does this situation arise?
Regards, R.N. Khola (Labour Law & Legal Consultants)

Sir,

Most of the time, it happens that an employee leaves the company without serving proper notice. For example, one takes the salary in the first week of the month, and the next day he resigns without serving notice. What to do in this case?

Thanks

Hi,

One of the senior employees received an offer from another company on June 20th. He didn't resign until he received his salary on July 7th. He only served a notice period of 4 days because he may have thought that he had nothing to lose in the company. Despite trying to convince him to stay for 10 days for a proper handover, he left after 4 days. According to his appointment letter, he was supposed to serve a notice period of 30 days.

What should I do in this case?

Thanks

Hi,

As our seniors have mentioned, the question is not clear. However, please confirm the cadre of the employee (whether workmen category or supervisor). If he is a supervisor, you can refer to the code of conduct/secrecy agreement and hold the payment due to him.

Thanks & Regards

Dear All,

I also wish to know what remedy is available to an employee if his contract is terminated by the employer without assigning any reason. The company is silent about full and final payment. What is the time limit for making full and final settlement? As per the terms of the contract, each side has to give three months' notice for terminating the contract. The company is an Indian company working abroad.

Thanks

Dear Pranob ji,

This will attract double employment, which is an illegal concept according to the Employment Standing Orders Act. (Does your company have certified Standing Orders? Please refer to the local state SO Act.) You have to take action according to the rules therein if the candidate is proven to have joined somewhere without settling with the parent company.

Regards, PBS KUMAR

The question of recovery, whether it is due to the amount spent or used by an employee and payable on full and final settlement, is one aspect. The other involves recovering the notice pay. In the first scenario, the Management has every right to recover, and if the employee does not pay, the Management can file a case for the recovery of dues.

In the second case, even if the employee has agreed to either serve the notice period or agreed to pay in lieu of the same, the Management cannot strictly recover through any legal forum. This is because it is akin to a situation where the employee is vulnerable at the time of joining. The employee may sign any document as they are on the receiving end. Therefore, such actions would be considered unfair, and no court would likely pass an order for the recovery of notice pay.

Dear All,

Some employers have a habit of withholding salary with immediate effect as soon as an employee resigns, keeping it on hold until the Full and Final (F&F) settlement, which could take 3-4 months. Nowadays, some employers require a notice period of 3 months. Is this possible or reasonable? When they recruit, they expect new employees to join within 15 days, so how can they ask resigning employees to provide a 2-3 months notice?

Thank you.

Nowadays, employers are asking employees to resign, otherwise, they will give a termination letter. After that, employers fabricate many stories behind that. In such a situation, what should one do with them?

Dear,

Kindly mention your name if you are asking a question. Regarding your question, an employer can only file a recovery suit in court against the employee.

Dear All,

A lot of people have been asking questions about the F&F procedures' aftereffects. Allow me to explain a few common scenarios that occur during an employee's Full and Final settlement:

Ideal Case: An employee resigns with one month's notice, completes the 30-day notice period (or as specified in the appointment letter), attends an Exit Interview on the last day, completes all F&F paperwork, and leaves for the day. In such cases, the employer typically releases the final payment within 3-5 days without withholding the salary.

Case A: If an employee secures a new job and the new employer requires them to start within 10 days, the employee may give 7-10 days' notice to the current company and leave to join the new employer.

In this situation, the company can calculate the employee's final salary, LTA, leave encashment, gratuity, bonus, etc., deduct the equivalent of the remaining notice period from the employee's earnings, and pay the balance due. If the company withholds the employee's salary, it is unlawful, and the employee can seek legal assistance through the labor department or the court.

In some cases, a more experienced employee may negotiate with the new employer to cover the notice period pay. This arrangement typically occurs in senior or mid-level positions.

No company can withhold an employee's F&F payment indefinitely. While some companies delay payments to frustrate employees into giving up, persistence usually results in receiving the dues owed.

However, this does not justify frequent job changes every year or six months. Even after a short tenure in a company, it is important to ensure a smooth exit to secure any pending dues.

Regards, Parul Makkar
Human Resources

Hi,

An employee is governed by the terms and conditions as mentioned in his appointment letter and by the company's service rules and regulations.

Therefore, in this case, you would have to check what terms are mentioned in the appointment letter. Does the employee pay notice pay in lieu of notice? If yes, then the company has the right to recover the same from him.

Secondly, has the company accepted his resignation letter? If yes, has the relieving letter been issued to him?

If the relieving letter has not been issued to him, the company can first write to this employee stating that his relieving letter would not be issued until and unless he pays back to the company the notice pay amount. You can also insert a threat therein that you can contact his new employers, that he (employee) has not been relieved from the services of the company, and would initiate appropriate legal action against him.

But if the company has issued the relieving letter, then it can only file a suit in the civil court for recovery of money through specific performance of the contract (the appointment letter is a contract between the employer and the employee). But since the notice pay amount is too small vis-a-vis the litigation costs, companies do not resort to the same.

In case of any further clarification, please do revert.

Ashish.

Dear Outlook,

When a new month starts, you simply pay your employees their one month's salary. You can withhold their provident fund or deduct an amount equal to their salary from their dues.

Another way to take preventive action is to begin deducting a fixed amount of money from their salary as a "security." Your company should retain some of their money equivalent to their salary.

Regards,
Asad Ahmed.

The action that an employer can take against an employee who exits the job without settlement of dues depends largely on the terms of the Offer of Appointment and the Standing Orders applicable to the employee. Even if the terms do not provide for such a situation, the employer can file a civil suit against the employee for recovery of money, etc.

My dear Asad,

All the suggestions given by you are illegal according to Indian laws. Kindly note:

- A company CANNOT HOLD P.F.
- A company cannot make any UNAUTHORIZED, ILLEGAL DEDUCTION (Re: Payment of Wages Act)

Are you working overseas (out of India)? If yes, then maybe the local laws allow you. If you are working in India, kindly study the labor laws (else, you will land yourself and your company in legal trouble) before you call yourself an HR professional.

Regards.

Dear,

I would suggest the following:

1. Send him a letter stating the inconvenience caused and asking him to pay salary for the remaining notice period. Mark a copy of the letter to his present employer, if you know it. You may decide about actually sending the letter.
2. His application for transfer of PF is to be processed strictly on a 'work to rule' basis.
3. Payment of gratuity, if it is due, could be processed very leisurely.
4. If there is any other due like bonus or incentive, deduct the amount and pay only the remaining.
5. Finally, give a legal notice.
6. Send all correspondence to all his known addresses.

These are the things I can immediately think of.

Regards,
KK Nair

Dear friend,

You will have to file a civil suit in court and ask the court that, as per the contract of employment, he has to serve a full 1-month notice and thus seek remedy from the court of law.

Regards,
Shekhar

Dear Outlook,

What I can suggest based on the info you have provided is:

1) Send a letter to the employee through a registered AD informing him that his resignation has not been accepted and that he has to either complete his notice period and a proper handover or pay the salary in lieu of the notice period.

2) If no response within a week, consult a lawyer and send him a legal notice for the same. Please make sure you have all the docs in place (appointment letter, confirmation letter, etc).

3) If still no response and if you know his current employer, you can write to them about the case (requesting confidentiality) and inform them that he/she has not been officially relieved and that he is on dual employment which is illegal as per the contract.

4) If there is still no response, based on the amount to be recovered, you can plan to file a suit against the employee. Filing a suit at times is not only for the money but also to set a precedent for others within the organization to value their commitment.

Would highly appreciate any inputs or suggestions on this from the forum.

Regards,

"D"

Dear Friend,

I have been going through the replies.

What I find is that the prime motive for taking action against him is that he "waited long enough to get his salary and then did not stay even for 10 days and left in 4 days".

How did you find out that he "got the offer of some other company on 20th of June"?

It is possible that the company had been pressing him for early joining, but he wanted to wait for his salary.

You might say it is unprofessional and your company may be feeling miffed. But remember that apart from his salary, he did not take anything along. He gave precedence to his "self-interest" than to honor the 30 days' notice.

Please do not be vindictive. An employee is very puny and resource-less when pitted against the might of a company.

Under such circumstances, good companies tend to be forgiving and ignore such infractions rather than to act mean and make it a prestige issue to prosecute the ex-employee.

I personally know a case where the company (a well-known good Indian company) had even written off the IT paid on his behalf, as the relevant documents were not produced subsequently by the ex-employee - simply because the employee had been a good productive employee during his tenure with the company.

Advise your company accordingly, rather than being vindictive (which is counterproductive). Believe me, it makes good business sense in the long run.

Regards.

Hello Sir,

Now the company has refused to provide me with Form 16 or TDS Certificate and said that they will see me in court.

If an employee is relieved by the employer without a full and final settlement, and after 4 to 5 months, the employer asks for recovery, can the employer take any legal action against the employee?

Please Suggest - All Seniors

The case is now complicated; the reason is the full and final settlement not being done, and now the past employer has issued a notice.

Brief: When one of my friends resigned from his company (let's name it A), he was supposed to serve a notice period. However, since he had to join the next employer immediately, he asked his company "A" to deduct his salary as he was unable to serve the notice period. Company A deducted all his salary, and he was paid a nil amount. Now, company A has sent a notice (after 18 months) to pay Rs. 15,000/- as full and final settlement.

Now, my questions are:

1. If my friend refuses to pay the dues, then what can happen?
2. What legal actions can be taken against that employee?
3. How much will be the impact of all this on the career?
4. Why did this company issue a notice after 18 months?
5. Till now, that company has not cleared the PF of this employee. Is this a tool in the hands of management to put pressure on the employees if they are running out of the company?

Please suggest as soon as possible.

Regards,
Yash

If a staff member does not receive a clearance or relieving letter from the employer and joins a new firm with dues pending at the previous employer, can the current employer be informed of the same? What purpose would it serve?

Regards,
Smitha

Sir, I was supposed to get my 23 days' salary and 25 months' expenses in my FNF settlement, which was 54,000. However, they have deducted all my expenses money, and 7 days' salary is also deducted. Please let me know, should I go to the legal court?

Employment and Probation Issues at a Startup

I have been employed with a new startup brand for a year starting from 28th April 2014. As per my joining letter, I was on a probation period of six months and had to be confirmed in writing after that period. In case the written document or an email has not been sent to the employee, the employee shall remain on probation. Salary on time has always been a concern, and every month the payment was done by the middle of the commencing month only. For example, the salary for October would get cleared after 15th November only. After six months, I was not given any confirmation letter, and the late payment of wages was a major concern. Therefore, I resigned from my services on completion of one year on 30th April 2015, mentioning my relieving date as 7th May 2015, which was later extended to 16th May 2015.

I had recently gotten married on 21st April 2015 and had some personal and professional reasons as the working culture had not been very professional, and I did not see growth in my career learning. As I had not been confirmed, my notice period being 30 days, and in case of short notice, a deduction of 14 days of basic salary was supposed to happen, which I had agreed to. However, on the last day, the employer, unable to find a replacement for the designation, threatened to cut two months' notice as per a confirmed employee, but I had not been given any letter of confirmation during my stay in the company. After much argument, both parties agreed upon a deduction of 1 month's basic salary as short notice, and HR confirmed the same via email.

Since I had not been paid for April and May, I agreed to work a few extra days without being on payroll for the company for 4 days, until 20th May 2015, and handed over the laptop on 21st May. After regularly checking with HR, he confirmed a deduction of 30 days of basic salary, which I agreed to as I needed the money promised to be paid soon. After waiting for 45 days, I received a call from HR that there was an audit in the office and I needed to come in to help, with the assurance of my full and final settlement payment after the audit. I cleared everything on 27th June 2015 and asked for my payment, which they promised to pay within a week.

After 5 days, when I contacted the HR person on 2nd July 2015, he informed me that the Managing Director wanted to speak with me and was holding my payment until I met with him. I tried calling the MD but could only speak to him once, and he informed me he was busy and would call back soon. Subsequently, he left for a 15-day trip to Europe. When I checked with HR, he mentioned that he had been instructed by the MD to cut two months of basic salary and release the payment. After waiting for over 60 days, the employer is refusing to pay me one month's salary out of my 1.5 months of unpaid salary. What legal action can I take against my employer, and what is the minimum time for clearing full and final settlement?

Thank you.

I served my notice period. Now, the company is not paying the full amount of full and final settlement, and my bonus portion is also being withheld, which is a fixed component of my cost to company (CTC). What should I do?

Take an opinion from a lawyer and file a civil suit for specific performance of the contract. Only through this action can you obtain or claim your remaining balance payment.