Shilpa,
My reply may not answer your question, but it airs my frustration (as a consultant and a potential jobseeker). This was a major challenge back in the mid-/late-90s, when there was a flood of Indian H1B workers (especially from India) into the US. One of the most difficult questions I had to answer (being an Indian) was - "Many Indian workers join one company and within a couple of months, disappear because they found another job that paid them a few dollars more. Our work and business suffers and we lose the time they spent in our company. How can you assure me that you would not do that to us?". Is it racial profiling? Of course it is. But I believe we fed that due to our own actions. People are quick to blame an entire race for the fault of a few (9-11 aftermath in NYC is the best example for this). I don’t just blame the H1B workforce. I used to receive numerous phone calls from IT recruiters asking me to join them saying “how much is your company paying you? I will pay you more”. That’s how low was the opinion – that one would sell one’s soul for a few dollars more.
Although my motivation has always been the work I do and not the money I am paid, it is the sad truth that there are indeed some bad apples in the basket for whom, money is the ONLY motivation - even if that is just a few dollars more. These people lack personal integrity, professional ethics and moral values. As such, the rest must take a hit. I don't face that question any more - I built my own reputation and trust. Also, such "bad" apples no longer flood the US job market, because the companies are no longer as desperate as they used to be in the 90s because of the changed Demand & Supply dynamics.
While my thinking is that you would find such people every so often, the question you need to ask yourself is, what is better in the long run? Is it better to explore legal options to the full extent now and instill fear in other employees to not follow this one bad employee's example? Or should you focus on better employee hiring and retention processes? Potential candidate interviews at companies like Microsoft etc., focus on finding reasons to NOT hire a candidate, rather than why they should hire them (process of elimination, rather than selection). This helps weed out such bad apples.
As far as setting an example for the fellow employees, it has been long proven that fear will not stop people from acting their natural instincts. Rather, it will encourage deceit, discreetness, and "absconding". Encourage them to be truthful and don't hold their honesty against them. For example, if an employee walks up to you and says, "Boss, I want to resign my job here, as I want to move on to a better position at a different company", treat them with respect and understanding, lay out a reasonable transition plan (lasting no more than two weeks), find another internal (interim) employee(s) who can pick up his/her work, and at the end of two weeks, let them go. Better yet, ask them to lay out a transition plan and timeframe. Your focus must be to get them out of the company as quickly and as smoothly as possible. If you can do that, you would minimize these "sudden death" employees. Remember, NO EMPLOYEE IS INDESPENSIBLE. By making it absolutely impossible for them to leave (I read in another post that some company asked the member for 3 months notice period!!!), gives even the good and ethical ones no option but to leave suddenly.
Therefore, following are my recommendations.
1. Create a strong interview process to weed out the bad apples
2. Create employee-friendly HR policies for, not just hiring but also, separation
3. Create a comfort feeling in the employees that they are not bonded labor to the company and are free to leave if they chose to. If you make it easy for them to leave, you will be surprised to see that they will chose to stay.
In the US, the culture in the private sector is "At Will Employment". An employment may be terminated either by the employee or the employer at any time for any reason or no reason, with or without notice.
Ending note: I haven't been in Indian job market in a very long time. My comments/suggestions above are based on the employee/employer relations as they were in the IT sector in early 90s. If this has changed and the culture now is "At will employment", please excuse my ignorance and lack of information about current job market.
Thanks, and best regards,
--Som G