The law relating to termination of employment in Pakistan does not conform to a uniform standard. In some instances, legislation has been enacted which attempts to intervene in the relationship between the employer and employee on this issue, abolishing or affecting the common law presumptions of employment at will and dismissal without the need to prove cause. However, workers falling outside this legislation remain covered by common law legal principles. In addition, different kinds of legislation establish varying degrees of employment protection for the worker.
The main statutes governing termination of employment in Pakistan are the West Pakistan Industrial and Commercial Employment (Standing Orders) Ordinance, 1968 (ICEO), and the Industrial Relations Ordinance, 1969 (IRO). Other relevant legislation which covers a smaller proportion of workers includes the Road Transport Ordinance, 1961 (RTO), the Newspaper Employees (Conditions of Service) Act, 1973 (NEA), the Pakistan Essential Services Maintenance Act, 1952 (ESMA), and the West Pakistan Shops and Establishments Ordinance, 1969 (SEO). The standing orders under the ICEO which relate to termination of employment have been made applicable to the RTO and the NEA.
The ICEO is generally applicable to all workers belonging to industrial and commercial establishments of 20 or more workers. However, industrial establishments of less than 50 workers are excluded from the provisions concerning termination of employment. While the ICEO does not exclude specific categories of workers from its purview, it is important to note that it is limited in its scope because of the restrictive interpretation given to the definition of a “workman”, to which the sections on termination of employment refer. Under sec. 2(I) of the ICEO, a “workman” is defined as a person who does “manual” or “clerical” work. This definition has been very narrowly construed by the courts to exclude many workers from protection against arbitrary dismissal under this legal instrument. In deciding whether a person may qualify as a “workman” under the provisions, the courts have regard not to the category of the job, but rather to the nature of the work involved.
The other legislation mentioned above applies specifically to special types of employment.
While provisions concerning termination of employment for misconduct apply to all “workmen”, protections related to termination for other causes are restricted to “permanent workers” under the ICEO. Under the ICEO's Standing Orders (SO) and the SEO, termination by the employer may be either termination simpliciter, which is termination on grounds other than that of misconduct, by notice (sec. 12, SO); or for misconduct (sec. 15, SO). This dichotomy is reflected both in the procedures and reasons accepted for termination of employment. This distinction also applies for employees covered under the NEA and the RTO.
For workers falling under the ICEO, a valid and written reason must be given for termination of employment to be upheld. This applies to both termination simpliciter (sec. 12, SO) and dismissal on the grounds of misconduct (sec. 15, SO). The IRO authorizes the Labour Court to inquire into the legitimacy of termination of employment according to the principles of good labour practices and natural justice. This implies that a valid reason must be given for termination, even though there is no other specific legislative requirement in this regard.
The provisions of the SEO do not stipulate that a reason must be given for termination of employment; it is sufficient if written notice is given to employees. For workers falling outside the purview of the above legislation, the common law presumption of employment at will prevails and no reason for termination is required by law. However, common law principles on procedural fairness will be applicable.
While the ICEO obliges the employer to state, in writing, a reason for termination of employment, except in very few instances, it neither prescribes any reasons for which the services of a worker could be lawfully terminated nor specifies limits on the kinds of reasons which will be acceptable. The development of valid reasons for dismissal has therefore been left to case law. In relation to termination unrelated to misconduct, case law establishes that acceptable reasons for dismissal include serious illness, economic needs of the industry or establishment, and inefficiency or incapacity to perform the required job.
Where there is jurisdiction under the IRO, the Labour Court may impose any requirement for reasons which is in keeping with its adjudicating principle of good industrial practices.
Serious misconduct, provided that the procedure of a fair hearing according to the principles of natural justice has been carried out, is a sufficient basis for dismissal under the ICEO and the SEO. Examples of misconduct include prolonged absence without permission, negligence at work, wilful insubordination or disobedience, theft, fraud or dishonesty in connection with the employer's business or property (sec. 15, SO).
Under sec. 12 of the SO of the ICEO (termination simpliciter), any termination effected must be carried out in good faith. Consequently, where discharge of an employee is carried out merely to avoid the obligations of a fair hearing under the SO (sec. 15), albeit with the required notice, the Labour Court may inquire into the matter and declare the reason for termination invalid.
Termination of employment on the basis of trade union membership or activity will also be considered invalid reasons for termination, both under the ICEO (sec. 18, SO) and under the standard of good labour law practices. Other specific examples of unlawful dismissal are not outlined in legislation but will be determined according to the adjudicatory principles of the Labour Court, the labour authority and case law based on good labour practices.
Notice for termination of employment is only mandatory for permanent employees falling under the purview of the ICEO or the SEO (sec. 12, SO, and sec. 19, SEO, respectively). This notice period is specified as one month's notice or equivalent pay in lieu of such notice.
Under sec. 15 of the SO of the ICEO, the employer is compelled to grant the worker a fair hearing in cases of dismissal on the grounds of misconduct. The worker must first be informed in writing of the allegations made and the employer is required to institute an independent inquiry into the charges. In addition, where dismissal is on grounds of misconduct, sec. 19 of the SEO requires that temporary employees (who are not entitled to notice) who are being dismissed as a punishment, be given an opportunity to explain the charges levelled against them.
Termination for economic reasons or retrenchment has not been given special attention as regards procedures and rights. It is included in the provisions concerning termination on grounds other than that of misconduct (sec. 12, SO, ICEO). Nevertheless, special provisions have been enacted concerning the choice of the “workmen” to be retrenched first (sec. 13, SO) and the priority of re-employment of retrenched workers (sec. 14, SO).
In the event of fire, catastrophe, breakdown of machinery or stoppage of power supply, epidemics, civil commotion or other cause beyond the employer's control that frustrate the operation of the work, “workmen” may be laid off and then receive a payment equal to their daily wage. The stoppage must be notified to the workers. After 14 days of lay-off, the contracts of employment may be terminated with appropriate notice (sec. 11, SO, ICEO). Apart from these situations of extreme emergency, the employer must obtain prior authorization from the Labour Court in order to close down an establishment or to terminate the employment of more than 50 per cent of the “workmen” (sec. 11A, SO, ICEO).
Under the ICEO, workers whose employment has been terminated for any reason other than misconduct are entitled to severance pay or a “gratuity” equivalent to 20 days' wages for every completed year of service or any part thereof in excess of six months. A pension may be substituted for any gratuity (sec. 12(5), SO).
The jurisdiction under the IRO is dual in nature. It provides mechanisms for adjudicating both individual dismissal grievances (under sec. 25A, added in 1972) and collective disputes on dismissal (secs. 26-31), where this is a dispute of interest, not a dispute of rights. However, the jurisdiction of a Labour Court under sec. 25A may only be invoked if locus standi is granted under another law, that is, if another law gives a basis for contesting the dismissal by providing for a specific right and there is no mechanism for settling such a dispute under that law. Laws granting such initial jurisdiction are the ICEO, the RTO and the NEA, which provide for mandatory procedures for termination of employment including a right to a fair hearing where dismissal on grounds of misconduct is alleged.
Where the IRO grants an avenue for redress for individual grievances, the employee may take the case to the Labour Court. The Labour Court is empowered to go into all the facts of the case when adjudicating a grievance under sec. 25A of the IRO and pass such orders as the Court deems just and proper in the circumstances of the case. This is a reversal of the previous law whereby the Court only had limited jurisdiction in dismissals on the ground of misconduct, not having the power to review the facts of the case and being able only to ensure that the worker had the opportunity of self-defence. The principles of good labour practices and natural justice are employed in the adjudication of termination disputes.
The jurisdiction under the IRO may be ousted by another statutory grievance procedure for specific workers. This is the case for workers in “essential services”, such as members of the police, armed and defence forces (ESMA), and workers in business, trade and professional enterprises (SEO).
For those workers who fall under the ESMA and the SEO, means of redress are not via the Labour Court but through a separate authority established under the respective statutes. In the case of the SEO (sec. 12) this is by way of a governmental authority, with a final appeal to the civil courts. An appeal must have the approval of this governmental authority, and be filed within a three-month period. Similarly, under Rule 3(2)(d) of the ESMA, a specified authority is set up to arbitrate on matters relating to termination of employment.
Where workers are not covered by the IRO or any other specific dismissal legislation, they may, if unionized, take a dismissal dispute to a Labour Court if it qualifies as a collective “interest” dispute. For the non-unionized employee, the only recourse is to the ordinary courts of law pursuing an action based on breach of contract in relation to the master/servant relationship.
The Labour Court has jurisdiction to make any award it deems fit, including an order of reinstatement, damages or exemplary damages. For actions pursued in the ordinary courts of law, reinstatement is not an option, and only damages or compensation for the loss of notice pay is possible. For awards arising out of the jurisdiction of governmental authorities, compensation for pay in lieu of notice and a fine where the employer violates statutory obligations are the options specified.