Can We Take Legal Action Against an Employee Misusing Company Resources for Personal Gain?

Hi All,

We monitored one of the employees for a week who was working against the interests of the company. This included using the company's infrastructure and bidding on projects on Elance, ODesk, and Guru for individual projects, as well as interacting with clients on the office premises. We have ample evidence and screenshots that prove these actions were being performed by them.

Can anyone suggest whether we can take any legal action against him or not? If yes, what could it be? It would be greatly appreciated if someone could advise me on this matter.

Looking forward to a kind response from your end.

Thanks,
Veronica

Hi Veronica,

The answer lies in the appointment letter given to him by the company. If you have a clause that mentions, "an employee while in service will not engage in any other activity or profession of any nature, which is detrimental to the interests of the Company. If they are found to be holding any interest in any other business without the knowledge of the Company, it will be treated as misconduct, and necessary disciplinary action will be initiated against them, and the services are liable to be terminated."

If such a clause is there, then you can terminate the services.

Regards,

Hi Dear,

As Archana mentioned, if you have included the clause in the appointment letter (double employment), you can take a hard decision against him. However, my opinion is quite different. Before coming to any decision, first, you should serve a show-cause notice or warning letter and warn him or her for the same. If he starts to repeat the same actions that go against the company's interests during working hours, conduct an inquiry and can dismiss him without giving any prior notice.

Dear Veronica,

In this case, my opinion is that you must call the concerned staff and explain verbally in front of any management staff about his/her misconduct/act, which is against the company rules/norms. Ask him/her about the reason for doing so. Make proper documentation to that effect with the signature of the concerned on all the papers prepared and further serve the show cause notice. If you have not received any reply or the reply received is not convincing to the management/HR team, then proceed with disciplinary proceedings as deemed fit.

However, if you terminate the concerned individual prima facie, then you will have to face unwarranted and unwanted legal proceedings (which I feel is a waste of time). Furthermore, if he is terminated, he will have the fear in his mind that he had signed all the papers and the company has all the proof and records for his termination to proceed legally.

Bhaskar and Vikash,

If we have this clause mentioned in the appointment letter and enough evidence to show the person that he/she has been involved in other business or activity, then we can terminate him/her without any show cause notice, and there would not be any legal complications. Care needs to be taken in showing all the documents and records of his/her involvement in any such activity.

Regards,

Hi,

The point of the clause is a perfect suggestion. As per my knowledge, most companies have this clause in their appointment letter. If you have it, that's perfect. However, it does not mean that you can directly terminate the employee. First, issue a warning letter stating all the matters, and if they continue, then the company has the right to terminate such employees.

Lastly, there is no harm in adding that clause to the appointment letter.

Dear Ms. Archana,

Even though there is a clause available in the offer of employment letter and in the appointment letter issued to the staff concerned who indulged in such activities which are against the company's interest, if we proceed with termination after 2 or 3 days, the individual will likely think carefully before seeking legal recourse.

However, as you mentioned, even with strong evidence, if we directly terminate the individual by presenting the evidence and removing them, it could provide an opportunity for the person to file a lawsuit in the appropriate court.

While everyone is aware that winning the case may not be possible for the individual, they can still prolong the legal process by engaging HR in preparing responses to court notices, written statements, and appointing legal advisors for court proceedings.

Additionally, there is a chance of reinstatement for the terminated employee if it is mistakenly proven that the company's provided documents are fabricated rather than original, potentially damaging the company's public image.

Therefore, instead of immediately informing the individual of termination, it may be better to meet with them, explain the disciplinary action, issue a show-cause notice, and complete all formalities within 2 to 3 days to alleviate any tensions.

I disagree not to cause harm or offense but to highlight potential scenarios that may arise.

The principles of natural justice should be followed while taking disciplinary action against any employee. One of the basic principles of natural justice is that the delinquent employee should be heard before he/she is punished.

The employee who is alleged to have committed any misconduct warranting punishment should be served with a charge sheet/charge memo and his explanation sought. If the explanation given by the employee is found to be unsatisfactory, then a domestic enquiry can be conducted into the charge; and based on the findings of the enquiry officer, a second show cause notice should be issued proposing punishment and asking the employee to explain why the proposed action should not be taken against him. On receiving the reply to the second show cause notice, the disciplinary authority can either confirm the proposed punishment, give a lesser punishment, or drop the proposed punishment.

Summary dismissal without following the procedure mentioned above, despite such provision being in the appointment letter, is illegal and should be avoided.

In the issue under reference, it is preferable to issue a warning memo rather than taking immediate disciplinary action. If the same misconduct is repeated, then termination of service could be considered by following the principles of natural justice. Otherwise, there is a high likelihood that the decision will be overturned by the appropriate adjudicatory forum.

Thanks,

Sanu Soman

Dear All,

The views of the members are highly valuable, but going through the content of the case of Veronica, it can be judged that the employee was working against the interest of the company for a long time as several pieces of evidence were available with the company to prove this.

Now, it would be quite appropriate to first issue a show cause to the concerned employee to understand the reasons for going against the interest of the company, as discipline is one of the vital parameters for the growth of any organization.

After receiving a written reply from the concerned employee, if the reply is unsatisfactory, management may proceed with conducting a domestic enquiry. The whole process will be cumbersome but legally very sound.

Thanks...

(Kumar Sanjeev)

Dear Veronica,

Please adopt the procedure suggested for disciplinary proceedings to avoid legal complications:

1. Conduct a preliminary inquiry into the matter through a senior/reliable official.

2. Serve a notice to the delinquent employee based on the findings of the preliminary inquiry. Ask him to explain his position on the allegations within 24 hours. If the reply is unsatisfactory, issue a detailed charge sheet incorporating the clauses of misconduct as detailed in the Standing Orders/Code of Conduct of the organization or in the employment contract, along with a list of witnesses and documents the management relied upon.

3. Initiate an inquiry giving a fair chance to defend the delinquent employee.

4. Terminate the employee if the charge(s) are proved. Provide a copy of the fact-finding report of the Inquiry Officer to the concerned employee.

5. If the standing orders permit, allow the terminated employee to approach the appealing authority to review the decision of termination given by the appointing authority.

R K SINGH

Dear Veronica,

You had ample information from every angle regarding the case. The question before me is whether the employee in question is working in an administrative or managerial capacity. If so, then you are free to drop all above remedies and solutions. Without any notice or chargesheet, you can fire him immediately.

Think over it. If he is within the definition of a Workman, then follow the procedure as stated by all my friends.

Regards,
KIRAN KALE

Hello all,

First things first - in all HR matters, stop thinking from the heart and start thinking with your head. No reader has inquired about the status of the employee, whether temporary or on probation. There is also no need for a clause in the appointment letter regarding conducting personal business during office hours, using office space, infrastructure, etc., which could set wrong precedents and spoil office work ethics and culture. It is well understood that a person cannot effectively juggle two jobs unless specifically permitted.

Now, for the action part - if dealing with a temporary or probationary employee, terminate their employment immediately without providing a reason to avoid prolonging both your and the employee's misery through show cause notices or domestic inquiries. However, if the employee is a permanent or long-term staff member and is not a repeat offender, justice demands that you offer them a chance to rectify their behavior in the shortest possible time. Begin by counseling them verbally. If the issues persist, then the route of a show cause notice and summary dismissal should be taken.

Dear Senior Member/Super Moderator,

I am very disappointed to see your reply, which simply suggests that for every obvious misconduct, we should have a clause in the appointment letter. I TOTALLY disagree with you in as far as what you have suggested rather pompously in your reply. For my detailed reasons, please read my reply which I have posted today on this topic.

CK SAFAYA
HR and Law Consultant

Hi Veronica,

The answer lies in the appointment letter given to him by the company. If you have a clause which mentions that, "an employee while in service will not engage in any other activity or profession of any nature, which is detrimental to the interests of the company. If they are found to be holding any interest in any other business without the knowledge of the company, it will be treated as misconduct and necessary disciplinary action will be initiated against them and the services are liable to be terminated."

If such a clause is there, then you can terminate the services.

Regards,

In my opinion, it is still better to talk to the concerned employee. Explain to him about the misconduct committed and ask him to resign voluntarily in confidence, rather than taking a longer and time-consuming approach.