Employee Misbehavior and Final Settlement: Can We Legally Withhold Payment?

Hi, In our organization, one employee was asked to resign due to his misbehavior. Now, after 2 months, the employee is asking for his full and final settlement, and management doesn't want to release his FNF.

Request you all to suggest what can be done. Also, request you to share a letter format that can be issued to the employee stating that his FNF will not be released.

Awaiting your response.

Regards,
Mihir

An employee has been asked to resign due to misbehavior. After 2 months, the employee is requesting Full and Final settlement (F&F). You may hold the employee's F&F until your inquiry process is completed. This information needs to be communicated to the employee. It is important to follow the proper process to avoid any potential trouble. Ensure all your documents are updated.

Thank you.

Thank you for your response. Could we halt the process of issuing employees their FnF (Full and Final settlement)? Could someone please suggest a letter format that can be used to communicate this to the employee?

Regards,
Mihir Vashi.

We cannot stop an employee's Full and Final (F&F) settlement; however, we can deduct the damage caused due to misbehavior as decided by the inquiry committee, and the rest should be paid. You may prepare a format for your organization depending on your needs.

Regards,

Did the employee accede to your request and resign or not? The answer to your post depends on this.

Regards

Considerations for Full and Final Settlement

If no official domestic inquiry was conducted regarding his misconduct, and the employee resigned as asked by his senior, the employer cannot deny his full and final settlement.

Another point to consider is that the management has already punished the employee by forcing him to resign. So, why does the management want to hold or deny his full and final settlement? Is double punishment really required?

Regards,
Kamal

As the employee has resigned, albeit due to the pressure exerted by the employer/management, he is entitled to all the legal dues that the employer is liable to pay him. The management cannot refuse to settle his accounts.

Regards,

Hi, just for further information, what if an employee resigns without any force and there is a shortfall in the notice period? Can an employer hold the full and final settlement in such a case?

Regards, Mihir.

You can delay the final settlement for a few days but not for an indefinite period. It is better to deduct the amount proportionately (shortfall of notice period) from his full and final settlement and relieve him.

When you realized that the employee had bad behavior, on what grounds was he told to leave the organization? It had to be accepted by the employee.

Holding his F&F is what all organizations do. What would happen if the employee goes to the labor court? Who is going to face the music? Ultimately, it would fall on the Head of HR.

Let the management be clear from the very first day when he is being shunted out—clear the dues as of that date.

I would speak for the employee; he shouldn't have walked out when the employer says so. He has to obtain the relieving letter from the employer.

Regards

In such a case, you can hold his F & F. However, you may send a reminder through registered post stating that you are required to receive F & F as per the terms and conditions mentioned in his Appointment Order.

After the third reminder through Registered Post, please file them in his personal record and keep them on your end. This will help us safeguard ourselves in case of any potential legal proceedings.

Thank you.

Regards,
V J

F and F cannot be withheld just because there is a shortfall in the notice period. The amount equal to the wages/salary for the period of shortfall can be recovered from the amount due to the worker.

With regards

If the employee has resigned on his own, he is entitled to all benefits. In case there is a shortfall in the notice period, the employer would have advised him when he tendered his resignation. Was the said employee advised by the employer? Was any inquiry made into the employee's behavior? If all the answers are NO, the employer should release his dues to avoid any complications.

Regards.

If an employee has already resigned, the inquiry becomes irrelevant. You have to settle his dues as quickly as possible. If you wanted to recover any damages from his salary or dues, the right course of action would have been to conduct a proper domestic inquiry. However, that is not possible now. On the other hand, if the employee approaches the Labor Office, your company will not be able to answer why his dues are not being settled. The Labor Commissioner will not accept your argument if you claim his FnF (Full and Final settlement) has been withheld due to misbehavior. I completely agree with Mr. Kamal Prasoon and Harikrishnan.

For Future Reference

For the future, if any employee misbehaves, do not ask for his resignation; instead, hold a proper domestic inquiry. Only then does the management have some legal standing.

Thanks,

You cannot hold his FNF but can recover the same from his settlement. Nobody can stop him from withdrawing his PF.

No organization can withhold or deny FNF (Full and Final settlement). It is a wrong practice that may negatively impact the organization's image.

Regards,
Balkishan Sharma
Mgr HR
Paras Healthcare

Dear Mihir, I am confused; kindly clarify the points mentioned below.

Termination Under Pressure

The employee has terminated his service, but pressure was built from the employer's side. On the grounds of misbehavior, was it proved by the inquiry committee or was it an allegation from the employer's side?

Notice Period Compliance

Did he abide by the clause mentioned in the notice period of his employment contract, or was his service terminated with immediate effect upon tendering his resignation? Was he paid for the notice period, or does he have to pay for it?

Full and Final Settlement

On what grounds does the employer not want to proceed with the F&F settlement?

Waiting for your response.

Regards

I think your ultimate motto is that you want to hold the Full and Final (FnF) settlement of that employee in any case. But you don't know that there are some rules and laws. If the employee raises their voice against your action, you and your employer will be in trouble. Actually, that employee has the full right to get his/her FnF. No one can stop that. He resigned because management forced him/her. I think you should release his/her FnF. If you want, you can deduct some amount in terms of recovery of damages caused by him/her.

Thanks

Mr. Kamal is totally right, so do not get confused. Release all dues for which the employer is liable to pay.

Regards,
Mangesh Wakodkar

Consideration of Notice Period and Legal Deductions

Only the notice period should be considered, and if there are any legal recoveries from his end, they should be deducted before paying out any other dues.

Regards,

If an employee has resigned, try to convince your management to relieve him, complete his full and final settlement, and bring a happy end. There may be a problem for the employer if the employee contacts the Labour Commissioner.

Regards,
Bhavin

The employee has been asked to resign because of misbehavior. Now, why do you want to hold his F & F? What is it that you are going to get by holding the F & F? It's been 2 months, and to date, the issue is not settled. He has resigned; finish the formalities, settle the dues, and close the issue. Please focus on current employees who are working with you. How you handle this employee sends a signal to all other employees...

You cannot hold full and final settlement for the employee's misbehavior. You can forfeit the gratuity if the employee is involved in moral turpitude and has caused financial loss to the management. Additionally, you can terminate an employee for misbehavior after conducting a domestic inquiry and need not pay any notice period for the same. Even the forfeiture of gratuity should be done by giving the employee an opportunity to explain his stance. The principles of natural justice should be followed for all these matters.

Regards,
V.SRI

As discussed above, the employee has been terminated/asked to resign. Therefore, the company needs to settle his F & F.

Regards,
Swathy

If an employee resigns, it means they have been relieved from their duties by the employer. Therefore, a shortfall in the notice period would not occur, as the employer would have impliedly agreed to waive the notice period at their discretion. Full and final settlement has to be completed unless otherwise mentioned in the full and final settlement documentation.

Dear all,

There has to be some difference between a case of resignation and a natural termination of service like retirement. Many organizations keep a distinction between the two. For example, although statutory payments like PF, Gratuity, and earned leave/Privilege encashment are done in both cases, certain benefits like encashment of sick leave/half-pay leave, terminal benefits like settlement allowance, or post-employment medical benefits are not admissible in the case of resignation. However, in your case, since the resignation has been accepted, the proper course would be to make his F&F settlement. Mind you, the CiteHR domain is to support ethical practices and cannot be made a sub-way to spread or promote unethical practices.

If you have followed the process of Model Standing Orders, then you can hold the Full & Final Settlement until the end of the process. However, you must complete his full & final settlement process. My opinion is not to prolong his Full & Final Settlement. Make it as early as possible and issue the same to him through registered AD (by Post) to avoid further legal consequences.

Please note that the organization had asked the employee to resign.

Thanks & Regards,
Yogesh Kulkarni
Assistant Manager – HR & IR
Krishidhan Seeds Pvt. Ltd.
Contact No.: [Phone Number Removed For Privacy Reasons]
E-mail ID: [Email Removed For Privacy Reasons]

K. Prasoon and other friends have taken the right position, not to punish the employee for his misconduct, if any, doubly—one with a demand for his resignation, and the other by stopping his terminal benefits.

In fact, there is a legal connotation in such disciplinary matters to the above effect that the employee, as per the canons of 'Natural Justice' applied to him, should not be subjected to 'Double Jeopardy' for the same proved offense. The employer, at his most and best, is however left with only justifiable/reasonable administrative actions, such as placing the employee in an innocuous position or effecting the employee's transfer to some other department/place. Awarding one single punishment, with this administrative course of action, does not by itself amount to double jeopardy highlighted above.

Company Regulations and HR Policies

In any case, what's really intriguing in this trail is, does not the 'Company/Employer In Question' have a set of established regulations/rules/code of conduct/discipline for the employees? A company/employer should have necessary/suitable contractual covenants to cover exigencies also of such cases, in the above scheme of things. The company/employer, notwithstanding a private enterprise in this case, above all still needs to have predeclared 'Legitimate Human Resources (HR) Policies/Systems And Values In Place' to guide its disciplinary matters.

The lack/absence of the above employment elements is precisely the reason for the 'Disguised Disloyalty & attrition movement of the employees towards their organizations. It's not the 'Management Principles' but mostly the 'Street Smartness' and 'Psychofancy,' especially in private enterprises, which is dictating the terms to society. The ill-equipped HRs should do well to introspect, realize, and do something resourceful/valuable to deal with this position of serious concern. One of the old wisest did counsel us to light a little lamp/candle instead of cursing the darkness around a thousand times. For after all, a journey of a thousand miles starts with a single step, as also quoted by another old wisest.

The matter is dealt with elaborately herein because, in essence, this forum is regularly getting cases of employees' alleged delinquency from some of our friends for acceptable solutions thereof, through collective wisdom.

We cannot hold his F&F in any case. In this situation, we can only deduct his Notice Period (i.e., the number of days that are still pending for him to serve). This may vary as per your company guidelines.

Regards,
Ruth

In that case, the shortfall is deducted from the total settlement amount, and the rest is deposited into the account.

Legal Implications of Withholding Final Dues

Withholding final dues in the manner it has been done is not supported by any legal provision. The fact that the employee submitted his resignation at the instance of management implies that there is not even a feeble case for recovery of notice period pay. By asking the employee to resign, it is deemed to have been waived off by the management. Thank the employee for having agreed to resign. It would have required enough effort to terminate his services after following the due process of law.

Pay his dues gracefully.

It will not be easy to provide you with any suggestions without understanding the matter in depth. The degree of misbehavior is unknown. It also depends on what kind of company policy you have. If he was made to resign, normally he/she should be eligible for his retirement benefits. But if he is terminated, then it is a different story altogether.

In case your company doesn't have a policy, then you should let the team investigate the matter and provide you with suggestions on what course of action needs to be taken apart from having the official resign.

Meanwhile, hold the final settlement and see what the team has to say on the matter.

Final Settlement and Employee Resignation

No employer can hold the Full and Final (FnF) settlement of an employee once they submit their resignation, and no one can force them to resign. In cases of misbehavior, the employer can initiate disciplinary action under the provisions of the company's conduct rules. If the employee is found guilty of the charges, they may be punished as per the provisions of the conduct rules, besides the recovery of any loss or damage caused to the company due to their misbehavior from their final settlement. The remaining balance needs to be paid. In the case of moral turpitude, the employer can also forfeit their gratuity after giving them due notice.

If an employee resigns on their own without providing sufficient notice as per the terms of employment, recovery towards the shortfall in the notice period may be done and communicated to the individual, but the FnF cannot be held.

Regards,
R. Sathishan

Hi, we may deduct an equal amount of salary in lieu of the notice period for his resignation. Otherwise, we may not accept his resignation letter and take disciplinary action as per the standing order of the company and proceed further. If his past records are good, we may consider his resignation depending upon the merits and the reasons for his leaving.

Regards,
N. Baskaran

Since there is nothing to show that the employee resigned under pressure, he has resigned and left. If he has not given or worked the notice period, you can deduct that from the amount due to him. Additionally, you can charge him for any actual damages, including the loss of client dues directly attributable to him. If you are a large company with HR procedures, please follow the regulations regarding a domestic inquiry.

In many cases, the notice period salary will exceed the full and final dues. A simple letter to him stating that his full and final amount is being adjusted towards the notice pay will suffice. It is preferable to include details of the statement.

However, please note that if he was forced to resign under the assurance of settlement or against the threat of withholding salary for failure to resign, it would be a breach of trust (regardless of whether there is proof) not to pay it.

Full and Final Settlement Considerations

FnF means the settlement of accounts by also considering the notice period. You can deduct the amounts while settling his accounts as permitted by law.

Regards,
Manish Gupta

"Resignation" is the willful termination of the service agreement by the employee from the organization; hence, the subject of being "asked to resign" or forced to resign is immaterial. In your case, misbehavior was not proven under the Domestic Enquiry. If proven, there should be an equilibrium between the quantum of damage and the penalty/fine, which needs to be addressed to the employee for the recovery of dues.

Regards,
Mohammed Azeez HRM

After receiving the resignation, you cannot withhold his legal dues, and no questions should arise for an inquiry. Upon accepting his resignation, please settle his full and final dues immediately to close the matter permanently.

Regards,
Shamsher Yadav

If there is a shortfall in the notice period, you may ask him to stay and complete the notice period or deduct a proportionate amount of the short notice period and settle his dues.

Regards,
Hemant Nadgauda

Many members of this site have expressed their views on your query.

First, it is not clear whether you have posted this question to know about the consequences of withholding an ex-employee's benefits/F&F settlement from the employer’s side or want to know how to help that ex-employee by way of humanity and to claim those dues, and whatsoever.

Secondly, whatever may be the case, that ex-employee must be getting guidance from someone to claim his dues and know his legal rights. Otherwise, please give this site’s address link to him to find these answers and to know his rights better in the future.

What is Legally Attributable:

The aggrieved ex-employee can file a Civil Suit for recovery of office dues accordingly, wherein the employer is liable to settle all dues. Furthermore, in respect of PF & Gratuity dues, the ex-employee can file cases under the PF Act and Gratuity Act accordingly.

I really appreciate that members stressed the point on this site to support only the rules of ethical practices by organizations.

However, to everyone's dismay, the maximum organizations in India are not employee-oriented and do not like to follow envisaged rules/policies/Acts for the benefit of employees. Maximum organizations do not even have a set of employee policies. Likewise, our government's enforcement on these firms is lacking. They are only money-minting organizations and need to be dealt with severely by the enforcement department.

Mr. Mihir, please do come back on this site to explain the end decision; members may want to know more.

Regards,
VL Prasad

If the appointment order/contract of service requires giving notice or paying in lieu of notice, such as one month, and the employee fails partially, then the proportionate salary (shortfall in notice) should be deducted with intimation to him. However, before doing so, inform the employee to comply with the short notice or pay in lieu of notice as per the service contract. It is neither fair nor legal to hold FNF for the partial fulfillment of the notice period.

Regards,
SDP