There is a notion or view that a contarct of employment is a law unto itself so far as the rights and obligations of the parties are concerned namely the employer and the employee.It is true but not entirely.The Indian Contract Act 1872 itself has imposed conditions for a contract to be valid and enforceable. For example, a contract entered into by one party exercising undue influence on the other party is void. Again, Sec.27 of the Act,since Niranjan Golikari's case way back in 1969, renders restrictive clauses prohibiting an employee joining a competetor after leaving service as null and void as they are in restraint of trade .
A contract of service is an agreement between a powerful employer who dangles the carrot of job with a salary tag before an employee who needs it to earn his livelihood.Thus it is a contract between two unequals and perhaps the terms have been accepted by an employee for a compulsive need or under undue influence of a powerful employer.Therefore the courts will lift the veil and see whther the terms are in accordance with any law that protects the economic rights of an employee or in accordance with the principles of equity and justice.In view of the fact, the Apex Court in Niranjan Golikari's case observes that the agreements between the master and servant shall be put to stricter view and they cannot be put on the same pedestal as business contarcts between a vendor and vendee or seller or purchaser.
Thus in one case, the employer terminates the service of an employee by giving one month notice by invoking terms of employment only in letter but not in spirit but the Constutution Bench of the Apex Court threw the termination out as the employee was not given a hearing before being terminated, though the contract does not provide for hearing. This is a gleaming example where the hon'ble Court imported the principle of equity reflected in the principles of natural justice to balance the contarct evenly between the employer and the employee. Another example to illustrate, is let us assume that a contract provides a clause which permits an employee to resign by giving one month notice but entitles the employer to refuse resignation without assigning any reason.Merely because the contract was signed by the employee, should he be under slavery of the employer for his life as he has conceded the right to refuse to the employer? Will such contract survive in a court of law? Will it not hit Sec.27 of the Contract Act to become void? The foundations of such contracts seem to be shaky in the light of court's observations in one case that a person, by entering into a contarct of employment does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign(more so in the modern era of technology which opened up abundant job opportunities).
Yet there are cases wherein either the contarct of service or service rules contain a clause that an employee is transferable any where in India.However such a clause does not give carte blanche to the employer to transfer an employee with malafide intention or in colourable exercise of power, for example, to punish him for an act of indiscipline.Though the courts have upheld the mployor's right to transfer as his previlege but set aside those, effceted with bad motive on the principles of equity and fairness.
In the instant case put up by the queriest, the employee submitted her resignation with an intention to serve the notice period and if the contract does not have notice period and notice pay clause, the queriest should not have any issue. The fact that she has an issue with the employee's resignation shows that there is a provison for notice period.In such a case when the employee expresses her intention to serve the notice period, it means she wants to terminate the contarct of service only after the expiry of the notice period. Since the employer has terminated the contract of service by accepting her resignation before the expiry of notice period and deprived her of a month's salary, in my view, he is required to pay notice pay as demanded by her on the basis of principles of equity and fairness.
B.Saikumar
HR & labour Law Advisor
Mumbai
A contract of service is an agreement between a powerful employer who dangles the carrot of job with a salary tag before an employee who needs it to earn his livelihood.Thus it is a contract between two unequals and perhaps the terms have been accepted by an employee for a compulsive need or under undue influence of a powerful employer.Therefore the courts will lift the veil and see whther the terms are in accordance with any law that protects the economic rights of an employee or in accordance with the principles of equity and justice.In view of the fact, the Apex Court in Niranjan Golikari's case observes that the agreements between the master and servant shall be put to stricter view and they cannot be put on the same pedestal as business contarcts between a vendor and vendee or seller or purchaser.
Thus in one case, the employer terminates the service of an employee by giving one month notice by invoking terms of employment only in letter but not in spirit but the Constutution Bench of the Apex Court threw the termination out as the employee was not given a hearing before being terminated, though the contract does not provide for hearing. This is a gleaming example where the hon'ble Court imported the principle of equity reflected in the principles of natural justice to balance the contarct evenly between the employer and the employee. Another example to illustrate, is let us assume that a contract provides a clause which permits an employee to resign by giving one month notice but entitles the employer to refuse resignation without assigning any reason.Merely because the contract was signed by the employee, should he be under slavery of the employer for his life as he has conceded the right to refuse to the employer? Will such contract survive in a court of law? Will it not hit Sec.27 of the Contract Act to become void? The foundations of such contracts seem to be shaky in the light of court's observations in one case that a person, by entering into a contarct of employment does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign(more so in the modern era of technology which opened up abundant job opportunities).
Yet there are cases wherein either the contarct of service or service rules contain a clause that an employee is transferable any where in India.However such a clause does not give carte blanche to the employer to transfer an employee with malafide intention or in colourable exercise of power, for example, to punish him for an act of indiscipline.Though the courts have upheld the mployor's right to transfer as his previlege but set aside those, effceted with bad motive on the principles of equity and fairness.
In the instant case put up by the queriest, the employee submitted her resignation with an intention to serve the notice period and if the contract does not have notice period and notice pay clause, the queriest should not have any issue. The fact that she has an issue with the employee's resignation shows that there is a provison for notice period.In such a case when the employee expresses her intention to serve the notice period, it means she wants to terminate the contarct of service only after the expiry of the notice period. Since the employer has terminated the contract of service by accepting her resignation before the expiry of notice period and deprived her of a month's salary, in my view, he is required to pay notice pay as demanded by her on the basis of principles of equity and fairness.
B.Saikumar
HR & labour Law Advisor
Mumbai