Facing a Surprise Settlement Notice After 18 Months: What Are the Legal and Career Implications?

Please Suggest - All Seniors

The case is now complicated; the reason is that the full and final settlement has not been done, and now the past employer has issued a notice.

Brief: When one of my friends resigned from his company (let's name it A), he was supposed to serve a notice period. However, since he had to join the next employer immediately, he asked his company "A" to deduct his salary as he was unable to serve the notice period. Company A deducted all his salary, and he was paid a nil amount. Now, company A has sent a notice (after 18 months) to pay Rs. 15,000/- as a full and final settlement.

Now, my questions are:
1. If my friend refuses to pay the dues, what can happen?
2. What legal actions can be taken against that employee?
3. How much will be the impact of all this on the career?
4. Why has this company issued a notice after 18 months? Is there any time limit?
5. Till now, that company has not cleared the PF of this employee. Is this a tool in the hands of management to put pressure on the employees if they are running out of the company?

All seniors, please suggest as soon as possible.

Thanks in advance for your valuable replies.

Regards,
Yash

Notice Period and Salary Deductions

How much notice period was due? How much salary was deducted? What is the salary he was getting?

Time Limit for Civil Action

The time limit for civil action is 3 years.

While mentioning that your friend was not paid a salary against the notice period not served, was he issued the full 'n' final settlement statement with a no-due certificate? If yes, the company cannot claim ₹15,000 after 18 months. You can very well seek advice from a lawyer or even directly ask the company to justify the reason against which it claims ₹15,000.

Your clarity on this and above will seek you more advice.

Regards

For clarification:
1. A 2-month notice period was required.
2. Full salary was deducted, and all no dues were cleared. All amounts have been taken by the company.
3. His salary was approximately 18 thousand.

Regards

Thanks, Hiral, but I am seeking more clarification, like:

1. His notice period was 2 months, but as he had to join his new company immediately, he did not serve the notice. All his dues were taken by the company, and he was not paid a single penny. If he is unable to pay 15,000, then what can happen to him?

Thanks, Yash

Dear Yash, Your friend was supposed to serve a notice period of 2 months. This means that his notice pay in lieu of the notice period would be ₹30,000. However, he left without giving any notice. Consequently, the company did not pay him his salary for the last month or a part of that month. Even if it was for a full month, the amount owed would be only ₹15,000. The remaining balance is payable to the company by him, as the company is within its rights to recover it from him.

The statute of limitations for civil liability is 3 years, so the company can definitely file a case against him. He will have to pay the amount with interest and the lawyer's fees. Since he has already received a legal notice, it is clear that the company is taking this matter seriously. It is hard to believe that a company would go through all this trouble for just ₹15,000. There might be some part of the story that you have not shared with us.

Kind regards

Provident Fund (PF) Issues

As for the PF part, there are many other cases of PF not being cleared, which have been discussed on the forum. Search, and you will find details of what you can do about it.

Regards,

Has he signed the full and final settlement papers by signing a "no demand certificate"? At that time, did the employer notify him regarding the dues of the remaining amount? If he signed the full and final papers and the employer had not notified him of the dues of the remaining amount, the employee has no liabilities to pay the money.

Yash,

You did not get the point. Let me explain it again. Was he issued an NDC and/or F&F statement while leaving the office with an experience and relieving letter? Please answer this.

If his salary is ₹18,000, he is liable to pay ₹36,000 for a 2-month notice period. In that case, if the company was unable to adjust the full amount against the last month's salary that he worked, the balance needs to be paid.

Before sending the legal notice, the company would have made efforts to convince the employee in question to pay the balance. Failure to do so has led to such a legal notice. In that case, if he denies paying the due amount, he might have to face legal consequences.

Regards,
Yash

Legal Notice and Employment Contracts

If the employee has collected a 'Relieving Letter' (mentioning that no dues are outstanding from him), the company cannot issue a legal notice. However, the details mentioned above indicate that the employee suddenly vanished from the company, assuming that his one-month salary, which the company was to pay him, will suffice in lieu of the notice period of 2 months. In my opinion, the company is justified in sending a legal notice to recover the balance amount of Rs 15,000.

It is to be noted, while examining this case, that the company possibly wants to convey to other employees that they are bound by the employment contract once they have accepted a job offer. They can't take the company for a ride by quitting without notice. These days, there are plenty of people who exit suddenly for personal benefits without realizing how much the organization suffers. The action initiated by this company needs to be repeated by all affected companies to make people realize that employment is a contract, and both parties (employer and the employee) are bound by its terms and conditions.

Dear Hiral, Thanks a lot for explaining the concept so nicely. My friend was not given any F&F letter, nor the relieving letter too. But one important point which is coming here is that after my friend left the company, many other people had also changed, but their F&F was given on the same day (even when other employees had not given a notice period). No notice is given to any of those previous employees. Is any settlement possible? Awaiting your reply. Regards, Yash

As mentioned by Saswatabanerjee, every case has its own peculiarity. You cannot compare nor do you have any concern with the company's actions with other employees. In that case, Yash, you can ask him to have a word with the company HR/Competent authority. However, as your friend neither has an NDC nor an F&F settlement statement, it is difficult to proceed smoothly. He'll have to pay the same to avoid legal consequences as the company seems to be adamant about going legal. This situation might also create problems in his current job. Rather than wasting time, it is advisable to immediately have a word with the employer and clear the issue.

Dear Saswata, I am extremely sorry for this mistake. Please forgive me. Actually, when I was replying, I just forgot to whom I am replying; my focus was on the matter.

That company has also not paid his bonus for the duration my friend worked there. About 15 months' bonus is also with the company.

Yash

Since his salary is above $10,000 per month, he is not eligible for a bonus. Therefore, that is also not something he can claim as part of a settlement.

Here are the answers to your queries:

1. If my friend refuses to pay the dues, what can happen?

Answer: The company will not issue any clearance certificate to the employee, and if already issued, then nobody can do any harm to the employee.

2. What legal actions can be taken against that employee?

Answer: The employer can take legal action against the employee if that is in the employment terms and conditions and signed by both parties.

3. How much will be the impact of all this on the career?

Answer: Without clearance letters and final settlements, an employee may not join a good professional company.

4. Why has this company issued a notice after 18 months? Is there any time limit?

Answer: The company can send a notice after the assessment of accounts—so no time limits.

5. Till now, that company has not cleared PF also of this employee. Is this a tool in the hands of management to put pressure on the employees if they are running out of the company?

Answer: PF and FNF clearance are different. No company can hold an employee's PF, but they may not sign the PF withdrawal forms. Well, there are other ways out of PF withdrawal.

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