Facing Sudden Company Closure: What Legal Steps Can We Take for Mass Terminations?

Need Help & Guidance on Company Closure Issue

Ours was a new company started on the 4th of October 2011 in Mumbai, employing approximately 75 employees across 12 locations in India.

Our appointment letter included the following two points, among others:

c. You will be on probation for a period of six months from the date of appointment. If, in the opinion of the company, you are found suitable for the appointed post, you will be confirmed. Unless otherwise communicated to you in writing, your services shall stand confirmed at the end of the probation period.

d. The employment is terminable by either party giving 15 days' notice within the confirmation period and 90 days' notice beyond the confirmation period. If notice is not given, salary for 15 or 90 days will be recovered, as the case may be, with mutual understanding as per the discretion of the senior management.

Most of the employees have now been with the company for over 6 months.

Of course, we knew that the company had not been doing well in the last 2-3 months, and clients had reduced. Until yesterday, however, it was business as usual, with employees busy with their work, completing projects and tasks, and it was hectic as well.

This morning, the chairman, along with the MD, started calling employees one by one, telling them not to come from tomorrow. Initially, there were 6-7 such employees. Then, all of a sudden, he took a drastic step, stating that he is closing down the company, and all will have to leave except for some 5-6 who will be absorbed in his old firm. Including the CEO, the VPs, and all employees have been terminated.

At best, they will pay us until the end of January (keep in mind even our December salary is pending).

Request for Assistance and Legal Guidance

1. Do all employees (in Mumbai) have any legal recourse?

2. When our appointment letter mentions 3 months' notice by either party, is it right that they pay us and give us time only until the end of January?

3. Most of us will be jobless, and finding a new job takes at least 2 months or more.

4. The appointment letter has the signature of the CEO, but he too has been asked to leave.

5. If we are within our rights to file a complaint, please guide me on where and how we can take this further.

6. The main concern is for employees in Mumbai, where the HQ was located and had about 45 employees.

Any other help or guidance shall be appreciated (I have uploaded our sample appointment letter).

Please do assist as we have been left high and dry by the company where we worked even on holidays and Sundays when work pressure was high, as we wanted the company to grow.

Thank you.

Regards,
Cyrus.

While empathizing with the situation you and your fellow colleagues are in, it's also better to be realistic.

Coming to Your Queries:

1. Do all employees (in Mumbai) have any legal recourse?

Legal recourse is always available for most HR issues/situations. But usually, it's more about whether to pursue it in such situations, considering there are potential downsides. In your situation, you need to decide if you and others want to focus on legal cases or finding the next job.

2. When our appointment letter mentions a 3-month notice period by either party, is it right that they pay us and give us time only until the end of January?

The company is obligated to pay all of you as per the Appointment Letter. Perhaps legal recourse can be utilized to obtain these dues.

3. Most of us will be jobless, and finding a new job takes at least 2 months or more.

Frankly, whether we like it or not, that's part of the globalization phenomenon, or rather one of the downsides. The IT industry is filled with such stories and situations, as seen during the 2008 global recession. It's essential to focus on how to handle it rather than spending time and effort on the how and why of it.

4. The appointment letter bears the signature of the CEO, but he too has been asked to leave.

That shouldn't matter since he was in service when the letter was issued. The Appointment Letter all of you have will remain valid unless the company claims they were not genuine (don't be surprised – there are dishonest individuals capable of such claims).

5. If we are within our rights to file a complaint, please guide me on where and how to proceed further.

I suggest waiting for the legal experts in CiteHR to respond. The ideal approach would be to consult with a lawyer, ensuring you are engaging the right one. Otherwise, the case could drag on for years, and you would end up investing time, effort, and money.

Hope this helps.

All the Best.

Regards, TS