Facing a Legal Dilemma: How to Handle an Employee's Demand for Unpaid Salary Arrears?

Dear Seniors, We are facing a unique situation. Early last year, we shut down one of our group's companies in Faridabad (I am from a different business vertical of the same group based in Gurgaon), and the process was smooth with full and final settlements of all the workmen and other employees taking place smoothly. A senior managerial employee 'X' with 25 years of work experience in that Faridabad company alone and currently 57 years of age was given the responsibility for the closure.

Now, 'X' is working with us in Gurgaon, but senior people here and the bosses want to do away with him as soon as possible. He hasn't joined us yet formally as he refuses to sign the papers for this company until his dues are settled for the previous company. The catch here is that his salary increment wasn't done for the last 5 years in the previous company, and he wants to include those significant arrears (calculated at a minimum of 8% per annum for each of the last 5 years) in the final settlement as other employees were given due increments in those 5 years.

Here we have offered him a marginal hike to be effective from April 2013. Also, we, on our part, have used every trick in the book, such as humiliating him, making him work for a smaller post than his previous designation, and taking many of the facilities back, but the old man refuses to budge!

Please suggest how to go about this and what are the legal avenues available to him and us in case we terminate him lock, stock, and barrel! Do we need to pay him for 1 year of service left as well? My company is afraid - in case he takes legal action!

Regards

First of all, please clarify/confirm if you [or rather your company] have been fair to this employee? To begin with, there haven't been any increments for 5 years. Then, when you needed him, you found him to be the best to handle the smooth closure of the Faridabad company—frankly, doesn't this 'sound' like 'using him' when his services are needed? And now, he is not needed anymore.

I don't think the reason for not giving him any increment for 5 years was his performance—if it had been, he would have been thrown out long back, and this thread/posting wouldn't have been here at all. Let's not get into his reasons why he still continued with your company despite not getting the increments. As a company, your prime focus should be the company's interest.

And purely from the HR angle, do you think this was the right thing to do, "...have used every trick in the bag viz humiliating him, making him work for a smaller post than his previous designation..."? And when any employee either pays or tries to pay back in the same coin, the employer objects—as if the company followed the Gospel Truth.

In a nutshell, the company doesn't want him but wants him to bear the cross for the company's benefits.

I would suggest this...if (and this, frankly, I can see will be a big if) you want to at least correct the wrong done to whatever extent possible now: please sit with him, sort the matters out amicably, and close the chapter.

You see the possibility of his going 'legal' as the biggest threat, but you forgot that he can even ignore the legal option and hit your company where it matters most for any company—credibility—through non-legal means. In these days of social media, that wouldn't be difficult to do at all, and remember that he would have the evidence about not getting the increments, etc. And for all you know, he might wish to pursue both options.

Take it from me...it will take ages to reestablish a battered credibility, especially when the hit comes from a senior employee and one who has handled the rest of the staff will surely have their empathy/sympathy.

There's an old saying that means: 'when one realizes there's nothing else to lose, forget about gaining, you can't predict the actions of such a person'.

And like the Bible says: As you sow, so you reap.

Hope you get the point.

Regards,
TS

I think this is one of the worst cases of exploitation by a company!

To quote/highlight from your post:

- "A senior managerial employee 'X' with 25 years of work experience in that Faridabad company alone and currently 57 years of age was given the responsibility for the closure."

- "We shut down one of our group's companies in Faridabad, and the process was smooth with full and final settlements of all the workmen and other employees taking place smoothly."

- "Now 'X' is working with us in Gurgaon, but senior people here and the bosses want to do away with him as soon as possible."

- "His salary increment wasn't done for the last 5 years in the previous company, and he wants to include those whopping arrears (calculated at a minimum of 8% per annum for each of the last 5 years) in the final settlement, as other employees were given due increments in those 5 years."

- "We have offered him a marginal hike to be effective from April 2013."

- "We, on our part, have used every trick in the bag, viz, humiliating him, making him work for a smaller post than his previous designation, taking many of the facilities back, but the old man refuses to budge."

- "Please suggest how to go about this..."

I am at a loss to understand what kind of assistance you seek from CiteHR members. Do you think everyone is so depraved as to be a party to the abatement of such inhuman, immoral, or unprofessional tasks?

I think you do not even understand what you are doing or what you are asking for. Considering that you are different from your UNETHICAL company, the only suggestion one can give you is that there is no dearth of companies; if you are well-qualified and competent enough, you can find several other opportunities. Do not be a party or an active participant in such unethical activities of your company.

You may not realize it at this point in time, but sooner than you think, you will find yourself in the same spot.

Regards.

I completely agree with the others on the site. And I sincerely hope he files a legal case against your company, maybe naming you personally.

Legal Position of the Employee

However, in view of enhancing our knowledge, I would like the group to discuss what is the legal position the employee has. To my mind, he will not be covered under the Industrial Dispute Act, as he is a managerial employee and his salary is much above the specified limit. He may not be able to claim an increment with retrospective effect as there is no law saying that an increment must be given. Further, he should have raised this matter years ago (maybe he did).

Retrenchment Compensation and Gratuity

He should be given full retrenchment compensation that is issued to him, plus gratuity. There is no doubt about that.

Legality of Transfer to the New Office

About the legality of his transfer to the new office, it depends on whether it is the same company or a different one. Not being relieved from the earlier company means that he is due to get a salary from there till the date he is relieved. I assume you have not done that. In addition, you will be liable for a penalty and interest on the delay in full and final settlement.

Rights in the New Company

In the new company, he will have rights to all dues irrespective of whether he has signed the documents or not. His working here and your acceptance in the new setup as a de facto employment.

Potential Legal Actions

To my mind (I hope TS and Raj agree), despite his not being a workman under the Industrial Dispute Act, a good labor lawyer will be able to take the matter to court. The courts as well as the government labor department look down on the exploitation of employees and are willing to give them enough leeway. I will appreciate if others can give details of which rule, etc., he can take legal action against the company.

Dear Members,

I agree with your views, but the problem is that he is an upright person (CAG-like), and other senior-level employees' revenue streams might get disturbed as they have influenced the bosses, hence creating this mess (Office Politics).

The company is willing to give a full and final settlement, but he insists, and rightly so, that the salary needs to be incremented, then revised full and final with arrears. Legally speaking, should we give him those increments, arrears, etc.? (Morally, they should be given though.)

Also, does he need to be compensated (legally) for one year of service left in case he is not willing to continue with a lower designation? Because even if he decides to work with a lower designation, I am 100% sure he won't be allowed to work for even three months, as people are already baying for his blood for obvious reasons.

One also feels for him as, at this age, it will be difficult for him to find another job!

I request all the members to give their legal opinions at the earliest!

Regards,
PLB

Legal Implications of Employee Termination

Legally speaking, as I have posted earlier, he does not have a right to get the increment. However, if he can demonstrate harassment, or more so, if he can show collusion and other revenue streams, the court will probably decree in his favor. He only needs to get some of the terminated employees to appear in court as witnesses—they must be upset with the company for termination anyway.

The fact that he has been given a lower designation, etc., will also tilt the matter in his favor. It's better you pay him the full-year pay and let him leave; the cost to the company may be much higher otherwise.

I think most of the members have given you sufficient inputs that should enable you, as an ethical HR professional, to steer this matter in the right direction. The role of HR is to maintain a fair balance between employees and management. You are in a position to show management the flipside of making any wrong decisions. You have already received leads posted by the members.

Prepare a strong case for this employee—consolidate his past performance, his loyalty towards the company, and his extraordinary contributions to the smooth closure/settlement of the Gurgaon plant, etc. Propose that he should be given a smooth release and that all his dues are settled fairly. If you manage to help this individual get a fair settlement, I am sure you, as an HR professional, will feel greatly satisfied.

Regards,
Gia

As clearly opined by other team members, there are two aspects to your issue:

1. Legal - Here, the employee has a very slender chance to get much out of you. Courts can, at most, grant him some relief, but that would not be adequate.

2. Ethical - Do you really justify the way the employee has been treated? Put yourself in the shoes of the employee and then come to a conclusion.

Regards,
Preetam Deshpande

Legal Compensation and Settlement Concerns

Legally, he can receive an increase for the past five years as part of the final settlement, as you have done the same for others. He can also receive the next year's salary if you force him out by using unethical means. Additionally, he can receive further compensation for harassment and causing mental agony willfully (your posting bears testimony to this). It may take a few years, but I am confident that I can win his case. The longer you take, the more interest you may have to pay for the same. Probably, he must be aware of this legal position.

Going forward, I would like to add that it's better if you provide him with the compensation and the arrears because it may end up costing the company more than what you are trying to save.

Dear PLB,

You have mentioned that the person is upright like the CAG, and it is going to affect the revenue stream of others. Does it mean others are indulging in some illegal or immoral gain from your company? And this man, being upright, loyal, and hard-working, would expose them. The management should rather keep him employed with back increments and some appreciation letter. Even if he is not required now, he should be given his dues and helped at this stage of his career to find some placement.

Please be upright yourself and discuss with your bosses.

Regards,
Ravi Thakur

Dear Ms. Premlata,

Just a point aside from this case: Indian courts have a huge backlog of cases, not just because there is a shortage of courts, judges, infrastructure, etc., but we collectively add to this by creating a legal case where there is none. This is a classic case in that regard. You are pushing an employee to go to court (even when he is not very keen... or so I gather).

As an HR professional, you can involve all concerned parties (happy and not-so-happy members) working at different levels, creating a conducive environment for a happy parting with this employee. At the age of 57, he is not likely to find a similar job. Please treat him as a human being with family, friends, and other liabilities and give him all his dues.

Many times, an HR professional has to do the unpleasant job of holding a mirror to management, even at the risk of their own appraisal. But as they say, "Ships in harbor are safer than those at sea, but that is not what they are meant for."

Best of luck,

Regards,
Col. S.S. Raikar (Retired)

Dear Premlata,

Thank you for sharing the facts and your dilemma. It is gratifying to know that you are able to see the situation objectively, without taking the side of the unethical management of your company. I also fully agree with others on this and the line of action suggested.

As you can see for yourself, the person is being victimized because he is upright and fair. He is able to take every obstacle and humiliation in his stride, unflinchingly. He has done his job and achieved his tasks and targets. However, he has been deliberately overlooked for increments for the past five years.

It is ironic and evil that the management, instead of rewarding and appreciating such an employee, is bent upon discarding him ruthlessly since he has delivered what was expected of him.

Given his experience and ability, it is evident that he can go to the Civil court (not being a workman) and present his case forcefully along with evidence and witnesses. There is a good probability that he may win, which will be very costly and embarrassing for the management.

Therefore, it is better if the management pays him his rightful dues. As an HR professional, it is your moral responsibility to ensure that this is done.

Warm regards.

Dear Fellow HR Colleague,

Your Mr. X is not asking for anything in excess; however, all that is justified should be given. Mr. X, an old man, is being humiliated. This is very sad. Maybe the company owners are not educated enough and have gained business standing through wrong means. Remember, even you will reach his age. If the same happens to you, then what? Provide corrective measures to your bosses and owners or leave this nonsensical company. Get yourself moving somewhere else. Don't squander your potential in wrong causes. Don't be a part of it.

There are various legal aspects that protect this man, Mr. X. If he takes that route, no one can do anything, not even your bosses.

Regards

The question is whether he can be terminated? YES. If he is asking for benefits extended to all other employees of Faridabad, then he is RIGHT. Either you pay now or on the order of courts; it depends upon you. Otherwise, you can ask him to leave with termination benefits, rightfully his, as per the company's rule.

If he is the only upright officer and all others are not, HR should motivate him to leave as soon as possible. He can get a better job and respect in many other companies in India. Upright officers are very much in demand, and his continuation on humiliating terms will demoralize those trying to emulate him.

HR should motivate him to leave the company of crooks, and HRs themselves should use the first opportunity to leave such companies.

The essence is the separation of the two, where you either terminate him for his benefits or he leaves the company for his own benefit.

One point of difference here: The other employees of the Faridabad unit have been given their termination benefits, but no one else asked for or received a 5-year increment on termination. That is the difference. He did not get his increment for 5 years. He is asking for it to be given now. Legally, there are no grounds for him to claim that. As a moral ground and leverage, etc., it is different. But unfortunately, I don't think he has a legal ground for it.

Members have given very mature answers. It is a shame that a person has been treated like this. I hope those who are responsible also get a taste of their own medicine.

Regards,
Suresh Rathi

This is a response to the entire email thread. Arguments on the matter should be looked at on MORAL/ETHICAL/SYMPATHETIC grounds, and I endorse them too. But I wish to know and am seeking confirmation of my following presumptions:

1) Mr. X is NOT a workman under the Industrial Disputes Act 1947.

2) Other non-workmen in the company have also NOT received "closure benefits" under V-A or V-B of the ID Act 1947 as may be applicable.

3) If he was NOT granted any salary increases for the past FIVE years, how does he now feel justified in demanding the same? The need for money at this stage of life and career is understandable, but to be obstinate and difficult about it is counterproductive and will defeat self-interests.

Let us understand that industrial organizations are first and foremost ECONOMIC organizations, and REASON comes ahead of EMOTION! HR is NOT in the driver's seat to make such organizational decisions driven by emotions, sympathy, ethics, and morality. Of course, the HR can quit right away as is being suggested also, but doing so will be at his peril!

Depending upon the level of the HR in the hierarchy of decision-makers, it will put a limit on his free and independent acts!

As far as Mr. X's case is concerned, he can be separated in terms of his contract of employment (now especially since he wishes to try being unreasonable in seeking a benefit that is essentially NOT his legitimate due), and what was he doing for the past five years anyway! In fact, he could have refused to handle the closure assignment and taken his chances then only.

The company is being decent to retain him, and as I notice, it is the "office politics" that is out to get him. I feel this is the area HR can influence proceedings and salvage Mr. X's career and employment or work out a decent and dignified separation package for Mr. X.

I entirely DISAGREE that HR must quit. (He may do so if he chooses - but NOT on moral or ethical disagreement with powers that be but out of his inability to ensure the right decision/s being taken.) But then he will have run away from virtually every organization since most industrial organizations will respect ECONOMISM first and only the HUMAN perspectives anyway!

My two bits worth for everyone's consideration, please. Kindly note that no offense is intended, and all views are respected. I am only putting across MY views!

Regards,
Samvedan

September 19, 2013