Can We Terminate Employees Without Notice? Understanding Legal Risks and Compliance Issues

I am from a large proprietorship company in Delhi. Recently, some employees have been hired in our company across various functions.

Company Policy on Offer Letters

As per company policy, the offer letter is given only after joining. The offer letter carries standard terms of termination for all levels/functions. It states that the company can terminate any employee at any time without assigning any reason with one month's salary/notice, whereas if the employee wants to leave, he/she will have to pay the last 5 months' salary.

Termination Concerns

We want to terminate the contracts of a couple of employees (middle-senior management) as they are unable to perform well and are struggling to adjust culturally. These employees have been with us for nearly 3 months, and despite some reminders, they have not shown improvement. We intend to terminate the contracts without paying one month's salary/notice as we have indirectly indicated to them verbally on a few occasions.

Legal Implications of Termination

If we terminate the contracts of these employees without notice, can they go to the labor court and challenge the termination? What consequences will our company face?

Working Hours Compliance

Some employees have raised objections regarding the working hours; is a minimum of 9 hours/day and 54 hours/week a violation of the Shops and Establishment Act?

Please advise on how we should handle the situation. We need to act quickly, so I would greatly appreciate your prompt response.

Thanks,

Chetan

Have you given the Notice of Non-performance to the said employees? If not, you have to give them the show cause notice and wait for the reply. If the reply is not satisfactory, give them another notice, mentioning termination if not improved within the stipulated time period.

Probation Period Considerations

Beforehand, what is the probation period of these employees? If they are under probation and if your termination clause mentions termination without notice during probation, then please specify to advise appropriately.

Thank you, Saji. Our appointment letter states that termination can occur at any time without providing a reason, whether during the probation period or after it. The probation period lasts for 6 months. Therefore, in accordance with the terms of the appointment letter, termination can be done without assigning a specific cause. While no written notice is required, verbal communication regarding expected performance may be given.

The issue is that you have to pay them their termination dues as per the law. They will sue you if you don't. Remember, it's you who wants to terminate them for their incompetency.

If it is mentioned in the appointment letter that termination can occur without assigning any reason whatsoever, and if the same has been accepted by the employee, then there is no need to worry. However, as a professional approach, it is advisable to give notice in writing before termination.

Termination Without Notice: Can It Be Challenged?

Thanks, Saji, but the point here is termination without one-month notice or salary as mentioned in the appointment letter. Only a verbal indication was given. Can the employee challenge termination without a notice period or salary?

In the appointment letter, one month's salary is specified at the time of termination. Therefore, you are required to provide the salary legally as stated in the Appointment Letter.