Is Terminating an Inefficient Employee Considered Misconduct or Retrenchment? Seeking Case Law Insights

Hi all, I would like to understand whether inefficiency amounts to misconduct or if the termination of an inefficient employee can be considered under retrenchment. I am looking for case law that states whether inefficiency amounts to misconduct and whether termination for inefficiency is or is not retrenchment. I have not found any specific regulation that defines inefficiency as misconduct. Even though the section for retrenchment under the ID Act states "any reason whatsoever," I have found articles on the internet that state termination for inefficiency is not retrenchment. However, these articles do not provide any supporting case law.

Thanks

Why do you want to handle employees' "inefficiency" under the provisions of labor laws? By the way, are you a student or a professional? What is the context of your query?

When an employer issues an "Appointment Letter," it is nothing but a "performance contract" between the employer and employee. The remuneration given to the employee is for the delivery of certain results or performance. Another factor for receiving a salary is observing the general discipline of the company.

Questions About Employee Inefficiency

I have a few questions about employee inefficiency. These are as follows:

- On what grounds do you say that the employee was inefficient? Have you investigated the causes of inefficiency? Is the employee lacking tools or other job aids? On a scale of 100, where does he/she stand?

- Was the employee given sufficient training to execute the work?

- By the way, is this a recruitment problem? Did you give prominence to the "salary bracket" over the "skill bracket"? Did you recruit a misfit and are now taking corrective action?

- What about the employee's manager? Did he/she provide sufficient support to the underperforming employee? How much time did the manager spend with this employee?

- Termination on the grounds of "inefficiency" is a loss to the company. Who has measured this loss and on what parameters? Who is accountable for reducing this loss?

There are so many questions, gentlemen, that cannot be swept under the carpet of labor laws.

Ok...

Dinesh V Divekar

Thank you for your response. I am a professional and need to put in place the termination policy. We have clear regulations regarding termination for misconduct and retrenchment. However, termination for inefficiency is ambiguous. Please note that before termination for inefficiency, all due processes are investigated, i.e., the underlying cause of the inefficiency—be it the company or the employee lacking training, skill set, etc.

Understanding Inefficiency in Termination Policies

My interest lies in understanding whether inefficiency amounts to misconduct or not. If it does not, can it be treated as retrenchment? Are there any landmark case laws that state whether inefficiency is or is not retrenchment? I would appreciate a response on this exact issue.

Regards,

Termination for Inefficiency: Misconduct or Not?

Termination for inefficiency would be invalid. Inefficiency is not misconduct, but deliberate go-slow is misconduct and can be taken cognizance of. If found necessary, disciplinary proceedings can be initiated. However, at the time of retrenchment, the rule of "first come, last go" can be deviated from, and inefficient persons, even though senior, can be retrenched.

Underperformance is not misconduct. However, if things come to termination, it is better to follow the principles of natural justice, i.e., conduct the domestic enquiry and then terminate the employee. I say this because if the employee were to file a suit later, records of the domestic enquiry come in handy in litigation.

Underperformance of an employee is completely different from retrenchment and cannot be handled under the provisions of the retrenchment clauses of the ID Act, 1947.

Recommendation for Employee Separation Policy

I recommend creating a comprehensive policy on employee separation. This policy could cover separation due to various reasons such as normal separation, separation on disciplinary grounds, or separation due to underperformance. For the latter two cases, clearly spell out how progressive discipline will be handled.

Regards,
Dinesh V Divekar

Hi Dinesh, thanks for your response. It certainly helps. I have a case law which states that inefficiency is not misconduct. However, a deliberate go-slow may be treated as misconduct. Are you aware of any case law which states that termination for inefficiency is not retrenchment?

I totally agree and support Mr. Dinesh Divekar's view. In fact, I had expected more from him in calling a 'spade' a 'spade'.

Linking Inefficiency with Retrenchment

The very idea of linking the term "inefficiency" with "retrenchment" seems mischievous and with questionable motives, especially when it is desired to be linked with a Termination Policy. The lawmakers, judicial system, and HRM in general have very rightly and in their far-seeing wisdom desisted from linking these two terms. This is the reason our member Mb_04 is unable to find any such reference for including in his agenda—a Policy for termination—which would allow easy termination by labeling anyone as inefficient!

The term inefficient cannot be defined precisely and thus is open to interpretations—and this in the hands of certain companies which are short on ethics can prove to be a disastrous weapon. Even if inefficiency is defined scientifically, it is based on the rationale of Input to Output. So, who is actually responsible for the input? Which means if there is a shortage or problems with input such as work or business or orders/demand; power; raw material, etc., and it affects the output, a worker can be blamed for the inefficiency and fired unceremoniously, for none of his fault!

Restricting the Use of the Term 'Inefficiency'

I think it's better to restrict the use of this term to managers and hire-and-fire them at will, as is being done today. To use such a discriminative and ambiguous term as a ploy to fire workers or workmen sounds malafide. Let these be governed by the relevant acts which do not take into consideration the term "inefficiency" and hence rightly no reference or case laws have been found. At times, the law is always a few steps ahead of those who intend to circumvent it!

And let good professional managers be more proactive and concerned about increasing the efficiency of their employees as suggested by Mr. Divekar, rather than finding ways to terminate on account of inefficiency.

Conclusion

To conclude, in a layman's view, one can say that when a company hires a worker when there is a lot of business, he is very efficient (because it's assumed no company would like to hire inefficient workers or admit that something is wrong with their hiring process); and when the business is bad, suddenly the same workers become inefficient! It is okay to retrench to save the business, but it's quite unfair to brand them inefficient and terminate them with impunity. This is why retrenchment does not include inefficiency. A company must be honest in accepting the facts of retrenchment and admit that it's unable to get more business.

Warm regards.

Understanding Legal Processes for Termination Due to Inefficiency

Seriously, people, all I am asking here is if there is a legal process in place. You all seem to be rather presumptuous and jumping the gun here, taking on an employee's cause. There is no termination going on here, just an attempt to understand the process. This is not an exercise to disguise termination but an exercise to understand the process.

I have come across Supreme Court cases where an employee has been terminated for being inefficient. My issue here is whether that would fall under misconduct or retrenchment, and is there any case law on the topic. I request you to grant the other person a degree of intelligence to have evaluated all possible angles. As I had told Mr. Dinesh, any termination for inefficiency has to be taken only after investigating the root cause of inefficiency, i.e., whether the company is responsible or the employee. There are set procedures and guidelines which HAVE TO BE FOLLOWED, WITHOUT WHICH ANY TERMINATION WOULD BE ILLEGAL.

I did not ask for your personal opinion; I asked if there is a legal process and what is the case law. I would appreciate it if you could provide an answer to the said query and not drone on about the ills of management. If you do not have anything constructive to add, don't answer. I REPEAT I AM NOT TRYING TO FIRE ANYONE FOR BEING INEFFICIENT. I AM TRYING TO UNDERSTAND WHETHER INEFFICIENCY FALLS UNDER RETRENCHMENT. IF THERE IS ANY CASE LAW WHICH STATES INEFFICIENCY IS/IS NOT GROUNDS FOR RETRENCHMENT. THERE IS NO COLORABLE ABUSE OF POWER HERE.

TO ALL THOSE WHO INTEND TO TALK ABOUT HOW BAD COMPANIES ARE VIS-A-VIS TERMINATION OF EMPLOYEES. THIS IS NOT THE POST FOR IT. IF YOU HAVE CASE LAW ON THE SUBJECT, PLEASE GO AHEAD AND REPLY.

Dear Mb_04,

The basic problem with your first post was the lack of clarity. Without giving sufficient background information, you raised the first post. To clarify what you wanted, you provided three posts.

Inefficiency and retrenchment are absolutely two unconnected things. A simple reference to the dictionary would have clarified your doubt. Furthermore, if you had referred to any book on the ID Act 1947, you would have found case law.

When you raise a post without doing sufficient spadework, you are bound to get replies of this kind. This happens because of perceptual gaps.

I am surprised at the repeated usage of the phrase "inefficiency." In HR Management, the general terms used are "performance" or "under-performance." How come you have yet to come to terms with this difference that I could not comprehend?

The last thing I would like to tell you is that you need to take training on the "Concept of Communication." I do not mean the concept of communication as "communication skills." You may be good at the latter, but you need to develop the former, that is for sure. Through your series of posts on the same subject, you have left sufficient evidence of this deficiency.

Gentleman, when you raise some query, basic courtesy demands disclosure of your identity. You wanted to conceal your identity and yet you want people to peep into your brain, understand your thinking, and give replies.

We are not paid consultants here. Even if you were to expect this from some paid consultant, he also would have failed on this count. Therefore, it is appropriate for you to choose your words carefully and choose your forum also carefully.

Instead of getting nervy at Mr. Raj Kumar Hansdah's post, have some self-examination, gentleman.

All the best!

Regards,
Dinesh V Divekar

I was very clear to begin with in my first post.

Understanding Inefficiency and Misconduct

I would like to understand whether inefficiency amounts to misconduct or if the termination of an inefficient employee can be considered under retrenchment. I am looking for case law which states that inefficiency amounts to misconduct and whether termination for inefficiency is or is not retrenchment. I have not found any specific regulation which defines inefficiency as misconduct. Even though the section for retrenchment under the ID Act states "any reason whatsoever," I have found articles on the internet which state that termination for inefficiency is not retrenchment. However, these articles do not provide any supporting case law.

It clearly states that it's an exercise in understanding the process and the legal provision. Nowhere does it state that I want to fire anyone for being inefficient. The mere fact that I am on this website shows that my research did not yield the desired result, and I hoped that I would receive a professional response to my query, not a sermon on the ills of management. I use the term inefficiency because non-performance or any other term is not defined by the Supreme Court of India or any other court. They define it as inefficiency. Also, we are not here to debate my communication skills or lack thereof. If this were such a forum, I would be obligated to point out your shortcomings. I am aware that you or any other member on this website are not paid consultants, and if I had paid for the service and received the kind of response I have to a query, I would surely undertake legal action to have my money refunded. As far as my identity is concerned, I am in no way obligated to reveal my name, gender, nationality, profession, etc. Knowing my identity has no relation to responding to the query.

In conclusion, I have said this before, I do not require a personal opinion or sermon on the ills of management, just the legal picture. If you do not have an answer, do not reply. If you do reply with a personal opinion (not backed by case law), please be prepared for any censure.

As a post-script: before asking a person to "self-examine," I would suggest you do the same. All your replies are based on presumptions and are highly judgmental and sexist. What if I happen to be a woman?

Regards.

The case of 'inefficiency' does not fall into the category of misconduct, and therefore, termination as punishment on account of misconduct is safely ruled out.

Secondly, if you consider the situation of retrenchment, then again, you will have to follow the process as given under the ID Act, i.e., First Come, Last Go.

I have not come across any case law in favor of or against the situation you have mentioned. However, you can simply use the provisions of your standing orders, if applicable to your establishment, or the terms and conditions of the appointment letter.

Regards,
Preetam Deshpande

The issue that the Learned Questioner faces is his desire to include "inefficiency" as a valid reason for the ultimate punishment of dismissal in his organization's separation policy, and he is seeking a judicial precedent to support this decision. In essence, he believes that hiring should not be done with the intention of firing. Furthermore, in our social interactions, whether significant or trivial, we cannot always rely on judicial precedents; what is crucial is to approach matters with wisdom. The rationale behind this is straightforward - humans are social beings, and just like animals, their behavior can be unpredictable. This unpredictability has led to numerous Case Laws emerging on similar subjects over time. Despite my efforts, I was unable to locate any relevant Case Laws on this matter. Therefore, I suggest that instead of seeking supportive Case Laws, the issue should be approached judiciously and impartially.

Employment Contracts and Performance Expectations

As Dinesh correctly pointed out, employment contracts are fundamentally contracts of performance. Both the employer and the employee are expected to deliver certain levels of performance. When there is a noticeable deficiency, appropriate corrective measures should be implemented, ensuring that these actions are morally, legally, empathetically, and equitably sound. Efficiency is a subjective term, making it challenging to define precisely. Inefficiency, on the other hand, is not necessarily the opposite of efficiency; rather, it signifies the lack of certain efficient attributes. Consequently, inefficiency alone is not deemed misconduct. However, an employee who consistently underperforms and becomes a liability cannot be retained in the organization. In such cases, if the departure is voluntary, through actions like self-initiated resignation or voluntary retirement schemes, the transition can be smooth. If the separation is initiated by the employer, dismissal solely due to inefficiency is not an appropriate punitive measure because the employer-employee relationship transcends the terms of the employment contract. Therefore, any separation, even if not celebratory, should be conducted with respect. This underlines the argument against subjective terminations based on fixed notice periods or monetary compensations in place of due process, which are deemed untenable and unjust.

Approach to Handling Inefficiency

Hence, the question of how an employer should handle such situations remains unanswered. In my view, the best approach would be to first attempt to improve the employee's performance through positive interventions suggested by colleagues. If no progress is observed, consider reassigning responsibilities to align with the employee's capabilities. Similar to the aging process, inefficiency typically develops gradually rather than abruptly.

Regards

Thanks for your response. It does bring in a degree of clarity. Like I stated earlier, my organization is not in the process of firing anyone for inefficiency. We need to have a policy in place in case there is a situation where an employee becomes inefficient. In that case, can his/her services be terminated under retrenchment laws, or would it amount to misconduct? I have now managed to gather sufficient case law which states that inefficiency does not amount to misconduct. However, a deliberate go-slow attempt would be considered as misconduct. So far, I have also found articles on the internet which state that termination for inefficiency is not retrenchment. However, the articles do not provide any supporting case law.

In the light of all the answers I have received here and some more research, my query has now changed to "whether a termination clause in the employment contract which states that employment can be terminated for any reason or without giving reason in lieu of either pay or notice can be held to be void." In terms of public entities, I have found case law which says that such clauses can be void if the process of natural justice is not followed. However, I am now stuck at finding a decision regarding private entities. Would appreciate any help with this regard.

Dear Mr. Umakanthan,

I profoundly appreciate your comments. You have brought out the facts of the matter beautifully and succinctly. No doubt, such brilliant and learned comments come out of your vast experience as a former Labour Commissioner and Presiding Officer of labour courts and tribunals.

The members have been expressing the same views, viz. "the contract of employment is a contract of performance"; "Efficiency is a relative term; hence, we cannot define it precisely. But inefficiency cannot be its antonym because it simply brings out the absence of certain attributes of efficiency. That's why inefficiency is not held to be misconduct," etc.

And also, the very fact that RETRENCHMENT by definition does not include any performance issues, and that the term Retrenchment itself means cessation of service in SITUATIONS WHICH ARE "NON-DISCIPLINARY"; thus, do not deal with Performance or Efficiency issues.

No wonder our learned member was unable to find any reference connecting or linking Retrenchment and Inefficiency, despite her enduring long effort.

Your kind and wise words remind me of the famous story about Emperor Akbar's court, wherein an astrologer was put to death for saying, "All family members of the emperor will die before his eyes," and another was rewarded for saying, "You will live a long life, longer than any of your relatives."

Thanks again for putting up the matter so nicely and explaining the issues involved in a manner that is pleasing, yet factual.

Warm regards.

Hi Mb, I have gone through a topic that is relevant to your query. I have enclosed it herewith for your perusal.

Regards, Swarna