Navigating IT Employee Retrenchment: Legal Questions and Concerns in Karnataka

Employee Retrenchment Queries

I have a few questions on employee retrenchment:

1. Is the "Industrial Dispute Act 1947" applicable to managers working in IT companies in Karnataka?

2. Are IT companies legally bound to pay severance pay of 15 days per year of completed service (in addition to gratuity)?

3. Is the applicability of (1) & (2) only in the case of mass retrenchment? Or, will this apply to individual cases where an employee is asked to leave the company due to performance reasons after completing 10 years of service?

4. Can disputes in the case of (3) be taken to the labor court? Is there any argument in favor of the employee?

Any expert opinion will help.

Thanks,
Sheen

Managers and the Industrial Disputes Act

Managers are not considered workmen, whether in connection with IT companies or not. Simply having the designation of a manager does not exclude them from the protection provided by the Industrial Disputes (ID) Act. To be considered a manager, their functional responsibilities must be considered. These responsibilities may include approving leave for subordinates, initiating disciplinary actions, and appraising performance. If these criteria are met, they would not fall under the definition of a workman.

Social Security Benefits and IT Companies

IT companies are not exempt from providing social security benefits such as PF, ESI, Bonus, Gratuity, etc., and they are also subject to the ID Act. For technical personnel without subordinates reporting to them, a compensation of 15 days' pay for each completed year of service under the ID Act is required to terminate their employment.

Termination and Compensation

The compensation mentioned above also applies to individual cases. Additionally, when terminating an employee for poor performance after ten years of service, principles of natural justice must be followed. This includes conducting a performance appraisal, sharing the results with the employee, providing them with the opportunity to improve, and not making sudden decisions. A long-serving employee should not be labeled as a non-performer abruptly.

Rights of Workers in IT Companies

If the individual is classified as a worker (in IT companies, typically all are designated as professionals, but only those with at least one subordinate would be considered supervisory or managerial employees), they have the right to challenge the termination order in the Labour Court.

Regards,
Madhu.T.K