Can a Branch Manager Be Let Go Without Reason Just Based on an Appointment Letter Clause?

Can management terminate the services of an employee who is at the Branch Manager level solely based on the appointment letter clause stating "this appointment can be terminated by either party with one month's notice in writing or on payment of one month's salary in lieu of notice"? Without providing any reason whatsoever?

I am seeking your insights on this matter.

Regards,
Raghavendra

Appointment Letter and Termination Clause

A letter of appointment is a contract between the employer and the employee. If either party wishes to terminate the contract, it cannot be continued by the other party. However, the terms and conditions of the contract for separation must be adhered to. The designation of the employee does not matter in the cessation of the contract.

Can management terminate the services of an employee who is at the Branch Manager level based solely on the appointment letter clause stating, "this appointment can be terminated by either party with one month's notice in writing or on payment of one month's salary in lieu of notice"? Without providing any reason whatsoever.

Requesting your inputs in this regard.

Regards,
Raghavendra

Termination of Employment: Contract vs. Legal Provisions

Termination of employment cannot be treated solely as dependent on the contract of employment. For managerial-level employees, it is based on the letter of appointment. In other words, a worker cannot be terminated without following the retrenchment procedures mentioned in the Industrial Disputes Act and the Standing Orders of the company, even if there is a clause relating to termination in the appointment letter. This is because the provisions of the ID Act and the Standing Orders will prevail over the terms of the contract for workers covered by those Acts.

Since in the present case the person involved is a manager, he can be terminated following the terms of the appointment order, i.e., by giving one month's notice or payment in lieu of notice.

Best Practices for Termination

As far as possible, it is always good to terminate "following the terms of the appointment order" only and "without showing any reason," like poor performance, etc. In the latter case, naturally, there is a stigma caused, and the employee can challenge the termination order, saying that he was not given an opportunity to be heard.

Regards,
Madhu.T.K

Without having a proper or sufficient reason, no management prefers to terminate the services of a senior employee like a branch manager. Under the given circumstances, reasons for the termination of a branch manager cadre employee may be on the grounds of poor performance, underperformance, misappropriation of company money, acting against the interest of the organization, insubordination, etc. Generally, management prefers to terminate the services of senior-level employees found guilty of any of the above misconducts in an informal inquiry. They may take a lenient view and not want to mention the same in writing, opting instead to establish the same formally. In such cases, they may prefer to terminate the services of such an employee by simply invoking the relevant clause of the appointment order to avoid complications.

Strictly speaking, merely having a clause in the appointment order does not mean an employee's service could be terminated unless there is a genuine reason for it known to both management and the employee. If the employee knows the exact reason for their termination due to any of the above reasons, it is better for them to keep quiet. On the other hand, if they do not know the reason for their termination and are confident that they did not commit any misconduct knowingly or unknowingly, they can insist that the management provide reasons for the termination. If the management fails to give any reason, the employee has the right to invoke the jurisdiction of a civil court and challenge the management's decision to terminate their services arbitrarily, without giving them an opportunity to be heard, or without a proper or justifiable cause or reason.

Regards

Dear Adv NV Rao,

The first paragraph of your post says, "Without having proper/sufficient reason, no management prefers to terminate the services of a senior employee like a branch manager. Under the given circumstances, reasons for the termination of a branch manager cadre employee may be on the grounds of poor/underperformance, misappropriation of company money, acting against the interest of the organization, insubordination, etc."

It would be naive to think that managers are removed only for the above reasons. There are unquantifiable instances wherein CEOs or MDs have removed managers because of their whims and fancies. Later, they give the semblance of "poor performance" for the removal. Intoxicated by power, when some manager does not go along with the CEO or MD, he/she is shown the door. "Poor performance" is just an eyewash. A newly joined CEO is always given freedom by the board. The board's interest is different, and hardly any board members are interested in who is retained and who is removed.

None of the managers is willing to go to court and challenge the decision. After remaining unemployed for a couple of reasons, somehow they manage to get the next employment and forget the incident.

One of your subsequent paragraphs says that, "Strictly speaking, merely having a clause in the appointment order, no employee service could be terminated unless there is a genuine reason for the same that will be known to both management and the employee himself."

This, again, is not necessarily the reality. When a new CEO joins, he tries to bring in his own men/women. To do this, older ones are removed under the pretext of "organizational restructuring." While removing them, they are paid as per the terms of the appointment letter or a little more. Therefore, there are no legal hassles. The new person joins with another designation but largely does the same job as the older one was doing.

The world is often different from what it appears. So let us not get carried away by what we see.

Thanks,

Dinesh Divekar