Am I Legally Required to Pay Notice Period Recovery After Leaving a Startup?

I joined a startup advertising agency on Dec 22, 2014, as a director and one of the founding members. I left the agency on March 19, 2015. I worked there for a little less than 3 months.

Probation Period and Employment Status

My offer letter mentioned a probation period of 6 months, which I never completed. So technically, I was not a confirmed employee. I never received an appointment letter as well.

Notice Period Clause

In the same offer letter, my notice period was stated as 2 months, but I didn't serve the entire notice period, assuming that until I am confirmed, I am not bound to serve the full notice. I was ready to serve a 3-week notice, but one of the partners asked me to get myself relieved within 4 days of the notice period.

Full and Final Settlement

Now, they have sent me an email with the full and final statement asking for the recovery of 2 months' salary (minus the 4 days' notice period).

Queries Regarding Legal Obligations

1. Am I legally bound to pay the money?

2. If yes, then what part of the salary is recoverable from the employee? I suppose it's only the basic pay?

3. Very important point - this company was registered, but they were not paying the provided funds. The reason they gave was that they could avoid doing so because there were very few employees at this point, and to pay the PF, they would have to have a certain number of employees.

4. There is no mention of the notice period during the probation period in the offer letter.

Regards

Dear Ishantgopa, it is clearly stipulated in the offer letter that it is two months, and your probation period is for six months. Normally, an appointment letter will be given to the employee on completion of the probation period. In case the employee does not receive the appointment letter after completion of six months but still continues to work in the organization, it is deemed that the services are confirmed.

However, in your case, you have not completed even three months of service in the said organization and have left the job without serving the notice period. This action is a clear violation of the contract agreement on your part, and hence the management has the right to collect the entire amount of your two months' salary.

Thanks

Dear Raghunath sir,

I was going through some other threads, and most of the members mentioned that until the employee is confirmed, he/she can leave the organization without serving a notice, and legally, organizations are not entitled to recover the money. The organization is only entitled to recover the money if the employee is confirmed and has not served the notice period. Please let me know if this is not right?

Thanks

Since you appear to have worked in Mumbai, you are governed by the Bombay Shops and Establishment Act and Rules. Since you were under probation and having worked for less than six months, you will be treated as under probation vide Rule 3 of the said Bombay rules. Under Rule 4, services of a probationer can be terminated at any time without any notice. A contractual clause denuding you of the right to resign immediately without notice will be discriminatory and arbitrary. Any appointment letter contrary to the Act and rules, unless it is more beneficial to the employee, is void as per Section 69 of the Act.

Further, under the Payment of Wages Act as applicable under Section 38 of the Bombay Act, no deduction of any kind is permissible unless authorized under the Act. The employer cannot make any recovery under the garb of notice period recovery, which is not valid. Thus, even though you were not issued an appointment letter, yet you are governed by the above statutory provisions.

Ignoring these provisions, by the way, did you mention in your resignation letter that, as per the directions of the employer, you were tendering resignation but wanted to serve for 3 more weeks? The employer had thus accepted your resignation with the above condition. If that is so, the employer forced you to commit a breach of contract and your liability under the contract is negated.

Thanks,

Sushil

During probation, your service can be terminated without notice. This is my understanding. The question of recovery/notice period does not, therefore, arise. Give them a polite reply drawing attention to your probationary status. Do not add or include other topics that divert attention and are your additional backup arguments in case the issue takes a legal turn.

Raising all relevant grounds in reply to a legal notice is essential; otherwise, you are deemed to have accepted the validity of the agreement. See Shyamalabai v. Ramkishan of Bombay HC and other decisions.

Replying to a notice containing these grounds can also be done politely. However, when the litigation process has been initiated by the employer through a legal notice, all legal and factual pleas should be taken to challenge the proposed plaintiff.

Thanks,
Sushil

Yes, I have sent an email to serve a 2-week notice, but they asked me to leave within 4 days, saying that they will save salary money as it's a new startup. I sent 2 emails—one for resignation, which mentioned a 2-week notice, and another one when I left the company after 4 days of my resignation, stating that "with our mutual agreement, my last day is today." Unfortunately, they didn't reply to either of the emails.

I do have relieving letters, an experience letter, and an NOC letter. I secured these on the day I left.

Simply put, do I have any legal grounds on which I can refuse to pay the money, or should I go ahead and pay the money and spare myself from this mental stress? Please suggest.

My opinion:

Personally, I feel that the demand of the company is incorrect (from what you mentioned). To do the right thing sometimes involves taking a stand. Politely, just sum up the events which have taken place and decline to pay. Of course, the easy way is to pay up and close the topic. Please take proper legal advice if you feel it's necessary.

Besides the earlier grounds stated in the thread, since you stated that because of mutual agreement you submitted for relieving to which the employer did not reply, he must be deemed to have accepted it. Therefore, your employer has waived off the notice period as well. You are not liable to pay any notice period money in these circumstances.

Thanks,
Sushil