Can We Legally Recover Money if an Employee Skips Their Notice Period?

Hello, I am the company secretary of a company. Here, I have encountered some cases where an employee leaves the company without serving the notice period, and the company wishes to file a civil case to recover the money for not fulfilling the notice period. My question is, can we file a case and recover the money from them?

The terms of appointment letter are critical.
If the terms specify a notice period or pay in lieu then you can file a civil suit for recovery of notice period pay.
Leaving without notice is breach of contract and civil remedies exist.
SBCWP No.5988/2006 – Manohar Singh vs. Union of India & ors.
Judgment dt;30/4/2014
Read this case it has some bearing on your query of recovery of notice period pay.

Dear Deepak, This is in addition to what Mr. Nathrao has written. You need to clarify further about your post. Please tell us:

a) What is the clause mentioned in the appointment letter about the notice period?

b) Are you referring to employees who abandon employment?

c) Are you referring to employees who follow the normal process of exit but neither complete the notice period nor pay in lieu of the notice period?

d) Do employees referred to in point (c) above take final clearance from all departments? If yes, why does the HR department not check the clauses mentioned in the appointment letter and ask for payment in lieu of the notice period?

e) For the employees referred to in point (c) above, does the HR department issue a Service-cum-Employment Certificate?

f) If employees quit without fulfilling the conditions specified in the appointment letter, then it is a breach of contract. Nevertheless, what about your company? Does it follow all labor laws in earnest, or are your hands equally muddied but you refer to the pages of the appointment letter with those stained hands?

g) Is the company's labor compliance record so bad that employees wish to inflict some collateral damage while quitting employment?

HR Standpoint

While the help of law is necessary to run an enterprise, law cannot be the foundation to run a company. The foundation is the organization's culture. If employees quit without fulfilling the conditions of employment, then what is the percentage of such employees? Has the HR Department conducted any study to know why things come to such a pass? Why does the company's brand mean nothing to the employees? What employee engagement activities are carried out to retain the right employees? For those who quit, what is the level of their performance? Did you lose bright or excellent employees?

Final Comments

Gentleman, there is a great scope to improve the quality of your post. By reading your post, one gets a feel that the post is written by an ordinary secretary and not by a Company Secretary. We give meaning to our qualification or designation by the way we interact. Hope you are aware of this age-old rule of professionalism.

Thanks,

Dinesh Divekar

Normally, companies don't go for that. They will not provide you any relieving letter or experience letter. They will not cooperate to withdraw PF amount. One intimation letter may be issued in an absconding case.

Thanks,
Shashi Jha

Dear Dinesh Divekar,

Thank you very much for your comments. Let's talk about the situation. I am referring to the employees who have signed the bond to work for the company for at least a year and to serve a notice period of 60 days; otherwise, the company would withhold the salary for 2 months. My question is, can we file a case against those employees to recover the notice period amount?

I hope this is in an understandable order.

Understanding the Role of Appointment Letters

A Letter of Appointment is a contract between an employer and an employee under the provisions of the Indian Contract Act, 1872. Has your company entered into any additional agreements with employees? In that case, Mr. Nathrao has cited a case wherein you can pursue legal action against the employee.

The Role of HR in Employee Resignation

While you have provided some additional information, you have not specified the role of HR in allowing employees to quit without notice. If employees abandon their employment, why issue a service-cum-employment certificate to them? To prevent disruptions in employment, employees are obliged to work as per the terms of their appointment.

Evaluating Employee Abandonment

What is the percentage of employees who abandon their employment? If the percentage is negligible, why not overlook their absences rather than resorting to litigation?

Addressing Recruitment and Retention Challenges

Lastly, if newly hired individuals are unable to remain with the company for even a year, this indicates a flawed hiring process. It is more cost-effective to revamp your recruitment process than engage in legal battles. Additionally, if the organization's culture fails to retain employees, the issue may lie there as well. Cultural deficiencies cannot be rectified through litigation. Even if employees comply with their employment conditions and notice periods, the cost of attrition would still exceed any gains from recoveries. Therefore, consider larger issues rather than finding comfort in completing accounting exercises.

Thanks,

Dinesh Divekar

Is your bond related to any special training activity, or is it just a bond asking for a minimum of 12 months of employment? As the learned poster Shri Dinesh mentioned, is the attrition rate so high that you are considering suing employees for breach of contract?

Look inwards at your company culture, work atmosphere, and comparative salaries to understand the reasons for quick exits. Self-introspection may prove to be a more viable and constructive approach than enriching a lawyer and gaining a reputation in the job market as a company that sues to retain employees but struggles to do so without bonds and legal threats.

Without delving into the points raised by Dinesh & Nathrao, please note that there are numerous gaps in the information you provided. Consequently, I assume you understand that ANY & EVERY suggestion offered by any member could either be non-actionable or misleading.

Details Needed

Can you provide more details about the situation/issue such as:

1. What's the sector/domain your company is in?
2. What's the employee strength?
3. Since when have you been facing this problem?
4. Regarding your statement about an "employee leaving the company without serving the Notice Period," what is the actual scenario? Is it a case of employees absconding, resigning and leaving without serving the full notice period (meaning only partial serving of NP), resigning and leaving without serving even a single day of notice period, or something else?

You mentioned being a Company Secretary. Therefore, I assume you have some knowledge of law and its issues. Hence, your last line, frankly, surprises me - "My question is can we file a case and get the money from them." You should be aware that anyone can file cases, not just civil suits but also criminal ones. However, whether the desired outcome will be achieved depends on various issues, angles, and aspects - some of which may not be within your control.

Just ask YOURSELF the same question - what are the chances that such a step will ensure you get any money back, especially in a civil case? 90%? 50%? 20%? 10%? You must realize it can never be 100%. So the decision is yours (or rather the company's) on the next step to take.

Also, based on what you have disclosed so far, I BELIEVE the company has MANY skeletons in their cupboards, which are likely to emerge when ex-employees start revealing information in court and it becomes public knowledge. Will the company be prepared for this scenario if it materializes?

Another aspect that companies (or their advisers) often overlook is the damage that such immature and incomplete actions cause to the company's image. Do you think your future hiring endeavors will be successful? Specifically, if you are in the IT sector, you can be certain that retaining clients will become challenging... I believe you can understand the reasons why.

I recommend advising your management to think rationally rather than emotionally in such matters - it's easy to get carried away.

All the best.

Regards,
TS

Let me clarify the situation. Mr. X was appointed as an Accountant. He was supposed to serve a 60-day notice period for resignation; otherwise, the company would be eligible to receive 2 months' salary. He was asked to transfer his services to another state, which he accepted. However, he left on 20.04.2015 and never returned.

Remedy and Prevention Measures

What would be the remedy for us? Moreover, how can we prevent such cases from a legal standpoint? What clauses or other measures could be considered valid in court?

I hope this helps clarify the situation. Let me know if you need further assistance.

Regards

One can file a civil suit for the recovery of notice period pay, provided it is spelled out clearly in the appointment letter. One cannot really stop people from absconding—your offer/appointment letter may be legally watertight, but still, there will be a few who breach the contract. One must take a broader view on such breaches. What is the effect on the company when such things happen? Like your Accountant has left, but has he handed over all accounts and property held by him?

Our judicial system is slow, and the remedy is worse than the disease. Make your company a happy place to work; then people will willingly continue. First, an in-house examination of how happy employees are should be done discreetly. Tell your managers to be mixing around and approachable for their subordinates. People sometimes do not leave the company; they quit because of the attitudes of the immediate manager. The problem appears to be more of a lack of employee engagement than a legal issue.

Hello Deepak_6,

Your initial postings gave the impression that there were MANY employees who are leaving without fulfilling the Notice Period norm. This looks more like an HR issue than a general trend.

Specific Issue with the Accountant

Coming to the specific issue about your Accountant, has he been taken into confidence about the transfer—or was it a sort of 'you MUST go' order situation? Did the Appointment Letter contain clauses about being transferable, and if yes, under what conditions? Some companies have additional allowances when an employee is transferred from the home base, since location is usually the first criterion why an individual joins any company.

Legal Remedies

Like Nathrao pointed out, legal remedy ought to be the LAST measure—and that too when what's at stake is very critical. This is NOT to justify the situation, but is driven more by the practicalities of the legal processes.

With respect to your line "how can we stop such cases from the legal point of view means what should be clauses or other things which can be treated as valid before the court," please note that incorporating suitable clauses to handle the legal aspects is JUST AN ADDITIONAL measure from the HR perspective—to handle worst-case scenarios.

HR Practices and Policies

But what ought to COME BEFORE is the human-to-human contact and smooth interaction with the employees—irrespective of whether they are in single digits OR in thousands. If this aspect is not covered by your HR, then no matter how ironclad your agreements are, you are bound to fall into such situations.

Suggest using this situation/case to improve your HR practices and policies.

All the Best.

Regards,
TS