Can a Company Take Action if an Employee Leaves Without Settling Dues?

Hi,

I just wanted to know, once the company issues the relieving letter and PF, whether any actions can be taken against the employee if he/she did not settle the dues of the company. Please clarify the doubt.

If the employee did not settle the dues, then why was he given a relieving letter and by whom? Are you from HR, or are you the employee who received the relieving letter and is now being asked for dues?

Solution for HR Professionals

If you are from HR, let me offer you a solution, though it is equivalent to putting the cart before the horse. Send a letter to the employee requesting clearance of his dues. If there is no response, send a follow-up letter threatening police involvement. For larger outstanding amounts, consider conducting a domestic inquiry and filing a police report.

Additionally, disciplinary action should be taken against the individual who issued the relieving letter. Such errors are not acceptable.

Thanks,

Dinesh Divekar

I just wanted clarification.  Thanks for solving the doubt. A police complaint without any proof will not happen, right? I'm not related to this case. One of my friends asked me, so I thought of discussing this here and getting some solutions for him. Once the company has given the relieving letter and settled the PF amount, I think no actions can be taken against that employee.

Now the company, which has issued the relieving letter, is troubling him by asking for dues of 14K for one month's notice, which they did not request when the employee left the organization or when he received the relieving letter. They are troubling him by sending emails and harassing him with calls and messages. Please let me know if any actions can be taken against the company for doing all this.

Dear Nathrao,

How do I calculate the notice period pay? Is there any specific formula for calculating notice period pay? I am looking forward to your reply.

Warm regards,
Pranab Chakraborty
9404384433

Look at your appointment letter. It would provide details about the notice period pay, gross pay, basic pay, etc.

Look at your standing orders.

Under the Factories Act and Shops and Establishments Act, pay for encashment of earned leave (annual leave with wages) means basic pay + DA. Therefore, in the context of notice pay, the pay shall also include basic salary + DA.

I just wanted clarification.  Thanks for solving the doubt. A police complaint without any proof will not happen, right? I'm not related to this case. One of my friends had asked me, so I thought of discussing this here and getting some solutions for him.

Once the company has given the relieving letter and settled the PF amount, I think no actions can be taken against that employee. Now, the company that has issues with the relieving letter is troubling him by asking for a due amount of 14K for one month's notice, which they did not request when this employee left the organization or when he received the relieving letter. They are troubling him by sending emails and harassing him with calls and messages. Please let me know if any actions can be taken against the company for doing all this.

For a Police Complaint, What Proof is Required?

Is it that the employee has not worked with the company, or the notice period was served, or notice pay is not applicable? It seems that you have little knowledge of the laws prevailing in India. If the company desires to lodge a complaint, your so-called friend will be in a difficult situation. Please don't underestimate any company or anyone. A company can hire the topmost lawyer in town, which an employee cannot afford. Keep that in mind. Last but not least, always advise what is right and beneficial to the person who requires your help, but don't give wrong advice or support wrongdoing.

Dinesh Sir,

If I have terminated an employee and then find out that the employee owes money to the company, how can I recover that money? It has been 5 months since the employee was terminated.

Once the employer-employee relationship is ceased by either resignation or termination, the bindings between them are gone. However, in what form does the employee owe money? Is it through misappropriation or a loan? If it is through a loan, what is the nature of such loan? Depending on all the details, advice on recovery can be provided.

Please check out my blog at www.labourlawhub.com

"Is it through some misappropriation or loan?"

If documents duly acknowledged show alone is outstanding from ex-employee, the company retains the legal right to recover the same. In the case of misappropriated money, the company can start the legal process to recover the money. The relationship between employee and employer may cease, but the burden of refunding money still remains with the employee (ex). It could be a clerical mistake that the cessation of the employee-employer relationship may have been initiated from the employer's side.

Ritesh Sir,

The employee had taken a loan from the company, and the company had given it as a salary advance. However, the full amount is yet to be recovered. Can I still recover the loan even after 5 months?

Handling Termination and Outstanding Dues

It is not a case of resignation where you could have resorted to legal action for the outstanding dues of the employee. It is a matter of termination by the company. Thoughtless termination can rebound, as in your instance. You could have first ensured the recovery of dues from the employee before terminating him. Once termination is effected, you should forget about your dues against him. You may have to write off the amount and treat it as a loss to the company. However, if the company is not agreeable to sustain this loss, the balance amount of advance can be made recoverable from the executive responsible for termination without ensuring recovery of the dues from the employee.

Hello Psdhingra sir, thank you for your clarification. Just to get a clearer understanding, could you refer me to the Act and Subsections where I can find information on such termination? It's a learning curve for a startup like ours.

If you are at the startup stage, you could also have stated in what capacity you have been involved in HR and terminated the employee. If you are a qualified HR executive, you should well have known that industrial employment is not regulated merely by one law. With particular reference to your initial query, you may better go through the terms and conditions of the employee's appointment, certified standing orders, and the HR Manual. The relevance of learning is aimless without reading between the lines, especially without specific reference to the complete background of the case, including the real cause of termination, which you have not mentioned anywhere.

@Mraj78

The employee had taken a loan from the company, and the company had provided it as a salary advance. However, the full amount is yet to be recovered. Can I still recover the loan even after 5 months?

You are contradicting yourself. A loan and a salary advance are different. Since you are sticking to the point of 'loan,' what documentary evidence do you have against the employee that you have provided him a loan? Depending on the nature of such documents, further proceedings and advice can be initiated.

Legally, you can recover the 'loan' through a money suit, which can be time-consuming and expensive too.

Check my blog at www.labourlawhub.com

As rightly said by Mr. Dhingra, it would have been recovered at the time of termination. What if the employee states that he/she is unemployed and does not have any source of income for their daily needs? The court of law will be on his/her side.

Termination and Recovery Concerns

The employee was terminated by the CEO. A salary advance was given as a cheque, but the employee did not sign any documents. The termination occurred because his subordinates were not happy under him and were totally frustrated. Now, the CEO wants to recover the money.

A month's notice or a month's basic salary was supposed to be given if termination was to be effected during probation. The CEO did not honor this and terminated the employee.

I have been asked by the CEO to get in touch with the ex-employee and initiate recovery. I just want to be sure if they can initiate recovery. I am new to this company, @psdhingra sir.

Thank you

As already mentioned earlier, since you have terminated the service, you have lost the opportunity to recover the same to a great extent. A domestic enquiry can be initiated during the course of employment and not after that. If you can prove that you gave the money as a "loan," then you can recover that amount through a money suit. On the other hand, the terminated employee can easily claim one month's notice pay from you.

Check out my blog at www.labourlawhub.com

Legal Implications of Employee Dues Post-Termination

Hypothetical questions have no relevance in legal parlance. If you have a real situation where an employee states before the court that he or she is unemployed and does not have any source of income for daily needs, it is for the court to decide, not Mr. Dhingra. Moreover, in such cases, the fault lies with the management, not the employee, if recovery is not made before the full and final settlement. The judgment is likely to favor the employee, as after termination, the company cannot rightfully claim its dues. It was the company's responsibility to recover the dues before deciding upon termination.

Regards

Dear Mr. Dhingra,

I have pointed out the same thing as you have mentioned. Termination was a hasty decision; the management is at fault for non-recovery. The court will be in favor of the employee.

I appreciate your agreement with me. However, in my last post, I simply pointed out your question, "What if the employee states that he/she is unemployed and does not have any source of income for their daily needs? The court of law will be on their side." Therefore, it is not within the scope of our members to judge. Only the court has to decide on that question if brought up by the employee.

Even otherwise, the happiness or unhappiness of subordinates cannot be considered as indiscipline on the part of the employee. His low performance or indiscipline matters for the purpose of termination.

Regards