How Should We Handle Employee Termination After Losing Our Major Client? Seeking Advice

Applicability of "No Work No Pay" in Our Company

We are a small-sized medical billing company operating since 2003, working for US doctors. In the last three years, we have been losing clients, but we managed to run our company due to the revenue from one major client. Apart from that, all other clients were very small with less revenue.

Now, the situation is that we suddenly lost the major client by September 15, without any notice from the client and with pending payments. Since this was the major client, 40% of our manpower was working for this process, and from October 1 onwards, we don't have any work for them.

Since we expected the client to return to us (as happened once six years ago with the same client) within 2-3 months, we asked the employees working for the process not to check into the office, considering it as paid leave. We have paid them for the last three months (October 15, November 15, December 15) without them working.

However, we have now received confirmation that we are not going to get the process back. Moreover, for the past two months, the management has been struggling to pay salaries and cannot afford to pay anything to these employees, who were getting paid without working.

Seeking Advice on Employee Termination

I want to call those employees and explain the situation, asking them to leave the company without further issues. Our general notice period clause is two months, and our total employee strength is 40 as of now, including all employees. Seniors, please suggest how to proceed further.

1) Can I inform them that we are not going to get the process back, so the management is not in a position to provide them work or salary without working, and request them to leave the company without further compensation or paying until today alone (since we have already paid them three months' salary)?

2) Can I inform them that we are not going to get the process back, so the management is not in a position to provide them work or salary without working? The management has decided to apply "NO WORK NO PAY," under which the employees will remain on the company rolls but will not be paid any salary until the management gets a new client and assigns them work. If anyone doesn't want to accept this, they can leave the company at their own will (as suggested by a statutory consultant).

Seniors, kindly guide me on how to close this issue smoothly without paying any more from the company side.

Thanks in advance.

Regards,
Kartheka R

Termination Process and Employee Communication

You can start the process for the termination of employment for the employees. Call all the employees and ask your senior management to interact with them, openly and honestly explaining the matters. Seek their cooperation in the financial crisis being faced. Offer them unpaid leave until the company can secure the major client or other sources of income, without any preconditions. Those who want to leave can be given an early exit since they have already received pay without work. All this should be done in an amicable and friendly manner.

Understanding "No Work - No Wages" Doctrine

From an academic perspective, the doctrine of "No work - No wages" implies a proportionate deduction of wages or the overt denial of wages by the employer as a consequence of a corresponding wanton failure or refusal on the part of the employees to work in breach of the contract of employment. Therefore, in the first place, it has no application to your establishment in the context mentioned in your initial post.

Second, it is the inability of your management to provide work to the employees when they are ready to work. Of course, it has been necessitated by the compulsion of circumstances beyond the control of the management, and the act of paying wages/pay for consecutive three months even without work in anticipation of improvement in the situation is a gesture of goodwill on the part of the employer. In such precariousness, the only way out is the termination or foreclosure of the contract of employment of the employees who cannot be provided with employment anymore on terms either mutually agreed upon or statutorily prescribed. Hence, I am not able to appreciate the suggestions offered by your consultant either to keep the contract of employment under animated suspension indefinitely or to ask the affected employees to tender resignation.

The final option, therefore, to protect the interests of both is to resort to statutory retrenchment.

Regards