Facing Layoff: How Can We Ensure Fair Severance Pay When Management Isn't Listening?

Hello, My current company has given prior notice about the layoff on 2nd December 2016 due to a shortage of projects.

Full and Final Settlement Details

1. The HR team has informed us that the Full and Final settlement (FnF) will be on 31st December 2016. Until then, there is no need to come to the office. We can search for a new job in the meantime, and December's salary will be paid after 10th January, upon completion of the FnF process.

Severance Payout Concerns

2. The issue revolves around the severance payout. As far as I know, if there is a 2-month notice period (as mentioned in the offer letter), they should have either notified us two months earlier or paid the severance for two months (covering December and January).

Despite a few of us approaching the management and HR team regarding this matter, they have not been receptive and have provided negative responses.

I seek your assistance in understanding whether our approach to the management/HR team was incorrect. If so, what would be the next course of action I should take to persuade them to agree to our request?

I look forward to hearing from you. Your support is greatly appreciated!

Certain important particulars are missing.

Nature of Your Company

1) What is the nature of your company? Is it a manufacturing unit, a service industry under the Shops and Establishment Act, etc.?

Employee Details

2) What is the total number of employees falling within the definition of "workman" under the ID Act, 1947, on average during the last 12 months from the date of issue of the notice?

Employee Classification

3) Were all the employees, including yourself, served with a notice of retrenchment (which is the legal term for what you've mentioned as lay-off)? Are they workmen or officers of predominantly supervisory capacity above the monthly salary of Rs. 1600/- or of managerial capacity?

These are the vital pieces of information based on which only appropriate answers can be suggested for further action.

Hello Umakanthan,

Glad to receive your response. Hope this information will help:

1. Nature of the company: Internet Digital marketing and software services.
2. Total Number of employees: 300 to 500
3. About the notice: They have laid off 17 employees in October from the same project/unit. Now they have informed 5 employees, including me.

Understanding Layoffs and Legal Compliance in ITES Companies

I understand that your company is an ITES organization governed by the State Shops and Establishment Act. From the details provided, it qualifies as an industrial establishment subject to the provisions of Chapter V-B of the Industrial Disputes Act, 1947, concerning lay-offs, retrenchment, and closure. Therefore, the company must obtain prior permission from the appropriate government before undertaking actions that affect the employment of its employees classified as "workmen" under the Act. If this is not done, the retrenchment orders will be deemed illegal.

Unfortunately, higher academic qualifications, substantial salaries, and attractive designations often lead employees in this sector to believe they are not classified as workmen. This misconception is particularly prevalent among HR personnel in IT and ITES organizations, who may mistakenly think their organizations are exempt from the country's labor laws. They may also refuse to acknowledge that the employment contract is governed by the Indian Contract Act, 1872, and that unilateral termination must strictly adhere to its terms and conditions. Failure to do so could result in liability for damages if the affected person takes the matter to a civil court.

Regardless of salary, all employees working under the supervision and control of their superiors are considered workmen as defined under the ID Act, 1947. Employees primarily employed in a supervisory capacity with a monthly salary above Rs. 1600/- and those in managerial positions are "persons employed" under the State's Shops and Establishment Act. As such, their services cannot be terminated without prior notice and sufficient reasons.

Therefore, employees likely to be affected and falling under the definition of "workman" may approach the labor officer for their area to file a complaint in advance or raise a dispute individually under sections 2-A(1) or 2-K of the ID Act, 1947, either on their own or through a general employees' trade union after retrenchment.

Others can file an appeal under the State Shops and Establishment Act before the designated Appellate Authority or initiate civil suits against the management for damages following their termination.

Regards

From the above details, it seems you will fall under the category of workmen under the ID Act and hence, the approval of the government is required for retrenchment on the 'last come, first go' basis. Retrenchment compensation has to be paid to you as well.

Umakanthan sir has given a detailed explanation.

First, what you are talking about is called retrenchment under the law and not layoff. Layoff has a completely different meaning, which is that you are given a temporary suspension from work for a specific period due to management issues (meaning not your fault).

So the company has 2 options: terminate, retrench, or get your resignation. The last is the simplest for them because they are not liable for compensation. For termination, they have to give a reason, and a shortage of projects or work is not a reason. You can read other threads here about the procedure for termination (if you are curious about it); it's widely discussed.

In the case of retrenchment, again, they have to follow a certain procedure. The newest employees have to be removed first. Each employee is eligible for compensation of 15 days' salary for every year worked with the company. This is apart from the standard notice period salary (2 months in your case) that is stated in the appointment letter and available in all of the 3 scenarios.

If you want to fight, you can do so. The method is already given to you in earlier posts by my seniors on the forum. You can point out to the HR team that you know what the law is and will file a complaint if they don't give you the proper notice pay at least. In many cases, if the HR is smart, they will give you the full notice pay and close the matter.

On the other hand, if you do get a job easily, just take a clean relieving and move on because your next employer will want to do a background verification, and the current company will definitely give a negative if you have fought or threatened them.

I am experiencing a similar event now. My company is an ITES UK-based MNC, and I have been asked to resign effective immediately. My company is offering me a 2-month notice, as signed on the offer letter, but it includes a 1-month salary payout followed by my 2nd month's pay as F&F, which can be expected in 60 days. The reason provided is that my profile is now required in the UK and not India. I have stayed in the UK and South Africa, doing project management for my company previously and worked as a Project Manager. However, they are not listening. My company has close to 500+ employees and has this culture of firing people with such reasons. We do not have any severance clause or entrenchment policy, and one of the business heads was fired last year with a false reason. When he cited taking legal action, they paid him a 3-month severance check on the spot and relieved him of all duties in one day.

I returned from South Africa in the last week of May and was planned to travel to Cape Town next month on the company's project and have got my VISA and all sorted. The client pays me a daily rate of 500 Pounds/day to my organization and has contractually agreed to have a Project Manager in SA for all of 2017. There is no resource in SA; however, I have been told to leave effective immediately as the role is now redundant.

Please advise. A similar incident has happened to another colleague of mine who has been asked to lay off immediately.

Regards, Praveen