Employee Threatens Legal Action Over Unpaid Notice Period: What Are the Risks?

One of my employees has resigned, and he has been relieved of his duties at his request after serving a 2-month notice period instead of the required 3 months. We have paid his salary for the first month during the notice period, but the salary for the second month has not been paid as he did not complete the full 3-month notice period. We are considering compensating him for the remaining month's salary.

What will be the consequences of this situation as the employee is threatening to file a complaint with the Department of Labour Relations?

Please assist me in this matter as soon as possible.

Regards, Prasad.

Under the Payment of Wages Act, read along with the Shops and Establishment Act, you need to pay him the wages by the 7th of the next month. Now, you said you have allowed him to leave. This means you have legally waived the employee's notice period. Hence, you cannot sue for compensation.

Considerations for Employee Resignation and Compensation

Prasad, what needs to be looked into is that:

1. There was a provision to relieve the employee in the employment letter, with or without pay.
2. The employee was not deprived of his right to compensation for the notice due to non-compliance with your company policies.

In your case, it is evident that:

1. The employee resigned on his own and agreed to serve a three-month notice period.
2. Salary for month 1 was paid to him for the time he worked for your company.
3. Salary for month 2 is still not paid.
4. Salary for month 2 can be set off against the last month's notice, which the employee is not intending to serve.

It is important that the condition, as I outlined in clause 4 above, was agreed to with the employee and substantiated by prima facie evidence. If it was agreed upon, then you are all set to set off month 2 payable with month 3 notice. If there was no agreement, please release month 2 salary and move ahead with the recovery proceedings for the notice period not served, i.e., month 3.

Best wishes.

Mr. Prasad,

What does your company's HR policy say? Do the terms of employment address this issue? If so, you can recover the balance NP amount from the final settlement or dues payable to the employee.

V. Murali

Fair Treatment During Notice Period

In the HR department, we have the power to discern right from wrong. If you have asked him to serve a two-month notice period and then the company decides not to pay him for one full month, it is an unfair practice. The company often makes the "notice period" phase extremely difficult for an employee without good reason. He is well within his rights to sue the company for non-payment of salary. Employees will always remember how they were treated during their notice period and will share their experiences, so ensure it contributes positively to the company's goodwill.

Regards