Can My Company Fire an Employee and Deduct a Penalty? Seeking Clarity on India Labor Law

Hi Seniors, This is Anand. I am working in a Manufacturing Organization. Recently, the management fired a senior employee (as per designation) within 3 months of his joining. Additionally, they plan to impose a penalty of 50K on his full and final settlement. I am unsure if it is possible for the management to terminate the employee and also deduct 50K as a penalty from his full salary. In my understanding, only one penalty should be imposed, either termination or a salary deduction. Could you please guide me on this matter as per labor law?

Thanks

Termination and Penalty for Employee Misconduct

An employee can be terminated from their service for any misconduct committed, provided that such misconduct is proved beyond doubt by conducting a domestic inquiry. This inquiry should be carried out by appointing an impartial outsider and giving the employee full opportunity to defend their case, in observance of the principle of natural justice. Otherwise, the termination itself becomes invalid in law.

If there is any misappropriation of funds, damage to property, or any misconduct leading to financial loss, and such misconduct is again proved through a domestic inquiry, then the employer can adjust the amount of loss from the full and final settlement.

Without studying the entire case history in detail, it is very difficult to give a definitive opinion.

Regards

Inquiry and Investigation Process

Normally, an inquiry into the matter is initiated, and the employee is given a chance to be heard. A complete investigation of the case, with all the documentation and proof, needs to be collected. Management should ensure that all activities and proceedings are conducted within the framework of policies and legal bindings. The focus here is not on punishment and penalty. The entire process should be acceptable to both parties so that neither the employee nor the employer faces problems later.

Committee Involvement

Generally, a committee is set up for such matters to resolve issues internally, which includes members from the union, employees, management, etc. However, unless the case is thoroughly known, it is difficult to provide any opinion.