Facing Department Closure: How to Handle Employee Resignation When They Won't Leave?

Hi All,

If a function or department needs to be shut down due to incurring costs, and the department manager is asked to leave, can the company provide a written notice via email stating, "You are asked to leave because the project has ended"? The employee is unwilling to resign voluntarily.

Since the post is managerial, the automatic exit of the manager on account of the closure of the department he headed depends upon his contract of employment. If his services were initially hired for the particular project only and there was a specific clause of termination of his employment being co-terminous with the closure or completion of the project, he could be straight away shown the door; otherwise, the employer cannot simply ask him to leave on his own.

The closure of a department as a measure of austerity or due to the completion of the project it handled does not imply the closure of the entire establishment but only a partial closure. In such a situation, the proposed exit of the manager becomes the initiative of the employer, which is strictly subject to the notice clause of the contract of employment.

Let the manager send a reply mail that he is not willing to resign, but the management can terminate the contract of his employment following the formalities of unilateral discharge by the employer.

Thank you, Mr. Umakanthan. In this situation, the employee wasn't hired for a specific project or period. The appointment letter states that employment can be terminated by either party upon giving a notice of 2 months. The employee has refused to take any action from his side. In this scenario, can the management send a mail stating that he is discharged as per the contract with a 2 months' notice?

Yes, my dear friend, that's the course of action normally adopted by ruthless managements. However, later it could become a complicated issue if the manager moves the court and the management is unable to prove that the closure of the department was a genuine business decision and the manager's exit was solely based on seniority. In the absence of a reasonable cause, such negative covenants in the contract of employment would be deemed by the courts as contrary to sec. 27 of the Indian Contract Act, 1872, and damages would be awarded to the affected employees. You can refer to my previous posts on the same issue on Cite HR from about a month ago.

Facets of Resignation

There could be a few facets to such a resignation.

1. Clause for co-terminus: No issue since with the termination of the project, the employee too goes.

2. If the employee is not covered under any such clause or condition but the company/organization is closing due to any number of reasons, economic non-viability could just be one such reason. The best course for the employer is to caution the employee about the likely termination or scaling down of employees concerning time. This should also be part of the employee communication and periodical management briefing so that employees understand the trend of manpower reduction and its necessity, while also preparing themselves to look for available options. This is indeed a good practice rather than giving the employee a sudden jolt by laying them off one morning or leaving a job without relief. Often, companies go for closure due to numerous reasons, and the employee cannot or should not keep dragging their feet over the clause in the offer letter. They were taken care of during the good times of the company, and now it is their duty to understand. My experience says that most people generally side with the employee, which may not be the right approach all the time and in all cases.

3. A two to three-month pre-notice clause was inserted in the offer letter for compliance by both parties. This should create a happy situation for both the employer and employee. Contrary to these three situations, there could be industry or organization-specific issues for asking an employee to resign, where more often than not, the employee resorts to appealing to the legal authority. Though at times the employee wins, it is sadly only after a long process. There is a common practice among many legal offices to generally support the employee irrespective of the genuineness of the employer's argument and justification. This is something I have seen for many years. An employee in my company resigned on their own and found their new job closed on the day of reporting. They came back, and we showed them their resignation. They went to court stating that they were forced to resign verbally. We presented all justifiable and honest information, but the court kept rescheduling dates.

I can say that irrespective of closing all ends, there will be many situations, especially for the employer, to get into avoidable legal tangles due to the highhandedness of employees. The best approach is for employees to keep their eyes and ears open and study the business environment. Simultaneously, it is extremely important for HR professionals to judiciously play the employee and employer supportive cards in time.