Facing Job Uncertainty: Can We Legally Demand Severance When Forced to Join a Smaller Company?

Background of the Situation

We are a group of people working for a multi-billion-dollar company in one of its profitable business units. The company decided to let go of the business unit as it does not align with its business roadmap. The business unit head/management agreed and took over control.

Current Developments

Now, the business unit management has terminated a few employees and paid them a severance package. For the remaining employees, they are merging the business unit with a small services company whose existence is not well-known in the IT domain. The group of employees is demanding a severance package similar to the terminated employees as we are asked to voluntarily resign and take the new offer. However, the business unit management is pushing the concerns to the company's HR area and stating that we are given a job, which itself is a great opportunity.

Employee Concerns and Legal Inquiry

Many of us do not want to join the small company and are demanding an ex gratia payment in case we are forced to accept the offer. I would like to know how this situation can be handled legally.

Dear Jaya-Janki,

The situation you're describing involves significant legal and HR considerations, particularly in terms of employee rights and severance packages. Here are some key steps and legal avenues that can be explored:

Review Employment Contracts and Company Policies

Severance Policies: Review the employment contracts and any company policies regarding severance packages. This includes clauses related to voluntary resignation, termination, and severance pay. If there's a precedent set by the terminated employees receiving severance, this could strengthen your case.

Transfer of Employment: If the transfer to the new company is being framed as a voluntary resignation, check the legal implications of this. Employment law in India generally considers a forced resignation as termination, which may entitle employees to severance.

Understand Legal Rights

Industrial Disputes Act, 1947: In India, the Industrial Disputes Act provides protection to employees in cases of retrenchment or layoffs. Employees who are retrenched are entitled to severance pay, usually 15 days' pay for every completed year of service.

Forced Resignation: If employees are being forced to resign and accept a new offer, this could be construed as constructive dismissal. Constructive dismissal occurs when an employee resigns due to the employer's behavior, and in such cases, employees may have a right to claim severance or challenge the resignation.

Negotiation with Management

Collective Bargaining: If a group of employees is involved, collective bargaining can be a powerful tool. You could negotiate as a group with the business unit management for a severance package or better terms for those who do not wish to join the new company.

Legal Representation: Consider engaging a lawyer or a labor union to negotiate on your behalf. Legal representation can help ensure that your rights are protected and that the company adheres to legal obligations.

Document Everything

Written Communication: Ensure that all communications with the management and HR are documented in writing. This includes emails, letters, and meeting minutes. Documentation is crucial if you need to pursue legal action later.

Explore Legal Action

Filing a Case: If negotiations fail, you can explore legal action. Employees can approach the Labor Commissioner or file a case in the labor court under the Industrial Disputes Act.

Legal Consultation: Consulting with a lawyer specializing in labor law can help clarify the legal options available and guide the next steps.

Alternative Resolution

Mediation: Sometimes, mediation or arbitration can be a faster and less adversarial way to resolve disputes. This can be considered before escalating to legal action.

Consider the New Offer

Evaluate the Offer: While negotiating, also evaluate the offer from the new company. If the terms are acceptable, it might be worth considering, especially if severance is not guaranteed. However, ensure that this decision is well-informed and aligns with your career goals.

Stay Informed

Legal Updates: Stay updated on any changes in labor laws or regulations that could impact your situation. Laws can evolve, and new judgments or amendments could work in your favor.

Conclusion

The situation requires careful handling, both from a legal and HR perspective. It's crucial to stay informed, seek legal advice, and negotiate collectively if possible. Protecting your rights and ensuring fair treatment is the priority.

Thanks,