Facing a Labor Court Case for Terminating an Employee Without Notice – What Should I Do?

Dear All, I would like some advice on how to handle a case related to our company employee who was terminated without notice because of poor performance.

Termination Details

1. His service was terminated abruptly citing his casual and non-serious attitude towards work.

2. Joining Date: 19-4-19, Relieving Date: 11-11-19. He worked for a total of 157 days.

3. His dues up to the relieving date were paid via NEFT to his bank account.

4. He was a technician, so he was not issued a joining letter upon joining, and he did not come to the office after his dues were cleared to sign a no-dues certificate.

5. He was not enrolled in PF and ESI because he requested us while joining that it's of no use to him and signed Form 11. His salary was actually 18,000, but we showed 21,500. Additionally, he was given conveyance as per actual, which was about 2,000-3,500 based on km run.

6. Office location: Delhi.

Current Situation

Now the employee has sued us in the labor court and is demanding 2 months' compensation + PF due, which in total amounts to 1 Lakh rupees.

I understand that there are lags at our end, but we cleared all the dues of that employee in good faith. Requesting the honorable members of the forum to please help me out in this case as to what can be done. If possible, please share your contact number so that I can consult.

Regards & Thanks in Advance.

Handling Termination Without Notice

You should appear for the hearing and state that he was hired as a probationer. When we found his work to be unsatisfactory, we asked him to leave after paying him the dues. It is true that you did not issue any appointment order with a clause of probation in it. You can say that the company does not issue appointment orders to technicians, but you have to prove that the technicians require at least one year of training and that the practice being followed is like this. In order to establish this, you have to keep records of his daily/weekly performance, his late-coming records, etc. Since you have had enough time to appear with lots of postponements of hearings, you can also make similar records of other technicians. This will be useful as evidence. You should put remarks in the performance record, like, 'talked to him, warned verbally,' etc., on different dates.

Since his salary was above Rs. 15,000, PF was not applicable to him, and that was why he was not covered by PF. Therefore, his claim for PF is also not maintainable. Since the employee had not worked for 240 days, no compensation could be paid to him legally. It will take at least two years to complete the process.

Advice to Management

Now my advice to the management: Never employ an employee, whether unskilled or managerial, without giving an appointment order. An appointment order is always a document that defines the employee and employer relationship. In this document, the service conditions, his probation, how the relationship could be terminated, notice period from either side, etc., will be clearly mentioned. Secondly, in order to avoid ESI or PF, never show a wrong entry in the books as salary paid. In your case, you have shown Rs. 21,500 as salary, just to avoid ESI. By avoiding ESI, what do you gain? Do you know that the compensation that you have to pay in case of any accident resulting in death or disablement of a worker not covered by ESI is much higher than the contribution payable to ESI in respect of him? Thirdly, how much time would it take for you to issue a memo for poor performance? Do you know that you are not expected to terminate even a probationer for non-performance without giving him an opportunity to be heard? In the case of poor performance, you should give two or three chances so that he could improve. Termination after that can only be justified.

Dear Colleague, You have made a serious blunder in:

1. Not following due process of law before terminating an employee.
2. Engaging an employee without a proper appointment letter.
3. Hastily making F&F through NEFT.

You are now facing a court case. You have two options - either fight it out or settle it amicably.

In the given circumstances, I would advise you to go for the negotiated settlement route wherein you pay him the agreed amount only upon his agreeing to withdraw his court case as a part of the written agreement.

Regards, Vinayak Nagarkar HR and Employee Relations Consultant

Violation of Statutory Compliance

This is a complete violation of statutory compliance. First, not issuing an appointment letter. Second, no ESI and PF contributions. The only way to save yourself is through a settlement between the two parties. Otherwise, you will be penalized for ESIC violations and unethical labor practices. Before terminating any employee, you should always remember the "Principle of Natural Justice." For workmen, the laws are very stringent, and you should always conduct a domestic enquiry for any misconduct or non-performance.

My suggestion is to go for an amicable settlement, and before this, review all your statutory compliance.

Regards, Nagesh

Dear Mr. Mahajan, After reading your posting, it is felt that there is a lack of professionalism in the matter of appointment as well as termination. Kindly note that "job performance being poor" is not misconduct or indiscipline, which can amount to strict disciplinary action. You employ personnel after going through the recruitment process; for technical personnel, the services of a technical expert are also utilized.

Improving Employee Performance

In the modern era, there are ways and means which can be adopted by the management to improve the performance of a person. You can give warnings, both oral and written. You can extend his probation period to another 3-6 months, you can stop his increment, etc. Please do not jump into the highest punitive action.

Since action is already taken, now there is no use to discuss it. PF, as claimed by him, is not applicable as he was drawing a salary which is above the PF salary ceiling.

Legal Advice on Compensation

Regarding his compensation, it is suggested to utilize the services of an advocate, well-versed with labor laws, and contradict the matter.

Dear Mahajan, firstly, we need to ensure that the IR part is handled well. This means that the employees who are not permanent and have not been issued appointment orders should have their documentation handled properly, including administrative actions. In the future, inform them officially for the first time, involve the production or department head for the second time, and issue an official letter of termination for the third time. Ensure all steps are documented for future reference.

1. Please face the labor inspector with documentary evidence. Do not panic. Speak to them politely but firmly.

2. The PF demand is fake in this case because he provided the declaration initially.

3. If the money (F&F) is transferred to his account or taken as cash settlement, ensure you have all the details with you.

4. For the future, ensure that ESI or workmen's insurance is obtained for all such workers.

5. He has only worked for 157 days.

Lastly, poor performers should be informed upfront without hesitation as an HR person. Labor is a crucial element in the 4M pillar (Man, Material, Method, and Machine).

As an HR person, you must be prepared with the necessary documentation.

All the best, Subramanyan PP