How Should We Handle an Employee Threatening Legal Action Over Termination?

Company Policy and Attendance Issues

When we started the company 10 years ago, not many laws were in place, but attendance was one policy we established. Although it was mandatory to be punctual or report any leaves, it was not strictly enforced for those who joined early in the organization.

Employee Misconduct and Response

One of the employees was caught engaging in kickbacks with a vendor. However, since it was a family-driven company, we decided to let him go after he apologized. We had recordings of the incidents but never took any formal action.

Recent Attendance and Performance Issues

In the last two years, this employee began arriving at work at his convenience and made mistakes on projects. We never issued formal written warnings but kept him on verbal notices. Despite his absences and irregular timings, we continued to pay his full salary. Eventually, we implemented an online attendance platform to log attendance accurately.

Salary Adjustments and Employee's Reaction

We paid the full salary until November. Starting in December, we informed him that his salary would be based on attendance, which he disagreed with. During a financial crisis in the MSME sector, our business was also affected by a slowdown, leading to delayed salaries. In March, the lockdown was imposed. Now, he is exerting unnecessary pressure, threatening legal action, and expressing disbelief in the system.

Seeking Advice on Employee Termination

Please suggest what I should do. He threatens that if we terminate him, he has the right to demand significant compensation and that we cannot dismiss him. We have offered a settlement based on attendance and, if he resigns, his gratuity as per the law. However, he never engages in negotiations, fails to stick to his words, and keeps asking for a final decision.

I understand it's a lengthy post, and we all acknowledge the challenging times for MSME companies and employees as well.

Ya, sir.

Some points that do not match your complaint about him, like we didn't take any action when he was found guilty... We didn't maintain any payment records. Anyhow, come to a conclusion yourself on whether to remove him or not, not solely due to the unusual lockdown situations. Okay, he is demanding huge amounts. First, send him a removal letter. Then, he will reply with the amounts he wants or he might approach the labor department for relief. No need to worry, at the conciliation stage you can negotiate and settle on an amicable figure with your ex-employee.

Disciplinary Action Against an Employee

You can initiate disciplinary action against that employee by following the principles of natural justice. If you don't have certified standing orders, a show cause notice should be issued, framing specific charges of misconduct as per Model Standing Orders, and seeking his written explanation. Regardless of the employee's response to the show cause notice, an enquiry should be ordered, and it may be conducted by an external Enquiry Officer.

After receiving the Enquiry Officer's findings, you can issue a second show cause notice proposing to award the punishment of dismissal. After receiving the employee's reply, you can proceed by issuing a dismissal letter. If, during the course of the enquiry proceedings, the employee expresses a desire to settle the matter amicably, you can negotiate and settle his case as an out-of-enquiry initiative. This is how you can handle this employee.

Regards, Panchsen

IR and Labour Law Consultant

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Ideally, you should not tolerate such attitudes and employees. You should initiate disciplinary action by issuing a charge sheet for all his lapses in a properly drafted form. If he is engaging in grave and serious misconduct, you can also suspend him pending inquiry. Since you are in Pune and he is making threats, you need to approach legal action against him, as the MRTU PULP Act is applicable. By conducting a proper legal inquiry through trained legal counsel, you can terminate him, so there will be no question of any compensation. This will also send the correct message to other employees that a high-handed attitude is not tolerated.

Before proceeding with anything, please ensure you have all indisputable documentary evidence, records, and witnesses to prove his guilt. Unless you are fully prepared with these requisite supports, you should not go ahead with the proposed action.

Employment Terms and Labour Laws

The terms and conditions of employment for employees classified as "workmen" are governed by various labour laws, including the Industrial Disputes Act of 1947. Therefore, before taking any action, please consult a labour lawyer properly.