Forced Resignation Dilemma: How Should We Handle the Director's Change of Heart?

Respected All,

Recently, the company asked one of the directors to resign due to lower business volume and economic crises caused by COVID-19. The director submitted his resignation and requested an immediate release, which the company accepted. The resignation was sanctioned, and the director was relieved on the same day.

Management has shown generosity and benevolence, but the challenges posed by the COVID-19 crisis are beyond their control.

During discussions, management agreed to pay three months' notice pay in lieu of the notice period, along with all indirect benefits as per the appointment terms and conditions, instead of requiring the director to serve the notice period. The company offered a separation agreement, stipulating that the director should not disclose any confidential information to outsiders, considering his key role. However, the director declined to sign the agreement but still submitted an official resignation.

Later that evening, the director emailed stating that management had coerced him to resign, expressing a desire to serve the notice period and mentioning the possibility of sending a legal notice to the company.

In this situation, expert opinions are needed:

1. Should we release the three months' notice pay at once, or should it be paid on a monthly basis until the three months have elapsed?

2. Is it advisable to withhold his dues temporarily to assess the situation?

3. Is it appropriate to continue the notice period without any assigned work, by staying at home?

Your guidance on these matters would be greatly appreciated.

Resignation and Termination Process

Pointwise reply to your query is given below:

1. The resignation of your Director is rather a forced one, which, in other words, is the termination of his services. As he is relieved on the same date of resignation, the company needs to pay him three months' salary in lieu of the notice period, as part of his Full and Final (F&F) settlement.

2. Once an action is taken, the reversal of the same is not possible.

3. In big corporate houses, for personnel in the managerial cadre or above—whose services are no longer required by management—management will not ask him to submit his resignation. Rather, he is allowed to come to the office, but it will be ensured that no official paper/file goes to his cabin, and no official assignment will be given to him by his boss. (He may become frustrated after 2-3 days and shall continue in the same position for a maximum period of one week only. Then he will voluntarily come forward and submit the letter of resignation to management.)

Dear Santhosh, since the individual happens to be a director and the abrupt termination of his tenure is actually at the instance of the management, your queries have to be answered based on the terms of the contract of his employment only. In his subsequent email, the individual has indicated that his resignation is forced, but he is willing to leave by serving the notice period of three months. Therefore, considering the magnanimous stand of the management and the necessity of the situation, you can settle all his dues promptly and conclusively.

Dear Santosh, you have written that "On the same day in the evening afterthought he sent an email stating that the management has forced him to resign and he wished to serve notice period, he may also send a legal notice to the company management for the same matter."

Questions Arising from the Situation

The following questions emerge from the above excerpts:

Does the Director have any proof of "forced resignation"? Did he record the conversation that took place between the company officials and the Director? How come he has mustered the courage to give a threat of a lawyer's notice?

Your company's requirement of signing the Non-disclosure Agreement (NDA) was genuine and legitimate also. Why has he refused to sign even a legitimate document?

Who handled the resignation of the Director? Was that person the reporting authority of the Director or some junior-level employee?

Responses to Your Questions

1. Should we release three months' notice pay at once or month by month until the three months are over?

Reply: If you have accepted the resignation and if you are going to pay in lieu of the notice period, then you have to pay the lump sum amount.

2. Should we hold his dues for the time being to analyze the situation?

Reply: In light of his threat of a lawyer's notice, first send him a reply stating that his belligerent attitude was uncalled for. He must submit an unconditional apology for this kind of email. Otherwise, disciplinary action would be initiated against him, and pending the disciplinary action, his dues can be withheld.

3. Is this the right way to continue the notice period without any assignment/work by sitting at home?

Reply: It depends on your company. However, do not do anything until the Director gives an apology letter in his own handwriting. An apology through email will not be accepted. You may even ask for an apology on bond paper also. He must solemnly affirm that he had written the email in a fit of annoyance and he apologizes for the same. Unequivocally, he must state that he will not pursue litigation.

Does the Director work from home or attend the office? If you wish to frustrate him, then withdraw all his powers. Issue a circular to this effect. Tell him to hand over the charge of his office completely. However, he must report to the office every day. Let him just come and sit in the office doing nothing. It is very difficult to cool one's heels in the office without any job. If your company is big enough, then identify a place near the security office and assign him a chair and table there. Once you humiliate him this way, he will stop reporting for work. Send him a show-cause notice for not attending the office.

Final Comments: Receipt of a notice from the Director does not bode well for your company. It shows the matter has been mishandled. Nevertheless, now the top management of your company must take this as an opportunity to establish authority. If the company orders are defied, then what lies ahead must be communicated to the employees. However, instead of communicating through words, let it be communicated through management's actions.

In the meanwhile, start scanning all the decisions taken by the Director and find out whether there are any loopholes. If you observe some omissions or commissions, issue him a show-cause notice.

Thanks,

Dinesh Divekar

Dear Santosh Ji, it is common for senior management to terminate employees. If I were in your position, in your company, I would not be concerned about the employee's email or his threats of legal action. I would enforce my decisions without hesitation.

Non-Disclosure Agreement Concerns

Now, the issue of his refusal to sign a non-disclosure agreement regarding confidential information, considering his key role. In my opinion, signing a non-disclosure agreement provides additional protection for the company.

When he has access to confidential information, he should not disclose it to anyone, regardless of any agreement or contract. An employee, especially one at a senior level, has an ethical and legal obligation to maintain the confidentiality of sensitive information. Simply remind him in writing when settling his dues.

Kind regards, [Your Name]