How to Handle Driver's Termination When He Rejects Compensation Offer?

Dear colleague,

Please advise on the matter of the termination of the car driver.

1. The driver was engaged for work on an off-roll/voucher payment basis from April 2004 to October 2011.
2. Starting from November 1, 2011, he was covered under P.F. without any appointment letter, with a component of Basic and Personal Allowance.
3. He has been on the roll since November 1, 2011, up to now.

Since his reporting officer retired on October 31, the services of the driver have not been required from November 1.

The present in-charge of the establishment is requesting the termination of the driver and is willing to pay gratuity and retrenchment compensation for ten years based on his current basic salary.

However, the driver is refusing to accept this compensation and is requesting retrenchment and gratuity based on his full salary, i.e., basic plus personal allowance. Additionally, he is not willing to relocate or transfer to another location for work and is asking for a written retrenchment notice or transfer order.

As no appointment letter has been issued, we are unable to provide him with any written documentation.

In this situation, what would be the best course of action to terminate his services and provide him with his final settlement?

Thank you.

Dear Colleague,

The said driver was engaged continuously from the year 2004, it seems from your write-up. From 2011, he was covered under PF and continues to date without any appointment order. This system needs to be reviewed and refined if more personnel are working like this. The organization may consider taking the drivers off-role through contractors, which is an effective way to manage the role instead of having on-roll drivers. This is widely practiced, and through the contractor, you can handle all compliances, which is hassle-free.

Coming to the present driver, it is presumed that the organization had a practice of paying his salary directly by voucher or other modes. From the given details, it is better to pay and close the matter with all magnanimity, as someone should not work without any order of appointment or clarity on their status in the organization for a long time.

Under such circumstances:

1. Gratuity should be paid for the total service based on the BASIC + DA, if any, at the rate of 15 days of wages for every completed year of service.
2. Kindly examine whether you paid the "personal allowance" in lieu of DA or if it is totally independent and serves a different purpose. In such a case, take care to exclude it.
3. Gratuity is payable only on BASIC + Dearness Allowance, if any, as of now under the present law.

Sec 2 (s) “wages” means all emoluments earned by an employee while on duty or on leave in accordance with the terms and conditions of his employment and which are paid or payable to him in cash. It includes dearness allowance but does not include any bonus, commission, house rent allowance, overtime wages, and any other allowance.

You need to make a decision after examining the component "Personal Allowance."

4. Regarding Retrenchment Compensation, it is payable under the Industrial Disputes Act 1947. Notices must be served, and compensation is payable based on the balance service remaining for the driver. It is advisable to consult a Labour Law Consultant and then decide the course of action, as there are provisions to send notices to the authority, notice to Trade Union if any, and compensation worked out for the remaining service (balance service of the driver) considering the two important definitions - Wages & Workmen as given below:

2(gg) (rr) 4 "wages" means all remuneration capable of being expressed in terms of money, which would, if the terms of employment, expressed or implied, were fulfilled, be payable to a workman in respect of his employment or work done in such employment, and includes:
(i) such allowances (including dearness allowance) as the workman is entitled to;
(ii) the value of any house accommodation, or supply of light, water, medical attendance, or other amenity or service, or any concessional supply of food-grains or other articles;
(iii) any travelling concession;
(iv) any commission payable on the promotion of sales or business or both;

but does not include:
(a) any bonus;
(b) any contribution paid or payable by the employer to any pension fund or provident fund or for the benefit of the workman under any law for the time being in force;
(c) any gratuity payable on the termination of his service.

2(s) "workman" means any person (including an apprentice) employed in any industry to do any manual, unskilled, skilled, technical, operational, clerical, or supervisory work for hire or reward, whether the terms of employment be express or implied, and for the purposes of any proceeding under this Act in relation to an industrial dispute, includes any such person who has been dismissed, discharged, or retrenched in connection with, or as a consequence of, that dispute, or whose dismissal, discharge, or retrenchment has led to that dispute,

but does not include any such person:
(i) who is subject to the Air Force Act, 1950 (45 of 1950), or the Army Act, 1950 (46 of 1950), or the Navy Act, 1957 (62 of 1957);
(ii) who is employed in the police service or as an officer or other employee of a prison;
(iii) who is employed mainly in a managerial or administrative capacity;
(iv) who, being employed in a supervisory capacity, draws wages exceeding 10,000/- rupees per mensem or exercises, either by the nature of the duties attached to the office or by reason of the powers vested in him, functions mainly of a managerial nature.

The analysis shows that he is deemed to be a workman under the ID Act, and all his components should be taken into account for Retrenchment Compensation working.

Caution: Retrenchment is a tricky subject, and depending on the number of workers employed in your organization, Chapter VA or VB will apply. There are pre-conditions applicable like Notice/Approval/Payment of Retrenchment compensation all in a single go, etc. Hence, if you really want to take this route, consult a Labour Law Practitioner before proceeding.

Another alternative is to try to convince the driver by briefing the justification and proposing a VRS-like proposal so that he will also leave happily, and there will be no dispute later on.

It is suggested to give the driver a good payment, reasonably worked out, and treat it like a resignation on his own accord.

The final option is that no workman can deny accepting a "transfer" if it is on genuine grounds, and it is the prerogative of the employer. If you have a vacancy elsewhere under the same employer, then there is no harm in transferring him to that place. However, kindly regularize his service properly with an official order at least now. Otherwise, there is every chance that he wins in an ID later on if it arises.

Overall, kindly take a calculated risk, close the case, and review such systems to streamline them.

All the Best, God Bless,
Dr. P. SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu

Dear Rakesh,

Whether an employee is kept off-roll or on-roll, what is important is whether he has been employed directly by the employer or industrial establishment. This is the basic criterion to determine the fact of employment. Suppose he had been employed by the retired officer as per his choice to drive his own car and paid out of the conveyance allowance he received from the employer, the position would be different. Hence, the inescapable conclusion is that he has been in continuous service of the establishment since 2004, as admitted in the thread, despite his off-roll tenure followed by his belated enrollment into the EPF Scheme in 2011. Therefore, he cannot be simply terminated by way of retrenchment or otherwise as the present in-charge desires.

If the establishment falls under the definition of the term "industrial establishment" under section 25-L of Chapter V-B of the Industrial Disputes Act, 1947, you have to obtain prior permission from the appropriate Government by following the provisions of section 25-N of the Act. In any other case, you have to follow the provisions of section 25-F of the Act before actually retrenching him.

Of course, gratuity can be calculated on the basis of the last drawn basic in the absence of dearness allowance. But in my opinion, the personal allowance being paid may be an allowance to defray the special expenses related to the performance of car driving and as such it cannot be treated as a component of wages for the purpose of minimum wages under the Minimum Wages Act, 1948. Therefore, the basic wages shall not be less than the statutory minimum wages for the purpose of calculating terminal benefits.

Again, retrenchment compensation should be calculated on the basis of 15 days' average pay received for every completed year of service rendered.

His total length of service shall be calculated effective from his actual date of appointment in 2004, which may be around 17 years as of now.

In view of the legal bottlenecks, my suggestion would be to settle the matter amicably by paying him retrenchment compensation and gratuity for the entire number of years of service rendered so far based on his last drawn salary as he desires and ensure that the separation is peaceful or transfer him if it is possible.

We had not issued an appointment letter to him. In such a situation, can we issue him a transfer letter as we need a driver in another location?

With Regards,
Rakesh Dubey

Dear Rakesh Dubey,

The driver was on a casual roll and was receiving payment in vouchers from April 2004 to October 2011. However, subsequently, your establishment brought him onto the payroll by deducting EPF. This action makes him a regular employee of your establishment from November 1, 2011, until his last day of work. Therefore, it does not require an appointment letter to prove his employment status. The title of 'Employee' was conferred upon him by your establishment through enrollment in the EPF. The driver's claim for terminal benefits and gratuity is legitimate, to which your establishment cannot deny. The requirement of an appointment letter is immaterial. The payment of gratuity and retrenchment compensation by your establishment is an indirect acknowledgment of the person's employment, even without the issuance of an appointment letter.

The driver can be issued a letter stating that his services are ending due to the lack of requirement at the current location. Consequently, the establishment will provide compensation of X amount (paying him termination compensation along with gratuity calculated on the basic salary on which his EPF deductions were made). An employee can be retrenched due to the non-existence of a position. If the individual still believes this action is not in accordance with the rules, they may contest it in court.

Please let me know if any further clarification or assistance is needed.

Thank you.

Options for Settling Employment Disputes

Very good options were given by seniors. I suggest that if you want to settle amicably, calculate retrenchment compensation, etc., and finally arrive at a figure to pay. Then you can have a discussion with the driver and settle for it.

We need to understand that we cannot fire an employee simply because someone retired. If he is not ready for the settlement offered by you, the course of action can be followed by a transfer as suggested if your rules permit.

At any point in time, you have to take care that the whole episode should not reflect on other employees of the organization. But if the other side is adamant, then the legal course becomes inevitable.

Thank you for the valuable advice. Furthermore, we have successfully convinced the driver to settle the outstanding amount through a lump sum one-time payment.

Could you please provide me with a draft of a letter that we can have him sign, confirming that he has no remaining dues to the company?

Regards,
Rakesh Dubey