Is It Fair to Terminate Employment with Just a Notice Period? Let's Discuss

Validity of Termination Notice in Appointment Letters

The term in the letter of appointment for managers states that service can be terminated by either side giving notice of one or three months.

Can the Term Be Used Without Following Principles of Natural Justice?

Is it valid to use this term without adhering to the principles of natural justice?

Dear Jagadish,

We do not know in what context you have raised your query. A little more background information could have brought clarity.

If the company wishes to terminate the services of the employee on disciplinary grounds, then it is incumbent on the company to follow the principles of natural justice.

Yes, you may give short shrift to the disciplinary procedure; however, by chance, if the terminated employee files a lawsuit, then the company may get entangled in the litigation. As you are well aware, court cases drag on for years. Under such circumstances, the cost of the half job could be greater than the cost incurred because of the process of discipline.

If the company adheres to the principles of natural justice, then the company can have a sense of comfort or relief, and the other party will think many times before proceeding with the litigation.

Thanks,

Dinesh Divekar

Distinction Between Public and Private Sectors

In analyzing the issue, a distinction has to be made between the public/Government sector and the private sector. Concerning the public/Government sector, such an action would be affected by Article 14 and Article 16(1) of the Constitution of India.

Private Sector Considerations

In the case of the private sector, again a distinction must be made between the workman category and others. Regarding a person who is in the workman category as per the ID Act 1947, they acquire a status on completion of 240 days of service and hence cannot be terminated using this clause. The termination of an employee who is not in the supervisory/managerial cadre as per the Contract of Service mutually agreed upon between the employer and employee signifies a contract as per the Contract Act 1872 and is valid and enforceable.

Supreme Court Ruling on Gold Collar Employees

The Supreme Court in OP Bhandari Vs. ITDC (1987 AIR SC 111) has held that a Gold Collar employee can be discharged without questions being asked. In fact, Justice Thakkar, who authored the judgment, called for such a regulation for the PSUs at the highest level.

In my opinion, even in the private sector, if a person is part of the management staff, their service cannot be terminated solely based on the terms stated in the letter of appointment regarding termination, which requires only a notice of a certain period. Such termination would be illegal as it would resemble a hire-and-fire scenario. Additionally, in service contracts, an employee and an employer do not possess equal bargaining power, leaving the employee with no choice but to accept the terms.

Legal Precedents
There were two appeals in the district court in Pune on the same grounds, and they ruled in favor of the management staff. Now, the matter is before the High Court.