Can Salary in lieu of Notice Period be only at the discretion of the Employer?

My son is working with a very renowned Consultancy Firm in India. His appointment had the following clause:

Under Termination

"Either party shall be free to terminate this Agreement at will and, at any time, with or without cause, upon Ninety (90) days prior written notice by the party desirous of terminating this Agreement or payment of equivalent salary in lieu thereof or a combination thereof, at the discretion of the firm."

My son had submitted his resignation stating that he may be released after serving the notice period. But the Firm is now saying that he will be released after 3 days and he is not entitled to any salary in lieu of the 90 days notice period, citing this clause.

Can the Firm do this based on the above clause? Is this lawful to have such a clause in the appointment letter which is one-sided at the discretion of the Firm? I would be obliged to have the opinion of the learned members of this Forum and can there be any recourse to this one-sided exploitative clause in the appointment?

Regards, Bhaskar J. Roy

Hi, It should be on either side. If the employer is relieving in 3 days, they are supposed to compensate. Please advise your son to check with HR on this.

As per the appointment order, the party intending to terminate has to give a three-month notice. This has been done by your son. However, if the other party does not agree to accept the serving of the notice period by such an employee, what would be done is not clear in the rules, nor is there a clear-cut court verdict in this regard. Nevertheless, there is a legitimate expectation that the employee will be allowed to serve the notice period, and to summarily terminate the service would be in breach thereof. Moreover, there is a case of willful breach of contract.

These are appointment orders that someone should have drafted, and the company is just following them without delving deep into interpreting the clauses correctly. "'...or payment of equivalent salary in lieu thereof or a combination thereof, 'at the discretion of the firm'" shall not mean that there can be two policies regarding the notice period—one for the employee and another for the employer. The employer can relieve an employee without paying notice pay 'at his discretion,' but it is only subjective to the main clause which states that both parties are 'free to terminate' the contract by giving 90 days' notice or salary in lieu or a 'combination of both,' which is subject to the company's discretion.

But who will challenge it? Nobody will challenge it because we don't have time to delve into such matters. Therefore, if the company relieves someone in three days without paying the notice period salary, the individual should either decide to work for three months or forget about the notice pay and silently leave the organization. The company loses nothing, but the employee will jeopardize his career by challenging the company's decision. Even nowadays, he will not receive justice from the appropriate authorities.

Thank you, honorable members. From your responses, it appears that although this is clearly a breach of appointment terms and the notice period cannot be different for either party, due to the inordinate delay in getting justice under our legal procedure, employers get away even after flouting all rules. An individual cannot fight a case on his own due to limited resources while the employer can. So employers (especially private companies) can flout appointment agreements at will, and the employee will always be at their mercy.

I was wondering if there is any caveat from the government or any legal precedence to refer to. I will appreciate your replies.

Thanks & Regards,

Bhaskar J. Roy

In my considered opinion, the clause - "Either party shall be free to terminate this Agreement at will and, at any time, with or without cause, upon Ninety (90) days prior written notice by the party desirous of terminating this Agreement or payment of equivalent salary in lieu thereof or a combination thereof, at the discretion of the firm" does not authorize the employer to act arbitrarily and unilaterally, and legal remedies are worth pursuing. Yes, the path is not easy and even hazardous; but unless someone takes up the courage to pursue the issue, law as a tool to ensure fairness would be rendered a dead letter in the long run.