Employee Resigns Early: Are There Legal Risks for Approving Their Exit Before Contract Ends?

To HR experts,

A situation has arisen where an employee, who initially signed an 18-month contract with our company, has tendered their resignation after completing only 12 months. Our standard notice period is 3 months. He is okay with serving the notice period, but it will not complete 18 months. Are there any legal concerns or implications if the company approves the employee's resignation under these circumstances?

Note: The agreement mentions that resigning before the period will have a penalty, the training amount.

Legal Implications of Early Resignation

There is no legal issue if an employee leaves before the period specified. However, if your Certified Standing Orders require a three-month notice period, you can ask the employee to serve the notice period or pay the salary in lieu of notice. Without any such clause regarding the notice period and payment in lieu of notice, you cannot insist that an employee serve a notice period if they fall under the scope of the Industrial Disputes Act. An employee who has no direct reports, cannot sanction leaves, appraise performance, or initiate disciplinary actions against subordinates is considered a worker protected by the ID Act. It is important to confirm the classification before requiring a notice period.

Recovering Training Costs

You can request training costs from the employee, but these costs should be specifically related to the training provided to that individual employee, excluding general training expenses. For an 18-month fixed-term contract, the training content and duration should be clearly outlined. If the intention is to train the employee and utilize their skills, an 18-month period may be insufficient. If, for example, the training duration was six months out of the 18, the employer may expect the employee to stay for a reasonable period, like five or three years. Similarly, significant training investments are typically made with the expectation of a longer-term return. The recovery of training costs should be based on quantifiable amounts spent on the individual's training.

These considerations are dependent on the specific circumstances, but if the training expenses for a particular employee are measurable, it is reasonable to seek reimbursement from that employee.