Employee Refuses Notice Period: Can Employers Withhold Salary and Documents?

What should an employer do when an employee refuses to serve a notice period?

What should an employer do when an employee refuses to serve a notice period? Can the company hold the due salary of that employee who refuses to serve a notice period? In that situation, the employee will not be entitled to the relieving or any other letter.

If an employee is not ready to serve the notice period as per the employment contract, the employer has the right to withhold the salary, relieving, and service certificates. You can also retain the full and final settlement.

Notice Period and Employee Obligations

Notice period is one of the terms and conditions duly signed and accepted by the employee at the time of joining. Though you can rightfully withhold the salary due to the employee if he/she falls short of the notice period.

If the employee is willing to pay an amount equivalent to the notice pay, then you can consider it. If he/she has any earned leave in his/her account, you can consider setting it off against his/her notice period, to the extent that earned leave is available.

However, we also have employees who withdraw all their entitlements, including the previous month's salary, and then submit a resignation and seek immediate relieving. In these cases, the amount due to the employee, even after considering the earned leave to his/her credit, falls short of the amount due from him/her.

In such an event, you can ask the employee to pay the amount that falls short of the notice period. If he/she refuses, you can officially write a letter to his/her last known address, communicating the amount due from him/her. This letter can be sent by Registered Post with Acknowledgement Due (RPAD).

Only if the employee fulfills his/her contractual obligations will he/she be entitled to receive a relieving letter/service certificate.

Regards,

MVK

Dear R Roy,

Earlier, I have provided responses to similar posts. You may click the following links to refer to them:

https://www.citehr.com/showpost.php?...mp;postcount=3

https://www.citehr.com/showpost.php?...mp;postcount=2

https://www.citehr.com/showpost.php?...mp;postcount=2

Thanks,

Dinesh Divekar

Employee Notice Period Obligations Under the Industrial Disputes Act

In respect of employees who do not have any functional powers and responsibilities of a manager and are thereby covered by the Industrial Disputes Act, the employer cannot withhold the salary for the reason that the employee has not served the notice period. This is because under the ID Act, a worker is not under any obligation to serve notice or pay salary in lieu of notice. It is also true that if an employer has to terminate the contract of employment, they should give notice. Certainly, if the establishment has certified standing orders, then it shall be obligatory on the part of workers to serve notice. However, just a provision in the appointment order is not sufficient to circumvent the ID Act.

In general, the employment conditions require either party to serve the notice period or to pay in lieu of notice. If an employee is not willing to serve the notice period, the employer can request payment in lieu or withhold the pay and may terminate the employment due to non-compliance with the contract of employment. The employer also has the right to withhold the salary and other payables on a case-by-case basis depending on the situation.

Please let me know if you need further assistance.

Please find out the reason why he is not serving the notice period. If it's a genuine reason, then you can consider waiving it off. However, if it's not genuine, then send him an email to serve the notice period compulsorily. In case of failure to do so, there will be no F&F settlement in the future.

There exists an employer-employee relationship which is a 'contract' between them. The terms and conditions of employment shall clearly spell out the circumstances of this nature and how to deal with cases of non-compliance as a 'breach of contract'. While the salary of an employee cannot be withheld statutorily, other measures available to the employer are i) withholding the 'service certificate' and ii) the relieving letter. Moreover, terminal benefits such as EPF and EPS endorsements, Gratuity, and leave encashment are also aspects available but with strings as they are time-bound. The only option available to the employee, if agreed upon by the employer, is cash compensation, i.e., to pay and get relieved.

The importance of a relieving order

The other weapons available to the employer cannot include the non-issuance of a relieving order per se because relieving an employee is for the benefit of the employer and not for the employee. It's true that, in order to pursue a career, one would require a relieving order. But more than that, the issuance of a relieving letter is important for the employer to make them responsible for the acts committed by the said employee while not in employment but legally in service of the employer. It's like a buyer of your vehicle without a proper sale letter and transfer of ownership.

Handling PF benefits and gratuity

The employer cannot hold the PF benefits provided the establishment is not an exempted establishment having their own PF Trust. Even without the signature of approval of the employer, a member can transfer or withdraw their PF accumulations. If the employer is not processing the exit of an employee, a remedy is available for the employee.

Gratuity cannot be forfeited because non-service of the notice period will not come under the scope of Section 4(6) of the Payment of Gratuity Act. Any delayed payment of gratuity beyond 30 days of the last working day will attract interest as well.

Leave encashment and employer retaliation

Leave encashment is also a right at the time of discharge under the law. Therefore, in my opinion, if the employee concerned is not a manager (manager by function and not just by designation), the only option available is to settle the dues and issue a relieving letter. The employer can retaliate, as many in the new generation companies do now, by giving negative remarks in the background verification, etc. But that will not add value to their organization by any means.

Withholding Relieving and Experience Letters

You can withhold the relieving letter and experience letter. You can create them and keep them on file but don't give them to the employee. There is little he can do against it. Giving negative remarks in BVG is also another tool for you.

Holding Back Salary and Notice Pay

You cannot, strictly speaking, hold back his salary. However, you can withhold the amount equivalent to the notice pay that he has not completed.

Provident Fund and Gratuity

As Madhu mentioned, PF is not in your hands. You will have to pay gratuity if he goes to the Gratuity Authority and you receive a notice. There is no provision to adjust outstanding amounts against it.