How to Draft a Legally Binding Release Letter for a Senior Employee with Outstanding Dues?

Dear All, Greetings! Could you please assist me in drafting a formal release letter? This is intended for a senior staff member who has shown unwillingness to complete the mandatory exit formalities of our company. He has failed to recover the outstanding market amount owed to the company. We now intend to adjust part of the outstanding dues from his salary. We wish to issue him a release letter stating that he is being released subject to the realization of the outstanding amount in the future by him. This release letter should be legally binding.

I would appreciate a prompt response.

Regards, Pradeep

Dear Pradeep,

In your situation, it is important to ensure that any deductions from the employee's final settlement are in compliance with the Payment of Wages Act, 1936 and other applicable Indian Labor Laws. Here's a sample draft for the letter you need. Please adapt it to your specific situation and consult with your legal team before sending it.

Sample Release Letter

Date: [Insert Date]

To, [Employee's Full Name] [Employee's Address]

Subject: Release Letter

Dear [Employee's Full Name],

This letter serves to confirm that your employment with [Company Name] ends on [Last Working Day], due to your unwillingness to complete mandatory exit formalities, specifically the recovery of outstanding market dues.

As per our records, the outstanding amount is [Amount Here]. After considering your pending salary and other dues, the adjusted amount to be recovered from your end is [Adjusted Amount Here].

Please note, this release is subject to the realization of the above-mentioned outstanding amount. You are legally bound to clear this outstanding amount on or before [Due Date Here].

Once the amount is received, a final release letter will be issued confirming that no dues are outstanding against your name. Failure to pay this amount may lead to legal actions as per company policy and Indian Labor Laws.

We thank you for your service and anticipate your cooperation in this matter.

Best Regards, [Your Name] [Your Position] [Company Name] [Company Address] [Company Contact Information]

This letter must be issued on the company's letterhead and should be signed by the appropriate authority. Make sure to keep a copy of this letter for your records.

Remember, it is crucial to follow due process while dealing with such issues to protect your company from any potential legal disputes.

I hope this helps!

Dear Pradeep,

When the senior person joined your company, you must have mentioned the clauses on separation in the appointment letter. Did you include the clause that states that while separating from the company, if there are outstanding dues in the market, these will be recovered from his/her salary? Have you defined "failure to recover outstanding dues from the market" as misconduct in your standing orders? If not, on what grounds would you like to initiate the recovery?

Recoveries or adjustments in the salaries cannot be made at the employer's will.

Occasionally, because of the workers' negligence, accidents happen in the factories, and the companies suffer huge losses. However, to recover the losses, the company has to order a domestic enquiry, and the worker's negligence has to be proved. While awarding the punishment, a small percentage from the salary is recovered. The recovery of the loss cannot be disproportionate to the salary. There are court rulings for disproportionate recoveries.

Given this, I strongly recommend taking the advice of a labour lawyer. The lawyer is expected to provide impartial advice and, for the sake of keeping the client in good humour, cannot just accede to the client's views.

Thanks,

Dinesh Divekar

Hi, I do not think you are allowed to deduct market outstanding from his salary. It is the amount due to the company from its customers; they are not amounts he owes the company. You can recover it from him only if he was involved in fraudulent activity to let them get away without paying for the goods they have bought from your company.

If you deduct this amount, it is a violation of the Payment of Wages Act and other laws. You can be in serious trouble, and the court is definitely going to side with the former employee.