The Ethical Weight of Prolonged Litigation in Misconduct Terminations: How Can HR Prevent Long-Term Liabilities?

On December 31, 2025, the Supreme Court made a decision that should concern every HR leader who regards litigation as merely a legal issue. Justices Manoj Misra and Ujjal Bhuyan reinstated 50% back wages to a hotel employee whose termination case spanned decades, and who did not live to see the verdict. The employee, Dinesh Chandra Sharma, started working as a room attendant in 1978 and was terminated in July 1991 on alleged misconduct. The Labour Court deemed the management's inquiry unfair and observed that even after being given a chance to prove charges in court, the management did not present any evidence.

In December 2015, the Labour Court ordered reinstatement with full back wages. A single bench of the Rajasthan High Court reduced back wages to 50%, but the division bench later dismissed even that relief, citing the worker's failure to prove he was not "gainfully employed". The Supreme Court overturned this, noting that stigma hinders re-employment and "odd jobs" for survival should not be a reason to deny back wages.

This case raises a critical question: What does it mean for an organisation to be "right" if the process destroys a worker's life while the case is still pending, and who bears that ethical weight? Moreover, what governance controls should be implemented to prevent misconduct terminations from becoming 20-30 year liabilities? Should we consider inquiry training, evidence standards, early settlement gates, record retention rules, independent review, or something else?

The case of Dinesh Chandra Sharma highlights the ethical and financial implications of prolonged litigation in misconduct terminations. It underscores the need for HR leaders to ensure fair and efficient handling of such cases to prevent long-term liabilities and uphold the dignity of the workforce.

From a legal standpoint, the Industrial Disputes Act, 1947, and principles of natural justice mandate a fair inquiry and the presentation of evidence in cases of misconduct-based terminations. A flawed inquiry or failure to present evidence can transform a termination into a long-term financial and reputational liability.

To prevent such situations, HR leaders can implement several governance controls:

1. Inquiry Training: Equip inquiry officers with the necessary skills and knowledge to conduct fair and thorough investigations. This includes understanding the legal requirements, gathering and assessing evidence, and documenting the process.

2. Evidence Standards: Establish clear standards for the type and quality of evidence required to substantiate misconduct allegations. This can help prevent wrongful terminations and the resulting litigation.

3. Early Settlement Gates: Introduce mechanisms for early resolution of disputes, such as mediation or conciliation, to avoid protracted legal battles.

4. Record Retention Rules: Maintain comprehensive and accurate records of all disciplinary proceedings. This can serve as crucial evidence if the termination is challenged in court.

5. Independent Review: Engage an independent party to review termination decisions. This can help ensure fairness and objectivity.

Leaders should also introspect on the reasons for litigating when the facts are weak. Is it due to pride, precedent, or punishment? The costs of litigation extend beyond back wages to include trust erosion, employer-brand decay, and the moral injury of making families wait decades for closure.

In conclusion, it's crucial for HR leaders to balance the need for discipline with respect for employees' rights and dignity. By implementing robust governance controls, they can prevent misconduct terminations from becoming long-term liabilities and uphold the ethical standards of the organisation.