Employees Rights If Employer Terminates

Author: Ravi Kumar (Advocate Chennai)

Entry date: 2020-11-21

Summary: In this back ground, what needs to be understood is that in the wake of the covid-19 outbreak, a private sector employee cannot claim eligibility for any special status while seeking legal relief against termination and wage cuts by his company. We further need to analyze here under what circumstances and laws an employee can challenge the termination and pay cuts. Under normal conditions, the relationship of an Employer and Employee is governed by the contract of employment which is drawn up when the employee joins the organization. In the wake of the covid-19 crisis when companies are facing grave financial adversities, employers may resort to the deduction of salaries in mutual agreement with their employees. However, in case an employee is refusing to work at a reduced salary, employers may choose to terminate employment by complying with the terms of the contract like paying notice salary. Employees always have the option of approaching a court of law for seeking damages but they do not have the right to seek reinstatement in their organization.

In this back ground, what needs to be understood is that in the wake of the covid-19 outbreak, a private sector employee cannot claim eligibility for any special status while seeking legal relief against termination and wage cuts by his company. We further need to analyze here under what circumstances and laws an employee can challenge the termination and pay cuts. Under normal conditions, the relationship of an Employer and Employee is governed by the contract of employment which is drawn up when the employee joins the organization. In the wake of the covid-19 crisis when companies are facing grave financial adversities, employers may resort to the deduction of salaries in mutual agreement with their employees. However, in case an employee is refusing to work at a reduced salary, employers may choose to terminate employment by complying with the terms of the contract like paying notice salary. Employees always have the option of approaching a court of law for seeking damages but they do not have the right to seek reinstatement in their organization.

We also need to assess here whether rules or regulations regarding pay cuts differ for employees on payroll of companies and those who are casual and employed on contractual terms. In the case of workmen who are employed in compliance with the terms of industrial laws, the employer-employee relation will be as per the statute. Moreover, as discussed above all these employees are protected by orders and directives issued under Disaster Management Act and epidemic Act.

Thus, the difference is of workmen under Industrial law and migrant worker is protected from Salary cut and termination but no such protection is available to other employee in private sector who is governed by the contract of employment.

Court to take a call on employee termination

Having said that no protection is available to employee who is not a workman, it is noticeable that a petition has also been filed by National Information Technology Employees seeking implementation of aforesaid advisories and directions issued by Central Government in its order dated 29.03.2020 and similar orders issued by several other State Governments on employees who are governed by contract of employment. Supreme Court has agreed to examine this issue pertaining to mass termination of employees and withholding/deduction of salaries of IT/ITES/BPO/KPO employees by the employers during Covid-19 lock down. Thus now the Hon’ble Supreme Court will rule not only on validity of various orders but will also rule if the employees of IT sector are covered. It will be interesting as to how Supreme Court will rule on this. In my opinion, Hon’ble Supreme Court is unlikely to interfere and at best can direct that the employers would be bound by the contract of employment and would be bound to pay salary for the Notice period where ever provided in the contract of Employment at the time of termination. In my opinion Supreme Court is unlikely to alter the existing terms of the contract employment in respect of such employees. The fundamental principle of law is that Courts are not to write a contract between the parties. However, in this era of crisis, Supreme Court is called upon to balance the equities between employer and employee. It would be interesting to see as to how the Apex court will deal with the situation in the light of position of law.

How to maintain is a difficult question to answer. The employers got to adopt a humanitarian approach and employee got to realise the fact of no cash flows are happening and the employer is in a difficult situation. A consensual approach where the employee agrees for deduction and employer is taking a humanitarian approach while deciding minimum salary cut will help build strong relations between employer and employee. Further, where an establishment has surplus and sufficient cash balances, in all fairness they should not be resorting to Salary cut. Even the employers announcing salary cut, should ensure each of the employee that in the event of business doing well in future months’ post lifting of lock down all deductions shall be restored is necessary in this time of global crisis.