TERMINATION OF SERVICE

TERMINATION OF SERVICEIssues concerning the matter of termination of

employment1/ Human work is not a commodity to be bought & sold as fruits or vegetables in the bazaar, nor is a worker a labor tool to be thrown away when less useful. Work is for the human person, not the human person for work. Labour has priority over capital. People come first. 2/ A worker after yrs of service acquires, as it were, “property rights” to the job; it is his or hers in a way that it is nobody else’s, in somewhat the same way as a farmer acquires rights to a field after cultivating it for many years.3/ Consequently, Labour Courts which are not courts of law, but courts of social justice, have remedies which surpass those of ordinary civil courts. Specifically, they can reinstate workmen whose services have been wrongly terminated.

How an Employee’s service is terminated?

Broadly divided into three classes:

1/ Termination by the employer

2/ Termination by the employee

3/ Automatic termination

Types of Termination Of Service Termination By Employeer Disciplinary -Dismissal -Discharge for Misconduct On grounds of continued ill-health Retrenchment -Surplus -Expiry of contract where post

remains -Discharge on transfer of

undertaking -Discharge on closure of

undertaking Simple discharge : Rarely

resorted to today

Types of Termination Of Service, contd… Termination By

Employee

Resignation

Voluntary Retirement

Automatic Termination

Compulsory retirement or superannuation

Where Standing Orders say automatic (sometimes)

Termination by Employer

How an employee’s service be terminated by an employer?

Ans. All forms of termination at the initiative of the employer are retrenchment except for the following three:

1/ Disciplinary termination2/ Termination on the ground of

continued ill-health3/ termination on reaching the

age of superannuation

Since Most Termination are Retrenchment, what’s Retrenchment ?

Termination of a workman for any reason whatsoever, otherwise that as a punishment inflicted by way of disciplinary action but doesn’t include

a/ Voluntary retirement of the workmen, or

b/ Retirement of the workmen on reaching the age of superannuation if the contract of employment between the employer & the workman concerned contains a stipulation in that behalf; or

c/ Termination of the service of a workman on the ground of continued ill-health

According to defn above, only workmen can be retrenched; Is it correct? In the sense that only workmen get retrenchment compensation

according to Industrial Disputes Act 1947, yes. There ‘workman’ excludes both managerial & administrative personnel drawing more than Rs 2500 pm but it includes supervisory personnel drawing less than Rs 2500 and all non supervisory personnel, whatever their pay. Only ‘workmen’ are eligible for retrenchment compensation and that under certain conditions.

What are those conditions?

There are two conditions:

1/ The employee must be a “workmen”

2/ He or she must have put in a year of continuous service or a certain number of days (240) in the previous twelve months

Steps required for valid retrenchment ? Broadly 3 steps – 1/ Notice or notice pay (Amount of time differs according to no of

workmen in the organization)

2/ Retrenchment compensation must be paid at the rate of 15 days average pay for every completed year of service or any part thereof in excess of six months

3/ Government permission is required in some cases, notification only in others.

Retrenchment workmen must be paid their wages within two working days from the date of retrenchment. Failure to do this can invalidate the process.

DISCIPLINARY TERMINATION

Q- What is disciplinary termination by an employer called?Soln- It is called either discharge or dismissal.

Q- What is the diff between discharge & dismissal?Soln-• Dismissal is always termination of service by an employer by way

of penalty for a misconduct. It is the most severe of penalties, a stigma, a very serious mark against the employee, and a definite handicap in obtaining further employment.

• Discharge however may or may not be by way of penalty. Two types of discharge i/ Discharge for misconduct ii/ Discharge not for misconduct

Dismissal and discharge for misconduct

Q- When may an employer dismiss an employee or discharge him by way of penalty?

Soln- When it has been shown through a fair & proper enquiry that the workmen has committed a serious misconduct.

Q- Must notice or pay given if a workmen is guilty of misconduct?Soln- If the worker is dismissed, NO ; if he is discharged, YES .

Q- Is a dismissed worker entitled to gratuity?Soln- Gratuity schemes now awarded do not deprive dismissed

workmen of gratuity. If, however, the misconduct has caused financial loss to the employer , the employer may deduct the amount so lost from the gratuity

RETRENCHMENT

Q- When may an employer retrench workmen?Soln- A retrenched worker should be given one month’s notice or pay in lieu

of notice, compensation at the rate of 15 day’s average pay for every completed year of continuous service. The employer, moreover must have good and sufficient reasons for reducing the no of his employees and must follow the rule, ‘Last come, First go.' This act also gives conditions for the discharge of workmen upon transfer or closure of an undertaking.

Q- When may an employer be discharged on the ground of continued ill-heath?

Soln- Here a regular enquiry must be held into the heath of the workmen, to determine whether he or she is physically capable of performing their duties. Obviously, fairness demands consideration of the length of the service, length of illness, and the necessity of a permanent replacement.

Q- A company had the following standing order: “The company has at all times the general right to discharge an employee from services not only for proved misconduct but also when the employer has lost confidence in the employee.” An employee was discharged with removing certain articles from the stores. In the enquiry the charge was established. Instead of dismissing the worker, the company served the worker with a simple discharge notice. Was this legitimate?

Soln- Previously this type of discharge, if it was not done in bad faith and not a question of victimization, was held to be legitimate but recent rulings of the supreme court now hold that such a discharge is stigmatic, i.e., it casts a bad light on the employee .Consequently today, the employer must go through the regular disciplinary process ie, issuing of charge sheet, etc. Only after such a procedure in accordance with principles of natural justice can action be taken against the employees

Q- Is it becoming very difficult for an employer to take disciplinary action against the employee. Is that right?

Soln- It is difficult but it should be difficult since to lose one’s employment is such a serious event and consequently protection against arbitrary and unfair terminations so necessary. On the other hand, it doesn’t mean that action cant be taken where it should. It merely means very close attention to the principles of natural justice.

TERMINATION BY THE EMPLOYEE

Q- How may a contract of service be terminated by an employee?Ans- By resignation or by voluntary retirement.

Q- When does a resignation become effective?Ans- Generally speaking a resignation becomes effective only when it is

accepted by the employer. Consequently, a resignation letter may be withdrawn if it has not been accepted. When a resignation is given with the employee specifying that it is with immediate effect, it is effective from the date it is accepted. Where, an employee, however specifies that it is with effect from a future date, eg 3 months, an employee remains in service even though the employer may have expressed acceptance of it, and if the employee before that date changes his or her mind, the resignation is not effective.

Q- What if a workmen is forced to resign by threat or by intimidation?Ans- A resignation must be freely submitted. Where it is forced by threat or

intimidation, it amounts to wrongful dismissal.

Automatic Termination

Q- What is automatic termination of services?

Ans- Such termination of service which occurs through compulsory retirement, expiry of contract, or in some few cases where the standing orders say termination of services will occur automatically. They are not termination because of a misconduct, nor are they termination because which depend upon the initiative of the employer or employee. The termination for the most part depends merely upon the passage of time, and a positive act on the part of the employer or employee is not necessary. Furthermore, unlike other forms of discharge, there is no need for a month’s notice or pay in lieu of service.

Q- When a worker must retire?Ans- When he reaches retirement age specified in the Standing orders.

Q- What if there is no retirement age specified in the Standing orders?Ans- The company may not retire a workman in such cases on the grounds

of superannuation since this was not a term of employment when the workman was hired.

Q-If no retirement age is specified, will not a dispute arise if a workman is retired?

Ans-Most likely, and if the matter comes before an Industrial Tribunal, the latter will consider in its award the following factors: the nature of the work, the wage structure, retirement and other benefits, the climate of the area, the practice in the area, and in the industry, and the past practice of the company .

Q- When a scheme of compulsory retirement is fixed by an award, does it bind only future employees or all workman?

Ans- The award binds all workman but usually the age limit for the pre-award employees is fixed more liberally.

Q- A company revised its rules, and in so doing, fixed retirement age at 60. Will the employees who entered before the company fixed this retirement age be bound by the retirement age fixed at this later date?

Ans- Only, if it can be shown that they accepted these revised rules as conditions of their employment. Sixty years, however seems reasonable.

Q- What is the retirement age today?Ans- There is no universally accepted standard or limit in this regard. Many establishments are fixing the age of compulsory retirement at 60.The trend to higher ages for compulsory has developed with increase in average life expectancy. Of course when pension schemes are in force, it is natural to expect lower compulsory retirement ages.

Q- What do you mean by automatic termination because of the expiry of a contract?Ans- That where a contract of service exists between a workman as an employer for a specific period, the contract expires at the end of that period.

PENALTY & TERMINATION SERVICE QUIZ (T/F)

1. Willful slowdown is a misconduct for which a worker can be dismissed ?

2. Dismissal is a penalty for some misconduct ?3. The bad name that is attached to the word ‘dismissal’, is not

attached to the word ‘discharge’ ?4. A strike automatically puts an end to the employer-employee

relationship ?5. Discharge is always a penalty ?6. Where the standing orders prescribe absence without leave for

more than ten days as an item incurring automatic termination, a worker may be terminated without enquiry ?

7. A worker can be dismissed or discharged by way of penalty on grounds of long and continued illness ?

8. Retrenchment is a possible penalty for a misconduct ?9. Compulsory retirement is a penalty for a misconduct ?10. A charge sheet is a penalty ?11. No worker may be penalized unless the principles of natural

justice have been followed ?