Employment in India is divided into two sections, the labour sector and the
employment sector. This divide comes from the definition of Workman' in the
Industrial Disputes Act. The result of making such a definition and its
connection to the definition of factory
lead to the specific conundrum, where
a majority of the labour law statutes in India don't apply to a large section of
employees in India.
This paper focusses on that part of the Indian workforce in
the organized sector that is dependent on employment contracts for their
continued relationship with their employee. Specifically, this paper wants to
discuss this relationship between employer and employee in the specific context
of the current pandemic and the lockdown. It is well known that employers have
been cutting down on their workforce in light of dwindling finances and
prospects for recovery for the economy.
The government has swooped in and has
attempted to remedy the situation by instituting nodal offices to the labour
departments that will receive complaints about unfair and unethical termination
In light of the pandemic, the government has further sent out advisories by both
the MHA and Labour departments. These advisories target this specific group of
unprotected employees. At the same time, the government itself cannot do much in
terms of interim protection, it has exhorted companies to refrain from sacking
employees en-masse, and further to not exacerbate the situations that might
cause employees to resign.
The respective states have passed their own
notifications mandating that employees shall be paid their wages as usual, and
employers shall be proceeded against under the Disaster Management Act, if they
indulge in large scale retrenchment. This comes from the fact that the
notifications of the government after the lockdown had been instituted have all
been issued in the strength of the Disaster Management Act. For that reason,
this paper will consider conventional cases of termination of employment of
contract-based employees, and answer the thesis from that perspective.
It is important to note that even though the primary reason why employees are
being removed is the Coronavirus and ensuing lockdown, companies are not
utilizing any new means and justifications to lay off the employees, it is still
being done through the contractual limitations and provisions already made
available and notified to both parties to the employment contract.
The government has made further provisions of the payment of wages to workmen and
their termination among other things:
These measures are welcome, and necessary
respite in light of the possibility and potential of misuse of the contractual
relationship that employers share with their employees. The reason why these
measures have been taken is that employers have a far greater say and power in
the negotiations for deciding the terms and conditions of the contract that is
agreed upon between the parties at the time. This paper wants to explore the
options the employer has in terms of his termination, and if at all, there are
remedies that can be pursued.
The At-Will Theory of Employment
The fundamental principle of contract-based employment is the understanding that
it is not contractual employment as defined in the Contract Workers Act. This
paper only deals with the peculiar situation of employer/employee relationships
thatare pre-determined through a contractual agreement.
In general, these
contracts already contain the conditions of employment, and there is little left
for speculation, this includes even the conditions for termination of
employment. Most contracts, and interpretations of these contracts are
constructed around the at will' theory of employment.
This theory propagates
that the employer is free to determine the role of the employee at will, and
this has been used as a justification in situations where employees have been
fired despite the lack of any apparent misgivings.
This at will
theory of interpretation of employment contracts is popular in
India, albeit with some modifications to suit the overall policy of employment
laws. In order to understand this at will' principle, let us look at the case of
DeMasse v ITT Corp
.194 Ariz. 500in this case the company had additional rules
of conduct guidelines in the employee handbook and when one of the employees
sued the company for wrongful termination, the company referred to the employee
handbook and argued that since some conditions of employer/ employee
relationship cannot be pre-determined, it is necessary that the at will
principle should be extended to provisions that are determined after the
conclusion of the original contract.
This means that the employer hasthe
absolute power to amend and modify the terms of employment (and therefore the
termination) at any time during the pendency of the employment, provided that
due notice has been given (this distinction was made in Gower v North Sound
957 P.2d 811 Wash. Ct. App.1998).
In India, the treatment of employment is
somewhat similar. Before moving on to understand the precedent of the
contractual relationship between parties, one needs to bear in mind that during
the current pandemic, the government has put out particular guidelines which
mandate that wrongful and excessive firing is not permissible, and in the same
notification, companies were instructed on the accruing penalties in the event
of either terminating employment or making detrimental changes to the
designation of the employee during the incidence of the pandemic. It is
important to note that there is still no protection or standardized dispute
resolution for employee disputes, neither is there a standard statute that
employees can make claims under.
The Shops and Commercial Establishments Act is
the best point of reference to protecting the rights of private employees, most
states have their personal Shops, and Commercial Establishments Act, the general
understanding from perusing the different state-specific acts is that there is
no limitation on the grounds for termination of employment, rather merely a
limitation on the procedure. In most states, more likely than not, employees
cannot be terminated without a 30-day notice if they have served more than 3
months, and if they served less, they are entitled merely to a 14-day notice.
These acts make reference to wrongful termination in the context that the
procedures such as payment of severance bond, due notice period (in Tamil Nadu
and Karnataka there is no time specified for notice of termination, what is
mentioned is just a reasonable notice period). These acts leave the grounds of
termination up to the specific employer and in the event that such termination
is based on a fundamental breach of contract, even that notice period is subject
Precedent and Treatment of Employment Contracts by SC and High Courts
In this light, this paper wants to take a look at a few cases that demonstrate
the relationship between a contract-based employee and his employer. The best
example is the Neha Dhar v National Airways Company(2011) 1 Cal, Lt. 284 case,
this was a blatant case of arbitrary termination.
The petitioner, in this case,
was fired from her position as air hostess because she was overweight
a matter of contention as the petitioner argues on the basis of Article 14
against discrimination on the basis for her physical condition. Upon
examination, the court held that the employment contract that she signed at the
time of joining required a minimum and maximum weight restriction.
In that case,
it was decided that despite the nature of the terms of employment, due to the
mutual nature of an employment contract, these conditions once accepted by
showing of assent by the employee couldn't be reneged unilaterally by the
A similar example can be seen in Ramneet Singh Chahal v Oracle Ltd.
essential claim of the terminated employee was a request to reinstatement to its
previous position upon establishing that his termination was motivated by
illegal motes. The court on the strength of previous Supreme Court decision in
Shetty v Bharat Nidhi Ltd
. AIR 1958 SC 12stated that a claim of reinstatement
was not statutorily provided for.
The best remedy a private employee can hope
for in action against his employer is one for payment of back-dated-wages and a
declaration that the termination is illegal in nature. To put in simpler terms,
as held in Binny Ltd. And Ors v. Sadashivnan and Ors.
(2005) 6 SCC 257.
principles of administrative laws do not apply to private employment, in that
case, the determinate fact in issue was whether the employees would be workmen
and in the event, they weren't due to a recent change in designation, whether
the same principles of industrial and administrative law applied to them. The
main takeaway from this case is that the determinate factor in applicability of
the at will' principle depends more on the tasks fulfilled by the employee
rather than the official designation.
Further, in the case of Shri Satya Narayan Garg v DCM Ltd.
(2012) 127 Drj 216 It
was held on the strength of mitigation of damages, and the manner in which the
Supreme Court interpreted the case, employees cannot claim compensation for an
indefinite period after their termination, and in situations where compensation
for wrongful termination is claimed, the expectation is that an employee will
seek out alternative employment in the meantime.
This case is a reference for
the quantum of compensation for a servant upon the termination of his services.
The court held that the compensation should extend only to such limited
period as the illegal termination has affected the employee.
A similar decision was rendered in the case of GE Transportation v Shri Tarun
(2012) 190 DLT 195, here the court held that since the employee wasn't
governed by the Industrial dispute act, and that the specific relief act didn't
provide for specific performance of a determinable contract, the agreed-upon
period of one month's notice shall validly terminate the employment and no
compensation for the period that the petitioner was disabled from the
Further in the discussion on grounds for termination, reference is made to Air
India Corporation v VA Rebellow
1972 AIR 1343where it was held that in order for
an employment contract to be terminated, a lack of confidence in an employee is
sufficient grounds. In this specific case, the company stated that since the
petitioners' job was to deal with the air hostesses and act in confidence, the
aspect of confidence of the management in his capacity is important. Despite the
arbitrary nature of this termination, it shall hold.
Employers and Covid-19 No
The Coronavirus outbreak has led to numerous problems in the country. The chain
of demand and supply is disturbed not only in the country but across the world.
Though work from is one of the thing, being suggested by most of the companies,
there are sectors where work from is not feasible as it includes fieldwork,
manufacturing units etc. Certain sectors are having a hard time opting for work
from home culture. This includes the banking sector or any sector where data to
be shared is highly confidential and needs to be protected.
All this is obvious to create a huge impact on the business and the job of the
employees. Therefore, there arises a need to safeguard the interest of such
employees so that they can feed themselves and their families, in these hard
Below are a few reasons that employers are listing while terminating an employee
during the pandemic:
- Lack of projects and work available to the employer himself.
- No access to financial supports due to lack of work and lack of investors.
- Work from home of remote work is not possible.
- If an employer and employee have not been able to agree to alternative working
- Consistency of work has been lowered relatively.
- Frustration of contract grounds wherein the employer would be unable to
determine with any certainty how they may be able to resume operations.
- Violation of confidential provisions.
- Breach of employment contract.
Employees and Covid-19
The country has shifted to digitalization due to the sudden outbreak of
Coronavirus in the country. It is hard to believe, but its been two months, that
people are locked inside their houses and non-essential offices are shut. Most
of the companies, employees have been asked to work from home so that that their
work is not stopped, and income can be generated. The question which arises
during this situation is that what are the rights of the employees under such
Remedies available to the employees
For an employee who falls under the category of a workman', their conditions of
service are governed by the Industrial Dispute Act, 1947 (Act'). Section 2A of
the Act provides that dismissal of an individual workman will be deemed to be an
- The above dispute can be settled by way of adjudication or by conciliation, and
in case the matter is settled by conciliation, the dispute comes to an end. In
case the dispute is not settled, the dispute is referred to adjudication.
- When an employee is terminated who is a non-workman, his terms and conditions of
service are governed by the letter of appointment or employment contract,
provided at the joining date, issued by the employer and the Indian Contract
Act, 1872 and the State-Specific Shops and Establishment Legislations as well as
the various orders that have been issued by various departments of central and
state governments during the lockdown. A non-workman has the right to approach
the civil court and/or the court designated under the Shops and Establishments
legislation seeking payment of any unpaid dues and/or damages for wrongful
termination if the termination was against the terms agreed by the employer.
- During the nationwide lockdown, the companies can ask the employees to work from
home, and for this, the employee would be entitled to full salaries.
- Talking about the payments to employees, the government on March 21, 2020,
issued a circular which provides that even if a work unit is non-functional due
to the virus, the employers are entitled to consider the employees as working.
The various state government has also issued notices that such employees should
- The Maharashtra government also mentioned that no employer can deduct salaries
or terminate the employee on the basis of this pandemic. It especially implies
on the contract or casual workers.
- The Ministry of home affairs issued a circular on March 29, 2020, which informed
the state governments and ministries to ensure that the employers of all the
industries, shops, companies, etc. pay full wages to the employees without any
deductions, during the lockdown.
- Employers cannot reduce the working hours, to get a reason to reduce the
salaries of the employees to control the loss of the business. Moreover, the
employers are not entitled to reduce the workforce to safeguard the business
from the impact of Covid-19. Both such acts are prohibited by the notification
issued by the Ministry of Home Affairs on 29th March 2020.
- Employers should make sure that the working hours of the employees are not
exceeded, then their actual working hours. Since there is no statute to govern
the concept of work from home therefore general employment laws will be
- However, these are mere guidelines and not enforceable in the court of law. The
employee can send a formal notice to the company explaining the unfair
dismissal, if the issue is not settled, then it can be taken to court.
- The employee has the right to file a case against the employer for unfair
dismissal in the Labour Court.
- Furthermore, the principles of natural justice are still applicable to an
employee (Delhi Transport Corpn. V DTC Mazdoor Sabha1991 AIE 101), which shall
allow him to be heard and be given due representation during the termination
process. Though even in this regard, most companies prohibit the presence of
lawyers during the internal termination hearings. Terminated employees are also
permitted to raise a claim in the absolute if due notice or time has not been
provided to him to formulate a response and justification for the alleged
These cases are a sample of the many instances where private employees governing
through a contract are able to exert absolute control over the termination of
work of a private employee. The states had the option to legislate on the status
of such employees when making their respective amendments to the state Shops and
Commercial Establishment Acts. However, such changes were only made in the
limited scope of procedure of termination rather than any governing principles
for the substantial element thereof. One thing needs to be kept in mind, is that
an employee has the absolute right to pursue a legal remedy in the instance of
wrongful termination; and the employer is mandated through contract law to
provide for a dispute resolution mechanism.
Despite all this, the pursuits of an employee wrongfully terminated fall short
of reinstatement. As we have seen in precedent above discussed, employment
contracts can determine the outcome of a claim made for wrongful employment, and
since they are determinate contracts, an employee thus terminated has the
capacity to initiate a proceeding in a forum of the mutual choosing, but will
never be able to enjoy the full gamut of protection and remedy a workman is
The author of this blog/Article is Kishan Dutt Kalaskar, a Retired Judge and
practising advocate having an experience of 35+ years in handling different
legal matters. He has prepared and got published Head Notes for more than 10,000
Judgments of the Supreme Court and High Courts in different Law Journals. From
his experience he wants to share this beneficial information for the individuals
having any issues with respect to their related matters.