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 of employees.
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 that are 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 ofDeMasse 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 has the 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 Bank957 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 to waiver.
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’ this was 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 employee.
A similar example can be seen in Ramneet Singh Chahal v Oracle Ltd.where the 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 S.K. 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 inaction 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 257The general 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 inapplicability 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 Bhargava(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 performance.
Further in the discussion on grounds for termination, reference is made to Air India Corporation v VA Rebellow1972 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 times.
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 arrangements.
- 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 the employment contract.
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 circumstances?
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 industrial dispute.
- 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 be paid.
- 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 applicable.
- 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 wrongful conduct.
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 privy to.