COVID-19 and Termination of Employment: A Labour Law Perspective

 

Animay Singh
Simpliance COE

Biography

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In light of the advisories issued by the Ministry of Labour and Employment that clearly request employers to refrain from terminating employees or reducing their wages, the question arises as to whether the same would constitute illegal/wrongful termination of employment.Generally speaking, wrongful termination is when an employee is terminated without sufficient cause and it is one of the most common types of employment disputes.

COVID-19 and Termination of Employment: A Labour Law Perspective

There exist several remedies for an employee who has been laid off in this manner in the form of provisions under the Industrial Disputes Act, 1947, the Workmen’s Compensation Act, 1923 and relevant state Shops and Establishments Acts. Additionally, the avenue of tortious action is also available where the employee incurs any personal injury due to the termination.

This might raise the question of whether termination of employment during the COVID-19 outbreak period or as a consequence of the same, constitutes unlawful termination? There exist arguments on both sides with regards to the above question, and we aim to explore these through this article.

There is the argument that any termination due to downsizing prompted by cash flow problems for example or other governance-related issues can be justified on the grounds of COVID-19 being a force majeure event. The contention is that the outbreak of the virus is an unforeseen event, similar to an act of God under the Indian Contract Act, 1872 and thus any action taken as a consequence of the same is unintentional and prompted by circumstantial necessities. There is also a great deal of doubt as to the nature of the Ministry’s advisory, more specifically as to whether the same is binding on private establishments? 

The intention seems to be to provide flexibility to companies so they are able to formulate their own policies to deal with the challenges posed by the economic side-effects of this crisis.However, the same is being misused by several establishments that are terminating employment en masse. 

The counterargument to the above stems from the notion that any termination of employment without cause is wrongful irrespective of the factual circumstances surrounding the same. Downsizing is often a reactive action that is implemented during drastic economic downturns, but whether it constitutes a legitimate cause for termination depends on certain conditions.Those being whether the procedural requirements such as notice and compensation have been complied with. Another argument for considering termination to be illegal is more economic in nature than legal. That is, if termination in light of downsizing becomes the norm it could lead to a ripple effect that creates large scale unemployment, which is why there exists the argument that the government should confine termination during this period to specific causes.

Thus, from the above, we can see that there exist a multitude of questions with regards to termination as a consequence or during the coronavirus crisis.If you as an employer/employee have any inputs, comments or queries with regards to the same, please drop a comment in the box below.

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58 thoughts on “COVID-19 and Termination of Employment: A Labour Law Perspective”

  1. Sacking employee will not resolve the problem. Yes this is tough time but all employees have served employers during crisis. Most of them put their life on risk and work for long hours. The employer has to extend support by paying the full wages during this lockdown period which will increase the faith. However this is a temporary situation.

    1. I am working in an LTD company and they are saying to continue without salary or take full and final settlement.
      In this situation what can I do ?

      I searched for some support page but dint find any helpful so if u have something wch can help.

      Kindly let me know

      1. You may approach the HR personnel in your company to take a fully informed decision about your options. We may have to look at both sides before formulating a more detailed legal opinion. You may contact us at sales@simpliance.in for the same.

  2. All customer billable and expertise oriented jobs ought to remain untouched. There could be opportunistic moves to shake up the management or shut down sick units.

  3. Dear Sir,

    In most of the advisory notifications we could interpret govt is protecting Contract Labour and minimum wages earners.
    So can we presume these notifications will not limit a private organisation to reduce wages of senior management employees, as they were not treated as WORKMAN being supervisor and above grades as per I.D.Act.

    Also many companies had already released pay cuts Information in press meets more specifically by airline operators,
    Amidst of all few state Govt. Like telangana and Maharashtra were also likely to opt for reduction in pay..

    So can a private company specifically an IT company also go for such reduction measures? Especially for senior /management employees? Will that not be treated as non compliances? Quoting the reason as loss of client projects billing in USD.

    Please advise and throw some light.

    1. Hi,

      According to the circular issued by the Ministry of Labour and Employment addressing all States/Union Territories, all employers are expected to refrain from terminating or reducing the wages of employees, irrespective of the nature of their employment. Hence in absence of any specific exemption the notification applies to all employees whether employed in private or public enterprises. You may reach us at sales@simpliance.in or +91 90080 00985 for detailed legal opinion/information.

      Thank you.

  4. I have been terminated from job due to covid19, as i was in sales deptt so employer said this corona will effect their business for one year or more.
    Please guide what I should do. I am only earner for family and kids.

    1. Hi,

      As per the current notifications issued by various central and state governments, the employers have been advised to not to terminate and not to deduct wages from any employee.

      You may approach the district administration in the state for assistance in this regard or call the helpline as provided by the state from labour department.

      There are detailed notifications available in our website on the page dedicated to COVID-19 notifications for further assistance.

      You may reach us at sales@simpliance.in or +91 90080 00985 for detailed legal opinion/information.

      Thank you.

  5. Dear team

    please confirm rule and act against payment salary to employee by firm, during Covid-19 Lockdown preiod from 24.03.2020 to 03.05.2020.

    Thanks

    1. Hi, in ordinary circumstances payment of wages to an employee is always governed by Payment of Wages Act, 1936 and the relevant Payment of Wages Rules of respective states. In the context of COVID-19 there are two relevant notifications that deal with your query:-
      1. D.O. No.M-11011/08/2020-Media which is an advisory issued by the Ministry of Labour and Employment advising employees not to terminate the employment or reduce wages of employees

      2. Order No. 40-3/2020-DM-I(A) issued by the Ministry of Home Affairs in exercise of its powers under Section-10(2)(l) of the Disaster Management Act, 2005 directing all employers whether in industries or shops and commercial establishments to make payment of wages on the due date without any deductions for the period their establishments are under lockdown

      While the first is merely advisory in nature, the second is binding and violation of the same shall entail action under the Disaster Management Act, 2005.

      The notifications are available on our website through the following link https://www.simpliance.in/employment-law-business-risk-management-covid-19-corona-simpliance. You may reach us at sales@simpliance.in or +91 90080 00985 for detailed legal opinion/information.

  6. The government order has been passed under the Epidemic Diseases Act, 1897 and The Disaster Management Act, 2005 read with the provisions of the Indian Penal Code 1860.
    The Hon’ble Supreme Court by its order dated 31 March 2020 in Writ Petition No. 468 of 2020 has prima facie held that these orders are valid. It is however pertinent to mention that the notifications issued by the Government was not a subject matter of challenge in the present Writ Petition. The issue in question was implementation of the notifications issued by the Government. It has also held that the aforementioned Acts are special Acts and would prevail over The Industrial Disputes Act, 1947 or the Standing Orders.
    Thus, in view of the aforementioned, it is definitely appears that the employers are liable to pay the wages to the workmen without deduction and on the due date owing to the directions of the Central Government under Disaster Management Act, 2005 as the aforementioned Act has an overriding effect and punitive in nature. Defaulting employer will be liable for penalties [as decided by the Court] and imprisonment up to 6 months.
    On humanitarian grounds, there can be no two opinions about the need to pay wages to employees.
    In common law, an employer could lay off employees without payment of wages. To
    remedy such a situation, provisions were introduced in the Industrial Disputes Act, for
    payment of compensation in the event of a lay-off.
    The legislature in its wisdom introduced a term called “lay off” under the ID Act and
    mandated payment of compensation in certain circumstances and prohibited lay off in
    certain circumstances.
    Section 2 (kkk) defines the term “Lay off”. As per the definition, if an employer is unable to provide employment to an employee due to a natural calamity or for any other connected reason, then the same would fall within the definition of “Lay off”.
    Section 25C of the ID Act mandates employers laying off workmen to pay a compensation equivalent to 50 per cent of the wages. Section 25M of the ID Act requires an industrial establishment with more than 100 workmen to seek prior permission. However, such permission is not mandated if the lay-off is due to a natural calamity.
    The Industrial Disputes Act 1947 is a Special Law which mandates payment of lay-off
    compensation in the event of a natural calamity or other connected reasons. The liability in this Special Law which is specific has restricted the payment of 50 per cent of wages as compensation.
    We are awaiting clarification/orders from the government on this option of lay-off.
    However, till the said orders are in force there cannot be any deduction or reduction in
    wages. There is a specific direction that employees have to be marked present and hence there is no question of adjustment of any leave.
    There cannot be any action of layoff on top of the order of lockdown till 3rd May
    2020. In other words, the employees cannot be laid off during the period of
    lockdown. The services of the employees also cannot be terminated. Employer shall
    also make payment to the contract labour even if they do not work.
    Please therefore note that whatever steps have to be taken shall have to be taken after
    lifting of the lock down that is after 3rd May 2020.
    There is no clarification as to what procedure is to be followed if funds are not available to pay the salary. At the most, employer can pay salary advance to the extent possible and make the balance payment when the funds become available.
    There cannot be any salary reduction during the period of lock down. However, company can defer salary increments and payment of performance-based incentives. State Labour Department has send notices to few companies in and around Pune as these companies has deducted salary and terminated services of the employees during lockdown period. On the similar lines Karnataka Government directed private and public sector companies not to sack employees or deduct their wages during lockdown period.Please note that the orders of the government are applicable to all employees irrespective of their grade and salary limit.

  7. Hi
    I work for a real estate company as a data analyst and I have been informed that my job is in risk as the company might downsize.
    If so is the issue as an employee what are the legal rights do I have and also is the employer entitled to pay any us any advance salary as we are being taken off work.
    Your suggestions would be highly appreciated.

    1. Hi Atraya, on the basis of your job description it is clear that the law governing the subject matter of your query is as follows:-

      1. Shops & Establishments Act applicable to your state provides that an employer must provide at least one months’ notice or pay in lieu thereof in case of termination of employment. If the same is not being complied with, it would be a violation of your legal right under the Act.

      2. Law governing your contract of employment, any stipulation/clause in the same relating to termination of employment or compensation that is not being complied with, gives rise to a cause of action in a civil suit.

      Hope this answers your query, please feel free to contact us for any clarifications at sales@simpliance.in

  8. Hi,
    Our firm is an e-commerce company in Gurgaon & we are working from home. One of our employee was already on leave without any approval from 5th March, 20. In march we paid him salary as per his working days & leave balance for 16 days. Now do we have to pay him full month salary in April in spite of he is not working from home? Kindly advise.

    Rgds,
    Monika

    1. An e-commerce company would be a ‘commercial establishment’ under Section-2(iv) of the Punjab Shops and Commercial Establishments Act, 1958. The same would be applicable to any contract of employment between your company and the employee you have mentioned in your query. With regards to payment of salary it is currently still mandatory to pay wages in your state, however owing to the circumstances you have described it would be best to constitute refer to internal policy to assess the individual’s performance before withholding wages. If it is found that he is not working for the requisite number of hours, the same could be grounds for a lawful termination of employment. It is important to note that the government advisories are limited to reduction/non-payment of wages on grounds of COVID-19, they do not apply in cases where there are clear grounds for termination of employment, as seen above.

      Hope this answers your question, feel free to reach out to us for any further queries/clarifications

  9. I work at Concentrix i had been on leave out of the state before the virus outbreak due to medical problems and recently on 25th of April my manager told me that i am being terminated. Is there something i can do about it because i spoke to him about it and told him i was helpless to return back as there was no option for me to travel back but he said that you are not an active employee now and there is no way you can get your job back. Please anyone if there is any way by which i can get my job back be it legally please help me with it.

  10. Hello sir.
    I work for a logistics form, with our warehouses Pan India. As understood from the government notification for the work force (Warehouse staff), no lay offs and salary reduction can be done till the time lockdown is being implemented.
    However, the cash inflow of the company has reduced drastically, as we are primarily dependent on revenue for customer. owing to which we need to look out for the alternatives with which we can support the warehouse work force, without lay offs. Kindly advice, what shall be the right steps to follow in this situation?

    1. Hi,
      There are numerous approaches you may employ, first you may consult the Government machinery with reference to MSME or SME for assistance through various schemes under the industry. Secondly, the government has also provided various measures such as ESI, PF exceptions, contributions paid by the government etc. you may avail of the same and refer to our COVID page for more details.
      The business decision may be made based on the current market conditions towards approaching the right stream of work (eg. E-commerce services). Rest we believe the management would be the best decision-maker to make the right decisions for the company.
      Feel free to contact us for any further clarifications.

  11. I am working for a logistics firm and i have been asked to resign forcefully and also my salary has been put on hold during the lockdown.

    Please suggest

    1. Please speak to your company HR with respect to the reason for termination and cite evidence on the government orders to the same for justification. We would need to understand both the sides to formulate an adequate remedy for your predicament. We recommend you speak to the HR before taking appropriate action.

  12. Hello Sir,

    I saw your article and it’s very useful. it would be great if you can give an answer to our question.

    We have started Pvt Ltd IT company at the start of 2020. We have hired few employees and right now all are doing work from home. One employee, we hired in mid of March and after a couple of days lockdown started. During this probation period he hasn’t performed well. During the evolution meeting, he left the meeting in between and told us that he doesn’t want to continue. Before the end of the day, he put the registration, and in the email mentioned that we have fired him. However, we haven’t fired him nor ask him to put the resignation. We sent an email that we haven’t fired you but need clarification on certain points. He again put the same allegation that we fired him in the middle of COVID-19 and asking for 2 months of salary to survive. As we haven’t seen his willingness to work in the company and we have accepted the resignation. Again he replied that you have to pay me a full month salary and other irrelevant content as well. We haven’t replied after that.

    We came to know that on the second day of his registration with us he started working with another company using our company assets (Laptop). On our regular salary date, we sent an email that your F&F (April half month salary as he worked only 15 days ) is ready and you can collect whenever you feel comfortable to come and finish the exit formalities and give company assets back to us. He replied that you are forcing me to give assets back during the lockdown and I will charge you for the same. You cannot stop my salary because of assets and Covid-19 and giving a threat to the company that he will go in a legal way.

    It clearly is shown that the employee is taking advantage of COVID-19. Please suggest us in that case how we can proceed to get company assets back. We are ready to pay F&F but we also need our assets back. Does government advisory cause create any problem for the employer in this case?

    1. As a company you may follow the procedure laid down in your corporate HR policy, on-boarding guidelines, probation period guidelines if any as well as appointment letter conditions etc. The due procedure as per corporate HR policy may be followed for employee not reporting to work by issuing show cause, warning letters and final disciplinary procedure as per the policy. Do note the above details are in reference to the above said information and we would need to understand both the sides to formulate an adequate remedy for actual predicament. You may write to us sales@simpliance.in for a detailed opinion for the same.

  13. Can a company terminate a doctor who is a permanent employee without any so cause and without any sufficient reason that too without giving any prior notice ???

    1. In the current situation, doctors come under the ‘Essential services’ category in treatment services. Hence if you are an employer please follow the due procedure as per law on any such action, as it may attract governmental action. If you are an employee you may seek justification on the reason for such action citing the above as a ground, to arrive at an amicable solution. For any further queries contact us In the current situation, Doctors come under the most Essential services category in treatment services. Hence if you are an employer please follow the due procedure as per law on any such action, as it may attract the purview of the government and if you are an employee you may seek justification on the reason for such action from the employer to arrive at the amicable solution. In the current situation, Doctors come under the most Essential services category in treatment services. Hence if you are an employer please follow the due procedure as per law on any such action, as it may attract the purview of the government and if you are an employee you may seek justification on the reason for such action from the employer to arrive at the amicable solution. For any further queries or a detailed legal opinion contact us at sales@simpliance.in

  14. Unfair labor practice – Forced to resignation.

    Hi Sir/Madam,
    I wrote below the short sequence of the event. Please scrutinize and kindly share your advice.
    • Employer legal team investigated the employee in the suspect of misconduct.
    • After hearing employee genuine claims and explanations Employer issued “SHOW CAUSE NOTICE” to prove not guilty and misconduct.
    • However, Employer has not responded anything to the explained show cause notice submitted by the Employee. In fact they overlooked instead to accept or deny or concur Importantly Employer not proved the misconduct.
    • Finally, HR communicated to the Employee citing “After due consideration the management decided to terminate the employment contract.”

    When employee asked “THE CAUSE FOR THE TERMINATION” management responded as in the employee offer letter the clause 14.1 under the Termination of Employment it says,

    “Your employment may be terminated by either party by giving one month’s written notice or payment of one-month salary instead of such notice period to other party. Employer holds the right to accept or deny payment instead of the said one-month notice”

    Along with this HR added(blackmailed) the employee that “he/she won’t get any reliving letters and cannot control on background verification if the employment is terminated by Employer.” (the same nowhere mentioned in the appointment letter). However, if the employee wants the proper conduct and experience certificate along with reliving orders then HR requested the employee to submit voluntary resignation immediately by not giving any chance to consult anyone. He just gave 5 mins to make the judgment.
    He also added on his own words
    “You should not bring anyone in the conversation. Also, at this end of the call I need to send you the termination letter, so you need to be in the call you shouldn’t hang up”

    Employee claim: Employer blackmailed for no fault of employee, In fact they forced the employee to submit resignation.

    Also, they retaliated for the whistleblower act for (Addressing business risk and threats).

    Reference:

    1. However as per “Industrial dispute Act, 1947-Ministry of labor” clause 150B point 1 says “retrenchment means the termination by the employer of the service of a workman for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action, but does not include”

    Also please check
    Article 150 2A.
    Ref: https://labour.gov.in/sites/default/files/THEINDUSTRIALDISPUTES_ACT1947_0.pdf

    2. Ref: https://knowledge.leglobal.org/wp-content/uploads/sites/2/LEGlobal-Employment-Law-Overview_India_2019-2020.pdf VIII. Termination of Employment Contracts.

    Kindly please check more similar book clauses and search exhaustively for all judgments in similar cases.

    .

  15. I work as COO for a reputed organisation in Telangana, which hired me to start up a new business line for them, an online travel agency, since Nov 2018. I started setting up the business and hired around 30 staff till date for various managerial positions and 3 interns, some of them even in early March 2020.
    we all were asked to work from home by HR from 23March and they paid us full salary of March. However, we were not paid any salary for April and were informed on phone that salary will be delayed till 7may. since then we have been following but no response until 20May when we got a call stating that project has been called off and settlement will be done 30May. HR also mentioned that as we are mostly managers and above, we are not entitled to demand any wages for April and May. we are asking HR to give us details in writing but they are not. what should we do as livelihood of 30 employees, about 24 migrated to Hyderabad to work.

  16. At the outset, thank you for this article and thanks to the people who have been kind in responding to people queries. I, received a notice from my employer today regarding termination of my services from the company w.e.f May 19, 2020. Reason as cited in the letter: “unauthorised absence from work starting March 24, 2020 to the day of termination”, which is precisely when the lockdown had started in the country. We were asked by the employer not to attend work and Early in April we received an email asking us to report to work, when the entire nation was under lockdown and no means of transport was available. I, replied to them over email about the situation and inability to report t work, post which there was no response and also follow ups with HR & Payroll for other reasons as well yielded no result. As well during the leave of absence I haven’t received a single penny from office, including the arrears they owe me. Is there anything that can be done in my case? Your kind advice is greatly appreciated.

  17. I’m working in healthcare company, due to covid-19.We lost our project, management decided to resign employees without prior notice.They hold our salary and placed as ideal and telling us to resign. They are offering one month salary compensation.How employees can survive with one month salary compensation that too not given on time. We are forced to resign our job. Last month itself no intimation we got only 20% of our salary.what to do pls advice is?

  18. Hi, Very nice blog, It gives very useful information regarding recruitment. People who are searching for these type of services it is very useful thanks for sharing.

  19. Dear Simpliance team,

    I am working in telecom company and My company asked me to put resign Otherwise they will terminate.
    My boss is expired in recent times. So they are giving feedback to me “your boss suggested your name for termination, so we are doing that”
    What to do in this scenario. ?

    Thanks
    Saurabh

  20. Sir,
    I was been terminated from the Organisation. I was working as a third party vendor as A IT Engineer.
    I left to my native place from delhi on 18th of may.
    They terminated without intimating me with a call that they have put a mail and please revert on it. After that i request that i will work from home.
    Client told they have not any option for work from home.
    Now, I need suggestion what should be the ideal words to response.
    Can termination be the option at this time ?

  21. Very simple ,if employer is terminate any employee in this covid 19 epidemic period of time.The govt should take immediate action against the employer and stop his benefits which they are taking from DIC and also cancel his factory licences this termination is automatically closed forever.and also give job security to employees.
    The Minister of home affairs should make a law immediately.to save the employment of emploees in the country.

  22. Thank you for sharing such great information.
    It has help me in finding out more detail about termination of employment

  23. “Thank you for sharing such great information.
    It has help me in finding out more detail about termination

  24. I am working in an MNC pvt Ltd company as sales manager and they are saying to take 3 months salary or termination due to covid-19 with take full and final settlement.

    In this situation what can I do ?

    I searched for some support pages but didn’t find any helpful so if you have something which can help.

    and company asked me resignation before 30 july 2020

    Kindly let me know

  25. My company in Bangalore has sacked me during covid time , But they made mutual sign agreement as showing mutual separation . Due to the CHinese border issue there was lot of loss in business to my company

    1. You may approach the HR personnel in your company to take a fully informed decision about your options. We may have to look at both sides before formulating a more detailed legal opinion. You may contact us in the comments for any further clarifications

  26. I am working as a cs in Pvt Ltd company. On 17 August 2020 company Ca call me and asking a Resignation when i am asking about Notice Period then on next day they send ma a termination notice. This is legal if not what action should i take.

    1. We would have to know further facts of the case to comment on your case, however on a prima facie basis we would recommend you consult your HR department regarding the same. Refer to your employment contract to find out the notice period you are entitled to and seek a justification for why the same was not observed. You can refer to our blog post on the same at https://www.simpliance.in/blog/covid19-unlawful-termination/, it outlines the various rights and options an employee in your situation has at their disposal.

  27. Hi sir,

    what to do if the company ends the work from home and callled me to ahmedabad office, hence i said its highly impossible to travel now so i can’t able to come their so they are asking me to resign the job .

    so please suggests me if i will resigned means what the company has to give me according to the govt rules .

    1. Hi, since we are in Unlock 4.0 businesses have resumed operations and according to the Central guidelines offices have been permitted to resume operations with staggered hours of work. Therefore your employer is entitled to request your presence at the workplace. With regards to resignation you would be required to serve your notice period as stipulated in your employment contract and would be entitled to your salary during the said period.

  28. I am working in an IT company.HR is asking me to resign.Otherwise they will initiate termination.Do they have right to terminate an employee in this covid situation.?

  29. My company director instructed me & want my resignation so I give him before 2 month s.But in this pandemic they reduce my salary by 40%,So I had claimed in resignation.But till from 2months resignation not yet accept ed & not given balance claims.

    My July salary paid in September & email me this is full & final .

    But how was they said full & final.
    April,May,June & july 40% salary they need to be pay me.

    Kindly suggest

  30. Dear Concern, I m working with PWD as computer operator…..I lost my Job due to COVID -19. I was complaint in labour office but there is no satisfactory answer. He was told me that, “we are not take any action for PWD”

  31. Hi,

    It is a great article. As you have said companies are formulating their own policies, my company is downsizing & they have formulated an unwritten (verbal) policy to pay only 15 days notice pay. they have forcefully taken resignation from some employees and issued termination letter to some employees who did not resign & only paying 15 days salary as notice pay instead of 30 days. they discontinued my services in September. can it be contested in the labor court? I have a proper letter and all records and I was in a senior position.
    Also they threaten all employees that they will give negative feedback.

    1. It is also important that you refer to your respective State’s Shops and Establishments Act or your contract of employment to ascertain the number of days of notice you are entitled to

  32. If your terminated,Is the employer should pay termination fee for 3 months and should they give also 1 way ticket for there employee that was terminated.

  33. Hi My employer terminate only me with the fake reason of Covid 19 lack of work. So if I want to file petitions than with in how many days I file it. No page can shown exact period. Please inform me.

    1. Hi,
      The limitation period for filing a suit differs based on the Act you are filing it under, kindly specify the same for a precise answer

      Regards
      Animay

  34. A very wonderful article to read it’s been worth reading the blog really informative piece of information shared with us thanks

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