There is a notion or view that a contarct of employment is a law unto itself so far as the rights and obligations of the parties are concerned namely the employer and the employee.It is true but not entirely.The Indian Contract Act 1872 itself has imposed conditions for a contract to be valid and enforceable. For example, a contract entered into by one party exercising undue influence on the other party is void. Again, Sec.27 of the Act,since Niranjan Golikari's case way back in 1969, renders restrictive clauses prohibiting an employee joining a competetor after leaving service as null and void as they are in restraint of trade .
A contract of service is an agreement between a powerful employer who dangles the carrot of job with a salary tag before an employee who needs it to earn his livelihood.Thus it is a contract between two unequals and perhaps the terms have been accepted by an employee for a compulsive need or under undue influence of a powerful employer.Therefore the courts will lift the veil and see whther the terms are in accordance with any law that protects the economic rights of an employee or in accordance with the principles of equity and justice.In view of the fact, the Apex Court in Niranjan Golikari's case observes that the agreements between the master and servant shall be put to stricter view and they cannot be put on the same pedestal as business contarcts between a vendor and vendee or seller or purchaser.
Thus in one case, the employer terminates the service of an employee by giving one month notice by invoking terms of employment only in letter but not in spirit but the Constutution Bench of the Apex Court threw the termination out as the employee was not given a hearing before being terminated, though the contract does not provide for hearing. This is a gleaming example where the hon'ble Court imported the principle of equity reflected in the principles of natural justice to balance the contarct evenly between the employer and the employee. Another example to illustrate, is let us assume that a contract provides a clause which permits an employee to resign by giving one month notice but entitles the employer to refuse resignation without assigning any reason.Merely because the contract was signed by the employee, should he be under slavery of the employer for his life as he has conceded the right to refuse to the employer? Will such contract survive in a court of law? Will it not hit Sec.27 of the Contract Act to become void? The foundations of such contracts seem to be shaky in the light of court's observations in one case that a person, by entering into a contarct of employment does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign(more so in the modern era of technology which opened up abundant job opportunities).
Yet there are cases wherein either the contarct of service or service rules contain a clause that an employee is transferable any where in India.However such a clause does not give carte blanche to the employer to transfer an employee with malafide intention or in colourable exercise of power, for example, to punish him for an act of indiscipline.Though the courts have upheld the mployor's right to transfer as his previlege but set aside those, effceted with bad motive on the principles of equity and fairness.
In the instant case put up by the queriest, the employee submitted her resignation with an intention to serve the notice period and if the contract does not have notice period and notice pay clause, the queriest should not have any issue. The fact that she has an issue with the employee's resignation shows that there is a provison for notice period.In such a case when the employee expresses her intention to serve the notice period, it means she wants to terminate the contarct of service only after the expiry of the notice period. Since the employer has terminated the contract of service by accepting her resignation before the expiry of notice period and deprived her of a month's salary, in my view, he is required to pay notice pay as demanded by her on the basis of principles of equity and fairness.
B.Saikumar
HR & labour Law Advisor
Mumbai
From India, Mumbai
1899A contract of service is an agreement between a powerful employer who dangles the carrot of job with a salary tag before an employee who needs it to earn his livelihood.Thus it is a contract between two unequals and perhaps the terms have been accepted by an employee for a compulsive need or under undue influence of a powerful employer.Therefore the courts will lift the veil and see whther the terms are in accordance with any law that protects the economic rights of an employee or in accordance with the principles of equity and justice.In view of the fact, the Apex Court in Niranjan Golikari's case observes that the agreements between the master and servant shall be put to stricter view and they cannot be put on the same pedestal as business contarcts between a vendor and vendee or seller or purchaser.
Thus in one case, the employer terminates the service of an employee by giving one month notice by invoking terms of employment only in letter but not in spirit but the Constutution Bench of the Apex Court threw the termination out as the employee was not given a hearing before being terminated, though the contract does not provide for hearing. This is a gleaming example where the hon'ble Court imported the principle of equity reflected in the principles of natural justice to balance the contarct evenly between the employer and the employee. Another example to illustrate, is let us assume that a contract provides a clause which permits an employee to resign by giving one month notice but entitles the employer to refuse resignation without assigning any reason.Merely because the contract was signed by the employee, should he be under slavery of the employer for his life as he has conceded the right to refuse to the employer? Will such contract survive in a court of law? Will it not hit Sec.27 of the Contract Act to become void? The foundations of such contracts seem to be shaky in the light of court's observations in one case that a person, by entering into a contarct of employment does not sign a bond of slavery and a permanent employee cannot be deprived of his right to resign(more so in the modern era of technology which opened up abundant job opportunities).
Yet there are cases wherein either the contarct of service or service rules contain a clause that an employee is transferable any where in India.However such a clause does not give carte blanche to the employer to transfer an employee with malafide intention or in colourable exercise of power, for example, to punish him for an act of indiscipline.Though the courts have upheld the mployor's right to transfer as his previlege but set aside those, effceted with bad motive on the principles of equity and fairness.
In the instant case put up by the queriest, the employee submitted her resignation with an intention to serve the notice period and if the contract does not have notice period and notice pay clause, the queriest should not have any issue. The fact that she has an issue with the employee's resignation shows that there is a provison for notice period.In such a case when the employee expresses her intention to serve the notice period, it means she wants to terminate the contarct of service only after the expiry of the notice period. Since the employer has terminated the contract of service by accepting her resignation before the expiry of notice period and deprived her of a month's salary, in my view, he is required to pay notice pay as demanded by her on the basis of principles of equity and fairness.
B.Saikumar
HR & labour Law Advisor
Mumbai
From India, Mumbai
Dear SaiKumar,
With due respect i would like to state that I put forward points with relevant case law as mentioned under under Delhi Shops & Estd Act. If you have any doubt, you can check detailed judgment of the case. Though I do agree that principle of equity need to be followed while devising any such clause.
regards
vikas
From India, Mumbai
With due respect i would like to state that I put forward points with relevant case law as mentioned under under Delhi Shops & Estd Act. If you have any doubt, you can check detailed judgment of the case. Though I do agree that principle of equity need to be followed while devising any such clause.
regards
vikas
From India, Mumbai
Dear Mr Saikumar
I went through your detailed posting and thanks for bringing up the issue of Principles of equity in contract.There had been some questions about validity of Service Agreements/Bonds a few days back and I did make a mention regarding this. To assess whether a contractual term is valid in law or void, we need to examine the principles laid down by SC more specifically the principles of equity.
I am in agreement with you on the following
1. A clause saying that a person shall not join with a competitor can not pass the test of equity.
2. An employee can be transferred anywhere in Inida may not pass the test every time
3. An employee can be terminated without assigning reason also shall not pass the test of equity.
The present issue is not about the validity of a clause. Both parties agree to give 30 days' notice. The clause passes the test of equity.
Now how do we implement ? While implementing, is there any violation on the principles.
The equity clause here is meant for both parties to compensate or get compensated for the hardships that they would undergo due to the resignation or termination.
In case of termination, the hardship is for the employee hence there has to be payment of 30 days or 60 days or 90 days as the case may be.
In case of resignation, there is no hardship created by the employer to the employee. Employee choses to resign as he would have got another employment or he would have some personal committments. The principle of equity requires the employee to give a notice of 30 days and he has honoured the provision. Now the Employer can take a decision as to whether they require him to work for 30 days or 10 days or not even one day after he submits his resignation. They have in no way breached the principles of equity here. If they refuse to accept his/her resignation even after 30 days and refuse to relese his/her dues even after 30 days, they are are breaching the prinicples.
Some managements ask me whether they can postpone relieving an employee by three months or six months . My advice always had been to relieve them exactly on the last day of the notice period or earlier and not to keep them even one day more.
Similarly an employee can give a notice of 30 days or 60 days. In fact I have thrice during my career gave six months' notice eventhough the appointment letter demands only three months.It was for the management to take the call whether to believe me or not after I submit my resignation. In senior positions, this is normally negotiated. I have seen instances of one year notice periods as well. Management request employees stay for a year to complete certain assignments and mutually they agree. I have also come across with senior level people submitting resignation and getting relieved within a week
Going with the priciples of equity as explained by you, I am of the opinion that the Employer here has not flouted or breached any of the principles . Hence, the employee is not entitled to any money towards notice period.
T Sivasankaran
From India, Chennai
I went through your detailed posting and thanks for bringing up the issue of Principles of equity in contract.There had been some questions about validity of Service Agreements/Bonds a few days back and I did make a mention regarding this. To assess whether a contractual term is valid in law or void, we need to examine the principles laid down by SC more specifically the principles of equity.
I am in agreement with you on the following
1. A clause saying that a person shall not join with a competitor can not pass the test of equity.
2. An employee can be transferred anywhere in Inida may not pass the test every time
3. An employee can be terminated without assigning reason also shall not pass the test of equity.
The present issue is not about the validity of a clause. Both parties agree to give 30 days' notice. The clause passes the test of equity.
Now how do we implement ? While implementing, is there any violation on the principles.
The equity clause here is meant for both parties to compensate or get compensated for the hardships that they would undergo due to the resignation or termination.
In case of termination, the hardship is for the employee hence there has to be payment of 30 days or 60 days or 90 days as the case may be.
In case of resignation, there is no hardship created by the employer to the employee. Employee choses to resign as he would have got another employment or he would have some personal committments. The principle of equity requires the employee to give a notice of 30 days and he has honoured the provision. Now the Employer can take a decision as to whether they require him to work for 30 days or 10 days or not even one day after he submits his resignation. They have in no way breached the principles of equity here. If they refuse to accept his/her resignation even after 30 days and refuse to relese his/her dues even after 30 days, they are are breaching the prinicples.
Some managements ask me whether they can postpone relieving an employee by three months or six months . My advice always had been to relieve them exactly on the last day of the notice period or earlier and not to keep them even one day more.
Similarly an employee can give a notice of 30 days or 60 days. In fact I have thrice during my career gave six months' notice eventhough the appointment letter demands only three months.It was for the management to take the call whether to believe me or not after I submit my resignation. In senior positions, this is normally negotiated. I have seen instances of one year notice periods as well. Management request employees stay for a year to complete certain assignments and mutually they agree. I have also come across with senior level people submitting resignation and getting relieved within a week
Going with the priciples of equity as explained by you, I am of the opinion that the Employer here has not flouted or breached any of the principles . Hence, the employee is not entitled to any money towards notice period.
T Sivasankaran
From India, Chennai
MR. Sivasankaran
Thanks for responding to my view and providing another angle to percieve the principle of equity in it's application to employment contracts and making the discussion more meaning ful.
Regards
B.Saikumar
Mumbai
From India, Mumbai
Thanks for responding to my view and providing another angle to percieve the principle of equity in it's application to employment contracts and making the discussion more meaning ful.
Regards
B.Saikumar
Mumbai
From India, Mumbai
Dear Sir,
Normally in every appointment order in termination clause, there will be the words that either side one month salary or one month"s notice pay.
As such if employee wants to leave, he has to give resignation and have to work one month in the notice period, if he wants to leave immediately, he has to
pay one month salary to the management and has to leave the job. Some managements may waive the notice period, and relieves him immediately on his request.
In this case, she has given notice period with an intention to work. But you have relieved her immediately. As such you have to pay one month salary if she claims.
D.GURUMURTHY
LL.HR & IR CONSULTANT
HYDERABAD.
From India, Hyderabad
Normally in every appointment order in termination clause, there will be the words that either side one month salary or one month"s notice pay.
As such if employee wants to leave, he has to give resignation and have to work one month in the notice period, if he wants to leave immediately, he has to
pay one month salary to the management and has to leave the job. Some managements may waive the notice period, and relieves him immediately on his request.
In this case, she has given notice period with an intention to work. But you have relieved her immediately. As such you have to pay one month salary if she claims.
D.GURUMURTHY
LL.HR & IR CONSULTANT
HYDERABAD.
From India, Hyderabad
Dear Rupavathi,
If she has mentioned and request you to relieved on specific date, then legally she is liable to complete her notice period and liable to get salary accordingly, if you want to relieve her before the date so check the appointment clause as "the management is free to relieve you before reliving date mentioned by you and in this case you are not entitled to get any amount and services after being relived".
Thanks//
Umesh Kumar
Rapid Fire Business Guidance
From India, Mumbai
If she has mentioned and request you to relieved on specific date, then legally she is liable to complete her notice period and liable to get salary accordingly, if you want to relieve her before the date so check the appointment clause as "the management is free to relieve you before reliving date mentioned by you and in this case you are not entitled to get any amount and services after being relived".
Thanks//
Umesh Kumar
Rapid Fire Business Guidance
From India, Mumbai
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