I am working with a reputed multinational company as an executive. For some days, the company has started to terminate employees due to manpower reduction. The company is providing benefits such as 30 months of basic pay to the terminated employees and giving a one-month notice for job searching. The company is targeting high-salaried and most experienced individuals. Can the organization do this? If so, can we appeal against it? Many employees are facing this situation. Please help.
From India, Pune
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1From India, Pune
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What you mentioned is legally termed as retrenchment, which is defined under the Industrial Disputes Act, 1947.
As per the definition of a worker in the act, employees performing managerial and supervisory roles, mainly involving managerial work, are not considered employees. Therefore, if such employees are retrenched by the company, there is no remedy.
From India, Mumbai
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As per the definition of a worker in the act, employees performing managerial and supervisory roles, mainly involving managerial work, are not considered employees. Therefore, if such employees are retrenched by the company, there is no remedy.
From India, Mumbai
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This appears to be a targeted manpower reduction of high-cost employees, and the package seems to be somewhat lucrative. However, the loss of employment and suddenly being back in the job market, struggling to find a job opening, may be a bit taxing, particularly considering the stagnating economy. In these circumstances, where there is not much scope in the existing employment, you may have to bid for time and await good times ahead, which hopefully are not far away.
From India, Mumbai
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From India, Mumbai
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Dear Amit,
This is in continuation of the foregoing comments of our friends. In India, the concept of employment at will has not yet been legally recognized. Therefore, the exit policy of any industrial organization for its employees, whether it be an MNC or a domestic enterprise, should not run counter to the provisions of applicable labor laws or the Indian Contract Act, 1872, as the case may be, in terms of unilateral implementation by the employer.
Unfortunately, after the advent of LPG, most of the MNCs in India adopt the policy of hire and fire solely based on their market performance. Particularly, such a practice is more rampant in the IT and ITES Sector where the workforce comprises mostly of knowledge workers who have a high degree of employability in the employment market in terms of age and expertise. Therefore, even large-scale reductions in the manpower of such industries simply go unnoticed and even uncomplained of by the affected employees themselves.
Why do MNCs thrust such seemingly voluntary resignation on the part of its specific type or selected group of employees alone on the pretext of manpower reduction instead of coming out with a transparent VR Scheme always remains an unasked question. It is only because of the restrictions imposed by the Income Tax Act u/s 10(10C) by means of the guidelines set down in rule 2-BA.
In respect of employees to whom labor law like the ID Act, 1947 is not applicable, the managements would cite the exit clause of the contract of employment, which would normally contain a notice period of a maximum of three months or the equivalent amount of salary in lieu thereof on either side and threaten them to put down their papers. But such an exit clause, if adopted by the employer without a reasonable cause, would be "opposed to public policy" under the Indian Contract Act, 1872, and liable to be struck down as per the judgment of the Supreme Court in Central Inland Water Transport Corporation Ltd vs. Brojo Nath Ganguly & Another [1986 (2) LLJ 171 SC].
Therefore, in this precarious situation of forced exit, you can legally resist it provided you have the wherewithal, courage, and patience.
From India, Salem
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This is in continuation of the foregoing comments of our friends. In India, the concept of employment at will has not yet been legally recognized. Therefore, the exit policy of any industrial organization for its employees, whether it be an MNC or a domestic enterprise, should not run counter to the provisions of applicable labor laws or the Indian Contract Act, 1872, as the case may be, in terms of unilateral implementation by the employer.
Unfortunately, after the advent of LPG, most of the MNCs in India adopt the policy of hire and fire solely based on their market performance. Particularly, such a practice is more rampant in the IT and ITES Sector where the workforce comprises mostly of knowledge workers who have a high degree of employability in the employment market in terms of age and expertise. Therefore, even large-scale reductions in the manpower of such industries simply go unnoticed and even uncomplained of by the affected employees themselves.
Why do MNCs thrust such seemingly voluntary resignation on the part of its specific type or selected group of employees alone on the pretext of manpower reduction instead of coming out with a transparent VR Scheme always remains an unasked question. It is only because of the restrictions imposed by the Income Tax Act u/s 10(10C) by means of the guidelines set down in rule 2-BA.
In respect of employees to whom labor law like the ID Act, 1947 is not applicable, the managements would cite the exit clause of the contract of employment, which would normally contain a notice period of a maximum of three months or the equivalent amount of salary in lieu thereof on either side and threaten them to put down their papers. But such an exit clause, if adopted by the employer without a reasonable cause, would be "opposed to public policy" under the Indian Contract Act, 1872, and liable to be struck down as per the judgment of the Supreme Court in Central Inland Water Transport Corporation Ltd vs. Brojo Nath Ganguly & Another [1986 (2) LLJ 171 SC].
Therefore, in this precarious situation of forced exit, you can legally resist it provided you have the wherewithal, courage, and patience.
From India, Salem
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Thanks..Umakanthan Sir. If u suggest me the legal way to fight against this management act It will precious n valuable for me
From India, Pune
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From India, Pune
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Dear Amit,
As you want to know whether the organization can terminate employees under manpower reduction, yes, our laws and rules permit it. However, this action must be taken only after obtaining permission from the appropriate government authorities. It is unfortunate that our current laws and rules have not yet provided a clear definition of employee categorization. Mr. Umakant has shared substantial information and his views on the matter.
Retrenchment cannot be denied if the preconditions for reducing costs and expenses exist. If your company is experiencing financial hardship, it may need to reassess its business operations. This could involve closing branch operations that are not profitable, reducing the budget for office supplies, evaluating current staffing needs, and considering the impact of staff reductions on operations. The company might also postpone the launch of a new product line or discontinue services that are no longer essential for its success. Layoffs may become necessary if the company continues to face significant financial challenges, despite employees not being at fault.
Thank you.
From India, Mumbai
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As you want to know whether the organization can terminate employees under manpower reduction, yes, our laws and rules permit it. However, this action must be taken only after obtaining permission from the appropriate government authorities. It is unfortunate that our current laws and rules have not yet provided a clear definition of employee categorization. Mr. Umakant has shared substantial information and his views on the matter.
Retrenchment cannot be denied if the preconditions for reducing costs and expenses exist. If your company is experiencing financial hardship, it may need to reassess its business operations. This could involve closing branch operations that are not profitable, reducing the budget for office supplies, evaluating current staffing needs, and considering the impact of staff reductions on operations. The company might also postpone the launch of a new product line or discontinue services that are no longer essential for its success. Layoffs may become necessary if the company continues to face significant financial challenges, despite employees not being at fault.
Thank you.
From India, Mumbai
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Dear Amit,
If you do not fall under the category of "workman" as defined under Section 2(s) of the Industrial Disputes Act, 1947, the only option available to you is filing a Civil Suit against the termination orders. To do that, first, you should be very firm in not submitting your resignation as instructed by the management, despite all the pressure and coercive tactics likely to be applied by them. Only then will they terminate you as per the exit clause of the contract. There is no provision for obtaining any injunction or setting aside the orders of transfer. At best, the Civil Court can declare the orders as illegal on the grounds of being opposed to public policy and award compensation only, not directing reinstatement. However, this process will take time, and you will have to patiently wait.
I have no information about your age, financial position, and employability. Therefore, think thoroughly before making a decision. Remember, life does not revolve solely around a job.
From India, Salem
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If you do not fall under the category of "workman" as defined under Section 2(s) of the Industrial Disputes Act, 1947, the only option available to you is filing a Civil Suit against the termination orders. To do that, first, you should be very firm in not submitting your resignation as instructed by the management, despite all the pressure and coercive tactics likely to be applied by them. Only then will they terminate you as per the exit clause of the contract. There is no provision for obtaining any injunction or setting aside the orders of transfer. At best, the Civil Court can declare the orders as illegal on the grounds of being opposed to public policy and award compensation only, not directing reinstatement. However, this process will take time, and you will have to patiently wait.
I have no information about your age, financial position, and employability. Therefore, think thoroughly before making a decision. Remember, life does not revolve solely around a job.
From India, Salem
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I will also appreciate the help of Mr. Umakanthan as the Civil Suit remedy will take time, and during this period, you may not accept any employment with another company. If you have the patience, determination, and a genuine sense of injustice, along with strong evidence to support your case, you should definitely proceed with filing a suit.
Malik Ravindra
From India ,
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Malik Ravindra
From India ,
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Legal Clarification on Termination for Criminal Case & PF Contribution Reduction.pdf