Termination of Employment

Non-performance, Redundancy, Loss of confidence in employee’s ability to perform their duties and obligations, Retrenchment

Among various case laws, there are two scenarios, whether the worker is a workman, or employee, since that would govern the applicability of ID Act. However, in most of the cases, courts have not mentioned that employer is not capable of removing employee for non-performance.

The courts emphasized that the employee should be well informed about deficiencies, and provided opportunities, otherwise the termination would be arbitrary.

Some of the steps highlighted are for employers to document the non-performance, inform or provide regular feedback to the employee regarding the non-performance in writing, and provide an opportunity to the employee to improve performance. Other procedures also have to be followed.

Performance issues are separate from misconduct. Employers should not confuse the two reasons for termination. The documentation for performance issues should be limited to the employee’s inability to meet the desired performance standards.

However, there can be said some protective categories as per statutes, e.g. Employee on Maternity Leave, or covered by RPwD Act, etc.

1. Abhujit Gupta vs. S.N.B. National Center, Basic Sciences and Ors. (18.04.2006 - SC) : MANU/SC/1985/2006 : (2006) 4 SCC 469

Appellant was probationer. His work was under observation during probationary period, and he was given repeated opportunities to improve his performance for which his probation extended from time to time. The authority did not find him fit due to unsatisfactory work and brought the same to his notice.

The court analysed tests laid down in various decisions. And found that service of appellant was unsatisfactory and that he was given repeated opportunities to improve his performance

2. Sumati P. Shere vs. Union of India (UOI) and Ors. (03.04.1989 - SC) : MANU/SC/0167/1989: (1989) 3 SCC 311

The petitioner was appointed on an ad-hoc basis for 6 months or if UPSC appoints suitable person, however here services were regularly renewed for multiple terms, around 3 years, and then she was terminated.

There it was said to have been recorded that the authorities were not satisfied with the performance of the appellant and so her reappointment after the expiry of the term was not recommended.

But it appears that at no time she was informed about her deficiencies. The order of termination came like a thunderbolt from the blue.

“The court emphasized that in the relationship of master and servant there is a moral obligation to act fairly. An informal, if not formal, give-and-take, on the assessment of work of the employee should be there. The employee should be made aware of the defect in his work and deficiency in his performance. Defects or deficiencies; indifference or indiscretion may be with the employee by inadvertence and not by incapacity to work. Timely communication of the assessment of work in such cases may put the employee on the right track.”

Without any such communication, it would be arbitrary to give a movement order to the employee on the ground of unsuitability.

3. M. Visvesvarya Industrial Research and Development Centre vs. Dilip Madhavrao Vaidya (31.07.1997 - BOMHC) : MANU/MH/0089/1998

The court observed that the cases where communication is found to be insufficient in this regard, the same may be construed to be arbitrary exercise of employer’s power.

“All in all, the employer failed and miserably so to say to justify its action before the Labour Court whereby the services of the employee were terminated on the ground of unsatisfactory work and the concurrent findings of the two courts below in not finding the justification reliable, cannot be faulted. The impugned orders do not suffer from any infirmity warranting interference by this Court in extra ordinary jurisdiction.”

4. Chaitanya Prakash and Ors. vs. H. Omkarappa (12.01.2010 - SC) : MANU/SC/0034/2010 : 2010 INSC 36

In this case, an employee was hired on probation, and his probation was repeatedly extended. But was terminated.

The court found that, after making a total appraisal of his performance, a report was submitted to the Board of Directors. The record also discloses that the Board of Directors held a meeting and in that meeting they not only considered the Performance Assessment Report but also perused the entire service record of the respondent, and thereafter took a conscious and considered decision of terminating his service due to unsatisfactory work

Moreover, a number of communications were issued to the respondent bringing to his notice his dismal performance and unsatisfactory work with an advise to improve his performance.

The court found the termination valid.

5. Punjab Land Development and Reclamation Corporation Ltd., Chandigarh vs. Presiding Officer, Labour Court, Chandigarh and Ors. (04.05.1990 - SC) : MANU/SC/0479/1990

In the case, under section 2(oo) retrenchment, Industrial Disputes Act, the court held that the words ‘for any reason whatsoever’ needs to be interpreted and understood in a much wider and literal sense. Accordingly, the term ‘retrenchment’ was found to mean the termination by the employer of the services of a workman for any reason whatsoever except those specifically excluded from the definition.