Termination of employment refers to the end of an employee’s work with a company. An employee may be terminated from a job of their own free will or following a decision made by the employer.
Voluntary Termination
- An employee who decides to terminate employment with a company usually does so when they find a better job with another company, retire from the labor force, resign to start their own business or take a break from working.
- Voluntary termination of employment could also be a result of constructive dismissal, also called constructive discharge. This means that the employee left the company because they had no other choice. They could have been working under significant duress and difficult working conditions at the employer.
- A forced discharge of an employee, whereby they are given an ultimatum to quit or be fired, also falls under constructive dismissal. In these cases, if the employee can prove that the employer’s actions during the worker’s tenure with the company were unlawful, they may be entitled to some form of compensation or benefits.
- An employee who voluntarily leaves an employer may be required to give advance notice to the employer, either verbally or in written form. Most industries usually require two-week advance notice of an employee’s termination. In some cases, the employee gives notice at the time that they terminate.
Involuntary Termination
Involuntary termination of employment occurs when an employer lays off, dismisses, or fires an employee.
Layoffs and downsizing
Companies decide to lay off workers or downsize their organizations to lower their operating costs, restructure their organizations, or because they no longer need an employee’s skill set.
Getting fired
An employee is usually fired from a job as a result of unsatisfactory work performance, poor behavior or attitude that does not fit with the corporation’s culture, or unethical conduct that violates the company’s policies. According to at-will employment laws recognized in some states, a company may dismiss without warning any employee who is performing poorly.
Illegal Dismissals
Although employment-at-will contracts do not require an employer to warn or give a reason for a dismissal, an employer cannot fire a worker for certain reasons. An employee who refuses to work more than the hours specified in the contract—who takes a leave of absence, reports an incident or a person to the Human Resources department.
Termination for cause
Other than at-will conditions of employment, an employer could fire an employee for a specific cause. A termination-for-cause clause may require the employer to put the employee on an improvement schedule, of 60 or 90 days, during which the employee is expected to improve their work ethic.
Termination Compensation
In most cases where an employee who has worked with a given company for at least three months and has their employment involuntarily terminated, the employer may provide them with a notice of termination and/or termination pay (or severance pay). A company that offers severance does so following an agreement made privately with the employee or because severance is specified in its employee handbook.
Also, employers are not required by federal law to give the terminated employee a final paycheck immediately. However, state laws may operate differently in this regard and may mandate that the employer must not only immediately provide the affected employee with a final paycheck, but also include accrued and unused vacation days.
Termination under contract
In most cases, employment contracts are very specific about the process of terminating employment. This is mostly the case when the termination is by mutual agreement, and in particular, cases where contractual employment is set for a fixed period. An employee is considered terminated at the conclusion of such a contract unless a new contract is offered or the clauses in the initial contract are amended.
Termination by law
As previously mentioned, any termination needs to comply with federal and state law because these laws supersede contract provisions. However, state law becomes particularly important when no defined procedure for termination exists. In such scenarios, state law becomes the rule of thumb for terminating an employee.
Laws and Compliances for Termination of Employment
- The main federal statutes that regulate the termination of employment include the Industrial Employment (Standing Orders) Act (IESA), 1946, and the Industrial Disputes Act (IDA), 1947, as amended.
- In addition, Indian labor is regulated by the Shops and Establishments Act, which is enacted in most states with minor differences in rules of implementation. The Shops and Establishments Act regulates labor and employment in all premises where a trade, business, or profession is carried out.
- Given the structure of Indian labor laws, there is no standard process to terminate an employee in India. An employee may be terminated according to terms laid out in the individual labor contract signed between the employee and the employer.
- In cases where there is no labor contract, or the labor contract does not define a method of termination, the matter comes under the jurisdiction of the specific state’s labor legislation.
- Laws in India offer workers and employees considerable protection. The courts as well as state and federal labor departments often embrace a pro-worker stance in employment termination disputes.
Compliance Rules
- The Industrial Disputes Act, 1947 mandates a 30- to 90-day notice period when terminating “workmen.” In the case of manufacturing units, plantations, and mines with 100 or more workmen, “termination for convenience” requires government approval; in other sectors, it requires only government notification.
- India’s labor laws cite the following reasons that justify termination for cause—willful insubordination or disobedience; theft, fraud, or dishonesty; willful damage to or loss of employer’s goods; partaking of bribes or any illegal gratification, etc.
- Employers that terminate for convenience must ensure that the last person to join the organization in the same role is first made redundant.
- In case an employee being terminated is pregnant or seeking maternity leave, employers must balance their convenience against the risk associated with noncompliance with the provisions enshrined in the Maternity Benefit (Amendment) Act, 2017.
- Non-compete agreements are not enforceable under Indian law, while non-solicitation clauses can be enforced only in limited ways.
