Recent Court Decision Signals Greater Pushback from Employees regarding Terminations in India

A labour court in Chennai recently asked an IT company to reinstate a former employee, setting a precedent for performance-related terminations in IT industry. The decision, once again, confirms that the designation and salary of an employee can’t decide whether he or she is exempt from the purview of the Industrial Disputes Act and can be protected from dismissal. 

In this case, a former employee, who was terminated from a large Indian IT company due to poor performance in 2015, filed for an unfair termination. The company argued that the employee did not fall into the category of ‘Workman’ under the Industrial Disputes Act as he had a supervisory role. Therefore, he was not protected from performance-related dismissal. 

Indian labor laws require that if the services of a workman (who has completed continuous service of at least one year) are terminated on grounds other than misconduct, in addition to Notice of Retrenchment, the employer is also required to serve notice to the appropriate government. Because the company failed to process it appropriately, the court has directed the company to reinstate the employee and pay him his full salary and benefits for seven years.

Outlook: the court ruling, combined with the upcoming labor reform, will give employees and union more power, especially in IT industry. Companies should establish a process to properly handle performance-related exits or mass layoffs.