Notice Period under the Indian Labour and Employment Law Regime

The quest to understand the issues and questions revolving around the mandate and the duration of the ‘notice period’ to be served by the employees employed with industrial or private sector employers, has sparked a peculiar controversy. Pursuant to divergent views expressed by industry experts on different social media platforms in recent times, the duration of the ‘notice period’ to be served by either the employer or the employee to terminate the employment relationship has created an ambiguity in the minds of the entire workforce community in India. The term ‘notice period’ simply refers to the number of days an employee is required to serve before leaving the organization, which is effective from the date of resignation till the last working day of the employee. The term of the notice period ideally ranges from 15 (fifteen) days to 90 (ninety) days, subject to the type of employment, size of the organization, requirements under the local employment laws, contractual agreement, employee’s position in the organization, etc.

In India, the mechanics of issuing or serving a notice period is of paramount importance. Wrongful termination of employment ends up in a legal battle and ignites a potential dispute in an employer-employee relationship. In this article, we will be analyzing the laws related to the ‘notice period’ under the Indian labour and employment regime and views expressed by the Indian courts in various judicial pronouncements.

Notice Period Under Extant Statutes

The mandate pertaining to ‘notice period’ has been enshrined under statutes such as the Industrial Disputes Act, 1947 (“ID Act”) and shops and establishments enactments enforced in certain states. Although the terminology ‘notice period’ has not been expressly defined in these statutes, the requirement of serving of ‘notice period’ can be inferred from the provisions related to termination of employment, as stipulated under the said statutes.

The ID Act being applicable only in cases of ‘workman’, uses the term ‘retrenchment’ in place of  ‘termination’. Section 25F of the ID Act provides that a ‘workman’ who has been in employment for a continuous service of not less than 1 (one) year under an employer shall not be retrenched by that employer until, such ‘workman’ has been issued a 1 (one) month prior notice in writing indicating the reasons of ‘retrenchment’ and the period of notice has expired, or the ‘workman’ has been paid wages in lieu of the notice. Moreover, such ‘workman’ shall also be paid with a retrenchment compensation by the employer, as mandated under the provision.

The provision related to the termination of employment under the shops and establishment legislations in the states viz. New Delhi, Haryana, etc., differ in the aspects of the ‘notice period’ to be served by the employee. The same is subject to the number of days of continuous service an employee has completed with the employer.

In Delhi[1], the shops and establishment regulation require that the employer can terminate the employee upon furnishing 1 (one) month prior notice in writing or wages in lieu of notice period. Provided that such an employee has completed 3 (three) months of continuous service with the employer. Similarly, the employee upon completing 3 (three) months of continuous service with the employer, is required to serve a notice period of 1 (one) month with the employer.

In Haryana[2], no employer shall issue a prior notice of 1 (one) month or pay wages in lieu of notice of period, to terminate the employee from the employment unless such employee has been in continuous service of 3 (three) months. Similarly, an employee upon completing a continuous service of 3 (three) months with the employer can terminate the employment upon furnishing a prior notice of 7 (seven) days or pay wages in lieu thereof to the employer.

Judicial Precedents

In the matter of Sanjay Jain Vs. National Aviation Co. of India Ltd[3]., the Hon’ble Supreme Court of India in its judgment dated November 01, 2018, adjudicated on the issue of whether acceptance of resignation is necessary in case a notice had been given by the employee. The issue arose in the backdrop of an appointment letter wherein, as per the terms and conditions, the appellant was required to serve the respondent (Air India) for a minimum period of 5 (five) years. After completing 5 (five) years of service, the appellant provided 30 (thirty) days’ notice to join Jet Airways. The respondent asserts that an employee must give a minimum of 30 (thirty) days' notice and that an acceptance of resignation is required in accordance with certified standing orders of the company formulated under the Industrial Employment (Standing Orders) Act, 1946.

The Apex Court clarified the position regarding acceptance of resignation wherein, it observed that: “To resign is a right of an employee who cannot be forced to serve in case he is not willing until and unless there is some stipulation in the Rules or in the terms of appointment or disciplinary proceedings is pending or contemplated which is sought to be avoided by resigning from the services”. Furthermore, the court added that it would depend upon the phraseology used in a particular provision of the service rules of the employer whether there is a necessity for acceptance or any other formality is required when it could be said a person ceases to hold the office.

In the matter of SDU Travels Pvt. Ltd. Vs. Vipin Sharma[4], the Hon’ble Delhi High Court opined upon the aspects related to employment in the private sector and stated that: “In case of private employment, the employers are fully justified in taking steps for termination of services, if it finds that the employee is not up to the mark. Employment in the private sector is governed by the terms and conditions of employment, and unless the termination is shown to be a violation of the terms and conditions of employment, it cannot be said that the termination is illegal. A contract of employment which provides termination of services by one month's notice, then, at best the employee will only be entitled to one month's pay in terms of the employment contract.”

In the case of SS Shetty Vs. Bharat Nidhi Ltd[5], the Apex Court held that an employee is entitled to get the salary for the notice period, even if he is terminated from the service on account of misconduct.

In another matter of Srikanth SM Vs. Bharat Earth Movers Ltd[6], the Apex Court had expressed its views in relation to the importance of the notice period from the perspective of both the employer and the employee and stated that “It is common knowledge that a person proposing to resign often wavers in his decision and even in a case where has taken a firm decision to resign, he may not be ready to go out immediately. In most cases, he would need a period of adjustment and hence like to defer the actual date of relief from duties for a few months for various personal reasons. Equally, an employer may like to have time to make some alternative arrangement before relieving the resigning employee”. In the aforesaid matter, the Apex Court also explained the meaning of the term ‘resignation’ wherein it stated that: ‘resignation’ means spontaneous relinquishment of one’s own right. It is conveyed by the Latin maxim Resignatio est juris propii spontanea refutatio. (Resignation is a spontaneous relinquishment of one’s own right). In relation to an office, resignation connotes the act of giving up or relinquishing the office. ‘To relinquish an office’ means ‘to cease to hold the office’ or ‘to leave the job’ or ‘to leave the position’. ‘To cease to hold office’ or ‘to lose hold of the office’ implies to ‘detach’, ‘unfasten’, ‘undo’ or ‘untie’ ‘the binding knot or link’ which holds one to the office and the obligations and privileges that go with it.

Analysis and Conclusion

The genesis of an employer-employee relationship rests upon the idea that the employee shall be bound with the employer for a duration as stipulated in his/her contract of employment. The importance of the ‘notice period’ in the contract of employment governing the overall relationship between the employee and the employer has been deeply deliberated upon by the Indian Courts. Whilst deciding the subject matter relating to the claim for damages initiated by either the employer or the employee upon the breach of terms of employment, the courts have assessed the subject matter on a case-to-case basis.

To safeguard the interests of both the employer and the employee, certain timeline depending upon the number of days of continuous service, has been incorporated under the shops and establishment legislations enacted by the respective state governments with the intent to avoid situations of wrongful termination. Moreover, the timeline prescribed for notice of termination prevents a situation of sudden and abrupt dismissal of service of employment.

Keeping in view the interest of the ‘workman’ belonging to under-privileged segments of society, the ID Act has been put into force by the legislature to not only cater to the needs and effectively manage the industrial workforce in India but also safeguard them from arbitrary dismissals and exploitations by the employer.

Apropos to protections offered under the extant labour law regime and precedents laid down by the Indian Courts, the aspect related to the notice period is to be critically analyzed in cases where employees and workers do not fall within the ambit of state-specific shops and establishment legislation and ID Act. In such cases, the contract of employment plays a vital role in deciding disputes revolving around the notice period.

Therefore, basis the observations enumerated by the Indian Courts and upon inferring the object and statement of the labour law statutes, it can be stated that the notice period plays a paramount role in driving the overall mechanism of the employer-employee relationship. From employers’ perspective, the notice period allows time to find an ideal replacement for an employee who is leaving the organization, collect data, assets, and information shared with the employee during the course of the employment, and settle all dues payable to the employee to prevent any potential claims in relation to his/her payments in future. From an employee’s perspective, the notice period provides sufficient time to scout other job prospects, allows the employee to properly undertake the handover of the documents and knowledge transfer, and get hold of all the payments due and accrue by the employer.