Employment termination, when carried out wrongfully, constitutes a serious violation of workers’ rights and can lead to lasting financial and emotional consequences for those affected
NEW DELHI: The economic turbulence unleashed by the COVID-19 pandemic triggered a wave of job losses across India. While some of these terminations were lawful, many workers faced dismissals that were abrupt, unjustified, and in clear violation of employment rights—commonly referred to as wrongful termination. Beyond the financial strain, these abrupt job losses have left many employees struggling with emotional distress and uncertainty about their future.
If you’ve been wrongfully dismissed—whether due to discrimination, retaliation, or a breach of employment terms—it’s crucial to understand your legal rights and the remedies available under Indian labor laws.
What is Wrongful Termination?
Wrongful termination, also known as wrongful dismissal or discharge, refers to the illegal dismissal of an employee by an employer. Such dismissals may occur:
- In violation of employment contracts,
- Without just or lawful cause,
- Due to discriminatory practices, or
- As a retaliatory act against whistleblowing or asserting legal rights.
A termination is considered wrongful when it contravenes existing labor laws or the terms of employment, and when it fails to adhere to fair procedural standards.
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Legal Framework Governing Termination in India
Indian labor law operates under a concurrent jurisdiction, meaning both central and state governments legislate and enforce laws related to employment. Several key legislations and codes now govern termination-related matters:
- Industrial Disputes Act (IDA), 1947
Protects workmen against arbitrary dismissal, mandating fair procedures and grounds for retrenchment, discharge, or layoff.
- Industrial Employment (Standing Orders) Act (IESA), 1946
Requires employers to clearly define terms of employment, including termination protocols.
- Labour Codes Consolidation
The Indian government recently streamlined 29 labor laws into 4 comprehensive codes:
- Code on Wages, 2019 – Covers wage payment and bonus-related disputes.
- Industrial Relations Code, 2020 – Regulates employment terms, industrial disputes, and termination practices.
- Occupational Safety, Health and Working Conditions Code, 2020 – Addresses worker safety and contract labor regulation.
- Code on Social Security, 2020 – Ensures social security benefits like gratuity, maternity benefits, and insurance.
- Shops and Establishments Act
Applicable to private sector and commercial establishments, varying by state, this Act governs working conditions and termination procedures.
No Standardized Termination Procedure
India lacks a universal termination process. Instead, termination procedures depend on:
- Individual employment contracts
- Applicable labor laws
- State-specific labor legislations
Even where contracts exist, they must align with prevailing labor laws—contractual terms cannot override statutory protections. In the absence of a contract, local state laws and judicial precedents apply.
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Grounds for Wrongful Termination
Not all terminations are illegal. Employers are justified in dismissing employees for:
- Gross misconduct
- Persistent underperformance
- Fraud or misrepresentation
- Sexual harassment or policy violations
- Damage to company property
- Willful insubordination
However, terminations become wrongful when based on:
- Discrimination : Dismissals based on gender, religion, caste, age, nationality, or health condition (such as HIV status) violate constitutional rights and are prohibited.
- Contractual Breach: Termination that disregards contractual obligations, including terms regarding notice periods or severance, is unlawful.
- Constructive Dismissal: Occurs when the work environment becomes hostile, or when job roles are altered significantly, forcing the employee to resign.
- Retaliation: Employees terminated for reporting illegal practices, raising grievances, or participating in investigations have been wrongfully dismissed.
- Coercion: Dismissing an employee for refusing to participate in unethical or illegal activities also constitutes wrongful termination.
- Personal Bias or Vendetta: Terminating employees due to personal disagreements, grudges, or refusal to follow illegitimate directives is unlawful.
Employee Rights Against Wrongful Termination
- Right to Written Notice: Employees are entitled to a written termination notice specifying valid reasons. This notice must comply with the minimum notice period required—typically seven days unless in exceptional situations.
- Right to Appeal: Employees can challenge dismissals by appealing to the appropriate labor tribunal or court, especially in cases of discrimination, lack of due process, or arbitrary dismissal.
- Right to a Fair Hearing: Before termination, employees have the right to be heard. This includes review of their performance and conduct by an unbiased authority.
- Right to Know the Reason for Termination: Employers are obligated to provide clear, written reasons for the dismissal. Employees can seek legal remedies if no reason is provided or if the reason is fabricated.
- Right to Legal Recourse: Employees may file a legal complaint or lawsuit for damages and reinstatement if they believe they were unlawfully terminated.
- Right to Severance and Gratuity :Under the Payment of Gratuity Act, 1972, employees with five or more years of continuous service are entitled to gratuity. Severance pay may also be applicable as per contractual or statutory provisions.
- Right Against Discrimination: Any termination based on discriminatory grounds is a violation of the Indian Constitution, and affected employees can seek redress through courts or labor commissions.
Legal Remedies for Wrongful Termination
- Legal Notice : Employees can send a formal legal notice to the employer detailing the circumstances of wrongful termination and demanding compensation, back pay, benefits, and damages. A timeframe must be given for the employer to respond, failing which court action may follow.
- Filing a Suit : If the employer does not respond satisfactorily, the employee may file a case in labor court or civil court, depending on the nature of the dispute. Alternatively, they can approach the Labour Commissioner, who may initiate conciliation. If unresolved within 45 days, the case can proceed to the Industrial Tribunal.
- Jurisdictional Clarity : According to the Supreme Court of India:
- Civil courts can hear disputes not categorized as industrial disputes.
- Labour courts/tribunals deal with disputes classified as “industrial disputes,” especially where statutory rights under labor laws are involved.
- Reinstatement : In appropriate cases, labor tribunals may order reinstatement along with back wages. However, for private employment (especially managerial roles), courts usually award monetary damages instead of reinstatement due to the personal nature of such contracts (Specific Relief Act, 1963).
- Compensation and Damages: Under Section 73 of the Indian Contract Act, 1872, courts award reasonable compensation, usually limited to the duration of the notice period specified in the contract. Courts discourage excessive damages beyond what is contractually agreed.
Important Judicial Precedents
- Smt. Saroj Agarwal v. Union of India
Reinstatement with continuity of service and back wages was upheld as a standard remedy for wrongful dismissal. - S.S. Shetty v. Bharat Nidhi Ltd
SC held that if employment terms allow termination with one month’s notice, compensation should be limited accordingly.
- Ram Ashrey Singh v. Ram Bux Singh
Back wages are not automatically granted; it depends on the facts and circumstances of each case. - State of Uttarakhand v. Raj Kumar
SC affirmed that reinstatement with full back wages is generally warranted if illegal termination is proven. - Vikas Kumar v. South Delhi Municipal Corporation
Compensation was ordered instead of reinstatement when the latter was impractical.
Wrongful termination can be a devastating blow to an individual’s livelihood, career, and mental well-being. However, India’s legal system provides substantial safeguards to protect employees from arbitrary and unjust dismissals. From the right to fair hearing and written notice to legal avenues for redress, the framework aims to uphold justice and dignity in the workplace.
Whether through legal notice, conciliation, or court proceedings, employees wrongfully terminated have multiple pathways to seek justice—be it reinstatement, compensation, or punitive damages. Awareness of these rights and proactive legal action are key to protecting oneself from exploitation and ensuring fair treatment in professional settings.
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