Termination of employment based on non-performance

While drawing up and implementing their “hire and fire” policy, employers in India witness plenty of interference on account of the voluminous legislative framework applicable to this, especially pertaining to termination of employees. Though the framework specifically deals with several situations under which an employee may be terminated, employers still struggle with certain situations not specifically captured under the applicable enactments. Dismissal of employees on grounds of non-performance may qualify as one of these situations.

Indian labour laws distinguish between an employee who is categorized as a “workman” and a “non-workman”. Employees who primarily discharge administrative, managerial or supervisory functions and earn more than the prescribed threshold are not considered to be workmen.

The Industrial Disputes Act, 1947, which is only applicable to workmen, defines “retrenchment” to mean termination by the employer of the service of a workman for any reason other than as a punishment inflicted by way of disciplinary action, and specifically excludes voluntary retirement, retirement on reaching the age of superannuation, termination as a result of non-renewal of contract of employment, or termination on the ground of continued ill health. Specific obligations are imposed upon employers if termination of a workman qualifies as retrenchment.

Nusrat Hassan and Raunak Singh are partners at Link Legal India Law Services.