Employee Resigned Voluntarily: Should We Pay Her Notice Period Salary? Seeking Advice

Dear Seniors, I have an issue with one of our employees. She has submitted her resignation due to personal reasons and mentioned that she will serve the notice period. However, since she resigned voluntarily, we have relieved her from duty today. Now, she is requesting payment of one month's salary for the notice period. Please advise on the appropriate course of action in this situation.

Thank you.

Hi, The employee is willing to serve the notice period, but you have asked her to leave, so it is your obligation to pay her. Please check the resignation clause in the appointment letter of your company and act accordingly.

She has an issue if she stated in her resignation that she will resign with effect from a future date, which may be one month away.

Regards,
B. Saikumar

Termination and Resignation Clause

Normally, the clause reads like this: "Your services may be terminated by giving one month's notice or one month's pay in lieu of notice. You may resign from the services by giving one month's notice or one month's pay in lieu of notice."

Purpose of Notice Period

If the management terminates suddenly, the employee will face hardship, and to compensate for this hardship to a certain extent, 30 days' notice or 30 days' pay is given. Similarly, when an employee resigns, the management will face the hardship of not having a person for that job and also need to spend money to manage the same job by incurring overtime, etc. To compensate the management, 30 days' notice is prescribed, and to persuade employees to be around for 30 days, notice pay is also included. Logically, both parties can say that they do not want the compensation.

Present Case

The employee opts to resign, and she gives a letter saying that she would like to be relieved on a specific date. Her intention is to leave the company, and there is no hardship created for her by the company. It is for the management to decide whether to relieve her on the same day or any day during the notice period. We need to understand the purpose of such clauses and apply the logic.

Some may not agree with my argument, and there has not been any case law on this subject (to my knowledge). However, I have followed this logic for 35 years, and wherever I have worked, we have followed this logic.

Regards,
T. Sivasankaran

Relevant Clauses in Employment Documents

You need to see the relevant clauses in the appointment letter, standing orders, HR manual (assuming given to employees), and terms of employment if any. Some companies have a clause stating that management has the right to accept resignation with or without notice, at their choice. If you have a clause to that effect, then you can relieve her and not pay.

In any other case, you have to pay the notice period salary even if you do not want her in the office. If you wish to take a humane view and consider your reputation in the job market (and also you may need to interact with the same person in another company on a professional basis), then you must pay for the notice period. She may face financial hardships if she loses one month's salary. It's not a good idea to have someone leave with a bad impression of your company when it could be avoided.

Likewise, the above arguments do not apply if she was asked to leave for fraud, shoddy work, or any matter of dispute that makes it impossible for her to work in the office.

Gardening Leave Practice

There is a practice of gardening leave in Western economies that applies to senior employees. It's a period for which they get paid, can't work for anyone else or join the next job, but are not wanted in the office (confidentiality issues). At the same time, they are available for anything the company might need. Unfortunately, few companies follow that in India.

Regards.

In my opinion, you have to consider only the clause of the appointment letter.

Regards,
Pani Ram Arya

Employee Resignation and Notice Period

In this case, the employee has resigned on her own and has not been terminated by the employer. Therefore, it is at the discretion of the employer to either require her to work the notice period or relieve her immediately. The employee cannot claim notice pay in lieu of the notice period. If the employer had terminated her, she would have been eligible for notice pay.

Since the employee has expressed her intention to resign from 21 July 2012 but you have relieved her immediately, it is advisable, both on technical grounds as well as on grounds of administrative prudence, to pay her one month's salary and end the matter on a win-win situation.

Regards,
B. Saikumar
Mumbai

Dear Seniors, In our appointment letter, we have mentioned that "your service may be terminated at any time by one month's notice in writing by either side." Now, she is referring to that point and asking us to pay one month's salary for the notice period; otherwise, she will proceed legally.

Legal Strength of Appointment Letter Clause

Is the point we mentioned in the appointment letter legally strong on the employee's side? Please suggest to me.

Regards,

Resignation and Notice Period Clarification

She has not been terminated; she has resigned. If she has resigned, it's up to the employer to decide whether to make her work for the full notice period or relieve her immediately. If she was terminated by the employer, she would be eligible for notice pay.

As I understand, the employee has submitted her resignation, and as per the terms of her appointment, she has given the Company the required notice and has agreed to serve out the said notice period. The management, however, decides to accept her resignation with immediate effect and also relieve her with immediate effect. Under the circumstances, the Company is obliged to pay her salary in lieu of the shortfall in the notice period.

Best wishes,
Vasant Nair

Notice Period and Resignation Guidelines

Normally, a notice of one or two months is required by the employer to ensure a smooth handover of duties and a successful transition for the new employee. This notice period may be waived at the discretion of the management. Similarly, the employee has the option to either provide notice or pay one to two months' salary in lieu of notice as per the terms of employment.

If an employee gives one month's notice and it is accepted by the management, the employment term comes to an end. An employee can only claim wages in the case of termination by the employer. Giving one month's notice is a requirement, and the acceptance of the resignation is at the management's discretion. It is essential to review the employment rules, particularly the terms and conditions outlined in the appointment letter, to take a legally sound position.

Regards,
Gsrao

Reply on the subject by Mr. Shivshankaran is most appropriate and practically executable. But the question is whether the employee has a legal right to serve the full notice period and get paid until the expiry or not?

Legal Right to Serve Notice Period

Under Sec-30 of the Delhi Shops and Establishment Act, 30 days' minimum notice is required from both sides after completing 3 months in service. The explanation of this section goes like this: "If one party has served notice, the other party is not bound to bear the party serving notice until the expiry of the notice."

In the present case, the employee can be relieved as per the wish of the employer on or before the expiry of the notice, and the employee can't insist on serving the full notice period. (Dass Studios Vs. RK Baweja, Labor Court, Delhi, 1972 (1) ILR 856, Delhi HC)

However, even in such a case, it is always better to have a clear policy as per the law in terms of appointment or certified Model Standing Orders to avoid any disputes with the employee since every leaving employee is an ambassador of your company.

Regards,
Vikas

This case is more than clear. Don't play games; pay her salary promptly and give her a farewell, or let her complete the notice period. Furthermore, all of you are advised to ignore the advice of traditional people like Tsawsnkaran. We should embrace modern approaches and prioritize being human-friendly to effectively utilize resources for the best interests of all organizations.

The employer cannot eat the cake and have it too when the terms of employment are reduced to writing. It cannot be that the employer does not want to terminate the service of an employee to avoid notice pay and does not want to pay a month's wages to an employee willing to serve the notice period by accepting her resignation immediately. It cannot adopt a "heads I win, tails you lose" policy when there is a written policy. It will be opposed to the principle of equity embedded in the contract, and the courts may examine whether the action of the employer conforms to this principle. Therefore, it is better to pay her a month's salary. As HR professionals, it is always better to achieve a "win-win" situation in the employer-employee relationship.

Regards,
B. Saikumar
HR & Labour Law Advisor
Mumbai

Please don't be philosophical. Quote hardcore facts and legal positions. The rest is up to the company to either follow it or discard it.

It is a fact that the concerned employee's intention was to resign with effect from 21st July 2012 only. In such a case, if an employer intends to relieve such an employee earlier, then the employer can accept her resignation from an early date only after the concerned employee agrees to be relieved from her service from the said date by giving her consent in writing. In this case, since the employer on his own accepted her resignation before her intended date of resignation, she is right in claiming pay for the unexpired period of notice (there are a number of judgments on this issue). The employer may withdraw or modify the acceptance of the resignation letter suitably and relieve her from service as per her resignation letter or from the early date if she agrees in writing.

Regards,
SC Verma

While I agree that she should get full notice pay, I do not agree with your contention that there is no rule of law that says an agreement must be fair or equal to both sides. It is up to each person to decide what they will sign, and once signed, they need to honor it.

The exception courts take is concerned with any term that requires the employee to work in circumstances of forced labor (like an unnecessarily onerous bond) or a non-compete clause that will result in the employee not getting a job in his area of specialization.

In the case of things like the notice period, if the appointment letter or, for that matter, the HR policy or terms of employment provide for termination on terms different from resignation, and the same has been signed or implicitly accepted, then it will stand in any court of law. But please note that in the case of the original poster, the appointment letter had no such clause allowing the company to terminate or relieve without a full notice period.

The Nature of Employment Contracts

There is a notion or view that a contract of employment is a law unto itself as far as the rights and obligations of the parties are concerned, namely the employer and the employee. It is true but not entirely. The Indian Contract Act, 1872, itself has imposed conditions for a contract to be valid and enforceable. For example, a contract entered into by one party exercising undue influence on the other party is void. Again, Section 27 of the Act, since Niranjan Golikari's case way back in 1969, renders restrictive clauses prohibiting an employee from joining a competitor after leaving service as null and void as they are in restraint of trade.

Contracts Between Unequals

A contract of service is an agreement between a powerful employer who dangles the carrot of a job with a salary tag before an employee who needs it to earn his livelihood. Thus, it is a contract between two unequals, and perhaps the terms have been accepted by an employee for a compulsive need or under the undue influence of a powerful employer. Therefore, the courts will lift the veil and see whether the terms are in accordance with any law that protects the economic rights of an employee or in accordance with the principles of equity and justice. In view of the fact, the Apex Court in Niranjan Golikari's case observes that the agreements between the master and servant shall be put to a stricter view, and they cannot be put on the same pedestal as business contracts between a vendor and vendee or seller or purchaser.

Termination and Natural Justice

Thus, in one case, the employer terminates the service of an employee by giving one month's notice by invoking terms of employment only in a letter but not in spirit. However, the Constitution Bench of the Apex Court threw the termination out as the employee was not given a hearing before being terminated, though the contract does not provide for a hearing. This is a gleaming example where the honorable Court imported the principle of equity reflected in the principles of natural justice to balance the contract evenly between the employer and the employee.

Another example to illustrate is, let us assume that a contract provides a clause that permits an employee to resign by giving one month's notice but entitles the employer to refuse resignation without assigning any reason. Merely because the contract was signed by the employee, should he be under the slavery of the employer for his life as he has conceded the right to refuse to the employer? Will such a contract survive in a court of law? Will it not hit Section 27 of the Contract Act to become void? The foundations of such contracts seem to be shaky in the light of the court's observations in one case that a person, by entering into a contract of employment, does not sign a bond of slavery, and a permanent employee cannot be deprived of his right to resign (more so in the modern era of technology, which opened up abundant job opportunities).

Transfer Clauses and Employer's Rights

Yet there are cases wherein either the contract of service or service rules contain a clause that an employee is transferable anywhere in India. However, such a clause does not give carte blanche to the employer to transfer an employee with malafide intention or in a colorable exercise of power, for example, to punish him for an act of indiscipline. Though the courts have upheld the employer's right to transfer as his privilege, they set aside those affected with bad motive on the principles of equity and fairness.

Case Analysis: Resignation and Notice Period

In the instant case put up by the queriest, the employee submitted her resignation with an intention to serve the notice period. If the contract does not have a notice period and notice pay clause, the queriest should not have any issue. The fact that she has an issue with the employee's resignation shows that there is a provision for a notice period. In such a case, when the employee expresses her intention to serve the notice period, it means she wants to terminate the contract of service only after the expiry of the notice period. Since the employer has terminated the contract of service by accepting her resignation before the expiry of the notice period and deprived her of a month's salary, in my view, he is required to pay notice pay as demanded by her on the basis of principles of equity and fairness.

Regards,
B. Saikumar
HR & Labor Law Advisor
Mumbai

Dear Mr. Saikumar,

I went through your detailed posting, and thanks for bringing up the issue of Principles of Equity in Contract. There had been some questions about the validity of Service Agreements/Bonds a few days back, and I did mention this. To assess whether a contractual term is valid in law or void, we need to examine the principles laid down by the SC, more specifically the principles of equity.

I am in agreement with you on the following:

- A clause stating that a person shall not join a competitor cannot pass the test of equity.
- An employee can be transferred anywhere in India may not pass the test every time.
- An employee can be terminated without assigning a reason, which also shall not pass the test of equity.

The present issue is not about the validity of a clause. Both parties agree to give 30 days' notice. The clause passes the test of equity.

Implementation of the Equity Clause

Now, how do we implement it? While implementing, is there any violation of the principles?

The equity clause here is meant for both parties to compensate or get compensated for the hardships that they would undergo due to resignation or termination.

In the case of termination, the hardship is for the employee; hence there has to be a payment of 30 days, 60 days, or 90 days, as the case may be.

In the case of resignation, there is no hardship created by the employer for the employee. The employee chooses to resign as he would have another employment or personal commitments. The principle of equity requires the employee to give a notice of 30 days, and he has honored the provision. Now, the employer can decide whether they require him to work for 30 days, 10 days, or not even one day after he submits his resignation. They have not breached the principles of equity here. If they refuse to accept his/her resignation even after 30 days and withhold his/her dues, they are breaching the principles.

Some managements ask me whether they can postpone relieving an employee by three months or six months. My advice has always been to relieve them exactly on the last day of the notice period or earlier and not to keep them even one day more.

Similarly, an employee can give a notice of 30 days or 60 days. In fact, thrice during my career, I have given six months' notice even though the appointment letter demands only three months. It is for the management to decide whether to believe me or not after I submit my resignation. In senior positions, this is usually negotiated. I have seen instances of one-year notice periods as well. Management requests employees to stay for a year to complete certain assignments, and mutually they agree. I have also come across senior-level people submitting resignations and getting relieved within a week.

Considering the principles of equity as explained by you, I am of the opinion that the employer here has not flouted or breached any of the principles. Hence, the employee is not entitled to any money towards the notice period.

Regards,
T. Sivasankaran

Termination Clause in Appointment Orders

Normally, in every appointment order, the termination clause includes the provision that either party must give one month's salary or one month's notice pay.

If an employee wishes to leave, they must submit a resignation and work for one month during the notice period. If the employee wants to leave immediately, they must pay one month's salary to the management and then leave the job. Some managements may choose to waive the notice period and release the employee immediately upon request.

In this particular case, the employee gave notice with the intention to work, but you immediately relieved her of her duties. Consequently, you would be required to pay one month's salary if she makes a claim.

Regards,
D. Gurumurthy
LL. HR & IR Consultant
Hyderabad.

It will be advisable to abide by the terms and conditions in the Appointment Letter. In this particular case, the employee, who has given one month's notice for resignation, is entitled to one month's notice pay.

If she has mentioned and requested to be relieved on a specific date, then legally she is liable to complete her notice period and entitled to receive salary accordingly. If you wish to relieve her before the mentioned date, please refer to the appointment clause which states, "the management is free to relieve you before the date mentioned by you. In this case, you are not entitled to receive any further salary or services after being relieved."

Thanks,

Umesh Kumar
Rapid Fire Business Guidance

Dear Seniors, I have an issue with one of our employees. She has given her resignation due to her own issues and informed us that she will serve the notice period. However, as she has resigned on her own, we relieved her from duty today itself. Now, she is requesting to be paid one month's salary for the notice period. Please suggest what we can do in this case.

Notice Period and Salary Payment

She has resigned; she has not been terminated. It is the decision of the company whether they require a notice period from a specific employee or not. She will be paid until the last day of her job. If today is her last day, then she will be paid until today.