Dear Respected Members,
We are seeking legal opinion in case of our suspended employees. I am briefing case as under
Three employees of high management grade made a conspiracy to form a partnership firm by respective wives. The said partnership firm was located/ registered at the residence of one of three employees. All wives were house hold ladies with no experience of business. After 8 months of working with the firm secretly, we came to know of above facts which were corroborated by Import-Export Code number and Port Shipping data which are in public domain. It revealed that firm was exporting products similar to ours and many Customers were the same that of our company.
When we learnt above we immediately suspended all of them to save further loss and asked them to appear before a One man enquiry Committee headed by our GM. All three employees didn’t appear before enquiry committee sending medical certificate. Then, they sent their resignation and claimed gratuity, earned leaves and 8 days salary etc.
We replied that their resignation couldn't be accepted during pendency of enquiry, that they should appear before Enquiry committee, that their said dues could not be paid until their services are terminated. At present we are showing them as Suspended employees in our records. Now they have gone to Court of Law to press their demand of gratuity, earned leaves etc.
Opinion sought:
1. Is step taken by us are correct in law?
2. Can we refuse payment as asked for on the ground that their services have not been terminated, that they are still suspended employees?
3. How long can we keep them in status of Suspended employees as there is no chance of their appearing before the Enquiry Committee?
(Currently all three are engaged in the new firm partnered by their wives and competing against us.)
4. Any other remedies available to us, apart from withholding their dues as said above?
From India, Tirupati
We are seeking legal opinion in case of our suspended employees. I am briefing case as under
Three employees of high management grade made a conspiracy to form a partnership firm by respective wives. The said partnership firm was located/ registered at the residence of one of three employees. All wives were house hold ladies with no experience of business. After 8 months of working with the firm secretly, we came to know of above facts which were corroborated by Import-Export Code number and Port Shipping data which are in public domain. It revealed that firm was exporting products similar to ours and many Customers were the same that of our company.
When we learnt above we immediately suspended all of them to save further loss and asked them to appear before a One man enquiry Committee headed by our GM. All three employees didn’t appear before enquiry committee sending medical certificate. Then, they sent their resignation and claimed gratuity, earned leaves and 8 days salary etc.
We replied that their resignation couldn't be accepted during pendency of enquiry, that they should appear before Enquiry committee, that their said dues could not be paid until their services are terminated. At present we are showing them as Suspended employees in our records. Now they have gone to Court of Law to press their demand of gratuity, earned leaves etc.
Opinion sought:
1. Is step taken by us are correct in law?
2. Can we refuse payment as asked for on the ground that their services have not been terminated, that they are still suspended employees?
3. How long can we keep them in status of Suspended employees as there is no chance of their appearing before the Enquiry Committee?
(Currently all three are engaged in the new firm partnered by their wives and competing against us.)
4. Any other remedies available to us, apart from withholding their dues as said above?
From India, Tirupati
Dear Sharmaji,
Since the proposed disciplinary action is against managerial Cadre employees, the application of labor laws other than the Payment of Gratuity Act, 1972 is out of question in the issue. In such a situation, the terms of the contract of employment and the service regulations applicable to their Cadre can only be called in assistance.
First and foremost, l have a basic doubt about your Company's authority as the employer of the husbands to question the formation of a partnership firm in the same trade by the wives of the 3 employees.
Secondly, even if your allegations based on the suspicion that the said partnership firm is a pseudo one actually run by the three employees, what is the proof? Mere suspicion cannot take the place of proof.
The customers being the one and the same might be a mere coincidence based exclusively on the choice of the same customers themselves.
The import-export Code No and Port Shipping data available in public domain may be in the Partnership Firm's name only. As such how they can prove the allegation that the three employees are secretly working there and creating conflict of interests against their current employer?
Thirdly, it seems that you have placed them under suspension pending enquiry. If so, have you framed any charges and served on them before calling them for enquiry? Without knowing the charges leveled how do you expect them to participate in the enquiry during suspension?
Fourthly, does the contract of employment or service regulations provide for suspension pending enquiry?
Whether any subsistence allowance was paid to them?
The Principles of Natural Justice applies to all suspended employees facing disciplinary proceedings irrespective of the sectarian classification. Even if there is no express provision for suspension by the employer, of course, it is inherent with the power to appoint. But non-payment of subsistence allowance during suspension would certainly vitiate the entire disciplinary action.
Fifth and finally, do you have entered into any non-compete agreement with the three employees?
You are perfectly right in rejecting their resignation on the ground of pending disciplinary action against them. This can be a valid defense against their claim for gratuity.
Therefore, my suggestion would be
A) To continue with the enquiry after framing formal charges and if they fail to participate, set the enquiry ex-parte and decide according to the enquiry findings.
OR
B) To accept their resignations forthwith after adjusting the notice period salary from their dues.
From India, Salem
5967Since the proposed disciplinary action is against managerial Cadre employees, the application of labor laws other than the Payment of Gratuity Act, 1972 is out of question in the issue. In such a situation, the terms of the contract of employment and the service regulations applicable to their Cadre can only be called in assistance.
First and foremost, l have a basic doubt about your Company's authority as the employer of the husbands to question the formation of a partnership firm in the same trade by the wives of the 3 employees.
Secondly, even if your allegations based on the suspicion that the said partnership firm is a pseudo one actually run by the three employees, what is the proof? Mere suspicion cannot take the place of proof.
The customers being the one and the same might be a mere coincidence based exclusively on the choice of the same customers themselves.
The import-export Code No and Port Shipping data available in public domain may be in the Partnership Firm's name only. As such how they can prove the allegation that the three employees are secretly working there and creating conflict of interests against their current employer?
Thirdly, it seems that you have placed them under suspension pending enquiry. If so, have you framed any charges and served on them before calling them for enquiry? Without knowing the charges leveled how do you expect them to participate in the enquiry during suspension?
Fourthly, does the contract of employment or service regulations provide for suspension pending enquiry?
Whether any subsistence allowance was paid to them?
The Principles of Natural Justice applies to all suspended employees facing disciplinary proceedings irrespective of the sectarian classification. Even if there is no express provision for suspension by the employer, of course, it is inherent with the power to appoint. But non-payment of subsistence allowance during suspension would certainly vitiate the entire disciplinary action.
Fifth and finally, do you have entered into any non-compete agreement with the three employees?
You are perfectly right in rejecting their resignation on the ground of pending disciplinary action against them. This can be a valid defense against their claim for gratuity.
Therefore, my suggestion would be
A) To continue with the enquiry after framing formal charges and if they fail to participate, set the enquiry ex-parte and decide according to the enquiry findings.
OR
B) To accept their resignations forthwith after adjusting the notice period salary from their dues.
From India, Salem
I would like to say in this matter that what will be the result of your inquiry? Terminating the service of employees? It will happen the same way when those people have given their resignation letter. Rather, by giving their resignation letter, your company will not have much liability, but if you terminate them then you will have to give notice period which will probably not be applicable in the resignation given by them, but the notice period will be recovered by the company (if the company has Notice period clause is indicated in the standing order and appointment letter)
From India, Rudarpur
From India, Rudarpur
Dear Colleague,
Very detailed explanation given by our Colleague Shri Umakanthan Sir in his reply. Few points to consider are :
1. In the event you had rejected their resignation and had lost confidence on them then, Clearly collect authentic evidence and issue charge sheet as early as possible to them. You may call for their explanation on the ground " loss of confidence" stating all facts of the matter mentioned in the charge sheet. Give a specific time line for submitting their reply in writing. If you are able to get letters from the customers list for whom you and they supply it will be a good proof.
2. It is also suggested once they submit or not submit reply within the given time for the charge sheet, then post an enquiry and send enquiry notice. Please conduct the enquiry with an Independent Enquiry Officer preferably from outside ( not by your GM). May be an Advocate from outside. If they attend to the enquiry well and good. If they do not attend to the enquiry for 2 times or more then conduct exparte enquiry in their absence and issue Termination letters in consultation with a Lawyer.
3. You may forfeit their gratuity claim based on the findings of the enquiry of proved against them and they are found guilty on the ground of "Moral Turpitude"
4. Kindly ensure that fair opportunities are given and then actions are taken in consultation with a good Lawyer in this case to avoid any after effect as well as to give good communication to other managers of the company too.
5. If you have strong evidences and belief then use " Loss of Confidence" provision and before moving have a good reading of all service rules, code of conduct etc of your organization.
6. There are some good detective agencies are there whom will be also helpful to find out the facts of their business which can also be explored.
7. Do not keep them as it is for long but quickly move on with concrete actions with all justice, fair process and opportunities to prove their side too.
All the Best, God bless,
Dr.P.SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
Very detailed explanation given by our Colleague Shri Umakanthan Sir in his reply. Few points to consider are :
1. In the event you had rejected their resignation and had lost confidence on them then, Clearly collect authentic evidence and issue charge sheet as early as possible to them. You may call for their explanation on the ground " loss of confidence" stating all facts of the matter mentioned in the charge sheet. Give a specific time line for submitting their reply in writing. If you are able to get letters from the customers list for whom you and they supply it will be a good proof.
2. It is also suggested once they submit or not submit reply within the given time for the charge sheet, then post an enquiry and send enquiry notice. Please conduct the enquiry with an Independent Enquiry Officer preferably from outside ( not by your GM). May be an Advocate from outside. If they attend to the enquiry well and good. If they do not attend to the enquiry for 2 times or more then conduct exparte enquiry in their absence and issue Termination letters in consultation with a Lawyer.
3. You may forfeit their gratuity claim based on the findings of the enquiry of proved against them and they are found guilty on the ground of "Moral Turpitude"
4. Kindly ensure that fair opportunities are given and then actions are taken in consultation with a good Lawyer in this case to avoid any after effect as well as to give good communication to other managers of the company too.
5. If you have strong evidences and belief then use " Loss of Confidence" provision and before moving have a good reading of all service rules, code of conduct etc of your organization.
6. There are some good detective agencies are there whom will be also helpful to find out the facts of their business which can also be explored.
7. Do not keep them as it is for long but quickly move on with concrete actions with all justice, fair process and opportunities to prove their side too.
All the Best, God bless,
Dr.P.SIVAKUMAR
Doctor Siva Global HR
Tamil Nadu
From India, Chennai
Dear Manoj Sharmaji,
In the matter suggestion provided by Umakanthanji and Dr Sivkumar quite relevant by analyzing the case from various angles.
In my opinion your case is very weak as per the information provided in posting. But your establishment has already initiated the action so now it is prime objective is to defend the case. You need to make your case strong, if required file FIR by consulting an advocate with relevant documents. Your management should not accept the resignation until they appear for domestic inquiry. You should appoint an Advocate as Inquiry officer let the GM be the management representative. You should construct the case as the misconduct to validate the action initiated.
Because doing business by the wives of your employee not a misconduct by forming a partnership firm. But it can be considered as misconduct, if anyway the use of name of your establishment or running a business in the company colony allotted for accommodation or violation any clause of appointment or misconduct as per company's standing order or violation any of the policy laid down by the company. Your action should be as per the guidelines of the Principles of Natural Justice.
You are perfectly right in rejecting their resignation on the ground of pending disciplinary action against them. This can be a valid defense against their claim for gratuity.
From India, Mumbai
In the matter suggestion provided by Umakanthanji and Dr Sivkumar quite relevant by analyzing the case from various angles.
In my opinion your case is very weak as per the information provided in posting. But your establishment has already initiated the action so now it is prime objective is to defend the case. You need to make your case strong, if required file FIR by consulting an advocate with relevant documents. Your management should not accept the resignation until they appear for domestic inquiry. You should appoint an Advocate as Inquiry officer let the GM be the management representative. You should construct the case as the misconduct to validate the action initiated.
Because doing business by the wives of your employee not a misconduct by forming a partnership firm. But it can be considered as misconduct, if anyway the use of name of your establishment or running a business in the company colony allotted for accommodation or violation any clause of appointment or misconduct as per company's standing order or violation any of the policy laid down by the company. Your action should be as per the guidelines of the Principles of Natural Justice.
You are perfectly right in rejecting their resignation on the ground of pending disciplinary action against them. This can be a valid defense against their claim for gratuity.
From India, Mumbai
Thank you very much Umakanthan. M Sir, Dr.P.SIVAKUMAR Sir, O.B.Gautam Sir and Prabhat Sir for your valuable inputs. It will help us to process this matter further. Thanks & Regards, Manoj Sharma
From India, Tirupati
From India, Tirupati
Dear Sirs,
Very good insights are provided by seniors. This kind of cases at senior level are very rare and provided a lot of learning experience. Thanks to all.
My suggestion as said by the seniors, if the employer has strong grounds or can make strong grounds then may go ahead with enquiry proceedings. If not better to settle by accepting resignations as failure in enquiry by employer will create undesired issues later.
If employer decided to go ahead irrespective of consequences, then proceed with enquiry and terminate based on enquiry findings. If the delinquents wish to move court face it.
Thank you seniors once again.
From India, Hyderabad
Very good insights are provided by seniors. This kind of cases at senior level are very rare and provided a lot of learning experience. Thanks to all.
My suggestion as said by the seniors, if the employer has strong grounds or can make strong grounds then may go ahead with enquiry proceedings. If not better to settle by accepting resignations as failure in enquiry by employer will create undesired issues later.
If employer decided to go ahead irrespective of consequences, then proceed with enquiry and terminate based on enquiry findings. If the delinquents wish to move court face it.
Thank you seniors once again.
From India, Hyderabad
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