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SymSun   23 April 2021

Termination of employees due to cost cutting

I am working for a IT services company in Karnataka. Company is planning to reduce workforce comprising of some senior employees in order to cut costs. I would like to know what is the retrenchment or termination dues payable normally under the applicable legislation such as the Shops and Commercial Establishments Act of Karnataka or the ID Act. Some of these employees have served over 10 years in the company. Is the offer letter to be considered the employment contract in this case? Can the employees be terminated by paying the notice period salary which is two months’ pay?....or should the employer be liable to pay compensation as indicated in the SE Act (15 days or 1 month of salary for every completed year of service)?

Second part of the same situation is who is considered a manager …as some of these employees designation has been very recently tagged as “manager” – according to one advocate’s document posted in this site it reads as below:

in order to determine whether a person is in a position of management or not, the factors to be considered are  whether the,  person  had  power to operate  on the  Bank  account, whether he could make payments to third parties  and enter into agreements with them on behalf of the employer, whether he  was entitled to represent the employer to the  world  at large  in  regard  to  the dealings  of the  employer with strangers, whether he had authority to supervise the work of the  clerks  employed in the establishment, whether  he had control  and charge of the correspondence, whether he could make commitments on behalf of the employer, whether he could grant leave  to  the  members of the staff and hold disciplinary proceedings against them and whether he had the power to appoint members of the staff or punish them. The salary drawn by an employee may have no significance and may not be material though it may be treated theoretically as a relevant factor"

Do all of the factors apply together to considered an employee as a “manager” or is an employee considered a manager if any one or few factors even apply?

 

Replies and opinions are gratefully appreciated!



Learning

 3 Replies

Sankaranarayanan (Advocate)     23 April 2021

With the support of your appointment letter and contract (if) approach a local labour lawyer and seek advise and act accordingly

SymSun   23 April 2021

Thanks - yes that is something that will definitely be pursued once the action is initiated by the employer. But the intent of asking here is to gather some expert opinion as a starting point, and with that information hopefully minimize the impact and also push for exploring alternatives. So request to please help with your insights.

Pradipta Nath (Advocate)     23 April 2021

ID Act have the provisions for retrenchment or lay off. The S&E Act though a State specific legislation, regulates closing and week off and leaves. In few maternity leaves also regulated! Please check whether the terminated employees are workman as defined under the ID Act or not! In case not the termination will be as per the Appointment letter.


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