Unfair Dismissal or Wrongful Termination of an Employee

Unfair dismissal or wrongful termination of an employee is construed as one and same. unfair dismissal is an act of removing or terminating an employee without assigning valid reason or on valid grounds. It is treated as unfair on the part of employer if an employee is removed or terminated without giving him valid reasons for such major act, despite his compliance and discipline and not giving opportunity of being heard which is also against to the principles of natural justice.

There is separate branch of law which is called as labour and industrial which deals with employment issues. Labour laws are set of laws enacted specifically to deal with employment issues in order to protect workmen from unfair activities by the employer. There are various provisions in labour laws, envisaging situations and circumstances under which employee should not be removed by employer from the employment. below mentioned are the certain circumstances under which the employer should not terminate his employer from the employment.

Dismissal or termination of employee without paying

Right to live and work is the fundamental right of every citizen. Earning for living is the primary object of everyone. Though livelihood of person to person may vary but every person work for earning for supporting his/her life. It is the right of an employee to get paid by his employer for the work extracted by his/her employer and it is the duty of every employer to pay wages/salaries to his/her employees for the work done. Though there are labour laws like The Payment of wages Act, 1936 having provisions for regular payment of wages/salaries to employees without failure, it is needless to refer them as, it is basic duty of an employer to pay employees for the work done. Therefore it is unfair on the part of employer to dismiss or terminate an employee without paying him for the work done, unless employee wilful negligence caused serious loss or damage to his/her employer.

What Supreme Court held on payment of Back Wages in case of wrongful termination

Read Judgement Below

The Supreme Court reaffirmed the law that payment of full back wages for the period for which no service has been rendered would be the normal rule in case of wrongful termination of service.

The appellant, in this case, was appointed as a Headmaster in 1986 of a Nagar Parishad High School. In 1994, a showcase notice was issued to him levelling allegations of misappropriation of funds to the tune of Rs 5,000. An inquiry officer was appointed to look into the matter whose report concluded no misappropriation and found the appellant not guilty of misconduct.

Subsequently, a second inquiry officer was appointed to probe the matter though his appointment was objected to by the appellant. The second inquiry officer found the appellant guilty of misappropriation of funds and the appellant was terminated from service in July 1996.

The appeal filed by the appellant before the Regional Director, Municipal Administration, Nagpur Division under Section 79 (6) of the Municipal Councils, Nagar Panchayats and Industrial Townships Act 1965 was dismissed

The appellant then filed a Writ petition before the Bombay High Court challenging his removal.

The High Court held the removal to be illegal and added that the action of the Municipal Council to proceed with the second inquiry was vitiated given that no reasons were recorded to buttress the non-acceptance of the first inquiry report. Even the objection to second inquiry committee raised by the appellant was taken note of by the High Court.

It, therefore, quashed the order of termination of services. However, since the appellant had attained the age of superannuation by then, the High Court ordered retiral benefits to be paid to the appellant but held that no back wages could be paid for the period for which he did not render any services.

The question before the Supreme Court was whether back wages could be allowed for the period for which the appellant was not in service.

The Court adverted to the principles laid down in a catena of judgments on this issue.

In Hindustan Tin Works case, a three-judge Bench of the Supreme Court had held that if the employer terminates the service illegally and the termination is motivated, the termination may amount to unfair labour practice. In such circumstances, reinstatement being the normal rule, it should be followed with full back wages.

Similar rulings were rendered in Surendra Kumar Verma v. Central Government Industrial Tribunal-cum-Labour Court and Deepali Gundu Surwase v Kranti Junior Adhyapak Mahavidyalaya.

Having due regard to the principles enunciated in Deepali Surwase, the Supreme Court held that the High Court was not justified in denying the back-wages to the appellant altogether.

Considering the lapse of time, the Court held that reopening the proceedings would not be expedient in the interest of justice particularly when the appellant had, in the meantime, attained the age of superannuation in 2005. Further, relegating the appellant to a protracted course of action by restoring the proceedings before the disciplinary authority would also not be fair and proper after a lapse of nearly fourteen years since his retirement.

Hence, the Supreme Court ordered that a lump sum amount quantified at Rs. 5 lakh be paid in full and final settlement of his claim for back wages for the period between the date of the order of removal and the date on which he attained the age of superannuation. This payment shall be in addition to the retiral benefits to which he is entitled in terms of the order of the High Court.

What Supreme Court held on payment of Back Wages in case of wrongful termination.pdf

Layoffs and retrenchment

Section 25A to 25S in industrial dispute act 1947, deals with the layoffs and retrenchment of employee.

To make it clear, layoff is temporary suspension of employee except on the reason of punishment and retrenchment is removal of surplus staff due to employer inability to maintain employees.

According to the said provisions, employee should not be layoff or retrenched without showing valid reasons to the employee and to the appropriate authority and without the permission or approval of the appropriate authority. If layoff is in accordance with the Industrial dispute Act 1947, employer is liable to pay compensation equal to 50% of remuneration of employee. provided that organisation or establishment should not be seasonal character and should consist of more than 50 employees.


For establishments or organisations having 50 or more employees but not more than 100, employer should give one-month notice to the employee who is going to be retrenched or salary in lieu of that notice and employer is liable to pay retrenchment compensation at the rate of half month's salary for every year of service employee puts up. Provided that employee should complete minimum one year of service in the establishment.

For establishments or organisations having 100 or more employees and not of seasonal character, such employer should give three months notice to the employee who is going to be retrenched or salary in lieu of that notice and employer is liable to pay retrenchment compensation at the rate of half months salary for every year of service employee puts up. provided that employees should complete minimum one year of service in the establishment.

Note: first come first go principle should be followed by employer for retrenchment of employee.

It is unfair on the part of employer to dismiss employee for the following reasons mentioned below

THE FIFTH SCHEDULE : Unfair Labour Practices

[Section 2(ra)]

(a) threatening workmen with discharge or dismissal, if they join a trade union;

(b) discharging or punishing a workman, because he urged other workmen to join or organize a trade union;

(c) discharging or dismissing a workman for taking part in any strike (not being a strike which is deemed to be an illegal strike under this Act);

To discharge or dismiss workmen-

(a) by way of victimization;

(b) not in good faith, but in the colourable exercise of the employer’s rights;

(c) by falsely implicating a workman in a criminal case on false evidence or on concocted evidence;

(d) for patently false reasons;

(e) on untrue or trumped up allegations of absence without leave;

(f) in utter disregard of the principles of natural justice in the conduct of domestic enquiry or with undue haste; (g) for misconduct of a minor technical character, without having any regard to the nature of the particular misconduct or the past record or service of the workman, thereby leading to a disproportionate punishment.

(11) To discharge or discriminate against any workman for filing charges or testifying against an employer in any enquiry or proceeding relating to any industrial dispute

Dismissal or termination of employee during the maternity leave

According to the Maternity Benefit Act,1961, section 12 [Dismissal during absence of pregnancy ] is unlawful by the employer to discharge or dismiss her during or on account of such absence.

The discharge or dismissal of a woman at any time during her pregnancy is also unlawful on the part of employer.

(The dismissal shall be lawful unless there is gross misconduct on the part of employee)

Dismissal or termination of an employee due to disablement [temporary, partial and total]

According to the Workmen's compensation act 1923, [section 3] it is unlawful to dismiss or terminate any employee for a disablement [temporary, partial and total] caused by an injury during course of employment. Provided that injury out of an accident should result in the total or partial disablement of the workmen for the period exceeding three days.

Employer is not liable to pay any compensation to employee in case the accident was caused due to;

    • the contributory negligence on the part of employee when they were under the influence of drink or drug and the time of accident,

    • the wilful disobedience of the workman to an order expressly given, or to a rule expressly framed, for the purpose of securing the safety of workman or

    • the wilful removal or disregard by the employee of any safety guard, or other device which he knew to have been provided for the purpose of securing the safety of employee.

Amount of compensation to injured workman shall be payable as mentioned in the [section 4] of Workmen's compensation act 1923.