Employment termination in India is governed by a structured legal framework designed to balance the rights of employees with the interests of employers. Whether you’re a business owner, HR professional, employee, or a law student, understanding these laws is crucial to avoid legal pitfalls and ensure compliance. This article delves into the key laws, sections, procedures, and rights relating to employment termination in India, especially relevant for individuals seeking employment legal advice in Chandigarh or representation in the High Court.

Legal Framework Governing Employment Termination in India

Employment termination in India is primarily regulated through various labor legislations, consolidated codes, and judicial interpretations. These include:

Industrial Disputes Act, 1947 (IDA)

The IDA is one of the most important laws concerning termination. It applies mainly to “workmen” as defined under the Act.

Section 2(s) – Definition of Workman

Defines a “workman” as any person employed in any industry to do manual, unskilled, skilled, technical, operational, clerical or supervisory work for hire or reward.

Section 25F – Conditions Precedent to Retrenchment

An employer must:

  • Provide one month’s notice or pay in lieu. 
  • Pay compensation equivalent to 15 days’ average pay for every completed year of continuous service. 
  • Notify the appropriate government authority. 

Section 25N – Retrenchment in Larger Establishments

For establishments employing 100 or more workmen, prior government permission is mandatory before retrenching.

Section 25O – Closure of Undertakings

Employers need government permission for closing down an undertaking, and affected workmen must be compensated.

Industrial Employment (Standing Orders) Act, 1946

This Act requires employers to clearly define service conditions, including termination procedures, misconduct definitions, and disciplinary action guidelines. Once certified, these Standing Orders become binding.

The Code on Industrial Relations, 2020

Part of India’s recent labor law reforms, this Code consolidates:

This Code simplifies the law while retaining core protections regarding retrenchment, layoffs, and closure. It also defines procedures for termination, requiring written notice and compensation for workers, including the need for government permission in certain establishments.

The Shops and Establishments Act (State-specific)

Each Indian state enforces its version of the Shops and Establishments Act, applicable to non-factory establishments. It covers:

  • Working hours 
  • Leave 
  • Conditions of termination 
  • Notice periods In Chandigarh, the Punjab Shops and Commercial Establishments Act, 1958 applies. 

The Contract Act, 1872

For non-workmen and managerial employees, termination terms are typically governed by the employment contract under the Indian Contract Act. Clauses regarding notice period, severance, and termination reasons become critical.

 

Types and Grounds of Employment Termination in India

Understanding the legally permissible grounds for termination is essential, whether you are an employer in Chandigarh’s corporate sector, a startup founder, or a worker seeking help from a High Court employment lawyer in Chandigarh. Indian labor laws provide structured reasons under which termination can be lawfully executed, ensuring employee rights are protected while giving employers the flexibility to manage operations.

Termination Due to Misconduct

This is one of the most common legal grounds for dismissal. Misconduct must be serious and proven through a fair domestic inquiry. Common examples include:

  • Theft, fraud, or dishonest behavior 
  • Physical assault or violence in the workplace 
  • Sexual harassment or violation of the Prevention of Sexual Harassment (POSH) Act 
  • Breach of confidentiality or leaking sensitive information 
  • Insubordination or refusal to follow lawful orders 
  • Habitual late attendance or unauthorized absences 
  • Gross negligence or willful disobedience 
  • Violation of employment policies or code of conduct 

Termination legal advice in Chandigarh is often sought in such cases, especially when the employee challenges the fairness of the inquiry or the dismissal.

Termination Due to Redundancy

Redundancy-based terminations are valid under the Industrial Disputes Act, 1947, provided the employer follows the appropriate retrenchment procedures. Causes of redundancy include:

  • Downsizing due to business loss 
  • Closure of a department or the entire unit 
  • Mergers and acquisitions leading to overlapping roles 
  • Technological changes making certain roles obsolete 
  • Outsourcing or automation of tasks 

In large establishments (100+ workmen), prior government approval under Section 25N is mandatory. Employees may approach a job termination lawyer in Chandigarh or the Chandigarh High Court if they believe the termination is a disguised form of victimization or unfair labor practice.

Termination on Performance Grounds

Employers can terminate an employee for consistent non-performance or failure to meet key performance indicators (KPIs). However, the termination must follow a structured process:

  • Regular performance reviews 
  • Issuance of performance improvement plans (PIP) 
  • Written warnings with timelines 
  • Documentation of underperformance 

Without proper documentation, performance-based terminations may be considered arbitrary. Employees often consult an employee rights lawyer in Chandigarh in such situations.

Termination Due to Long-Term Illness or Incapacity

Termination on medical grounds is permitted if an employee becomes permanently incapacitated or is unable to fulfill their duties for an extended period. Employers must:

  • Offer reasonable accommodations where possible 
  • Obtain medical reports and expert opinions 
  • Follow humane and legally compliant procedures 

Dismissing an employee solely due to illness without due diligence may invite legal action, especially in the Chandigarh High Court if the employee alleges discrimination or violation of human rights.

Termination During Probation

Probationers can be terminated with shorter notice periods as defined in the appointment letter or company policy. However, even during probation, employers must:

  • Record performance concerns or behavior issues 
  • Avoid arbitrary or discriminatory termination 
  • Offer the probationer a chance to respond, especially in disciplinary matters 

Probationers are increasingly turning to employment lawyers in Chandigarh to contest unfair terminations, particularly in the IT and education sectors.

Termination Due to Expiry of Contract

Employees hired on a fixed-term contract may be legally terminated upon contract expiry. No retrenchment benefits are payable unless the contract is renewed multiple times or the termination violates the terms of engagement.

However, if the employee was functioning like a regular staff member, courts may treat the termination as illegal retrenchment.

Termination Due to Company Closure

If a business permanently shuts down due to insolvency, government regulation, or any other lawful reason, employers must:

  • Provide notice to all affected employees 
  • Pay compensation under Section 25FFF of the IDA 
  • Notify the labor department 

A labor law advocate in Chandigarh is often consulted for handling legal formalities and defending claims from terminated employees.

Voluntary Retirement or Mutual Separation

In some cases, termination may be executed through:

  • Mutual separation agreements 
  • Voluntary Retirement Schemes (VRS) 
  • Golden handshake packages 

Although these are not technically “terminations,” they are governed by employment contracts and state labor laws. Legal scrutiny may arise if coercion is involved or benefits are denied.

Termination of Employment During Maternity Leave

Termination of a female employee during maternity leave or due to pregnancy is strictly prohibited under Indian law. The Maternity Benefit Act, 1961 governs the rights and protections of pregnant women in the workplace and ensures job security during this sensitive period.

Key Provisions under the Maternity Benefit Act, 1961

Section 12 – Dismissal During Absence of Pregnancy

  • It is unlawful for an employer to discharge or dismiss a woman employee during her maternity leave. 
  • Termination during this time is void, and the woman is entitled to wages and benefits for the entire maternity period. 
  • The section further states that a woman cannot be dismissed on the grounds of miscarriage, medical complications, or absence due to pregnancy-related illness. 

Eligibility for Protection

  • Applies to women who have worked in an establishment for at least 80 days in the 12 months preceding the expected delivery. 
  • Covers both private and public sector employees across India, including establishments in Chandigarh governed by the Punjab Shops and Commercial Establishments Act. 

Exceptions and Employer Responsibilities

  • Employers cannot terminate, issue notice of termination, or alter service conditions unfavorably during the maternity benefit period. 
  • If an employer believes there is a valid reason to take disciplinary action unrelated to pregnancy, they must consult legal counsel and ensure compliance with due process and judicial guidelines. 

Legal Recourse for Wrongful Termination

A woman terminated unlawfully during or shortly after maternity leave can:

  • File a complaint with the Labour Commissioner, Chandigarh 
  • Approach the Labour Court or file a writ petition in the Chandigarh High Court 
  • Seek assistance from an employee rights lawyer in Chandigarh or a job termination lawyer Chandigarh experienced in maternity-related labor disputes 

Important Judicial Precedents

Indian courts, including High Courts, have consistently ruled in favor of female employees in such cases, stating that termination due to pregnancy or maternity leave is discriminatory and violates fundamental rights under Article 14 (Right to Equality) and Article 21 (Right to Life and Dignity) of the Constitution.

 

Notice Periods and Severance Pay

Statutory Notice Period

Most state Shops and Establishments Acts require:

  • One month’s notice for confirmed employees 
  • Shorter notice during probation (often one week) 

Retrenchment Compensation

Under Section 25F of the IDA:

  • 15 days’ average pay per completed year of service 
  • Wages in lieu of notice 
  • Benefits under other applicable laws 

Managerial or non-workmen employees may rely solely on contract terms.

 

Procedure for Lawful Termination

Proper termination procedures are essential to safeguard both the employer’s legal interests and the employee’s rights. Whether you’re a corporate HR professional or a business owner in Chandigarh, following due process is critical to avoid wrongful dismissal claims. Courts, including the Chandigarh High Court, closely scrutinize termination practices that do not comply with legal standards. Employers often consult a labor law advocate in Chandigarh to ensure the procedure is legally sound.

Below are the key steps to execute a lawful termination under Indian employment law:

Issuance of Show-Cause Notice

Before initiating disciplinary action, the employer must serve a show-cause notice to the employee. This notice should:

  • Clearly state the allegations or charges of misconduct 
  • Provide the employee a fair opportunity to explain or rebut the charges 
  • Be delivered in writing and acknowledged by the employee, if possible 

This step is foundational in building a legally defensible case. Employees facing unjustified allegations often approach an employee rights lawyer in Chandigarh for assistance.

Conduct of Domestic Inquiry

If the employee’s response is unsatisfactory, the next step is to initiate a domestic inquiry. The inquiry must be:

  • Conducted by an impartial officer or panel 
  • Based on documented evidence and witness statements 
  • In accordance with the principles of natural justice (right to fair hearing, unbiased adjudication) 

The employee must be allowed to:

  • Cross-examine witnesses 
  • Be represented by a co-worker or union representative 
  • Present documents in their defense 

Failure to conduct a fair inquiry may render the termination illegal. Seeking termination legal advice in Chandigarh at this stage helps employers protect their position.

Decision and Termination Letter

After evaluating the findings of the domestic inquiry, the employer can proceed with termination if charges are proven. The termination letter should:

  • Clearly outline the reason for termination 
  • Reference the inquiry report and applicable service rules 
  • Specify the effective date of termination 

The letter should be delivered formally and recorded for legal purposes. Employees who believe the decision is biased or unlawful often approach a job termination lawyer in Chandigarh or file a complaint in the Chandigarh High Court.

Final Settlement and Clearance of Dues

Before the employee exits the organization, the employer is required to process the full and final settlement, which includes:

  • Salary up to the last working day 
  • Gratuity (if applicable under the Payment of Gratuity Act, 1972) 
  • Leave encashment 
  • Bonus and statutory dues 
  • Provident Fund and ESI contributions 

The settlement must be done promptly, typically within two working days, as mandated by most state Shops and Establishments Acts, including those applicable in Chandigarh.

Issuance of Relieving Letter and Service Certificate

Although not mandatory by law, most employers provide a relieving letter and service certificate as part of the exit documentation. Refusal to issue these can lead to legal complications, especially if the termination was disputed.

Key Takeaways for Employers in Chandigarh

  • Consult a labor law advocate in Chandigarh before terminating any employee 
  • Maintain full documentation throughout the disciplinary process 
  • Avoid oral dismissals or ad-hoc decisions 
  • Ensure that internal HR policies align with applicable Indian labor laws 

Following a legally compliant process not only reduces the risk of wrongful termination claims but also protects the employer’s reputation. Employees who feel aggrieved often challenge the termination before labor courts or file writs before the Chandigarh High Court, especially when procedures are not followed.

 

Legal Recourse Against Wrongful Termination

An employee who believes they were wrongfully dismissed can take the following actions:

Approach Labor Court or Industrial Tribunal

If classified as a “workman,” the employee can file a dispute under the IDA. Remedies may include reinstatement, back wages, or compensation.

Civil Suit for Damages

Non-workmen may file a suit for breach of contract or damages.

Writ Petition in High Court

For violations of fundamental rights or principles of natural justice, a writ petition may be filed in the High Court. This route is common in Chandigarh for employment disputes involving public sector employees or large corporates.

Chandigarh-Specific Relevance

For employees and employers in Chandigarh, labor laws are enforced through:

  • The Labour Commissioner, Chandigarh Administration 
  • Labour Court and Industrial Tribunal, Chandigarh 
  • Punjab and Haryana High Court 

Legal representation from an employment lawyer in Chandigarh or a labor law advocate at the Chandigarh High Court is commonly sought in complex or high-stakes matters involving termination disputes.

Employer Obligations Upon Termination

Employers must ensure:

  • Final settlement of dues within two working days (as per most state laws) 
  • Issue of service certificate and relieving letter 
  • Timely payment of gratuity if applicable 
  • PF and ESI closure or transfer 
  • Compliance with termination policies and employment contract 

Employee Rights During Termination

Employees, whether covered by IDA or not, are entitled to:

  • Due process and fair hearing 
  • Compensation as per law 
  • Right to challenge wrongful dismissal 
  • Right to receive gratuity, bonus, PF, and other dues 
  • Protection from discriminatory or arbitrary actions 

Employment termination laws in India involve a detailed and procedural legal landscape. Employers must carefully comply with statutory obligations, while employees should be aware of their rights and remedies. Whether in a local company or a multinational based in Chandigarh, understanding these laws is critical to ensuring lawful employment practices. Seeking timely legal guidance can help both parties navigate this complex terrain effectively and avoid costly disputes.

FAQs on employment termination laws in india 

  1. Can an employer terminate an employee without giving any notice in India?

No, an employer cannot terminate an employee without notice, except in cases of serious misconduct that has been established through a fair domestic inquiry. In all other cases, the employer must issue a written notice (typically one month) or provide payment in lieu of notice, as per the applicable laws or employment contract. For legal clarity, many employers in the region consult an employment lawyer in Chandigarh before initiating termination.

  1. What legal remedies are available for an employee facing wrongful termination in Chandigarh?

An employee who believes they’ve been wrongfully terminated can seek relief by:

  • Filing a case before the Labour Court under the Industrial Disputes Act, 1947 (if categorized as a “workman”) 
  • Initiating a civil suit for damages for breach of employment contract 
  • Filing a writ petition before the Punjab and Haryana High Court, particularly in cases involving procedural violations or public sector employment 

Employees often work with a job termination lawyer in Chandigarh to determine the best legal route based on their employment classification and the nature of the termination.

 

  1. What is the standard compensation for retrenchment under Indian labor law?

As per Section 25F of the Industrial Disputes Act, retrenched workmen are entitled to:

  • 15 days’ average pay for every completed year of continuous service 
  • Notice pay (one month’s notice or pay in lieu) 
  • Other statutory dues, such as earned leave encashment, gratuity, and bonuses 

Employees terminated due to redundancy should seek termination legal advice in Chandigarh to verify their rightful entitlements.

  1. Is government approval necessary for terminating employees in India?

Yes, but only in specific situations. Government approval is mandatory before retrenching employees in establishments employing 100 or more workmen, as per Section 25N of the Industrial Disputes Act. However, in cases of termination due to misconduct or performance (not classified as retrenchment), no government permission is required — though proper procedure must be followed to avoid legal challenges.

Employers often consult a labor law advocate in Chandigarh to ensure full compliance before proceeding.

  1. Can a probationer be terminated without assigning any reason?

While probationers can be terminated more easily than confirmed employees, termination must still be reasonable and non-arbitrary. Courts have held that even probationers are entitled to natural justice, especially when the termination is based on alleged misconduct or performance issues.

An unfair or abrupt termination during probation may be challenged in court. In such cases, individuals frequently consult an employee rights lawyer in Chandigarh to assess their legal position.