No entry for IT layoffs in Indian law

n unpalatable casualty of globalisation is that an employee friendly IT industry is beginning to reek with the detritus of piling layoffs. Trapped in an iron grip of recession, technology companies - ranging from IT powerhouses to smaller organisations - are aping global (read US) corporations and are ruthlessly wielding the axe. For quite some time, the shocking story of a leading Bangalore-based snazzy dotcom making a dry, matter of fact 45 minute PPT presentation to educate employees on leave taking procedures without providing any other form of emotional and psychological support has been doing the rounds of tech circles. The dotcom is not the only one. Employees from other IT companies have similar experiences to narrate. With the exception of Trigyn Technologies and Aztec Software, loathe to admit layoffs, most companies have branded employees as non-performers causing added emotional trauma to the shock of coming to terms with being laid off. In its defence the IT industry cites the example of US Corporations. Not long ago, when the first tremors of slowdown were felt by India IT Inc, Narayan Murthy ex-CEO of India's leading IT company, Infosys, made a statement that IT companies must be allowed to retrench employees at will to remain competitive. In India, where layoffs are a first generation phenomenon, there is a sore need to modify corporate attitude from an arbitrary, at will dismissal to a sensitively handled retrenchment.

The example from the West that Indian companies are so fond of touting is ridden with bullet holes. International labour laws while granting freedom to corporates to sack employees also have adequate clauses to safeguard rights of white-collar worker. The code of conduct evolved by the International Labour Organisation emphasises: " In view of the flexibility which multinational enterprises may have, they should strive to assume a leading role in promoting security of employment, particularly in countries where the discontinuation of operations is likely to accentuate long-term unemployment; avoid arbitrary dismissal procedures and provide some form of income protection for workers whose employment has been terminated." The code is not binding but forms the basis of labour laws in many. For instance, the US Worker Adjustment and Retraining Notification Act requires companies to give employees 60 days notice before mass layoffs or a plant closing. The protection extends to all employees of companies with more than 100 people. The Act defines mass layoff as the shutdown of a site in which 50 or more employees lose their jobs. Mass layoffs occur when a company lets go 500 workers over 30 days or 33 per cent of the work force. Violators of the Act can be forced to pay heavy damages. Bankruptcy Grocery e-tailor Webvan which laid off employees without notice is trapped in a slew of cases filed by former employees." In addition, white-collar workers in US can fall back on the Federal Unemployment Insurance for monetary support.

IT employees in India have no legal armour to ward layoffs. The 1947 Industrial Dispute Act of India which governs layoffs defines it as the failure, refusal or inability of an employer on account of shortage of coal, power or raw materials or the accumulation of stocks or the breakdown of machinery or natural calamity or for any other connected reason to give employment to a workman whose name is borne on the muster-rolls of his industrial establishment and who has not been retrenched. As obvious, white collar workers are excluded from the ambit of this definition. Many, not all, IT companies have exploited the absence of a legal framework to pull the plug at the workplace. Stories of employees being given less than two hours to leave the workplace or discovering they were laid off when swipe cards failed to authorise entry abound.

According to Senior Advocate Venugopal, Singhania and Company: "The only document that can prevent employers from wielding absolute power is the employment contract. Termination of employment by the employer should be according to the terms and conditions of the Employment Agreement and the Contract of Employment. The legality and validity of the termination of employment can be ascertained only by referring to the relevant clause in the Employment Agreement. If the termination is not in accordance with the Employment Agreement, then the employee can initiate legal proceedings against the employer for breach of contract, claiming damages and other incidental remedies."

As a safeguard against any possible litigation alleging violation of the employment contract, many companies force employees to sign resignation letters. In a statement to The Hindustan Times, official spokesperson for HCL Perot Padmaja Krishnan accepted that about 150 people have left the company in the last two months but maintained that "the people had left on their own". She said that "the people are not asked to leave in an appraisal process, they resign. The employee having submitted the resignation letter abdicate right to legal redressal" Venugopal opines that in such cases, although difficult, if it is proved that the employee submitted the resignation letter under duress, the employer will be liable for arbitrary termination of employment."

There can never be a perfect and easy layoff but IT companies can definitely do much more to ease the pain and hurt of being laid off. IT companies who extol the virtues of a free market must learn to admit to their non-performance rather than label laid off employees as failed workers. Sacking companies the dotcom way is plain dumb. In France, to stem the tide of swelling layoffs, the government has outlawed sacking. Under the proposed terms of the new legislation, profitable companies would be restricted from using layoffs to cut costs. Indian IT companies need to get their act together and handle layoffs with greater sensitivity before the groundswell of employee opinion presses for laws which in the long-term will hinder freedom to grow.

(Legal inputs for this article were provided by Senior Advocate Venugopal, and Chetan Padival, and Soujanya from Singhania and Company. The company specialises in corporate and business law. For any advise on employment contracts or legal phpects of severance pay or layoffs, you can contact them at scblr@vsnl.com or bangalore@singhania.com. Their address and phone numbers are as follows: The address of the Bangalore office is 204-A Mittal Tower, 6 Mahatma Gandhi Road, Bangalore 560 001.
Tel 91-80-558-8763. Fax 91-80-558-4593)

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