Forced To Resign: A Legal Vacuum Being Exploited By IT Companies

What is a forced resignation?

Forced resignations, though lacking a legal definition, have become an unfortunate reality in the IT sector that many workers have come to face. While resignation indicates a free choice exercised by the employee, forced resignations leave an employee with no choice but to resign. Companies force resignations through direct pressures or through sustained unfair treatment.

For instance, in the TCS lay-off employees have alleged direct pressure from the company threatening their future job prospects. In the 2017 Verizon layoffs, employees even alleged threats and verbal harassment by the company's counsellors forcing them to sign their resignations. Companies often threaten future job prospects through various practices such as denying experience letters, malicious comments in termination letters and informal word-of-mouth messages to other employers.

Why does it happen?

Companies resort to forced resignations over formal termination primarily to avoid the legal obligations involved while terminating an employee. In the context of the IT industry, provisions under the Industrial Disputes Act, 1947 and certain state-specific legislations impose such obligations that act as safeguards for employees.

Forced resignations enable companies to sidestep rules on notice periods, retrenchment compensation, and other safeguards, since resignations are presumed to be voluntary and a resigning employee is deemed to waive their rights related to termination.

While trade unions have seen significant success in their lawsuits against forced resignations, the practice continues to be rampant in the industry. The lack of a clear legal position and the noticeable absence of unions within the industry both contribute to the continuation of such practices.

Layoff, Retrenchment, Termination and Compensation: What do our current laws say?

The primary legal framework governing terminations in India is the Industrial Disputes Act, 1947. Chapters V-A and V-B of the Act contain several provisions related to the laying-off and retrenchment of employees.

It is vital to note that the term 'layoff' has a specific legal meaning under Section 2(kkk) of the ID Act, which significantly differs from the ordinary usage of the term. Legally, a layoff refers to a temporary situation in which an employee remains on the rolls of a company but is not assigned any work due to the lack of work in the company.

The closest we get to layoffs in the IT sector is 'benching' but it does not fully satisfy the definition. Benched employees remain on the company's rolls without active projects and are, instead, required to complete certifications and courses which are sometimes irrelevant to any future projects. Newly inducted employees and employees whose projects have closed are often benched and benching periods vary extensively. While they receive salaries benching harms their career growth, bonuses and incentives.

Such a practice itself raises serious concerns since companies often bench existing employees and assign projects to newer employees. Benching harms an employee but it stems from mismanagement and managerial convenience. However, benching fails to fall under layoff as the latter requires a 'lack of work' while the former is practiced citing 'suitable work' with 'suitability' being defined arbitrarily by the employer. Thus, neither benching nor any other practice in the IT sector fits the legal definition of a layoff.

Consequently, what are commonly termed as 'layoffs' in the IT sector are legally considered as 'retrenchments' under the ID Act. Section 2(oo) of the Act defines retrenchment as the termination of service and Section 25F provides the rules to be followed during retrenchment. It mandates a notice of at least one month to be sent to the employee and the relevant authority which is typically the local labour office. In the absence of such a notice, it mandates a compensation to be paid to the employee.

In addition to the ID Act, state legislations such as the Karnataka Shops and Commercial Establishments Act, 1961 also provide protections. Section 39 of this Act governs notices of dismissal and it contains notice and compensation related rules to similar to the ID Act along with an emphasis on providing a 'reasonable cause' for termination.

The impact of forced resignations

Termination safeguards like notice periods and compensation provide workers with the crucial time and financial stability required to secure another job before leaving their current one. They also allow the government to monitor a company's treatment of its workers, ensuring accountability. Forced resignations bypass such fundamental and vital safeguards and undermine the legal framework that guarantees these basic protections.

Salaried employees live with a legitimate expectation of a regular monthly income and forced resignations destroy these expectations. The sudden loss of income often leads to defaulting on rents, loan repayments and EMIs, and in some cases, the need to vacate housing or, in the case of migrants, even the compulsion to leave a city. This further contributes to job insecurity and a persistent anxiety about the future, impacting the overall mental health of employees.

A study by Onsurity (a health-tech company) and the Knowledge Chamber of Commerce and Industry revealed that up to 43% of IT workers suffer from work related physical and mental illnesses. These alarming numbers show us the urgency of legislative reform and government intervention against forced resignations.

The need for legal recognition

Trade unions have had some success in fighting against forced resignations. In a 2018 case against a tech company in the 3^rd additional labour court in Bengaluru, KITU's arguments against forced resignation utilizing principles such as 'unfair labour practices' defined under Section 2(ra) of the ID Act were admitted by the court and the employee was ordered to be reinstated. Section 2(ra) along with the Fifth Schedule of the Act can be utilized in this context as they penalize certain exploitative practices. However, the provisions lack any explicit mention of forced resignations creating legal ambiguity and a vacuum that makes the fight for justice and labour rights a far more difficult process than it needs to be.

The urgency of clear legal recognition and penalization of forced resignation cannot be overstated, particularly in the IT sector. The sector already enjoys leniency from many state governments in labour law enforcement. Karnataka, for instance, has exempted the industry from the Industrial Standing Orders Act, 1946 which contains vital safeguards for employees. Inclusion of an explicit legal penalty against forced resignations would not only deter companies from adopting this practice but would also empower the courts and the workers in safeguarding the rights enshrined under our labour law.

Surjeeth Rahulji M. is an Assistant Professor of Law in St. Joseph's College of Law. Views are personal.