Employment Notice Period: What Does Indian Law Say?

The transition phase from one job to another is often filled with mixed emotions, ranging from excitement for new opportunities to the uncertainty of leaving behind familiar surroundings. Among the many formalities that need to be completed, serving the employment notice period is a crucial one. Often referred to as the ‘honeymoon period,’ this phase can either be a smooth sail or a challenging experience, depending on the circumstances.

The employment notice period refers to the duration an employee is required to work after submitting their resignation, before officially leaving the organisation. This period can range from one month to three months, depending on the company’s policies. 

While it may seem straightforward, there are numerous legal intricacies involved, particularly when either party—employer or employee—fails to fulfill their obligations during this period. The Supreme Court of India has played a pivotal role in clarifying various aspects related to employment notice periods through several landmark judgements. 

What is the Employment Notice Period?

Before diving into the legal complexities, it’s essential to understand the basic concept of the employment notice period. When an employee decides to leave their job, they are usually required to serve a notice period, which is a predetermined duration during which they continue to work before their official exit. This period allows the employer to find a suitable replacement and ensures a smooth transition of responsibilities.

The length of the notice period is typically mentioned in the employment contract and can vary depending on the organisation’s policies and the employee’s role. In some cases, the employer may choose to relieve the employee immediately and provide compensation in lieu of the notice period. Conversely, employees may also negotiate with their employers to waive off the notice period, either partially or entirely.

Is It Compulsory to Serve a Notice Period?

Yes, under the Indian Contract Act 1872 and the Industrial Employment Standing Orders, 1946, both employers and employees are generally required to provide notice before terminating the employment relationship, unless specified otherwise in the employment contract or company policies.

The applicability and duration of the notice period are typically based on industry norms and are often detailed in the job offer letter or appointment letter. Serving the notice period is crucial as it ensures a smooth transition and helps avoid potential legal or financial repercussions.

Employment Laws Governing Notice Periods

The legal framework surrounding employment notice periods in India is primarily governed by the Industrial Disputes Act, 1947 and the terms of the employment contract. The Supreme Court has been instrumental in interpreting these laws, providing clarity on various aspects such as retrenchment, resignation and the rights of both employers and employees during the notice period.

Supreme Court Judgements on Employment Notice Period

Retrenchment Notice Period

The concept of retrenchment and the associated notice period has been a subject of legal scrutiny in India. The Supreme Court, in its various judgements, has laid down the principles governing retrenchment and the obligations of employers.

Pramod Jha v. State of Bihar, (2003) 4 SCC 619

In this case, the Supreme Court explained the requisites of retrenchment under Section 2(oo) of the Industrial Disputes Act, 1947. The Court held that for retrenchment to be valid, the following conditions must be met:

• The workman must be served with one month’s notice in writing, indicating the reasons for retrenchment.
• Retrenchment becomes effective after the expiry of the one-month notice period or the workman should be paid wages in lieu of the notice period.
• The workman should be paid compensation equivalent to 15 days’ average pay for each completed year of continuous service or any part exceeding six months.
• Notice must be served to the appropriate government or the specified authority in the prescribed manner.

This judgement underscores the importance of following due process in retrenchment cases and ensuring that the workman’s rights are protected during the notice period.

J.K. Cotton Spg. & Wvg. Mills Ltd. v. State of U.P., (1990) 4 SCC 27

In this case, the Supreme Court addressed the issue of voluntary resignation and its impact on the notice period. The Court held that an employee is only required to give notice to quit as per Section 5 of the Industrial Employment (Standing Orders) Act, 1946 and the service would terminate upon the expiry of the notice period.

The Court further clarified that the period of notice depends on the terms of employment and if no such period is prescribed, a reasonable time must be given before the employment relationship is terminated. The judgement emphasised that if an employee is not allowed to terminate the employment relationship as per the contract, such employment could be deemed as bonded labor.

Notice Period for Trainees

The issue of whether trainees are required to serve a notice period has also been addressed by the Supreme Court in several cases.

Kalyani Sharp India Ltd. v. Labour Court No. 1, Gwalior, (2002) 9 SCC 655

In this case, the Court analysed the employment contract of a trainee vis-à-vis Section 25 F of the Industrial Disputes Act, 1947. The Court observed that the trainee was appointed for a specific training period, during which the employer could terminate the employment if the trainee’s performance was unsatisfactory. The Court ruled that since the trainee’s employment was contingent upon completing the training satisfactorily, the issue of notice under Section 25 F did not arise.

This judgement highlights that the legal obligations related to notice periods may differ for trainees compared to regular employees, depending on the terms of their employment.

State’s Power to Terminate Services and Notice Period Obligations

The Supreme Court has also dealt with cases where the state’s power to terminate services and the associated notice period obligations were questioned.

Workers Employed in Hirakud Dam v. State of Orissa, (1971) 1 SCC 583

In this case, the Supreme Court examined whether the state had the power to terminate the services of any member of a work-charged establishment under the Central Public Works Department Code by giving a month’s notice or a month’s pay in lieu of the notice. The Court held that the government had the authority to terminate the services under the relevant provision.

The judgement clarified that dismissal was not limited to punishment for serious misconduct but also applied to termination simpliciter of an employee, wherein providing notice or month’s pay in lieu of notice was obligatory.

Withdrawal of Resignation During Notice Period

One of the most contentious issues related to employment notice periods is the withdrawal of resignation during the notice period. The Supreme Court has provided guidance on this matter through various judgements.

 Air India Express Ltd. v. Gurdarshan Kaur Sandhu, (2019) 17 SCC 129

In this case, the Court considered the withdrawal of resignation within the notice period under Civil Aviation Requirements (CAR). The Court emphasised that the mandatory notice period was in the public interest, ensuring no last-minute cancellation of flights that could cause significant inconvenience to travellers. 

The judgement clarified that the notice period’s primary purpose was to find and train a replacement and it could be curtailed if a No-Objection Certificate (NOC) was given to the pilot and the resignation was accepted before the notice period expired.

Srikantha S.M. v. Bharath Earth Movers Ltd., (2005) 8 SCC 314

In this case, the appellant resigned from his position and the resignation was accepted while he was still serving the notice period. The appellant later withdrew his resignation, but the company did not allow him to continue working after the expiry of the notice period. 

The Supreme Court ruled that since the appellant had not paid one month’s basic pay in lieu of the notice, as per the company rules, the resignation would only become effective after one month. The Court held that the company’s action of accepting the resignation and not allowing the appellant to work after the notice period was illegal and unlawful.

These judgements illustrate the complexities involved in cases of resignation withdrawal during the notice period, emphasising the need for both parties to adhere to the terms of the employment contract.

Employee’s Right to Resign

The Supreme Court has consistently upheld an employee’s right to resign, provided they fulfill the notice period obligations outlined in their employment contract.

Sanjay Jain v. National Aviation Co. of India Ltd., (2019) 14 SCC 492

In this case, the Supreme Court supported the employee’s right to terminate their services after serving the requisite notice period. The Court held that “To resign is a right of an employee who cannot be forced to serve in case he is not willing to serve until and unless there is some stipulation in the rules or in the terms of appointment.”

This judgement reinforces the principle that employees cannot be compelled to continue working against their will, provided they comply with the notice period requirements.

Conclusion

The Supreme Court’s judgements on employment notice periods provide a comprehensive understanding of the legal obligations and rights of both employers and employees during this critical phase of employment transition. From retrenchment and resignation to the nuances of notice period obligations and the right to resign, these judgements have shaped the legal landscape, ensuring that both parties’ interests are protected.

While the notice period is intended to facilitate a smooth transition, it is essential for both employers and employees to be aware of their legal obligations and the potential consequences of non-compliance. The Supreme Court’s interventions have provided much-needed clarity on these issues, helping maintain a balance between the rights and responsibilities of both parties.