Serving your full notice period can be tricky after resignation, especially if you wish to join the next place of your employment at the earliest.In companies where notice periods can run for several months, moving to a new job can become difficult unless either the employee or the prospective employer arranges for the notice period to be bought out with the existing employer.This raises an important question: can your boss force you to serve the full notice period?Notice period buyouts are often treated as though they are a standard right available to employees. However, there is no specific legal provision that gives an employee an automatic right to buy out the notice period. Similarly, an employer is not legally required to accept payment instead of requiring the employee to continue working through the notice period.
When can you buy out your notice period?
Gerald Manoharan, Partner at JSA Advocates & Solicitors, told ET that the position can be different when the employment contract itself gives the employee two alternatives.If the agreement says employment can be terminated by either serving the stipulated notice or making a payment in lieu of notice, the employee can exercise either option. In such a situation, the employer cannot insist that the employee serve the notice period.Manoharan said the new Labour Code, specifically the Industrial Relations Code, 2020, does not deal with resignations. It sets out notice and compensation requirements for terminations initiated by employers.For resignations by employees, Manoharan said, the terms governing notice periods and buyouts are primarily determined by the employment contract between the two parties, unless the matter is covered by state-specific shops and establishments legislation.
What if the buyout request is rejected?
An employer may sometimes insist that an employee complete the entire notice period rather than opting for a buyout. There can be legitimate business reasons for such a decision, including meeting client deadlines, arranging a replacement, completing the handover of responsibilities, training another employee or maintaining standards for other employees.Prof. Paramjeet Singh, Associate Professor of Practice, BITS Law School told ET: “Sometimes, the reason may be retaliatory, that of revenge, deterrence to avoid mass exit or other reputational reasons, which must be checked for legal consequences and potential liabilities.”If an employee leaves without serving the required notice and also declines to make the payment applicable in lieu of that period, the employee could face monetary or penal consequences, Singh said.Singh says: “The employer generally deducts the applicable amount from the final settlement, and if the amount is insufficient, the employer may file a suit for recovery of the balance.”However, PF and gratuity cannot be used for making such a deduction.
Can you be forced to serve notice period?
An employer cannot force an employee to continue working through the notice period under any circumstances. At most, an employer’s insistence on enforcing the notice period can amount to a breach of contract, for which civil remedies may be available.Singh says: “Forcing an employee to work may amount to forced labour, which is prohibited under the Indian Constitution.”Singh further explained that a contractual provision attempting to compel an employee to continue working cannot be specifically enforced in law.Under Section 14 of the Specific Relief Act, 1963, obligations involving continuous duties, requiring constant supervision by a court or dependent on the personal qualifications of an employee are not specifically enforceable.
Monetary implications
This means that employers’ practical remedy is generally monetary. Employees who leave without serving the agreed notice period may have to compensate the company for reasonable damages resulting from their resignation. If the amount being demanded is considered unreasonable, the employee can challenge it through legal action.If employer does not accept the notice period buyout, and the employee leaves, the employer can sue for recovery of damages.Sweta Sinha, Assistant Professor, OB and HR, IMI Kolkata, told ET that standing orders and employment contracts can prescribe notice periods and other conditions of service. Where such provisions form part of the employment contract, the notice period can be contractually enforceable.Even so, if an employee refuses to serve the notice period, the employer generally cannot obtain a judicial order forcing that person to continue working. Sinha said this follows from the legal treatment of employment agreements as contracts based on personal skill and confidence.Sinha says: “Instead, the employer can recover the notice pay, claim damages for breach of contract or loss of trade secrets, and recover company property if there is an actual loss.”An example cited by Sinha is Hewitt Associates India Pvt. Ltd. v. Naveen Goyal, decided by the Delhi High Court in 2013. In that case, the court held that where an employee fails to comply with a mandatory notice-period requirement, the company’s remedy is to seek damages from the employee.The High Court also held that an employer cannot compel an employee to return and work for 30 days when the employee has already resigned and does not wish to continue with the company.
