A notice period is the duration of time an employee is required to continue working for their employer after they have formally resigned from their position, but before their employment officially ends. This period allows for a smooth transition, enabling the employer to find a replacement or make other necessary adjustments.

Employee’s right to resign:

In the case of Sanjay Jain v. National Aviation Co. of India Ltd. (2019), the Supreme Court upheld the right of an employee to resign after serving the required notice period, emphasizing that an employee cannot be compelled to continue in employment against their will unless there are specific contractual provisions or rules mandating otherwise.

Is the fulfilment of the notice period requirement outlined in an employment contract legally binding?

In the case of M/s Center for Development of Telematics (C-DOT) vs Ms. Indra Sood, 2011 the court emphasized that contractual obligations, such as the requirement to provide a three-month notice before resignation, are binding unless explicitly waived by mutual agreement or conduct that implies waiver.

What Are the Consequences of Not Serving the Notice Period if specified in the employment agreement?

The Hon’ble Delhi district court in Mantech Consultants Pvt. Ltd. vs Jinu P. C., 2022held that the defendant failed to serve the mandatory notice period of two months after ceasing to report to work. Despite the defendant’s assertion that he was terminated and not allowed to serve his notice period; the evidence provided is insufficient to substantiate these claims. The plaintiff has adequately demonstrated that the defendant did not fulfil his contractual obligation of serving the notice period, thus making him liable to pay the two months’ salary in lieu of notice.

Notice period and salary in lieu of notice:

In employment contracts, the notice period and salary in lieu of notice are critical aspects governing the termination of employment. The notice period typically stipulates a period during which either party must inform the other of their intention to terminate the employment relationship. This period allows for a smooth transition and ensures fairness to both the employer and the employee. If an employee resigns without serving the full notice period as specified in the contract, they may be liable to compensate the employer by forfeiting salary equivalent to the notice period. Conversely, if an employer terminates an employee without providing the required notice period, they are generally obligated to pay the employee salary in lieu of the notice period.

Is Payment in Lieu of Notice Period Legally Enforceable?

• Yes, payment of salary in lieu of notice period has also been recognised as a legal and valid clause in the contract of employment by the Hon’ble Delhi Court in the case of Amit Kumar Gupta v Indian Oil Corporation Ltd., 2016.
• In the case of Pradeep Mathur vs M J International (P) Ltd, 2015 the central issue revolved around the notice period for resignation and the corresponding salary entitlement. The appointment letter stipulated a 30-day notice period for resignation, failing which the company reserved the right to adjust the salary in lieu of the notice period. The plaintiff argued that he was ready to serve the notice period but was allegedly instructed by a company official not to. However, the court found that the plaintiff’s resignation letter did not explicitly mention an intention to serve the notice period, merely requesting immediate resignation and settlement of accounts. Consequently, the court held that the plaintiff failed to demonstrate a genuine willingness to adhere to the notice period requirement. As a result, the plaintiff’s claim for salary during the notice period was rejected, and the defendant’s adjustment of the plaintiff’s salary for October 2012 against the notice period dues was deemed justified. This case underscores the importance of clarity in resignation communication and adherence to contractual obligations regarding notice periods.

What are the consequences of not serving any notice period if no such terms were specified in the employment agreement?

The employee is not bound to serve notice period if no such terms were specified in the employment agreement. The High Court of Delhi in Klintoz Pharmaceuticals Pvt Ltd. vs Ravinder Shankar Mathur, 2018concluded that the appellant, Klintoz Pharmaceuticals Pvt Ltd., failed to prove that the respondent, Ravinder Shankar Mathur, was bound by a two-month notice period for resignation. The key document asserting this condition lacked the respondent’s signature and date, and there was no evidence showing that these terms were communicated to or accepted by the respondent. Additionally, the appellant did not suffer or claim any loss due to the respondent’s failure to serve the notice period. Consequently, the court found no merit in the appellant’s claim to deduct two months’ salary from the respondent’s dues and upheld the First Appellate Court’s decree in favour of the respondent.

Whether an employee’s resignation becomes effective automatically upon the expiry of the notice period, without requiring formal acceptance by the employer?

In the case of Sanjay Jain vs National Aviation Co. of India Ltd., 2018, the Supreme Court held that an employee has the right to resign by giving a 30-day notice, and the resignation becomes effective upon the lapse of this period. The employer cannot refuse to accept the resignation unless disciplinary action is pending or contemplated against the employee at the time of resignation. The Court emphasized that resignation is a unilateral act of relinquishment by the employee, and once the notice period is served, the resignation takes effect automatically. Thus, the employer’s attempt to require the employee to continue working after the resignation was invalid, and the employee was entitled to receive pending dues and benefits accordingly. This decision clarifies that unless specific provisions or circumstances requiring acceptance by the employer are stipulated, an employee’s resignation with due notice is effective upon completion of the notice period.