TCS Case News: TCS case may throw spotlight on job terminations in IT industry

The spotlight is on illegal terminations in the country, experts said, after a Chennai labor court recently asked to reinstate an employee who was asked to leave more than seven years ago with unpaid wages.

This case, they added, could be used as a reference point in the future when there are mass layoffs or performance-related illegal terminations of employees.

“Awareness of workers’ rights is growing as we encounter more similar statements. As this order involves one of the largest Indian IT companies, it will have an impact on the industry in terms of employment termination cases,” said Vikram Shroff, head of human resource law (employment and labor) at Nishith Desai associates.

“The definition of worker under the law is quite broad and does not change under the new labor laws. There are limited exclusions for those who cannot be considered a workman. Employers should be wary of taking a one-size-fits-all approach and instead make a decision based on a specific case,” Shroff said.

The Indian common law system takes into account case law for judgments and it is necessary to take note of such developments regarding dismissal, which is still the most litigated aspect in labor law, he added.

Earlier this month, the chief labor court in Chennai, under presiding officer C Kumarappan, asked India’s largest IT service provider for revenue to restore Thirumalai Selvan Shanmugam with continuity of service, wage arrears and all other associated benefits after a seven-year trial period.

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It set aside its performance-related termination in 2015 after a plea from Shanmugham.

The court disagreed with the TCS attorney’s argument that Shanmugham did not fall under the Industrial Disputes Act’s ‘workman’ definition, as he held a supervisory role.

“One of the clear implications of this ruling is that the IT industry should not have any misconceptions that its employees are automatically exempt from the Industrial Dispute Act,” said Sowmya Kumar, partner, IndusLaw.

TCS has not commented on the case as it is under trial.

The IT Workers Forum was part of the lawsuit and it reflects the growing involvement of unions in the IT sector of late and union influence is no longer limited to traditional industries, Kumar said. “This is another factor to consider in any workforce termination scenario,” she added.

The verdicts in such cases are “always” based on facts, says Atul Gupta, partner at law firm Trilegal.

“Because of the counterparty involved, there may be more attention for this ruling because there are less significant statements regarding IT people. It does not lead to a new or special law. But IT organizations definitely need to be better prepared and structured in their approach to performance-related or large-scale exits because of greater awareness and greater likelihood of employees questioning their actions,” Gupta said.

There is currently no labor law mechanism to calculate or award monetary compensation in the event of wrongful termination of employment. As a rule of thumb, labor courts generally award recovery with wage arrears and service continuity, legal experts say.

TCS could appeal in this case, she added.

“Normally, one can go to the Supreme Court to challenge the ruling. The basis will again be fact-specific – it depends on whether the employer considers the ruling flawed enough to take it to court under its jurisdiction. But the matter can be disputed,” Trilegal’s Gupta said.

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