What are the grounds for termination under Labour Act 2017?

Imagine working in Nepal, and one day, you find yourself wondering: Can I lose my job, and if so, on what grounds? Or perhaps, you're an employer asking yourself, What are the valid reasons for letting an employee go? These are valid concerns. In fact, navigating employment relationships can be tricky for both employers and employees, but Nepal's Labour Act 2017 offers a structured roadmap.

This article will explore the various reasons why an employment contract can be terminated under the Labour Act 2017 and provide actionable insights for anyone navigating the employment landscape in Nepal.

Mutual Consent: A Simple Agreement

Termination of employment doesn’t always have to be a dramatic or conflict-ridden process. One of the most straightforward and amicable ways to end an employment contract is through mutual consent. This occurs when both the employer and employee agree to part ways, often for practical reasons like a change in personal circumstances, career shifts, or even relocation.

The only requirement? A written notice from both sides. It’s an open-and-shut case, ensuring that the employee receives all due benefits, while both parties maintain a positive relationship.

Expiry of Term: When Time Runs Out

If the employment contract is for a fixed term, it naturally expires when the contract's duration ends. There’s no need for complicated conversations, but it’s important to note that if the employee continues to work after the expiry without any new agreement, the contract will automatically renew for an indefinite term.

This is a subtle but significant clause of the Labour Act 2017 because it prevents employers from endlessly keeping workers on temporary contracts while benefitting from permanent services. For employers, this means it’s crucial to review contract end dates and ensure clear communication with employees about future employment status.

Retirement: A Well-Earned Goodbye

Retirement is inevitable in every career. Under the Labour Act, the retirement age in Nepal is set at 58 years unless otherwise stated by law or the employment contract. Employers must give the employee a three-month notice before the retirement date. This allows for a smooth transition, ensuring that the employee can plan for retirement without any surprises.

For employees, this notice period is a critical window to ensure they have all their retirement benefits in place. Make sure you're aware of what you're entitled to receive, and don't hesitate to reach out to your HR department for clarification!

Resignation: An Employee's Exit Plan

Perhaps the most common form of termination is resignation. Employees who want to move on to new opportunities or need to leave due to personal reasons can resign by giving their employer a 30-day notice. This gives the employer sufficient time to find a replacement and ensures that the departing employee has enough time to tie up any loose ends.

But here’s a tip: before handing in your resignation letter, make sure you understand your financial situation. Employers in Nepal are required to pay all dues within seven days of receiving the resignation. This includes any salary, bonuses, or leave encashments that are pending.

Dismissal: Serious Reasons Only

Dismissal is one of the more serious grounds for termination and is initiated by the employer. The Labour Act 2017 ensures that employers can't just terminate an employee on a whim. There are specific reasons for which dismissal is allowed:

1. Incompetence or Lack of Qualification: Sometimes, an employee may not perform up to the required standard. In such cases, the employer can dismiss them for incompetence or a lack of qualification. However, the employee must first be given a chance to improve their performance. Employers should set a reasonable timeframe for improvement and offer support if possible. This ensures that the process is fair and transparent.
2. Misconduct: Misconduct is another valid reason for dismissal. This can range from dishonesty, theft, and fraud to violence, harassment, and breach of confidentiality. However, employers must follow due process, including proper investigation and a hearing, before making a decision. Employees accused of misconduct should be allowed to present their side of the story to avoid unjust dismissal.
3. Physical Incapacity: If an employee becomes physically unable to perform their job due to illness, injury, or disability, the employer has the right to dismiss them. However, this is not an immediate decision. The employer must obtain a medical certificate from a licensed doctor confirming the incapacity and give the employee time to recover before making the final call.
4. Redundancy: Another reason for dismissal is redundancy, often caused by business restructuring, downsizing, mergers, closures, or automation. Redundancy is perhaps one of the most painful forms of termination because it’s often unrelated to the employee's performance. Employers must give at least 30 days' notice and pay a severance equal to one month's salary for each year of service.

What Can You Do if You're Facing Termination?

No one likes to lose their job, and the fear of termination can be stressful. But here's the key: know your rights. Nepal's Labour Act 2017 was designed to ensure that employees are protected against arbitrary or unfair dismissal. If you feel you've been wrongfully terminated, here are a few steps you can take:

1. Review Your Employment Contract: Ensure that the reason for your termination aligns with the terms of your contract and the provisions of the Labour Act.
2. Consult Your HR Department: Many companies have internal grievance mechanisms that allow employees to file complaints.
3. File a Complaint: If your grievance is not resolved internally, you can take it to the Labour Office in your district.
4. Seek Legal Help: If you're facing a serious dispute, consider consulting with a legal expert specializing in labor laws.

For Employers: How to Navigate Termination Fairly

If you're an employer, the Labour Act 2017 ensures that termination is a fair and justified process. Make sure that:

• All termination notices are in writing and follow the notice period specified in the law.
• Employees are given clear reasons for termination, and due process is followed, especially in cases of dismissal due to misconduct or incompetence.
• Severance is paid promptly, and any dues are cleared within the legal timeframe.

Conclusion

Termination is a sensitive subject, but understanding the grounds for termination under the Labour Act 2017 helps both employees and employers manage the process smoothly. By following the rules set out in the Act, employees can protect their rights, and employers can ensure legal compliance while fostering a fair work environment. Remember, clear communication, due process, and mutual respect can make even the most difficult terminations manageable.