Forced Resignation or Termination? The Law in India

A forced resignation is not automatically a resignation. If you signed or sent one because you were told the alternative was termination, the law can still treat what happened as a termination by the employer, and every protection in the Industrial Relations Code, 2020 comes back into play. The difficulty is practical rather than theoretical. The document the company holds says you left of your own accord, the burden of showing otherwise falls on you, and the clock in Section 53 starts running from the day you signed.

Part of the employment and labour law practice at S Jain & Attorneys, Bangalore.

This guide is about that specific moment, the one where an exit is dressed up as a departure. It is written for engineers, analysts, designers and product staff in Bengaluru, because that is where the practice is most common, but the reasoning applies to any office employee.

Why a resignation is worth so much to an employer

Start with the money, because that is what drives the conversation. Section 2(zh) of the Industrial Relations Code defines retrenchment as the termination by the employer of the service of a worker for any reason whatsoever, otherwise than as a punishment inflicted by way of disciplinary action. The phrase for any reason whatsoever is deliberately wide. Restructuring, a closed project, a cost target, a role that no longer exists, all of it is retrenchment.

The same definition then carves out a short list, and the first item on that list is voluntary retirement of the worker. A genuine resignation sits in that carve out. So the moment your departure is recorded as voluntary, the case leaves the retrenchment provisions altogether, and everything Section 70 would have required simply never applies.

Key takeaway. The word voluntary is doing all the work. Retrenchment is defined so widely that almost any employer led exit falls inside it, which is exactly why so much effort goes into producing a piece of paper that says you left by choice.

Set the two routes side by side and the commercial logic is obvious.

What is at stake	Recorded as your resignation	Retrenchment under Section 70
Notice	Whatever your contract says, and often you serve it or you buy it out	One month's written notice stating the reasons, or wages in lieu of that notice
Compensation	None	Fifteen days' average pay for every completed year of continuous service, and for any part beyond six months
Notice to the State	None	Notice served on the appropriate Government in the prescribed manner
Who goes first	Does not arise	Ordinarily the last person employed in that category, under Section 71, unless reasons are recorded
If the company hires again	No claim	Preference for re-employment under Section 72
Where you fight	A civil suit on the contract	Conciliation, and then the Industrial Tribunal

Those differences are not small, and they compound with length of service. The three points below are the ones that decide most of these matters long before anyone reaches a tribunal.

One year qualifies you

Section 70 protects a worker with not less than one year of continuous service. Under a year, the retrenchment conditions do not apply and the contract governs.

Fifteen days per year

Retrenchment compensation is fifteen days' average pay for every completed year, plus any part of a year running beyond six months.

Two clocks, not three years

Conciliation cannot be held more than two years after the dispute arose, and the Tribunal application follows within ninety days of the failure report.

The performance plan as an exit instrument

A performance improvement plan has a legitimate use. It records a concern, sets a measurable target, gives a defined period to meet it, and creates a record either way. Used properly it protects both sides.

It is also, in practice, the most common way an exit is built. The pattern is recognisable. The plan appears without warning after a reorganisation or a budget review rather than after months of documented feedback. The targets are set so that meeting them depends on work the employee does not control. The review at the end is brief. Then comes the meeting where resignation is offered as the dignified option, usually with a sentence about how a termination would look to future employers.

In my experience the single most damaging thing an employee does in that meeting is treat it as an HR conversation rather than a legal one. People argue about whether the ratings were fair. Fairness of appraisal is very hard to litigate. What matters far more is what was said about the consequences of refusing, and whether anything in writing shows that the decision to end the employment had already been taken before the plan was ever issued.

When a resignation is not voluntary in law

There is no formula, and no single fact decides it. A tribunal looks at whether the employee actually had a free choice, and the following features are the ones that tend to show there was none.

The resignation letter was drafted by the employer and presented for signature, rather than written by the employee.
It was signed in the meeting itself, with no time to take advice and no opportunity to sleep on it.
It is dated with immediate effect and waives a notice period that the contract required.
Access, devices and building entry were withdrawn the same day, which fits a planned exit rather than a resignation the company was not expecting.
The employee had recently raised a complaint, a safety concern, an overtime claim or a harassment complaint.
The stated reason for leaving in the letter does not match anything in the contemporaneous record.
The employee asked to withdraw the resignation within a short time and was refused.

Common mistake. Sending a warm goodbye note to the team an hour after signing. It is human, and it is the first document the other side will produce to show the departure was amicable and voluntary. Say your goodbyes in person or say nothing.

The record that decides it

These cases are won on what exists in writing before the dispute starts, not on what is argued afterwards. Build the record while you still have access.

Ask for the reason in writing. A single line by email, sent the same day, asking the company to confirm in writing why it is asking you to resign, is the most valuable document you can create.
Send a contemporaneous account. Email a short factual note of what was said in the meeting, who was present and what you were told would happen if you refused. Send it to your own personal address as well.
Preserve the appraisal history. Save every rating, increment letter, bonus communication and written commendation that predates the plan.
Keep the plan itself, along with the targets, the review notes and any evidence that the targets depended on inputs outside your control.
Do not delete the WhatsApp thread. Informal messages from a manager are frequently the clearest evidence of what was really said.
Collect your salary slips, appointment letter, confirmation letter and the dates of every promotion, because continuous service and average pay are both calculated from these.

What to say when you are asked to resign on the spot

You are allowed to say no, and you are allowed to say nothing. Neither is misconduct. A calm sentence such as, I am not going to sign anything today, please put the company's position in writing and I will respond, is enough. It does not accuse anyone, it does not refuse to cooperate, and it moves the conversation onto paper where it can be assessed.

If the reply is that the offer expires at the end of the day, that pressure is itself a fact worth recording, because a genuine resignation does not come with a deadline set by the employer.

If you are a worker, the Code route

Whether you are a worker under Section 2(zr) decides which forum hears you, and it turns on the dominant nature of what you actually did rather than on your designation. We have set out that test in detail separately, and it is worth reading before you act, because it is the question the employer will contest first. See our guide on worker status under the Industrial Relations Code.

The point that matters here is narrower. If you are a worker and the exit was in truth an employer decision, then it was a retrenchment, and a retrenchment that skipped the Section 70 conditions is bad. The relief sought is usually reinstatement with continuity, or compensation in lieu where reinstatement is not workable.

One caution on scale. The prior permission regime in Chapter X does not help an office employee, because Section 77(3) confines that Chapter to a factory, a mine or a plantation. An IT company in Bengaluru is outside it however many people it employs. The Section 70 conditions still apply, and they are the ones to rely on.

If you are not a worker, Section 39 of the Karnataka Shops Act

Employees in managerial or administrative roles, and supervisors drawing more than eighteen thousand rupees a month, fall outside the definition of worker. That is not the end of the matter in Karnataka. Section 39 of the Karnataka Shops and Commercial Establishments Act, 1961 survives all four labour codes, because it is State legislation and appears in none of the repeal lists.

It says that no employer shall remove or dismiss an employee who has put in six months of continuous service except for a reasonable cause, and unless one month's previous notice or pay in lieu has been given. It gives an appeal to the prescribed authority on the ground that there was no reasonable cause, allows compensation not exceeding one month's pay for every year of service, and provides a revision to the District Judge. For a large number of Bengaluru white collar exits this is the practical route.

Three quick markers before you decide which door to use.

Six months, not one year

Section 39 protection begins at six months of continuous service, which is earlier than the one year that Section 70 of the Code requires.

Reasonable cause

The employer must show a reasonable cause for the removal. Missing a target is not the same thing as proven misconduct after an inquiry.

More favourable terms win

Section 39 preserves better terms available under any other law, award or contract, so it adds to your rights rather than capping them.

The two clocks that end the claim

This is where good cases are lost. Under the old Industrial Disputes Act an employee had three years to apply. That is gone. Under the proviso to Section 53(1) of the Industrial Relations Code, the conciliation officer cannot hold proceedings relating to an industrial dispute after two years from the date the dispute arose. Section 53(6) then requires the application to the Tribunal within ninety days from the date the failure report is received.

Deadline warning. Two years to reach conciliation, and ninety days after the failure report to reach the Tribunal. Anyone still working to a three year limitation period is applying a repealed Act.

Because the dispute arises on the day the employment ends, a resignation you signed under pressure starts the clock immediately. Waiting to see whether the company will settle is how the two years disappear.

Frequently Asked Questions

I already sent the resignation mail. Is it too late?

No. A resignation can still be challenged as an employer led termination, and the sooner you put the circumstances in writing the better. What matters is the surrounding record, not the existence of the letter, and the limitation clocks in Section 53 run from the date the employment ended.

Can I withdraw a resignation?

Until it is accepted, a resignation can generally be withdrawn, and the position is stronger where the letter names a future date. Send the withdrawal in writing immediately and keep proof of delivery. A refusal to allow withdrawal is itself a useful fact.

Does a severance package stop me from bringing a claim?

It depends entirely on what you signed. A full and final settlement with a release clause is intended to close off claims, and courts do give effect to a settlement freely arrived at. Read it before you sign, and do not sign it in the same meeting in which it is handed to you.

Is a performance improvement plan illegal?

Not at all. It is a legitimate management tool. The question is never whether a plan existed, but whether it was a genuine attempt to correct performance or a step in an exit that had already been decided.

My contract says either side can end it with two months' notice. Does that settle it?

No. A contractual notice clause does not displace a statutory protection. If you are a worker, Section 70 applies on top of the contract, and in Karnataka Section 39 preserves whichever terms are more favourable to the employee.

What is average pay for the compensation calculation?

Broadly it is the average of your wages over the qualifying period, and wages under the codes is a defined term with its own inclusions and exclusions. Because the definition changed with the codes, work it out from your actual salary slips rather than from your offer letter.

Does any of this apply if I was on probation?

Continuous service is what counts, and probation time forms part of it. Under a year of service you fall outside the Section 70 conditions, but at six months you may already be inside Section 39 of the Karnataka Act.

The company says it is a global layoff decided abroad. Does that change the law?

No. The legal test is applied to the employment in India. A decision taken by a parent company is still a termination by the employer for a reason, which is what Section 2(zh) covers.

This article is for general informational purposes only and does not constitute legal advice. Consult a qualified advocate for advice on your specific situation.

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