Introduction: The Statutory Evolution of Employment Termination

The jurisprudence surrounding the termination of employment in India has historically been governed by the Industrial Disputes Act (IDA), 1947, a statute heavily weighted toward preserving industrial peace through stringent job security provisions. With the formal operationalisation of the Industrial Relations (IR) Code, 2020 (effective November 21, 2025), the legislative framework has undergone a monumental shift. The IR Code subsumes the IDA, the Trade Unions Act, 1926, and the Industrial Employment (Standing Orders) Act, 1946, streamlining compliance while introducing novel concepts such as Fixed-Term Employment and the Worker Re-Skilling Fund.

Despite the modernization of the code, the fundamental protections against arbitrary dismissal remain robust.”Wrongful termination” constitutes a severe violation of statutory mandates, exposing corporate entities to protracted litigation, back-wage liabilities, and mandatory reinstatement orders. This publication analyzes the legal parameters of wrongful termination in India, the differentiated remedies available to employees, and the critical compliance shifts introduced by the IR Code as of 2026.

Jurisdictional Classification: “Worker” Vs. Managerial Staff

The threshold question in any wrongful termination dispute is the statutory classification of the employee, as this dictates the adjudicatory forum and the legal remedies available.

• The Expanded Definition of “Worker”: Under Section 2(zr) of the IR Code, the definition of a ‘worker’ (formerly ‘workman’ under the IDA) has been broadened. It now explicitly includes working journalists, sales promotion employees, and, crucially, individuals employed in a supervisory capacity earning up to ₹18,000 per month (a significant increase from the ₹10,000 threshold under the IDA).
• Managerial and Administrative Employees: Individuals employed in a purely managerial or administrative capacity, or supervisors earning above ₹18,000, fall outside the protective umbrella of the IR Code. Their remedies for wrongful termination are strictly contractual, governed by the Indian Contract Act, 1872, and the Specific Relief Act, 1963. They must approach a Civil Court seeking damages for breach of contract, rather than statutory reinstatement.

What Constitutes Wrongful Termination in India?

Under the Industrial Relations (IR) Code, 2020, termination is deemed “wrongful” if it violates established statutory procedures, breaches the principles of natural justice, or constitutes an Unfair Labour Practice (categorized under the Second Schedule of the Code).

Disciplinary Dismissal and the Domestic Enquiry

An employer cannot lawfully terminate a worker on the grounds of misconduct (e.g., insubordination, fraud, absenteeism) without conducting a fair and documented Domestic Enquiry. The termination is legally void if:

• The worker was not served a formal charge sheet.
• The worker was denied a reasonable opportunity to cross-examine witnesses or present a defense (violating the principle of audi alteram partem).
• The punishment of dismissal is shockingly disproportionate to the proven misconduct.

Retrenchment (Redundancy) Violations

If a termination is due to business restructuring, redundancy, or financial loss, it qualifies as “retrenchment.”Retrenchment becomes wrongful if the employer fails to adhere to the Last In, First Out (LIFO) principle.Terminating a senior worker while retaining a junior worker in the identical role, without recording substantive, objective reasons for the deviation, is a direct statutory violation.

The New Retrenchment Thresholds (Section 77, IR Code)

The most debated reform within the Industrial Relations (IR) Code, 2020 is the recalibration of the threshold requiring prior government approval for retrenchment, lay-offs, or unit closure.

• The 300-Worker Rule: Under Chapter X of the IR Code, industrial establishments (factories, mines, and plantations) must obtain prior permission from the appropriate Government before retrenching workers only if they employ 300 or more workers on an average per working day in the preceding 12 months. This is a substantial relaxation from the 100-worker threshold under the erstwhile IDA, granting mid-sized manufacturing and industrial units significantly higher operational flexibility.
• Statutory Conditions Precedent: Irrespective of the 300-worker threshold, the retrenchment of any worker who has completed one year of continuous service remains contingent upon:
  1. Providing one month’s prior notice in writing (or wages in lieu thereof).
  2. Payment of retrenchment compensation equivalent to 15 days’ average pay for every completed year of continuous service.

The Novel Compliance Mandate: Worker Re-Skilling Fund