Labour and Employment Quarterly Milestones (July-September 2025)

The Delhi High Court recently upheld a former employee’s claim against their ex-employer for including remarks such as “malicious conduct” and “complete loss of trust” in their termination letter. The Court awarded INR 2,00,000 as damages for reputational harm and directed the employer to issue a revised termination letter omitting the defamatory remarks.¹

The employment contract permitted either party to terminate the employment by serving the prescribed notice period. While the Court recognised the employer’s contractual right to terminate a determinable contract, it held that this right does not extend to making stigmatic or defamatory assertions in the termination letter — especially in the absence of any supporting material, such as disciplinary warnings or an enquiry report. The Court noted that the employee’s strong and consistently positive performance record further undermined the employer’s assertions.

The Court further held that in cases of alleged defamation arising from confidential employer-employee communications, such as termination letters, the traditional requirement of publication does not apply. Instead, the doctrine of foreseeability of publication is relevant. Applying this approach, the Court found that the employer had gone beyond a routine administrative action by including defamatory remarks in the termination letter. Given that it was reasonably foreseeable that the employee would need to share the letter with prospective employers, the Court held that the inclusion of such language amounted to defamation.

In a recent ruling, the Supreme Court examined whether non-disclosure of a preliminary investigation report in a disciplinary proceeding constitutes a violation of the principles of natural justice, rendering the entire proceedings and the consequent termination invalid. The Court held that such reports need not be disclosed to the concerned employee unless specifically relied upon during the enquiry.²

The case arose from a challenge by a senior bank officer to his dismissal, on the ground that the disciplinary proceedings were vitiated due to the employer’s failure to share the preliminary enquiry report. The Supreme Court, after examining various precedents, observed that preliminary investigation reports are primarily fact-finding in nature and are intended only to determine whether formal disciplinary proceedings should be initiated.

The Court clarified that any material actually relied upon to arrive at findings of misconduct must be disclosed; otherwise, the enquiry would violate the principles of natural justice. However, unless the disciplinary authority relies on the contents of the preliminary investigation report while imposing punishment, there is no obligation to furnish it to the concerned employee.

The Calcutta High Court has held that an employee’s decision to seek another job with a competitor offering better benefits is a basic right and does not constitute ‘moral turpitude’ so as to justify the forfeiture of gratuity under the Payment of Gratuity Act, 1972.³

The case involved the termination of an employee on the basis that he had explored opportunities with a competitor company and, in doing so, had allegedly shared confidential information of the current employer. The employer claimed that the alleged act amounted to moral turpitude and justified the denial of gratuity.

The Court, however, found that the employer had failed to establish any actual loss arising from the employee’s conduct. It also noted that the disciplinary process did not adhere to the principles of natural justice, and the enquiry officer had not recorded any independent adverse findings against the employee.

Accordingly, the Court set aside the punishment imposed by the enquiry committee and directed the employer to pay the entire gratuity amount, along with interest, to the employee.

The Employees’ State Insurance Corporation (ESIC) has launched the Scheme to Promote Registration of Employers/Employees (SPREE or the Scheme) to encourage factories and establishments covered under the Employees’ State Insurance Act, 1948 (ESI Act), to register with the ESIC and expand the social security coverage. The Scheme is specifically aimed at employers who, despite exceeding the statutory threshold of 10 or 20 employees as mandated under the ESI Act, have failed to obtain registration. The Scheme provides a time-bound opportunity to ensure compliance by 31 December 2025, without facing retrospective scrutiny, financial liabilities, or legal action for past non-compliance.

Employers registering under the Scheme will be deemed covered under the ESI Act from the date of registration or the declared date of commencement, as applicable. Newly registered employees will similarly be covered from their respective date of registration. The Scheme further clarifies that such registration would not affect any actions taken or required under the ESI Act prior to 1 July 2025.