When you are not a “worker”: termination rights for managers, senior staff and directors in India

Most salaried professionals in India assume the labour law protects them. For a large part of the managerial workforce, it does not. The Industrial Relations Code, 2020 — which now governs in place of the repealed Industrial Disputes Act, 1947 — defines a “worker” so as to exclude anyone employed in a managerial or administrative capacity, and to exclude supervisory staff drawing wages above ₹18,000 a month. If you fall outside the definition there is no Labour Commissioner to approach, no conciliation, no industrial tribunal and, in almost every case, no reinstatement. What remains is the contract, the employer’s own policy, the law on stigmatic dismissal and defamation, a handful of statutory dues that do not care about your designation — and the record. The record is what decides these matters, and it is written long before anyone reaches a courtroom.

It usually starts with a meeting that is not on the calendar. A senior manager with nine years of service and no adverse appraisal is told, in a forty-minute conversation with HR and a skip-level, that there are “serious concerns”. No complaint is shown. Two days later a performance improvement plan arrives with targets that were not in any earlier document, running for thirty days — which happens to end eleven days before the next tranche of stock vests. The plan says failure may result in termination. It also says the matter is confidential.

The instinct at that point is to fix it: to work harder, to reply reasonably, to avoid making things worse. That instinct is what the process is designed to produce, and it is usually the wrong one. Not because the situation calls for aggression, but because the employee has just entered a process in which everything they write becomes evidence, and they are the only party in the room who does not know that yet.

Before deciding what to do, it is worth knowing exactly where you stand in law — because for senior employees the answer is often not what they were told at induction.

First, what actually happened to the old law

This is worth getting right, because a good deal of what is currently being written about it is wrong, and because HR departments are still issuing notices drafted against a statute that no longer exists.

The Industrial Relations Code, 2020 commenced on 21 November 2025, and the Industrial Disputes Act, 1947, the Trade Unions Act, 1926 and the Industrial Employment (Standing Orders) Act, 1946 now stand repealed. The route there was not clean: the commencement notification did not itself invoke the repeal power in Section 104, which left the position genuinely uncertain for some weeks; the Removal of Difficulties Order of 8 December 2025 (S.O. 5683(E)) kept the existing Labour Courts and Industrial Tribunals adjudicating in the meantime; notification S.O. 465(E) of 2 February 2026 specified the repeal date; and the Industrial Relations Code (Amendment) Act, 2026, which received assent on 16 February 2026, put the repeal beyond doubt and confirmed the continued functioning of tribunals and statutory authorities under the repealed Acts. Existing Labour Courts and Industrial Tribunals continue to hear existing and new matters until the corresponding authorities under the Code are constituted.

Two practical consequences follow. The first is that a termination letter, standing order or HR policy citing the Industrial Disputes Act, 1947 as the operative law is citing a repealed enactment — which does not by itself invalidate anything, but is a fair indication of how closely the process was thought through. The second is that the forum has not disappeared: Labour Courts and Industrial Tribunals are still sitting and still taking new matters. What changed is the statute they apply, not their existence.

The line the law draws, and where it leaves you

The new labour laws have changed a great deal about compliance, wages and social security, but they did not change this: Indian employment law is not one body of protection applying evenly to everyone who draws a salary. It is two systems. One is industrial law, which is statutory, protective, and administered through a dedicated machinery. The other is contract law, which is neutral, and which assumes two parties of roughly equal bargaining power negotiating terms.

Which system you are in depends on a single definitional question. Under Section 2(zr) of the Industrial Relations Code, 2020, a “worker” is a person employed in any industry to do manual, unskilled, skilled, technical, operational, clerical or supervisory work. The definition then carves out, among others:

• persons employed in a managerial or administrative capacity; and
• persons employed in a supervisory capacity drawing wages exceeding ₹18,000 per month, or such higher amount as may be notified.

The supervisory threshold was raised from the older figure of ₹10,000, which sounds like a liberalisation until you notice where ₹18,000 a month sits in a metropolitan salary structure in 2026. For most graduates in professional employment in Delhi, Gurugram, Bengaluru or Mumbai, it is cleared within the first two or three years. Once cleared, the industrial-law system closes behind you, and nothing announces it.

Two points are commonly misunderstood, and both cut in the employee’s favour more often than employers suggest.

First, the test is function, not title. Indian courts have consistently examined what an employee actually did rather than what the employer chose to call them. Designation inflation is endemic — “Manager, Client Servicing” is frequently a title given in place of a raise — and a person with no power to hire, dismiss, sanction leave, allocate work or bind the company is not converted into management by a word on a business card. The relevant enquiry is into real authority: independent decision-making, supervision of subordinates in a meaningful sense, and control over the terms of others’ employment. An employee who has been told they are outside the protective net should not simply accept it.

Second, being outside the definition is not the same as being outside the law. It removes a forum and a set of statutory presumptions. It does not remove the contract, and it does not remove the employer’s obligation to keep to its own written processes.

What you lose when you fall outside

It is worth being precise about the loss, because vague anxiety leads to bad decisions in both directions.

• The conciliation and tribunal route. The machinery under the Industrial Relations Code — conciliation officers, industrial tribunals, and the associated recovery mechanism for money due — operates in respect of industrial disputes involving workers. It is quicker and cheaper than a civil suit, and it is not open to you.
• Standing orders. Certified standing orders require a proper enquiry before dismissal for misconduct in covered industrial establishments, and under the Code the coverage threshold now sits at establishments employing 300 or more workers. Where they apply they are a powerful procedural guarantee. They are keyed to workers.
• Retrenchment protections. The notice, compensation and last-in-first-out framework governing retrenchment is part of the same statutory package.
• Reinstatement, in practical terms. A contract of personal service is ordinarily not specifically enforceable under the Specific Relief Act, 1963. Outside public employment and certain statutory bodies, a court will compensate you rather than put you back in the job.

That is a real loss and there is no use pretending otherwise. What is left, however, is more substantial than most people in the middle of a dispute realise.

What you still have

The contract, read strictly

Notice period and notice pay, severance where the contract provides it, earned incentive and commission, retention bonuses, and the terms of any stock plan are contractual entitlements enforceable on their own footing. Employers routinely treat accrued incentive as discretionary at the point of exit; whether it is depends on the language, the scheme document and the past practice, not on what HR asserts in an exit meeting.

The employer’s own policy

This is the most underused lever available to a senior employee. Companies publish disciplinary policies, PIP frameworks, grievance procedures and codes of conduct, and they hold them out to employees as the process that will be followed. Having done so, an employer that departs from its own stated procedure — no written charge, no disclosure of the material relied on, no appeal where the policy provides one, a decision-maker who is also the complainant — has to explain the departure. Ask for the policy in writing, by version and date, at the earliest opportunity, and note carefully if it is not supplied.

Fair process where misconduct is alleged

Where the employer proceeds on alleged misconduct rather than on a simple contractual discharge, the principles of natural justice engage: a specific charge you can actually answer, disclosure of the material relied upon, a genuine opportunity to respond, and an impartial decision-maker. The Supreme Court in Meenglas Tea Estate v. The Workmen put the principle plainly — a person must know the accusation and the material against them and have a fair chance of testing it. A case cannot be simultaneously undisclosed and unanswerable. A show-cause notice that records the misconduct as already “found” before you have replied is evidence of pre-judgment. See also, in more detail, show cause notice at work: your right to a fair process and domestic enquiry procedure and employee rights.

Protection against a stigmatic exit

The distinction between a termination in exercise of a contractual right and a termination founded on alleged misconduct is not a formality. Where the order, the internal record or what is communicated to third parties casts an imputation on the employee’s character or integrity, the character of the termination changes, and remedies in defamation and for the removal of stigma become relevant. This matters commercially as much as legally: what a background-verification agency is told at the next job offer is frequently the real dispute. See relieving and experience letters withheld on exit.

Statutory entitlements that do not depend on your designation

• Gratuity and provident fund have their own qualifying conditions and their own authorities, and are not confined to workers. Gratuity is not forfeitable simply because an employer is aggrieved; forfeiture is confined to specific grounds and cannot be effected by unilateral deduction from a settlement.
• Limits on deductions from wages. Permissible deductions are defined and finite. A recovery is not authorised merely because it appears on a settlement statement.
• POSH. The 2013 Act applies to employees at every level, complainant and respondent alike, and prescribes how an Internal Committee must be constituted and how an inquiry must run. In Aureliano Fernandes v. State of Goa (2023) the Supreme Court issued directions precisely because implementation across institutions had been so uneven. Departures from the prescribed procedure are challengeable irrespective of your seniority.
• Restraints on future employment. A covenant restraining you from taking up employment after the contract ends is void under Section 27 of the Indian Contract Act, 1872. Employers assert these far more often than they enforce them, and the assertion is frequently made to depress a settlement rather than to be litigated.

Five places employers get it wrong with senior staff

In practice, disputes involving managerial employees tend to turn on a small number of recurring defects. They are worth knowing because they are visible in the documents, and because they are created by the employer.

1. Misconduct dressed as a simple discharge. The employer wants the procedural ease of terminating on notice while also recording, internally or to third parties, that the employee was dishonest, insubordinate or in breach of the code of conduct. It cannot have both. Where the substance is punitive, the process obligations follow the substance.

2. A PIP with no antecedent record. A performance case that appears for the first time in the PIP, with no supporting appraisal history, contradicts the employer’s own documents. The prior ratings, bonus letters and promotion notes are usually in the employee’s own inbox — which is why they should be preserved before access is withdrawn.

3. Timelines calibrated to entitlements. A process that concludes shortly before a vesting date, a bonus payment date or the completion of a gratuity qualifying period invites an obvious question. Sequence and dates are objective facts, and they are difficult to explain away.

4. Bond and recovery demands without substantiation. A training-cost bond may be enforceable where it reflects genuine, documented expenditure, but Section 74 of the Contract Act confines recovery to reasonable compensation. A round figure with no supporting invoices is a negotiating position rather than a legal entitlement. See notice period buyout and recovery demands.

5. Full and final settlements that are never itemised. Notice pay, alleged asset loss, training costs and a reversed discretionary bonus arrive as a single net figure. Asking the employer to identify the clause authorising each line is often enough to remove several of them. A preliminary computation can be run using the full and final settlement calculator.

Why the record decides it — and why it is written before court

Employment disputes are decided almost entirely on documents. By the time a matter is contested, the file consists of the notice, the reply, the emails with HR, whatever minutes exist, the PIP, the appraisal history, the settlement statement and the resignation if one was given. Very little of it is created in court. A substantial part of it is created by the employee, in the first two weeks, while they are distressed and still hoping the problem will resolve itself.

This is the practical reason that early intervention matters more in employment disputes than in most other civil matters. Not because a lawyer can compress a multi-year proceeding, but because the questions that will be asked of the employer years later can be asked now, in writing, when the employer must either answer them or visibly decline to. An enquiry that refused to supply the complaint; a policy clause that was demanded and never produced; a bond figure that was never substantiated; a committee whose composition was queried and never disclosed — each of these becomes apparent on the face of the record, without any need for oral evidence about what was said in an unminuted meeting.

It is also what makes a negotiated resolution realistic. An employer’s appetite for settlement is a function of how the file reads if it has to be defended. A file that documents its own procedural failures is a different proposition from one containing an unanswered notice and a signed resignation.

What to do in the first week

1. Preserve the record, lawfully. Do not copy, forward or download company data to secure evidence — it is the counter-attack employers most reliably find, and it carries contractual and IT Act exposure of its own. Work from what you already lawfully hold: documents you were given, anything in your personal email, your own dated notes made the same day as each meeting. Then put the employer on written notice to preserve the complaint, the material relied on, the meeting records and the applicable policy versions. Disclosure comes through process, not self-help — and a preservation demand that goes ignored is evidence in itself.
2. Reply in writing, and only in writing. Decline unminuted meetings courteously, and confirm by email what was said in any meeting you do attend. “To record our discussion of this morning…” is the single most useful sentence available to an employee in dispute.
3. Do not answer on merits before you have the material. Ask for the complaint, the exact documents relied on, and the specific policy clause and version alleged to be breached. Reply under protest and without prejudice, deny what is untrue, and state that you are willing to participate in a fair process. Silence is read as acceptance; a full defence written blind is worse.
4. Do not resign to obtain a relieving letter. This is the most common irreversible mistake. A resignation, once given, reframes the entire dispute, and the relieving letter is frequently withheld anyway.
5. Do not sign the settlement until the deductions are itemised. A full and final settlement usually carries a release. Establish what is being deducted, and under which clause, before signing anything.
6. Establish your status early. Whether you are a worker within the meaning of the Code determines the forum, the remedy and the limitation. It is worth resolving at the start rather than after a year in the wrong place.

Forum and limitation

Where the employee is outside the definition of worker, the route is ordinarily a civil suit on the contract, or arbitration where the contract requires it, or writ proceedings where the employer is the State or an instrumentality of the State. Statutory dues such as gratuity and provident fund go to their own authorities. POSH matters run on their own statutory track and their own timelines. Contractual jurisdiction clauses frequently fix the forum in the city of the employer’s registered office, and this should be checked before anything is filed.

Limitation for a civil claim is measured in years, and that is often taken as licence to wait. It is not. Documents disappear, witnesses leave, memories fade, and — most importantly — the moment at which the record could have been shaped passes within weeks.

Frequently asked questions

Am I a “worker” under the Industrial Relations Code, 2020?

A worker is a person employed to do manual, unskilled, skilled, technical, operational, clerical or supervisory work. The definition excludes persons employed in a managerial or administrative capacity, and supervisory staff drawing wages above ₹18,000 a month. The test is what you actually did, not what your business card said. A designation containing the word “manager” does not by itself exclude you; genuine powers — hiring, dismissal, sanctioning leave, allocating work, independent decision-making — are what the enquiry is directed at.

If I am not a worker, can I still approach the Labour Commissioner?

Generally no. The conciliation machinery and the industrial tribunal route operate in respect of industrial disputes involving workers. Employees outside the definition ordinarily proceed by civil suit, by arbitration where the contract requires it, or by writ where the employer is the State or an instrumentality of it. Some statutory dues, however, do not depend on worker status at all.

Which entitlements survive regardless of designation?

Gratuity and provident fund have their own authorities and qualifying conditions. Protection under the POSH Act applies at every level. Limits on deductions from wages operate on their own terms. Contractual entitlements — notice pay, earned incentive, vested stock — stand on the contract.

Can I be reinstated?

Generally not. A contract of personal service is ordinarily not specifically enforceable, so the usual remedy is compensation together with relief directed at the consequences of the termination: removal of stigma, correction of the record, release of documents, and payment of what is due. The exceptions arise mainly in public employment and some statutory bodies.

Does it matter whether the employer calls it misconduct or a simple discharge?

Considerably. A discharge in exercise of a contractual right, carrying no imputation, involves limited procedural obligations. A termination founded on alleged misconduct engages the duty of fair process, and where the order or the record casts a stigma it opens challenges on stigmatic dismissal and defamation. Employers frequently blur the two — taking the convenience of the first while recording the substance of the second.

My employer says the process is confidential and I cannot take advice.

A confidentiality obligation does not prevent an employee from taking legal advice about their own employment. An instruction framed to discourage advice is itself worth recording in writing.