Employee transfer needs trust on both sides

Recently, a number of Indian companies have faced questions regarding the validity of transfers they have required of their employees. With several incidents of employees resisting such transfers coming to light, it is essential for companies to take a holistic approach to their transfer decisions, especially where many staff are involved.

While the right to transfer is the prerogative of the employer, economic reasons and social factors such as family, community ties, children’s education and their standard of living affect an employee’s decision when required to relocate to another city or country.

In India, an employer’s right to transfer an employee comes from service conditions set out in the contract of employment, standing orders, company policies and rules. Courts do not, ordinarily, interfere with an employer’s decision to transfer provided it is made for good faith administrative reasons and the exigencies of work. Factors such as frequency of transfers, hardship and the initial place of posting are usually not considered sufficient grounds for the court to intervene. This approach was evident in a recent decision of the Karnataka High Court, which upheld the employer’s decision to transfer an employee despite medical issues. The court held that transfer is an incidence of service and ample discretion must be given to an employer to transfer their employee, bearing in mind the needs of the organisation. The employee’s frequent transfer was not a violation of his civil or fundamental rights.

Transfer orders are often challenged on the grounds that the transfer violates the conditions of employment or results in a change of conditions of employment to the employee’s detriment. In several cases, employees have also pleaded bad faith on the part of the employer, alleging transfers were arbitrary, vengeful or imposed as victimisation or punishment. Courts do usually set aside transfer orders if one or more of these grounds is established.

It is therefore essential for employers to ensure that the right to transfer is an express condition of service and that such actions are taken for proper business needs. The employer’s power to transfer employees should not be abused to punish or victimise an employee. It is equally important for an employer to implement employee transfers in the correct way. Employees, for example, should not have to choose between accepting a transfer or being terminated or losing pay. Regulators are likely to take action in such a case. This was the case of a leading IT company where the Maharashtra state labour department issued a notice after employees complained that the employer had stopped their pay and demanded they resign for not accepting transfers.

Employers must remember their statutory obligations when requiring employee transfers as part of business transactions, such as the sale or transfer of the company. While such transactions are usually the result of strategic business decisions by employers, any consequential transfers of employees require the transferor as well as the transferee employer to be aware of and comply with applicable legal obligations. The law does not specify such obligations in respect of employees unless they qualify as workmen under the Industrial Disputes Act, 1947 (ID act). Section 25FF of the ID act, in dealing with the transfer of an undertaking prescribes the obligations of the transferring employer when transferring workmen in order to ensure that their interests are protected.

Under section 25FF, every employee who has rendered continuous service for a period of not less than one year immediately before the transfer is entitled to notice and compensation. Such provisions do not apply where the employment of the employee has not been interrupted by the transfer and there is continuity of employment; the terms and conditions of service applicable to the employee after the transfer are no less favourable than those immediately before such transfer, and the new employer is, either under the terms of such transfer or otherwise, legally obliged to provide compensation to the employee in the event of retrenchment.

Employers must implement best practices and ensure compliance with applicable laws when transferring employees. This will then be a mutually beneficial situation for both employer and employee.

Anirudh Mukherjee is a partner and Pankaj Anil Arora is a principal associate at Kochhar & Co., Advocates & Legal Consultants.