Sources of regulation
In Nepal,
termination of employment is governed by the Labour Act, 2048 (1991) (LA).
Exercising powers conferred by the LA, the Government has issued the Labour
Regulation, 2050 (1993) (LR), and, with a more limited scope, the Labour
Rule Relating to Tea Estates, 2050 (1994) (LTE), both expanding upon the
LA in minor respects.
Scope of legislation
The LA’s Preamble indicates that the Act applies
to workers and employees in enterprises of various sectors. The LA applies
only to enterprises where at least ten workers or employees are employed,
unless the enterprise is situated in industrial districts established by
the Government (sec. 2(b), LA).
The employer is defined as “manager”, which
means a person appointed for performing the business of the enterprise, as well as “establishment”,
which means a person having final authority on the activities of the enterprise
(secs. 2(e) and (f), LA).
“Employees” are defined as persons engaged in
the administrative functions of the enterprise. “Workers” are defined as
persons employed, in return for the payment of salary or wages, in production,
in providing services, or in any work related or incidental thereto, including
work on a piece-rate, contract or agreement basis (sec. 2(d), LA).
Apprentices are covered by the Industrial Apprenticeship
Training Act, 1982, and as such are not considered to be workers or employees.
Contracts of employment
The employment contracts can be concluded as
permanent, temporary, seasonal, contract, on daily-wage or piece-wage basis.
Prior to recruitment, the employer must classify
the posts of the workers and employees according to the nature of the production
process, service or work of the enterprise. The Labour Office to which the
classification must be notified may direct the employer to amend the classification
of posts (sec. 3, LA).
Workers and employees, including those engaged
in any piece-rate or contract work, must be granted a permanent appointment
after they complete one year of uninterrupted service, if their performance,
honesty, discipline, dedication to work, attendance and so on are satisfactory
(probationary period). The mandatory appointment letter issued by the employer
must explicitly mention the post, remuneration, and conditions of service
for the worker or employee concerned. The employer has to inform the competent
Labour Office of the appointment (sec. 4, LA).
In the event that any enterprise needs to increase
production or services immediately, it may employ any person on contract
for any fixed work of the enterprise, except for the work or permanent nature
by prescribing the period of service, remuneration and other work conditions
in the contract. (sec. 7, LA).
It follows from the foregoing that the probationary
period is a maximum of one year, irrespective of the type of employment relationship
established.
Termination of employment
The contract of employment can terminate, not
at the initiative of the employer, in certain circumstances, including by:
- mutual
agreement of the parties,
- the
expiry of a fixed-term contract, and
- force majeure.
Any worker or employee who causes turbulence
or besiege illegally, or directly or indirectly instigates others to do so,
in any enterprise other than the one in which he or she is working, or in
any government office, may be dismissed from service by the Department of
Labour (sec. 54, LA). Both the enterprise and the Department of Labour[1] have to follow the procedure set out in sec. 53
of the LA (see below) before dismissing a worker or an employee on such disciplinary
grounds.
The employer may compel any worker or employee
who has attained the age of 55 years to retire. However, the service of any
worker or employee who is indispensable to the operation of the enterprise
may be extended for an additional period of five years (sec. 15, LA).
Dismissal
It is unlawful to terminate the employment of
a permanent worker or employee of the enterprise, unless the procedures and
rules prescribed under the LA or regulations issued under it are followed
(sec. 10, LA). As a result, an employer can only give notice of termination
to a permanent worker or employee in accordance with the procedure set out
in cases of redundancy and misconduct.
If the production or services of an enterprise
need to be curtailed, or if the entire enterprise needs to be closed down
due to “special circumstances” for a period of up to three months, all permanent
workers and employees must be “kept in reserve” with half the salary they
normally receive and with all appropriate benefits which they have been receiving.
“Special circumstances” relate to production stoppages due to damage to machinery,
shortage of energy or raw materials, natural disaster or lack of customers.
Permission must be obtained from the Labour Office if the period of curtailment
is 15 days or less, and from the Department of Labour if the period exceeds
15 days (sec. 11, LA).
A different regime applies to workers or employees
of a seasonal enterprise when it closes during the off-season period notified
to the Labour Office. Permanent workers or employees of such enterprises
receive an allowance amounting to at least 25 per cent of the remuneration
to which they are normally entitled (sec. 13, LA).
If the need for curtailment or closure exceeds
three months, the employer may dismiss all or part of the enterprise’s employees
after obtaining permission from the Department of Labour. If it becomes necessary
to subsequently fill the posts vacated by retrenched workers and employees,
priority must be given to the retrenched workers or employees as far as possible.
It is lawful to terminate the employment of
any worker or employee who has not recovered from an occupational accident
within a year, or who has been found to be permanently disabled by a certified
physician (sec. 21, LR).
Any worker or employee committing any of the
following forms of misconduct may ultimately be dismissed from service (sec.
51, LA):
- causing
physical injury or harm, tying up or detaining the employer or colleagues,
or engaging in destructive activities within the enterprise in respect
of any labour dispute or any other issue;
- any
criminal offence involving moral turpitude for which the worker or employee
is convicted or imprisoned;
- taking
or instigating others to take action in such a way as to adversely affect
the production of or the provision of services by the enterprise, or preventing
the supply of food and water, or cutting telephone or electricity service,
or obstructing movement within the enterprise;
- stealing
any property of the enterprise;
- offering
or accepting bribes;
- participating
or forcing others to participate in a strike which has been declared irregular
or illegal;
- participating
in a strike without fulfilling the legal requirements, or wilfully slowing
down work so that the interests of the enterprise are harmed;
- wilfully
destroying or damaging any asset of the enterprise, or carrying outside
the premises of the enterprise and using or allowing unauthorized persons
to
use such assets without obtaining permission from the competent authority;
- frequently
and intentionally violating any order or directive issued under the LA
or the rules established under the LA, or any work rules made by the enterprise,
or misbehaving in relation to the clients of the enterprise;
- frequent
absence from work without having obtained permission or frequent late arrivals
for work;
- committing
any action which violates the secrecy of the enterprise relating to any
special technology, with the objective of causing losses to the enterprise
where
the worker or employee is employed; and
- wilfully misusing
or damaging any object or facility kept to ensure the welfare, health and
safety of workers or employees.
The LA provides for different punishments depending
on the type of misconduct. Any worker or employee who behaves in a manner
mentioned above may be dismissed from service at once or after being punished
twice. The punishment for some types of misconduct may be a suspension of
three months, the withholding of the annual salary increment or a warning
(secs. 51 and 52, LA).
If an employee remains absent from work for
more than 30 days without informing his or her employer about the extension
of the leave or without obtaining leave, he or she can be dismissed from
service with a reduction of salary commensurate with the number of days of
absence (sec. 37, LR).
During the probationary period, the contract
of employment may be terminated by either party without notice.
Notice and prior procedural safeguards
The length of the notice period can be defined
in the individual contracts of employment. A notice has to be served to the
worker/employee personally in the presence of three witnesses or sent by
registered mail to this/her last recorded address.
In case of dismissals for economic reasons,
the employer has to obtain the approval of the Department of Labour, which
has to give its decision within two months. In such event of retrenchment,
the workers or employees performing similar work who were appointed last
must be dismissed first, unless the reasons are given for proceeding differently
(sec. 12(2), LA).
The LR lays down the following particulars (sec.
8, LR):
- non-Nepali
nationals must be retrenched first, even if they have not been employed
last;
- workers
and employees who are absent for a long period due to poor health must
be retrenched first; and
- other reasons
can be given for the need to deviate from the last in, first out order.
Pursuant to the LTE, the same selection criteria
for retrenchment apply to tea estate workers.
In case of collective redundancies, permanent
workers or employees are entitled to one month’s advance notice indicating
the reasons for retrenchment, or payment in lieu of the notice (sec. 11(3)(a),
LA). This rule does not apply to workers or employees appointed under contract
service (sec. 11(4), LA).
As regards the disciplinary procedure for misconduct,
any worker or employee must be served a notice explicitly referring to the
alleged misconduct and the punishment that might be imposed. The employer
must grant the worker/employee with an opportunity to submit his/her explanation.
This reply period is of seven days within which the employment relationship
cannot be terminated. If the worker or the employee concerned does not submit
an explanation within the time limit prescribed, or if the explanation submitted
by him or her is not found to be satisfactory, the worker or employee may
be punished for misconduct. No disciplinary action can be taken by the employer
after expiry of two months from the date of commitment of this misconduct.
If the worker or the employee concerned does not accept the notice, or remains
absent, he or she is deemed to have been duly notified, provided it is sent
to his or her address by registered post and the copy is posted on the public
notice board of the enterprise witnessed by at least three persons and subject
to the sending of another copy to the Labour Office (sec. 53, LA).
Severance pay
In case of retrenchment, permanent workers or
employees are entitled to lump-sum compensation at the rate of 30 days’ salary
for every year of service completed in the enterprise. In this regard, a
service period of at least six months constitutes a service period of one
year (sec. 12, LA).
Permanent workers or employees who have served
for at least three years and whose employment is terminated are entitled
to a lump-sum gratuity the amount of which increases with seniority (sec.
23, LR). Those dismissed from service by the employer or the Department of
Labour for any of the above-mentioned forms of misconduct are not entitled
to this gratuity (sec. 23(3), LR). Retrenched workers or employees can choose
between the gratuity and the compensation mentioned in the previous paragraph.
Permanently disabled workers can claim separate compensation, in addition
to the gratuity (sec. 21, LR). The LTE applies these principles to tea estate
workers.
Avenues for redress
Individual claims or complaints regarding employment
matters must be submitted to the employer in writing (sec. 73, LA). If the
employer fails to resolve the problem through discussions within 15 days,
the claim may be submitted to the competent Labour Office, which will arrange
bilateral negotiations within seven days between the employer and the worker
or employee concerned. If the problem is still not resolved, the chief of
the competent Labour Office must settle the dispute, but this decision is
subject to an appeal to the Labour Court within a period of 35 days from
the date of receiving notice of the decision.
A worker/employee dismissed on disciplinary
grounds may file a complaint to the Labour Office within 35 days from the
date of receipt of the dismissal notice. He or she can appeal against the
decision of the Labour Office within 35 days after receiving notice of the
decision (sec. 60, LA).
Terminating the employment of a permanent worker
or employee without observing the legal prescriptions (“illegal breach”)
is void and no compensation can substitute for the specific remedy of reinstatement.[2]
Workers and employees can appeal against an
order to wind up an enterprise to the Supreme Court within 35 days of such
an order.
Further information
[1] The Labour
Officers are appointed per region. Among his or her functions are conducting
inspections in enterprises, providing advice with a view to improving labour
relations and solving disputes between the workers or employees and the
employer (sec. 65, LA). Whereas the Ministry of Labour devises labour
policy, the Department of Labour coordinates the implementation of policy.
Regional Labour Offices are the first-level contact institutions for employers
and employees/workers.
[2] Mathur
Ajeet N.: “Nepal”, in R. Blanpain
(ed.): International encyclopaedia for labour law and industrial relations (The Hague,
Kluwer Law International, 2003), p.111.
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