Sources of regulation
The law relating to termination of employment in Pakistan
does not conform to a uniform standard. In some instances, legislation
has been enacted which attempts to intervene in the relationship between
the employer and employee on this issue, abolishing or affecting the common
law presumptions of employment at will and dismissal without the need to
prove cause. However, workers falling outside this legislation remain covered
by common law legal principles. In addition, different kinds of legislation
establish varying degrees of employment protection for the worker.
The main statutes governing termination of employment in
Pakistan are the West Pakistan Industrial and Commercial Employment (Standing
Orders) Ordinance, 1968 (ICEO), and the Industrial Relations Ordinance,
1969 (IRO). Other relevant legislation which covers a smaller proportion
of workers includes the Road Transport Ordinance, 1961 (RTO), the Newspaper
Employees (Conditions of Service) Act, 1973 (NEA), the Pakistan Essential
Services Maintenance Act, 1952 (ESMA), and the West Pakistan Shops and
Establishments Ordinance, 1969 (SEO). The standing orders under the ICEO
which relate to termination of employment have been made applicable to
the RTO and the NEA.
Scope of legislation
The ICEO is generally applicable to all workers belonging
to industrial and commercial establishments of 20 or more workers. However,
industrial establishments of less than 50 workers are excluded from the
provisions concerning termination of employment. While the ICEO does not
exclude specific categories of workers from its purview, it is important
to note that it is limited in its scope because of the restrictive interpretation
given to the definition of a “workman”, to which the sections on termination
of employment refer. Under sec. 2(I) of the ICEO, a “workman” is
defined as a person who does “manual” or “clerical” work. This definition
has been very narrowly construed by the courts to exclude many workers
from protection against arbitrary dismissal under this legal instrument.
In deciding whether a person may qualify as a “workman” under the provisions,
the courts have regard not to the category of the job, but rather to the
nature of the work involved.
The other legislation mentioned above applies specifically
to special types of employment.
Contracts of employment
Standing Order No. 1 of ICEO distinguishes between four
types of worker. “Permanent employees” are defined as workers who are engaged
in work likely to last more than nine months and who have satisfactorily
completed a probationary period. “Temporary workers” are those who have
been engaged for work of an essentially temporary nature that is likely
to be finished within a period not exceeding nine months. There is also
a concept known as “baldi”, which describes a worker who is appointed
in the place of a permanent worker or probationer who is temporarily absent.
Finally, “probationers” mean workers provisionally employed to fill a permanent
vacancy, and who have not completed three months’ service.
Termination of employment
While provisions concerning termination of employment for
misconduct apply to all “workmen”, protections related to termination for
other causes are restricted to “permanent workers” under the ICEO. Under
the ICEO’s Standing Orders (SO) and the SEO, termination by the employer
may be either termination simpliciter, which is termination on grounds
other than that of misconduct, by notice (sec. 12, SO); or for misconduct
(sec. 15, SO). This dichotomy is reflected both in the procedures
and reasons accepted for termination of employment. This distinction also
applies for employees covered under the NEA and the RTO.
Dismissal
For workers falling under the ICEO, a valid and written
reason must be given for termination of employment to be upheld. This applies
to both termination simpliciter (sec. 12, SO) and dismissal
on the grounds of misconduct (sec. 15, SO). The IRO authorizes the
Labour Court to inquire into the legitimacy of termination of employment
according to the principles of good labour practices and natural justice.
This implies that a valid reason must be given for termination, even though
there is no other specific legislative requirement in this regard.
The provisions of the SEO do not stipulate that a reason
must be given for termination of employment; it is sufficient if written
notice is given to employees. For workers falling outside the purview of
the above legislation, the common law presumption of employment at will
prevails and no reason for termination is required by law. However, common
law principles on procedural fairness will be applicable.
While the ICEO obliges the employer to state, in writing,
a reason for termination of employment, except in very few instances, it
neither prescribes any reasons for which the services of a worker could
be lawfully terminated nor specifies limits on the kinds of reasons which
will be acceptable. The development of valid reasons for dismissal has
therefore been left to case law. In relation to termination unrelated to
misconduct, case law establishes that acceptable reasons for dismissal
include serious illness, economic needs of the industry or establishment,
and inefficiency or incapacity to perform the required job.
Where there is jurisdiction under the IRO, the Labour Court
may impose any requirement for reasons which is in keeping with its adjudicating
principle of good industrial practices.
Serious misconduct, provided that the procedure of a fair
hearing according to the principles of natural justice has been carried
out, is a sufficient basis for dismissal under the ICEO and the SEO. Examples
of misconduct include prolonged absence without permission, negligence
at work, wilful insubordination or disobedience, theft, fraud or dishonesty
in connection with the employer’s business or property (sec. 15,
SO).
Under sec. 12 of the SO of the ICEO (termination simpliciter),
any termination effected must be carried out in good faith. Consequently,
where discharge of an employee is carried out merely to avoid the obligations
of a fair hearing under the SO (sec. 15), albeit with the required
notice, the Labour Court may inquire into the matter and declare the reason
for termination invalid.
Termination of employment on the basis of trade union membership
or activity will also be considered invalid reasons for termination, both
under the ICEO (sec. 18, SO) and under the standard of good labour
law practices. Other specific examples of unlawful dismissal are not outlined
in legislation but will be determined according to the adjudicatory principles
of the Labour Court, the labour authority and case law based on good labour
practices.
Notice and prior procedural safeguards
Notice for termination of employment is only mandatory
for permanent employees falling under the purview of the ICEO or the SEO
(sec. 12, SO, and sec. 19, SEO, respectively). This notice
period is specified as one month’s notice or equivalent pay in lieu of
such notice.
Under sec. 15 of the SO of the ICEO, the employer
is compelled to grant the worker a fair hearing in cases of dismissal on
the grounds of misconduct. The worker must first be informed in writing
of the allegations made and the employer is required to institute an independent
inquiry into the charges. In addition, where dismissal is on grounds of
misconduct, sec. 19 of the SEO requires that temporary employees
(who are not entitled to notice) who are being dismissed as a punishment,
be given an opportunity to explain the charges levelled against them.
Termination for economic reasons or retrenchment has not
been given special attention as regards procedures and rights. It is included
in the provisions concerning termination on grounds other than that of
misconduct (sec. 12, SO, ICEO). Nevertheless, special provisions
have been enacted concerning the choice of the “workmen” to be retrenched
first (sec. 13, SO) and the priority of re-employment of retrenched
workers (sec. 14, SO).
In the event of fire, catastrophe, breakdown of machinery
or stoppage of power supply, epidemics, civil commotion or other cause
beyond the employer’s control that frustrate the operation of the work,
“workmen” may be laid off and then receive a payment equal to their daily
wage. The stoppage must be notified to the workers. After 14 days of lay-off,
the contracts of employment may be terminated with appropriate notice (sec.
11, SO, ICEO). Apart from these situations of extreme emergency, the
employer must obtain prior authorization from the Labour Court in order
to close down an establishment or to terminate the employment of more than
50 per cent of the “workmen” (sec. 11A, SO, ICEO).
Severance pay
Under the ICEO, workers whose employment has been terminated
for any reason other than misconduct are entitled to severance pay or a
“gratuity” equivalent to 20 days’ wages for every completed year of service
or any part thereof in excess of six months. A pension may be substituted
for any gratuity (sec. 12(5), SO).
Avenues for redress
The jurisdiction under the IRO is dual in nature. It provides
mechanisms for adjudicating both individual dismissal grievances (under sec.
25A, added in 1972) and collective disputes on dismissal (secs.
26-31), where this is a dispute of interest, not a dispute of rights.
However, the jurisdiction of a Labour Court under sec. 25A may only
be invoked if locus standi is granted under another law, that is,
if another law gives a basis for contesting the dismissal by providing
for a specific right and there is no mechanism for settling such a dispute
under that law. Laws granting such initial jurisdiction are the ICEO, the
RTO and the NEA, which provide for mandatory procedures for termination
of employment including a right to a fair hearing where dismissal on grounds
of misconduct is alleged.
Where the IRO grants an avenue for redress for individual
grievances, the employee may take the case to the Labour Court. The Labour
Court is empowered to go into all the facts of the case when adjudicating
a grievance under sec. 25A of the IRO and pass such orders as the
Court deems just and proper in the circumstances of the case. This is a
reversal of the previous law whereby the Court only had limited jurisdiction
in dismissals on the ground of misconduct, not having the power to review
the facts of the case and being able only to ensure that the worker had
the opportunity of self-defence. The principles of good labour practices
and natural justice are employed in the adjudication of termination disputes.
The jurisdiction under the IRO may be ousted by another
statutory grievance procedure for specific workers. This is the case for
workers in “essential services”, such as members of the police, armed and
defence forces (ESMA), and workers in business, trade and professional
enterprises (SEO).
For those workers who fall under the ESMA and the SEO,
means of redress are not via the Labour Court but through a separate authority
established under the respective statutes. In the case of the SEO (sec.
12) this is by way of a governmental authority, with a final appeal
to the civil courts. An appeal must have the approval of this governmental
authority, and be filed within a three-month period. Similarly, under Rule
3(2)(d) of the ESMA, a specified authority is set up to arbitrate on
matters relating to termination of employment.
Where workers are not covered by the IRO or any other specific
dismissal legislation, they may, if unionized, take a dismissal dispute
to a Labour Court if it qualifies as a collective “interest” dispute. For
the non-unionized employee, the only recourse is to the ordinary courts
of law pursuing an action based on breach of contract in relation to the
master/servant relationship.
The Labour Court has jurisdiction to make any award it
deems fit, including an order of reinstatement, damages or exemplary damages.
For actions pursued in the ordinary courts of law, reinstatement is not
an option, and only damages or compensation for the loss of notice pay
is possible. For awards arising out of the jurisdiction of governmental
authorities, compensation for pay in lieu of notice and a fine where the
employer violates statutory obligations are the options specified.
Further information
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