PROBATION –  A RISK OR AN OPPORTUNITY A Study in the Indian Context

There are no provisions in the Indian labour and employment laws which defines the term probation. As the word ‘probation’ suggests, it is the initial period of employment during which an employer can carefully consider whether a new member is able to meet the standards and expectations of the job and if they should be offered a permanent position. The basic idea behind keeping an employee on probation is to give the employer an opportunity to evaluate the employee’s performance before confirming the appointment. Probation is governed by usage and it is a common practice.

Probation in India

The only law where Probation is dealt with in India is the Industrial Employment (Standing Orders) Central Rules, 1946 (which is applicable to every industrial establishment wherein 100 (One Hundred) or more workmen are employed or were employed on any day) (the “Standing Orders Rules”).

The Standing Orders Rules defines a “Probationer” as a workman who has been engaged on a permanent basis and includes any person who has satisfactorily completed a probationary period of 3 (Three) months in the same or another occupation in the industrial establishment, including breaks due to sickness, accident, leave, lock-out, strike (not being an illegal strike) or involuntary closure of the establishment, hence provides for a probationary period of up to 3 (Three) months.

However, the above probation law applies only to persons who fall under the definition of “Workman” as defined under the Industrial Employment (Standing Orders) Act, 1946 (the “Standing Orders Act”). The person/companies to whom the Standing Orders Act and the Rules does not apply shall rely upon the Maharashtra Shops and Establishments (Regulation of Employment and Conditions of Service) Act, 2017 (the “Maharashtra Shops & Establishment Act”) which excludes from its purview persons in ‘positions of confidential, managerial or supervisory character’. The impact of Probation on such class of people needs to be determined.

Certain states have built in their own probation concept indirectly into their local laws, which ranges from 3 (Three) to 6 (Six) months. Ideally, probation period should not exceed 240 (Two Hundred Forty) days, as several statutory social welfare laws apply to employees who have worked for such period.

Benefits of a Permanent Workman vis-à-vis a Probationer

A permanent workman is entitled to certain benefits which a Probationer is not entitled to. For example, every permanent workman is provided with a departmental ticket showing his number. A Probationer is not entitled to a permanent ticket. For terminating the employment of a permanent workman, a compulsory minimum notice in writing shall be given either by the employer or the workman as stated in the Standing Orders Rules. However, a Probationer can be immediately terminated from his employment without being entitled to any such notice. Every permanent workman is entitled to a service certificate at the time of its dismissal, discharge or retirement from service, however if the services of a Probationer is dismissed or discharged before the completion of its probation period, it will not be entitled to such service certificate.

Hence one has to be a permanent workman to avail the benefits as provided under the Standing Orders Rules.

Whether the agreement or contract override the Industrial Employment (Standing Order) Rules, 1948.

In Western India Match Company Ltd vs Workmen[1], it was held by the Hon’ble Supreme Court that, according to the Standing Order, a workman shall not be kept on probation for more than 2 (two) months, the letter of appointment (or special agreement) is inconsistent with the Standing Order to the extent of the additional 4 months’ probation. The inconsistent part of the agreement is ineffective and unenforceable.

Further the Hon’ble Supreme Court held that, where the terms of the agreement were inconsistent with the Standing Order, the terms of employment as per the Standing Order would prevail over the express terms of the contract of service. In other words, the terms and conditions of employment inconsistence with the Standing Orders would not survive.

In Srivastava (S.P.) And Anr. vs Banaras Electric Light and Power[2] Allahabad High Court held that, “The basic and general conditions contained in standing orders cannot be overridden by adopting the device of special agreements. The intention of a legislature in providing for statutory standing orders and laying down the only mode in which they can be modified and attached penal consequences to violation of standing orders, was necessary to prohibit terms of contract which contravene a standing order which would be struck by section 23 of the Contract Act, 1872, also.

Thus, from the above it is evident that the Standing Orders, which have the statutory force would prevail over the terms and conditions of the letter of appointment.

Termination during probation period

In the event the employer is not satisfied with the performance of an employee on probation, the employer is free to terminate the services of the employee before the completion of probation period subject to the notice period, if any, prescribed in the employment letter or company’s policy. The employer is not under an obligation to wait for the employee to complete its probation period, before terminating such employee from service. If the employer is dissatisfied with the performance of such employee, then such employer has the authority and right to terminate the employee. It is also well settled law that the employer is not under an obligation to establish or prove the unsatisfactory performance of a probationer through an enquiry prior to terminating its services. Indian courts have consistently held that the termination of a Probationer is to be done by a non-stigmatic order and there is no need to follow the principle of natural justice while passing such order. In Progressive Education Society v. Rajendra[3] the Hon’ble Supreme Court observed that the law with regard to termination of the services of a Probationer is well established and it has been repeatedly held that such a power lies with the appointing authority which is at liberty to terminate the services of a Probationer if it finds the performance of the Probationer to be unsatisfactory during the period of probation. Unless a stigma is attached to the termination or the Probationer is called upon to show cause for any shortcoming which may subsequently be the cause for termination of the probationer’s service, the management or the appointing authority is not required to give any explanation or reason for terminating the services.

Other issues arising during probation

As per Section 18 of the Maharashtra Shops & Establishments Act every worker who has been employed for not less than 3 (Three) months in a year, shall for every 60 (Sixty) days on which he has worked during the year be allowed leave, consecutive or otherwise, for a period of not more than 5 (Five) days. However, every worker who has worked for 240 (Two Hundred and Forty) days or more, shall be allowed leave with wages for a number of days calculated at the rate of 1 (One) day for every 21 (Twenty One) days.

A Probationer is hence entitled to leave irrespective of the probation period as mentioned in the employment letter or company’s policy.

There is no specific law on whether an employee is supposed to serve notice during the probation period. However, notice period during probation shall be as prescribed in the employment letter or company’s policy. Ideally, notice period of a probationer is shorter as compared to the notice period of a confirmed employee.

Concept of deemed confirmation

The judgement of the Hon’ble Supreme Court maybe relied on in the case of Lawrence School, Lovedale Vs. Jayanthi Raghu and Anr.[4], for the interpretation of “deemed confirmation”. It was held by the Hon’ble Supreme Court that, confirmation arises only where the confirmation was served by the employer to the employee. There is no concept of automatic or deemed confirmation. Merely because an employee is working beyond the probation period he cannot be deemed to be confirmed. Therefore, an employee may only be confirmed after receiving the confirmation mail or offer letter from the higher authority of the company.

The issue of whether a Probationer acquires the status of a permanent employee merely by expiry of time, had been debated in various prior judgments of the Hon’ble Supreme Court, and the following principles have emerged:

  1. Where in the letter of appointment, a period of probation is specified and power to extend the same is also conferred upon the authority, without prescribing any maximum period of probation, and if the employee continues beyond the prescribed or extended period, he or she cannot be deemed to be confirmed; and
  2. Where there is a provision in the employment rules for initial probation and extension thereof, and a maximum period for such extension is also provided, beyond which it is not permissible to extend probation, the employee is deemed to have been confirmed upon expiry of the maximum period of probation in case he or she has not been terminated prior thereto.

Where under the rules, however, a maximum period of probation is prescribed, but the rules require a specific act on the part of the employer, by issuing an order of confirmation or passing of a test for the purposes of confirmation, the employee cannot be deemed to have been confirmed merely by expiry of the maximum probationary period prescribed in the rules.

In Sum

Generally, the probation period of an employee is governed by the employment letter or company’s policy for the employee. As per the industrial practice and labour laws in India, maximum period of probation for a Probationer or a trainee should not exceed 240 (Two Hundred Forty) working days. There are various states that have established their own laws to govern the probation for instance Tamil Nadu has the Tamil Nadu Conferment of Permanent Status Act, 1981, which states that an employee should be made permanent or deemed as a permanent employee once he or she had worked for 240 (Two Hundred Forty) days a year. But the customary practice is that the probationary period is governed by employment letter or company’s policy.

Further, automatic confirmation after expiry of period of probation cannot be claimed as a right because as per customary practice the employment could not be treated as confirmed unless a specific order is passed by the management authority. Thus, for instance an employee can be terminated from employment during the probation period by giving 1 (One) month notice pay or 1 (One) month notice period.

Therefore, the Probationer remains a Probationer until the company decides and communicate the decision to the employee within the reasonable time period regarding the extension of the probation period. If the work is not satisfactory then the Probationer is allowed to continue after probation period or else terminated by the employee.

However, to avoid disputes, one must provide for a specific action without which the employee shall not be deemed to be confirmed. Care needs to be taken while drafting employment letters and company policies.

Bindi Parekh
Associate

 

[1] 1973 Supreme Court Cases ( L & S) 531.

[2] (1970) ILLJ 394 All

[3] (2008) 3 SCC 310

[4] (2012) 4 SCC 793

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