Layoffs are a difficult reality in today’s volatile job market. While there are clear rules and legal frameworks designed to protect employees during layoffs, a troubling trend is emerging: companies increasingly pressure workers to resign on short notice, allowing them to sidestep mandatory compensation and severance. This practice not only undermines employee rights but also exposes the urgent need for greater transparency and accountability in workplace policies.

In most countries, including India, labor laws differentiate clearly between termination (layoff) and resignation:

• Termination/Layoff: If an employer initiates the separation, they are typically required by law to provide notice, severance pay, or other compensation, depending on the employee’s contract and local labor statutes.

• Resignation: If an employee voluntarily resigns, the employer is often not obligated to pay severance or additional compensation, except for any accrued benefits.

This distinction is crucial, as it forms the basis for many companies’ strategies when downsizing.

Instead of issuing formal termination letters which would legally bind them to pay severance some companies resort to subtle (or not-so-subtle) pressure tactics:

• Short-Notice Meetings: Employees are called into sudden meetings and told their roles are redundant, often with little or no prior warning.

• Implied Threats: Workers are told that if they don’t resign, their records may reflect “poor performance” or “misconduct,” impacting future job prospects.

• Emotional Pressure: HR and managers may use emotional appeals, suggesting that resignation will “look better” on the employee’s resume than being terminated.

• Withholding Information: Employees may not be informed of their legal rights or the compensation they are entitled to in case of termination.

The result? Many workers, fearing reputational damage or further hardship, choose resignation; often without realizing the financial consequences.

This practice has far-reaching effects:

• Loss of Compensation: Employees who resign under pressure typically forfeit severance pay, notice period salary, and other benefits.

• Emotional Distress: The suddenness and coercion can cause anxiety, loss of self-esteem, and long-term distrust of employers.

• Career Uncertainty: Forced resignations can leave gaps in employment history and complicate future job searches.

Labor laws in India and many other countries are clear:
If an employee is terminated, they are entitled to compensation as per the Industrial Disputes Act, Shops and Establishments Act, or their employment contract. Any resignation obtained under duress or coercion can be challenged in labor courts, and such resignations may be deemed invalid.

However, many employees are unaware of their rights, and legal recourse can be time-consuming and costly.

• Companies must be transparent about layoff procedures and employee rights. Clear communication and documentation are essential.

• Labor authorities should proactively investigate complaints and penalize companies that misuse resignation to avoid compensation.

• Workers should educate themselves about their rights and seek legal advice before signing any resignation letter under pressure.

• Unions, advocacy groups, and HR watchdogs can offer guidance and support to affected employees.