Stigmatic Termination: How Employers Invite Lawsuits Without Knowing It
Termination of employment, though a managerial prerogative, must be exercised with due care. A poorly drafted termination letter or a misstep in the process can expose the employer to legal and reputational risks, sometimes costing far more than the employee’s salary.
ncreasingly, Indian courts are scrutinising not just the act of termination, but the language used in termination letters. Phrases such as “unsatisfactory performance” or “loss of trust”, though often used routinely, may carry unintended legal consequences if not supported by proper documentation. When such terms are viewed as casting a stigma on the employee, courts have been willing to intervene, particularly where the reasons stated are vague, unsubstantiated, or damaging to the employee’s future prospects.
Several judicial decisions illustrate how seemingly minor drafting choices can result in significant liability for employers
- In Goetze (India) Ltd. v. H.R. Thimappa Gowda (2007 (4) KarLJ 654), the Hon’ble Karnataka High Court dealt with a situation where the employee had served the company for over 19 years with an unblemished record. His termination letter stated “unsatisfactory work” as the reason for dismissal. The employee challenged the termination, claiming that it cast a stigma on his professional standing. The High Court upheld the trial court’s decision declaring the termination null and void. The court noted that while such language may be acceptable for a probationary employee, it is inappropriate and stigmatic when used for a permanent employee with a strong service record, especially in the absence of documented shortcomings. The court awarded damages to the employee.
- In another case, Vishal Gupta v. L&T Finance Limited (CS (OS) 2309 of 2008), the employee had resigned after two years of service and paid all dues, including notice period compensation and outstanding loan amounts. Despite this, the company refused to issue a relieving letter. Later, he was issued a qualified relieving letter stating that the employee had “abandoned service”. The Hon’ble Bombay High Court held that such remarks were stigmatic and unjustified, especially in the absence of any contractual requirement to resolve those cases or disciplinary proceedings against the employee. The Court granted an ad interim mandatory injunction, directing the company to issue a simple relieving letter without any adverse or stigmatic remarks, recognising the irreparable harm caused to the employee’s future employment prospects.
- More recently, in Abhijit Mishra v. Wipro Ltd. (2025 SCC OnLine Del 4976), the employee was terminated after nearly two years of service. The termination letter referred to “malicious conduct”, “complete loss of trust” and “irreparable breakdown of the employer-employee relationship”. The employee filed a defamation claim, arguing that the remarks were baseless and harmed his reputation. The court agreed, holding that the company failed to provide evidence of misconduct, such as internal warnings or disciplinary actions. The court found the remarks to be defamatory and awarded the employee ₹2 lakh as compensation.
- Termination is not a mere administrative act and must be supported by documented reasons, avoiding language that could be construed as stigmatic. Courts have intervened even in private employment where termination adversely affects an employee’s reputation or future prospects. In cases of alleged misconduct, an independent enquiry affording the employee a fair opportunity to be heard should precede any stigmatic termination.
- At Abhay Nevagi & Associates, we assist organisations in managing employee exits in a manner that is legally compliant, defensible, and risk aware
- Before issuing a termination letter, it is important to seek appropriate legal advice. It is a small step that can prevent long and costly disputes.