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Full and final settlement is a procedure to settle the dues payable by the employer to the employee.
A full and final settlement statement (the “statement”) is a formal declaration by the employee that all outstanding dues payable, have been paid to him in full. The statement also outlines the obligations of the employee post-termination of the employment, thereby protecting the employer from breach of the confidentiality obligations, intellectual property or any litigious action that may be initiated by such former employee on the grounds of non-payment of dues.
Frequently Asked Questions
1. Can all claims be barred by a full and final settlement statement?
While most claims can be waived by an employee under the statement, however, any claims arising out of express provisions of the law can be recovered by the employee. Such claims include
1.1 Payment of gratuity under the Payment of Gratuity Act 1972 cannot be waived pursuant to section 14 of the same;
1.2 Compensation payable under the Workman’s Compensation Act 1923 cannot be waived under Section 17 of the same.
2. Does the full and final settlement statement bar the employer from pursuing legal action against the employee?
While the statement waives the rights of the employee to pursue legal action, the employer is free to initiate legal action against the employee for any dues that arose out of the employment or for violation of the binding obligations.
3. Is a full and final settlement statement binding on the employee?
Yes, a full and final settlement statement is binding on the party signing it, as it is a written declaration towards the settlement of all claims.
4. As an employer what should I keep in mind before getting a full and final settlement statement signed by my employee?
The following points should be kept in mind when getting the statement signed:
4.1 All statutory dues payable to the employee are accounted for;
4.2 Any deductions that have been made towards the indemnification, for damages caused by the employee, the same should be acknowledged by the employee as a fair and equitable deduction; and
4.3 Employee consents that the terms and implications of the statement have been understood by him.