Salary theft in India's IT and online operational sector is no longer an exception. It has become a business model quiet, procedural, and legally sanitised.
In India's fast-growing IT and online services ecosystem, non-payment of salary has become a disturbingly common experience. Employees are not just terminated; they are financially strangled. Performance bonuses are withheld without explanation, salaries for the last three to six months are stopped, and the employee is pushed into silence through procedural exhaustion. What follows is not justice, but a tour through a legal vacuum where every forum exists in theory and fails in practice.
This article examines how existing labour laws, civil courts, conciliation machinery, and jurisdiction clauses collectively fail employees, particularly in IT and online operational companies that hire digitally but evade accountability territorially.
Salary Withholding as a Tool of Control
In most IT and every online company, performance bonuses are not occasional rewards but structured, periodic components of compensation often annual or biannual, frequently reflected in the Cost to Company (CTC). Yet, the moment an employer “dislikes” an employee whether for questioning internal practices, refusing unpaid overtime, or simply falling out of any favour the first casualty is the bonus.
There is no transparent metric, no written evaluation, no appeal. The bonus is conveniently labelled “discretionary,” allowing employers to convert what is economically a wage into a weapon of retaliation.
More severe is the practice of withholding the last few months' salary. Employees are neither terminated nor relieved; they are left in limbo working, reporting, but unpaid. This silent coercion ensures compliance without the legal consequences of dismissal.
Conciliation That Never Conciliates
In theory, the first institutional remedy for unpaid wages is conciliation before the office of the Deputy Commissioner of Labour. Especially in non-metropolitan areas, conciliation has become a procedural ritual devoid of substance.
Many Deputy Commissioners or more often Assistant Commissioners/Labour Officers as DCL in charge of Labour conducting conciliations in Tamil Nadu display:
- A lack of basic understanding of labour law,
- Minimal familiarity with employment contracts drafted in English,
- An open reluctance to summon employers,
- And an unspoken fear of corporate entities.
Employees attend hearings regularly. Employers never. Yet no convincing step. Let alone coercive.
The so-called “conciliation” invariably results in pressure on the employee to accept whatever amount the employer is willing to offer, irrespective of the merits of the claim. The welfare orientation of labour law is replaced by an informal settlement culture that prioritises administrative convenience over statutory duty.
Repeal of the Payment of Wages Act and the Illusion of Reform
The Payment of Wages Act, 1936, once a familiar limited remedy, has been repealed and subsumed under the Code on Wages, 2019. On paper, the reform is expansive: wage ceilings removed, broader applicability, and a promise of universality.
On the ground, especially for employees of online and IT-driven companies, the repeal has created a remedy vacuum.
There is:
- No clearly identifiable authority for remote employees,
- No clarity on territorial jurisdiction where work is online,
- No visible inspector-cum-facilitator mechanism,
- No accessible digital enforcement process.
India today has wage protection laws but no wage recovery forum for a large segment of its modern workforce.
Online Companies: Everywhere for Profit, Nowhere for Accountability
A troubling trend in employment contracts is the deliberate insertion of exclusive jurisdiction clauses bearing no real nexus to either the employer or the employee.
The pattern is predictable:
- Employer registered in State A,
- Employee working from State B,
- Jurisdiction clause fixed in State C.
These clauses are routinely enforced by civil courts, despite the obvious imbalance of bargaining power inherent in employment contracts. Even in a post-COVID era where virtual hearings are the norm, courts mechanically rely on such clauses, forcing employees to:
- Travel to an unrelated state,
- Engage local counsel,
- Spend a substantial portion of the very salary they are trying to recover.
The employer, meanwhile, remains digitally omnipresent and legally elusive.
Civil Courts and the Jurisdictional Escape Hatch
When employees approach civil courts for recovery of unpaid salary, they face a familiar pattern:
- One set of courts returns or dismisses suits as “labour disputes,”
- Another enforces exclusive jurisdiction clauses,
- Summary suits for recovery of money are treated as alien concepts in many non-metropolitan district courts.
The employee is left oscillating between labour authorities and civil courts, with neither willing to adjudicate entitlement.
Industrial Relations Code, 2020: Expanded Definition, Contracted Remedy
The Industrial Relations Code, 2020 marks a significant conceptual shift by expanding the definition of “employee” to include managerial, administrative, and technical roles categories previously excluded under the Industrial Disputes Act.
Yet this expansion offers little solace.
Sections such as Section 33-C(2) of the ID Act (and its equivalent Section 59 under the IRC) continue to be interpreted narrowly. Labour Courts treat these provisions as purely executionary, refusing to entertain claims where entitlement itself is disputed. Without prior adjudication, computation is denied. Without computation, execution is impossible.
The employee is thus recognised by statute but abandoned by procedure.
Experience Certificates as Instruments of Economic Blackmail
Perhaps the most insidious form of coercion is the withholding or threat of issuing a negative experience certificate.
In sectors where career mobility depends heavily on documentation, the absence of a relieving letter or experience certificate can irreparably damage future prospects. Employers exploit this vulnerability openly, summoning employees under the pretext of “discussion” only to threaten career consequences if legal action is pursued.
There is no effective statutory penalty for this conduct. Courts routinely dismiss it as a “private dispute.” What is ignored is that such conduct directly interferes with the right to livelihood.
Overnight Termination in the Age of WhatsApp Governance
Another recurring and deeply disturbing practice in IT and online operational companies is instant termination without process, notice, or even communication.
In several cases, the employee wakes up to a single WhatsApp message or an abrupt email stating that their “services are no longer required.” In more egregious instances, there is no message at all. Login credentials are revoked overnight, official email access is disabled, internal tools are blocked, and the employee's phone number is silently blacklisted by HR. The termination is not conveyed it is inferred.
This form of digital disappearance replaces due process with technological erasure.
Such terminations violate even the most basic principles of natural justice. There is:
- No show-cause notice,
- No domestic enquiry,
- No termination order,
- No relieving letter,
- No settlement of dues.
Yet, employers justify this practice under the garb of “contractual employment” and “at-will clauses,” even when the employee has served continuously, drawn monthly wages, and functioned as an integral part of the organisation.
What is particularly alarming is that this method is uniquely enabled by remote work infrastructure. The same technology that allows companies to hire across states is weaponised to terminate without accountability instant, silent, and irreversible.
In India's online employment ecosystem, termination no longer requires an order it only requires an internet connection.
Legal Notices as Instruments of Intimidation
When an employee finally gathers the courage to issue a legal notice demanding unpaid salary, the response is rarely substantive. Instead, it is tactical and often threatening.
Well-established IT and online operational companies routinely return advocate notices with replies drafted not to address the claim, but to intimidate the claimant into submission. These replies commonly:
- Deny liability in sweeping terms,
- Allege misconduct without particulars,
- Threaten counter-litigation for defamation, breach of confidentiality, or damages,
- Warn of adverse experience certificates and future “career consequences.”
In several instances, employees are summoned to the office after refusing to get the notice via post under the guise of an “amicable discussion,” only to be confronted with threats explicit or implied that pursuing legal remedies will result in blacklisting, negative background verification, or permanent damage to professional prospects.
What is more troubling is that the cost of issuing such reply notices is later deducted from the employee's own salary dues, along with alleged “consultation charges.” The act of asserting a legal right is converted into a financial penalty. Resistance becomes expensive; silence becomes rational.
This practice exposes a deeper imbalance. Advocate notices meant to be precursors to resolution are transformed into tools of coercion. The law, instead of acting as a shield for the vulnerable, is repurposed as a sword by the powerful.
Police Complaints and the Civil Dispute Shortcut
Employees who approach the police alleging cheating or criminal breach of trust are met with a ready-made response: “civil dispute.” Complaints are closed with mechanical reports directing parties to seek judicial remedies—remedies that, as shown, are already dysfunctional.
In some cases, when employees return to negotiate out of desperation, employers deduct the cost of replying to legal notices and consultation fees from the salary dues themselves—turning resistance into an additional financial penalty.
When the Cost of Justice Exceeds the Wage Due
The cumulative effect of these failures is stark:
- Travel costs,
- Legal fees,
- Time without income,
- Procedural delays.
For many employees, recovering unpaid salary costs more than losing it.
This is not accidental. It is structural.
The Overnight Vanishing Act: Liability Laundering
An increasingly common phenomenon in the IT and online operational sector is the sudden and complete disappearance of the employer itself.
Offices are shut overnight. Signboards are removed. Landlines go dead. Emails bounce. Directors become unreachable. Employees arrive at work—or log in remotely only to discover that the company has ceased to exist in every practical sense, except on paper. Salaries remain unpaid, statutory dues unsettled, and experience certificates unobtainable.
This is not a formal closure, insolvency, or liquidation. There is no notice under labour law, no intimation to authorities, and no structured exit. The company simply vanishes.
Indian labour law is ill-equipped to address this reality. Most remedies presuppose an identifiable and accessible employer. Conciliation requires attendance. Civil suits require an address. Criminal complaints are routinely diluted into “civil disputes.” Corporate law remedies, such as proceedings under the Companies Act, are slow, expensive, and ill-suited for individual salary recovery.
What follows the overnight shutdown is not corporate death, but corporate reincarnation. The same promoters, directors, or key managerial personnel quietly resurface through another entity, a freshly incorporated private limited company, a rebranded subsidiary, or a conveniently worded “merger.” Operations continue uninterrupted, clients remain unchanged, and revenue flows as usual — only liabilities are selectively abandoned. The law treats the earlier company as defunct, while reality exposes it as merely renamed. Employees are left chasing a company that no longer exists, even as the very business that caused the harm continues under a different legal mask. This is not entrepreneurship; it is liability laundering with statutory blessings.
The New Invisible Workforce
India's IT and online operational workforce represents a new class of employees highly skilled, digitally mobile, and legally unprotected. Labour codes exist. Courts function. Conciliation machinery operates. Yet, when salary is withheld, the employee finds no forum willing to take responsibility.
What remains is not justice, but attrition financial, professional, and psychological.
Until jurisdiction clauses are scrutinised through the lens of unequal bargaining power, until conciliation authorities are made accountable, and until wage recovery mechanisms are made real rather than rhetorical, unpaid salary in India's digital economy will remain not a violation but a norm.
The author is an Advocate practising at Tirunelveli District, Tamil Nadu. Views are personal