What Must a Termination Letter of Employees Contain—And What Must Not

Posted On - 17 July, 2025 • By - Rohitaashv Sinha

Introduction

Termination of employment is a sensitive and high-risk legal action. While employers have the contractual right to end employment relationships, the way a termination letter is worded can carry significant legal, reputational, and financial consequences. Courts in India, including in the recent case of Abhijit Mishra v. Wipro Limited (2025), have provided clear guidance on what a termination letter should and should not contain.

What a Termination Letter Must Contain

1. Reference to Employment Contract

  • Clearly cite the applicable clause of the employment agreement that permits termination—whether with or without cause, during probation, or with notice or pay in lieu thereof. This provides legal justification. Example: “This termination is being effected in accordance with Clause 10 of your Employment Agreement dated…”

2. Termination Effective Date

  • Specify the last working day and whether the employee is relieved with immediate effect or after the notice period. Example: “Your last working day shall be [date], and you will be relieved of your duties with immediate effect.”

3. Notice Period Compliance

  • Mention whether the notice period is being served or waived, and if compensation in lieu of notice is being paid. Example: “In accordance with the agreement, you will be paid two months’ salary in lieu of notice.”

4. Final Settlement and Dues

  • State that full and final settlement, including gratuity, leave encashment, bonus, etc., will be made as per law. Example: “Your full and final settlement shall be processed within 30 days as per company policy and applicable laws.”

5. Return of Company Assets

  • Include instructions to return laptops, ID cards, documents, or other company property.

6. Confidentiality and Non-Compete Obligations

  • Reiterate continuing obligations post-termination, such as confidentiality, non-solicitation, and non-compete clauses.

7. Neutral and Professional Tone

Even when termination is due to performance or misconduct, the letter should be professionally worded and avoid personal criticism.

What a Termination Letter Must Not Contain

Based on the Delhi High Court judgment in Abhijit Mishra v. Wipro Ltd. (2025), the following elements are legally risky and must be avoided:

1. Defamatory Language:

  • Statements like “malicious conduct,” “loss of trust,” or “ethical violations” without proof can be deemed defamatory.
  • Wipro used such language in the termination letter. The Court held that these remarks were unsubstantiated, damaging to the employee’s reputation, and amounted to defamation.

2. Stigmatic Allegations Without Inquiry

Even in at-will or without-cause terminations, stigmatic reasons such as dishonesty, harassment, or incompetence must not be mentioned unless:

  • A disciplinary inquiry has been conducted; and
  • The employee has been given a chance to respond.

Otherwise, such remarks violate natural justice and can lead to lawsuits for defamation or wrongful termination.

3. Details of Internal Complaints

Do not include internal grievance details, complaints, or pending investigations in the termination letter unless they form part of a concluded disciplinary process

4. Remarks That Can Harm Future Employment

Language that can hinder the employee’s re-employment prospects (e.g., “unreliable”, “poor performer”) should be avoided unless objectively proven through appraisals and formal documentation.

5. Public or Mass Communication of Termination

Termination letters should be private communications. As held in Abhijit Mishra, even a confidential termination letter can be treated as defamatory if the employer knew or should have foreseen that the employee may be compelled to share it (e.g., for job applications).

Abhijit Mishra v. Wipro Limited (2025) | Court: Delhi High Court

  • Issue: Defamatory termination letter containing phrases like “malicious conduct”
  • Held: Even in a determinable contract, defamatory remarks without proof may attract liability for civil defamation.
  • Key takeaway: Employers must not insert unsubstantiated allegations in termination letters, even when terminating without cause.

S.P. Sharma v. IFCI Ltd. – 2015

  • Held that remarks in termination letters suggesting “lapses” or “negligence” amount to stigma and are defamatory unless proven through due process.

Best Practices for Employers

  • Avoid Character Judgments – Stick to factual statements like notice clause invocation, final settlement, and last working day.
  • Consult Legal Before Issuance – Especially if there’s friction, prior complaints, or PIP issues.
  • Maintain Documentation – Any claim of poor performance must be backed by appraisals or formal warnings.
  • Be Consistent Across Platforms – HR records, emails, relieving letters, and references should not contradict the termination letter.
  • Handle Exit Interviews Professionally – Avoid verbal remarks that could later be cited as defamatory.

Conclusion

Termination letters are not mere HR formalities—they are potentially legal documents that can influence litigation outcomes. Employers must carefully balance their contractual rights with legal prudence, dignity of the employee, and reputation management.

Avoiding defamatory, unproven, or stigmatic language is not just about ethics—it is essential risk management. A termination letter must comply with the contract, uphold procedural fairness, and maintain a neutral tone.