A well-disciplined work environment is the foundation of a successful organization. To ensure that rights and responsibilities of both employers and employees are protected, the Labor Act, 2074 (2017) of Nepal outlines clear provisions related to workplace discipline, misconduct, and corresponding punishments. These provisions are mainly addressed under Chapter 20 on Provisions Related to Conduct and Punishment.
Duty to Maintain Discipline:
According to Section 130 of the Labor Act, it is the duty of every worker have to observe discipline and fulfill their responsibilities as prescribed by the Act and the rules or regulations made under it. Workers are expected to:
- Comply with workplace norms and instructions.
- Perform their tasks responsibly and sincerely.
- Respect their colleagues, superiors, and the working environment.
This section emphasizes that discipline is a shared obligation and a legal requirement not just an internal rule and that failing to comply with basic workplace responsibilities can lead to disciplinary action.
Misconduct and Disciplinary Actions :
The Labor Act provides also, structured approach to dealing with misconduct by categorizing it into minor, moderate, serious, and gross misconduct. Each type of misconduct carries specific penalties, depending on the severity of the behavior.
Warning letter
Minor misconduct may result in a verbal or written warning. This includes:
- Being absent from work without approved leave.
- Leaving the workplace without informing or obtaining approval from the manager.
- Frequently arriving late without a valid reason.
- Disobeying lawful work-related instructions from supervisors or the employer.
- Engaging in any other inappropriate conduct defined in workplace regulations.
Warnings serve as a corrective measure, encouraging the worker to improve their behavior without financial or professional penalties at this stage.
Deduction up to one day’s wage:
In case of moderate misconduct, the employer is authorized to deduct up to one day’s wage. Examples include:
- Refusing to accept an official notice or correspondence from the employer or authorized officer.
- Participating in or being forced to participate in an illegal strike or intentionally delaying work as part of a collective action.
- Negligently reducing production or service, causing financial loss to the business.
- Providing false information with the intent of securing workplace benefits.
- Failing to use safety equipment provided by the employer when required to do so.
- Engaging in other similar behavior outlined in company regulations.
These types of actions are considered harmful to the efficiency and safety of the workplace and warrant mild financial consequences.
Deny of annual salary increment or promotion for one year :
If a worker commits a serious offense, the employer may withhold the annual salary increment or deny promotion for one year. Offenses include:
- Using company property without approval or allowing unauthorized persons to use it.
- Attempting to embezzle or misuse company assets or resources.
- Damaging the employer’s property through negligence or carelessness.
- Obstructing services such as food, water, electricity, or blocking access/exit within the premises.
- Misusing or damaging items provided for workers’ safety, health, or welfare.
- Other similar misconducts that violate organizational norms.
These actions show a lack of respect for workplace rules and a disregard for shared resources or safety provisions.
Dismissal from Employment:
The most serious category of misconduct is listed under Section 131(4), where the offense is considered so severe that it justifies immediate dismissal from service. These acts directly violate workplace safety, ethics, or legal obligations.
Gross misconduct includes:
- (a) Assault, injury, hostage-taking, or vandalism in the workplace.
- (b) Bribery – either giving or accepting.
- (c) Theft within the workplace.
- (d) Embezzlement of organizational funds.
- (e) Intentionally damaging employer’s property.
- (f) Being absent for more than 30 consecutive days without permission.
- (g) Sharing confidential business technology or formulas with the intent to harm the organization.
- (h) Collaborating with a competitor or sharing company secrets.
- (i) Criminal conviction involving moral turpitude during service.
- (j) Submitting fake educational or required documents at the time of appointment.
- (k) Use of drugs or alcohol during working hours.
- (l) Being penalized for misconduct more than twice within three years under Sub-sections (1), (2), or (3).
- (m) Any other offense punishable by dismissal under Nepalese law.
These violations reflect a complete breakdown of trust and responsibility, and are treated with zero tolerance.
Prohibition of Sexual Harassment:
The Labor Act, under Section 132, explicitly prohibits any form of sexual harassment in the workplace. It recognizes harassment as a serious violation of dignity, equality, and personal security.
Key provisions include:
- (1) No person may commit or instigate acts of sexual harassment using their position or authority.
- (2) Employers are authorized to impose penalties, including dismissal, based on the severity of the offense.
- (3) If the employer or executive is the perpetrator, the victim, a family member, or the trade union can file a complaint as per law.
Institutional Authority to Define Penalties through Regulations
In addition to the general classification of misconduct under Section 131, the Labor Act 2074 recognizes the certain industries and sectors have unique operational challenges and ethical standards. Hence, Section 133 allows regulatory bodies and companies in specific sectors to create additional misconduct provisions and penalties through their internal regulations or bylaws.
Authority to Define Misconduct in Specific Sectors
Banks, financial institutions, schools, telecommunication providers, hospitals, airlines, and insurance companies may include provisions for specific forms of misconduct and penalties in their internal rules. These provisions must be aligned with the Labor Act and authorized by relevant laws or departments.
Provision for Termination Based on Serious Misconduct
If an employee is found to have committed serious misconduct that may result in dismissal, such actions can be formalized either through:
- A collective bargaining agreement, or
- With approval from the Department of Labor.
This clause gives flexibility to organizations to adapt disciplinary measures to their specific industry needs.
Suspension of Employees and Entitlements During Investigation:
The Labor Act, under Section 134, outlines the conditions under which an employee may be suspended, particularly during investigations or criminal proceedings. This ensures procedural fairness while protecting the integrity of investigations.
Automatic Suspension During Custody
If an employee is taken into legal custody, they are automatically suspended and will not receive salary for that period.
However, if the employee is found innocent, they will receive full back pay for the time they were suspended.
Discretionary Suspension During Internal Inquiry
An employer may suspend a worker even if they are not in custody, in the following cases:
- If disciplinary action under Section 131(4) is being considered, or
- If the employee may destroy evidence or interfere with the investigation.
Suspension Duration
Ordinarily, the suspension period should not exceed three months, but it can be extended by one additional month if the investigation isn’t completed in time.
Remuneration During Suspension
During suspension under Sub-section (2), the employee is entitled to half of their regular pay.
Reinstatement if Found Innocent
If the employee is cleared of the allegations, they must be:
- Paid the remaining withheld remuneration.
- Granted any salary increment due during the suspension.
Termination After 90 Days of Custody
If custody exceeds 90 days and the employer was not the complainant, the employer may terminate the employee without requiring a hearing.
Right to a Fair Defense Before Punishment:
To ensure that disciplinary actions are not arbitrary, the Labor Act provides every accused worker the right to be heard and defend themselves before a penalty is imposed.
Opportunity for Defense
Before punishing any worker for misconduct, the concerned authority must:
- Provide the worker with written details of the allegations and potential penalties.
- Allow the employee seven days to submit their written or verbal defense.
This is a critical due process requirement that safeguards workers from unjust or hasty disciplinary measures.
Authority to Investigate and Impose Punishment
The Labor Act, 2074 provides clear direction on who can take disciplinary action in cases of worker misconduct. According to Section 136, the authority to punish depends on the organizational structure and the provisions set in the company’s internal rules (Byelaws)
As per Section 136(1), the Executive Head of the establishment (such as the CEO, Managing Director, or Principal) holds the legal power to investigate misconduct and impose punishment.
And also in Section 136(2), However, if the organization’s Byelaws delegate this authority to other manager-level officers, those officers can:
- Conduct the investigation.
- Make final decisions on the punishment for misconduct.
Time Limit for Disciplinary Proceedings and Decision (Section 137)
To ensure that disciplinary matters are handled without unnecessary delay, the Labor Act2074 sets strict timeframes for initiating and deciding on punishment in cases of misconduct.as per Section 137(1): The employer must have begin disciplinary action within two months from the date the misconduct came to their attention. Failure to initiate proceedings within this period may invalidate the action.
And in Section 137(2): Time to Finalize Decision, once proceedings have started, the final decision must be made within three months. This prevents indefinite delays and ensures fairness and closure for both employer and employee.
These timelines help preserve due process and minimize prolonged uncertainty for workers.
Possibility of Reducing Punishment
Recognizing that not all cases require the harshest possible penalty, the Labor Act provides room for flexibility and leniency in imposing disciplinary action.
According to Section 138(1) Reduction from Major to Minor Punishment
Even if a major punishment (like dismissal or demotion) is proposed, the law allows the disciplinary authority to reduce it to a minor punishment (like a warning or salary deduction), depending on the circumstances, the employee’s conduct history, or the outcome of the investigation.
Application of Lesser Punishment in Byelaws
If the organization’s Byelaws prescribe a lesser penalty for a particular offense than what is stated in the Labor Act, then the Byelaw’s provision will apply. This means companies can adopt more compassionate or progressive approaches tailored to their institutional culture, while still staying within legal boundaries.