Arbitrariness in HR Decisions

1. Meaning

Arbitrariness in HR decisions means taking an employment-related decision according to whim, personal preference, bias, irrelevant considerations, inconsistent standards, or without a rational and fair basis, rather than according to objective criteria, applicable rules and legitimate organisational reasons.

Examples include:

• terminating an employee without a rational basis;
• selectively disciplining one employee while ignoring identical misconduct by others;
• denying promotion despite consistently applying different criteria to similarly placed employees;
• transferring an employee as a punishment without following procedure;
• manipulating performance ratings to remove an employee;
• rejecting an application for reasons unrelated to the prescribed criteria;
• changing eligibility criteria after the selection process;
• taking an HR decision because of personal hostility or favouritism;
• imposing disproportionate punishment;
• relying on an opaque or irrational algorithm for recruitment or appraisal.

The constitutional dimension is particularly important where the employer is the State, a government department, statutory corporation, public sector undertaking, or an instrumentality of the State. Article 14 prohibits arbitrary State action, and Article 16 specifically protects equality in public employment. The Supreme Court has repeatedly held that arbitrariness and equality are fundamentally incompatible.

2. Constitutional Foundation

Article 14 – Equality

Article 14 guarantees:

Equality before law and equal protection of laws.

It is not limited to situations where two employees are expressly treated differently. An administrative or executive decision can itself be arbitrary and therefore violate Article 14.

Article 16 – Equality in Public Employment

Article 16 applies specifically to employment or appointment under the State.

Therefore, arbitrary decisions concerning:

• recruitment;
• promotion;
• transfer;
• disciplinary action;
• termination;
• seniority;
• pay;
• selection;
• appointment;

may attract Articles 14 and 16 when taken by State authorities.

The Supreme Court has expressly recognised that where arbitrariness affects public employment, Article 16 is also attracted.

3. Arbitrariness Is Wider Than Discrimination

This is an extremely important distinction.

Discrimination generally involves unequal treatment between comparable persons.

Arbitrariness can exist even without identifying a comparator.

For example:

A company arbitrarily terminates A because the manager dislikes A.

Even if there is no similarly situated employee to compare with A, the decision may still be arbitrary if the employer is subject to constitutional standards.

The Supreme Court in A.L. Kalra v. Project & Equipment Corporation of India Ltd. explained that Article 14 strikes at arbitrariness in executive/administrative action and that one need not always establish a comparative case of discrimination; an action can be arbitrary per se.

4. Leading Case Laws

1. E.P. Royappa v. State of Tamil Nadu

(1974) 4 SCC 3

This is the foundational case on the modern doctrine of arbitrariness under Article 14.

Facts

E.P. Royappa, a senior IAS officer, challenged his transfer from the post of Chief Secretary and alleged that the action was arbitrary and motivated by improper considerations.

Supreme Court's principle

The Court moved beyond the traditional concept that Article 14 only prohibits discriminatory classification.

It held that equality and arbitrariness are antithetical.

In public employment, arbitrary State action can violate both Articles 14 and 16.

HR significance

The case is directly relevant to:

• arbitrary transfers;
• arbitrary postings;
• promotion decisions;
• public-sector employment;
• administrative decisions concerning employees.

Rule: A State employer cannot exercise employment powers according to personal whim or irrelevant considerations.

5. Maneka Gandhi v. Union of India

(1978) 1 SCC 248

Importance

The Supreme Court significantly expanded the concept of fairness under Article 14.

The Court held that reasonableness and non-arbitrariness are essential components of equality.

Article 14 therefore requires State action to satisfy standards of:

• fairness;
• reasonableness;
• non-arbitrariness.

The Supreme Court has subsequently described Maneka Gandhi as an important development of the arbitrariness doctrine established in E.P. Royappa.

HR significance

An HR procedure involving:

• termination;
• disciplinary proceedings;
• transfer;
• denial of benefits;
• administrative decisions;

should not be merely formally authorised; it should also operate fairly and reasonably where constitutional standards apply.

6. Ajay Hasia v. Khalid Mujib Sehravardi

(1981) 1 SCC 722

This Constitution Bench decision reinforced the principle that Article 14 strikes at arbitrariness.

The Court explained that Article 14 is not confined to the traditional doctrine of reasonable classification. Arbitrary executive action can independently offend equality.

HR significance

This case is particularly important for employment in organisations that may technically have a corporate structure but function as an instrumentality or agency of the State.

Thus, an organisation cannot necessarily avoid constitutional scrutiny merely by saying:

"We are a company, so Article 14 does not apply."

The real question may be whether the entity qualifies as State or an instrumentality of State under Article 12.

7. A.L. Kalra v. Project & Equipment Corporation of India Ltd.

(1984) 3 SCC 316

This is one of the most directly useful cases for arbitrary disciplinary action.

Principle

The Supreme Court reaffirmed that Article 14 strikes at arbitrary executive and administrative action.

Importantly, the Court explained that an employee need not always demonstrate that another employee was treated differently.

An action that is inherently arbitrary can itself offend equality.

HR significance

Suppose an employee is punished for conduct that is not actually covered by the applicable disciplinary rules.

The employer cannot simply say:

"The management has discretion."

Discretion must be exercised according to law, relevant considerations and fair standards.

Rule: Administrative discretion cannot become an unrestricted power to punish employees.

8. Air India v. Nergesh Meerza

(1981) 4 SCC 335

This is a landmark employment-law decision concerning discriminatory and unreasonable service conditions imposed upon Air India employees.

The Supreme Court examined employment conditions affecting air hostesses, including provisions relating to retirement and termination.

Principle

The Court emphasised that employment rules can be tested against Articles 14 and 16 when constitutional standards apply.

A condition that is discriminatory, unreasonable or arbitrary may be invalid.

HR significance

This case demonstrates that arbitrariness can occur not merely in individual HR decisions but also through:

• employment rules;
• service conditions;
• retirement conditions;
• termination provisions;
• discriminatory workplace policies.

9. Kumari Shrilekha Vidyarthi v. State of U.P.

(1991) 1 SCC 212

This case is especially important for employment contracts involving government authorities.

The State argued that contractual matters should generally be treated as private contractual matters.

The Supreme Court rejected the idea that the State can act arbitrarily merely because the relationship has a contractual character.

The Court held that State action in contractual matters can still be examined under Article 14 where public law principles apply.

The broader principle has subsequently been reaffirmed: governmental action in employment or contractual relationships cannot be arbitrary and must satisfy standards of reasonableness and fair play.

HR significance

A government employer cannot necessarily defend an arbitrary employment decision by saying:

"It is only a contract."

Public authorities remain subject to constitutional requirements.

10. Shayara Bano v. Union of India

(2017) 9 SCC 1

Although this was not an employment dispute, it is important for understanding the modern concept of manifest arbitrariness.

The Supreme Court explained that manifest arbitrariness may include action that is:

• capricious;
• irrational;
• without an adequate determining principle;
• excessive;
• disproportionate.

The Court reaffirmed the development of the arbitrariness doctrine through E.P. Royappa, Maneka Gandhi and A.L. Kalra.

HR significance

The principle can be useful when examining extremely irrational HR policies or rules, particularly where the employer is subject to constitutional review.

11. State of Punjab v. V.K. Khanna

(2001) 2 SCC 330

This is an important service-law case concerning mala fide and arbitrary exercise of administrative power.

The Supreme Court examined allegations concerning administrative decisions involving senior public servants.

Principle

Courts can examine whether administrative decisions concerning public employees have been influenced by:

• mala fides;
• irrelevant considerations;
• improper motives;
• abuse of power.

HR significance

An HR decision may be vulnerable when it is merely a disguised exercise of power for an improper purpose.

For example:

A manager initiates disciplinary proceedings not because of genuine misconduct, but because the employee complained against the manager.

Such circumstances can raise questions of mala fide or colourable exercise of power.

12. When is an HR Decision Arbitrary?

An HR decision is more likely to be considered arbitrary when one or more of the following factors exist:

A. No Rational Basis

The decision has no reasonable connection with the legitimate organisational objective.

B. Irrelevant Considerations

The employer relies upon factors that have nothing to do with the employee's performance or conduct.

C. Personal Bias

The decision is motivated by:

• personal hostility;
• favouritism;
• retaliation;
• nepotism;
• personal preferences.

D. Inconsistent Treatment

Two similarly situated employees are treated substantially differently without a legitimate reason.

E. No Consistent Criteria

The employer changes the standards from employee to employee.

F. Predetermined Outcome

The decision-maker has already decided the result and merely creates a formal process afterwards.

G. Disproportionate Punishment

The punishment is grossly excessive compared with the misconduct.

H. Procedural Unfairness

The employee is denied a meaningful opportunity to respond where applicable.

I. Retaliation

An employee suffers adverse HR consequences because he or she:

• raised a legitimate grievance;
• reported misconduct;
• exercised a legal right;
• complained about workplace practices.

J. Unreasoned Decision

The decision contains no meaningful explanation despite the nature of the decision requiring justification.

13. Arbitrariness in Recruitment

An employer may act arbitrarily where:

• eligibility criteria are changed after applications are received;
• a candidate is rejected despite satisfying the published criteria;
• selection criteria are secretly changed;
• an interview panel applies different standards to different candidates;
• a preferred candidate is selected without following established criteria.

For public employment, such conduct can violate Articles 14 and 16.

The Supreme Court has repeatedly held that governmental employment decisions must follow rational and non-discriminatory standards.

14. Arbitrariness in Promotion

Promotion decisions may become arbitrary where:

• seniority rules are ignored without justification;
• performance criteria are manipulated;
• similarly situated employees are assessed using different standards;
• confidential reports are selectively used;
• promotion criteria are changed retrospectively;
• an employee is denied promotion for irrelevant reasons.

However, every unsuccessful promotion decision is not arbitrary.

Courts generally do not substitute their own assessment for that of the competent authority unless there is illegality, mala fide, discrimination, procedural unfairness or arbitrariness.

15. Arbitrariness in Performance Appraisal

Modern HR systems frequently use:

• KPIs;
• performance scores;
• productivity targets;
• 360-degree feedback;
• algorithmic assessments;
• automated ranking.

An appraisal can become problematic where:

• the criteria are undisclosed;
• targets are impossible or selectively imposed;
• the employee is assessed using criteria never communicated;
• negative ratings are retaliatory;
• similarly situated employees are rated under different standards;
• data used for appraisal is demonstrably inaccurate;
• the decision-maker ignores relevant evidence.

Example

If Employee A is given a "poor performance" rating because she completed 80% of a target, but Employee B receives a satisfactory rating for completing the same 80% under identical circumstances, the employer should have a rational and documented explanation for the distinction.

16. Arbitrariness in Disciplinary Action

Disciplinary decisions should be based on:

1. a recognised rule or standard;
2. established facts;
3. relevant evidence;
4. appropriate procedure;
5. proportionate punishment.

A disciplinary authority cannot simply punish an employee based on personal dislike.

The principle in A.L. Kalra is particularly relevant because arbitrary administrative action can violate Article 14 even without proving a classic case of discrimination.

17. Arbitrariness in Termination

Termination may be challenged as arbitrary where:

• the stated reason is false or pretextual;
• similarly situated employees are retained without justification;
• the employer violates mandatory procedure;
• termination is retaliatory;
• termination is mala fide;
• the employee is punished for exercising a legal right;
• public employment protections are bypassed.

But the legal remedy depends heavily on the nature of employment.

Private-sector employee

Article 14 ordinarily does not directly govern an ordinary private employer merely because it is an employer.

The employee may instead rely upon:

• employment contract;
• standing orders;
• applicable labour legislation;
• disciplinary rules;
• principles of natural justice where applicable;
• anti-discrimination provisions;
• statutory remedies.

Government/public-sector employee

Constitutional protections under Articles 14 and 16 become significantly more important.

18. Arbitrariness and Natural Justice

Arbitrariness is closely connected with natural justice.

The major principles include:

Audi Alteram Partem

A person affected by an adverse decision should ordinarily receive a meaningful opportunity to present their case where the law requires it.

Rule Against Bias

The decision-maker should not have an improper personal interest or predetermined bias.

Reasoned Decision

Where reasons are required, the decision should explain the basis on which the conclusion was reached.

Failure to observe these principles can make an HR decision vulnerable to judicial review, particularly in public employment.

19. Arbitrariness vs Mala Fide

These concepts overlap but are not identical.

Example

If a public authority creates an irrational promotion rule affecting everyone, the rule may be arbitrary.

If an officer deliberately manipulates the promotion process solely to prevent one employee from being promoted, the action may additionally be mala fide.

20. Arbitrariness and Proportionality

A decision may also be challenged because it is disproportionate.

For example:

Employee commits a minor procedural mistake and receives dismissal, while the applicable disciplinary framework ordinarily treats the misconduct as minor.

The question becomes whether the punishment bears a reasonable relationship to the misconduct.

The modern jurisprudence on arbitrariness recognises excessiveness and disproportionality as relevant aspects of manifest arbitrariness.

21. Can Private Companies Make Arbitrary HR Decisions?

This requires an important distinction.

Purely private employer

A private company is generally not directly subject to Article 14 merely because its HR decision appears unfair.

An employee normally needs to identify a:

• contractual right;
• statutory right;
• labour-law protection;
• standing order;
• specific anti-discrimination protection;
• other enforceable legal obligation.

State employer/public authority

Where the employer is State or an instrumentality of State, the decision can be examined under Articles 14 and 16.

The Supreme Court has also recognised that even contractual decisions of State instrumentalities can attract constitutional scrutiny when they involve public power.

22. Judicial Review of HR Decisions

Courts generally do not function as ordinary HR managers.

They do not normally substitute their own opinion for the employer's on:

• who should be promoted;
• which candidate is best;
• what performance rating should be given;
• how the organisation should be managed.

Instead, judicial review generally asks whether the decision suffers from:

• illegality;
• arbitrariness;
• mala fide;
• discrimination;
• procedural unfairness;
• irrelevant considerations;
• failure to consider relevant factors;
• irrationality;
• disproportionality where applicable.

Thus, judicial review examines the legality of the decision-making process rather than simply re-making the HR decision.

23. Practical Test for Determining Arbitrariness

An HR department can use the following checklist before taking a major adverse decision:

Step 1 – Identify the rule

What policy, contract, statute or service rule authorises the decision?

Step 2 – Identify the objective

What legitimate organisational purpose is the decision intended to achieve?

Step 3 – Apply consistent criteria

Are similarly situated employees being evaluated using the same standards?

Step 4 – Remove irrelevant factors

Is the decision based on personal preference, hostility, retaliation or other irrelevant considerations?

Step 5 – Give an opportunity to respond

Where required, has the employee been given a meaningful opportunity to explain?

Step 6 – Record reasons

Can the organisation explain why this particular decision was made?

Step 7 – Check proportionality

Is the consequence reasonably related to the conduct or objective?

Step 8 – Check for bias

Would an independent observer reasonably suspect personal or institutional bias?

Step 9 – Review comparators

Have similarly situated employees received materially different treatment? If yes, is there a rational explanation?

Step 10 – Preserve records

The employer should maintain the relevant performance data, communications, policies, approvals and reasons supporting the decision.

24. Important Case-Law Summary

25. Conclusion

Arbitrariness in HR decisions is fundamentally the absence of rational, fair, consistent and legally relevant decision-making.

The central constitutional principle comes from E.P. Royappa: equality and arbitrariness are incompatible. This was reinforced by Maneka Gandhi, developed in Ajay Hasia, applied specifically to administrative/disciplinary action in A.L. Kalra, and extended to State contractual relationships in Shrilekha Vidyarthi. The modern doctrine of manifest arbitrariness was further articulated in Shayara Bano.

For HR practice, the safest principle is:

An employment decision should be based on a legitimate objective, relevant evidence, consistent standards, fair procedure, and reasons capable of objective justification.

Where the employer is a State authority or instrumentality of State, arbitrary recruitment, promotion, transfer, appraisal, disciplinary action or termination may be struck down under Articles 14 and 16. In the private sector, the same conduct may still be unlawful, but the employee generally has to identify the applicable contract, statute, standing order or other legal source of protection rather than relying directly on Article 14.