I am working for an R&D-based organization in Bangalore. In this company, freshers are asked to execute a 2-year bond at the time of joining. The bond is signed by the employee, their parents or relatives, along with two witnesses, on a ₹100 bond paper.
Concern:
One such employee has given his resignation letter. He wants to pursue higher studies, which is a full-time M.Tech program. He has just completed 1 year in our organization and will complete his bond period in August 2010. As per the agreement, he has to pay a year's CTC as compensation to the company in case of breach of contract.
Query:
1. Since the bond is not valid in India, would the company be able to recover the money?
2. If the employee moves legally, is there any chance by which the company can win the case in court?
Regards,
Indulekha
From India, Bangalore
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1Concern:
One such employee has given his resignation letter. He wants to pursue higher studies, which is a full-time M.Tech program. He has just completed 1 year in our organization and will complete his bond period in August 2010. As per the agreement, he has to pay a year's CTC as compensation to the company in case of breach of contract.
Query:
1. Since the bond is not valid in India, would the company be able to recover the money?
2. If the employee moves legally, is there any chance by which the company can win the case in court?
Regards,
Indulekha
From India, Bangalore
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Hi Indulekha,
I read your query with great interest. Kindly clarify for what reason the bond is not valid in India, especially when the employee is working in India (Bangalore) and the cause of action has arisen at the place of work (i.e., in Bangalore).
In my considerate view, in case the Company for which you are working is an MNC/having registered office abroad/as per the Bond might have stated that the guilty person shall be proceeded against as per the law of that particular country; still, there is a possibility that the decree could be executed in Indian Courts.
Last but not least, what's about the policy matter of the Company in case your employee could be spared for further studies that would be a value addition. It would be better if the salient features of the Bond could be elaborated; that would be better for proper comments.
From India, Delhi
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I read your query with great interest. Kindly clarify for what reason the bond is not valid in India, especially when the employee is working in India (Bangalore) and the cause of action has arisen at the place of work (i.e., in Bangalore).
In my considerate view, in case the Company for which you are working is an MNC/having registered office abroad/as per the Bond might have stated that the guilty person shall be proceeded against as per the law of that particular country; still, there is a possibility that the decree could be executed in Indian Courts.
Last but not least, what's about the policy matter of the Company in case your employee could be spared for further studies that would be a value addition. It would be better if the salient features of the Bond could be elaborated; that would be better for proper comments.
From India, Delhi
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Hi Indulekha,
There is one small clarification pertaining to the salient feature. What I really meant was that, as a standard practice, the place of jurisdiction and indemnity clause have to be incorporated. Further, in case there is any guarantor, you can also proceed against him (by asking him to furnish a bank guarantee, etc.).
From India, Delhi
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There is one small clarification pertaining to the salient feature. What I really meant was that, as a standard practice, the place of jurisdiction and indemnity clause have to be incorporated. Further, in case there is any guarantor, you can also proceed against him (by asking him to furnish a bank guarantee, etc.).
From India, Delhi
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Dear Sir,
Thank you for your guidance. I was informed that a bond is not valid as per the labor laws in India. Moreover, there is a common perception that if the case is taken to court, the employee has the maximum chances of winning, and the employer won't benefit much.
Points:
1. Our company is registered in Bangalore, and we have designated Bangalore as the place of jurisdiction.
2. Agreement details are as follows:
a) The bond paper includes the following sections:
i) Company and employment details
ii) Employee agrees part
iii) Guarantor agrees part
iv) Breach of contract and jurisdiction part
b) A 2-year employment term is agreed upon.
c) In case of a breach of contract, one year's CTC has to be given to the company as compensation.
3. We have provisions for employees to pursue higher studies, full-time or part-time, once they complete 2 years of service.
Regards,
Indulekha
From India, Bangalore
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Thank you for your guidance. I was informed that a bond is not valid as per the labor laws in India. Moreover, there is a common perception that if the case is taken to court, the employee has the maximum chances of winning, and the employer won't benefit much.
Points:
1. Our company is registered in Bangalore, and we have designated Bangalore as the place of jurisdiction.
2. Agreement details are as follows:
a) The bond paper includes the following sections:
i) Company and employment details
ii) Employee agrees part
iii) Guarantor agrees part
iv) Breach of contract and jurisdiction part
b) A 2-year employment term is agreed upon.
c) In case of a breach of contract, one year's CTC has to be given to the company as compensation.
3. We have provisions for employees to pursue higher studies, full-time or part-time, once they complete 2 years of service.
Regards,
Indulekha
From India, Bangalore
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Dear Indulekha,
In India, the Bonded Labour System is abolished by the Act, so it is unethical to engage someone under the contract/agreement. However, most of these agreements are for pro-training expenses. If the employee can prove before the appropriate government that no training cost was incurred for the training of the employee with valid documentation, then not a single penny can be recovered from the employee.
In the above case, if the company could prove that there were some training expenses incurred by the company for enhancing the skill/knowledge of the employee, then the company can recover to the extent of expenses incurred by the company.
In case of any query, please call.
From India, Pune
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In India, the Bonded Labour System is abolished by the Act, so it is unethical to engage someone under the contract/agreement. However, most of these agreements are for pro-training expenses. If the employee can prove before the appropriate government that no training cost was incurred for the training of the employee with valid documentation, then not a single penny can be recovered from the employee.
In the above case, if the company could prove that there were some training expenses incurred by the company for enhancing the skill/knowledge of the employee, then the company can recover to the extent of expenses incurred by the company.
In case of any query, please call.
From India, Pune
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Dear Prashant,
Please let me know the act by which such agreements are made invalid. Does the general perception "labor laws will give protection to the employee only and no money can be recovered as compensation, except for the pro-training expenses," hold good?
My suggestion was to terminate his services and allow him to go for higher studies. To keep the morale up for other employees who are affected by the same contract, his relieving letter and PF withdrawal sanction can be given by August 2010, instead of recovering the compensation. His training records will fetch a very small sum on recovery. Definitely, we will take the acceptance from the employee in writing for this action.
Regards,
Indulekha
From India, Bangalore
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Please let me know the act by which such agreements are made invalid. Does the general perception "labor laws will give protection to the employee only and no money can be recovered as compensation, except for the pro-training expenses," hold good?
My suggestion was to terminate his services and allow him to go for higher studies. To keep the morale up for other employees who are affected by the same contract, his relieving letter and PF withdrawal sanction can be given by August 2010, instead of recovering the compensation. His training records will fetch a very small sum on recovery. Definitely, we will take the acceptance from the employee in writing for this action.
Regards,
Indulekha
From India, Bangalore
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Dear Indulekha,
Your contract itself is explanatory about legal violations. You can ask the employee to furnish the below information:
1) Your experience certificate would not be issued as the internal contract does not comply.
2) As per employee information, he is going for higher study. If they are found working anywhere, then the company can claim all expenses on training.
3) Rejoining offer letter after completion of higher study, but the terms and conditions would be decided later on.
Nothing is to be claimed from the employee as per the agreement between the employer and employee.
Best Regards,
Sajid Ansari
Delhi
From India, Delhi
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Your contract itself is explanatory about legal violations. You can ask the employee to furnish the below information:
1) Your experience certificate would not be issued as the internal contract does not comply.
2) As per employee information, he is going for higher study. If they are found working anywhere, then the company can claim all expenses on training.
3) Rejoining offer letter after completion of higher study, but the terms and conditions would be decided later on.
Nothing is to be claimed from the employee as per the agreement between the employer and employee.
Best Regards,
Sajid Ansari
Delhi
From India, Delhi
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Dear Sir,
Whether he goes for higher studies or works somewhere else does not make any difference. These contracts do not stand in a court of law because:
1. They are one-sided contracts, meaning if you leave the organization, you will pay this much to the company. However, if the company removes you, then -----
2. Secondly, as per the Contract Act, any contract which restrains you from any trade, business, or profession is void. Therefore, in my view, this contract will not stand in a court of law.
Regards,
JS Malik
From India, Delhi
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Whether he goes for higher studies or works somewhere else does not make any difference. These contracts do not stand in a court of law because:
1. They are one-sided contracts, meaning if you leave the organization, you will pay this much to the company. However, if the company removes you, then -----
2. Secondly, as per the Contract Act, any contract which restrains you from any trade, business, or profession is void. Therefore, in my view, this contract will not stand in a court of law.
Regards,
JS Malik
From India, Delhi
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I agree with Mr. Malik. Such contracts are just moral bindings and not legal as they are one-sided agreements. The company cannot enforce such contracts. I do remember there was a judgment by the Supreme Court on this issue in favor of the employee.
To maintain the company's image (brand) in the market, you should settle it mutually. It will help to maintain the morale of the other employees.
The contract is one tool to retain people, but there are other effective tools for retention. Once an employee loses interest, there is no point in retaining them solely through a contract.
For higher studies, you can sanction leave without pay and keep the option open for both the employer and the employee for possible future assets.
Ulhas Chandratre
Senior HR Professional, Pune
From India, Pune
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To maintain the company's image (brand) in the market, you should settle it mutually. It will help to maintain the morale of the other employees.
The contract is one tool to retain people, but there are other effective tools for retention. Once an employee loses interest, there is no point in retaining them solely through a contract.
For higher studies, you can sanction leave without pay and keep the option open for both the employer and the employee for possible future assets.
Ulhas Chandratre
Senior HR Professional, Pune
From India, Pune
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