ghorpadets 22 April 2016

Employment bonds

Hello Experts,

I would be pleased if you enlighten me on following questions-----

1. Can an employer make an employment agreement or bond mandatory for a specific period say 1 year for the employees who are newly joined? Because of the growing labour turnover / attrition and to reduce cost of recruitment process?

2. Can he add following conditions in his employment bond?

a. keeping original documents

b. keeping a lump sum amount as deposit

c. a clause of to pay xyz amount of money as an indemnity in case of leaving / absconding from the job

d. deducting xyz sum of amount from monthly salary of employee as a security for the period of 1 year

e. can he (employer) terminate an employee before completion of period of agreement on any grounds who has signed a bond?

3. Also do employee bonds really have any value? Are they enforceable in the courts of law?

I heard that No Law in the country supports employee bond VALID???? Means even if any employee has signed a bond and if breaks it before a particular period of time, he is always given protection from the Court and he cannot be sued???

4. To make a bond VALID & ENFORCEABLE in the court of law, what precaution / legal things an employer should keep in mind???? (Like type of bond paper, witnesses etc)

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7 Replies

Kumar Doab (FIN) 22 April 2016

The said bond is to be created in lieu of what extra ordinary favor by employer?

If there is NO such ground then the said Bond may not be even worth the piece of paper on which it is written.

If the purpose of employer is only to check attrition then employer should create an environment, work culture, and reward schemes that attarcts employees and they prefer to stay.

The good industry leaders are never wary of attrition.

The arm chair managers are.

You are right as courts have declared Bonds/service agreements as; unconscionable, unreasonable, unenforceable, VOID........

JustAdvisor (IT) 23 April 2016

never make the mistake of keeping original documents with you for your own benefit. attrition is there in most of companies - you have to mitigate it by good pay, good motivation and hiring good managers. it is a well accepted fact that people leave managers not jobs. as per position of law, i agree with learned expert's opinion.

Ritesh Maity (Labour Law Advocate) 27 April 2016

To the queries point wise:

1. Bond/ service agreement does not hold any value in the eye of law. On the other hand, it amounts to unfari trade practice. The Supreme Court has clearly stated that an employer cannot stop its employee from joining any other company for his own benefit. I wrote a blog post on this here. At most, the company may be able to recover the actual cost they have incurred on specially trainning the employee, if at all.

2. (a, b, c and d) - For all these answer is BIG NO. For (e) service of any employee can be terminated only on misconduct which needs to be proved by observing the principle of natural justice (i.e. conducting a domestic enquiry).

3. NO. Check answer #1

4. This kind of bond/ agreement will not valid since it violates the basic principle of right to employment. (ref Article 19 and Section 27 of Contract Act)

Kumar Doab (FIN) 27 April 2016

It is a pleasure to see such discussions on labor/service matters and especially Service Agreements/Bond etc that is bothering the younger generations and also the HR personnel who are not properly informed on legalities but have to subscribe to dictums of theri masters.

The employer as usual prefer to fire from someone else's shoulder and usually it is HR personnel and even legal cell personnel.