Employee Bond

A ‘bond’ is probably the most talked about and hated word among employees today. Not a day goes by without hearing a complaint from an employee about an ‘unfair’ bond in his / her contract.
So what exactly is a bond?
A bond is simply a clause in the employment contract. It is a clause that compels the employee to serve the employer for a specific period of time. It is this element of compulsion that creates most of the problems. People enter into employment contracts because they need the job and are willing to overlook the lock-in period, and then when they find a better opportunity, they realize that they are stuck and try to extricate themselves. And that road invariably ends at a lawyer’s door.
So the big question – is a ‘bond’ legal?
The answer to that question is a clear yes. A bond is legal and a company is entitled to include the clause in the contracts it signs with employees. However, having said that, there are some limitations on the bond which can be incorporated into the contract.
Very long bond periods
A bond has to be for a reasonable period of time. A very long bond period is definitely going to be struck down by a Court of law, and the company will be the loser. The only way to justify such a bond period is to show that there is a huge investment in the employee, which can be recovered by the company only if the employee serves those many years with the company (for example, an eight year bond period will need a very convincing set of reasons to win the approval of the Court).
Reasonable bond periods
Normally, a bond period of 1-2 years should be tolerated by a Court provided there is some investment by the Company in the employee. The usual practice in SaaS companies we interact with at vakilsearch.com is to bring in employees first without the necessary skills and then train the employee and equip him / her with those skills. In such cases, which are most common, a bond period of 1-2 years is acceptable. Please note that if the employee decides to challenge the bond in Court, you will have to show the actual expenses you incurred, so keep a clear record of the expenses (with written proof).
What about manufacturing companies which have a very short training period, or where the employee is a very junior position, where there is minimal training imparted?
Here, justifying a bond period is very difficult. In any event, for a junior employee, enforcing a bond is more costly than finding a new employee, so just don’t include any bond period in the contract at all.
In the next part…
We shall continue our discussion of a ‘bond’ in the next part. Specifically, we shall look at some decided cases on this issue, and how start-ups can make use of this in their contracts. To conclude this part, remember that merely getting the signature of the employee on a contract with a high bond period is not going to help you much, because the Courts will never enforce it. A bond period which is fair to both you and the employee should be the one you include in the employment contract.

If an instrument which is required to be executed on a Stamp Paper and remains un-stamped,it will not be acceptable in evidence.However, it can be legalised by paying the penalty as well as the apprpriate stamp duty.
Employment Bond in India is generally treated as a one sided contract and hence not enforecable through court of law unless it was executed to recover any reasonable actual losses suffered by the employer.Such contract subject to certain exceptions is treated as void under section 27 of the Contract Act.It is also violative of Article 19 of our Constitution,which guarantees freedom of practising any profession or to do any trade,business or profession to every citizen of India.
In view of the above,Bond executed on a non-stamp paper has no legal validity and further, even if it was valid,your employer could not recover anything more than the actual reasonable loss suffered by them.Therefore, they have no right to claim any compensation from you for pre-mature termination of contract.If they creat any problem in releaseing you or settling your dues, please serve a legal notice upon them.However, please take all actions in the matter in consultation with a service lawyer to protect your interest.

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