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Enforceability of employment bonds


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Enforceability of employment bonds

  1. 1. Enforceability of Employment Bonds<br />By<br />Baby Veena John<br />Altacit Global<br />Email: Website:<br />
  2. 2. Legislative framework of Contracts Relating to Employment<br /><ul><li>The Indian Contract Act, 1872
  3. 3. The Constitution of India, 1950
  4. 4. The Bonded Labour Prohibition Act, 1986
  5. 5. The Indian Penal Code, 1860</li></li></ul><li>What do we notice in a Appointment Letter/Offer Letter?<br /><ul><li>The Name of the Company;
  6. 6. The Designation
  7. 7. The “Package”</li></ul>That’s All????<br />
  8. 8. Unenforceability of One Sided Employment Contracts<br /><ul><li>Termination of Service without Notice
  9. 9. Incorporation of Restrictive Covenants -
  10. 10. Prohibition in terms of tenure
  11. 11. Prohibition in terms of employment with competitor
  12. 12. Prohibition in terms of territorial limits</li></li></ul><li> Exceptions to the Rule of Unenforceability of Restrictive Covenants <br /><ul><li>Beneficiary of Special Training
  13. 13. Reasonable Restrictions
  14. 14. Protection of Trade Secrets
  15. 15. Protection of Intellectual Property</li></li></ul><li>Employment Contracts under the Indian Contract Act, 1972<br /><ul><li>Sec. 27. Every agreement by which anyone is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void.
  16. 16. Sec. 28. Agreements in restrain of legal proceedings is void and unenforceable
  17. 17. Sec. 73 & 74. Breach of Contract </li></ul> <br />
  18. 18. Employee Bonds and its relevance to The Indian Penal Code, 1860<br />Section 368: Extortion by the threatening to file a legal suit<br /> If any person or institute holds back any document or any use any legal document or threatens any legal suits or actions and thus forces a person to perform any act against his wishes or which is illegal or wrong as per the statute of Law of the land.<br />The minimum punishment under this act is 2 two years, which can be extended to a period of 7yrs.<br />
  19. 19. Constitutional Perspective<br />Art. 19 (1) (g) Freedom of trade and profession<br />Art. 21 Right to life and personal liberty includes<br />the right to livelihood<br />The right to live with human dignity<br />Art. 23 (1) Right against Exploitation<br />
  20. 20. Judicial Perspective<br /><ul><li>Ban to work with the competitor for two years after the term of contract of employment was held to be a void contract (Polaris Software Lab. V/s Suren 2004 I LLJ 323)
  21. 21. Clause waiving payment of Gratuity on termination of service due to misconduct is void (Bakelite Hylam V/s S.J. Hasan 1985 I LLJ 438)</li></li></ul><li><ul><li>Specific Performance of Personal Service is unenforceable </li></ul>(Vaish Degree College v/s LakshNarain (1976) 2 SCC 58)<br /><ul><li>Restraints or negative covenants in the appointment or contract may be valid if they are reasonable (Niranjan Shankar Golikari v/s The Century Spinning and Manufacturing Company Ltd 1967 I LLJ 740)</li></li></ul><li>Remedies Available to Employer Against the Employee<br />Getting A Restraint Order<br />Non-Competition & Non Solicitation Clauses<br />
  22. 22. Factors to be Considered by Employers while Drafting Contract of Employment<br /><ul><li>Scope and Duties of the employee and potential harm if the employee quits
  23. 23. The position he/she shall hold in the company
  24. 24. Nature of job (whether specialized or not)
  25. 25. Nature of Designation(whether unique or not)</li></li></ul><li>The enforceability of the contract increases consequently in accordance with the designation and the degree of specialization<br />
  26. 26. Arbitration <br />
  27. 27. Conclusion<br />Bonded Labour is Unlawful - Employee bonds leading to bonded labour is violative of Fundamental Rights<br />Retention of Documents is Unlawful - Clauses empowering retention of certificates of employees is void and consequently unenforceable<br />
  28. 28. General Rule- Employment Contracts containing Restrictive Covenants are void to that extent<br />Exceptions-IPR & Trade Secret Protection, Reasonable Restrictions <br />Expenditure for Training is Retrievable - Employment Contracts requiring payment of compensation to employer is enforceable where company has incurred expenditure by way of training employees.<br />
  29. 29. Thank You for your Patient Hearing<br />