Dinesh Divekar
Business Mentor, Consultant And Trainer
Saswatabanerjee
Partner - Risk Management
Psdhingra
Legal Analyst, Hrm
Gopinath Varahamurthi
Mindhour Partner, Ass.professor/adm. Officer,
Tajsateesh
Recruitment/talent Acquisition, Career Counselling
Ashutosh Thakre
Hr Professional
+2 Others

Can company put a clause in the appointment letter that if employee declines offer before date of joining then employee will reimburse the expenses incurred by the company for interview. Is this clause valid.
14th October 2015 From India, Lucknow
Dear Smriti,

First and foremost, you need to understand difference between "Offer Letter" and "Appointment Letter". Former is issued when candidate fulfils the recruitment criteria and company considers his/her selection. In most cases the latter is issued once the employee joins company. In extreme case appointment letter is issued even before employee joins the company.

You might introduce this type of clause nevertheless, please anticipate repercussions of insertion of this clause as well. Why recover just the cost of interview and selection? Why not cost of discontinuity in work as well? Latter cost is greater than former!

Introduction of this type of clause could scare away the job candidates. When a job aspirant starts searching a job, it is obvious for him/her to attend interviews at as many places as possible. Possibly he/she might get selected in 2-3 places. Therefore, the job candidates weighs options and chooses the best option. What if job candidates start declining job offer because of this clause?

Secondly, a needy candidate may accept the job offer even with this clause but then what if he/she still does not turn up? To recover the cost of interview and selection, will your company sue the job candidate? Under such cases, how many court cases you will go on fighting? By settling score with the job candidates, what image your company will cultivate in the job market?

Job candidates do not turn up even at MNCs as well. "No show" is fait accommpli that employers need to put up with. Nevertheless, what matters is brand image of the company. Higher the brand image, less the chances of "No show". Therefore, real challenge lies in how to enhance brand image of the company so that you can attract quality candidates. Failure of job candidate(s) to join your company after issue of offer letter shows that your brand image means nothing to the him/her. Rather than drawing solace from recovery of small amount owing to "No shows", please address the larger issues.

Thanks,

Dinesh Divekar


14th October 2015 From India, Bangalore
Divekar ji,
You may please like to review your answer in the spirit of the question put by the member.
The question was, "can company put a clause in the appointment letter that if employee declines offer before date of joining then employee will reimburse the expenses incurred by the company for interview. Is this clause valid," BUT CERTAINLY NOT about the brand image of the company.
14th October 2015 From India, Delhi
Dear Friend,
As the learned shri dinesh divekar pointed out, no to such clause..go for better optitons. Also, today employees are passion for a good working place, they want to rid of bad boss even the organisation is the excellent. In most of the cases, the employee want to be recognised otherwise you are going to get substandard employees...
14th October 2015 From India, Arcot
Dear Mr PS Dhingra,
Of the five paragraphs of my reply, paragraph number 2,3 and 4 deal with the direct query by the poster. First paragraph is to bring clarity in offer letter and appointment letter and last paragraph is reserved for brand image. This paragraph is written to assess why situation came to such a pass where company is thinking of introduction recovery clause in the offer letter itself.
From my point of view, these challenges are faced by the SMEs. Everybody wants to work in branded company and companies with lesser brand image suffer in the job market. I wanted to bring to fore this fact. Hence my the paragraph on brand image.
Thanks,
Dinesh Divekar
14th October 2015 From India, Bangalore
Dear Smriti,

You should understand that companies do not intend to spend a lot of money and time in the process of conducting interview to select a capable cadidate that goes waste and futile. But, if a selected candidate backtracks after accepting offer of appointment, the company has to restart its recruitment process a fresh resulting in wastage of another lot of time and money again and again leading to affecting productivity of the company and sometimes piling of backlog of work. So, there is nothing wrong if a company puts a clause for reimbursement of the recruitment cost by the acceptor of the offer of appointment and later declines to join.

It is for the employee to think ten times before accepting the offer of appointment. Brand image has nothing to do with the recruitment process. Brand image is not built by merely wasting money of the company and precious time of the management in fulfilling the greed of the candidates. If a candidate has attended interview for jobs in other companies also, he can very well request the selecter company for extension of time for acceptance of offer letter, but should not backtrack from the offer already accepted. Rather the action of the candidate can be viewed to construe dishonesty and selfishness on the part of the candidate. A candidate, if sees only his own interest, he may for the time being get benefitted from some other offer of appointment, but cannot be successful in developing his career. Future is always unpredictable. The same company can prove to be opening the gates of luck for the candidate, if he behaves ethically.

Every company expects a selected candidate to be honest and sincere to fit within management's expections and follow sincerely the employment ethics. A candidate nust have to bear in mind that any company makes recruitment for company's own needs, but not just to pay for unethical behavious on the part of the candidates.
14th October 2015 From India, Delhi
Dear Shri Divekar,
I would like to totally differ with your views. There seems to be a big difference between yours and my views and in the understanding about the central idea of question. If liked, you may like to go through my reply in response to the question of the member. So far as question of scaring of the job candidate is concerned, when the clause is already included in the offer letter, why the candidate accepts that clause by accepting the offer?
14th October 2015 From India, Delhi
Dear Smriti,
No, i do not think such a clause can solve any problem.
Isnt it same as saying that you can resign, but the company will release you (even after the notice period) if you provide us with the replacement.
If the above clause is unjust, so is the above clause.
On the other hand, this clause will deter the employee from saying a yes, especially if the joining date is after 3 months, as there is uncertinaty in that period. So, No, inserting this clause, will not serve any purpose, as the company will spend more on the letigation expense, then the actual recovery amount.
Instead make your selection and offer so sound in other manners, that it is difficult for the candidate to reject or fall back after accepting.
Regards,
Ashutosh Thakre
14th October 2015 From India, Mumbai
Dear Nathrao,
Your point is quite valid, as that happens often. But, the question is of breach of contract, which becomes a legal issue, not to be adjudged by the candidate or the company themselves. Uunles some mutual settlement is arrived at that becomes the domain of the competent court to decide, as to whether breach of contract has happened or not and what penalty the offender has to bear. So, in respect of the case of the company asking the candidate not join the job after its offer is accepted, the cadidate is free to sue the company to claim damages from the company. Joining job, however is not advisable in that com[pany to avoid revengeful attitude of the company towards the candidate cannot be overruled after his joining.
14th October 2015 From India, Delhi
Hello CS Smriti Sharma,
Are you the HR OR the candidate?
While the answer would essentially be the same.....it's NOT legal,,,,,the reasons/justifications/angles would vary depending on which side of the table you are.
If you have gone thru the responses of so many senior members, they have been on the basic PRESUMPTION of you being the candidate OR the HR........either way, some have wasted their time.
Don't you think everyone who responded with the WRONG presumption has wasted at least some time in addressing an issue that's way off the mark from your perspective & which may not have answered your query completely/appropriately?
.....and this coming from someone who has been a member of CiteHR since Aug, 2011.....
Suggest first clarify your locus-standi & also give the background of the query.....that will enable the members to give pointed & actionable suggestions for your benefit.
Rgds,
TS
14th October 2015 From India, Hyderabad
In practical sense, this clause will have zero meaning. You will find it impossible to enforce this clause. The candidates also know this. And they know the cost of taking this to court will find exceed the amount that you can recover for such expenses. it is also unlikely that the courts will give a judgement in your favour.
From a legal point of view, the offer letter may not even have a enforceability from a contract act point of you. Every contract needs a consideration. Consideration actually means an offer of something of value in return of something for value. In case of the offer letter, there is no consideration that has been exchanged. It is actually an agreement of intent to enter into a contract of employment.
If the above you is correct in the eyes of the court, you do not really have any scope of recovery of your mouth

14th October 2015 From India, Mumbai
Very interesting debate. As learned member Mr.tajsateesh said, it would have been worth it's while if the member who posted the question, clarified whether he is seeking the answer from employee perspective or from HR(company) perspective as it would have attracted more focused replies from the senior members. From employee's perspective, the question, I believe, centers round the enforce ability of such clause and the consequences of breach thereof. However, the reply to the question from employer's perspective, in my view, is not merely confined to legal ramifications but beyond them.

The employee’s perspective. Here the company, by making an offer, signified it's willingness to promise him a job and puts a condition that he has to reimburse the company of interview expenses, if he declines the offer with a view to obtain his acceptance thereof. Here the clause raises many questions of legal importance such as;

1) How an offer or proposal fructifies into contract when it is declined? Legally an offer or proposal when accepted, becomes a contract.

2) whether the Contract Act envisages consideration for declining an offer, if at all the willingness to reimburse the expenses is considered as consideration. The Act envisages consideration only in case of accepting an offer (of job) or proposal.

3) How far such condition of compulsive nature makes the consent by the candidate as 'free consent' and will It not taint it with 'undue influence' as one party namely the company is in dominant position vis-a-vis a candidate?

4) If the condition becomes operative only in case of declining offer then, is it that the candidate need not reimburse the expense of interview, once he accepts the job and joins and latter quits the next day?

Therefore the clause, to be valid shall strand legal scrutiny and it is not possible to answer the query satisfactorily from legal perspective in this forum as the issue involves so many legal nuances and technical interpretations and it is better to leave it to the courts to decide it. I am not going into the legal aspect of the question.

That leaves us with employer's perspective. The learned members have also attempted to address it. My two cents on this perspective are :-

The anguish and agony of an employer who incurs a cost on hiring and seeing it to go waste is understandable. He may feel helpless to resort to such compulsive options at least to make the candidates join the job, though he may not really mean to recover the expenses. However it is not prudent nor desirable to incorporate such clauses if tested against the principles of prudence, practical wisdom and market psyche.

1)It is paradoxical and inconsistent with the unwritten code of conduct in the business of buying and selling goods and services in markets where the buyer cannot ask the seller to pay for his travel expenses for coming to market, if the seller refuses to sell his articles to him. In the employment market too the employer and the candidate will be in the position of buyer and seller. It is first an employer's immediate need to have required manpower to run his business and it is he who approaches the market directly through advertising or through his agent in the form of a manpower agency to buy manpower to fulfill his need. The candidate only offers to sell his services for a price but does not induce the employer to incur costs of hiring him. For the employer there is no other go but to incur cost to have access to candidates. Therefore when a candidate appears for interview, he does not do so with the knowledge that he has to pay for his interview also. So the transactions till this stage of offer from employer's side, fall into an unwritten understanding or code of conduct (accepted behavioral norms) in the employment market. Therefore it defies logic to pass the cost of hiring to the candidate even with some conditions.

2)Secondly, does it require any guessing as to how many candidates show up for an interview if they know that they have to pay for appearing for their own interview even with some conditions. On the other hand, in some cases, the employers are even willing to pay for travel expenses of the candidates. Therefore It defies, in my view, practical wisdom in hiring and is counter- productive.

3)The paradigms of employment is undergoing a change with tech savvy, freedom loving, job hopping and more entrepreneurial modern Gen-Y work force which may view such conditions as reflecting a negative culture of the organization. With Gen-Y work force so active on social media and ‘whats app’, employer branding may take a beating.

B.Saikumar

HR & Labour Law consultant


15th October 2015 From India, Mumbai
#Anonymous
Hello everyone, I have a similar query. Actually I accepted one offer from the company. I was initially skeptical about joining and I wanted to take the offer letter home but they didn't allow me and also took my phone so that I cannot Google about the company. Actually they advertised the job with one Company name and before going in for the interview, I checked the company on glass door and found nice reviews. While accepting the offer, there was a different company name, I asked them about the same and they said it's a subsidiary. Also, I was made to sign check for about 3 lakhs for recruitment costs reimbursement in case I don't turn up on the agreed date.
I came home and searched the company name with which I executed the offer letter and it was having a separate glass door profile and pathetic reviews. So, I didn't join, and I express all my concerns to this company. And everytime, I went there, they manipulated me. At last, I made up my mind to join the company but just before 3 days of joining, I was chatting with a friend, and I told him the situation without taking the company name and he immediately took the same company name and warned me not to join this company.
Current situation is they have presented the check for clearing but I had already given stop payment instructions. And now they have sent me legal notice and they want to initiate proceedings under section 138. Please advise what should I do
13th October 2017 From India, Delhi
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