Dinesh Divekar
Business Mentor, Consultant And Trainer
SrAdvBhat
Sr Advocate
+1 Other

Anonymous
Dear Members,
My query is regarding the employment agreement that needs to be signed by each employee prior to joining company. In most of the organizations this agreement is furnished at the time of joining when the employee has already resigned and is performing the joining formalities. Is it the correct time? Applying the rules of natural justice I feel that the employee does not have much choice at the time of joining except than to sign whether he agree with the terms or not, instead this agreement should be furnished with the offer letter so that he may choose to join or not at the time of considering the offer itself.
Please suggest.

From India, Hyderabad
Dear friend,
You have raised the query however, what is the nature of the agreement? What are the main contents? Do you want selected job candidate enter into contract saying he/she will not back off from joining your company? Occasionally companies also back off and withdraw the offer letter. In such a case, will the condition of offer be binding on you also.
Please clarify on your post. Further suggestions can be given thereafter.
Thanks,
Dinesh Divekar

From India, Bangalore
candidate is free to ask all his queries regarding the employment before accepting the offer letter. Even I also have the same opinion as yours, offer letter should have general conditions of the employment. I think people are generally afraid to ask for general conditions such as working hours, weekly offs, leave policy, notice period, etc.
From India, Kochi
Thanks Mr. Dinesh and Sr Adv Bhat,

I am a legal advisor to an IT consultancy firm.The present organization has a practice of getting signed a confidentiality agreement and an Intellectual Property and non-compete agreement. The confidentiality agreement is signed at the time of joining and the other agreement while being relieved. The confidentiality agreement includes a clause that the confidentiality shall be preserved three years after the termination of the agreement to the effect that he will not join any competing company in the same geographical area.

I have some objections over this:

1. This is against section 27 of Indian Contract Act;

2. The organization furnishes this agreement at the time on joining when he has left his prior employment and has furnished reliving letter, in this way he has no other choice than to sign the agreement;

3.How do you bind a person post employment?

Similarly at the time of relieving an employee if you furnish hi with an "Intellectual Property and Non-Compete agreement" and inform him that relieving letter will only be issued if he sign the letter then that amounts to an indirect blackmail and somehow I do not approve it.

So I intend that these documents be furnished with the offer letter and he be informed clearly that the acceptance of his employment offer by Employer depends on his expressed acceptance to the terms of the agreement so that he may get the terms vetted by some counsel externally.

I am not aware whether any other organization follows the practice but it just seems to be fair besides some organizations do not provide the copy of the signed agreement to the employee, I presume that this too is against law.

Please suggest and thanks for your inputs in advance.

From India, Hyderabad
Dear NKvs1975,

Please reefer the following:

In the case of R.Babu and Another Vs TTK LIG Limited, Formerly London Rubber Company (I) Limited, recently published in Labour Law Reporter (Jan-05; 71-73) the Division Bench of Madras High Court has refused to grant injunction against an employee restraining him from carrying on a competitive trade after the termination of his employment. The court stated that an agreement whereby an employee agrees not to join another competitive company for a specific period after cessation of his employment will be violative of public policy as stipulated in Section 27 of the Indian Contract Act, 1872. The referred Section says, “ Every agreement by which any one is restrained from exercising a lawful profession, trade or business of any kind, is to that extent void”.

While giving its judgment, the Madras High Court has referred to the cases of N.S.Golikari Vs Century Spinning & Manufacturing Co. Limited (AIR 1967 sc 1098); Rajan G.R.V. Vs Tube Investment of India Limited (1995 (1) LW 274) and Superintendence Company of India (P) Limited Vs Krishna Murgai (AIR 1980 SC 1717).

Explaining the same in detail, learned advocate Shri. H.L. Kumar has stated in the journal section of the Labour Law Reporter (Feb-05; 38-42) that such clause is legally impracticable and unrealistic.

In his article he has referred to the case of Pepsi Foods Limited & Others Vs. Bharat Coca-Cola Holdings Pvt. Limited & Others (LLR, 1999, 1027) wherein the Delhi High Court has said, “injunction cannot be granted to create a situation such as “Once a Pepsi employee, always a Pepsi employee”. It would almost be a situation of economic terrorism or a situation creating conditions of bonded labour”. It has also said that inter-changeability of service is an accepted norm of Service Jurisprudence that cannot be curtailed by a court injunction.

It is interesting to note that, the Court said that, in a free market economy, everyone concerned, must learn that the only way to retain employees is to provided them attractive salaries and better service conditions. The employees cannot be retained in the employment perpetually or by a Court injunction.

Read the following article: Freedom of contract must yield to freedom of occupation | Business Line

Thanks,

Dinesh Divekar

From India, Bangalore
Dear Mr. Dinesh, Thanks for the revert and that is in line with my line of thoughts. However could you please also guide about applicability of post termination contractual obligations. Thanks
From India, Hyderabad
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