How Can We Validate Employment Agreement? - CiteHR
Umakanthan53
Labour Law & Hr Consultant
Riteshmaity
Labour Law Advocate
+2 Others

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Hi, I am an HR of an IT company. For employee retention we have service agreement under which they have to work for us for 3 years and if they quit they need to provide a compensation amount.
My questions are,
1) can we make the trainees sign this service agreement during training phase?
2) If yes can trainees & employees sign same SLA breaking it in 2 phases-training & employment?
3) Can we ask a trainee compensation if he breaks the agreement or after training does not join the company?
4) How many months of salary we can maximum ask to an employee to compensate if he/she leaves with service level agreement period? Is it possibly to legally contest and claim the money?
5) can you suggest any other legally proven way through which we can ensure retention of the trainees and employees?
Shall be obliged to have your guidance.
Thanks,
Maniratna

The question need to be addressed by keeping many labour laws in mind. But in my opinion your answer can be found only in The Indian Contract Act.

1) Trainee : If he is not an apprentice under the Apprentice Act, then you are free to create any contract you want. Now contract act is different from other laws. All other laws provide for what is to be done. They create rights like right to minimum wages. These are to be upheld irrespective of the parties you are dealing with. For example if Mohan is a worker, you have to pay him minimum wages irrespective of he being appointed by X ltd or Y ltd. This is called Jus in Rem (Right against the world). But contract creates Jus in Personam (Right against a person). Here there are no such rights defined, parties define them. The act provide for boundaries, like Contract cannot be against a law or morality. In those boundaries you can create any rights and duties. So if your trainee is not one covered by Indian Apprentice Act, there can be any condition imposed. See this for books on the issue Law Books and Reviews

2) Conditions cannot be Unreasonable. Though court will not inquire on the balance between consideration. It can strike conditions that are unreasonable. What is unreasonable differs in each case.

3) Enforcement : Irrespective of the amount of compensation you write on the contract, the court will award reasonable compensations. This again is a question of fact.

With bonds and agreements, you will not be able to retain employees in a true sense. But it can only play as a "pressure tactics". Bonded labour or agreement/ bond to compel someone to work in a particular company or to leave and join a company is illegal. With these bonds, one can only recover the amount as spent on training a particular employee.
In the realm of employment, service bonds act as a detterent to early and frquent attrition. However, as pointed out by our learned friends above its justifiability depends on the reasonableness of the conditions stipulated therein. For example, if the employer invests considerable amount of time and money in exclusively training the prospective employee, he can make a provision for recovery of the entire cost of training from the trainee if he fails to report for duty after completion of the training or to serve a minimum period. Similarly, the notice obligations on unilateral termination of the contract of employment within the bond period should also be same to both the employer and the employee concerned.
Bonding employees with contract is illegalvas it amounts to treating as bonded labour. If such employee wants to be released & you don't release her / him and he approaches authorities, it will cause difficulties to the org.
Best way is to create culture, avenues, and processes that will retain maximum talent.
Shrikant Prabhudesai

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