What Happens If an Employee Breaks Their Bond Early? Legal Steps and Consequences Explained

Hi,

Dear HR members,

It's always been a fruitful and amazing experience sharing and gaining knowledge on this platform. Today, once again, a query has prompted me to seek a solution here.

My basic question to all my seniors is, "If an employee leaves the organization before completing the bond period, is the organization eligible to take legal action? If so, what are the different processes or levels of charges that can be included when formulating the violation clause in the bond documents - the consequences of violating the employment bond?"

Regards,
Lakshmi

Lakshmi,

First of all, a bond is not valid in India. You cannot take any legal actions against the candidate even if he breaks it.

Dear Prathima,

Is correct in this respect, and you cannot take any action against a person breaking a bond.

Thank you.

J. S. Malik

Dear All,

Organizations are incurring huge expenses in training and molding new hires to fit their technologies, organizational culture, etc. Sometimes, the cost of recruitment is prohibitive. Such developments have compelled organizations to think of a "Service bond" as an instrument of recovering such costs, in case an employee jumps training or service midway through.

Typically, the bond binds the person executing to the organization engaging the trainee, stating that he is liable to pay a certain amount towards the cost of training, etc., in the event the trainee leaves before, let's say, three years. This is an agreement where there is an offer and an acceptance for consideration. It is perfectly enforceable, as the agreement is executed on a stamp paper of appropriate value. The bond can be produced in a court of law as evidence.

However, the fact of the matter is that a "Service Bond" is a product of a bygone era when employers were ruling the employment market, skills were abundantly available, and few avenues were open for the talented. With the crisis in the industry for skilled 'employable' manpower, I think organizations should look for other ways of attracting and retaining talent.

Thank you, Mr. K.S. Murthy, for providing clear insight into the subject. I would also like to thank Malikjs and Prathima for sharing their respective views. The discussion has enhanced my understanding, but my initial query was different.

My main question is: "What are the various processes or levels of charges that can be included when formatting the violation clause of bond documents?" Currently, we adhere to a set format, but I am keen on making some changes. I am eagerly anticipating fresh, innovative inputs and suggestions from experts in this field.

Once again, thank you all for your contributions.

Regards,
Laxshmi

Dear,

Many PSUs requiring new hires to submit bonds were, in fact, keeping such bonds in the files. Till 2006, the bond money was in the range of Rs. 10,000 to 25,000 only. Additionally, many PSUs had presidential directives to transfer the bond in case the new hire left to join another PSU, as it was considered important to retain talent within PSUs.

As far as I can see, the actual cases of recovery suits against individuals furnishing bonds are negligible. During that time, many organizations might have found it troublesome to initiate lengthy and complex legal proceedings to recover such minimal amounts through the court recovery process. In any case, the organization would end up spending more on advocates.

There was a smart move by some organizations. In case an employee or trainee breaks the bond, the organizations would recover the dues in full or on a pro-rata basis from the amounts due. Although their PF, gratuity, etc., cannot be touched, dues can be recovered from salary, the cash value of leave balance, incentives, bonuses, etc.

Some individuals who wish to make a graceful exit would settle such dues and make a decent exit. Perhaps both the employee and the employer need to foster an environment of mutual respect.

Thank you.

Dear Laxmi Madam,

I agree with the views of Mr. K.S. Murthy. The first thing in such cases is linked with the conditions specified in the bond. Unless the company really incurs expenditures in providing skills to the individual/trainee, it is a fitting case to fight and recover. However, we must have solid proof of spending the money on training.

In the case of a sham bond, it is not worth it.

Patrudu

Dear All,

Please help me with my bond. I am working for an Indian company. I have been in the US for 1.5 years. I was placed in the US by my Indian employer. Just before coming here, my company took a bond stating that we should serve in India for at least 1 year after returning; otherwise, we should pay 3 months' salary equivalent to what we earn in the US.

I spent 2 months here on training and then started working. Now, I want to leave my current company and settle in India with another one. However, my employer is asking me to pay 3 months' gross salary in the US, which amounts to around 12 lakhs. I have requested them to consider a reduced amount of around 6 lakhs as this is a significant sum for me. Despite my request, my employer is insisting that I pay the full amount.

Could anyone please advise me on how I can navigate this situation and find a resolution?

Thank you.

Dear All,

We need to understand that the bond, though legally not valid and a one-sided affair, involves significant expenses for training employees abroad or in India. I strongly believe that if we compile a case with all the necessary documentary evidence, such as their travel costs, accommodation expenses, and training fees paid to the trainer, whether abroad or in India, we will still have a strong case.

As HR professionals, we also have a responsibility. If we are informed by a past employer that an employee has left without fulfilling their bond obligations, it is our duty to ensure that they reimburse the reasonable amount spent on their training. We should also insist on receiving proper relieving and experience certificates.

If an employee is found to have used forged documents to secure employment, we must be prepared to take appropriate action against them. It is important to note that an individual who behaves dishonestly towards one company is likely to do the same to another.

I believe that the bond serves as a psychological deterrent, and we should require the guarantor to hold a responsible position rather than a family member. This, I believe, would give the bond more credibility.

This is my perspective on the bond.

A. Ratna Sekhar
AGM-HR

I have 9 years of experience working in a placement company, and I signed a 2-year bond. I am currently in the probation period, with 4 months already passed. I have submitted my degree as security. Kindly advise me on how to exit this company.

Thanks and regards

Hi all,

A bond is enforced for those to whom training is given and the cost involved is higher. However, one cannot force or compel an employee to comply with the bond.

Devarajan

Hello Mr. Sekhar,

Thank you for sharing the information. In my case, I have been billing my employer 100% of my hours since completing my training, which has been for the past 16 months. During this time, I have trained approximately 15 engineers from our company. However, I am now willing to contribute financially in some way.

Please advise me on the next steps to take.

As per the principle of natural justice, a bond may not hold good in the court of law, but the chances are 50-50 because there will be an offer and acceptance from both parties.

I have a problem with my employer, please read patiently and give me some advice on it.

I joined an IT firm one year ago for a pay of 5000 as a trainee, which is very low compared to the industry standard. They had me sign a bond for 2 lakhs for a time period of 2 years. Additionally, they took my original 10th-grade marks list.

They promised an increment after 6 months, which they have not provided even after completing one year. Now, they are asking me to wait for 3 to 4 months for an increment of 2000, citing present economic reasons.

They have not provided any training, and I am not willing to continue working there. When I requested to leave, they demanded 3 months' salary as a penalty. They threatened not to return my marks list and even mentioned a possible legal suit if I do not comply.

I am stuck as I have not received any increment in the past year, and now they are threatening to withhold my original 10th certificate. Do they have the legal right to make such claims against me? Please guide me, sir. Thanking you.