Employment Bonds: Are They Legal and What Happens If Taken to Court?

Is it basically statutory to put employment bonds (to prevent employees from leaving the company)? If yes, then are there any period restrictions? What about the outcome of the majority of cases if the employer takes it to court?

Please give your valuable comments.

Hi,

I have been working on this section for quite some time. Bonded labour is a condition where the employer restricts the movement of workers or staff. According to statutory law, no employer should bind the worker or labor for a specific time, and the worker or labor has the freedom of movement.

However, when we talk about companies where training/technology piracy is the main concern for the employers, a new employee trained for new technology or provided with the latest technological know-how might opt to join another company with a better package.

The company can opt for a right to principle clause in the appointment wherein the new candidate is bound not to use the company's name and engage in other activities for a specific time period. The candidate, upon completing a certain time in the company, can be issued a letter for using the company's details as per the instructions from the management.

Another important clause is the service contract. The company can enter into a service contract for a specified time (which has to be mentioned in the contract for service). For example, this contract is between the employer and employee to associate themselves for a period of 3 years from 21/10/2000 to 22/10/2003. Other conditions of the contract are then followed as per the contract act.

Suresh Sharma

Hi,

Your term of bonded labor is incorrect. We cannot ask people to work under any circumstances, and it is not supported by any law.

However, if you analyze your company and identify key strengths - for example, if your technology is unique and requires significant investment in training new employees - you can have them sign a service agreement for a specified time. Ensure the agreement includes proper clauses, and remember that it should clearly outline all aspects.

It is essential to include clauses that allow us to defend ourselves in a court of law. The agreement must have a specified duration.

Regards,
Pooja

Hi Pooja,

Actually, speaking, the term "bonded labour" as defined by law has different perspectives. In general, I am referring to conditions where the turnover ratio is high, generally taking into consideration the junior staff and middle management staff.

In the appointment letter, you can add a clause of a minimum service period, considering the kind of training you are imparting to the new employee. Moreover, we can extend the minimum service period clause by entering into a service agreement for a specific period, but either party can give notice of a specific period to end the service period. The service payment is binding on both parties.

Suresh Sharma

Hi Suresh,

I completely agree that service agreements are binding to both parties. We usually forget that in the process of getting a service agreement with candidates, we, at times, have to continue with non-performers because of the service agreement. I think today, we as HR representatives should think of alternatives like getting into agreements with competing companies to avoid this high attrition. Finally, all companies, no matter whether they are big, medium, or small, are getting affected because of attrition.

Regards,
Pooja

Hi Pooja,

That is true. Attrition is a major problem with most of the companies, especially where I am working. This condition of service agreement has been successful in my organization. Regarding non-performers, that depends upon our hiring procedures, and in the normal course of hiring, we assess the stability conditions and performance of the candidate.

Moreover, it is virtually not possible to stop the candidate, but we have found a way so that in case of no performance, the service agreement can be mutually dissolved.

Suresh Sharma