Is Bonded Labor Legal in Software Companies According to Labor Law?

Is bonded labor allowed in software companies as per labor law?

Bonded labor is not permitted in any industry, and there is no special consideration for the IT industry.

Regards,
Madhu.T.K

Dear Aijaz,

I assume you have encountered the training/traveling bond in a software company. Please correct me if I am mistaken in my understanding.

Regards,
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I can't leave the company for the next two years if I join, as that is what the company demands from its employees. If bonded labor is not allowed as per labor law, can we file a case against the company if we leave before the stipulated period and they claim some amount or refuse to provide documents?

As per the Constitution of India, bonded labor is abolished in every form. Employment contracts are based on the AT-WILL concept. Some companies have a policy of a bond, which is based on compensation in case of a breach of contract. This is because the company is investing in training and other specific areas for the employees, and they should not suffer due to the early exit of an employee. The duration and amount of this bond must be reasonable, but determining the reasonableness can be a challenging task. It is advisable for employees to carefully review and think twice before signing an appointment letter that includes such a bonded clause.

[White Eagle](http://kuldeeprathore.blogspot.com/)

When software companies hire talent, a lot of training is provided to make them productive on the project. Furthermore, the company requires the talent to work for a fixed duration to make the talent billable and the project profitable. But when a talent leaves the company after completing the training or somewhere midway in the project, it affects the credibility of the company. Further, it drains the training cost with little or no return.

Hence, to mitigate risks, the company offers a training bond to be agreed upon and signed by the employee, which does require the employee to work for a fixed duration. In case the employment is discontinued, the talent would be required to reimburse the training cost on a pro-rated/fixed basis, as mentioned in the agreement.

It creates a win-win situation for both as it brings credibility to the company and stability to the talent. A training agreement showcases the worth of the talent in the market, hence adding to the employability.

Hope it addresses your concern.

Regards

Reimbursement for Training Costs and Employment Contracts

If the company has invested money in the training and skill development of an employee, then to that extent, the company is in a position to demand reimbursement from the employee who leaves without serving the company until such costs are reimbursed by availing services from them. However, no negative covenant is permitted, even if it is included in the employment contract.

Understanding Negative Covenants

A negative covenant refers to restrictions regarding leaving the company or joining other companies, possibly competitors. Indian law does not recognize such restrictive agreements. According to Section 27 of the Indian Contract Act, 1872, such contracts are void to that extent and against public policy. No employee can be prevented from pursuing similar work if they leave their current position, simply on the pretext that it may be detrimental to the former employer.

Legal Precedent: Gujarat High Court Ruling

In this context, the Gujarat High Court, in the case of Sandhya Organic Chemicals v. United Phosphorous, held that an employee cannot be prohibited from utilizing the knowledge and experience gained while being employed.

Regards,
Madhu.T.K