Can a Company Demand Notice Period Buyout Repayment Without Prior Disclosure?

My friend resigned from a company "A". When he joined the company "A", he received the amount for the notice period which he had paid to his previous company. Now that he has resigned from Company "A", he is being asked to pay back the amount that was paid to him earlier. The company claims it is their policy that if someone leaves within 1 year, they must repay the notice period amount that was initially paid to them upon leaving their previous company.

Though he resigned within 1 year, he was not informed about this policy at the time of joining or when the amount was paid to him. Additionally, there was no document signed by him or email acknowledging that he was informed about the policy. Can the company recover this amount from his Full and Final Settlement (F&F)?

Yes, the company can deduct the amount from F&F, but if no document has been signed, it can be challenged. Most companies have this policy or clause mentioned in either the appointment letter or policy manual.

Regards,

Archna is right. And even if no document is signed, don't you think your friend [or is it 'you'?] has a moral obligation to pay back when Company A went the extra distance to pay the notice amount to the earlier company? Especially since he is leaving within a year. Any time of service of less than a year, in most industries, is considered too short for payback to the organization.

Even if nothing is mentioned in the appointment letter, if this is challenged, the company can always bring out some document to prove that this is a standard practice. However, this doesn't mean your friend has to back out due to this possibility. Just ask him to go by his conscience—that's what will carry the day for him. If he wants to go the legal/rules way, ask him to be ready for Company A also to go the legal/rules way. One can't quote the rule book and expect the other party to adhere to just the moral values.

Regards, TS

Dear My Friend,

Please clarify the following points:
- Is there a COMPANY HR POLICY SIGNED?
- Were you part of an Induction program in the company?

If the answer is yes to these questions, then you may have to pay back the notice pay amount. Otherwise, it can be challenged.

Mangesh Wakodkar
Sr. Executive HRD

Assumptions Regarding Notice Period Reimbursement

Assuming:

1. Your friend had to pay Company A a salary in lieu of the prescribed notice period he was obliged to give as per the terms of his employment.
2. This amount was reimbursed by Company B, perhaps since they wanted him on board at the earliest.
3. There is no document that your friend signed in this regard.

Then, recovering this amount from your friend will not be proper. One must appreciate that (as per my assumption) Company A wanted him on board ASAP. Therefore, your friend left the company he was working for after surrendering salary in lieu of the prescribed notice period and joined Company A, which reimbursed the surrendered money to your friend. Therefore, your friend is not obliged to refund this money to Company A. If it is a matter of company policy, then it should have been explained to him by the HR of Company A before reimbursing the money to your friend.

Cheers!!!
Vasant Nair