Facing a Penalty for Breaking an Employment Bond: What Happens If I Can't Pay?

I have given my resignation letter to my organization and served about 15 days of my 3-month notice period, after which I had to take leave due to medical reasons. My company has sent me an acknowledgment letter asking me to pay Rs. 1,00,000/- for breaking the 3-year employment bond signed by me on my date of joining. I have been working with that organization for 11 months.

Can My Employer Penalize Me for Breaching the Employment Contract?

What will be the consequences if I default by not paying the mentioned amount? Please clarify.

Regards,
Shakti

I would suggest you read the employment bond letter of your company, a copy of which you might have received at the time of joining. If there are strict rules, then you need to follow them.

Unofficially, you can talk to someone senior with whom you have a good relationship, and maybe this person can help.

Please read the thread titled "break of bond" dated 27.2.15. In the thread, it has been explained that the employer can recover training expenses incurred, but not the bond amount. It is also clarified that the employer can only make authorized deductions as permitted under the Shops and Establishment Act or the Payment of Wages Act, whichever is applicable. Deductions or recovery concerning the bonded liquidated amount are not contemplated.

Thanks,
Sushil

Hi,

In case of a breach of employment contract, your employer can take legal action against you and can ask the honorable court for specific performance of the contract or to liquidate the damages from you. For a more detailed discussion, you can contact us.

Thanks & Regards,

Sanjeev Kumar Baliyan
Advocate & Consultant
sanjeev.baliyan@clairvoyants.co.in
9971589511

Specific performance cannot be enforced by or against an employer. See the famous Vaish Degree College case of 1976, decided by the apex court and followed in a 1991 case. Furthermore, as per Scispa India Ltd v. Manas, decided by the Delhi High Court in 1991, against a bond of Rs. 2 lakhs, an amount of Rs. 22,000 was awarded, considering the training expenses incurred and the period of service rendered by the employee. Please see the ratio in terms of Sections 73 to 74 of the Contract Act.

Specific performance depends on the type of employment contract. It is a general view in an open discussion. The citation of cases is very specific. Specific advice can be given after going through the employment contract only.

Thanks & Regards,

Sanjeev Kumar Baliyan
Advocate & Consultant
sanjeev.baliyan@clairvoyants.co.in
9971589511

1 lakh rupees is not a big amount. The company can easily prove that they have spent this amount on your training and onboarding. Since you have not completed one year in the organization, it can still be deemed as your training period. Legal matters can take a lot of time to settle. The company can easily appoint a lawyer, but you will have to waste unnecessary time and money on it.

Your best choice would be to discuss with the senior management in the company and settle the matter. You can provide the medical certificate and request the company to allow you to consider the period as an absence in the notice period (non-payable). During the notice period, sick leave is not applicable like any other leaves, but if you provide a medical certificate, they will have to accept it in goodwill.

I am sure the medical excuse during the relieving period is not considered or detailed in the bond you have signed.

However, please do not consider this as a loophole in the system. Beware that you should not be proved to be working elsewhere during this period. If you produce a false medical certificate, it can lead to a different legal case against you and the doctor involved.

If your reason is genuine and you request appropriately, you may get out of this situation with a good note in the relieving letter as well.

Best of luck in the negotiations... 

Regards,
Amod.