Facing a Penalty Clause: Can I Be Sued for Not Joining After Accepting a Job Offer?

I was recently selected for an organization where, in the Offer Letter, there was a clause regarding a Breach of Contract. It stated that if I do not join, I will have to pay 8% of the annual CTC. I took the job because I liked the role, but I opposed the clause since, as a candidate, I wanted to explore other options that suited my career path. They did not agree and explained that they included this clause because many people do not inform or report on the date of joining without intimation.

Now, three weeks before my joining date, I want to inform them that I wish to decline the offer because I received an offer from my dream company yesterday.

Question about Legal Implications

My question is, if they do not agree and I cannot pay the amount, can they file a case against me? This may be termed unprofessional, but I signed because, at that time, I did not have any other offer. I had been waiting for this other company's call, and now that I have it, I do not want to miss it.

Dear Friend,

Yes. As you signed the contract with that particular clause, you need to abide by it and clear the amount; failing which, they have every right to proceed legally. Let us wait for the inputs from other senior professionals.

Regards,
Kamesh333

Strictly speaking, the company can initiate action and claim the cost of recruitment. It will be difficult to quantify how much money was spent to select you only, but proving such costs is not easy. Asking you to pay 8% of CTC is an ad hoc figure and can be contested. No one can predict whether the company will act legally if you do not join. Send them a polite letter expressing your inability to join now and take the plunge to join where you feel fit. Request the clause of 8% CTC for us to read and understand.

Having signed the offer, you have accepted it as it is and also effectively communicated your acceptance to the offeror. Just because you now have a better offer, you cannot rescind it.

Dear Archisa,

The company cannot claim the same from your side because you have joined the organization but are now going to resign from the post. As per your statement, you have mentioned that the clause states, "If I do not join, I will have to pay 8% of the annual CTC," but it does not mention that you are bound to work for a certain period.

Regards,

Shubham

Thank you, everyone, for your valuable inputs.

Shubham mentioned that he chose not to join this company as he found better prospects elsewhere.

If the offer letter was conditional upon medical check-ups, background verification, etc., does it still hold as a conditional offer that has not been fulfilled? In such a case, would the penalty still be applicable? I welcome suggestions and comments on this matter.

Acceptance must be absolute and unconditional. The company had given you an offer which you had accepted, but some stipulations like verification and medical requirements are there from the company's side. They have given a conditional offer. Your acceptance has been unconditional, and you are bound by it. (But also read my answer above.) The company can still reject you as they have made a conditional offer regarding medicals and verification.

If you feel that you are getting a better opportunity elsewhere and you are certain about it, please go for it now instead of joining here due to the threat of getting dragged into court. You can't live in fear. Surely, the company can go legal, but it has been seen that usually companies don't prefer doing it.

Also, if they put such a clause in the offer letter, they must have experienced such situations when would-be employees didn't show up on the Date of Joining (DOJ), and they are sure prepared for that. Usually, recruiters for such situations always shortlist 2-3 people to whom they can extend an offer.

Now you still have 3 weeks, be sure first and let them know about your incapacity to join their company, keeping it documented. You should inform them well in advance so that they can work on Plan B.

All the best...

To Respected Seniors,

I know that my suggestion could seem far from right, but sometimes the opportunity cost is just unbearable. Also, fortune favors the brave.

Archisa,

The particular clause is meant to instill fear only. You can certainly pursue better opportunities. The company will not waste its time, money, and energy by taking legal action against you in this regard.

Regards,
Princely Raj

Dear friends,

Simply put, the question here is whether, in a contract of employment, the offeree, i.e., the employee, can later repudiate his/her acceptance already communicated. The answer can only be an emphatic "NO" with reference to the Indian Contract Act, 1872. Only such a legal position enables the offeror, i.e., the prospective employer, to sue for damages already mentioned and accepted. Whether it is reasonable is a question to be decided by the Court only. Similarly, the prospective employee can simply ignore it under the impression that "nothing ever happens" and accept a more beneficial offer that comes later. But everyone should be law-abiding!

It is better to personally meet the concerned HR Head and share your concerns with him. A dialogue is a much better solution than an escape route.

All the best...

Query on Breach of Contract Clause

Is this a real query? It has been observed that the very same query, verbatim (even with the same errors), had been posted in the thread https://www.citehr.com/470887-can-co...candidate.html in a highly informative discussion initiated by Swati.

Hi, I was recently selected for an organization where the offer letter contained a clause regarding breach of contract. It stated that if I do not join, I will have to pay 8% of the annual CTC. I accepted the job because I liked the role, but I did express my disagreement with the clause. As a candidate, I wanted to explore other options that aligned with my career path as well. However, they did not agree and mentioned that the clause was included because many individuals fail to inform or report on the date of joining without notice. Now, three weeks before my joining date, I wish to inform them that I want to decline the offer as I received an offer from my dream company yesterday.

My question is, if they do not agree and I am unable to pay the amount, can they file a case against me? This may be considered unprofessional, but I signed the agreement because at that time, I did not have any other offers. I had been waiting for a call from this other company, and now that I have it, I do not want to miss the opportunity.

Regards,
Jobcandidate
14th December 2015
From India, Gurgaon

Handling Conditional and Unconditional Job Offers

1. Please do not worry about the offer if it is conditional, e.g., subject to being medically fit or subject to background verification. If the offer is unconditional, then you may face a legal problem in the future.

2. Let the company go ahead and file a suit against you—so what? Contest it in the court of law. It's not a big deal. Employers often try to intimidate. They cannot hold your future in the balance.

3. If the offer is conditional, you can refuse to accept it and proceed with the new offer. Please check if your offer mentions that it can be withdrawn even after acceptance; this would work in your favor.

4. In the future, before accepting any offer, please carefully review the offer letter, seek clarifications, and only then accept.

5. Every employer may believe they are the best in the world with the best service conditions, but this is often a myth for the majority of employers.

Warm Regards,

Bharat Gera
HR Consultant
[Phone Number Removed For Privacy-Reasons]

If a prospective employee is liable to compensate the company for not joining, the company should compensate the candidate if it cancels an offer.

Varghese Mathew

There is no binding on somebody unless and until he/she becomes an employee. Hence, no action could be taken in such a case if the person has initially accepted the offer but later expressed his denial on account of some reasons.

Rgds
Piyush

The Impact of Job Offer Acceptance and Withdrawal

This routine habit of people accepting a job offer and later making excuses near the joining date, such as having a better opportunity, often leads to them not picking up phone calls from HR. When an employee accepts the offer letter, it is their own decision; no one forces them.

It is essential to consider that companies invest a significant amount of money and time in shortlisting and recruiting an employee. When the employee agrees to join after a 1 or 2-month notice period, the company is assured that the position will be filled. However, if the employee backs out near the joining date, it creates the same recruitment process all over again.

Misconceptions About Shortlisting Candidates

There is a misconception that companies always shortlist multiple candidates when they only need one, which is not true every time. Is this behavior not unprofessional? What if the company denies the employee near the joining date?

The Importance of Ethics in Job Acceptance

These days, it seems that ethics are lacking. I am not implying that the employee is solely at fault; some companies also exhibit poor behavior. In my opinion, employees should carefully consider before accepting the offer letter and once accepted, they should honor their commitment.

Yes, you can cancel the offer, but you need to communicate your intention of canceling the offer and at the same time put a counteroffer with conditions. Once you put a counteroffer, the original offer is null and void.

Inform the recruiter about your cancellation and proceed towards your dream job. The company will not waste their time and money by filing a case. You have not accepted the offer on any bound paper or in any court document. Mainly, offer letters do not show the offered salary, so how can they prove your CTC.

Candidates accept our offer but insist on an offer letter being issued before the joining date so that they can quit their earlier job or stop their job search. In all good faith, HR issues an offer. However, candidates sometimes use the offer letter to leverage a higher offer. Alternatively, they may join to avoid a break in service while searching for a new job or join after a break in service to show that they are employed, obtain 1-2 paystubs, and then quit abruptly without serving the notice period. In both scenarios, HR is back to square one. It appears that ethical considerations differ between being employees and being employers.

Regards, JS

Understanding Offer and Appointment Letters

An offer letter is not a contract of employment. An appointment letter is a contract of employment. An offer letter is an offer made to accept, decline, or make a counteroffer. Companies, when they recruit, always have a backup candidate in case the initial candidate does not accept the offer or later declines, which is a wise practice.

Current Labor Market Dynamics

The labor market is currently volatile and skill-deficient. Companies often seek ways to reduce costs by hiring inexpensive labor, while candidates aim to meet their budget requirements. Therefore, where do we draw the line? The minimum wages in India, at present, establish a parallel line where the cost benefits for employees and employers do not align.

The candidate has still not joined or come under the contract of employment conditions. It is better to avoid such cases because whatever he or she signed for a better future, he or she may have heard some negative things about the organization and decided not to join. It is also possible that he or she received a promotion in their current employment.

One of our client companies has a similar clause. Read what happened to them...

The candidate accepted the offer letter. On the date of joining, he officially joined them but disappeared the next day. The condition of joining the company was fulfilled, and there were no other conditions to ensure a long-term association. For each case, there are loopholes. Just reread your offer letter and act accordingly.

The other part of it is...

1) It's unethical considering the company's investment in your selection and the lost opportunities.
2) Without disclosing, recruiters put your profile on their blacklist and share it with other recruiters too.

Wishing you a great career ahead!

Yes, typical query. Now, let's come to the point. Any agreement, if signed, binds you. However, this is an offer letter for a job. For any job applicability, it comes into force only when the so-called joining report is completed. Until then, no employee-employer relationship is established. Simply sending an appointment cannot become a handcuff to the employee.

Usually, some companies misuse the law of contract even if the situation does not start like this. Companies may invoke such laws to retain their employees only after the joining of the employee. No company has the right to intervene in the personal right of freedom in choosing a job. Here, you have no other option at the time of approved selection by the company. Now, you have received an offer from your dream company.

The only salient saving point is that you have not yet joined the previous trouble-shooter company. So, go ahead and challenge the condition with a lawyer. This is a violation of the freedom right of selecting a job, as provided by the Constitution of India.