New Employee Wants to Quit Despite 2-Year Contract: How Should We Handle This?

Dear All,

One of the employees who joined a week ago wants to resign now. He is bound by a 2-year contract which he signed on the joining date by agreeing to the terms and conditions. We have called him for a meeting to discuss his reasons:

1. He is not interested in working due to the bond.
2. He is not interested in working on Saturdays.
3. He is seeking a higher salary.

Regarding the first two points, we had already communicated with him before his joining. As for the third point, we are willing to accommodate his request by offering an additional monthly charge of (12K).

However, he is still not expressing readiness to continue. Please suggest how to proceed with this situation. Additionally, it is important to note that we waited for him to join for 90 days.

Regards,
Vasavi

Risk in Employment Decisions

Every decision will involve a risk, and that principle applies both to you as an employer and to him as an employee. After waiting for 90 days, you have inducted him, but suppose you find that he is not performing well, his attitude is very bad, and you finally realize that he will not add any value to the organization. What will you do? You will ask him to leave. At that time, you will just forget about the bond, which should be one-sided (as always), right?

Employee's Right to Resign

Similarly, the employee should have resigned from his organization, stayed there for 90 days, and joined you by agreeing to remain with you for two years. After joining, only then did he find that your attitude is not positive and the work culture is not as expected. He should also have the option of leaving you.

Legal Implications of Employment Bonds

Legally, you cannot enforce the bond. So far, you have not provided him with any training as well. If he decides to leave, you cannot take any legal action against him. The right to work with an employer one likes is a fundamental right. He can say that this is not the employer he expected. The decision to join you was wrong. Therefore, considering that the decision to offer employment to this employee and the decision to wait for this employee for 90 days were wrong, you should allow him to leave. There will be a business loss, which should be treated as one of the many losses that you may face in business.

Thank you for your response. Does this mean employees have all the rights to do anything according to their wishes, while employers should remain silent? How can this be right, sir? If so, tomorrow someone else might come and try to do the same. Should we still remain the same?

Regards,
Vasavi

This is completely unfair to the employer. Yes, it's correct that an employer pays a salary for the skills used. It's a mutual agreement. If an employee is not performing well, we will not terminate immediately. Instead, we will see if any training and development methods help improve performance. If the performance does not improve even after this, we will inform the employee three months prior to any action. This is how every organization follows procedures.

However, when it comes to employees, this is not happening.

Notice Period and Bonded Labor

You can insist on the notice period requirements as per the contract of employment. However, this is restricted to human resources who do not hold any supervisory or managerial powers and responsibilities. Enforcing a bond to make an employee work for you for two years is akin to bonded labor, which is impermissible. If there are quantifiable costs related to training and skill development, you can recover that amount if the employee leaves after acquiring skills from you. The cost must be specific and quantifiable.

Employer-Employee Dynamics

An employer holds a higher position when offering employment to an employee. The employee, in turn, gains leverage when confident that their skills are valuable to the employer. This often leads to negotiations for a suitable fee or remuneration. The dynamics of supply and demand in the labor market play a significant role; in an inelastic market, employees have more bargaining power, while in an elastic market, employers have more options. Failure to recognize employees as valuable assets can lead to discontent and potential unionization.

Experience in Labor Markets

In my experience spanning over three decades, I have dealt with both highly skilled and unskilled individuals from both inelastic and elastic labor markets. It is crucial to view employees as assets; otherwise, their trust may be lost. The IT industry faces fewer issues not because employees are unable to voice concerns but due to the presence of strong employer associations. Incidents of harassment in major multinational corporations often come to light only when extreme measures are taken.

Dear Vasu,

You are complaining about how employers have no rights and everything is with the employee. Have you checked how many cases there are of employers terminating employees without reason (or for non-business reasons) or just out of spite? Or how many cases there are of recruitment that happened even with companies like Infosys where the joining date is not given for a whole year?

You have a bond and want him to honor it (which is an illegal bond in India). But are you willing to honor it? Are you willing to continue employing him for 2 years even if he contributes nothing or if the particular job/function/client is eliminated?

I am pretty sure you will be getting rid of him without a second thought. So, no, your contention that the employee has all the rights is definitely erroneous.

Handling Employee Resignation and Contract Breach

Ask the employee to leave by paying the damages in lieu of the bond and notice amount. You can call the employee for discussions to settle the matter by paying the amount, or else terminate him.

Legal or Illegal: A Matter for the Court

The question of whether it's legal or illegal is a subject for the court to decide. An employee who wishes to resign must adhere to the terms of their employment contract. If the employee believes the bond violates their freedom or creates bonded labor, they should challenge it on those grounds.

Questioning the Acceptance of Terms

Why did the employee accept the offer, sign the bond, and agree to the terms from the employer? Employment begins only after one accepts the terms and conditions, and no one is compelled to do so or subjected to any force; it is their own decision.

Hi VV, I think you have no choice; you have to go by your rule book. There's no point at this stage to consider ethics per se. You, as an HR professional, will have your task cut out. Otherwise, your corporate governance will fail.

What's your policy?

He joined, then raised so many of his demands. By all means, he's your regular employee; whether he likes it or not is secondary. Wherever possible within your restrictions, you can accommodate if you really don't want to lose him. Is relaxing bonding within your delegated powers and giving an enhanced salary an option? Is he a crucial candidate? You got No. 2 in the panel, right? Why should you worry?

Escalate the matter

Take a legal opinion, and leave it to your bosses to decide or organize a meeting with your boss and him. Await what transpires there for the present. Probably, he has another offer on hand which might have looked like a better option. That may be a reason for his standoff with you.

Hi, It has only been a week's time. Why do you want to enforce the terms and conditions of the bond/training agreement?

Was any software skills/concept training imparted to the candidate within a week's time?

There is no loss involved except the 90-day waiting period. You should be happy that the employee communicated his unwillingness within a week's time. So, there is no point in harassing the employee by quoting the terms and conditions of the bond. Even if you proceed legally, you will be expected to prove how it will result in a loss for you as the employer. You will also be expected to substantiate the volume of training imparted.

As the proverb says, "You can lead a horse to water, but you can't make him drink," which means that you can give someone an opportunity but not force them to take it. Considering the short stint, I suggest you let him go and close his file. You may mark his profile in the 'not to hire' list.

Hi,

Legality and enforceability of employment bonds

In the case of a bond, you cannot stop an employee from leaving your organization based on the following aspects:

1. Have you legally enforced a bond? This can be seen as coercion, where you, as an employer, set a condition prior to joining that the bond is compulsory. If the employee does not sign the bond, he will not get the job. If the employee wishes to switch for growth or a higher salary, he may accept the bond condition. However, legally, this could be viewed as a forced agreement since it is one-sided in favor of the employer, and the employee has no option but to sign it.

2. If you are binding an employee for a specified period, for example, a 2-year bond, are you providing training to that employee in return? If not, the bond may not be enforceable. If yes, you can claim the training cost from the employee if he leaves early.

3. Bonds usually have a specified fee to be recovered from the employee if he leaves early. You can recover that amount. However, if you set an unreasonably high amount that the employee refuses to pay, you can go to court, where the amount may be reduced, and a settlement reached. The enforceability of your bond may also be questioned.

Overall, a bond is often used to instill fear in employees so that they do not leave early. However, if an employee is well-informed, they may still sign the bond even if they know the terms are illegal and unenforceable.

Dear Vasavi,

The necessity of employment bonds

First question to you from my side is, why should you have an employment bond with employees if everything is going well and planned smoothly? If something is going wrong or missing in your organization in terms of work culture, opportunities for growth and learning, respect for employees, company growth, and management, then you should consider having employment agreements with newcomers.

Evaluating work culture

So, first, you should examine and evaluate the work culture to ensure we are on the right track. What steps should we take to bring about improvements in the organization to reduce employee turnover and foster a culture where employees stay with the company for an extended period?

All these aspects are crucial for any company.

Dear Vasavi,

Why implement an employment bond?

The first question from my side is: why should you implement an employment bond with an employee if everything is going well and according to plan? If there are issues present such as a lack of proper work culture, limited growth opportunities, insufficient learning prospects, lack of respect for employees, stagnant company growth, or ineffective management, then it may be necessary to introduce employment agreements with new hires.

Evaluating work culture

Therefore, the initial step should involve examining and evaluating the work culture to ensure that we are heading in the right direction. What actions can be taken to enhance the organization, reduce employee turnover, and foster a culture where employees choose to remain with the company for an extended period? All these factors are crucial for any company.

Thank you.

Hi Vasavi, I understand and agree with your concern. I'm an HR professional at an e-commerce company in Coimbatore. Before I started consulting here, the Founder also faced the same issue of people leaving abruptly. Employees would come at any time and request a salary for the days they had worked.

Policies Implemented to Address Employee Abrupt Departures

So, I've imposed certain policies after employees agreed:

1) 10% of the salary every month will be held as a security deposit. It will be released after they end their employment with the company, only after assessing their performance and behavior. If there are any issues, they will be deducted from that 10%.

2) A clear NDA is required to be signed, stating certain penalty clauses. All the penalties and clauses are explained to every employee by me, and everyone has signed it. The penalties include:

a) If they want to stop employment immediately without any prior notice, the entire salary will be held by the company. No salary will be released.

b) If they want to stop employment immediately with prior notice, 7 days' salary will be held. The same applies in terms of bad organizational behavior.

c) If the company terminates any employee, the company can either hold the entire salary or 7 days' salary based on the issue.

d) After signing the NDA, they or anyone from their family or friends cannot dispute over salary.

Every point in the NDA is clearly explained to every employee and duly signed. This has brought great discipline and helped the company solve issues like this.

Thanks,
Gauri

Mr. Kumar,

Are you saying an NDA providing for a deduction of salary for leaving without notice (not any action concerning misuse or disclosure of confidential data) is valid as a part of the NDA or that it will be enforceable as such?

Nothing in that post was about the breach of data confidentiality.

Dear Saswata,

As you are aware, an NDA is a signed document, and employment is a 'contract'. Therefore, any 'breach' has to be dealt with within the ambit of the 'Law of Contract'. Recovery from the salary is a different aspect. Yes, there cannot be any deduction that is not permitted under the PoW Act, etc. But the remedy to the employer under the NDA is to be spelled out in the agreement itself, which has been agreed upon and signed by the employee. How to proceed is between the employer and employee. They can seek the verdict of the designated court or even go before arbitration first.