The Supreme Court recently reaffirmed the validity of employment bond clauses—especially those tied to tenure or liquidated damages—and reversed a High Court decision that had struck a bond clause as restraint of trade under Section 27 of the Indian Contract Act. The Court held that bonds which require commitment during employment are permissible if not restrictive of future movement, and that the damages clause in a bank’s bond wasn’t disproportionate or unconscionable.
Law.asia
This delivers clarity for many HR and legal teams who debate whether exit bonds are lawful. For employees, especially freshers or mid-level hires, this may curb unauthorized exits but can feel restrictive if bond terms lack fairness. The judgment sends a message: exit penalties must be defensible, balanced, and reasonably related to training cost or employer investment.
In compliance, HR contracts with bonds must be carefully drafted: ensure training outlay is documented, bond duration is reasonable, and damages clauses are proportionate. Overly punitive or generic bonds risk challenge. Review existing agreements to check if they follow this ruling; adjust or allow mitigation paths. Leadership should use bond clauses sparingly, not as default retention crutches.
If you were an employee, what bond term would feel fair?
How can HR balance investment in training with freedom to move?
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5Law.asia
This delivers clarity for many HR and legal teams who debate whether exit bonds are lawful. For employees, especially freshers or mid-level hires, this may curb unauthorized exits but can feel restrictive if bond terms lack fairness. The judgment sends a message: exit penalties must be defensible, balanced, and reasonably related to training cost or employer investment.
In compliance, HR contracts with bonds must be carefully drafted: ensure training outlay is documented, bond duration is reasonable, and damages clauses are proportionate. Overly punitive or generic bonds risk challenge. Review existing agreements to check if they follow this ruling; adjust or allow mitigation paths. Leadership should use bond clauses sparingly, not as default retention crutches.
If you were an employee, what bond term would feel fair?
How can HR balance investment in training with freedom to move?
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Bond of Employment.doc
Bond in employment.pdf