Dear All,
We hired an employee and received negative feedback on employment verification. Later, we found out that he had been terminated from four companies before us for the same reason. He acknowledges that he will not repeat the mistakes he has made in the past. Additionally, he expressed his concern that if no one gives him a chance, how will he be able to prove himself.
We are considering requesting a blank security deposit check. Could anyone provide guidance on the format and confirm its legality?
Thank you.
From India, Ahmedabad
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5We hired an employee and received negative feedback on employment verification. Later, we found out that he had been terminated from four companies before us for the same reason. He acknowledges that he will not repeat the mistakes he has made in the past. Additionally, he expressed his concern that if no one gives him a chance, how will he be able to prove himself.
We are considering requesting a blank security deposit check. Could anyone provide guidance on the format and confirm its legality?
Thank you.
From India, Ahmedabad
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Hi,
Merely collecting a security cheque alone will not suffice. It should be accompanied by an Indemnity Bond. Additionally, please obtain a self-declaration from the candidate regarding the deposit of cheques into the employer's account in case of a violation of the agreed terms between the parties.
From India, Madras
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Merely collecting a security cheque alone will not suffice. It should be accompanied by an Indemnity Bond. Additionally, please obtain a self-declaration from the candidate regarding the deposit of cheques into the employer's account in case of a violation of the agreed terms between the parties.
From India, Madras
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Dear Mansi, you mentioned receiving negative feedback from a recent recruit's former employer. What specifically was mentioned in the feedback? Was there any mention of fraud? Which department did the employee work in, and will they continue in the same role? Will their responsibilities involve dealing with suppliers or customers, possibly including financial transactions?
Though not explicitly stated, it seems you were considering requesting a security deposit from the employee. Is this to safeguard against potential fraud? If so, would the deposit be forfeited in case of misconduct?
Regarding Mr. V. M. Lakshminarayanan's input, it was suggested that any cheque received should be supported by a legal agreement, which is a valid point. However, some aspects of the indemnity letter draft may not be relevant to this situation. The issue of holding a blank cheque from the employee needs further clarification.
For Mansi: If considering a blank cheque and indemnity bond, what measures are in place if the employee stops payment on the cheque? Perhaps engaging a legal professional to draft a comprehensive agreement would be beneficial, with the employee covering the legal fees.
An alternative proposal is to pay the employee minimum wages for a set period, with the salary difference acting as indemnity. Clear terms should be outlined in the appointment letter to avoid any misunderstandings.
Thank you,
Dinesh Divekar
From India, Bangalore
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Though not explicitly stated, it seems you were considering requesting a security deposit from the employee. Is this to safeguard against potential fraud? If so, would the deposit be forfeited in case of misconduct?
Regarding Mr. V. M. Lakshminarayanan's input, it was suggested that any cheque received should be supported by a legal agreement, which is a valid point. However, some aspects of the indemnity letter draft may not be relevant to this situation. The issue of holding a blank cheque from the employee needs further clarification.
For Mansi: If considering a blank cheque and indemnity bond, what measures are in place if the employee stops payment on the cheque? Perhaps engaging a legal professional to draft a comprehensive agreement would be beneficial, with the employee covering the legal fees.
An alternative proposal is to pay the employee minimum wages for a set period, with the salary difference acting as indemnity. Clear terms should be outlined in the appointment letter to avoid any misunderstandings.
Thank you,
Dinesh Divekar
From India, Bangalore
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Indemnity Bond and Security Cheques
In my initial reply, I suggested going for an Indemnity Bond with self-declaration. However, since Member Mansi requested a sample, I have provided a template for reference. I have advised him to 'customize' the template as per his requirements since I am not aware of the background of the candidate he is hiring. He needs to edit the clauses of the bond, including the mentioned amount. The concept is that security cheques are primary, and the Indemnity Bond is additional support to the employer, acting as a moral threat to the employee.
Return of Cheque/Cancellation of Agreement
Regarding the return of the cheque/cancellation of the agreement, this has to be mentioned in the appointment order. In your reply to Member Mansi, you mentioned the "stop payment instructions" option for the employee. In my initial reply, I advised collecting a self-declaration from the employee. The purpose of the self-declaration is for the employee to confirm issuing the cheque to the employer for security purposes and agreeing to the deposit of the cheque into the employer's bank account in case of a violation of stipulated terms.
Even if the employee advises the bank with stop payment instructions, once the cheque is bounced and the employer receives the Cheque Return Memo from his bank, the employer can file a criminal case for the dishonor of the cheque according to Section 138 of The Negotiable Instruments Act, 1881, which is applicable to cases of dishonored cheques.
Practical Considerations
Leaving the legality part aside, based on my experience, I have seen in many cases that the employee tends to fulfill the agreement terms primarily or approach the employer for negotiating compensation if they are unable to honor the terms of the agreement. Therefore, the employer has the advantage of using the agreement/cheques as a moral threat.
I have not elaborated much on the security cheques/indemnity bond to the member due to a lack of time, assuming that the member will have some idea about this.
Thanks
From India, Madras
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In my initial reply, I suggested going for an Indemnity Bond with self-declaration. However, since Member Mansi requested a sample, I have provided a template for reference. I have advised him to 'customize' the template as per his requirements since I am not aware of the background of the candidate he is hiring. He needs to edit the clauses of the bond, including the mentioned amount. The concept is that security cheques are primary, and the Indemnity Bond is additional support to the employer, acting as a moral threat to the employee.
Return of Cheque/Cancellation of Agreement
Regarding the return of the cheque/cancellation of the agreement, this has to be mentioned in the appointment order. In your reply to Member Mansi, you mentioned the "stop payment instructions" option for the employee. In my initial reply, I advised collecting a self-declaration from the employee. The purpose of the self-declaration is for the employee to confirm issuing the cheque to the employer for security purposes and agreeing to the deposit of the cheque into the employer's bank account in case of a violation of stipulated terms.
Even if the employee advises the bank with stop payment instructions, once the cheque is bounced and the employer receives the Cheque Return Memo from his bank, the employer can file a criminal case for the dishonor of the cheque according to Section 138 of The Negotiable Instruments Act, 1881, which is applicable to cases of dishonored cheques.
Practical Considerations
Leaving the legality part aside, based on my experience, I have seen in many cases that the employee tends to fulfill the agreement terms primarily or approach the employer for negotiating compensation if they are unable to honor the terms of the agreement. Therefore, the employer has the advantage of using the agreement/cheques as a moral threat.
I have not elaborated much on the security cheques/indemnity bond to the member due to a lack of time, assuming that the member will have some idea about this.
Thanks
From India, Madras
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Hello, I just want to view this matter from a different perspective. Is this person the last option for your company's particular profile? Can't you recruit someone better with a good background? Is management aware of all this? You are considering the monetary damage he may cause. But have you thought about whether his actions might harm the company's goodwill? Does the company only have employees like this?
Future implications of retaining this employee Are you going to have ample time in the future? If he repeats the same mistake in your company, will you have the time to pursue all the legal actions, etc.? What about the time and resources you and the organization will spend dealing with this? If he does something wrong in the future, you will have to recruit and train a new person. What about the time and cost of that recruitment process? Are you prepared for that?
Potential risks in decision-making Won't your decision-making be questioned in the future if anything goes wrong? Could you be suspected of having a bias or hidden motive for recruiting this person? Please consider these points and prepare accordingly.
From India, Mumbai
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Future implications of retaining this employee Are you going to have ample time in the future? If he repeats the same mistake in your company, will you have the time to pursue all the legal actions, etc.? What about the time and resources you and the organization will spend dealing with this? If he does something wrong in the future, you will have to recruit and train a new person. What about the time and cost of that recruitment process? Are you prepared for that?
Potential risks in decision-making Won't your decision-making be questioned in the future if anything goes wrong? Could you be suspected of having a bias or hidden motive for recruiting this person? Please consider these points and prepare accordingly.
From India, Mumbai
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Before I comment on the advisability of procuring a security cheque, I wish to make one observation. It is rather strange that you are considering hiring someone with such a dubious track record of employment. I assume that you have a strong compulsion to recruit someone who has managed to secure not one or two but four negative stamps. In the normal course, one could surely do without such an employee. Having given you this unsolicited advice, let me turn to your query.
Purpose of a Security Cheque
The purpose of taking a security cheque is to enable you to take legal action against a delinquent employee in a criminal court rather than under civil jurisdiction, due to the obvious delays and procrastinations associated with the latter. Now, let us look at your proposal closely. If the employee turns out to be a good citizen and a responsible employee, everything would be fine. However, let us assume the worst, as that is the reason you are considering a security cheque.
If the employee turns out to be a rogue, you will have to terminate his employment by giving him the requisite notice. You would present his cheque, and if it gets honored, you are still okay with the situation. If the employee does not honor the cheque, then what happens? You will have to proceed against him under Section 138 of the Negotiable Instruments Act. The employee's only defense would be that the cheque was only a "security" cheque and there is no crystallized liability to pay a dime to you. The proposed Indemnity Bond supports that premise. It is here that your situation would become a bit dicey. The court may not allow you to proceed against the employee under Section 138 of the NI Act on the ground that this provision can be invoked only in cases where there is lawful crystallized liability on the part of the accused against which a cheque has been issued. The cheque should be for a debt in presenti.
Legal Precedents
In Sudheer Kumar Bhalla vs. Jagdish Chandra Bhalla and others, 2009, SCC Supreme Court held that the criminal liability of the accused under the provision of Section 138 NI Act is attracted only on account of dishonor of a cheque issued in discharge of liability or debt, but not on account of issuance of a security cheque. There are a number of decisions both in favor and against this view depending on the facts and circumstances of the cases. Then the issue is back to the civil court where you can proceed against the employee for breach of contract and for liquidated damages as envisaged in the Indemnity Bond. Do you want to do that with all the attendant delays?
Lest I be misunderstood, I wish to make one point clear. I do not want to stand in the way of someone getting rightful employment. For all that you know, the person concerned may be a reformed individual today deserving of the job he has applied for. That is a call you must make. My reply is purely technical/legal in nature based on the facts presented.
From India, Nasik
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Purpose of a Security Cheque
The purpose of taking a security cheque is to enable you to take legal action against a delinquent employee in a criminal court rather than under civil jurisdiction, due to the obvious delays and procrastinations associated with the latter. Now, let us look at your proposal closely. If the employee turns out to be a good citizen and a responsible employee, everything would be fine. However, let us assume the worst, as that is the reason you are considering a security cheque.
If the employee turns out to be a rogue, you will have to terminate his employment by giving him the requisite notice. You would present his cheque, and if it gets honored, you are still okay with the situation. If the employee does not honor the cheque, then what happens? You will have to proceed against him under Section 138 of the Negotiable Instruments Act. The employee's only defense would be that the cheque was only a "security" cheque and there is no crystallized liability to pay a dime to you. The proposed Indemnity Bond supports that premise. It is here that your situation would become a bit dicey. The court may not allow you to proceed against the employee under Section 138 of the NI Act on the ground that this provision can be invoked only in cases where there is lawful crystallized liability on the part of the accused against which a cheque has been issued. The cheque should be for a debt in presenti.
Legal Precedents
In Sudheer Kumar Bhalla vs. Jagdish Chandra Bhalla and others, 2009, SCC Supreme Court held that the criminal liability of the accused under the provision of Section 138 NI Act is attracted only on account of dishonor of a cheque issued in discharge of liability or debt, but not on account of issuance of a security cheque. There are a number of decisions both in favor and against this view depending on the facts and circumstances of the cases. Then the issue is back to the civil court where you can proceed against the employee for breach of contract and for liquidated damages as envisaged in the Indemnity Bond. Do you want to do that with all the attendant delays?
Lest I be misunderstood, I wish to make one point clear. I do not want to stand in the way of someone getting rightful employment. For all that you know, the person concerned may be a reformed individual today deserving of the job he has applied for. That is a call you must make. My reply is purely technical/legal in nature based on the facts presented.
From India, Nasik
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Thank you all for these valuable inputs. This person is recruited in an IT development role. He has been rejected from four companies before us. Management is aware of the adverse report and the rejections as well.
Comment from the Previous Employer
Skill limited to WordPress only, lack of team-leading skills, not proper or fit for a senior role, less punctual, and was taking his work very lightly and company projects for granted. We lost one big client because of his attitude and punctuality. He is accepting the mistake and assuring that he won't repeat it again. It's not that we won't get any other employee, but management wants to give him a chance.
I thought taking a security deposit check might be a good idea. Open for any other suggestions too.
Thanks,
Mansi
From India, Ahmedabad
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Comment from the Previous Employer
Skill limited to WordPress only, lack of team-leading skills, not proper or fit for a senior role, less punctual, and was taking his work very lightly and company projects for granted. We lost one big client because of his attitude and punctuality. He is accepting the mistake and assuring that he won't repeat it again. It's not that we won't get any other employee, but management wants to give him a chance.
I thought taking a security deposit check might be a good idea. Open for any other suggestions too.
Thanks,
Mansi
From India, Ahmedabad
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Dear Mansi, By hiring this type of person, your management is taking a calculated risk. Nevertheless, taking the security cheque and making a legal agreement for accepting the cheque is a messy business. As mentioned earlier, it would be better to hire him for minimum wages, such as Rs 12-15K. Let him work for one year or so. Next year, review his salary based on performance, but at that time, ensure the salary is consistent with the designation.
My suggestion of paying minimum wages may sound funny or ridiculous. However, the candidate needs to understand that there has to be a trade-off, and he must accept it for the continuity of employment.
Thanks,
Dinesh Divekar
From India, Bangalore
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My suggestion of paying minimum wages may sound funny or ridiculous. However, the candidate needs to understand that there has to be a trade-off, and he must accept it for the continuity of employment.
Thanks,
Dinesh Divekar
From India, Bangalore
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Mansi,
This whole business of taking a cheque is not clear. If you are willing to give a chance to the employee, do it fairly. I am assuming that since you have already appointed him post-interview, you have found his skill sets to be a good match. Since the major issue is related to following company norms, you can have a longer probation period, and that would give him a fair chance to prove himself.
From India, Pune
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This whole business of taking a cheque is not clear. If you are willing to give a chance to the employee, do it fairly. I am assuming that since you have already appointed him post-interview, you have found his skill sets to be a good match. Since the major issue is related to following company norms, you can have a longer probation period, and that would give him a fair chance to prove himself.
From India, Pune
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