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Now a days many employees forcefully accepting employment bond or employment agreement form the employer through HR department. Are these bod are legal? Is there and legal aspect for future if they accepting the bond at their joining time?
An employment bond is an agreement between the employer and the employee that states the employee must stay with the company for a specified period of time after joining or being sent for training.
The Supreme Court of the United Kingdom expanded this customary test in 2015 to distinguish between an enforceable liquidated damages clause and an unenforceable penalty clause. The real test for a penalty, according to the court in Cavendish Square Holdings v El-Makdessi (2015) UKSC 67, is “whether the impugned provision is a secondary obligation that imposes a detriment on the contract-breaker out of all proportion to any legitimate interest of the innocent party in the enforcement of the primary obligation.”
As a result, an employment bond is enforceable as a contract. Before signing such a contract, an employee must ensure that he thoroughly reads the agreement, comprehends the significance of what he is signing, and retains the services of his lawyer if necessary.
Employment bonds are quite common these days among organizations. Employees who sign an employment bond usually are mandated to spend a specified tenure in the organization along with following other conditions whatever mentioned in the bond. However, bounding someone for a certain period of time in the employment is the most common aspect of employment bond.
Now, let me address you question specifically that is “are employment bonds legal or not?” Well, if we talk about Indian law, Yes, it makes employment bond legal and enforceable even if it combines negative covenants. Though the bond requires consent to be signed by both the parties.
As per Indian law, if an employee breaches the bond, the employer has right to recover any damage happened because of the employee but at a considerable/reasonable extent. Therefore, bonds have to be carefully drafted to make it reasonable and acceptable under law.
The purpose of this kind of bond is to safeguard the employer’s interest and rescue businesses from any sort of harm caused. Though law makes sure that the effects of contract breach should not be too extreme.
The most notable factors here is that; these bonds have to be prepared on a valid stamp paper of adequate value to make it legally enforceable.
So, I believe I’ve answered your question thoroughly. Still, in case, you need more insights on this question, you can ask.