In this post we, will understand the legal validity of Employment bonds in India where the enforceability is most circumstantial. This post may help you answer questions like what will happen if I break an employment bond, legality/enforceability/validity of employment bonds, whether or not they legal in India, and many other similar questions like these.
Let’s take the help of this news story.
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Air India to claw back salary, benefits of employees who leave before stipulated time
Today there have been rapid changes in the economy and industrial processes, which has resulted in greater business competition. To cope up with competition, the employers incur huge expenditure in imparting training to their employees for improving the quality of goods and services of the company. However, sometimes the employees leave their employment after honing the skills & improving the knowledge of the industry for better salary and incentives. Therefore, in order to safeguard their interest, employers have of late started to obtain an employment bond from their employees who are found suitable for training or skill development. Such employment bonds are agreements between the employer and employee wherein among other terms & conditions of the employment, an additional clause is incorporated which requires the employee to serve the employer compulsorily for a specific time period else refund the amount specified as bond value.
In the given case Air India, has resorted to cutbacks in salaries and benefits of employees who leave before completion of their stipulated time
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Issue of law
The question that arises here is whether such a method to retain employees is effective, acceptable and enforceable under the law.
Facts of the case
Air India has warned Air India Engineering Services Limited (AIESL) and air craft maintenance engineers that if they leave after completing their aircraft training but without completing their stipulated bond period , their salaries and benefits would be clawed back from them
All such aircraft maintenance engineers would be required to refund the cost of training, hotel expenses, travel allowance/dearness allowance, salary for the training period, and the opportunity cost of training to the AIESL,” an order from the office of Executive Director, Engineering, said.
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If the employee fails to pay the said amounts, it will be recovered from his final settlement, the order said.
The Indian commercial Pilots Association claimed in a letter dated December 23, that the Air India pilots were being paid only half of what other air carriers are offering ,hence most of the CAT 3B qualified co pilots were leaving to join other private carriers , They had further claimed that since the government had decided not to extend any further support to the debt laden national carrier ,they should be allowed to leave the organization.
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Such conditions of employment bonds can be challenged on the ground that it restrains the lawful exercise of trade profession or trade or business. According to section 27 of the Contract Act, 1872, any agreement in restraint of trade or profession is void. Thus, any terms and conditions of the agreement which directly or indirectly either compels the employee to serve the employer or restrict them from joining competitor or other employer is not valid under the law. Therefore, the employee must always have the right to resign the employment even if he has agreed to serve the employer for specific time period. 
However, such restraints or negative covenants in the agreement/ contract may be valid if they are reasonable. For a restraint clause in an agreement to be valid under law, it has to be proved that it is necessary for the purpose of freedom of trade. For example, if the employer is able to prove that the employee is joining the competitor to divulge its trade secrets then the court may issue an injunction order restricting the employment of the employee to protect the interests of the employer.
Therefore, in the current case it is evident that such a bond is not reasonable, the employees are being exploited with such harsh conditions being imposed upon them. Air India has a debt of around 54000 crore, plus with the lack of any financial aid, it is only rightful that they allow the employees to resign.
For case specific advice, please contact best employment lawyer advocate in Chandigarh Panchkula Mohali Zirakpur Derabassi Kharar for Free Legal Advice Online related to employment bonds and their validity, enforceability and legality in India.
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Central Inland Water Transport Corporation v Brojonath Ganguly, (1986)IILLJ171SC