If you break an employment bond without paying the penalty as specified in the bond is considered a breach of contract. The penalty for breaking the bond is usually monetary compensation agreed upon by the employer and the employee at the time of signing the bond.
I am Supriya Gill, a lawyer and this article provides all the information about employment bonds, the consequences of breaking an employment bond, the ways to break an employment bond without paying money and ways to fight back employment bond cases.
If an employee resigns from his employment before the bond period is over, he may be liable to pay the agreed-upon penalty to their employer. But there may be certain exceptional circumstances, such as illness or disability, which may allow an employee to break the bond without paying the penalty. This depends on the specific terms of the bond and applicable laws. It’s best to consult a lawyer for a more specific and accurate assessment of your situation.
Purpose of employment bond
An employment bond is a legally binding agreement between an employer and an employee, in which the employee agrees voluntarily to work for the employer for a specified period of time in exchange for certain benefits such as a signing bonus, training, or other compensation.
The employment bond ensures that the employee remains with the company for a certain period of time and protects the employer’s investment in the employee’s training and development. The bond typically requires the employee to repay a portion of the benefits received or pay a penalty if they leave the job before the end of the bond period.
Ways to break an employment bond without paying the penalty
The bond agreement being a legally binding Contract, it is quite difficult to break the employment bond without paying the damages or compensation. The employer is entitled to take legal action in this case to recover the compensation or penalties specified in the bond.
But there are some circumstances in which an employee may be able to break the bond without paying the penalty. These circumstances are:
- If the bond agreement allows for resignation with prior notice, the employee may be able to resign from the job without incurring a penalty, as long as they give the required notice period.
- If both the employee and the employer agree to terminate the bond, the employee may be released from the bond without paying a penalty.
- If there is any breach of the terms of the bond agreement by the employer, for example, failing to pay the employee’s salary or providing a safe working environment, in this situation the employee may be able to break the bond without paying a penalty.
- If the employee becomes ill or disabled and is unable to fulfil the obligations of the bond agreement, they may be able to break the bond without paying a penalty.
The terms and conditions of each employment bond are different and the circumstances under which an employee may be able to break the bond without paying a penalty will depend on the specific terms of the bond agreement.
The consequences of breaking an employment bond
Breaking an employment bond in India can have several consequences, including:
1. Repayment of the signing bonus or other benefits received
The employee may be required to repay the signing bonus or other benefits received in exchange for entering into the bond agreement.
2. You will not get any experience letter
You will not get any experience letter, no matter how many months or years you have served that company.
If you don’t pay the bond amount, the company can refuse to give you any experience letter because it is mentioned in the offer letter that you must serve that period of time in the company.
You need to serve for the period mentioned in the offer letter. But if you want to leave before the completion of that period, then you need to pay some amount for it depending upon whatever is mentioned in the offer letter.
Whenever you join any company all these things will be mentioned in the offer letter, if you don’t pay the bond and don’t serve that period in that company whatever you are signed for, then the company can refuse to give you any experience/service letter. In this way, those months/years you served the company, will be a total waste.
3. Consequences of Absconding
If you don’t serve the company for a particular period of time that you are signed for and you don’t pay the bond amount then that can be termed as Absconding, which is illegal.
The company can take legal action against you because you have not paid the bond amount or you have not served that time period. It can be a very critical thing for your career.
4. You can get blacklisted from that Company
If you don’t pay the bond amount in that company or you have not served that time period in the company that you are signed for then that company can blacklist you or block you to join the company again in future.
5. Legal action
Generally, companies don’t take such steps. The company can’t take drastic steps against the employees.
But in some scenarios, if the employee makes a big loss to the company or the company has spent a lot of resources on the employee’s training purposes or if the company sent the employee abroad for work then in such cases company can take legal action against the employee.
The company can demand whatever it spent on you during the bond period. It could involve training costs or foreign trip costs.
Note: If the company has generated a UAN number against you then think before absconding from the company. It is a unique number which is generated for each employee once in a lifetime.
Legal Provisions for Employees to fight back employment bond cases
1. Section 383 of the Indian Penal Code (IPC)
Section 383 of the IPC penalizes extortion and can be used by employees to fight back against any illegal or unethical conduct by the employer such as coercion or undue influence while enforcing employment bonds.
Extortion is defined as the illegal act of obtaining something, usually money or property, through coercion or threats.
Such an offence is punishable with imprisonment of either description for a term which may extend to three years, or with fine, or with both.
Note: Only the enforcement of an employment bond is not considered extortion under the IPC. The provision applies only if the enforcement of the bond involves any illegal or unethical conduct by the employer, such as coercion or undue influence.
2. Article 19(1)(g) of the Constitution
Article 19(1)(g) of the Constitution provides that all citizens shall have the right to practice any profession or to carry on any occupation, trade, or business. This right can be subject to reasonable restrictions in the interests of the general public.
3. Indian Contract Act, 1872
The Indian Contract Act provides the legal framework for the enforceability of contracts, including employment bonds. Employees can challenge the enforceability of the bond if it contravenes any provisions of the Act, such as being excessively restrictive or oppressive.
The terms and conditions of employment bonds
The terms and conditions of an employment bond vary depending on the employer and the nature of the job. The common terms and conditions in an employment bond may include:
- The bond specifies the duration of time the employee is required to work for the employer which is usually one or two years.
- The bond specifies the compensation or benefits received by the employee in exchange for entering into the bond, such as a signing bonus, training, or other financial incentives.
- The bond specifies the financial penalties for breaking the bond, such as repayment of the signing bonus or a monetary penalty.
- The bond specifies the conditions under which the bond can be terminated, such as a job offer in another location or a medical emergency.
- The bond may include a confidentiality clause requiring the employee to keep confidential certain information about the employer, such as trade secrets or confidential business information.
- The bond may include a non-compete clause which prohibits the employee from working for a competitor of the employer for a specified period of time after leaving the job.
Note: The employees should carefully review the terms and conditions of an employment bond before signing it understanding the financial consequences of breaking the bond.
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