Conditions Apply in Making Training Bonds Binding

Nowadays business houses are imparting training to their employees to improve quality of the goods and services, and the costs of these trainings are pretty high. Obviously, the companies expect a return on their investment by having competent and well-trained employees serve them for a reasonable period of time pursuant to the training.

Most certainly, the investment would be a sheer waste of money if the businesses are required to consistently train new staff each time. Therefore, as a condition of employment, companies require employees to sign a training agreement or a bond prior to receiving such training. The basic premise of such bonds  is that in exchange for training, the employee agrees to remain with the company for an agreed period of time. If the employee leaves the organisation before that time, he or she is required to pay back compensation, which could be pro-rated share of the training costs as well as compensation and damages.

The million-dollar question is: are these training bonds legal? The legality and enforceability of the bond depend upon whether there were justified clauses or not. A case where the company has spent a lot of time and money in training the employee and the bond is for a reasonable time period, and the compensation sought for breaking the bond is logical, it would be seen as a justified restriction. In a case, however, where the company gives less or no consideration or other clauses like time period , etc. are imprudent, the arrangement can be termed arbitrary.

Though compensation for breaking a bond is achievable, an injunction for compelling the employee to serve the training period is generally held to be barred by provisions of the Specific Relief Act, according to which contract of personal service cannot be enforced and is also hit by Section 27 of the Indian Contract Act, 1872, which prohibits any agreement in restraint of trade and profession. Nevertheless, seeking compensation is in itself a strong deterrent for the employees. The Supreme Court and high courts have ruled in their various judgments that in the event of breach of contract by the employee, the employer shall be entitled to recover damages if a considerable amount of money was spent on providing training or incurring other expenses for the employee, and the clauses of the contract are rational. In case the employee has spent a part of the contractual period and violated rest of it, the bond amount awarded by court may also be proportionate.

It is advisable that the bonds are thoughtfully and aptly drafted rather than being vague. For instance, the kind of training and its duration should be specified, years of service expected should be categorically mentioned and the same should be reasonable (normally one to three  years), compensation, damages and other claims in case of violation of bond should also be stated. It would be better if the bond is on a stamp paper of appropriate value. While deciding upon the contractual bonds, courts may also look into the fact if the nature of the job justifies the bond or the clause of training mentioned is only for namesake. Courts may even look into the aspect if the cost of training stipulated in the contract is actually a part of salary and has been camouflage as training cost.

Currently, the industrial scenario witnesses a number of instances each day where the employees after honing the skills and acquiring industry knowledge jilt the employer. This impacts the productivity of the organisation to a large extent. There is a need for devising a middle path and clear provisions for curbing such unethical practices. 

raavibirbal@gmail.com

Birbal is an advocate specialising in labour, civil,litigation and corporate laws

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