The world of Corporate is in the process of improving the world market. Significant economic and industrial changes were taking place, leading to an increase in market tensions. In keeping with market competition, companies are investing heavily in training their employees to improve the efficiency and effectiveness of the company's assets and services. However, some employees quit their jobs after a training session, after honing their skills and improving their business knowledge in order to earn higher wages and incentives. The growing level of attraction not only exposes employers not only to financial losses but also to delays in the completion of progressive businesses, which has a direct impact on their credibility and their market pool. Therefore, to protect their interests, employers have begun to find employment obligations for their employees who are found to be ready for training or skills development.

Even a good set of high degree qualifications or different marks to get a job in this difficult competitive age is hard. As a result an employee nowadays takes a job on the majority of the employer’s terms and conditions. 


The employment bond is the most commonly talked about and perplexing case in this. Many businesses these days especially multinational companies, require their workers to sign an employment bond, which usually prohibits an employee from leaving the company and or joining another completing a specified period of employment.

Under the current economic system after wasting a significant amount of time, energy, and resource on an employee’s training and other expenses, the business loses greatly if the employee moves in a new position using the technology and training he has learned from his previous job. In this situation, the most pressing question is whether such a person procedure for retaining employees is legal, efficient, reasonable, and enforceable. 

The sole aim of such bonds or contracts is to ensure that the employer’s resources and time are not expended in raining with no result or benefits derived as a result of early resignation. The employers try to recoup training costs, according to the reasoning behind the employment bond. This bond serves as a deterrent to prematurely terminating the employment contract. 


Employment agreements with negative covenants are valid and legally enforceable under Indian laws if the parties agree with their free consent. The courts in India have held in its various judgments that in the vent of breach of contract by the employee, the employer shall be entitled to recover damages only if a considerable amount of money was spent on providing training or incurred other expenses for the employee which must be proved with the evidence in the court of law.  Further, the courts have been reluctant to restrain the employee from joining a competitor or other employer. It is also being noted that an employment bond will not be enforceable if it is either one-sided, unconscionable or unreasonable.

As given under Section 74 of the Indian Contract Act, 1872, when a contract has been broken, if a sum is named in the contract as the amount to be paid in case of such breach is entitled, whether or not actual damage or loss is proved to have been caused thereby, to receive from the party who has broken a contract is a fair compensation that does not exceed the amount so-called or, as the case may be, a fixed penalty. Thus keeping this section clear, a business lease agreement is a perfect way to provide a contractual agreement. Violations of the law in the case of employment bonds could be the termination of the contract by the employee before the expiry of the term of the agreement.


The validity or enforcement of an employment bond may be challenged on the grounds that it precludes the legitimate use of commercial or commercial activity or business. In terms of section 27 of the Contract Act, 1872, any contract prohibiting trade or profession is void. Therefore, any terms and conditions of the agreement that compel the employee or directly to compel the employer to serve the employer or to prevent him or her from joining a competitor is not valid under the law. However, restraints or negative agreements on an agreement or contract may apply if applicable. For a restraint clause in the agreement to apply under the law, it must be proved that it is required for freedom of trade. Whenever an agreement is challenged on the grounds that it prohibits trade, the onus is on the party supporting the contract to show that the restraint is reasonably necessary to protect its interests.

It is to be noted that an employment bond that imposes an excessive time period of mandatory employment will amount to forced labor and invoke the safeguards under Article 23 of the Constitution. 

In order to fulfill a valid employment bond, parties must ensure that the following requirements are met: 

(i) The agreement must be signed by the parties with free consent; 

(ii) The conditions must be reasonable; and 

(iii) The conditions imposed on the employee must be shown to be necessary to protect the interests of the employer.

It should be noted that the employment bond that exceeds the term of mandatory employment will amount to forced labor and invoke the safeguards under Article 23 of the Constitution.


One can go to court if the bond is a legal contract. Any act on the part of the organization such as keeping the original educational certificates or creating any kind of impediment for the concerned employee to enter a job, manhandling the concerned individual, tarnishes the company’s cause. In addition, the amount of compensation that a company can claim should be equal to the damage it has done, not more.

If the employer has spent money on preparing an employee for a specific job, he will sue for damages for the financial loss he has suffered. If the work bond is one-sided, unconscionable, or immoral, it would be unenforceable. As a result, it's important to exercise caution when drafting the employment bond, since the employment bond’s terms, such as the required employment duration and penalty amount, must be fair in order for it to be effective under Indian law.


A few key points to keep in mind when a company is responsible for a job are:

•    Make sure the bond is reasonable and appropriate

•    Make sure the non-competitive clause does not make sense

The first step an employer takes after breaking a business agreement is to send a legal notice requiring the employee to report to the employee immediately, otherwise, the notice requires the employee to pay the agreed amount to the bond. After an employee has failed to pay a fee, a claim is lodged with the court of the competent authority in accordance with the terms and conditions of employment to recover the correct amount. Employers need to make sure that there are training materials that can be produced as evidence in a court of law.

In the event of a breach of employment obligation, the employer may lose and therefore be entitled to compensation. However, compensation paid should be a reason for compensating for the losses incurred and should not exceed the contract penalty, if any. Usually, the court determines the appropriate amount of compensation by paying the actual losses incurred by the employer taking into account all the circumstances of the case.

It should be noted that a particular act of service may not be required to violate a personal service contract or bond6 and, therefore, an employer shall not be entitled to claim the reimbursement of his employees as assistance in the event of a breach of duty.


Employment bond categories are an employer-friendly clause that acts as a barrier to employees who often leave their jobs after seeking training. It is very helpful for the employer to reduce the losses caused by the normal work holiday by employees. One of the main reasons is that firms these days offer more time for the training of new workers to allow for the greater compensation that an employee has to pay if he or she leaves the contract prematurely. As a result, employment obligations are an important tool in ensuring that employees stay with the job or the job they are entering at least the right time, thus ensuring the stability and functioning of the employer's business.

Subject to the above findings and various court decisions, employees remain free to choose their employment and are not required to work for any employer by imposing an employment obligation. The only way an employer is open in the event of a breach of contract is by the employee to claim the appropriate amount of compensation. The amount of compensation provided will depend on the actual losses incurred by the employer for such violations.

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Damini Nagar
B.A LLB from Indore institution of Law

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