Company bond rules are an important aspect of a business when it comes to hiring employees. An employment bond agreement is a basic agreement entered into by a company and an employee where terms for training and employer expenses are outlined in exchange for a specified period of employment.

Signing employment bonds has become the standard in many industries. These agreements can outline:

  • Restrictions on employees for joining a company
  • Restrictions an employee may face after leaving a company
  • Monetary penalties for leaving a company before a bond period is up

Often with a bond agreement, if an employee breaches the agreement they can be liable for a sum of money to replace the employer's expenses for the training of the employee. If the amount is so much that the employer feels the employee will not be able to pay in the event of a breach, they may require the employee to have a guarantor who will take the financial responsibility if the employee cannot.

In addition to the monetary compensation, the agreement may also include a noncompetition clause or confidentiality agreement.

Making an Enforceable Company Bond

There are a number of requirements that must be satisfied for the bond to be considered enforceable. Some of the requirements include:

  • The bond must be a contract signed by both parties giving their mutual consent
  • All the conditions set in the bond must be considered reasonable
  • The employer must be able to demonstrate the costs for time, technology and training that will be spent on the employee

Employment Bonds Issues

There have been issues on whether bond agreements are enforceable. For example, employment bonds are not considered legally binding in India. For an employment bond to be enforceable, it must first be considered a contract under law. In essence, the term "agreement" means there are a set of promises that are expected to be fulfilled if the proposal has been accepted. If the offer is accepted, then the promises can have a reasonable expectation to be met.

All agreements start with an offer which is a legal obligation to fulfill certain responsibilities in exchange for compensations. The acceptance of this offer is the next stage in completing a contract and will constitute a promise of compliance. If either party is not competent to enter into the contract that the contract can be considered null.

There are certain requirements of any contract for it to be considered enforceable. Some of these requirements include:

  • It must state a definite purpose
  • It must be made under legal capacity
  • Minors cannot be considered competent to enter into a binding contract
  • There must be reasonable restrictions set such as training in exchange for one year of guaranteed work
  • The sum of breach of contract must be listed as liquidated damages

It is important to note that for a court to grant monetary damages to a company, they must have sustained a loss as a result of the early termination of the employment. It is the burden of the employer to prove the amount of damages that were suffered. This can be easier if the company maintains well-kept records of all of the costs required for training the employee. Though it is important to note that even if the amount is higher than what is in the contract the employer cannot seek more damages than are listed.

While the court can set a monetary award for an employer, it cannot force the employee to stop work due to an injunction but the employer has the right to petition the court to prevent the employee from using or divulging trade secrets.

Checklist for Employee Contract

There are many particulars of employment that should be included in the contract to allow the bond to be enforceable in court. It is important to provide detailed information and not vague references. Some of the items that should be included in the contract are:

  • The name and address of employer and employee
  • The title and nature of the job
  • The start date of employment
  • The wages and salary details
  • Overtime rate if applicable
  • Cash benefits available to the employee
  • Any deductions from the employee's pay
  • Method of payment and wage calculations
  • Noncash benefits
  • Leave and entitlements
  • Scheduling procedure
  • Alternative work and flex time
  • Meals and rest periods
  • Timekeeping

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