Theme: Employment Contracts

Can I withdraw my acceptance of a job offer after I have accepted it?

If you have accepted the job offer before you have signed an appointment letter or employment contract, you can withdraw your acceptance. This applies to the employer as well. The employer may revoke the job offer after you’ve accepted it but before you’ve signed any paperwork.

If you accepted a job offer verbally or through writing and you and the employer did not intend to enter into any further formal contract, then the acceptance can be considered as final. Due to this finality, the employer may take action against you for withdrawing from a final contract.

However, if you did intend to enter into a contract after a verbal/written acceptance of a job offer, the employer may not take any action towards you, for rejecting the job offer at this stage.

What will happen If I violate the confidentiality/non-disclosure clause in my employment contract?

If you violate the confidentiality/non-disclosure clause in your employment contract, your employer may file a civil or a criminal case against you.

Your employer may file a civil case if they want to stop you from sharing any information or if they want to get monetary compensation from you for violating the terms of the contract.

Your employer can also file a criminal case against you for violating the confidentiality clause and you may be charged with:

  • Theft (ex. documents)
  • Hacking
  • Causing damage to a computer system
  • Tampering with computer source document
  • Violating the privacy policy of the company

However, it is important to note that using your own knowledge, skill, and experience at your new job, even if it was acquired during the course of employment at your previous company will not be considered confidential information or trade secrets.

Why is it important to understand the terms in your employment contract?

While discussing the terms given to you in the offer letter by your employer or before signing the contract, it is important to negotiate if you are unhappy with the terms. Keep in mind the following:

  • Understand and state the value you bring to the organization
  • Be aware of the technical terms (legal and non-legal) in the contract
  • Make your contract is personalized
  • Make sure you are not restricted from gaining employment in any other place once you resign
  • If anything sounds unfair or unreasonable, talk to your employer
  • Changing the terms of your contract is hard after signing it.

What is a HR policy?

HR policy or Human Resource policies are an organization’s guidelines  to manage its employees. It provides guidance to employees and employers on how the organization functions and provides for strict rules on things you can and cannot do in the organization. For example, the HR policy will specify the manner in which you have to inform your employer that you are taking leave. Many employment contracts refer to the HR policy and not following the HR policy may lead to disputes with your employer, which in turn may result in termination.

What is a joining bonus?

A joining bonus is an amount of money paid to a new employee as an incentive to join that company. A joining bonus may be offered in these situations:

  • When your new employer wants you to join as soon as possible, they may offer you a joining bonus to quit your old office and forgo the notice period.
  • When a company, especially a start-up, wants to persuade you to join.

Can my employer ask me to not work with a rival firm if I quit the job?

No, employers cannot deny you the freedom and right to move to any firm if you decide to quit. Such restrictive terms in the contract are very problematic for employees and Indian courts have said that the protection of the rights of an employee seeking employment is more important than protecting the interests of the employer. If such a term is there in your contract, then you should talk to your employer. It is typically referred to as a non-compete clause. If your employer does not want to negotiate or remove such a term in your contract, then your only remedy is to go to court.

Why is it better to have a written employment contract, as compared with an oral one?

Contracts may be in written or oral form but in a scenario where there is no documentation of the offer and acceptance of the job, it may be more difficult to discover whether your employer and you have agreed and promised to honour the words spoken. This is why it is better to have an employment contract that is written and signed by your employer and you. It is also a useful proof for any proof of employment or filing of taxes.

Read and Understand the Employment Contract

To ensure that your rights as an employee in the private sector are protected, you must carefully read and understand the terms of your employment contract. It will not only mention the basic terms like salary and your job description but also provide further details of the rights and duties of both the employer and employees. Therefore you must always insist on getting a written contract and read it carefully before signing it as it will be hard to change any of the terms after it has been signed.

Research while applying for jobs

The terms of your employment contract will capture facts, rights, duties, and obligations that relate to you and your employer. These terms are based on your calibre, your expectations, your employer’s expectations, and industry standards. The terms are described with heavy legal terminology such as “non-compete”, “dispute resolution” etc.

It is important for you to conduct some research to understand what expectations you can have of your employer, if the expectations of your employer are fair, and if your contract is at par with industry standards.

Evaluate the Industry

When you are applying for a job or accepting a job offer, it is important to know industry standards of salaries, pay scales, and work practices. By understanding market trends and having knowledge of best practices, you have higher chances of getting what you rightly deserve from your employer.

Evaluate the Organization

Also, it is advisable to check the prospective organisation’s practices, work environment, treatment of employees, pay scales etc. Conducting such research will help you negotiate your contract better. You can find out such details from networking groups, ex-employees of that workplace, your batchmates from college who work there, colleagues of batchmates, etc.

Evaluate Yourself

Assess your skills and capacity, as it will help you negotiate the terms of your contract better. Your work experience, educational qualifications, relevant degrees/courses/certificate programs etc. will all add value to the position you can ask for as well as your salary.

Important details in an Employment Contract

All contracts start with the description of who you are, your role in the organization and details of your job. This is an example of how the first term of your employment contract would look like:

“XYZ Future Ltd. (“XYZ”), is hiring Abhinav Chandra as “Lead Architect” for a period of 12 months with effect from 15 February, 2019.”

Your Name 

In an employment contract, your name has to be expressly written. The names of the parties involved will be the first and most important detail in your employment contract. In the example given above, it is clear that XYZ is hiring only Abhinav for the job.

Organization’s Name

The official and proper name of the organization has to be in the contract. It should be mentioned that you are being hired by such an organization. In the example given above, it is clearly given that XYZ Future Ltd (“XYZ”) is the organization hiring for the job.

Your Employer’s Name

If you are being hired by an organization, then the name of the party hiring you would be the organization itself. Either the head of the organization or the head of human resources department (HR) will sign your contract on behalf of the organization.

If you are being hired by an individual, your contract will specifically have your employer’s name and only your employer will sign your contract.

For example: “Dr. Raj Sharma, is hiring Abhinav Chandra as “Lead Architect” for a period of 12 months with effect from 15 February, 2019.”

Job Description

The employment contract will have the description of the position you are being hired for and what the terms of your employment are, i.e. what you are expected to do. In the example given above, the job description for Abhinav is “Lead Architect”. His contract will mention that he is being hired for that post and will also include what his work as a lead architect would entail.

Employment Period

Contracts are usually either for a specific period of time or for specific tasks. The employment contract will state the period of time you are being hired for. In the example given above, the period has been specified as 12 months with effect from 15 February, 2019.

In some cases, employers might even add a probation period. This means that once hired, you will be on probation for a specific period of time. After the probation period expires, your employer will assess your work and capabilities and decide whether to confirm your employment or not.

Salary and Other Allowances

The contract has to specify your salary amount in numerals as well as in words. If you do want to modify this amount, make sure you do this before signing the contract as you cannot negotiate your salary amount until the contract expires. Keep in mind that you can ask for a raise in your salary based on the competitive market rates for your job position, if you have previous work experience or if you hold any degrees or certificates in higher education.

Some other allowances that may be mentioned in the contract or in the HR policy are:

  • Relocation allowances, if you relocate to another city for the job provided by the employer.
  • Reimbursement for any work-related expenses.

Job Offer

When an employer is willing to hire you and gives you a job offer, they must:

  • Communicate to you about the offer
  • Specify the job role and the terms of the job
  • Offer some remuneration/salary/benefits in return for your work

Communication of the Offer

An employer has to communicate the willingness to hire you through a job offer in clear words, either in writing or verbally.

However, it is better to have the offer in writing, as it is easier to prove that the offer was indeed made, if your employer denies it in the future.

Job Role and Terms of Job

  • The offer made to you should be for a specific position or a role. If the offer is unclear, clarify the kind of job role they are interested in hiring you for. It will be hard to get out of the job, once you have taken it and signed the written contract.
  • Make sure that your job role, annual cost-to-company (CTC), benefits, monthly salary etc. are given. You should also clear up any doubts you have about the job details before you accept the offer.

Salary and Other Benefits

The nature of the job will determine your salary. Salaries are usually calculated based on the market rate for that particular job, previous work experience, and your bargaining skills. You can negotiate your salary by clearly communicating the advantage, in the form of your skillset, that you are bringing to the organization, and by utilizing your own market research regarding the salary as per industry rates.

If you are a salaried employee, your total salary will be broken up under different heads such as basic pay, dearness allowance (DA) , Provident Fund deduction, house rent allowance (HRA) etc. You will get your salary after deduction of tax at source. However, if you are not an employee, you will get your full salary amount, which is called a ‘retainership fee’.

After the job offer has been communicated to you, depending on your circumstances, you can always negotiate for additional benefits, a higher salary, or a better position. Your employer may or may not entertain such negotiations, in which case it is up to you to accept or reject the offer.

Timely Response to Offer

Your job offer may specify a time period within which you will have to reply and if you do not respond within the time given, the job offer will lapse. If there is no specific time period mentioned, you should reply to the employer within a reasonable time, either accepting or rejecting the job offer.

Importance of a Written Contract

You will get a written employment contract only after you accept the job offer. The written contract will include all the details of the offer letter and more details provided by the employer. With a written contract you can exert the rights given to you under the contract. Further, you are bound by the duties given in the contract. The contract will establish:

  • Your salary/remuneration.
  • Your role and job description.
  • The duration of time working with your employer.
  • The employer’s responsibilities such as following the notice period while firing an employee, payment of salary etc.
  • The employee’s responsibilities such as standard of performance of the job offered to them, following the work timings of the organization etc.
  • Remedial processes if things happen to go wrong, for example, methods of resolving disputes etc.
  • A list of all the things you are restricted from doing so that there is no conflict with your new employer. For example, non-disclosure, non-solicitation clauses.

Other purposes for which you can use the employment contract are:

  • applying to banks for loans, or when filing your tax return, you can also produce the contract as proof of employment.
  • renting a house or applying for any visa/passport application.

You should make sure that your contract covers all the important terms as it will be hard to add or change any term in your contract after you sign it.

Accepting your Job Offer in Writing

Acceptance Only After Negotiations

Make sure that you finish all your negotiations for any change in the offer and only then accept the job. This is because once you accept the offer, your employer will think that you are accepting all the terms in the offer without any problem.

Writing an Acceptance Letter

While accepting a job offer from your employer, either do so by email or sign an appointment letter provided by your employer. This way it will be hard for the employer to dispute your appointment in the future and withdraw from it.

Time Limit for Acceptance

In some cases, your employer may ask you to reply with the acceptance of the job offer by email before a certain date, for example, the 10th of the month or by the end of the week. It is imperative that you respond to the job offer within this time period or the offer may lapse and the employer may offer the position to someone else. You will not have any recourse against this.

If your employer does not specify any time or manner of replying to the job, then:

  • Use the mode of communication which does not cause delays.
  • Reply within a reasonable time or the job offer may not be there anymore.

If you decide to reject the job offer, please make sure that you communicate it properly to your employer either in writing or in person or over the phone.

Documents for Prospective Employer

Before you are appointed, employers may ask you to submit some documents to check whether you are eligible for the job. Some of them are:

Documents from Old Employer

Relieving Letter (if applicable)

Your employer may ask you to get a signed document from your previous employer stating that you are no longer associated with them. This safeguards the employer from disputes in case a new employee has not terminated the agreement with the previous employer.

Work Reference

Your prospective employer may ask you for a work reference by either before the interview stage or after you accept the job offer. A work reference would usually be a contact you give of your ex-employer, who can verify and explain the quality of your work and your character while at work. The employer may ask for the reference in the form of a letter or they may contact the referees directly.

Payslips

Some employers ask for a copy of the payslip given by the previous employer to double check how much you were earning in your previous office to determine your salary in the new job.

Resume and Other Documents

Resume/CV

Your employer will ask for your latest resume or curriculum vitae with all the details of your work experience and education.

Educational Certification/Documents

For HR purposes and documentation of employees, some employers may ask you for proof of education such as school certificate, college graduation certificate, higher studies certificate, etc.

Identity Proof Documents

Government-Authorized Identity Proof

Most employers ask you for passport-sized photographs and a copy of the identity proof such as Aadhar, passport, driving licence, etc. for assurance of your identity and documentation purposes.

Police Clearance Certificate

Sometimes employers may ask employees to do a police verification to check for previous or existing criminal records. Some states, like Delhi, have this provision online. Otherwise, if your employer does not help you, then you may have to go to a police station yourself and request for the police clearance certificate from the police officer and submit it to your employer.

Documents for Salary Account

Bank Details

Your employer will ask either for your bank details or set up a new bank account for you, so that they can transfer your salary to that account.

Content of an Employment Contract

In order to safeguard all your rights as an employee, you should make sure:

  • You have a written employment contract. It is easier to resolve any disagreements or disputes if you have all the terms in writing.
  • You have read all the terms mentioned in your contract. You are legally bound to comply with the terms after signing it. These terms decide your role and responsibility with the new employer. If you want your employer to add or modify anything in the terms of your contract, you must discuss it before signing the agreement.

HR Policy

It is not necessary that all the terms will be in your employment contract. Sometimes they may be mentioned in the HR policy of your organization. It is necessary for you to read and be informed of all the policies, in order to avoid any dispute with your employer and assert your rights.

Written Contracts

The following details are included in most written contracts:

  • Your Official Name
  • Head of the Organization’s Name
  •  Organization Name
  •  Job Description
  •  Employment Period
  •  Working Hours
  •  Salary
  •  Other allowances
  •  Holidays
  •  Leaves
  •  Insurance
  •  Confidentiality terms
  •  Non-compete terms
  •  Non-solicitation terms
  •  Dispute Resolution Method/ Remedies like arbitration.
  •  Training/Indemnity bond
  •  Reasons for Termination
  •  Notice period
  •  Retirement/Pension
  •  Provident Fund and Gratuity
  •  Overtime Compensation (if any)
  •  Work From Home policy (if any)

Restrictive Terms in a Contract

There may be restrictive terms mentioned in your contract. In India, you have a fundamental right to practice any trade, profession or conduct any business. However, this is not an unlimited freedom.

You will find certain clauses or terms in your agreement that in some way restrict you to a certain degree from carrying on a business, trade, or profession either during or after employment. These clauses are commonly known as restrictive clauses. They are:

Confidentiality Clause/Non-Disclosure Clause

What is Confidentiality?

The organization or company you are employed with has a right to protect its trade secrets and other confidential business dealings. Hence, a clause in your employment contract restricts you from sharing or disclosing any confidential information of the employer to anyone outside the organization. This clause is known as a confidentiality clause. It is sometimes referred to as a non-disclosure clause as well.

Typically, the term ‘confidential information’ is widely defined to cover almost all information that you get from your employer. You should read the definition carefully to make sure that you are not violating the confidentiality clause during or after your employment. Apart from information specifically marked as ‘confidential’ or ‘proprietary’, it is safe to assume that information like technical and business information, intellectual property rights, formulae, software programs or codes, internal reports, trade secrets, inventions, know-how, business strategies, marketing tactics, financial information, information about your employer’s clients and/or customers and other commercially valuable information is meant to be kept confidential.

When does Confidentiality apply to you?

The confidentiality clause applies not only while you are in the company’s employment, but also after. If you share confidential information after your employment has ended, it would be a violation of your contract and your employer may file a case against you.

This does not mean that you cannot be employed by a company doing similar work. Legally, you have the right to work wherever you want to, but you cannot disclose any confidential information from your previous employer in your new employment. For example, if you were working with P&G before and are now offered a job with Unilever, you will not be restricted from taking up the job. But you cannot disclose trade secrets of P&G to Unilever.

No Confidentiality Clause in Agreement

If there is no confidentiality clause in your agreement, you have a duty of fidelity to your ex-employer to not disclose to others or to use for your own profit the trade secrets and confidential information you learned during the course of your employment with them. In some cases, you can be sued for criminal breach of trust also.

Non-Compete Clause

A non-compete clause in an employment contract restricts a current employee from competing with their employer in the same or similar area of business as the employer. Typically, this restriction is not limited only to the duration of employment but also for a specified period after the employment is terminated or concluded.

Some examples are:

  • If H is in the business of manufacturing air purifiers with a specific technology then its employee Y cannot start a rival business with the same technology.
  • Harpeet Singh Bedi is a salesman at AYS Computers, with whom he has a non-compete clause. If Harpeet starts a business, Rocket Sales Corporation, which is similar to AYS, while still in AYS’s employment, he is violating the terms of his contract and may be sued, as the clause specifically forbids him from doing so.

Non-Solicitation Clause

Poaching of Co-Workers

If there is a non-solicitation clause in your agreement, you cannot enlist other employees of the company in a business, trade, or profession that would harm the interest of the company. This restriction applies to you both while in the employment of the company and after you have left.

For example, if Harpreet Bedi leaves AYS Computers to start his own company, he cannot take employees/co-workers from AYS along with him. If he does so, he would be in violation of his contract with AYS and can be sued by them for breach of contract.

Poaching of Clients

Depending on the nature of employment, in some cases, this restriction on solicitation extends to customers of the company you are employed with as well. If you are leaving your current company to join a competing company or to start your own, you cannot take clients of the workplace you are leaving with you. This will affect the business of your ex-employer and you can be sued.

For example, if Lokesh Sharma leaves XYZ Ltd. to start his own company, he cannot take clients from XYZ Ltd. along with him while leaving. If he does so, he would be violating his contract with XYZ Ltd. and can be sued for breach of contract.

Training Bonds

What are Training Bonds?

In some cases, an employer may make you sign a training bond. According to the terms of this bond, you will have to work for that company for a specified period of time. You cannot terminate the employment before the required period is over. If you do, you will have to compensate the employer as per the terms of your agreement.

Why are Training Bonds Signed?

This type of bond is usually signed when there is some training involved, the cost of which is borne by the employer. The idea behind it is that if the employer is investing their resources in training you, they should also be able to utilize your talent and reap the outcome of the training. Therefore, training bonds are usually signed to protect the interests of the employer.

For example, Bhanu Rao was offered a job at Centaur Hotels. When he accepted the offer, Bhanu was made to sign a training bond which stated that he would have to work for the company for a minimum period of 2 years, which would also include a 6-month training period, cost of which would be borne by Centaur Hotels. If he were to leave before the expiry of the training period, Bhanu would have to pay to Centaur Hotels the cost of his training. After one and a half years, Bhanu found a higher paying job and quit Centaur Hotels, with 6 months remaining on his bond. Now, Centaur Hotels has a right to recover the cost of training from him.

Amount of Training Bond

It is important to note that the amount given in a training bond should be reasonable and is usually decided depending on the facts and circumstances of each case.