EMPLOYMENT- EMPLOYEE’S BOND

Publishes by The Daily Star on February 11, 2012 (Link Above)

This week Your Advocate is Barrister Omar Khan Joy, Advocate, Supreme Court of Bangladesh. He is the head of the chambers of a renowned law firm, namely, ‘Legal Counsel’, which has expertise mainly in commercial law, corporate law, family law, employment and labor law, land law, banking law, constitutional law, criminal law, IPR and in conducting litigations before courts of different hierarchies. Our civil and criminal law experts from reputed law chambers will provide the legal summary advice.

Query

I joined a well known company (a reputed bank) last July 2011 and was on probation period. I liked the job there and was doing quite good. However, I got a better job offer in January 2012, and submitted resignation to be released with effect from 1st February 2012. I also gave up 1 month’s salary as per the terms of the employment agreement. The problem is that when I joined I had to sign a bond which contained that I will stay in the job for a minimum period of 5 years. In case I resigned before that, I will be required to give up one year’s basic salary to the company (my previous employer). Now they wish to execute the bond because I left within 7 months.

My query is, is this bond proper and executable in the eye of law? What should I do now?

Sincerely

Saqeef Shahabuddin
Chittagong

Response
Thank you very much for your queries. I have fully understood your situation and have made necessary legal research in order to equip myself to respond to your query.

I understand that you have resigned from service from a company you joined in July 2011, i.e. your previous employer (hereinafter referred to as ‘Your Employer’). As a prior condition for employment, you signed and executed a bond guarantying that you will serve Your Employer as an employee for a minimum period of 5 (five) years. And in the event of your voluntarily resigning before this guaranteed period, Your Employer will be entitled to your 12 (twelve) months’ basic salary.

The main question regarding the lawfulness and correctness of execution of such a bond revolves around the validity of the bond. If the bond is valid, it shall be enforceable. Conversely, if it is found not to be ‘valid’ or ‘lawful’, it will have no value before the Courts of Law.

The validity of the bond shall be governed by the laws of contract as the bond you must have signed is a contract between Your Employer and you. The bond itself is not unlawful; but depending on the circumstances, it may not be enforced as lawful.

Many employers nowadays require their employees to sign such bonds as a condition of getting the job and/or facilities therein. If an employer provides any additional facility or training and invests some money and time for the training and grooming of a particular employee, then it is very likely that the employer would want him to serve it for, usually, a long period of time. Otherwise, the financial investment will have no return and the employer cannot run such loss. The rationale behind such a bond is that an employer is investing the money and time behind an employee for higher training purposes, enhancing the quality of his work and enlarging his experience for the ultimate gain of the employer. Therefore, it is only fair that the employee must commit himself to serve the employer for a certain period so that the investment made by the employer is not wasted.

The most common default clause for this kind of bond is that in case the employee decides to leave the job before the reserved period, he must pay the amount that the employer spent in providing the employee with higher training. It is also very common in many companies to obtain a bond whereby the employee guarantees that he shall serve the company for a certain period or shall surrender some salary in default. That may be the exact case of yours. Note that this shall be valid if the employer has also given some ‘consideration’ against your consideration of serving the employer for 5 years period. In such a case, the Employer’s expenditure (e.g. training expense) shall be considered as valid consideration.

You have not mentioned whether in these seven months you have taken any training or whether the Employer faced some expenditure for training purposes etc. We also do not know whether the Employer promised in the bond to provide any “additional benefit” as a consideration. Note that only giving you the job may not be found as a lawful consideration which may render such a bond to be unlawful.

If your Employer cannot show that it has provided any additional benefit beyond the salary for the service, a bond requiring to surrender the entire salary or even half of it for the termination of employment may be considered as against public policy and hence unlawful due to the fact that allowing such a contract would mean legalizing slavery. The salary that is provided by Your Employer is a consideration that the Bank is providing against receiving your service under the employment contract. By providing the same consideration, the Bank cannot receive further consideration from you to stay for a specific period.

In light of the above discussion, therefore, in our opinion, a bond without providing any additional benefit to the employee is likely to be rendered unenforceable as being against public policy.

In light of the above discussion, it is advisable that, if Your Employer has promised consideration other than the giving you a job and/or salary, then please do as the bond demands. On the other hand, if Your Employer did not give such consideration then the bond may not be enforceable and you can resign without paying so. In case you take the latter course of action, make sure you send Your Employer a letter to that effect, explaining the reason for you not conforming to the bond in plain language.

I hope this opinion helps you to understand and solve your problem.

For detailed query contact: omar@legalcounselbd.com.