Safeguard or coercion?

The economy of Bangladesh is growing at an exponential pace, owing to the rise in export and inward remittance. Multinational companies are entering into the market with a view to establishing a strong presence in the country. Undoubtedly, experienced and skilled workforce is the key to meeting the objectives of the corporations. Being one of the most densely populated countries, the competition for securing employment is fierce. What jobseekers often fail to realise is that the business entities are struggling in the same way to find suitable candidates and moreover to retain employees who have the right skills and required experience.
Large corporations spend a significant portion of their budget on training their human resource personnel; employee retention is of immense importance to them. One of the common terms that jobseekers often hear, alongside employment contracts, is the term “employment bond”. Usually employees may be required to sign an employment bond and the consequential experiences of the employees in this regard are often unpleasant. This may be the right time to delve into this issue and analyse if employment bonds are being used as a tool for exploiting vulnerable jobseekers.
Employment bonds are essentially agreements between an employer and an employee. The general purpose of these agreements is usually tilted to the benefit of the employer. With many high demanding jobs in different sectors, a large number of employees are required to go through vigorous training in order to become fit for the desired positions. Employers expect trained employees to stay with the organisation for a certain period of time or else the investment bestowed upon them in the form of training will all go in vain. To ensure that companies do not incur loss due to these necessary investments, employees are often required to sign a bond. With this employment bond in action, a certain clause is added and it is made mandatory for the employee to pay a fixed amount as penalty to the employer should she decide to quit before the end of the agreed minimum period of service.
In some cases, the company might look for a guarantor who would provide guarantee on behalf of the employee. In case of any breach of the employment bond, the guarantor will be equally liable and thus can also be made a party to any prospective suit. There are other types of employment bonds used quite frequently, where the employer explicitly prohibits the employee to join certain competitor companies after termination of the employment. Such measures are taken because when an employee joins a rival company, it might cause concept extortion and thus severe conflict of interest may arise. However, here we are going to concentrate on the previous type.
Section 74 of the Contract Act 1872 deals with compensation for breach of contract where a penalty is stipulated. Employment bonds mostly contain such a penalty clause where the amount the employer shall be entitled to recover from the employee is stipulated. Fortunately, there is a safeguard in favour of employees because the said provision allows the employer to obtain only as much amount as is reasonable and such amount shall not exceed the stipulated amount. Therefore, the employer cannot ask for an unscrupulous or outrageous amount. In determining the compensation amount the court computes the actual loss that has been suffered by the employer due to the reason that the employee left without serving the whole duration as specified in the employment bond. Even if a specific amount is mentioned in the employment bond, the employer shall only be able to recover an amount that can be proved to be the actual loss suffered.
Employment bonds often suffer from various other formal defects. Apart from the requirement that conditions of employment bond must be reasonable, such an agreement has to be entered into by the parties (both employer and employee) with free consent. Since employment bonds contain conditions stipulating penalty for the expenses incurred by the employer due to the non-performance of obligations by the employee in the nature of indemnity bond, such bonds will not be enforceable unless executed on stamp paper of appropriate value and properly signed by both parties.
It can be rendered that the employment bond comes as an aid towards the employer. However, that does not mean that the employees have to adhere to any claim by the employer or endure every dilemma they are forced to face. To ensure that no undue trouble arises later on, one should be careful while signing an employment bond. It should be carefully assessed if the bond covers only training expenses incurred by the employer and if the amount stipulated therein is reasonable. It should also be checked that if the employer actually spends the mentioned amount for the said purpose. The employee needs to make sure that the deduction is proportionate with the period of service provided. Another thing that should be kept in mind is that the bond is likely to come into action only in cases of voluntary resignation and not in scenarios of redundancy or forced termination by the employer.
Corporations should have recourse to modern management practices for retaining qualified employees but it is absolutely unacceptable when they resort to measures that amount to “bonded labour”. Despite the absence of any comprehensive code for governing various aspects of employment contract as distinct from a labour code, the employees can safeguard their interests at least to some extent by being aware of the protections offered by the law of the land. Awareness of such measures will definitely equip the employee better to bargain a fair employment contract.

The writers are legal practitioner at a law firm, Legacy Legal Corporate.