Breaking service agreement
Nagraj
(Querist) 16 February 2015
This query is : Resolved
Dear sir/madam,
Though I have read many discussion on this subject I need some more clarification. I am currently working in an organization signing a service agreement of 2 years with penalty of 2Lakhs and I also have gone through a training period during which I was paid some stipend amount. Recently I attended an interview and cleared it which violates the terms of the agreement. And in background verification of the new company they may contact my present company in which case I might be terminated from the company by paying the penalty as mentioned above. After terminating will they give me the relieving letter which I can produce to new company and join. And is terminating different from Resigning. Below are some of the necessary terms of agreement on this query.
If the Employee leaves the employment of the Company or brings about a situation as referred above, during Service Period, the Employee undertakes and agrees unconditionally to pay, on demand, to the Company, a sum of Rs 2 Lakhs as pre-estimated liquidated damages as compensation for the breach of the terms of this Agreement. The Company may also, in addition, demand a quantified damages for loss of business opportunities, negative growth in the business, if any.
Thanks in advance.
P. Venu 
(Expert) 17 February 2015
A Company cannot unilaterally impose any penalty on an employee simply on the basis of an agreement.
Rajendra K Goyal
(Expert) 17 February 2015
Company can proceed as per appointment terms / agreement.
prabhakar singh
(Expert) 17 February 2015
You should resign instead of giving them chance of termination along with tender them
a pro rata amount against two years bond deducting for the job period already served
there as this much of the agreement is valid and enforceable at law but the rest of agreement is void and not enforceable at law.
ajay sethi
(Expert) 17 February 2015
the company must have spent substantial sum of money on your training . you have on your own accord signed service agreement wherein you agreed to serve organisation for period of 2 years . you have before completion of 2 years period sought to join another organisation . the company will seek to recover the sum of rs 2lakhs in event you resign from the organisation
Nagraj
(Querist) 17 February 2015
Thank you all for your valuable reply.
Will the company give me relieving letter if I resign by paying the sum mentioned above?
Kumar Doab
(Expert) 17 February 2015
Relieving Letter: If various threads and publications are to be believed :NO the HR personnel in company might not process and issue Relieving Letter!
However you may download the HR policy/Service Rules and Regulations/Exit Policy/FnF Policy /Employee handbook/conduct and discipline rules ………………….and any other rule and policy…………….and go thru these………………and should preferably write to Head-HR,Appointing Authority,MD in writing and seek written reply, with citation of any private policy/rule of the company framed for such matters…...................if you sense that it is unwilling to write and is resorting to verbal transactions record everything (audio/visual/witnesses/minutes) for use .........if the need be/at appropriate time in appropriate forum....
Relieving Letter signifies that employee has resigned/separated and nothing is due towards employee!
You may also ask the company to mention the ‘Liquidated Damages’ in original FnF statement that is to be supplied to you for verification and acceptance.
Training Period; you were paid stipend during Training Period. Stipend is paid to Trainee/Apprentice recruited as per Management’s Standing Orders/Apprenticeship Rules framed as per Apprenticeship Act…..
There is no rule that lays down Service Agreement/Bond should be signed in lieu Training.
It is not mandatory that job be offered to Trainee/Apprentice.
If you were recruited as ‘Trainee’ as per Managements Standing Orders then your designation should be covered by CSO and you may demand a certified copy of Certified Standing Orders (CSO) that company is under obligation to display at a conspicuous place/notice board/near entrance and supply a certified copy even if against a nominal cost say Rs.10/-.
Employee or anyone can obtain certified copy from certifying Officer (CO) that might be DLC at location of Redg. Office of company against a nominal cost say Rs.3/page…
The Service Agreement/Bond might be violative of standing Orders. Model Standing orders:Sec18: Employer personally is held responsible for faithful observance of standing orders.Standing orders are certified on the lines and essence of Model Standing Orders. Model Standing Orders is a statue and once certified (CSO) it becomes an instrument of law.
YOU MAY NOTE IN CASE OF CONFLICT BETWEEN PRIVATE POLICY/RULE/AGREEMENT (appointment letter/ policy/Service Rules and Regulations/Exit Policy/FnF Policy /Employee handbook/conduct and discipline rules/Bond/service agreement etc ………………….and any other rule and policy of the company) ………………………AND STATUE/ INSTRUMENT OF LAW (Model Standing Orders/CSO) ………………..the statue/ instrument of law SHALL PREVAIL.
The CSO shall prevail upon any private agreement drafted and signed by employer with employee.
Service Agreement/Bond: The Bonded Labor/bondage has long been abolished. If there is no consideration/extra ordinary benefit/Training from some certified Instt. that added to qualification or provided some CERTIFIED EXTAR ORDINARY SKILL …………………….the BOND may be unconscionable.
Liquidated Damages: Are not to be paid on just demand………………..and might have to be proved.
Pro Rated Damages: Rs200000/24*NO. of months left to be served= Rs………….
The company has also added clause on quantified damages for negative growth and loss of business……..and the figure may be horrifying for you……………….
The company just want that such employee be out of Trade/Business/Employment ………………..and set a precedence for other employees………………and create a crowd of sheep that can be herded as per sweet will and wish……
As you have gone thru many threads you might have noted and downloaded judgments awarding Pro rated damages…………………………AND YOU MIGHT HAVE NOTED THAT EMPLOYEE AND HIS LAWYER DID NOT CONTEST THE VALAIDITY OF CLAIM OF LIQUIDATED DAMAGES………….OTHERWISE EVEN PRO RATED DAMAGES MIGHT HAVE NOT BEEN AWARDED BY THE COURT OF LAW…….IN THAT CASE.
The Relieving letter is bait and you shall be subjected to Carrot and dagger like approach.
Since it is required for you to get next employment (source of Livelihood) the courts shall help.
You may ASAP Visit a Labor Law Consultant/Service Matters Lawyer/Law firm specializing in such matters with all docs on record (whatever you have) e.g. Job advt,job application,interview call letter, selection letter, offer letter,appointment letter, HR policy/service rules and regulations etc. cited in appointment letter, any other agreement signed by you, copy of resignation, service agreement/Bond…….. and give inputs in person and proceed under expert advise of your counsel. Your counsel may like to build favorable written record hence may prefer to draft your representations…………
If you have duly served notice of resignation deftly drafted covering everything, and no termination notice/show cause notice/inquiry report/speaking orders has been served you before it ………………. then if employer resorts to termination it may become invalid……………
If you have carefully gone thru many threads then you might have noted that it is invariably suggested that employee should firm up conditions with next employer preferably in writing…………………e.g. submit in writing that you have signed Service Agreement…………………..and that current employer may not issue acknowledgment of resignation,acceptance of resignation,service certificate,relieving letter, FnF statement ………………………….and may post adverse comments in BGV report…………………….and may even resort to termination…………………….and the next employer should not resort to termination……………………
Employee should negotiate properly and ensure that next employer that would benefit by employing the employee……….buys out notice period/liquidated damages unconditionally…………and pay on joining at once…………………..
BGV : is for correctness of statements in employment application:;::::::including reason for resignation/separation::::::and here employee should narrate everything and keep a properly acknowledged copy for future record and reference………………….
If current employer gives false information then it can be sued………………for criminal defamation……………..discriminatory retaliation…………..civil suit for damages………………
Why are you apprehending termination?
Share everything with your counsel.
Are you a member of employee’s /Trade Unions?
Dr J C Vashista
(Expert) 18 February 2015
Very well explained and advised by the experts, nothing more to add.
Nagraj
(Querist) 18 February 2015
Dear Mr. Kumar Doab, Thanks a lot.
Kumar Doab
(Expert) 18 February 2015
@ Nagraj,
You are welcome.
Rajendra K Goyal
(Expert) 19 February 2015
Well explained by the expert Kumar Doab, agree to it.
T. Kalaiselvan, Advocate
(Expert) 19 February 2015
A detailed explanation given by our expert Mr. Kumar Doab which is self explanatory and informative. You may follow the suggestions made utilising whichever is favorable to you.
