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Krishna (Business Head)     28 February 2013

Training Service Agreement: Please help

Hello everyone, 

I've recieved an offer from a Multi-National firm, and reproduced below is the clause in the employment agreement which would require me to reimburse the company in case I do not complete the stipulated period of 3 years. 

"Service Agreement

The Company has offered to provide you at its cost and expense an opportunity to receive specialized training (which may include travelling from your home country) in *The postion (hereinafter referred to as “the said Training”).

A.    The Company shall spend a substantial amount of cost and expenses towards the said Training (including but not limited to training, airfare, accommodation, stipend and other miscellaneous expenses of the Employee) during the said Training period. The company will also have Subject Matter Experts travel to India for a long term secondment solely to transfer this knowledge.

B.    In consideration for the said Training, you agree to remain in employment with the Company for a minimum period of 3 (Three) years from the Effective Date. (*Effective date is Yesterday's, the day the agreement was created)

C.   You  acknowledge and confirm that in the event that you fail to complete employment with the Company for a minimum period of 3 (Three) years from the Effective Date, the Company shall suffer a loss and the Company shall be entitled to liquated damages, including the cost of and expenses  the Company actually incurs towards the said Training.

D.     In consideration for the Company imparting the said Training, you hereby covenant and undertake to pay the Company a sum of Rs. 15 Lakhs (Rupees Fifteen Lakhs only) (hereinafter referred to as “Reimbursable Amount”) being the agreed, genuine predetermined estimate of damages duly agreed by the parties (not being a penalty), in the event you (a) fail to successfully complete the said Training, or (b) You fail to complete 3 (Three) years from the Effective Date for any reason (other than termination of employment by the Company), save and except due to the Employee’s death, permanent disability, or redundancy, as determined by the Company. You hereby irrevocably indemnify the Company for the same.

E.     Any difference or dispute between the parties hereto in respect of their respective rights, duties or obligations under or arising out of this agreement shall be referred to arbitration of a sole arbitrator to be appointed by the Chief Executive Officer of the Company. The arbitration proceedings will be in accordance with the Indian Arbitration and Conciliation Act, 1996 and shall be held in Mumbai. The language of arbitration shall be English."


 
From what I have been made to understand, the training programme is in Mumbai spread over the duration of a year. The CTC on offer is 12 Lakhs per annum plus variable (10 to 20%)
 
Is this contract enforceable by law ? Generally, do companies take you to court if you fail to complete the aforementioned obligation ?  I've worked for almost two years, and am in the beginning stages of my career. Please advise me on what should I keep in mind if I sign this contract, if I sign it at all.  
 
Thank you
 
Krishna


Learning

 4 Replies

Kumar Doab (FIN)     28 February 2013

Your initiative is appreciable.

All employees should discuss and deliberate on options and merits before blindly signing on the dotted line, and falling in legal traps and repenting later.

Has the company explained what is this training and its curriculum e.g. title of training, intent of training, name of degree/diploma/certificate that shall be issued to certify the course company has conducted for you? Would you be attending only classes for period of training or you would be working as regular employee fetching revenue and profits for the company?

If yes, why the company has not mentioned the full details in the said agreement and why it referring to just “Said Training” in the written agreement?

Which institute/organization shall conduct this training? Is this institute registered and certified to conduct this training and if yes by which dept of the govt. of country?

You may ask the company to mention full details instead of “Said Training”.

Would this training add to some extraordinary/specialized skills enhancing your education/qualification?

What is the stipend to be paid to you during this so stated and referred as just “Said Training”?

What is the itemized detail of each expense on “Said Training” and in particular other miscellaneous expenses of the Employee?

Would the company provide you certified copy of each bill?

The company has further stated ( which is to be signed by you) “Company shall suffer a loss and the Company shall be entitled to liquated damages

Why the company has not quantified the so stated liquated damages and what is the justification of this amount?

 

Do you think and agree that the amount of Rs.15/ Lacs which is claimed as “Reimbursable Amount”) being the agreed, genuine predetermined estimate of damages duly agreed by the parties (not being a penalty). (This statement is to be signed by you as willful acceptance.)

 

 

Any difference or dispute between the parties hereto in respect of their respective rights, duties or obligations under or arising out of this agreement shall be referred to arbitration of a sole arbitrator to be appointed by the Chief Executive Officer of the Company. The arbitration proceedings will be in accordance with the Indian Arbitration and Conciliation Act, 1996 and shall be held in Mumbai. The language of arbitration shall be English."

 

 

Then:

Any difference or dispute between the parties hereto in respect of their respective rights, duties or obligations under or arising out of this agreement shall be referred to arbitration of a sole arbitrator to be appointed by the Chief Executive Officer of the Company. The arbitration proceedings will be in accordance with the Indian Arbitration and Conciliation Act, 1996 and shall be held in Mumbai. The language of arbitration shall be English."

 

Why the company is adamant on its CEO being the sole arbitrator and venue of arbitration Mumbai only?

Why the company is writing arbitrator shall be mutually decided one and venue of arbitration shall be your location?

 

 

Has the company advertised anywhere in its job advertisement, interview call letter, during interview, offer letter, selection letter, appointment letter that the job is as “Trainee/apprentice” and the selected candidate shall have to sign a service agreement/bond of …….years, for Rs……..?????

 

If not would this company agree to reimburse the expenses incurred by you on making job application, attending the interview, selection process????

 

Is the company approved by the govt. for conducting such training programme?

The company is conducting this training under managements/company’s standing orders or under apprenticeship act?

 It is felt that if this “Said Training” is for acquainting the employee with products, processes, technologies being used by the company, or its strategies, policies, disciplines, machines (which it want its employees to run), technology on which its machines are run, then company is under obligation to provide it without any cost to its employees.

 

You have posted that:

From what I have been made to understand, the training programme is in Mumbai spread over the duration of a year.

Who has made you understand and has he/she stated so in writing? If yes and also if no yu should ask them to clarify and this should be another reason to ask the company to justify and explain how it has arrived at a figure of Rs.15 Lacs as a reasonable amount.

 

 From the language of the agreement it appears as if company is sending you abroad.

 

“The company will also have Subject Matter Experts travel to India for a long term secondment solely to transfer this knowledge.

These experts are from which institute/organization and would they take any classes which are part of the curriculum of the training?

Has the company stated that the language and contents of the agreement open for deliberations and can be amended as suitable to you or both the parties? If yes you may advance to reduce the contract for both parties to reasonable and equitable terms.

 

The agreement is heavily tilted towards the company.

Have you discussed the reputation, standing, ranking, acceptability of the company in the market, and experience of its former and current employees? What is the conduct of the company with Trainees/employees who separate during contract? Does it issue FNF statement/settlement, service certificate, relieving letter, PF, Gratuity etc….?

You should conduct a thorough survey.

If your trade is like that in which no employer shall employ without such or even worse contract you may retain a lawyer to guide you always so that in case you have no other option than separate at a later stage your interest is protected.

 

You would need to prove that employer was unworthy of being employed with, and contract was unconscionable, coercive, void, inequitable, unenforceable, suppressive, unlawful, illegal…..…

The litigation for some employees can be stressful.

 

The purpose of this discussion is not to paint a negative picture.

This is just a discussion in the thread initiated for discussion in the forum.

If you can strike an opportunity with a company with good HR practices and which does not impose any such harsh conditions it shall be certainly better.

Kindly discuss with elders in the family, competent and experienced well wishers, lawyer/law firm specializing in such matters and decided as suitable to you.

Your lawyer can advice on the merits and remedies available to you in case there is a dispute in future between you and the company.

Yu may go thru many threads initiated by fellow employees e.g.:

 

 

Discussion > Labour & Service Law > Others > Service bond

 

https://www.lawyersclubindia.com/forum/Service-bond-75613.asp

 

 

Discussion > Others > General Discussion > Is service bond is legal

https://www.lawyersclubindia.com/forum/Is-service-bond-is-legal-74011.asp#.USt-AkpMe8A

 

Discussion > Labour & Service Law > Employment > Joining the client organization

https://www.lawyersclubindia.com/forum/Joining-the-client-organization-75245.asp )

 

 

Valuable advice of learned experts/members is sought.

 


Attached File : 939094063 417759075 validity of employment bonds.pdf downloaded: 63 times
1 Like

JT Rajasuriya, Chennai (Advocate 98410 53790)     28 February 2013

Mr.Krishna,

                    It appears that the company wants a minimum period of 3 years sit in. Of course, there is every possibility to break it within the legal confines, but the company would surely not give you a neutral or positive discharge letter, which is usually insisted upon by subsequent companies.

                   If you are career-oriented, you better decide if you could be there for 3 years or look out for some other company.

                 Or if you are a risk taker who does not mind to take these kinds of selfish employers to task, then go ahead and join and then challenge legally - it is almost probable that they will fail, unless they have really invested huge sums to train you which places a legitimate expectation.

2 Like

Kumar Doab (FIN)     28 February 2013

Mr. Rajasuriya has aptly concluded in few words and has given valuable advice.

Appreciated.

Kindly follow it.

Krishna (Business Head)     28 February 2013

Mr. Doab and Mr. Rajasuriya

I can't thank you enough for taking out time to guide me. I have scheduled calls with two current employees so that I may be able to ascretain specific details about the company's training process. 

Mr. Doab, 

I agree with you that this agreement is heavily biased in favour of the company, and I don't think you have painted any negative pictures; these questions are absolutely justified. 

Mr. Rajasupriya

You have summed up the scenario in a very succinct manner. Thank you for your valubale inputs. 

I will however post more details after I have had a discussions with current employees. 

Once again, thank you gentlemen. 

Regards, 

Krishna


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