EMPLOYMENT AGREEMENT- CLAUSES AND LEGAL VALIDITY

EMPLOYMENT AGREEMENT- CLAUSES AND LEGAL VALIDITY

Introduction

An Employment Agreement is a kind of contract which specifies the rights and duties of both the employer and the employee at the time of the employment period. From a very junior post to a very senior post everyone is considered an employee, and to maintain proper functioning everyone needs to be bound by an employment agreement. It specifies the employees about their pay, bonus, time duration, and much more. For an employee, this agreement is very important to protect his rights whenever a dispute arises. For an employer, this agreement aids in streamlining the employees.

Essentials Terms and Conditions in an Employment Agreement

Though the below list is just general clauses that are to be followed, there can be numerous other clauses that can be added according to the type of business and employment.

• Parties-: Both parties should mention their name and their status and should sign the contract.

• Effective Date -: It is referred to as the joining date that is the date from which the period of employment commences.

• Work Timing-: The agreement should state the work timings of the employees clearly.

• Job Description-: This clause states the employee’s job description in detail like what will be his duties, what he is supposed to do during the employment. It is essential for a proper understanding of the job and the role.

• Probationary Period-: During this period employees are paid normal remuneration. This period should be discussed well in advance. And the time limit of this period should not exceed more than 6 months. In fixed-term employment, the probationary period should not exceed half of the employment contract.

• Leave Policy-: This specifies the public holidays and other paid leaves that an employee is entitled to have.

• Notice Period-: It has to provide to both the employer and employee. No party can terminate the contract abruptly. Apart from the breach of the agreement and reasonable terms of non-termination a party should be entitled to compensation in case of immediate termination.

• Remuneration-: The agreement should state the gross salary that will be offered to the employee. Any deduction towards it should be clearly mentioned in the contract. The method of payment should also be discussed mutually by the parties.

• Term-: It specifies the duration of employment in the company. It should be clearly mentioned in the contract.

• Termination-: This is the right of both parties. The basis of termination of employment should be clearly mentioned in the contract.

• Arbitration-: In order to avoid any dispute or disagreement in the future the party should discuss way before the employment commences whether to go for arbitration or not, or whether to opt for mediation or not. There should be a consensus of both parties in order to reach a healthy settlement.

• Jurisdiction-: In this clause the parties mention the judicial court forum which will have the right to resolve the dispute of the parties. A governing law clause in the employment agreement specifies the choice of law of the parties to the contract. Laws of employment differ from state to state that’s why it is advisable to set the governing laws prior to the employment.

• Non-Disclosure and Confidentiality-: The employer will never want his company’s secret or sensitive data to be out in public or to be shared with its competitors. Therefore it is essential to have this clause in the agreement in order to bind the employee from revealing the information.

• Intellectual Property Rights-: There are several efforts which a company makes in order to train their employees with knowledge and skills and in return the employees give them the desired output in form of their work. This work is the company’s intellectual property and should not be misused by anyone, that’s why this clause is there that such property, is well within the rights of the employer.

• Non-Compete Clause-: This clause prevents the employee from opening or joining a similar business he is already in for the time period provided within the clause.

Execution of Employment Agreement

An employment agreement has to be made in two identical copies, one each for both Employer and Employee.

The validity of the Employment Agreement in India

Such an Agreement has not been defined anywhere in the Indian Contract Act. But it’s valid in India as far as it does not impose any unreasonable restriction on the employee. Section 27 of the Indian Contract Act renders an agreement in restraint of trade void only to the extent it restrains the trade. That’s why there is only partial restriction and not an absolute one. The employer has an exclusive right to the services of the employee.

The compulsion to get the Employment Agreement Notarized?

An Employment Agreement need not be notarized by a public notary but stamp duty has to be paid. The rates of stamp duty can be seen in the schedule of the Stamp act as it differs from state to state.

Laws for Regulating Employment

Policies of Employment like leaves, maternity leaves and etc are governed by the applicable shops and establishment act. Other laws that govern several aspects related to employment are the Factories Act, 1948, The Payment of Gratuity Act, 1972 and etc.

To know more about, the importance of employment agreements, see the video below-

BY-

SHRUTI KULSHRESTHA