Terminating Employment: Navigating Bond Clauses in India

As a scholar trainee at Wipro, you are facing a challenging situation where you want to resign but have completed only 10 months. However, your employment agreement includes a bond that requires you to pay a significant sum if you leave before 12 months. Before making a decision, it's important to understand your legal rights and obligations under Indian law. This article explores the implications of bond clauses in India, the Indian Contract Act, and provides guidance on navigating the termination of employment.

Understanding Bond Clauses in Employment

Employment contracts often include bond clauses that compel employees to serve a certain period before resigning from their job. In your case, Wipro has stipulated that if you terminate your employment within the first year, you would incur a financial penalty of 75,000 INR if you resign immediately, and 60,000 INR if you wait for an additional two months. This situation can be confusing and stressful.

Legal Framework: Indian Contract Act and Sec. 27

Sec. 27 of the Indian Contract Act governs agreements to restrain an employee from leaving employment before a specified period. According to this section, such agreements are void and not enforceable in court. Therefore, while the bond clause is legally binding in terms of your employment agreement, it may not hold up in a legal dispute.

Practical Steps to Follow

Here are some practical steps you can take:

1. Serve the Notice Period

Under the terms of your employment, if there is a clause for the notice period, you are required to serve that notice period before resigning. Failing to do so might have repercussions, though not necessarily financial penalties as per Sec. 27. However, you can negotiate a settlement with your employer if you wish to leave before the notice period.

2. Pay Financial Penalties (if any)

If you choose to leave before the agreed notice period, you may have to pay a financial penalty as stipulated in the bond clause. The payment amount could be significant, as in your case, 75,000 INR if you resign now, and 60,000 INR if you wait for two more months.

3. Explore Negotiation Options

Your employer might be flexible. You can approach them and request to negotiate the amount of the financial penalty or to waive it altogether. Provide a strong and well-reasoned argument for your circumstances, and document any discussions in writing.

4. Seek Professional Legal Advice

Consulting a legal expert in employment law in India is highly recommended. A legal professional can provide you with clear guidance on your rights and obligations, and help you navigate the complexities of your situation.

5. Document Your Resignation

Ensure that formal resignation procedures are followed. Submit a written resignation letter to your employer mentioning the date of your last working day clearly. This helps in avoiding any misunderstandings.

Conclusion

While the bond clause in your employment agreement may require you to pay a sum, legally, such agreements are often non-enforceable. Your best course of action is to carefully review your notice period, explore negotiation options, and seek professional legal advice. Remember, your legal rights and obligations are more important than the bond clause in your agreement.

Good luck with your decision and subsequent actions.