On 10 Jun 2009, at 06:39, Lahar Appaiah wrote:
4 Additionally, if they are serious about you staying back the 3
months,
they can get an injunction in court, enforcing the terms of the
contract.
Once a court passes an order requiring you to serve out your notice
period,
you will have to comply.
Bonded labour is a red herring in relation to this point. The company
simply *cannot* force you to work out your notice - there is no
specific performance contractual remedy for personal service, and
court will not order you to go back to your job and work out the notice.
The consequences are basically financial, because what the court will
do is order you (depending on the case) to pay damages to the company
for breaching the terms of your contract in relation to your notice
period.
It is a very interesting clause though - I've never seen anything like
it. I agree with Lahar that it is probably enforceable (certainly not
coercion or anything like that on the face of it, although might be,
depending on further details).
In effect, it seems almost like a liquidated damages clause that has
been dressed up. I mean, if the contract simply said that you have to
give 3 months notice, then if you breached that notice requirement,
you would have to pay the employer damages - it is for the employer to
establish what damage it suffered because you left early and quantify
it financially in court. This clause seems to quantify that amount by
agreement in the contract itself so that if you do breach the notice
requirement, there will be no messing about in court arguing the
extent of loss suffered.
The only caveat I would add is that (in England) so called "penalty
clauses" are unenforceable in contracts - I don't remember if the same
doctrine exists in Indian law. In essence, damages for breach of
contract are meant to compensate a party for the damage suffered as a
result of the other party's breach. They are *not* meant to be
penalties, or punishments designed to intimidate people into not
breaching the contract. As a result, liquidated damages clauses in
contracts are fine in themselves, but they can't be excessive - the
key words are that they have to be a "genuine pre-estimate of loss".
If the contract says that you have to work out the notice or pay the
company US$ 1 billion (for example), it would definitely fall foul of
this doctrine, assuming of course, that the company was not in line to
lose that much (in England). Since it says "three months salary", the
position is much less clear and would depend on the facts of the case.
Incidentally, there is a huge legal fight going on in England about
the charges levied by banks for late credit card payments or
unauthorized overdrafts, etc, and one of the key issues is whether the
charges are unenforceable penalty charges or justifiable by the banks..
That's off the top of my head..I could probably dig into it more when
I'm back in the office.
Badri
PS - I don't see why the contract needs to have mirroring provisions
on this for both employer and employee - nothing to prevent (except
the overarching contractual rules re coercion, unequal bargaining
power etc) a clause saying employee has to give 3 months notice, but
employee has to give only one (unless there are specific statutory
provisions that I am unaware of).
