--- On Thu, 11/6/09, Badri Natarajan <asi...@vsnl.com> wrote:
> From: Badri Natarajan <asi...@vsnl.com>
> Subject: Re: [silk] pay up, or stay here
> To: silklist@lists.hserus.net
> Date: Thursday, 11 June, 2009, 7:42 PM
>
> 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).
The practical problem is rather different, in certain cases.
In such cases, the cases of software services organisations working offshore on
projects relating to a client many thousands of miles away, it is likely that
the original company-to-company contract was entered into upon the vendor
showing the customer that there was a certain skill available within the vendor
company, in the person of named individuals, whose skills are subject to
examination, sometimes through a personal interview.
In these cases, the vendor company is in trouble if a named individual decides
to leave. While that individual's value of work may be low, the value of work
in the entire project may be quite high, and all endangered due to possible
cancellation of contract by the customer due to the vendor no longer being in
possession of the skills claimed, to the extent claimed.
It becomes difficult to build a convincing case for an adjudicator not familiar
with industry practice that significant harm has been caused, beyond the
probable value of the programmer.
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