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High attrition rate is emerging a very major problem, especially in certain industries like IT. The company incurs huge training cost on its employees, especially fresh recruits. In such a scenario, company had to recruit more people and give them training once again. This implies, incurring the expenses once again. So, employment bond is used by the companies in order to protect its interest in its employees. But the major question is, to what extent is this enforceable and what are the remedies a company can seek and what are the defense options available to an employee to protect his interest.

Firstly, we need to look at what is an employment bond. It is an Agreement between the company and the employee which states that the employee will remain in the services of the company for a particular period in consideration of the training given to the employee and the money spent by the company in imparting such training. If the employee breaches the contract, he/she will be liable to pay the amount specified in the bond to the company. But, the legality and enforceability of the bond depends on the fact that weather there was consideration in the form of training or otherwise.

The most important question which arises is weather the contact is enforceable or not. Even though such contract imposes restrictions on a person’s trade and profession, it is enforceable as long as such restrictions and reasonable. The reasonability of the contract would depend upon the case.

For example, if the company has spent a lot of resources (time and money) on the training and development of the employee, such contract will be enforceable. However, if the company has not given any such consideration, the contract will not be enforceable.

The bond may have a liquidation damage which the employee is required to pay in case of breach of the contract. But under India law, the court will not ask the employee to pay these charges until and unless the employer proves that the company has suffered a loss because of his termination. Even though the amount has been fixed in the contract, the company has to prove that it has suffered losses to the extent of its claim. However, the company cannot demand for an amount higher than what is specified in the contract. The company can prove this by showing that they have incurred cost for training, and losses suffered because the employee is leaving in the middle of the project etc.

At this stage, another issue which emerges is restricting the employee from joining the competitor’s firm. However, such restrictions are not granted if it means that the employee might remain ideal or will be forced to work for a particular employer. But the company can get an order restricting the employee from divulging its trade secrets to the competing firm.

When a case is instituted against an employee, he can take several defenses. Some of them can be: no training was provided to him, hence there was no consideration. The employee can also say that he was forced to sign the agreement, without being given an opportunity to understand the contract etc. However, the effectiveness of the defense varies from case to case.