Intricacies of the Employee Contract

One of the first agreements that people enter into as adults mostly include employment agreement. It is natural to have limited knowledge of how the agreements work, let alone the  employment agreement. This gives rise to a certain fear while signing because well, the agreements tie you into liabilities.
In general practices, the employees are restricted by such agreements to mandatorily serve for a certain amount of time. There are other obligations as well, which are brought upon the employees through the employment agreement. It is important to analyse any agreement before signing it.
Therefore, we have decided to quickly explain the important parts of every employment agreement, which is currently in practice with modifications according to different industries. If you look for certain clauses in the document, you shall be able to get a hold of liabilities the agreement is looking to put over you and make an informed decision.

An Employees’ Contract could be broken down in some parts. While there could be ‘n’ number of clauses setting down the terms of employment, following are the few important clauses that could be definitive while drafting a contract. These clauses must be read and understood positively before signing a contract.

Pre-employment

The clauses which deal in the situations before the employees joins are called pre employment clauses. The objective of such a clause is to protect the employer from any liability that might arise on his/ her part because of some act of the employee which he/ she committed before joining in with the employer. Extent of this clause must be carefully determined before entering into the contract.

Dispute Resolution
A dispute may arise between the employer before the employee joins in, of during his/ her period of service, or after termination of his/ her services. This clause may determine the mode of dispute resolution say, arbitration. The extent of this clause must the understood; it might restrict the employees from using the available remedies. Especially in the area of alternative dispute resolution methods the terms of clause might not look unfair, but it may not be as fair. Generally, the contracts include that the dispute to be referred to arbitration. In this case, it is important to pay attention to the method of appointment of arbitrator, if the clause contains that.

Termination
It is not pessimistic to be talking about how your service as an employee could be terminated, it is only practical. That is why, termination clauses are essential parts of employment contract which lay down some ground rules if either of the side wishes to terminate the relationship (of employer-employee).

Generally, the termination clause lays down a notice period. An employee has to serve the notice of termination before they can affect the resignation. Before signing the contract, you must compare if the notice periods on both sides i.e. from the employer’s side and form the employee’s side, or make sure that the notice period obligation is applicable on the employer as well, so that you are not caught off guarded or without an option if you are fired.

Restrictive covenants
These are the clauses which are tailor made to suit the needs of employer and protect their business interests. As the name suggests, the effect of these clauses is that, the employees are restricted from acting in certain way. Following are some of the examples

  • Non compete- The objective behind 5theis clause is to restrict the employee from competing against the employer. This could be done by entering into such business or profession themselves or by working for a competitor. Non compete agreement expressly prohibits all such act, which would create a competition for the employer, or aid such competition. 

  • Non solicitation- This clause is aimed to restrict the employees from entering into any solicitation activities, against the interest of the employer. Such solicitation could be towards other employees or the established clients of the employer, usually for one’s own personal interests or someone else’s. The effect is that the employer either loses on the client or the employees or reputation.

  • Non disclosure- While working with the employer, the employee might get hold of sensitive information or business information or client list or any such information which the employer might not wish to share with others. Generally, non disclosure covers every such information which the employer would not deem fit to be shared with someone outside their organization. This clause prevents the employees from sharing such information, as the employer wishes.

It is important to mention that this is not an exhaustive list of the restrictive agreements. Wherever an employee is restricted from doing something could be termed as restrictive agreement. Restrictive clauses are a standard norm in the employment contracts and it is most likely that you shall come across them. It is important to determine if the extent of restriction is reasonable or justifiable. It is also important to determine if the extent of the clause effects the rights of the employees.

The general practice is that the employer produces an employment contract, which the employee has to sign. There always is the scope for negotiation at the time of entering into any contract. It is appropriate to register your concern and express your objection upon any clause that you might find unreasonable or unfair at the time of signing. 

-Akshay Mankar


Posted On: 03 Sep 2019 Home / Legal / Intricacies of the Employee Contract