Your Advocate
This week Your Advocate is Barrister Tanjib-ul Alam Advocate, Supreme Court of Bangladesh. He is the head of the chamber of a renowned law firm, namely, 'Tanjib-ul Alam and Associates ',which has expertise mainly in commercial law, corporate law, admiralty, employment and labor law, land law, banking law, constitutional law, telecom law, energy law, Alternative Dispute Resolution, Intellectual Property Rights and in conducting litigations before courts of different hierarchies.
Query
I served an institution where I had to sign a surety bond that, among other conditions, obligates a cent percent return of all the allowances, including basic pay, if I resign at my will before a certain period.
Now, for some particular reason, I'm discontinuing the job and becoming worried about the legal consequence.
I know many other institutions have their employees signed such bonds containing such a condition to compensate if they leave before a certain period from service and most of the cases it limits up to fifty percent of their compensation package. Some other reputable institutions also allow their employee a grace period of, normally six months, to decide to serve or not to that particular institution when the bond won't be effective.
My query is how much it is legal in the eye of relevant laws , firstly , to bound an employee to undertake such bonds and, secondly, how much compensation, legally, can an employer ask from an employee by a surety bond. Does law allow such a bond to ask for a cent percent return of the employee's salaries and allowances if somebody leaves at her will? Moreover what is the legal base for an employee to seek in such a situation?
Ashfaque
University of Dhaka
Response
The method of surety bond is usually applicable in a situation when an employer is providing an employee certain additional training beyond the normal employment. For example, some of the IT companies require their employees to sign surety bond as a condition for their foreign training. It is also common in multinational companies. The rationale behind such a surety bond is that an employer is investing huge amount of money behind an employee by sending him abroad for higher training purposes. Therefore, it is only fair that the employee must commit himself to serve the employer for a certain period so that the investment made by the employer is not wasted. The most common default clause for this kind of surety bond is that in case the employee decides to leave the job before the reserved period, he must pay the amount that is being spent by the employer in sending the employee for higher training. The most common example of similar bond in public sector would be found in the public universities. A teacher who receives the benefit of study leave (often for a period of 3-5 years) is required to serve in the university for the equal period that he/she enjoyed the study leave. If she leaves the job before the requisite period, he is required to surrender the salary of the unspent period. Therefore, the concept of surety bond is not unlawful.
However, there are certain parameters that must be fulfilled for a surety bond agreement to be lawful. As a matter of general principle, the concept of surety bond may be termed as against public policy as being in restraint of trade. The scenario that you have suggested does not appear to provide any "additional benefit" on the part of the employer so as to render such a bond to be lawful. If an employer cannot show that it has provided any additional benefit beyond the salary for the service, a surety bond requiring to surrender the entire salary or even half of it for the termination of employment may be considered as against the public policy and hence unlawful due to the fact that allowing such a contract would mean legalising slavery.
In my opinion, a surety bond without providing any additional benefit to the employee is likely to be rendered unenforceable as being against public policy. According to section 27 of the Contract Act, 1872 a contract against public policy is not enforceable. The reason why such a contract can be considered against public policy will mostly depend on the circumstances of the case.
For detailed query contact: [email protected]
