Introduction
The field of employer-employee relationship has experienced significant developments and evolution in the recent past. Numerous legislations have been introduced to maintain the delicate balance of the relationship. These laws have a very wide scope. The purpose of this article is to shine a light on the numerous elements of employment contacts.
As in the case of any other valid contract, the validity of an employment contract also stands on 6 pillars; offer or proposal, an acceptance, a consideration, competency of parties, legality & free consent. An employment contract is an agreement between two parties for a decided period of time under which one party provides a service in exchange for remuneration and / or other benefits.
To ensure a robust and secure employment contract, the following are some of the essential elements that should be mentioned:
Offered or Proposed Position
An employment contract should contain the proposed position of employment that is being offered. It is imperative for the employee to have a clear understanding of the nature of their position in the organization.
Probation Period
Probation is a trial period at the end of which the employer informs the employee whether the organization wishes to continue to employ their services. Not all employment opportunities have probation periods. However, if there is one, the same should be laid out in the contract.
Time Period
Some employees are hired for a specified time period for a specific service. If that is the case, the duration should be mentioned in the contract.
Performance Expectations or Job Description
In a performance-based organization, there are various job expectations from the employee that needs to be fulfilled. To make the employee more efficient, some skills may be developed by them. The terms of the performance requirements should also be enlisted. If it is a sales-based employment opportunity, several sales targets could be included by the employer in an employment contract to ensure optimum performance. There should also be a clear cut description of the position to reduce doubts or discrepancies.
Benefits
Illustrate the benefits that the new employee shall be receiving upon joining. This includes any life, health, etc. insurances that the organization offers. One might also have an incentive-based employment and in that case, the incentive details are to be described.
Termination
Although such a situation would be undesirable, the employment contract should contain the terms of a termination or a severance. Categorically illustrate the results of employment being terminated with or without cause. It is pressing that the employer hashes out the details of both the scenarios including the terms that will be applicable in both cases.
Calculation Method of Compensation
It is obligatory to explain the basis of compensation and the method of calculation in the contract. When a remuneration amount has been agreed upon, the employer should specify the base salary and whether the stipend’s calculation is based on hours worked or commission earned. The prevalent overtime policy should be a part of the contract. When a salary is based on commission, the percentage of commission and should be specified.
Non-Compete
In a non-compete clause, the employee agrees to not enter or start a related or same profession with the intent of being in competition with his former employer. However, Section 27 of the Indian Contract Act, 1872 talks about the legality of such a clause.
According to this section, an agreement that establishes a restraint on an individual from exercising a legal profession or trade or business, is void. Such clauses are essentially only valid during the employee’s period of employment. Upon termination of the employment, it falls within the ambit of Section 27 and therefore, stands void. This clause is introduced for the purpose of limiting competition and establishing a monopoly.
Moreover, Article 19 (1) (g) of the Constitution of India confers the Right to Freedom of Trade on every individual of the country.
Confidentiality or Non-Disclosure
Ideally, an employment contract should have a non-disclosure clause for the protection of an organization’s confidential information. This may include trade secrets, client information, etc. This clause puts a restraint on the employee from divulging any confidential information to any 3rd party without prior permission or approval from the employer of the organization. In some cases, an entirely separate contract is drafted known as the Non-Disclosure Agreement or NDA since this clause may coincide with other restrictive covenants.
Jurisdiction
In case a legal dispute arises, some parties wish to resolve it by going for arbitration while some choose to place their faith in the judicial court. When a jurisdiction clause is included in the contract, it becomes binding on the parties that the dispute be resolved by the forum or court which has exclusively been specified in the jurisdiction clause.
Conclusion
An employment contract is like any valid contract. An extensive contract secures the rights and obligations of both the employer & the employee. It clearly states the duties and responsibilities of the employee and what is expected out of them in the course of their employment. An employment agreement needs to be comprehensive and all-inclusive. Clauses such as non-disclosure and non-compete are set out to ensure the protection of the organization’s sensitive and confidential information, the disclosure of which may cause significant irreparable damage to the employer’s organization.
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