CONTRACT BETWEEN EMPLOYER

AND EMPLOYEE

Submitted by

Ms. Advita Hegde (16BSP0150)

Mr. Aditya Mahajan (16BSP0144)
Mr. Achyut Shukla (16BSP0111)
Ms. Aileen Saikia (16BSP0152)
Mr. Akhil Sanghi (16BSP0198)
Mr. Hamza Sheikh (16BSP0906)
Mr. Akash Dewan (16BSP0188)
Mr. Abhishek Gupta (16BSP0082)
Mr. Abhishek Vyas (16BSP0105)

Supervisor:
MR. ANANT AMDEKAR
 TABLE OF CONTENTS

1. INTRODUCTION 1

1.1 TYPES OF EMPLOYMENT CONTRACTS 2

2. WHETHER CONTRACT IS OF/ FOR PERSONAL SERVICE? 3

3. CONDITIONS OF EMPLOYMENT CONTRACT 4

4. TERMINATION CLAUSE (WITH/WITHOUT NOTICE) 5

5. TIME PERIOD AND BUYING OUT 6

6. CLAUSE FOR DATA PRIVACY AND CONFIDENTIALITY 7

7. CASE STUDY 8

8. CONCLUSION 9

9. REFERENCES 10
 1. INTRODUCTION
In the 21st century where from getting jobs to maintain company data secrecy is a big task, legal contracts come
into the picture. With two parties inclusive of the employer (the one who hires) and employee (the one who is
hired). Under Indian Labour Law, a legal contract between an employer and an employee for an exchange of
service over a period of duration is called as an employment contract. This paper focuses on the employment
contract details. In order to maintain smooth relations with the organization staff, an employment contract is
signed. Prior to signing the formal employment contract, an employer and employee sign a letter of appointment.
The objective of the employment contract is to be transparent in working terms between the employer and
employee and have work harmony in long run. The objective of secured employment contract is to abide by the
labour laws for work benefits.
Not all the employees need an employment contract but they do sign letter of appointment. The need of the
employment contract for permanent and top officials is the most. The need of an employment contract is the most
in the situations wherein employee is difficult to be replaced, holds confidential information about the firm or
when you dont want them to leave your company to join competitors. The purpose of an employment contract
is to ensure that both employee and employer have a clear understanding of what is expected during the term of
employment. This contract clears individual's rights and clears the air if disputes arrive in futures.
The written document may contain the following information [1]: -
Name
Address of the employer; name and address of the employee; the title of the job or nature of work to be
performed by the employee (or job description)
Place of work and hours of work; and probation, if any, and its term, etc.
Any benefits that an employee is entitled to (gratuity, provident fund, and pension)

Employment contract is that form of contract for personal service which the courts recognize as expressing the
social relationship of employer and employee.

Example: -For a sales executive in a XYZ company is asked to sign an employment contract which holds its
personal details and salary payment details (60% will be basic and 40% partial incentives and bonus based). It
also holds all the necessary details of TDS AND PF norms which the company follows for the designated profile.

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 1.1 TYPES OF EMPLOYMENT CONTRACT

There are three pillars of Employment contracts which focuses of the purpose, duration and specification
with respect to the employer and employee who signs it to maintain harmony and save it as a defensive
instrument if in future any disputes arrive. Following are the three types of employment contract:

a. OPEN ENDED APPOINTMENT LETTER- This type of contract could be for a fresher to be specific,
new to the firm. It includes all the benefits due to a salaried employee (provident fund, bonus, etc.)
Applicable to regular salaried employees. It provides security and also a platform to grow and learn
over an extended period. UNDER SECTION 192 of Income Tax Act, taxable norms are implemented.
Example: - For a XYZ company, a fresher for the role of Relationship Manager (Sales) is asked to
sign the employment contract form of appointment letter with basic details of its designation, payment,
TDS and PF deductions are mentioned in clear language.

b. FIXED TERM APPOINTMENT LETTER This type of contract is for the workers with permanent
work tasks. The contract has no maximum length of fixed contracts. It includes all benefits to a salaried
employee (provident fund, bonus, etc.) applicable to the regular salaried employees. It also provides
additional support for a limited period.
Example: - To be specific even President of India signs an employment contract which holds its
details and benefits, payments and tax deductions etc. specifying the tenure of the presidential ship of
5years.

c. CONSULTANT- This type of contract is very employee specific. Contract holds all the necessary
details of the salaried employee hired for a specific task or who has specific skill knowledge
exclusively.
Example: - If a FMCG company wants to implement AI for CSAT analysis, then a AI analyst/ expert
consultant would be asked to sign this type of contract. It helps to run professional business
independently

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 2. WHETHER CONTRACT IS OF/ FOR PERSONAL SERVICE?

Employment contract is always signed for a specific purpose, but the issue of purpose of whether the contract
is of / for personal service is debatable. Each of these types of contract, both parties have specific rights and
responsibilities, which differ according to the type of contract in place.

In simpler terms, an employer-employee contract is a contract of personal service and a contractor-client

contract is a contract for services.

a. Contract of Personal Service- Permanent employees have a contract of service with their employer. With
employer in the dominant position of power and paying the employee, he/ she has to oblige by the tasks
assigned to but it also enjoys many benefits like holiday pay, sick leaves, incentives etc.
Example- Recent article about menstrual cycle leave for women (in Kerala and Mumbai) is a mutually
understandable decision taken by employer and a right enjoyed by the female employees. [4]

b. Contract for personal service- This is strictly business to business kind of contract, where services
provided by the agency is very important. The client, or agency, is a buyer and the contractors company
is the supplier. Details of required service, penalties, defective supplies and other major details are
included in this type of contract for smooth transactions.
Example- Utopian Media agency was given the digital marketing task for Siyarams Italy arm Cadini
India. [5]

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 3. CONDITIONS OF EMPLOYMENT CONTRACT

a. Training/Probation: This condition describes the duration of the training and probation period probation

period. It is usually 6 months however it can be extended by a period of three months. The maximum

probation period can't exceed two years.

Example- Rajasthan University has asked to give regular pay scale to the probationers instead of fixed

pay scale, which influences flexibility in payment and tenure.

b. Duration of Employment: Sets forth the duration of employment and the event on which employment starts.

This condition focuses on the time period of the employment. For seasonal companies it focuses on specific

fixed term projects and interns with pay scale for lesser duration of time.

Example- Hydroelectric projects hire employees for certain duration till the project completes/ MMRC

hires tree consultant for new metro project in Mumbai (line three).

c. Renumeration: It is the amount of stipend paid during training/probation and the basic salary afterwards.

Paid in cash or partial payment in terms of issue of bonus/ shares etc is specified and reward for the work

done in the accounting period is the condition talked here about.

Example- Cement major Ultratechs Chairman and Non-Executive Director Kumar Mangalam Birla

received an annual remuneration of Rs 22.50 crore in FY2016-17 in contrast to just Rs. 3.3 lakh he

earned from his group's telecom arm Idea Cellular. [7]

d. Place and hours of work: Defines the place of work and the working hours. From overtime clause, location
of workplace, no of working hours on daily basis, wages on daily basis etc. are mentioned.
Example- For any corporate life the general timings are from 9.30am to 5.30pm from Monday to
Saturday with working 8hrs on daily basis.

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 4. TERMINATION CLAUSE (WITH/ WITHOUT NOTICE)

Termination clause is an exclusive one because most of the disputes between the two parties occur due to this.
Many factors lead to termination of service, namely (i) Voluntary termination (retirement of an employee,
resignation of an employee, failure to return from leave, failure to report to work without notice), (ii) Involuntary
termination (layoffs, disciplinary actions, and unsatisfactory work of an employee). [8]

Uncertainty plays a major part, one day and situation is changed leading to either voluntary or involuntary
termination. Termination conditions usually include a one-month notification period. company should provide a
verbal and then a written warning before terminating. Employment disputes tend to take place in various stages
of employment with termination being one part of it.

a. Voluntary termination- When an employee voluntary terminates either by giving resignation or retirement
without any prior notice/ serving any notice period.

Example- When he/she has a plan B and decide to take a leap and work for a better company and
resigns without serving the notice period.

b. Involuntary action-When an employer terminates the contract of employment due to misconduct by an

employee or any other issue, then there is a tiff between employer and employee which has all the
ingredients of a dispute and which is generally settled through court sessions.

Example-
Fox Sports fires Jamie Horowitz (Director of Programming) for sexual misconduct with
immediate effect. Some values are non-negotiable says the COO of Fox Sports. [9]
TCS planned to retrench 25,000 engineers, Rekha, who is pregnant at present, was issued
termination orders on December 22, 2014. She was informed that she would be relieved from
duty on January 21, 2015.She moved the high court saying the retrenchment move was
illegal and in gross violation of Industrial Disputes Act, 1947.admitting her petition, Justice
M Duraiswamy granted a four-week interim inunction restraining the company from
retrenching her. [10]

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 5. TIME PERIOD AND BUYING OUT

a. Time period- A time period is a contractual relationship between an employee and an employer that
lasts for a specified period. Time period will specify the length of time the employee agrees to work
for the company. In some cases, this might be an ongoing period of time. In other cases, it might be
an agreement set for a specific duration. After notice has been given to terminate your employment
either by you or by the company, the company reserves the rights to either terminate you with
immediate effect or to ask you to serve the complete notice period. Company reserves the right to
terminate the services with 30 days notice on the basis of poor performance.

Example:- Infosys executive vice-president Ritika Suri, who was focused on getting large deals, has
resigned from the company, according to sources. Suri, who led the acquisition of Israeli automation
technology firm Panaya for Infosys, was based out of the US. She also helped Infosys set up a $ 500
million venture fund to invest in start-ups, and especially those working on areas like artificial
intelligence and automation. The sources said Suri put in her papers last week and is serving out
her notice period. [11]

b. Buying out- An employer may "buy out" an employee's contract by making a single prepayment, so
as to have no on-going obligation to employ the person is the definition of buying out in employment.
Mostly in cases where a company need a specific set for skilled employees on an urgent basis, they
usually buy out their notice period so that the employee can join them at the earliest. By buy out it
means they pay the other company on behalf of the employee his/her one-month current salary.
Example- Air India is drawing up a proposal to offer voluntary buyouts to just over a third of
its 40,000 employees, a senior company official said, one of the largest such offers in India's state
sector, as the carrier slashes costs ahead of a 2018 sale. An official in Modi's office said the
leader, under pressure to cut spending and boost basic infrastructure like ports and roads, is in
"no mood" to provide fresh monetary assistance to any loss-making public sector company. The
official said that top bureaucrats in the civil aviation ministry and at Air India had been asked
to present a report on how a Voluntary Retirement Scheme (VRS) could be offered?

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 6. CLAUSE FOR DATA PRIVACY AND CONFIDENTIALITY

In recent years, the companies are largely depended upon the innovative ideas and suggestions and hence
their protection all is of greater importance which sometimes entails placing specific restrictions on all
the Ws i.e. when, where, how and with whom the employees work. This has, in turn, resulted in a
mandatory signing of non-competition clauses and non-disclosure clauses. To be on safer side the
authorities divide information into the three categories mentioned above: trade secret, know-how and
trivial information.
But the most important part is of trade secret. It is that information that is confidential to the employer. It
can perhaps be better described as information which, if disclosed to a competitor, would be liable to
cause real (or significant) harm to the owner of the secret in more legal terms. The second relevant
category of information in this context is generally described as know-how. And trivia is static
information retained by the employees, any disclosure of confidential information to the competitors and
if found guilty will be a punishable act. From payroll confidentiality to analytical data all are under scanner
and high alerts. An employee exposed to such data must sign a NDA for secrecy purposes. Protecting
trade secrets and confidential data is one of the growing legal aspects in todays world.

Example- William Billy Walters lost the biggest gamble of his life on Friday when a New York
jury found the gambler and businessman guilty of engaging in a $40m insider-trading scheme with
the former chairman of Dean Foods. After a day of deliberation, the 12-member jury of six men
and six women found Mr Walters guilty on all 10 counts of conspiracy, securities fraud and wire
fraud charges. The 70-year-old Las Vegas sports gambler could face several years in prison when
he is sentenced at a future date. [13]

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 7. CASE STUDY

Brownson v. Honda of Canada Mfg., 2013 ONSC 896

Investigation may be required, even where employer intends to terminate complainant without
cause [14]
Brownson commenced an action for wrongful dismissal after having been terminated without cause during his
participation in Hondas investigation into incidences of misconduct in the workplace. On a summary judgment
motion, Honda sought to have the claim dismissed, arguing that Brown son had been provided with an adequate
period of reasonable notice. The Court did not agree, suggesting that it was a triable issue whether the employer
adopted the [without cause termination] intentionally to side step the criteria for fair treatment of an employee
against whom cause is alleged. While the case will need to be tried, there is the suggestion here that an
investigation may not be able to be avoided even when the terminated party is provided reasonable notice.

Insights learnt- The terminated party was provided with notice and cause of action is not clear and needed an
investigation with much more clear facts. As its an involuntary termination, the rules and norms suggested to
give the opposite party a notice period which was proved in the law suit sessions but the misconduct reason of
termination does not support clear facts, therefore a much deeper investigation is required to quantify the action.

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 8. CONCLUSION

Globalization booming all around the globe, retention of employees has become very difficult. With increasing
costs and decreasing growth factor of various sectors employment has been hit by the hard rock. A legal contract
mutually signed by employer and employee with all the necessary details mentioned of employment is very
important. Therefore, this contract is not just a paper instrument but also a defensive weapon which either of the
parties can use at the time of dispute.

Employment contract serves basic details of employees name, designation, salary details, working hours, leaves
structure, and others. Employment contract differs by its nature of purpose. To maintain transparency and
harmony during the entire duration of employment this contract plays a very important role. Contracts of and for
services indicates a whole lot of differentiation. To abide by labour laws is very essential. Conditions specified
to the contract are all the aspects related to the employment. In this world of traitors, to avoid internal trading and
data leak cases NDA clauses are mentioned for security purposes Employment contract takes care of everything
and anything related to the employment of that course. Employee and Employer both have their individual rights
and benefits. If either of the parties fail to abide by the rules and terms mentioned in the contract are punishable
under law.

Employment contract is a legal paper but is based on mutual understanding between employer and employee.
Employment contract can be of fixed tenure or for a short term purpose specific. After a proper theoretical study
of employment contract, it is understood that sane intentions to reap profits for both the parties is a valid contract
wherein mutual consent, legal parties, considerations make a very important role.

Therefore, a legal contract for between employer and employee for a certain duration in return of a service is
abide to certain rules and regulations under Indian Labour Law which also mentions benefits to both the parties.
Thus it is one of the most amendable legal vertical in todays world for proper work justice and functioning.

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 9. REFERENCES

1. https://www.justlanded.co.in/english/India/India-Guide/Jobs/Employment-Contracts
2. http://www.businesstoday.in/moneytoday/cover-story/different-types-of-employment-
contracts-benefits/story/192008.html
3. http://www.contractorcalculator.co.uk/difference_contract_for_services_of_services_ir35.as
px
4. http://www.indiatimes.com/news/india/after-mumbai-start-up-a-malayalam-media-firm-
decides-to-give-period-leave-to-female-staff-326190.html
5. https://www.socialsamosa.com/2016/12/utopian-media-digital-mandate-cadini/
6. https://india.findlegalforms.com/product/employment-agreement-india/
7. http://economictimes.indiatimes.com/news/company/corporate-trends/kumar-mangalam-
birlas-idea-salary-shrinks-takes-home-rs-3-3-lakh-in-fy17/articleshow/59060836.cms
8. http://www.mondaq.com/india/x/481054/employment+litigation+tribunals/Key+Features+Of
+Employment+Contracts+An+Indian+Perspective
9. http://www.dailynews.com/sports/20170703/fox-sports-fires-jamie-horowitz-for-sexual-
misconduct
10. http://timesofindia.indiatimes.com/city/chennai/Madras-high-court-stays-termination-of-TCS-
employee/articleshow/45870194.cms
11. http://timesofindia.indiatimes.com/business/india-business/infosys-executive-vice-president-ritika-
suri-quits/articleshow/59650200.cms
12. http://economictimes.indiatimes.com/industry/transportation/airlines-/-aviation/ahead-of-
privatisation-air-india-eyes-bumper-staff-buyout/articleshow/59648250.cms
13. https://www.ft.com/content/e50bd70e-1b11-11e7-bcac-6d03d067f81f
14. http://www.lexology.com/library/detail.aspx?g=3ed29500-8d11-46ed-924f-743fea8478a4

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