Gardening leave & exit clauses: Beware of these devils in your job offer letter

When 38-year old Satish Chomwal put in his paper at a Gurugram-based IT company, little did he know that he would be asked to serve another three months over and above his notice period. His employment contract had mentioned ‘gardening leave’ as a clause which he had overlooked at the time of signing the contract.

While he did have to serve this period, his future employer wasn’t happy with this because they were hiring for a sensitive project and wanted him to join him immediately.

At a time when freshers are in a rush to get a job but miss several important factors in the offer letter, Moneycontrol gives you a lowdown on what should be checked in an offer letter:

The first thing to look for in an employment contract are the terms of employment. This includes whether this is a permanent position or a contractual position.

Further, the leave policy and notice period requirements also need to be studied. In sectors like media and entertainment and aviation, there are terms that prevent women from getting pregnant. If this is violated, employees are often sacked.

Some companies allow only emergency leaves, including sick and bereavement leave, during the first year of employment. If this is violated, either pay is cut or the leave is outrightly rejected.

Also, if a candidate has a contract for a fixed tenure, there is an impending risk of being terminated as per the employer’s choice. So asking for a permanent position would be a better option.

Signing a bond

A candidate needs to look at whether his work profile involves a contractual bond. Under this if an employee quits before ‘x’ number of years, they will have to pay a fixed sum of money to the organisation.

Several IT and financial services firms have this provision as part of the offer letter that is given to the new joinees. If you do not pay up this amount, the company can drag you to court.

Contractual bond means that this will have to be signed at the time of the employment and has to be agreed upon by both the employee and employer. However, often fresh graduates are told that this is mandatory and a pre-condition for employment.

However, if you have not signed any such agreement at the time of joining and quit the company in one to two years, you are not liable to pay any compensation to the organisation.

Exit clauses

Anshul Prakash, Partner, Labor and Employment Law Practice, Khaitan & Co explained that the exit clauses occupy a critical position in an employment contract.

“From an employers’ perspective, it is important to provide for adequate notice period which is in compliance with the shop and establishment laws, as well as substantial enough to complete handover and transition formalities,” he said.

In case of senior employees, the termination events (good leaver and bad leaver situations) are clearly spelt out to avoid any termination related disputes and consequences. From employee standpoint, well defined clauses help the employees to complete exit formalities sans bad taste resulting in an amicable and graceful separation from the employer’s services.

Gardening leaves

A ‘gardening leave’ is a period that an employee serves in a company but is not required to come to the workplace. The employee is still contractually part of the organisation, and cannot join anywhere else. This is a sort of a paid leave to ensure that the employee does not have any sensitive information that could be potentially used by competitors.

Though it is advisable to incorporate gardening leave clauses in employment contract itself, in some instances employers may insist on such covenants even if the employment agreements are silent on such aspect.

Prakash said that from a statutory standpoint, the gardening leave clause is legally enforceable only during the notice period required to be served by the employee in accordance with the employment contract. So, any gardening leave taking effect or continuing post termination will not be enforceable under Indian law.

Employers while issuing an acknowledgment of resignation or termination letter, as the case may be, to the employee, may specify if they need the employee to stay at home while serving the fully paid notice period.

Renegotiating the offer letter

Prakash said that contractually, an employee may renegotiate employment agreements and execute an amendment, addendum to an existing employment contract with the employer. However, he said that such situations are uncommon especially in case of employees at subordinate levels or grades and on account of that, having lesser bargaining power.

Buyout clause

Prakash said that the local shops and establishment laws provide for the option for the employer to either ask the employee to serve the notice period as per the contract and applicable law or relieve him of his duties immediately by paying salary in lieu of notice.

He added that notice buyout clauses are mostly inclined in the employer’s favour to cover an immediate release scenario or another situation where the employer would like to ensure a detailed handover and transition to the new incumbent.

Termination clause

This is probably the most misused term in an employment contract. Most companies state that an employee can be removed from service for disciplinary action or on account of non-performance, this concept is entirely subjective. Cases like leaking information and sexual harassment or even willful non-disclosure of facts are the common terms mentioned in the offer letter but companies often leave out what exactly would ‘under-performance’ constitute.

While cases have been filed in the past for wrongful termination, lawyers agree that it is a lengthy and painful process. Hence, it is imperative to clarify the human resource teams in the beginning of the contract itself on what would be the exact terms of a possible termination by the company. Once it is spelt out in the letter, it will be easier to challenge them in court.